[Federal Register Volume 61, Number 159 (Thursday, August 15, 1996)]
[Notices]
[Pages 42457-42458]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20786]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37539; File No. SR-NSCC-96-10]


Self-Regulatory Organizations; National Securities Clearing 
Corporation; Order Approving a Proposed Rule Change to Permit 
Establishment of Alternative Settlement Cycles for Mutual Fund 
Transactions Through the Fund/SERV System

August 8, 1996.
    On April 4, 1996, National Securities Clearing Corporation filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change (File No. SR-NSCC-96-10) under Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ On May 8, 1996, NSCC 
filed an amendment to the proposed rule change.\2\ Notice of the 
proposal was published in the Federal Register on June 26, 1996.\3\ No 
comment letters were received. For the reasons discussed below, the 
Commission is approving the proposed rule change.
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    \1\ 15 U.S.C. 78(b)(1) (1988).
    \2\ Letter from Julie Beyers, Associate Counsel, NSCC, to Jerry 
Carpenter, Associate Director, Division of Market Regulation, 
Commission (May 8, 1996).
    \3\ Securities Exchange Act Release No. 37341 (June 20, 1996), 
61 FR 33159.
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I. Description

    The proposed rule change enables NSCC members using NSCC's Fund/
SERV system to select settlement cycles for mutual fund 
transactions.\4\ The Fund/SERV system automatically establishes a 
settlement cycle and assigns a settlement date to a mutual fund 
transaction based on the transaction type.\5\ The proposed rule change 
permits mutual fund transactions to settle on an expanded or 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 processing related to that particular transaction and 
could be as short as the same day or as long as seven business days.
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    \4\ 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.
    \5\ For example, transactions involving shares of traditional 
load mutual funds normally settle on a three business day settlement 
cycle whereas transactions for shares of the same fund involving 
401K accounts normally settle on a next day settlement cycle.
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    When a member submits a mutual fund order and desires to establish 
a settlement cycle other than that established by the Fund/SERV system, 
the member will 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 has the opportunity to accept or reject the 
transaction. The transaction also will be rejected by NSCC if the 
specified settlement cycle is longer than seven business days. Once the 
mutual fund transaction is accepted, NSCC will process the transaction 
in accordance with the specified settlement cycle.

II. Discussion

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency, such as NSCC, be designed to promote the prompt and 
accurate clearance and settlement of securities

[[Page 42458]]

transactions.\6\ The proposal gives to participants the flexibility to 
establish alternative settlement cycles when agreed to by the parties. 
Without such an alternative, parties to a transaction with a 
nonstandard settlement cycle would either need to submit the trade to 
FUND/SERV at a later date (to get an extended settlement cycle) or to 
settle the trade outside of Fund/SERV. The proposal should allow mutual 
fund transactions to settle more efficiently and may encourage the 
settlement of more transactions through the automated Fund/SERV system. 
Thus, the proposal promotes the prompt and accurate clearance and 
settlement of mutual fund transactions.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular with the requirements of Section 17A of the Act and the 
rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (File No. SR-NSCC-96-10) be and 
hereby is approved.

    \7\ 15 U.S.C. 78s(b)(2).
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    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-20786 Filed 8-14-96; 8:45 am]
BILLING CODE 8010-01-M