[Federal Register Volume 60, Number 229 (Wednesday, November 29, 1995)]
[Notices]
[Pages 61280-61281]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29151]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36501; File No. SR-PHLX-95-50]


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

November 21, 1995.
    On July 3, 1995, the Philadelphia Stock Exchange, Inc. (``PHLX'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposal to amend PHLX Rule 722(c)(6), ``Time Within 
Which Margin or `Mark-to-Market' Must Be Obtained,'' to reduce from 
seven business days after the trade date to five business days after 
the trade date the time in which a customer must either pay for a long 
foreign currency option (``FCO'') position or post initial margin for a 
short FCO position.

    \1\15 U.S.C. 78s(b)(1) (1988 & Supp. V 1993).
    \2\17 CFR Sec. 240.19b-4 (1994).
---------------------------------------------------------------------------

    Notice of the proposed rule change appeared in the Federal Register 
on August 24, 1995.\3\ No comments were received on the proposal.

    \3\See Securities Exchange Act Release No. 36114 (August 17, 
1995), 60 FR 44098.
---------------------------------------------------------------------------

    Currently, PHLX Rule 722(c)(6) provides that margin for a short 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.\4\ 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.

    \4\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 (``T + 3''). 
Accordingly, after June 7, 1995, the payment period for satisfying a 
margin call under Regulation T is five business days.
---------------------------------------------------------------------------

    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. 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 standard 
securities settlement time (prior to the effective date of Commission 
Rule 15c6-1) of five business days (``T + 5''). Within T + 5 reduced to 
T + 3, the Exchange proposes to conform its FCO margin rules to the 
reduced five business day time period by which margin or cash payment 
must be obtained on securities, including FCO options, pursuant to 
Regulation T.\5\

    \5\See note 4, supra. The Commission notes that PHLX Rule 
722(c)(6) establishes a maximum time period for the payment of 
margin. According to the PHLX, most Exchange members require payment 
for long FCO positions or margin for short FCO positions by the date 
following the trade.
---------------------------------------------------------------------------

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange and, in 
particular, the requirements of Section 6(b)(5)\6\ in that it is 
designed to protect investors and the public interest and to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities. Specifically, the proposal 
will make PHLX Rule 722(c)(6) consistent with Regulation T, as amended, 
which is in effect for FCOs as well as for other securities options, 
and provides that a margin call must be satisfied within one payment 
period (i.e., five business days) after the margin 

[[Page 61281]]
deficiency was created or increased. When the PHLX originally proposed 
margin requirements for FCOs, the Exchange incorporated the seven 
business day margin posting rule then required under Regulation T.\7\ 
Since the Board has decreased the Regulation T payment period, the 
Commission believes that it is reasonable for the PHLX to make a 
corresponding amendment to PHLX Rule 722(c)(6) so that the PHLX's rule 
will continue to be consistent with Regulation T.

    \6\15 U.S.C. Sec. 78f(b)(5) (1982).
    \7\See Securities Exchange Act Release No. 19313 (December 8, 
1982), 47 FR 54591 (December 17, 1982) (order approving File No. SR-
PHLX-81-4).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-PHLX-95-50) is approved.

    \8\15 U.S.C. Sec. 78s(b)(2) (1988).
---------------------------------------------------------------------------

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\

    \9\17 CFR 200.30-3(a)(12) (1994).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-29151 Filed 11-28-95; 8:45 am]
BILLING CODE 8010-01-M