[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
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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