[Federal Register Volume 61, Number 124 (Wednesday, June 26, 1996)]
[Notices]
[Pages 33159-33160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16293]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37341; File No. SR-NSCC-96-10]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Notice of Filing of Proposed Rule Change To Permit 
Establishment of Alternative Settlement Cycles for Mutual Fund 
Transactions Through the Fund/SERV System

June 20, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 4, 1996, National 
Securities Clearing Corporation (``NSCC'') filed with the Securities 
and Exchange Commission (``Commission'') the proposed rule change and 
described in Items I, II, and III below, which items have been prepared 
primarily by NSCC. On May 8, 1996, NSCC filed an amendment to its 
proposed rule change.\2\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1) (1988).
    \2\ Letter from Julie Beyers, Associate Counsel, NSCC, to Jerry 
Carpenter, Assistant Director, Division of Market Regulation, 
Commission (May 8, 1996).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change will modify NSCC's Rules to enable NSCC 
members using NSCC's Fund/SERV system to establish settlement cycles 
for mutual fund transactions other than that which would be 
automatically assigned by Fund/SERV.

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\
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    \3\ The Commission has modified parts 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 purpose of the proposed rule change is to enable NSCC members 
using NSCC's Fund/SERV system to establish settlement cycles for mutual 
fund transactions other than that which would be automatically assigned 
by Fund/SERV. Fund/SERV is an NSCC service that permits NSCC members to 
process and to settle on an automated basis mutual fund purchase and 
redemption orders and to transmit registration instructions.
    Currently, the Fund/SERV system automatically establishes a 
settlement cycle and assigns a settlement date to a mutual fund 
transaction based on the underlying security type. The proposed rule 
change will permit mutual fund transactions to settle on an expanded or

[[Page 33160]]

shortened settlement cycle upon agreement of the submitting parties. 
The date established by the submitting parties for a transaction will 
be the date used for all trade processing relating to that particular 
transaction and could be as short as the same day or as long as seven 
business days.
    As a result of the expansion of the types of businesses conducted 
by broker-dealers, the mutual fund industry has requested that NSCC 
modify the Fund/SERV system to enable broker-dealers to establish 
settlement dates with respect to specific transactions. For example, a 
transaction involving shares of traditional load mutual funds normally 
settles on a three business day settlement cycle, whereas a transaction 
for shares of the same fund involving a 401K account \4\ normally 
settles on a next day settlement cycle. The proposed modifications to 
the Fund/SERV system will allow NSCC members to make an adjustment to 
the settlement cycle for mutual fund transactions in order to 
accommodate the need for different settlement cycles.
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    \4\ A 401K account is a cash or deferred profit sharing plan as 
described in Section 401(k) of the Internal Revenue Code of 1986, as 
amended.
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    Under the proposed rules, a member which submits a mutual fund 
order and desires to establish a settlement cycle other than that 
established by the Fund/SERV system would include in the order data the 
date on which the transaction is to settle and a reason code for 
modifying the settlement cycle. The contraparty would then have the 
opportunity to accept or to reject the transaction. The transaction 
also would be rejected by NSCC if the specified settlement cycle is 
longer than seven business days. Once accepted NSCC will process the 
mutual fund transaction in accordance with the specified settlement 
cycle.
    The proposed rule change is consistent with the requirements of 
Section 17A of the Act, and the rules and regulations thereunder 
because it will facilitate the prompt and accurate clearance and 
settlement of securities transactions.\5\
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    \5\ 15 U.S.C. Sec. 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

    NSCC solicited comments from the Investment Company Institute 
Broker Dealer Advisory Committee on November 10, 1995. NSCC received 
one letter from Smith Barney \6\ requesting certain formatting 
features. Based on this letter, NSCC has made certain modifications to 
the Fund/SERV system. NSCC will notify the Commission of any additional 
written comments received.
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    \6\ Letter from Alan Rubin, Vice President, Smith Barney, to 
Chris Hayes, NSCC (January 15, 1996).
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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 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.

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, N.W., Washington, D.C. 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 withheld 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 Room in Washington, D.C. Copies of such 
filing will also be available for inspection and copying at the 
principal office of NSCC. All submissions should refer to the file 
number SR-NSCC-96-10 and should be submitted by July 17, 1996.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-16293 Filed 6-25-96; 8:45 am]
BILLING CODE 8010-01-M