[Federal Register Volume 59, Number 208 (Friday, October 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26763]


[Federal Register: October 28, 1994]


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POSTAL RATE COMMISSION
[Release No. 34-34880; File No. SR-Amex-94-44]


Self-Regulatory Organizations; American Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change Relating to the Commencement of the Use of the New York 
Stock Exchange's Overnight Comparison System

October 21, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 17, 1994, the 
American Stock Exchange, Inc. (``Amex'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared primarily by the Amex. On October 19, 1994, the Amex amended 
its proposal to exclude all references to equity transactions.\2\ The 
Commission is publishing this notice and order to solicit comments on 
the proposed rule change from interested persons.
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    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\Letter from Ivonne L. Nagy, Special Counsel, Legal & 
Regulatory Policy Division, Amex, to Peter Geraghty, Senior 
Attorney, Division of Market Regulation, Commission (October 19, 
1994). In the future, the Amex intends to file under Section 
19(b)(2) of the Act a proposed rule change to permit it to use the 
New York Stock Exchange's Overnight Comparison System for the Amex 
equities transactions.
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I. Self-Regulatory Organization's Statement of the Terms and 
Substance of the Proposed Rule Change

    The purpose of the proposed rule change is to permit the Amex to 
begin using the New York Stock Exchange's Overnight Comparison System 
(``OCS'') for all bond transactions executed at the Amex on and after 
October 21, 1994.

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 Amex included statements 
concerning 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 IV below. Amex has prepared summaries, set forth in section (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

    On October 21, 1994, the Amex will commence use of the New York 
Stock Exchange's OCS for the comparison of all Amex bond transactions 
executed at the Amex. Transactions in Amex equities and options will 
continue to be compared and processed through the Amex's Intra-Day 
Comparison System (``IDC'').
    The change from IDC to OCS for the comparison of all Amex bond 
transactions will have no impact on the efficiency and capacity of the 
electronic system. OCS will continue to deliver an automated, highly 
flexible, and efficient system for capturing, comparing, and processing 
bond trades as well as providing a greater measure of uniformity 
between the Amex and New York Stock Exchange marketplaces. Essentially, 
the same procedures presently in use for IDC will continue to apply to 
OCS.
    Specifically, the proposed rule change consists of amendments to 
Amex Rules 700(e),\3\ 719(b),\4\ 729,\5\ and 731\6\ and the rescission 
of Amex Rule 731A\7\ to require Amex members on and after October 21, 
1994, to submit initial trade data for transactions in listed bonds 
effected on the Amex through OCS for comparison. The proposal also will 
enable Amex members to resolve through OCS all uncompared transactions 
in listed bonds effected on the Amex for ``Regular Way,'' ``Next Day,'' 
and ``Seller Option'' settlement that are traded on an ``issued,'' 
``when listed,'' and ``when distributed'' basis. Uncompared 
transactions that cannot be resolved on T+1 will be subject to close 
out. However, if a transaction remains in the system and both parties 
agree to the trade it will compare on T+2. In addition, OCS also will 
compare ``Ex-Clearing House'' bond transactions (i.e. any transaction 
in which the buying and selling parties to the trade agree to 
physically settle the transaction between themselves) for ``Cash,'' 
``Next-Day,'' and ``Seller's Option'' settlement.
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    \3\Amex Rule 700(e) ``References and Definition of Securities 
Transactions.''
    \4\Amex Rule 719(b) ``Next Day Comparison of Exchange 
Transactions.''
    \5\Amex Rule 729 ``Comparison of Seller's Option Contracts and 
``When Issued'' Special Contracts.''
    \6\Amex Rule 731 ``Resolution of Uncompared Transactions.''
    \7\Amex Rule 731A ``Resolution of Uncompared Bond 
Transactions.''
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    The Amex will accept initial trade data submissions in all listed 
bonds traded on the floor of the Amex from its clearing member 
organizations and compare the data through OCS. The compared trades 
then will be transmitted to the National Securities Clearing 
Corporation (``NSCC'') where the transactions will be printed on 
clearing members' contract sheets. NSCC then will complete the 
clearance and settlement process. Any uncompared trade will remain in 
OCS for resolution until resolved or canceled.\8\
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    \8\Cancel means to remove the transaction from the system. When 
there is an uncompared transaction and one party does not 
acknowledge the transaction, the floor official can authorize the 
close out of the transaction. However, where the transaction is 
acknowledged by both parties but one party does not acknowledge the 
transaction until T+2, the transaction must be canceled by the late 
acknowledging party and must be resubmitted as an ``as of'' trade.
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    Expanding the Amex's on-line comparison system to include bond 
transactions will automate the Exchange's bond trade comparison and 
resolution system and will shorten the comparison cycle from T+2 to 
T+1. The Amex believes the proposal will reduce the risk exposure to 
investors and to Amex members and will contribute to the prompt and 
efficient clearance and settlement of securities transactions. The Amex 
also believes that the proposed rule change is consistent with Section 
6(b) of the Act and specifically with the objectives of Section 6(b)(5) 
in that it will foster cooperation and coordination with persons 
engaged in regulating, clearing, settling, processing information with 
respect to, and facilitating transactions in securities and will 
protect investors and the public interest.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Amex does not believe that the proposed rule change will impose 
a 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

    Comments were neither solicited nor received.

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

    Section 6(b)(5) of the Act requires that the rules of the Exchange 
be designed to foster cooperation and coordination with persons engaged 
in regulating, clearing, settling, processing information with respect 
to, and facilitating transactions in securities and protect investors 
and the public interest. The Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) in that it will expand Amex's 
on-line comparison system to include bond transactions and will 
automate Amex's bond trade resolution system. In addition, the proposal 
will shorten the comparison cycle for bond transactions from T+2 to 
T+1, which is consistent with the conversion to a three business day 
settlement cycle.\9\
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    \9\For a complete description of Commission Rule 15c6-1 
mandating a three business day settlement cycle for most broker-
dealer transactions, refer to Securities Exchange Act Release No. 
33023 (October 6, 1993), 58 FR 52891 [File No. S7-5-93] (``Rule 
15c6-1 Adopting Release'').
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    Amex has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after the 
date of publication of notice of the filing. The Commission finds good 
cause for so approving the proposed rule change because it will allow 
Amex members to begin utilizing the New York Stock Exchange's OCS for 
bond transactions as soon as possible. In addition, Amex has 
distributed two information circulars to its members concerning the use 
of the New York Stock Exchange's OCS for bond transactions, and Amex 
has not received any comments. Further, the Commission published for 
comment the New York Stock Exchange's proposal to implement OCS, 
received no comments, and subsequently approved the proposal.\10\
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    \10\Securities Exchange Release Act No. 26527 (March 14, 1989); 
54 FR 11470 [File No. SR-NYSE-88-36] (order granting approval to the 
New York Stock Exchange's OCS).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street NW., Washington DC 20549. Copies 
of the submissions, 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 principal office of Amex. All submissions should refer to File No. 
SR-Amex-94-44 and should be submitted by November 21, 1994.
    It Is Therefore Ordered, pursuant to Section 19(b)(2) that the 
proposed rule change is hereby approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\17 CFR 200.30-3(a)(12) (1994).
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Jonathan G. Katz,
Secretary.
[FR Doc. 94-26763 Filed 10-27-94; 8:45 am]
BILLING CODE 8010-01-M