[Federal Register Volume 60, Number 106 (Friday, June 2, 1995)]
[Rules and Regulations]
[Pages 28716-28718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13465]



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[[Page 28717]]

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200 and 240

[Release No. 34-35775; File No. S7-3-94]


Recordkeeping and Reporting Requirements for Trading Systems 
Operated by Brokers and Dealers; Delegation of Authority

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; change of effective date.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
postponing the effective date that registered broker-dealer sponsors of 
certain automated trading systems (as defined in Rule 17a-23) 
(``Broker-Dealer Trading Systems'') must comply with the recordkeeping 
requirements of Rule 17a-23 under Section 17 of the Securities Exchange 
Act of 1934 from June 1, 1995 to July 1, 1995, in order to facilitate 
the process of conversion to a standard trade settlement time frame of 
three business days after the trade date. In addition, the Commission 
is amending its regulation concerning Organization and Program 
Management1 to delegate authority to the Director of the Division 
of Market Regulation (``Division'') to grant exemptions to any sponsor, 
or class of sponsors, of a Broker-Dealer Trading System or Systems from 
any or all of the provisions of Rule 17a-23, either unconditionally or 
on specified terms and conditions, if the Director of the Division 
determines that such exemption is consistent with the public interest 
or the protection of investors.

    \1\17 CFR 200.30-3.
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EFFECTIVE DATE: The effective date for Sec. 240.17a-23(c), which was 
published on December 28, 1994, 59 FR 66702, is postponed until July 1, 
1995. The effective date for the delegation of authority (Sec. 200.30-
3(a)(60)) will be June 2, 1995.

FOR FURTHER INFORMATION CONTACT: Sheila C. Slevin, Assistant Director, 
202/942-0796, or Elaine M. Darroch, Staff Attorney, 202/942-0798, 
Office of Automation and International Markets, Division of Market 
Regulation, Securities and Exchange Commission, 450 Fifth Street NW., 
Mail Stop 5-1, Washington, D.C. 20549.

SUPPLEMENTARY INFORMATION:

I. Introduction and Background

    The Commission today announced that it is changing the date for 
registered broker-dealer sponsors of certain automated systems to 
comply with recordkeeping requirements of Rule 17a-232 under 
Section 17 of the Act from June 1, 1995 to July 1, 1995; and (2) 
amending the Commission's regulation concerning Organization and 
Program Management to delegate to the Director of the Division the 
authority to grant exemptions from the requirements of Rule 17a-23.

    \2\17 CFR 240.17a-23.
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    Effective June 1, 1995, Rule 17a-23 and Form 17A-23 establish 
recordkeeping and reporting requirements for registered brokers and 
dealers that operate certain automated trading systems (``Broker-Dealer 
Trading System'' or ``BDTS'').3 Under Rule 17a-23, registered 
broker-dealers that sponsor BDTSs are required to maintain participant, 
volume, and transaction records. In addition, Rule 17a-23 and Form 17A-
23 require system sponsors to submit three reports to the Commission 
and, under certain circumstances, to an appropriate self-regulatory 
agency: (1) An initial system description (Part I of Form 17A-23), 
updated as necessary to reflect material changes (Part IA of Form 17A-
23); (2) quarterly volume summaries (Part II of Form 17A-23); and (3) 
notice of ceasing to operate the system (Part III of Form 17A-23). At 
final adoption, the Commission modified Rule 17a-23 to allow sponsors 
of Broker-Dealer Trading Systems currently operating on June 1, 1995 to 
submit the information required by Part I of Form 17A-23 no later than 
July 1, 1995 (one month following the effective date). Due to 
extenuating circumstances, the Division has determined that system 
sponsors also should be allowed to delay compliance with the 
recordkeeping provisions of Rule 17a-23(c) until July 1, 1995.

    \3\Securities Exchange Act Release No. 35124 (December 20, 
1994), 59 FR 66702.
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II. Extension of Deadline for Recordkeeping Requirements

    The Commission is extending the deadline for complying with 
recordkeeping requirements of Rule 17a-23 from June 1, 1995 to July 1, 
1995. The effective date for provisions of Rule 17a-23 other than Rule 
17a-23(c) remains June 1, 1995, unless otherwise noted in the final 
rule published December 28, 1994 (59 FR 66702). As noted previously, at 
final adoption the Commission modified the Rule to allow sponsors of 
BDTSs currently operating on June 1 to delay compliance with the 
reporting requirements of Rule 17a-23(d) until July 1, 1995. BDTS 
sponsors have requested that the Commission similarly delay 
effectiveness of the recordkeeping requirements of the Rule.
    BDTSs have informed the Commission that reconfiguring their 
automated systems to comply with the recordkeeping requirements of Rule 
17a-23(c) by June 1, 1995 would be difficult, because a significant 
portion of their automation resources are committed to implementing 
system changes necessary to comply with Rule 15c6-14 by June 7, 
1995. Rule 15c6-1 establishes the standard settlement time frame to be 
three business days after the trade date (``T+3''). In some cases, 
sponsors have informed the Commission that compliance with Rule 17a-
23(c) recordkeeping requirements by June 1, 1995 may delay or adversely 
affect the broker-dealers' implementation of system changes necessary 
to comply with T+3. In recognition of the importance of T+3 in reducing 
settlement risk, and in reducing the liquidity risk among the 
derivatives and the cash markets, and because the conversion to T+3 
will affect a substantial portion of the securities industry, the 
Commission believes it is important to allow the T+3 conversion to take 
place in an orderly fashion.

    \4\17 CFR 240.15c6-1.
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    Accordingly, the Commission is postponing the effective date for 
Rule 17a-23(c) until July 1, 1995.

III. Delegation of Authority to the Director of the Division of Market 
Regulation

    The Commission currently has the authority under Rule 17a-
23(i)5 to grant exemptions to any sponsor of a Broker-Dealer 
Trading System from any or all of the provisions of Rule 17a-23, either 
unconditionally or on specified terms and conditions, if the Commission 
determines that the exemption is consistent with the public interest 
and the protection of investors. The Commission has determined it 
should revise its rules to delegate this authority to the Director of 
the Division of Market Regulation.

    \5\17 CFR 240.17a-23(i).
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    Accordingly, the Commission announced today an amendment to Rule 
30-3 of its regulation concerning Organization and Program Management 
by adding paragraph (a)(60), which authorizes the Director of the 
Division, pursuant to Rule 17a-23(i),6 to grant exemptions to any 
sponsor, or class of sponsors, of a Broker-Dealer Trading System or 
Systems from any or all of the provisions of Rule 17a-23, either 
[[Page 28718]] unconditionally or on specified terms and conditions, if 
the Director of the Division determines that such exemption is 
consistent with the public interest or the protection of investors.

    \6\17 CFR 240.17a-23(i).
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    The delegation of this authority will conserve the resources of the 
Commission and the Division, by providing for the Division to handle 
exemption requests rather than requiring exemption requests to be 
handled by the Commission itself. In any particular case where the 
Director of the Division believes it appropriate, the Director of the 
Division may submit a request for an exemption to the Commission for 
review.
    The Commission finds, in accordance with Section 553(b)(A) of the 
Administrative Procedures Act,7 that the amendment to Rule 30-3 
relates solely to agency organization, procedure, or practice, and does 
not relate to a substantive rule. Accordingly, requirements for notice, 
opportunity for public comment, and publication of the amendment prior 
to its effective date would not apply in these circumstances.

    \7\5 U.S.C. 553(b)(A).
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List of Subjects in 17 CFR Part 200

    Administrative practice and procedure, Authority delegation 
(Government agencies), Organization and functions (Government 
agencies).

Text of Amendment

    In accordance with the foregoing, Title 17, Chapter II of the Code 
of Federal Regulations is amended as follows:

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS

Subpart A--Organization and Program Management

    1. The authority citation for part 200, subpart A, continues to 
read in part as follows:

    Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 79t, 
77sss, 80a-37, 80b-11, unless otherwise noted.
* * * * *
    2. Section 200.30-3 is amended by adding paragraph (a)(60) to read 
as follows:


Sec. 200.30-3   Delegation of authority to Director of Division of 
Market Regulation.

* * * * *
    (a) * * *
    (60) To grant exemptions from Rule 17a-23 (Sec. 240.17a-23 of this 
chapter), pursuant to Rule 17a-23(i) (Sec. 240.17a-23(i) of this 
chapter).
* * * * *
    Dated: May 26, 1995.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-13465 Filed 6-1-95; 8:45 am]
BILLING CODE 8010-01-P