[Federal Register Volume 60, Number 199 (Monday, October 16, 1995)]
[Notices]
[Pages 53652-53653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25510]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36352; File No. SR-MSRB-95-14]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of a Proposed Rule Change Relating to the 
Settlement Dates for ``When, As and If Issued'' Transactions, the 
Confirmation of Inter-Dealer Transactions, and Providing New Issue 
Information to Registered Securities Clearing Agencies

October 6, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 15, 1995, the 
Municipal Securities Rulemaking Board (``MSRB'') filed with the 
Securities and Exchange Commission (``Commission'') a proposed rule 
change (File No. SR-MSRB-95-14) as described in items I, II, and III 
below, which items have been prepared primarily by the MSRB. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

    \1\ 15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of the proposed rule is to amend MSRB rules G-12 and G-
34 to modify the requirements for the setting of settlement dates for 
``when, as and if issued'' transactions and for the confirmation of 
inter-dealer transactions. The proposal also seeks to modify and 
reorganize the requirements for providing new issue information to 
registered securities clearing agencies. Finally, the proposal seeks to 
make technical changes to rule language to clarify the different 
processing requirements for transactions that are eligible for 
automated comparison through the facilities of a registered clearing 
agency as opposed to those that are not eligible. The MSRB requests 
that the amendments be made effective thirty days after approval by 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 MSRB 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 MSRB has prepared summaries, set forth in sections 
(A), (B), and (C) below, of the most significant aspects of such 
statements.\2\

    \2\ The Commission has modified the text of the summaries 
submitted by the MSRB.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    On February 28, 1995, the Commission approved amendments to MSRB 
rules G-12(b) and G-15(b) redefining regular-way settlement as three 
rather than five business days (``T+3 settlement'').\3\ Since that 
time, the MSRB has been reviewing its rules to determine other 
appropriate changes to accommodate T+3 settlement within the municipal 
securities market.

    \3\ Securities Exchange Act Release No. 35427 (February 28, 
1995), 60 FR 12798 [File No. SR-MSRB-94-10] (order approving 
proposed rule change).
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    The proposed rule change seeks to amend MSRB rules G-12 and G-34 to 
modify the requirements for setting settlement dates for ``when, as and 
if issued'' transactions and for the confirmation of inter-dealer 
transactions. The proposed change also seeks to modify and reorganize 
the requirements for providing new issue information to registered 
securities clearing agencies. Finally, the proposal also seeks to make 
technical changes to rule language to clarify the different processing 
requirements for transactions that are eligible for automated 
comparison through the facilities of a registered clearing agency as 
opposed to those that are not eligible. These amendments seek to 
advance T+3 settlement in the municipal securities market and are 
designed generally to facilitate automated clearance and settlement of 
municipal securities and to support the MSRB's Transaction Reporting 
Program.\4\

    \4\ MSRB rule G-14 sets forth the Transaction Reporting 
Procedures for inter-dealer transactions.
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    MSRB rule G-12(f) requires all inter-dealer transactions eligible 
for automated comparison to be compared in an automated comparison 
system operated by a registered clearing agency.\5\ Under the proposed 
rule change, revised MSRB rule G-12(b) would require that the 
settlement date for when, as and if issued (``when-issued'') 
transactions eligible for automated comparison not be earlier than two 
business days after notification of the initial settlement date for the 
issue is provided by the managing underwriter to the register clearing 
agency. These changes reflect current capabilities of the automated 
comparison system to process when-issued transactions.

    \5\ MSRB rule G-12(b) requires the underwriter to provide the 
initial settlement date for a new issue to the registered clearing 
agency offering automated comparison services as soon as the initial 
settlement date is known or immediately upon a change. This 
requirement continues in effect under the proposed rule change by 
cross-reference in revised rule G-12(b)(2)(C) to new rule G-
34(a)(ii)(D)(2). Generally, the automated comparison system requires 
two days advance notice of the initial settlement date of an issue 
from the underwriter to process when-issued transactions for the 
underwriter and all other dealers.
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    MSRB rule G-12(b) currently requires that the settlement date of a 
when-issued transaction for the rare inter-dealer transactions not 
eligible for automated comparison not be earlier than the fifth 
business day following the date the physical confirmation indicating 
final settlement date is sent (six days for syndicate transactions).\6\ 
The proposed rule change would require that the settlement date for 
such ineligible when-issued transactions, including syndicate 
transactions, not be earlier than the third business day following the 
date that the confirmation indicating final settlement is sent.

    \6\ Nearly all new issue municipal securities are eligible for 
automated comparison with the exception of those that do not meet 
the CUSIP numbering eligibility requirements.
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    The proposed rule change also would amend MSRB rule G-12(c) 
concerning the sending of confirmations for inter-dealer transactions 
not eligible for automated comparison. For such ineligible when-issued 
transactions, the proposed rule change would reduce the time period for 
sending (1) the initial confirmation from two business days to one 
business day after trade date, and (ii) the final confirmation from 
five business days to three business days prior to final settlement. 
For regular-way transactions ineligible for automated comparison, the 
proposed rule change would change the requirement for sending a 
confirmation from one business day after trade date to trade date.
    The changes to rules G-12(b) and G-12(c) generally accelerate the 
timing for sending confirmations and allow for the settlement of when-
issued transactions in a shorter time frame. The MSRB 

[[Page 53653]]
believes that these changes will allow for more efficient clearance and 
settlement and will help conform the municipal securities market to the 
shorter settlement cycle.
    In addition, the proposed rule change would amend MSRB rule G-34 to 
require underwriters to submit interest rate and final maturity 
information about new issues to the registered clearing agency offering 
comparison services as soon as such information is known and would 
reformat the existing requirements of the rule. The MSRB is aware of 
instances in which incomplete or inaccurate security descriptions for 
new issue municipal securities are available in the initial days of 
trading in the issue. The MSRB's Transaction Reporting Program and 
participants in the municipal securities market rely on accurate and 
complete security descriptions in the automated comparison system. The 
new requirement is designed to ensure that the registered securities 
clearing agencies have the information necessary to provide accurate 
descriptions and to calculate accurately final money amounts. Because 
the MSRB's Transaction Reporting Program is linked to the National 
Securities Clearing Corporation's (``NSCC'') automated comparison 
system,\7\ the proposed amendment also will facilitate accurate prices 
and security descriptions in NSCC system.

    \7\ As set forth in detail in MSRB rule G-14, brokers, dealers, 
or municipal securities dealers must submit or cause the submission 
of specified transaction information for any transaction eligible to 
be compared in NSCC's automated system directly to NSCC or to 
another registered clearing agency linked with NSCC for the purpose 
of automated comparison.
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    The proposed rule change moves the requirement that underwriters 
provide the registered clearing agency with notification of settlement 
date as soon as it is known from rule G-12(b) to rule G-34. The 
placement of this requirement within rule G-34 is part of the MSRB's 
plan to include basic new issue requirements for underwriters within 
one rule.\8\ Finally, the proposed rule change also makes technical 
changes in rule language to clarify the different processing 
requirements for transactions that are eligible for automated 
comparison as opposed to those transactions that are ineligible for 
automated comparison.

    \8\ Rule G-34 currently requires underwriters, for new issue 
municipal securities: (1) to apply for CUSIP numbers; (ii) to apply 
for depository eligibility; and (iii) to communicate CUSIP numbers 
and the initial trade date to syndicate and selling group members.
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    As set forth in Section 15B(b)(2)(C) \9\ of the Act, the MSRB has 
the authority to adopt rules to foster cooperation with persons engaged 
in regulating, clearing, settling, processing information with respect 
to, and facilitating transactions in municipal securities. The MSRB 
also has the authority to adopt rules to remove impediments to and 
perfect the mechanism of a free and open market in municipal 
securities, and in general to protect investors and the public 
interest. The MSRB believes the proposed rule change is consistent with 
Section 15B(b)(2)(C) because the proposal should facilitate more 
efficient clearance and settlement and should assist the municipal 
securities market in conforming with T+3 settlement by fostering 
efficient and accurate reporting of transaction information and 
accelerating the confirmation and settlement time frames for when-
issued transactions.

    \9\ 15 U.S.C. 78o-4(b)(2)(C).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The MSRB does not believe that the proposed rule change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act because it would apply equally to all 
brokers, dealers, and municipal securities dealers.

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

    In April 1995, the MSRB published for comment an earlier version of 
the proposed rule change to rules G-12(b) and G-34. One comment letter 
was received in response to this request.\10\ The commentator was 
generally supportive of the proposed rule change. The proposed rule 
change was revised by the MSRB at its July 1995 meeting to add 
clarifying language to the amendments and to ensure consistency between 
the requirements of rule G-12(b) and G-12(c).

    \10\ In addition to submitting comments pertaining to two other 
proposed rule changes by the MSRB, Goldman, Sachs & Co. stated that 
it fully supports the amendments proposed in this rule filing (SR-
MSRB-95-14) but indicated that the mechanism for reporting prior to 
award both the interest rate and final maturity for any new issue 
will require some system developments. Letter from Edward C. 
Brisotti, Vice President, Operations Division, Goldman, Sachs & Co. 
to Judith A. Somerville, Uniform Practice Specialist, MSRB (May 31, 
1995).
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within thirty-five 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 ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the MSRB 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.
    The MSRB requests that the Commission delay effectiveness of the 
proposed rule change until thirty days after the approval by the 
Commission is published in the Federal Register to ensure that 
underwriting practices are in compliance with the rule change.

IV. Solicitation of Comments

    Interested people 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 submissions, 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 in the 
Commission's Public Reference Room. Copies of the filing will also be 
available for inspection and copying at the principal offices of the 
MSRB. All submissions should refer to File No. SR-MSRB-95-14 and should 
be submitted by November 6, 1995.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\11\

    \11\ 17 CFR 200.30-3(a)(12) (1994).
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Jonathan G. Katz,
Secretary.
[FR Doc. 95-25510 Filed 10-13-95; 8:45 am]
BILLING CODE 8010-01-M