[Federal Register Volume 61, Number 200 (Tuesday, October 15, 1996)]
[Notices]
[Pages 53773-53774]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26341]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37794; File Nos. SR-BSECC-96-02; SR-BSE-96-06]


Self-Regulatory Organizations; Boston Stock Exchange Clearing 
Corporation; Boston Stock Exchange, Inc.; Order Approving Proposed Rule 
Changes To Modify Specialists' Clearing Fund Requirements

October 7, 1996.
    On June 14, 1996, the Boston Stock Exchange Clearing Corporation 
(``BSECC'') and the Boston Stock Exchange, Inc. (``BSE'') each filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change (File Nos. SR-BSECC-96-02) and SR-BSE-96-06, respectively) 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ to modify specialists' clearing fund requirements. On 
July 23, 1996, BSECC and BSE each filed an amendment to its proposed 
rule change.\2\ Notices of the proposed rule changes were published in 
the Federal Register on August 16, 1996.\3\ No comment letters were 
received. For the reasons discussed below, the Commission is approving 
the proposed rule changes.
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    \1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\ Letters from Karen A. Aluise, Assistant Vice President, 
BSECC, to Mark Steffensen, Division of Market Regulation 
(``Division''), Commission (July 19, 1996) and Karen A. Aluise, 
Assistant Vice President, BSE, to Mark Stefensen, Division, 
Commission (July 19, 1996).
    \3\ Securities Exchange Act Release Nos. 37552 (August 9, 1996), 
61 FR 42669 (BSECC) and 37553 (August 9, 1996), 61 FR 42670 (BSE).
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I. Description

    BSECC's rule change amends BSECC Rule II, Section 1 relating to the 
maintenance and purpose of BSECC's clearing fund and BSE's rule change 
amends Chapter XXII, Section 2(f) of BSE's rules regarding specialists' 
liquidating equity deposits.\4\ Specifically, Section 2(f) of Chapter 
XXII of BSE's rules requires specialists to maintain a liquidating 
equity deposit of $200,000 per specialist account with BSECC (``minimum 
equity requirement''). Section 2 of BSECC Rule II requires that all 
members contribute $6,000 to the clearing fund.\5\ Under the rule 
change, BSECC Rule II, Section 1 has been amended to provide that 
specialists are deemed to have met their clearing fund requirement 
through the minimum equity requirement and that the amount of the 
minimum equity requirement equal to the required clearing fund deposit 
is deemed to be the clearing fund deposit. Additionally, Section 2(f) 
of Chapter XXII of BSE's rules has been amended to provide that the 
minimum equity requirement can be utilized by BSECC and is deemed to be 
clearing fund up to the amount required to be deposited as clearing 
fund pursuant to BSECC's rules. This provision only applies to 
specialists that are members of BSECC.
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    \4\ Pursuant to BSECC's rules, a specialist is a BSECC member 
that acts as a specialist on the floor of BSE and on whose behalf 
BSECC guarantees settlement of all trades executed by such member on 
the floor of BSE. Pursuant to Chapter XV, Section 1 of BSE's rules, 
a BSE member may be registered as a specialist upon application to 
and with the consent of BSE.
    \5\ BSECC Rule II, Section 5 specifies the use and application 
of clearing fund. Paragraph (d) of that section provides that 
clearing fund may be used to discharge a member's liability to 
BSECC, BSE, or Boston Stock Exchange Service Corporation.
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II. Discussion

    The Commission believes that the proposed rule changes are 
consistent with the obligations of BSECC under Section 17A of the Act 
and the obligations of BSE under Section 6 of the Act. Among other 
things, Section 6(b)(5) \6\ of the Act requires that the rules of a 
national securities exchange be designed to protect investors and the 
public interest and Section 17A(b)(3)(F) \7\ of the Act requires that 
the rules of a clearing agency be designed to assure the safeguarding 
of securities and funds which are in the custody or control of the 
clearing agency or for which it is responsible. Permitting

[[Page 53774]]

specialists to satisfy their clearing fund requirements through the 
minimum equity requirements should not impair BSECC's obligations to 
safeguard securities and funds in its custody or control. Moreover, the 
rule changes clarify that a portion of the minimum equity requirement 
will be deemed clearing fund for purposes of BSECC's rules and can be 
utilized by BSECC according to BSECC Rule II, Section 5 which governs 
the use and application of clearing fund deposits. This should help to 
protect BSECC from the risks associated with specialists' default and 
thereby should allow BSE to protect investors and the public interest.
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    \6\ 15 U.S.C. Sec. 78f(b)(5) (1988).
    \7\ 15 U.S.C. Sec. 78q-1(b)(3)(F) (1988).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule changes are consistent with the requirements of the Act 
and in particular Sections 6 and 17A of the Act and the rules and 
regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule changes (File No. SR-BSECC-96-2 and SR-BSE-96-
06) be and hereby are approved.

    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) (1996).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-26341 Filed 10-11-96; 8:45 am]
BILLING CODE 8010-01-M