[Federal Register Volume 60, Number 100 (Wednesday, May 24, 1995)]
[Notices]
[Pages 27578-27579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12697]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35724; File No. SR-CSE-95-04]
Self-Regulatory Organizations; The Cincinnati Stock Exchange
Incorporated; Order Approving Proposed Rule Change Relating to
Implementation of a Three-Day Settlement Standard
May 17, 1995.
On April 4, 1995, The Cincinnati Stock Exchange Incorporated
(``CSE'') filed a proposed rule change (File No. SR-CSE-95-04) 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 April 17, 1995,
to solicit comments from interested persons.\2\ The Commission did not
receive any comments. As discussed below, this order approves the
proposed rule change.
\1\ 15 U.S.C. 78s(b) (1988).
\2\ Securities Exchange Act Release No. 35580 (April 7, 1995),
60 FR 19312.
---------------------------------------------------------------------------
I. Description
In October 1993, the Commission adopted Rule 15c6-1 under the Act
which will become effective June 7, 1995.\3\ The rule 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. Several of the CSE's rules are interrelated with the
standard settlement time frame. The purpose of the proposed rule change
is to amend CSE's rules in order that they are consistent with a T+3
settlement standard for securities transactions.
\3\ 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).
---------------------------------------------------------------------------
The following changes to CSE rules are needed to implement the new
settlement standard established by Rule 15c6-1. Rule 3.8(b)(1)(iii)
will require that members receive reasonable assurance from the
customer that a security will be delivered within three business days
of the execution of the order. Rule 3.8(b)(2) will require that members
note on order tickets that the customer has the ability to deliver
stock within three business days. Rule 11.4 will provide that
transactions in stocks (other than those made for ``cash'') shall be
``ex-dividend'' or ``ex-rights'' on the second business day preceding
the record date fixed by the company or the date of the closing of
transfer books except when the Board of Trustees of CSE rules
otherwise. When the record date or closing of transfer books occur upon
a day other than a business day, transactions in stocks shall be ``ex-
dividend'' or ``ex-rights'' on the third preceding business day.
CSE has requested that the proposed rule change become effective on
the same date as Rule 15c6-1, which will be June 7, 1995. The
transition from five day settlement to three day settlement will occur
over a four day period.\4\
\4\ 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 6 of the Act.\5\ 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. 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, the CSE's current rules based on
a T+5 settlement cycle will be inconsistent with this rule. This
proposal will amend the CSE's rules to harmonize them with the
Commission Rule 15c6-1 and with a T+3 settlement cycle.
\5\ 15 U.S.C. 78f (1988).
---------------------------------------------------------------------------
In addition, the Commission 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 the risk to clearing
corporations, their members, and public investors which is 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.\6\
\6\ The release adopting Commission Rule 15c6-1 stated, ``[T]he
value of securities positions can change suddenly causing a market
participant to default on unsettled positions. Because the markets
are interwoven through common members, default at one clearing
corporation or by a major market participant or end-user could
trigger additional failures resulting in risk to the national
clearance and settlement system.'' Securities Exchange Act Release
No. 33023 (October 6, 1993), 58 FR 52891.
---------------------------------------------------------------------------
IV. Conclusion
For the reasons stated above, the Commission finds that CSE's
proposal is consistent with Section 6 of the Act.\7\
\7\15 U.S.C. 78f (1988). [[Page 27579]]
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (File No. SR-CSE-95-04) be and
hereby is approved, effective June 7, 1995.
\8\ 15 U.S.C. 78s(b)(2) (1988).
---------------------------------------------------------------------------
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\9\
\9\ 17 CFR 200.30(a)(12) (1994).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-12697 Filed 5-23-95; 8:45 am]
BILLING CODE 8010-01-M