[Federal Register Volume 60, Number 73 (Monday, April 17, 1995)]
[Notices]
[Pages 19311-19312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9396]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35581; File No. SR-BSE-94-05]


Self-Regulatory Organizations; the Boston Stock Exchange Inc.; 
Order Approving Proposed Rule Change Relating to Implementation of a 
Three-Day Settlement Standard

April 7, 1995.
    On February 21, 1995, the Boston Stock Exchange Incorporated 
(``BSE'') filed a proposed rule change (File No. SR-BSE-95-05) with the 
Securities and Exchange Commission (``Commission'') pursuant to Section 
19(b) of the Securities Exchange Act of 1934 (``Act'').\1\ Notice of 
the proposal was published in the Federal Register on March 8, 1995 to 
solicit comments from interested persons.\2\ As discussed below, this 
order approves the proposed rule change.

    \1\15 U.S.C. 78s(b) (1988).
    \2\Securities Exchange Act Release No. 35422 (February 28, 
1995), 60 FR 12793.
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I. Description

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

    \3\17 CFR 240.15c6-1 (1994).
    \4\Securities Exchange Act Release Nos. 33023 (October 6, 1993), 
58 FR 52891 (adopting Rule 15c6-1) and 34952 (November 9, 1994), 59 
FR 59137 (changing effective date from June 1, 1995, to June 7, 
1995).
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    Chapter II, Section 6 of BSE's definition of ``Regular Way,'' will 
be amended to require settlement of regular way transactions on the 
third business day after the trade.\5\ Buyer's or seller's option 
trades will settle between four business days and 180 days following 
the contract date except that BSE may provide otherwise in specific 
issues or classes of securities. Next day trades will settle on the 
first or second business day following the date of the contract. Under 
Chapter X, Section 1, securities will trade without (i.e., ``ex'') any 
dividend, right, or privilege on the second full business day preceding 
the record date except that when the record date is on a holiday the 
securities will trade ``ex'' on the third preceding full business day.

    \5\References to five-day delivery contained in Section 5 will 
be deleted.
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    The proposed rule change also will amend Chapter XV, Section 14, 
``Claims and Reports against Specialists,'' to shorten the time periods 
in which members can file claims of erroneous or omitted transactions 
against specialists. Claims regarding lack of a comparison of a 
reported transaction must be made within three days of the original 
trade date. Claims regarding the omission of reports and erroneous 
trade comparisons will have to be within five business days. The 
proposed rule [[Page 19312]] change will amend Chapter XXVIII, 
subparagraph (4) to shorten by two days the time frames in which 
customers must provide their agent instructions for delivery versus 
payment and receipt versus payment instructions.
    BSE has requested that the proposed rule change become effective on 
the same date as Rule 15c6-1. Rule 15c6-1 will become 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.
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II. Discussion

    The Commission believes the proposal is consistent with the 
requirements of Section 6 of the Act.\7\ Specifically, Section 6(b)(5) 
states that the rules of the exchange must be designed to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, and processing information. The BSE rules and other 
self-regulatory organizations' rules currently establish the standard 
time frame for settlement of securities transactions. The proposal will 
conform those rules to the new settlement time frames mandated by Rule 
15c6-1.

    \7\15 U.S.C. 78f (1988).
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    The Commission also believes that the proposed rule change is 
consistent with Section 6(b)(5) of the Act in that it protects 
investors and the public interest by reducing risks to clearing 
corporations, their members, and public investors which are inherent in 
settling securities transactions. The reduction of the time period for 
settlement of most securities transactions will correspondingly 
decrease the number of unsettled trades in the clearance and settlement 
system at any given time. Thus, fewer unsettled trades will be subject 
to credit and market risk, and there will be less time between trade 
execution and settlement for the value of those trades of 
deteriorate.\8\

    \8\See Securities Exchange Act Release No. 33023 (October 6, 
1993), 58 FR 52891.
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III. Conclusion

    For the reasons stated above, the Commission finds that BSE's 
proposal is consistent with Section 6 of the Act.\9\

    \9\15 U.S.C. 78f (1988).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (File No. SR-BSE-95-05) be and 
hereby is approved and will become effective on June 7, 1995.

    \10\15 U.S.C. 78s(b)(2) (1988).
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    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\11\

    \11\17 CFR 200.30(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-9396 Filed 4-14-95; 8:45 am]
BILLING CODE 8010-01-M