[Federal Register Volume 63, Number 207 (Tuesday, October 27, 1998)]
[Notices]
[Pages 57347-57348]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28645]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40571; File No. SR-NYSE-98-30]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. Relating to Customer
Account Transfer Contracts
October 19, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 28, 1998, the New York Stock Exchange, Inc. (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. 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).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The proposed rule change consists of amendments to existing
Exchange Rule 412 (``Customer Account Transfer Contracts'') and its
stated interpretation. The text of the proposed rule change is as
follows (additions are italicized; deletions are bracketed):
* * * * *
Customer Account Transfer Contracts
Rule 412. (a) no change.
(b)(1) and (b)(2) no change.
(b)(3) Within [four (4)] three (3) business days following the
validation of a transfer instruction, the carrying organization must
complete the transfer of the customer's securities account to the
receiving organization. The carrying organization and the receiving
organization must establish fail to receive and fail to deliver
contracts at then current market values upon their respective books of
account against the long/short positions (including options) in the
customer's securities account that have not been physically delivered/
received and the receiving/carrying organization must debit/credit the
related money account. The customer's securities account shall
thereupon be deemed transferred.
NYSE Interpretation of Rule 412(b)(1)
102 Exceptions to Transfer Instruction
A carrying organization may not take exception to a transfer
instruction, and therefore deny validation of the transfer instruction,
because if a dispute over securities positions or the money balance in
the account to be transferred. Such alleged discrepancies
notwithstanding, the carrying organization must transfer the securities
positions and/or money balance reflected on its books for the account.
An organization may take exception to a transfer only if:
1-9 no change.
[10. account type mismatch (receiving organization's account type
does not correspond to carrying organization's);]
[11.]10. missing authorization signature (TIF requires an
additional client signature or successor custodian's acceptance
signature or custodial approval); or
[12.]11. client takes possession (entire account is in transfer to
deliver direct to customer).
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange 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. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Rule 412 regulates the transfer of customer accounts from one
member organization to another. Such transfers
[[Page 57348]]
are generally effected through the Automated Account Transfer Service
(``ACATS'') which is a system administered by the National Securities
Clearing Corporation (``NSCC''). Since ACATS's inception in 1985,
numerous enhancements to the system and to Rule 412 have allowed for
faster and more efficient transfers of customer accounts. As a result
of the work of an industry committee, the ACATS system is in the
process of being redesigned to enhance and further expedite the
transfer process. The purpose of the proposed rule change is to update
Rule 412 to reflect these upgrades.
Currently, the ACATS system and Rule 412 provide for a seven day
cycle to transfer a customer account. The proposed enhancements would
reduce this cycle to six days. To illustrate, the current ``Normal
Transfer Stage'' function cycle breaks down as follows:
------------------------------------------------------------------------
Current Proposed
(days) (days)
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INPUT TIF \3\ (Receiving Organization) AND VALIDATE
(Delivering Organization).......................... 3 3
ASSET REVIEW (Receiving Organization)............... 2 1
SETTLEMENT PREP (ACATS)............................. 1 1
SETTLEMENT (ACATS).................................. 1 1
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The proposed rule changes would reduce the total post-validation
transfer period from four to three days by streamlining the ASSET
REVIEW portion of the transfer period from two days to one day.
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\3\ Transfer Initiation Form. A basically standardized industry
form submitted by the receiving organization to the delivering
organization to request customer account transfers.
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In addition, the Exchange proposes to amend an interpretation to
Rule 412 with respect to ``reject codes.'' The interpretation currently
enumerates the reasons for which a member organization may reject or
take exception to an account transfer request. The proposed amendment
deletes one current ``reason'' regarding ``Account Type Mismatch'' due
to its limited usefulness arising from inconsistencies among member
organizations in defining account types.
It is anticipated that ACATS system changes will become operational
on January 25, 1999. Therefore, the Exchange proposes that the proposed
rule changes become effective in accordance with the effective date of
the ACATS system changes.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \4\ that an exchange have rules that
are designed to promote just and equitable principles of trade, to
remove impediments to and to perfect the mechanism of a free and open
market and a national market system and, in general, to protect
investors and the public interest. The proposed rule change is designed
to accomplish these ends by reducing the time frame allowed for the
transfer of customer accounts from one member organization to another.
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\4\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within 35 days of the publication of this notice in the Federal
Register or within such longer period (i) as the Commission may
designate up to 90 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 Exchange consents, the Commission will:
(A) By order approve the 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, including whether the proposal is
consistent with the Act. 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
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for inspection and copying at the Commission's
Public Reference Room. Copies of such filing will also be available for
inspection and copying at the principal office of the NYSE. All
submissions should refer to File No. SR-NYSE-98-30 and should be
submitted by November 17, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-28645 Filed 10-26-98; 8:45 am]
BILLING CODE 8010-01-M