[Federal Register Volume 60, Number 90 (Wednesday, May 10, 1995)]
[Notices]
[Pages 24938-24940]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11442]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-35656; File No. SR-MSTC-95-06]
Self-Regulatory Organizations; Midwest Securities Trust Company;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change Relating to the Expansion of an Interface With the
Depository Trust Company's Interactive Institutional Delivery System
April 28, 1995.
Pursuant to Section 19(b)(1) of the Securities and Exchange Act of
1934 (``Act''),\1\ notice is hereby given that on April 6, 1995, the
Midwest Securities Trust Company (``MSTC'') filed with the Securities
and Exchange Commission (``Commission'') the proposed rule change (File
No. SR-MSTC-95-06) as described in Items I and II below, which items
have been prepared primarily by MSTC. The Commission is publishing this
notice and order to solicit comments on the proposed rule change from
interested persons and to grant accelerated approval of the proposed
rule change.
\1\15 U.S.C. 73s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
MSTC proposes to expand its interface with The Depository Trust
Company's (``DTC'') Interactive Institutional Delivery (``IID'') system
to include an interactive inquiry and affirmation capability and to
facilitate access to DTC's standing instruction database (``SID'').
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, MSTC 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 self-regulatory organization has prepared summaries,
set forth in sections (A), (B), and (C) below, of the most significant
aspects of such statements.\2\
\2\The Commission has modified the text of the summaries
prepared by MSTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
MSTC proposes to make certain changes to its National Institutional
Delivery System (``NIDS'') to comply with the accelerated settlement
cycle mandated by Commission Rule 15c6-1\3\ and to provide uniformity
in depository processing for institutional trade recording and
settlement. To accomplish those goals, MSTC is expanding its interface
with DTC's IID system to include an interactive inquiry and affirmation
capability and to facilitate access to DTC's SID. As a result, MSTC's
NIDS system also will be known as the Interactive Institutional
Delivery System.
\3\Securities and Exchange Act Release No. 33023 (October 6,
1993), 58 FR 52891 (adoption of Rule 15c6-1). Rule 15c6-1 will be
effective June 7, 1995. Securities Exchange Act Release No. 34952
(November 9, 1994), 59 FR 59137 (changing the effective date of Rule
15c6-1).
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Currently, MSTC provides its own screens and functions; however,
through the new on-line interface, MSTC will provide its participants
with DTC's functions and screens. For example, the current MSTC
National Institutional Delivery Affirmation (``NIDA'') function for
affirmation input will be replaced by the IID system's affirmation
function menu (``IDAA''). The IDAA function is currently part of DTC's
IID system and MSTC intends to use this function to replace the current
end of day transmission of data accumulated via the NIDA screen. The
IDAA function will provide MSTC participants with on-line access to the
following trade affirmation processing options: (1) Affirm all trades,
(2) affirm all trades with exemptions, (3) affirm individual trade, and
(4) individual exceptions.
DTC's Institutional Delivery Global Inquiry Menu, (``IDGI'')
function also will be made available to MSTC participants through
MSTC's on-line interface with DTC's IID system. The IDGI function will
provide on-line inquiry capability on the following data, most of which
was previously available in hard copy reports: (1) Single trade detail,
(2) change of security eligibility, (3) settlement date inquiry, (4)
trade data inquiry, and (5) batch trade summary. As result of MSTC use
of the IDGI and IDAA functions, MSTC will discontinue the following
hard-copy reports: (10 T+3 Unaffirmed Report, (2) T+4 Unaffirmed
Report, and (3) T+4 Cumulative Eligible Trade Report. The following
reports and contracts will be produced three times daily instead of
once a day: (1) Broker Trade Error Report, (2) Confirmed trades, (3)
Affirmed Trades, and (4) Unaffirmed Trades. A change of Eligibility
Report\4\ will be produced once at the end of the day. [[Page 24939]]
\4\Eligibility refers to depository eligibility of securities.
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Multiple intraday transmissions of trade data submitted via the
IIDT screen will replace the current practice of once at the end of the
day transmission of data submitted via the NIDT screen.\5\ All on-line
IID input and inquiry screens will be available until 8:00 p.m. central
time ``CT''). Also, the current cut-off times of 5:00 p.m. CT for
affirmation input via file transfer, 8:00 p.m. CT for trade input via
terminal, and 10:30 p.m. CT for trade input via file transfer to
receive affirmation/confirmation output at 7:00 a.m. CT the next day
will be changed to the following input/output schedule:
\5\MSTC's current trade input screen (``NIDT'') will be replaced
with MSTC's revised IID Trade Input screen (``IIDT''). Filed changes
have been made to both terminal and file transfer trade input
layouts to achieve compatibility with the DTC IID system. Changes to
existing fields on the trade input screen have been made to allow
for additional edits and expanded fields. The following fields have
been deleted: (1) ISIN--international security identification
number, (2) CD--international check digit, and (3) CORSP IND--
Correspondent. The following fields have been added: (1) SIDIND--
Bypass SID indicated, (2) SET LOC--Settlement Location, (3) ORG
CONF--Orginal Broker Confirm Number, and (4) FED Factor--Amortized/
Accredited Factor.
The following new fields will be defaulted and will be included
on the file transmission submitted to DTC for process but will not
be populated on the revised IIDT trade input screen: (1) Split
Currency Indicator--Default to No., (2) Quality Control Exempt--
Default to be (i.e., transaction will be included in reporting of
member firm confirmation and affirmation rates), (3) Security
Numbering System--Default to US=CUSIP, (4) Alternate Currently
Conversion Rate--Default to zero, (5) Alternate Currency ISO Code--
Default to CUR CD value (i.e., field currently provides default to
zero value but will permit default to alternative currently values)
and (6) Alternate Currency--Default to zero net amount.
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Affirm input cut-off
Trade input cut-off Confirm output (FTS)
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10:30 a.m. on Trade 12:00 noon on Trade 1:00 p.m. on Trade
date (T). date (T). date (T).
12:30 p.m. on Trade 2:00 p.m. on Trade date 3:00 p.m. on Trade
date (T). (T). date (T).
3:30 a.m. on Trade date 5:00 a.m. on Trade date 6:00 a.m. on Trade
plus one (T+1). plus one (T+1). date plus one (T+1).
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Upon the effective date of Rule 15c6-1 requiring settlement of most
trades on trade data plus three (``T+3''), the affirmation cut-off time
for automatic settlement of regular way trades will be accelerated from
the close of business on T+3 to the close of business on T+1 will a
correction affirmation period until 12:00 noon eastern time (``ET'') on
T+2. For all trades subject to a nonstandard settlement cycle, the
stated cut-off time will be settlement data minus two (``S-2'') with
corrections until noon ET on S-1. Finally, Quality Control Reports will
be adjusted to reflect the shortened settlement cycle and the revised
cut-off times.
Under the proposal, when an affirmed confirmation is received by
the established cut-off time, the new IID system automatically will
create the book entry movement to settle the trade. Based on the
revised input/output schedule, the IID system now has the potential to
produce settlement transactions three times daily on the date of
affirmation.
Finally, DTC's Standing Instruction Database (``SID'') also will be
available to MSTC participants through MSTC's on-line interface with
DTC's IID system. The SID function will allow MSTC participants to
utilize DTC's database to maintain customer account and settlement
information in a central repository. This is a new function not
previously available to MSTC participants using NIDS and will be
optional for MSTC participants. SID will only populate certain fields
on the trade confirmation and will enable automatic affirmation through
matching.\6\
\6\As described in the Commission order approving DTC's overall
concept of an enhanced IID system, the matching option is intended
to serve as an alternative to the current confirmation and
affirmation processing in the IID system. The matching feature will
match trade data received from the broker-dealer with institution
instructions received from the institution. The results of the
matching will be reported through the distribution of output reports
to the broker-dealer, the agent, and the institution. Securities
Exchange Act Release No. 33466 (January 12, 1994), 59 FR 3139 [File
No. SR-DTC-93-07]. At present, however, matching is not available
through the enhanced IID system, and DTC has not yet filed a
proposed rule change with the Commission seeking approval of the
matching option.
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MSTC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act and the rules and regulations
thereunder because the rule proposal will facilitate the prompt and
accurate clearance and settlement of securities transactions.
(B) Self-Regulatory Organization's Statement on Burden on Competition
MSTC does not believe that the proposed rule change will have an
impact on or impose a 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 have been solicited or received. MSTC will
notify the Commission of any written comments received by MSTC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Section 17A(b)(3)F\7\ of the Act requires the rules of a clearing
agency be designed to foster cooperation and coordination with persons
engaged in the clearance and settlement of securities transactions. The
Commission believes that MSTC's proposal to expand its interface with
DTC's IID System should help cooperation and coordination because the
proposal will enable MSTC participants to utilize DTC's IID system's
interactive inquiry and affirmation capability and to access DTC's SID.
The proposal also will provide uniformity in depository processing of
institutional trade recording and settlement and should help MSTC
participants to settle institutional trades in a T+3 settlement cycle.
\7\15 U.S.C. 78q-1(b)(3)(F) (1988).
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MSTC has requested that the Commission find good cause for
approving the proposed rule change prior to the thirtieth day after the
date of publication of notice of the filing. The Commission finds good
cause for so approving the proposed rule change because timely
settlement of institutional trades is critical to the successful
conversion to T+3, and accelerated approval will allow MSTC
[[Page 24940]] participants to become familiar with and utilize the new
functions available through MSTC's expanded interface with DTC's IID
system prior to the implementation of T+3 settlement.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submission
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. Copies
of the submissions, 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 5th Street NW., Washington,
DC 20549. Copies of such filings will also be available for inspection
and copying at the principal office of MSTC. All submissions should
refer to the file number SR-MSTC-95-06 and should be submitted by May
31, 1995.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-MSTC-95-06) be, and hereby
is, approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
\8\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-11442 Filed 5-9-95; 8:45 am]
BILLING CODE 8010-01-M