[Federal Register Volume 60, Number 8 (Thursday, January 12, 1995)]
[Notices]
[Pages 3007-3008]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-815]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35197; File No. SR-Amex-94-57]
Self-Regulatory Organizations; American Stock Exchange,
Incorporated; Notice of Filing of Proposed Rule Change Relating to
Implementation of a Three-Day Settlement Standard
January 6, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that the American Stock Exchange
Inc. (``Amex'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change on December 13, 1994, and filed
an amendment thereto on December 23, 1994, as described in Items I, II,
and III below, which items have been prepared primarily by Amex. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
\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
Amex proposes to modify its rules to implement a three business day
settlement standard.
Self-Regulatory Organization's Statement Regarding the Proposed Rule
Change
In its filing with the Commission, 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. The Amex 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 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.\2\ The rule will become
effective June 7, 1995.\3\ 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.
\2\Securities Exchange Act Release No. 33023 (October 6, 1993),
58 FR 52891.
\3\Securities Exchange Act Release No. 34952 (November 9, 1994),
59 FR 59137.
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In order to accommodate the implementation of the new settlement
standard pursuant to Commission's Rule 15c6-1, Amex will amend the
following rules. Rule 17, which concerns transactions in rights and
warrants, refers to five business days in describing when transactions
preceding the final day of trading must be made only for ``cash''
settlement. ``Five'' will be changed to ``three.'' Rule 124(c) defines
delivery conditions for ``regular way'' as the fifth business day
following the contract. ``Fifth'' will be changed to ``third.'' Rule
124(d) requires seller's option delivery to be made within the time
specified in the option, which time shall not be less than six business
days nor more than sixty days. ``Six'' will be changed to ``four.''
Rule 179(a) requires during the five business days preceding the
final day for trading in an issue of rights, every order entered on a
specialist's book shall be for ``next day'' delivery. ``Fifth'' will be
changed to ``third.'' Rule 179(b) dictates during the five final
business days for trading in an issue of warrants, every order entered
on a specialist's book shall be for ``cash,'' and during the three
preceding business days every such order entered shall be for ``next
day'' delivery. ``Fifth'' will be changed to ``third.'' Rule 179(c)
requires during the five business days preceding the final day for
trading in an expiring equity security, every order entered on the
specialist's book shall be for ``next day'' delivery, and on the final
day for trading in such equity security, every order entered on a
specialist's book shall be for ``cash.'' ``Fifth'' will be changed to
``third.''
Rule 205C(2) requires that where an odd-lot dealer accepts
``seller's option'' trades for delivery within not less than six
business days nor more than thirty days following the day of the
contract, such order shall be filled at a price below the effective
round lot sale or bid regular way by the amount of any differential.
``Six'' will be changed to ``four.''
Rule 423 refers to fourth and third business days in discussing
agent instructions with respect to receipt versus payment (``RVP'') or
delivery versus payment (``DVP'') customer transactions. ``Fourth'' and
``third'' will be changed to ``second'' and ``first.'' Rule 830 states
that transactions in stocks shall be ex-dividend or ex-rights on the
fourth business day preceding the record date. ``Fourth'' business day
will be changed to ``second'' business day. With regard to a record
date other than a business day, the ``fifth'' will be changed to the
``third.'' The proposal also eliminates the distinction between New
York City transfers and transfers outside New York City.
Rule 858 directs settlement in contracts in bonds dealt in ``and
interest.'' There shall be added to the contract price interest on the
principle amount at the rate specified in the bond, which shall be
computed up to but not including the day on which delivery is due,
except that in the case of contracts made ``seller's option.''
Currently interest is computed only up to but not including the fifth
business day following the day of the contract. The proposed rule
change would compute the interest up to the day when delivery would
have been due if the contract had been made ``regular way.''
Rule 862 states that the notice for the return of loans of
securities must be given before 3:45 P.M. on a business day and such
return shall be made on the ``fifth'' business day following the day in
which notice is given. ``Fifth'' will be changed to ``third.''
Rule 866 requires for loans of securities to be deliverable on the
``fifth'' business day following the day of the loan unless otherwise
agreed to by the parties. ``Fifth'' will be changed to ``third.'' Rule
882 refers to delivery of securities and due-bills after the record
date or after the ``equivalent New York record date'' and requires the
seller to pay or to deliver to the buyer the distribution made with
respect to such security. With stock or cash dividends or rights to
subscribe, the seller shall deliver to the buyer either the dividend or
rights or a due-bill for such dividend or rights within five days after
the record date or the equivalent New York record date. ``Fifth'' day
will be changed to ``third.'' The proposal also eliminates
[[Page 3008]] references to the equivalent New York record date.
Amex has participated in meetings sponsored by the Commission among
self regulated organizations, clearing corporations, and other industry
participants and has kept its members informed of the forthcoming
transition to T+3. As the effective date for implementation draws near,
Amex will continue to educate its membership and to ascertain that they
are informed and understand specific timing and cutover issues. The
Amex's implementation of these rule changes will be consistent with the
June 1995 conversion schedule which Amex and the National Securities
Clearing Corporation (``NSCC'') have developed for industry use.\4\ The
schedule is as follows.
\4\NSCC will use two double-settlement days for the conversion.
The first double-day settlement, scheduled for Friday, June 9, will
incorporate trades from Friday, June 2 (the last T+5 settlement day)
and from Monday, June 5 (a T+4 settlement day). The second double-
day settlement, scheduled for Monday, June 12, will include trades
from Tuesday, June 6 (T+4 settlement day) and Wednesday, June 7 (the
first T+3 settlement day). With respect to the two trade days on
which ``regular way'' trades will settle on T+4, Amex rules will be
temporarily deemed to be amended accordingly.
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Trade date Settlement cycle Settlement date
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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.
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If the Commission determines to alter the exemptions currently
provided in Rule 15c6-1, the Amex may be required to file additional
rule amendments.
The proposed rule change is consistent with Section 6(b) of the Act
in general and furthers the objectives of Section 6(b)(5) in particular
in that it protects investors and the public interest by reducing the
risk to clearing corporations, their members and public investors which
is inherent in settling securities transactions. This is accomplished
by reducing the time period for settlement of most securities
transactions which will correspondingly decrease the number of
unsettled trades in the clearance and settlement system at any given
time.
The proposed change is also 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
Amex 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 the Amex 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 the Amex.
All submissions should refer to File No. SR-Amex-94-57 and should
be submitted by February 2, 1995.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-815 Filed 1-11-95; 8:45 am]
BILLING CODE 8010-01-M