[Federal Register: November 17, 2006 (Volume 71, Number 222)]
[Notices]
[Page 67005-67006]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17no06-94]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54734; File No. SR-SCCP-2006-02]
Self-Regulatory Organizations; Stock Clearing Corporation of
Philadelphia; Order Granting Approval of a Proposed Rule Change
Relating to the Definition of a Margin Member
November 9, 2006.
I. Introduction
On August 14, 2006, Stock Clearing Corporation of Philadelphia
(``SCCP'') filed with the Securities and Exchange Commission
(``Commission'') proposed rule change SR-SCCP-2006-02 pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'').\1\
Notice of the proposal was published in the Federal Register on
September 29, 2006.\2\ No comment letters were received. For the
reasons discussed below, the Commission is
[[Page 67006]]
granting approval of the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 54488, (September 22,
2006), 71 FR 57598.
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II. Description
The rule change amends the definition of ``margin member'' in SCCP
Rule 1, Definitions, to accommodate the introduction of equity market
makers on the Philadelphia Stock Exchange (``Phlx'') and to reflect the
introduction of Phlx's new equity trading system, XLE, which will
replace Phlx's equity trading floor.\3\ XLE is an electronic trading
system which will provide for the entry, display, ranking, routing, and
execution of orders in NMS stocks\4\ for its members and member
organizations (``XLE Participants''). The current equity specialists
will be replaced by market makers, a type of XLE Participant, which
will be liquidity providers on XLE.\5\
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\3\ Securities Exchange Act Release No. 54538 (September 28,
2006), 71 FR 59184 (October 6, 2006) [File No. SR-Phlx-2006-43]
(Order granting approval of a proposed rule change relating to
Phlx's new equity trading system, XLE).
\4\ 17 CFR 242.600(b)(47).
\5\ Not every security on XLE will require a market maker.
However, if a market maker or multiple market makers choose to
register in a security, they must provide a two-sided market in that
security on XLE during regular trading hours (usually 9:30 AM to
4:00 PM) of the security. Therefore, some securities on XLE may have
no market makers or may have one or more market makers.
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SCCP Rule 1, Definitions, currently defines ``margin members'' as
SCCP participants that are Phlx specialists, alternate specialists, or
other Phlx floor members specifically approved by the National
Securities Clearing Corporation to effect trading in a margin account.
Margin members that clear and settle their transactions through SCCP's
``omnibus clearance and settlement account'' at NSCC receive margin
accounts from SCCP.\6\ SCCP expects that many of its current margin
members that are Phlx specialists, alternate specialists, or other Phlx
floor members will become XLE Participants, including market makers,
upon approval of XLE. This rule change amends the definition of margin
member in SCCP's rules to add the term market maker\7\ and to remove
the word floor from the term Phlx floor member. This will allow SCCP
members that are currently margin members under Rule 1 of SCCP's rules
to maintain their status as margin members following Phlx's transition
to XLE.
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\6\ SCCP Rule 9, Margin Accounts.
\7\ The rule change in File No. SR-Phlx-2006-43 defines the term
``market maker'' in Phlx Rule 1, Definitions, paragraph (m). It also
adds new rules 170 through 174 to set forth the registration
requirements, rights, and obligations of Phlx market makers.
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SCCP believes that the proposed rule change is consistent with
Section 17A of the Act\8\ because the proposed rule change is designed
to allow current SCCP margin members to maintain their status as they
transition from the current floor based trading environment at Phlx to
the XLE electronic trading system and would thereby promote the prompt
and accurate clearance and settlement of securities transactions and
remove impediments to and perfect the mechanism of a national system
for the prompt and accurate clearance of securities transactions.
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\8\ 15 U.S.C. 78q-1.
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III. Discussion
Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of a clearing agency be designed to promote the prompt and
accurate clearance and settlement of securities transactions.\9\ SCCP
is a member of NSCC and has an omnibus clearance and settlement account
at NSCC through which its margin members' transactions are cleared and
settled. The proposed rule change amends the definition of margin
member in SCCP's rules to accommodate the Phlx rule change regarding
XLE that was recently approved by the Commission. The proposed rule
change neither affects the services SCCP may provide to its member nor
affects SCCP's agreement with NSCC to clear and settle transactions
submitted through SCCP's omnibus account. Accordingly, because the
proposed rule change is designed to be consistent with the new Phlx
rules for the XLE trading platform and to avoid any confusion with
respect to the services SCCP's members may receive either directly from
SCCP or through SCCP's omnibus clearance and settlement account at
NSCC, we find that it is designed to promote the prompt and accurate
clearance and settlement of securities transactions.
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\9\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular Section 17A of the Act and the rules and regulations
thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-SCCP-2006-02) be and hereby
is approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\10\
Nancy M. Morris,
Secretary.
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\10\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E6-19422 Filed 11-16-06; 8:45 am]
BILLING CODE 8011-01-P