[Federal Register Volume 60, Number 2 (Wednesday, January 4, 1995)]
[Notices]
[Pages 519-520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35154; File No. SR-SCCP-94-07]


Self-Regulatory Organizations; Stock Clearing Corporation of 
Philadelphia; Notice of Filing of Proposed Rule Change Relating to 
Implementation of a Three-Day Settlement Standard.

December 27, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on November 14, 1994, the 
Stock Clearing Corporation of Philadelphia (``SCCP'') filed with the 
Securities and Exchange Commission (``Commission'') a proposed rule 
change as described in Items I, II, and III below, which items have 
been prepared primarily by SCCP. On December 19, 1994, SCCP filed an 
amendment to the proposed rule change.\2\ The Commission is publishing 
this notice to solicit comments on the [[Page 520]] 
proposed rule change from interested persons.

    \1\15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\Letter from Sharon S. Metzker, SCCP, to Christine Sibille, 
Division of Market Regulation, Commission (December 12, 1994).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Term of Substance of 
the Proposed Rule Change

    SCCP proposes to modify SCCP rules 18 and 40 to be in conformity 
with the three business day settlement standard. SCCP requests that the 
Commission delay effectiveness of the proposed rule change until the 
effective date of Commission Rule 15c6-1.

II. Self-Regulatory Organization's Statements Regarding the Proposed 
Rule Change

    In its filing with the Commission, SCCP 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. The SCCP 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

    On October 6, 1993, the Commission adopted Rule 15c6-1 under the 
Act which will become effective June 7, 1995.\3\ The rule establishes 
three business days after the trade date (``T+3'') instead of five 
business days (``T+5'') as the standard settlement cycle for most 
broker-dealer trades. In the release adopting Rule 15c6-1, the 
Commission concluded that a T+3 settlement cycle, as compared to the 
current T+5 settlement cycle, will reduce credit and liquidity risks 
and will increase efficiency in broker-dealer and clearing agency 
operations.

    \3\Securities Exchange Act Release Nos. 33023 (October 6, 1993), 
58 FR 52891 (order adopting Rule 15c6-1) and 34952 (November 9, 
1994), 59 FR 59137 (order changing effective date from June 1, 1995, 
to June 7, 1995).
---------------------------------------------------------------------------

    SCCP has identified those rules which require amendment to provide 
for compliance with a T+3 settlement cycle by member and member 
organizations. The rules are as follows.
    Rule 18 (``Insolvency''), Section 6 currently provides that upon 
the insolvency of a participant, no contracts, pending settlement up to 
and including T+3 shall be settled by SCCP. Rule 18, Section 7 
currently provides that on or after T+4, SCCP will buy in the 
securities due it from an insolvent participant and will sell out the 
securities due to the participant from SCCP. The time frames contained 
in these sections will be shortened by two days.
    Rule 40 (``Instruments with Exercise Privileges'') states that a 
Participant is advised of potential liability based on its short value 
positions the fourth business day after the trade date. Under the 
proposed rule change, the participants will be advised on the second 
business day.
    SCCP's implementation of the proposed rule change will be 
consistent with the T+3 conversion schedule which SCCP and the National 
Securities Clearing Corporation (``NSCC'') have developed for industry 
use. The Conversion schedule for June 1995 is as follows.

------------------------------------------------------------------------
       Trade date            Settlement cycle         Settlement date   
------------------------------------------------------------------------
June 2, Friday.........  5 day..................  June 9, Friday.       
June 5, Monday.........  4 day..................  June 9, Friday.       
June 6, Tuesday........  4 day..................  June 12, Monday.      
June 7, Wednesday......  3 day..................  June 12, Monday.      
------------------------------------------------------------------------

    If the Commission determines to alter the exemptions currently 
provided in Rule 15c6-1, SCCP may need to submit additional rule 
amendments. It is intended that this proposed rule change will become 
effective the same date as Commission Rule 15c6-1 becomes effective.
    The proposed rule change is consistent with Section 17A of the Act 
in that it will facilitate the safeguarding of securities and funds 
which are in SCCP's custody or control or for which SCCP is 
responsible. The proposed change also is consistent with Commission 
Rule 15c6-1 which requires brokers or dealers to settle most securities 
transactions no later than the third business day after the date of the 
contract unless otherwise expressly agreed to by the parties at the 
time of the transaction.

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

    SCCP does not believe that the proposed rule change will impose any 
inappropriate burden on competition.

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

    No written comments were either solicited or 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 SCCP consents, the Commission will:
    (A) By order approve such 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, 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. 552, will be available for inspection and copying in the 
Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of SCCP. All submissions 
should refer to File No-SCCP-94-07 and should be submitted by January 
25, 1995.

    For the Commission by the Division of Market Regulation pursuant 
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-29 Filed 1-3-95; 8:45 am]
BILLING CODE 8010-01-M