[Federal Register Volume 61, Number 49 (Tuesday, March 12, 1996)]
[Notices]
[Pages 10050-10051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5843]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36931; File No. SR-NSCC-96-05]


Self Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change Modifying the 
Automated Customer Account Transfer Service to Facilitate the Transfer 
of Shares Being Tracked in the Initial Public Offering Tracking System

March 6, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 27, 1996, the 
National Securities Clearing Corporation (``NSCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III below, which items have 
been prepared primarily by NSCC. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.

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

    NSCC proposes to modify its rules and procedures relating to its 
Automated Customer Account Transfer Service (``ACATS'') to facilitate 
the transfer of shares which are purchased in an initial public 
offering (``IPO shares'') and which are being tracked in The Depository 
Trust Company's (``DTC'') IPO tracking system.\2\

    \2\ This filing is made in conjunction with DTC's proposed rule 
change seeking to implement the IPO tracking system. The IPO 
tracking system will allow lead managers and syndicate members of 
equity underwritings to monitor flipping of new issues in an 
automated bookentry environment. For a complete description of the 
IPO tracking system, refer to Securities Exchange Act Releaser No. 
36897 (February 27, 1996), [SR-DTC-95-27] (notice of filing of 
proposed rule change seeking to implement the IPO tracking system).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NSCC 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. NSCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of such 
statements.\3\

    \3\ The Commission has modified the text of these statements.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The proposed rule change will notify NSCC's Rule 50 (ACATS) so that 
Rule 50 states that shares to be transferred through ACATS that are 
being tracked through DTC's IPO tracking system will not be entered 
into NSCC's Continuous Net Settlement (``CNS'') accounting operation 
even if such shares are CNS eligible.\4\ Rule 50 also will state that 
NSCC will prepare ACATS receive and deliver orders for such shares.

    \4\ CNS eligible securities are those securities that are 
eligible for transfer on the books of a securities depository 
registered with the Commission under Section 17A of the Act and that 
are contained in a list maintained by NSCC as subject to clearance 
and settlement in its CNS system.
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    Under DTC's proposed IPO tracking system, broker-dealers will have 
an IPO control account at DTC for IPO shares and a free account for 
shares purchased in the secondary market. The seg regated accounts aid 
in tracking the movement of IPO shares.
    In the CNS system, deliver obligations must be made from the free 
account. If IPO shares for which there is an ACATS deliver obligation 
were to settle in CNS, the shares would have to be moved out of the 
segregated IPO control account and into the member's free account. The 
IPO tracking system would register the movement from the IPO control 
account into the free account as a flip \5\ and would no longer be able 
to track the shares.

    \5\ Flipping occurs during an IPO when a syndicate's lead 
manager is supporting the IPO with a stabilization bid, which is 
intended to keep the price of the issue from dropping below its 
initial offering price, and securities that had been distributed to 
investors are resold by those investors back to the syndicate.
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    NSCC's proposed rule change will require IPO shares transferred 
through ACATS to be delivered ex-CNS (i.e., outside of the CNS system). 
The shares will be delivered pursuant to DTS's new IPO customer account 
transfer function. The shares will continue to be tracked and will not 
register as flipped even though they are subject to an ACATS deliver 
obligation.
    NSCC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act \6\ because the change will 
facilitate efficiency and safety in the clearance and settlement of 
securities transactions. Furthermore, NSCC believes the proposed rule 
change will permit DTC's IPO tracking system to achieve its maximum 
potential and expects to implement these changes concurrently with the 
implementation of DTC's IPO tracking system.

    \6\ 15 U.S.C. 78q-1 (1988)
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NSCC does not believe that the proposed rule change will have an 
impact on or impose a burden on competition.

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

    No written comments relating to the proposed rule change have been 
solicited or received. NSCC will notify the Commission of any written 
comments received by NSCC.

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 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.

[[Page 10051]]


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 with held from the public in accordance with provisions of 
5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Section 450 Fifth Street NW., Washington, 
DC 20549. Copies of such filing will also be available for inspection 
and copying at the principal office of NSCC. All submissions should 
refer to File No. SR-NSCC-96-05 and should be submitted by April 2, 
1996.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\

    \7\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-5843 Filed 3-11-96; 8:45 am]
BILLING CODE 8010-01-M