[Federal Register Volume 60, Number 164 (Thursday, August 24, 1995)]
[Notices]
[Pages 44098-44099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20954]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36114; File No. SR-PHLX-95-50]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc., Relating to PHLX Rule 
722, ``Margins''

August 17, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on July 3, 
1995, the Philadelphia Stock Exchange, Inc. (``PHLX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Currently, PHLX Rule 722(c)(6), ``Time Within Which Margin or 
`Mark-to-Market' Must Be Obtained,'' provides that margin for a short 
foreign currency option (``FCO'') position in a customer account or 
full cash payment for a long FCO position in a customer account must be 
obtained within seven business days following the date on which the 
customer enters into the FCO position. Recently, the Board of Governors 
of the Federal Reserve System (``Board'') amended Regulation T under 
the Act to reduce from seven business days after the trade date to five 
business days after the trade date the amount of time in which a 
customer must meet initial margin calls or make full cash payment for 
securities.\1\ To be consistent with Regulation T, as amended, the PHLX 
proposes to amend Exchange Rule 722(c)(6) to reduce from seven business 
days to five business days the time in which a customer must either pay 
for a long FCO position or post initial margin for a short FCO 
position.

    \1\ Regulation T, as amended, provides that a margin call must 
be satisfied within one payment period after the margin deficiency 
was created or increased. Under Regulation T, a ``payment period'' 
is the number of business days in the standard securities settlement 
cycle in the United States, as defined in SEC Rule 15c6-1 under the 
Act, plus two business days. As of June 7, 1995, SEC Rule 15c6-1 
establishes a standard three business day settlement cycle for most 
securities transactions in the United States. Accordingly, after 
June 7, 1995, the payment period for satisfying a margin call under 
Regulation T is five business days.
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    The text of the proposed rule change is available at the Office of 
the Secretary, PHLX, and at the Commission.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
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.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change
    Commission Rule 15c6-1, which became effective on June 7, 1995,\2\ 
reduced the standard time for securities settlement from five business 
days (``T+5'') to three business days (``T+3''). At the same time, the 
Board amended Regulation T under the Act to define the payment period 
in which a margin call must be satisfied or a cash payment received as 
two business days after the standard securities settlement cycle. 
According to the PHLX, T+3 has impacted securities trading in many 
ways, primarily in the systems and procedures utilized by broker-
dealers, exchanges, and clearing agencies.

    \2\ 17 CFR 240.15c6-1.
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    In addition, the Exchange states that PHLX Rule 722 has been 
impacted by T+3. Specifically, PHLX Rule 722(c)(6) currently provides 
that FCO margin and cash payment must be obtained as promptly as 
possible but before the expiration of seven full business days 
following the trade date. This time period was originally established 
by allowing two days after the regular T+5 settlement time for 
securities. With T+5 reduced to T+3, the Exchange proposes to reduce 
the time period by which margin or cash payment must be obtained to 
five business days.
    The purpose of the proposed rule change is to reduce the payment 
period to correspond to the recent amendments to Regulation T. However, 
the Exchange notes that this time period is a maximum, as PHLX Rule 
722(c)(6) requires the payment of margin ``as promptly as possible.'' 
According to the PHLX, most Exchange member firms clearing FCO trades 
require payment to be paid or margin collected by the date following 
the trade.
    The Exchange believes that the proposal is consistent with Section 
6 of the Act, in general, and, in particular, with section 6(b)(5), in 
that it is designed to foster cooperation and coordination with persons 
engaged in regulating, clearing, settling, processing information with 
respect to, and facilitating transactions in securities, by reducing 
the time frame for margin or cash payment to reflect the reduced 
securities settlement time period.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The PHLX does not believe that the proposed rule change will impose 
any inappropriate burden on competition. 

[[Page 44099]]


(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    No written comments were either received or requested.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reason for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (a) By order approve such proposed rule change, or
    (b) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. Copies 
of the submission, 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 at the 
Commission's Public Reference Section, 450 Fifth Street NW., 
Washington, DC. Copies of such filing will also be available for 
inspection and copying at the principal office of the above-mentioned 
self-regulatory organization. All submissions should refer to the file 
number in the caption above and should be submitted by September 14, 
1995.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\3\

    \3\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-20954 Filed 8-23-95; 8:45 am]
BILLING CODE 8010-01-M