[Federal Register Volume 59, Number 124 (Wednesday, June 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15711]


[[Page Unknown]]

[Federal Register: June 29, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34246; File No. SR-NYSE-94-21]
June 22, 1994.

 

Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing of a Proposed Rule Change Relating to NYSE's Customer 
Account Transfer Contracts Rule and Its Related Interpretations.

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 16, 1994, New York 
Stock Exchange, Inc. (``NYSE'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared primarily by 
NYSE. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
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    \1\15 U.S.C. Sec. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The primary purpose of NYSE's proposed rule change is to amend 
Exchange Rule 412, Customer Account Transfer Contracts and its related 
Interpretations. The proposed amendments are an effort to incorporate 
into the account transfer process enhancements to the Automated 
Customer Account Transfer System (``ACATS'') which have been developed 
by the National Securities Clearing Corporation (NSCC) and other 
registered clearing agencies.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NYSE included statements 
concerning the purpose of and basis for the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NYSE has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to amend rule 412, 
Customer Account Transfer Contracts, and its related Interpretations. 
The proposed amendments are intended to increase the speed and 
efficiency of the account transfer process by reducing the time period 
for transferring customers' cash/margin and retirement accounts from 
ten to seven business days. This will be accomplished by reducing the 
five business day validation period for accounts to three business days 
and reducing the delivery period from five business days to four 
business days [Rule 412(b)]. The interpretation permitting a ten day 
validation period for retirement accounts will be deleted [Rule 412, 
Interpretation (f)/01].
    NYSE's proposed rule change also will mandate the use of an 
automated system for transferring mutual fund positions where a member 
organization is a participant in a registered clearing agency which has 
such a facility. This will provide a link between broker-dealer 
participants and mutual fund participants for reregistration of mutual 
fund positions and will reduce fails. It also will reduce manual 
processing and the associated costs [Rule 412(e)(2)].
    Under the proposed rule change, member organizations participating 
in a registered clearing agency with automated residual credit 
processing capabilities will be required to utilize such facilities to 
transfer residual credit positions (e.g., dividends, interest, etc.) 
which accrue to an account after transfer. Credit balances accruing in 
a transferred account will have to be transferred within ten business 
days for a six month period following transfer. The required time 
periods will apply to all member organizations regardless of whether 
they are participants in a clearing agency [Rule 412(e)(3)].
    The proposed rule change will permit partial customer account 
transfers to be accomplished through the existing automated transfer 
system. Presently, partial transfers are accomplished outside of the 
system. The time frames required by Rule 412 for transfer of entire 
accounts will not apply to partial transfers. However, member 
organizations are expected to expedite partial transfers of customer 
accounts [Rule 412, Interpretation (a)/01)].
    NYSE's proposed rule change will facilitate communication between 
organizations and will improve exchange oversight by providing more 
explicit reason codes for when accounts may be rejected [Rule 412, 
Interpretation (b)(1)/02]. Member organizations that receive an account 
transfer related claim letter will be required to resolve the claim 
within five business days or respond in writing setting forth specific 
reasons for denying the claim [Rule 412(d)].
    The shortening of the time period for transferring accounts from 
ten to seven days is appropriate in view of enhanced automation of the 
process by member organizations and clearing agencies and will be 
beneficial to both customers and member organizations. In addition, the 
reduction of time allowable for account transfers is consistent with 
the three day settlement period, which has been mandated by the 
Commission for June 1995.
    The development by registered clearing agencies of automated 
systems to transfer mutual funds and residual credit balances and their 
mandatory use will benefit both customers and member organizations by 
increasing efficiency, reducing paperwork and providing significant 
cost savings. Permitting partial account transfers to be accomplished 
through existing automated account transfer systems will provide member 
organizations with the ability to utilize these facilities where they 
will provide the most efficient and expeditious transfer. The use of 
more explicit reject codes will reduce unnecessary back office 
operations functions and will allow the NYSE to be better able to 
determine the exact reason for excessive rejects. The amendments to 
require the resolution or denial of claim letters within five business 
days will provide a regulatory framework in an area where no specific 
requirements currently exist and will expedite resolution of such 
claims.
    The amendments relating to use of an automated system for 
transferring mutual fund positions, Rule 412(e)(2), and residual credit 
processing, Rule 412(e)(3), will become effective one hundred eighty 
calendar days after Commission approval of the amendments. All other 
amendments referred to above will become effective ninety days after 
Commission approval.
    The statutory basis for the proposed change is based upon Section 
6(b)(5) of the Act in that it fosters cooperation and coordination with 
persons engaged in facilitating transactions in securities. This is so 
because the procedures contained in the proposed rule are intended to 
expedite transfer of customer securities accounts between member 
organizations. The change also generally protects investors and the 
public interest by requiring expeditious transfer of accounts.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NYSE believes that the proposal does not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    Statements were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (A) by order approve the proposed rule change or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 10549. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. Sec. 552, will be available for inspection and copying in 
the Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. Copies of such filing will also be available 
for inspection and copying at the principal office of the above-
referenced self-regulatory organization. All submissions should refer 
to File No. SR-NYSE-94-21 and should be submitted by July 20, 1994.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-15711 Filed 6-28-94; 8:45 am]
BILLING CODE 8010-01-M