[Federal Register Volume 59, Number 135 (Friday, July 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17256]


[[Page Unknown]]

[Federal Register: July 15, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34346; File No. SR-BSE-94-05]

 

Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the Boston 
Stock Exchange, Inc. Relating to Its Net Capital and Equity Rule

July 11, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on 
April 11, 1994, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change\1\ as described in Items I, 
II and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\On April 25, 1994, the BSE filed Amendment No. 1 which 
corrects several technical mistakes in the original rule filing in 
the text of the Rule. On June 20, 1994, the BSE filed Amendment No. 
2 which removed the Early Warning Alert Notification provision from 
BSE's Rules because, as the Exchange members are bound by 
Sec. 2.(a)(iii) of the Rules to be subject to the SEC's Early 
Warning Alert Notification, such provision was duplicative. See 
letters from Karen Aluise, Assistant Vice President, Boston Stock 
Exchange, to Amy Bilbija, Commission, dated April 20, 1994, and June 
20, 1994, respectively.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Boston Stock Exchange proposes to amend its Capital and Equity 
Requirements to conform to the current requirements as set forth in SEC 
Rule 17a-11. The text of the proposed rule change is as follows: new 
language [deleted language].

Chapter XXII--Capital and Equity Requirements

    Sec. 2[.](a) All members and member organizations [using the 
facilities of the Boston Stock Exchange Clearing Corporation (``the 
facilities'') doing business on the floor of the Exchange and; who 
clears transactions for another broker or dealer or; maintains 
accounts for another broker or dealer or; introduces accounts to 
another broker or dealer or; maintains customer accounts] shall at 
all times--
    (i) Maintain net capital not less than that prescribed by SEC 
Rule 15c3-1 (17 CFR 240.15c3-1); [and]
    (ii) [b] Be subject to Appendix D of SEC Rule 15c[ ]3-1 in 
regard to Satisfactory Subordination Agreements[.] and
    (iii) Be subject to the reporting requirements set forth under 
SEC Rule 17a-11 and the SEC's Early Warning Rule contained therein.
* * * * *

[Early Warning Alert Notification

    Sec. (c)(3) All specialists assigned to the Exchange as their 
Examining Authority shall be required to compute net capital and 
must immediately deliver written notice to the Exchange, identifying 
what action is being taken to alleviate the alert status, whenever 
one of the following occurs:
    (i) Net capital falls below required minimum levels;
    (ii) Net capital falls below 120% of its minimum requirement; or
    (iii) Specialist fails to comply with the following financial 
responsibility requirements:
    (A) Fails to make and keep current books and records;
    (B) Discovers or is notified by an independent accountant of the 
existence of any material inadequacy; or
    (C) When the Exchange learns that the specialist has failed to 
file a notice under this section.

    Note: Where a specialist is assigned to another Examining 
Authority, that specialist shall be required to comply with the 
provisions as set forth by its assigned Examining Authority or SEC 
Rule 15c3-1 and the reporting requirements set forth under SEC Rule 
17a-11. Whenever the Exchange provides a specialist with an early 
warning alert notice, such specialist must respond by verifying the 
alert in writing. If a specialist fails to respond to the early 
warning alert sent by the Exchange, it shall be considered a valid 
alert and the specialist shall be notified by the Exchange that it 
must comply with the provisions of this rule as set forth above.]

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

    In its filing with the Commission, the self-regulatory organization 
included statements governing the purpose of and basis for the proposed 
rule change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item III below. The self-regulatory organization 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

1. Purpose
    The purpose of the proposed rule change is to amend certain 
provisions of the net capital and equity rule to conform to the current 
requirements as set forth in SEC Rules 15c3-1 and 17a-11. The proposed 
changes to Section 2(a) will expand the scope of the rule to require 
that all members comply with SEC Rule 15c3-1 regarding net capital 
which became effective on April 1, 1994, and as such supersede the 
current Exchange rule. The proposed changes to Section 2(c)(3) 
eliminates the Exchange's Early Warning Alert Notification procedure 
and replaces it with the SEC's Early Warning provisions as set forth in 
SEC Rule 17a-11.
2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act, in that the capital and equity requirements of the Exchange 
are designed to protect investors and the public interest by ensuring 
that Exchange members doing business on the Floor have adequate funds 
to cover losses that they might incur in the everyday transaction of 
business.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. 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, NW., Washington, DC 20549. 
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 at 
the Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the BSE. All 
submissions should refer to File No. SR-BSE-94-05 and should be 
submitted August 5, 1994.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the BSE's proposal to amend its Capital 
and Equity Requirements Rule is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to a national 
securities exchange. Specifically, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act, in 
that the capital and equity requirements of the Exchange are designed 
to protect investors and the public interest by ensuring that Exchange 
members doing business on the Floor have adequate funds to cover losses 
that they might incur in the everyday transaction of business.\2\
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    \2\15 U.S.C. 78f(b)(5) (1988). See generally Securities Exchange 
Act Release Nos. 34295 (July 1, 1994) and 33838 (March 30, 1994) 
approving similar changes with respect to conforming exchange rules 
to the revised SEC Net Capital Requirements for the Pacific Stock 
Exchange (``PSE'') and Philadelphia Stock Exchange (``Phlx''), 
respectively. The Discussion in those approval orders are 
incorporated herein.
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register. The Commission 
believes that accelerated approval of the proposal is appropriate in 
order to allow the BSE to amend the Exchange's current net capital and 
equity rule to conform to Rules 15c3-1 and 17a-11 of the Act. In 
addition, the Commission previously noticed for comment and approved 
similar filings of the PSE and the Phlx. No comments were received on 
those files.\3\
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    \3\See note 2, supra.
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    It Is Therefore Ordered, pursuant to Section 19(b)(2)\4\ that the 
proposed rule change (SE-BSE-94-05) is hereby approved.

    \4\15 U.S.C. 78s(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-17256 Filed 7-14-94; 8:45 am]
BILLING CODE 8010-01-M