[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)
------------------------------------------------------------------------
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
------------------------------------------------------------------------

    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