

[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
