[Federal Register Volume 60, Number 57 (Friday, March 24, 1995)]
[Notices]
[Page 15620]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7240]



[[Page 15620]]

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35510; File No. SR-SCCP-94-07]


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

March 17, 1995.
    On November 14, 1994, the Stock Clearing Corporation of 
Philadelphia filed a proposed rule change (File No. SR-SCCP-94-07) with 
the Securities and Exchange Commission (``Commission'') pursuant to 
Section 19(b) of the Securities Exchange Act of 1934 (``Act'').\1\ On 
December 19, 1994, SCCP filed an amendment to the proposed rule 
change.\2\ Notice of the proposal was published in the Federal Register 
on January 4, 1995, to solicit comments from interested persons.\3\ As 
discussed below, this order approves the proposed rule change.

    \1\15 U.S.C. 78s(b) (1988).
    \2\Letter from Sharon S. Metzker, SCCP, to Christine Sibille, 
Senior Counsel, Division of Market Regulation, Commission (December 
12, 1994).
    \3\Securities Exchange Act Release No. 35154 (December 27, 
1994), 60 FR 519.
---------------------------------------------------------------------------

I. Description

    In October 1993, the Commission adopted Rule 15c6-1 under the 
Act\4\ 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. The rule will become 
effective June 7, 1995.\5\ Several of SCCP's rules are interrelated 
with settlement time frames. The purpose of the proposed rule change is 
to amend SCCP's rules to be consistent with a T+3 settlement standard 
for securities transactions.

    \4\17 CFR 240.15c6-1.
    \5\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 (changing effective date from June 1, 1995, to 
June 7, 1995).
---------------------------------------------------------------------------

    The proposed rule change amends Rule 18 (``Insolvency''), Section 6 
to provide that upon the insolvency of a participant, no contracts 
pending settlement up to and including T+1 shall be settled by SCCP. 
Rule 18, Section 7 is amended to provide that on or after T+2, 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 
proposed rule change also amends Rule 40 (``Instruments with Exercise 
Privileges'') to state that a participant is advised of potential 
liability based on its short value positions on its CNS projection 
report starting on the second business day after the trade date.
    SCCP has requested that the proposed rule change become effective 
on the same date as Rule 15c6-1. Rule 15c6-1 becomes effective on June 
7, 1995.\6\

    \6\The transition from five day settlement to three day 
settlement will occur over a four day period. Friday, June 2, will 
be the last trading day with five business day settlement. Monday, 
June 5, and Tuesday, June 6, will be trading days with four business 
day settlement. Wednesday, June 7, will be the first trading day 
with three business day settlement. As a result, trades from June 2 
and June 5 will settle on Friday, June 9. Trades from June 6 and 
June 7 will settle on Monday, June 12.
---------------------------------------------------------------------------

II. Discussion

    The Commission believes the proposal is consistent with the 
requirements of Section 17A of the Act.\7\ Specifically, Section 
17A(b)(3)(F)\8\ states that the rules of a clearing agency must be 
designed to assure the safeguarding of securities and funds which are 
in the clearing agency's custody or control or for which it is 
responsible and must be designed to foster cooperation and coordination 
with persons engaged in the clearance and settlement of securities 
transactions. Several of SCCP rules are based on a five day time frame 
for settlement of securities transactions. On June 7, 1995, the new 
settlement cycle of T+3 will be established as mandated by the 
Commission's Rule 15c6-1. As a result, SCCP's current rules will be 
inconsistent with the Commission's rule. This proposal will amend 
SCCP's rules to harmonize them with the Commission's Rule 15c6-1 and a 
T+3 settlement cycle. Further, the proposal amends SCCP's procedures 
for dealing with an insolvent participant to be consistent with a T+3 
settlement cycle. Thus, the proposal enhances SCCP's ability to 
safeguard securities and funds in its custody and control or for which 
it is responsible.

    \7\15 U.S.C. 78q-1 (1988).
    \8\15 U.S.C. 78q-1(b)(3)(F) (1988).
---------------------------------------------------------------------------

III. Conclusion

    For reasons stated above, the Commission finds that SCCP's proposal 
is consistent with Section 17A of the Act.\9\

    \9\15 U.S.C. 78q-1 (1988).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (File No. SR-SCCP-94-07) be and 
hereby is approved and will become effective June 7, 1995.

    \10\15 U.S.C. 78s(b)(2) (1988).
---------------------------------------------------------------------------

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\11\

    \11\17 CFR 200.30(a)(12) (1994).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-7240 Filed 3-23-95; 8:45 am]
BILLING CODE 8010-01-M