[Federal Register Volume 60, Number 188 (Thursday, September 28, 1995)]
[Notices]
[Pages 50224-50225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24031]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36258; File No. SR-NSCC-95-09]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving Proposed Rule Change Relating to a 
Modification to its Procedures to Allow the Processing of Voluntary 
Reorganizations with Protect Periods of Three Days or Greater

September 21, 1995.
    On July 27, 1995, National Securities Clearing Corporation 
(``NSCC'') filed a proposed rule change (File No. SR-NSCC-95-09) 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 August 
22, 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. 36097 (August 11, 1995), 
60 FR 43629.
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I. Description

    The proposed rule change modifies NSCC's Procedures, Section 
VII.H.4(b), to allow the processing of voluntary reorganizations (i.e., 
tender or exchange offers) with protect periods \3\ of three days or 
greater through NSCC's Continuous Net Settlement (``CNS'') system. 
Previously, only voluntary reorganizations with protect periods of five 
days or greater were eligible for NSCC's CNS system. All other 
voluntary reorganizations with protect periods of four days or less had 
to be settled on a trade by trade basis through NSCC's balance order 
system. On June 7, 1995, Rule 15c6-1 \4\ adopted under the Act became 
effective requiring that most broker-dealer securities transactions be 
settled in three business days (``T+3''). Since the implementation of 
T+3, some voluntary reorganizations have had protect periods of three 
days rather than five days.

    \3\ A protect period is generally understood to mean the amount 
of time after the expiration of a tender or exchange offer that the 
owner or record holder that has elected to participate in the offer 
has to submit the shares to the tender agent.
    \4\ 17 CFR 240.15c6-1 (1994).
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II. Discussion

    The Commission believes that NSCC's proposed rule change is 
consistent with Section 17A of the Act.\5\ Specifically, Section 
17A(b)(3)(F) \6\ states that the 

[[Page 50225]]
rules of a clearing agency must be designed to promote the prompt and 
accurate clearance and settlement of securities transactions.

    \5\ 15 U.S.C. 78q-1 (1988).
    \6\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
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    Currently, if an entity making a tender or exchange offer wants a 
protect period of three days, the entire reorganization must be settled 
on a trade-by-trade basis. By including these transactions within the 
CNS system, the rule change enhances the settlement procedure for such 
trades. Thus, the rule promotes the prompt and accurate clearance and 
settlement of securities transactions. Further, by including 
reorganizations with protect periods of three days within the CNS 
system, the proposed rule change may encourage the use of three day 
protect periods.\7\ By limiting the time the tender or exchange offer 
remains unsettled, the goal of risk reduction contemplated by Rule 
15c6-1 is furthered.

    \7\ Buyers sometimes purchase securities on the last day of a 
tender offer and tender their shares that day. Such purchasers can 
not deliver the securities until their purchase transactions settle. 
Before the implementation of T+3, a three day protect period was not 
practical because purchasers would not receive their securities 
until the fifth business day after the trade date.
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III. Conclusion

    For the reasons stated above, the Commission finds that NSCC's 
proposal is consistent with Section 17A of the Act.\8\

    \8\ 15 U.S.C. 78q-1 (1988).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (File No. SR-NSCC-95-09) be and 
hereby is approved.

    \9\ 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.\10\

    \10\ 17 CFR 200.30(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-24031 Filed 9-27-95; 8:45 am]
BILLING CODE 8010-01-M