[Federal Register Volume 60, Number 18 (Friday, January 27, 1995)]
[Notices]
[Pages 5444-5445]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2071]



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

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35256; File No. SR-MCC-94-16]


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

January 20, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 28, 1994, the 
Midwest Clearing Corporation (``MCC'') 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 MCC. 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).
---------------------------------------------------------------------------

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

    MCC proposed to modify its rules to implement a three business day 
settlement standard for securities transactions.

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

    In its filing with the Commission, MCC 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. MCC 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 securities transactions.\2\ The rule will 
become effective June 7, 1995.\3\

    \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.
---------------------------------------------------------------------------

    The proposed rule change will amend Interpretations and Policies 
.01 of Rule 2 of Article II of MCC's rules to shorten the time frame in 
which contract data of comparison data must be submitted to MCC to 
ensure that MCC has sufficient time to review such contracts and 
receive the necessary protection to guarantee the performance of such 
contract to the contra-broker in a T+3 environment. Under such 
interpretations, MCC reserves the right to cause such contract to be 
settled under the trade-by-trade system or to reverse the trade in the 
continuous net settlement system (1) if a regular way contract is not 
recorded by MCC in a participant's account until T+4, (2) if a regular 
way contract is not submitted by another clearing corporation for 
recordation in a participant's account until T+4, or (3) if the 
contract is to be settled through the participant's account at another 
clearing corporation and the contract is not recorded until T+3. The 
proposed rule change will shorten each time frames by two days.
    The proposed rule change also will amend Article III, Rule 2, 
Section 9 to state that a participant will be deemed to have requested 
delivery of a security if the participant has entered into contracts to 
be settled by MCC which will result in net settling sales of such 
security by the participant during the next two, instead of four, 
business days. The proposed rule change also will amend the definition 
of ``as-of contract'' in Article I, Rule 1, to include contracts for 
which the intended date of settlement is one to two days, instead of 
four days, after the recording of the transaction by MCC.
    The MCC's implementation of this rules change will be consistent 
with the ``T+3'' conversion schedule which the National Securities 
Clearing Corporation has proposed for industry use. The schedule is as 
follows:

                                                                                                                
[[Page 5445]]                                                                                                   
------------------------------------------------------------------------
       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, MCC may need to undertake additional rule 
amendments. It is intended that the proposed rule changes are to become 
effective on the same date as Commission Rule 15c6-1.
    The proposed rule change is consistent with Section 17A of the 
Exchange Act in that it will facilitate the safeguarding of securities 
and funds which are in MCC's custody or control or for which MCC is 
responsible. The proposed rule change also is consistent with proposed 
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

    MCC does not believe that the proposed rule change will 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.

    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 MCC 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 MCC. All submissions 
should refer to File No. SR-MCC-94-16 and should be submitted by 
February 17, 1995.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 95-2071 Filed 1-26-95; 8:45 am]
BILLING CODE 8010-01-M