Federal Register / Vol. 62, No. 37 / Tuesday, February 25, 1997 / Notices 8477

8 17 CFR 200.30–3(a)(12)

1 15 U.S.C. 78s(b)(1).

2Securities Exchange Act Release No. 38115

(January 3, 1997), 62 FR 1351.

3Recently, NSCC amended its Procedure II(G) to

provide that failure to respond to a RECAPS

reconfirmation attempt shall result in the

transaction being DK’ed. Treating a failure to

respond to a RECAPS reconfirmation attempt as a

DK under NSCC’s rules extinguishes any rights of

the nonresponding member with respect to the

transaction.

4The word ‘‘promptly’’ in paragraph (b)(1) is

intended to be interpreted in accordance with the

nature and liquidity of the securities.

5 15 U.S.C. 78o–3(b)(6). 6 17 CFR 200.30–3(a)(12).

refer to the file number SR–GSCC–96–

14 and should be submitted by March

18, 1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–4607 Filed 2–24–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38309; File No. SR–NASD–

96–54]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Granting Approval

of a Proposed Rule Change Relating to

Reconfirmation and Pricing Services

February 19, 1997.

On December 20, 1996, the NASD

Regulation, Inc. (‘‘NASD Regulation’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change (File No. SR–

NASD–96–54) pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’).1 Notice of the proposal

was published in the Federal Register

on January 9, 1997.2 No comment letters

were received. For the reasons

discussed below, the Commission is

granting approval of the proposed rule

change.

I. Description

Several years ago, the National

Securities Clearing Corporation

(‘‘NSCC’’) began operating its

Reconfirmation and Pricing Service

(‘‘RECAPS’’) that permits NSCC

participants to submit their fail

transactions for reconfirmation and

repricing on a quarterly basis. Rule

11190 (formerly Section 69) of the

Uniform Practice Code (‘‘Code’’) of the

National Association of Securities

Dealers, Inc. (‘‘NASD’’) mandates that a

member which is a participant in a

registered clearing agency participate in

the clearing agency’s fail reconfirmation

and pricing service.

Even after a transaction is compared,

fails can occur for many reasons (e.g.,

because the securities fail to be received

or delivered or payment is not received

or delivered). RECAPS provides a means

for parties with open fails on their books

to send them to NSCC for matching on

a quarterly basis. The RECAPS process

allows members to reconfirm

outstanding fails by establishing a new

settlement date and to reprice such fails

by marking the contract to the current

market price. It also identifies a

submitting member’s fails that may have

been settled or for which the

contraparty has no record.

Prior to this amendment, when one of

the parties did not respond to a RECAPS

submission, the submitting party could

either leave the fail open for three more

months and try again for resolution

through RECAPS or could buy in or sell

out the transaction pursuant to NASD’s

Code. The submitting member was

required by Rule 11810 of NASD’s Code

to send another notification to the

contraparty and wait another two days

prior to effecting a buy in. No prior

notice is or was required before effecting

a sell out pursuant to Rule 11820 of

NASD’s Code.

As amended, Rule 11190(b)(1) permits

a contract that has been submitted to a

reconfirmation and repricing service

and that has been DK’ed by the

contraparty or is otherwise deemed a

DK under the rules of the service 3 to be

closed out by the submitting party

without notice during normal trading

hours promptly after the completion of

the reconfirmation and pricing cycle for

the account and liability of the

nonconfirming member.4 New

paragraph (b)(2) of Rule 11190 requires

that the submitting member notify the

nonresponding member of any

execution to close the contract on the

day of execution and the action of the

member to buy in or sell out in

accordance with the provisions of Rules

11810 and 11820, respectively.

However, if the submitting member

determines not to close out a DK, the

fail continues to remain open on the

submitting member’s books until the

next RECAPS cycle.

II. Discussion

Section 15A(b)(6) provides that the

rules of an association must be designed

to foster cooperation and coordination

with persons engaged in regulating,

clearing, settling, processing

information with respect to, and

facilitating transactions in securities.5

The Commission believes that the

proposed rule change is consistent with

the NASD’s obligations under the Act.

The proposals provides an expedited

mechanism to reduce long outstanding

fails that have been submitted to

RECAPS. When a selling member DKs a

transaction or fails to respond to a

RECAPS advisory, Rule 11190(b) of the

Code allows the buying member to

immediately execute a buy in

transaction and notify the

nonresponding selling member of its

liability for the transaction. The

proposal provides an incentive to

parties to resolve RECAPS transactions

submitted against them in a timely

fashion. By encouraging and assisting

parties to resolve their trade disputes,

the proposal helps foster cooperation

and coordination with persons engaged

in clearing, settling, and facilitating

transactions in securities.

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 Section 15A 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 change (File No. SR–

NASD–96–54) be and hereby is

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–4606 Filed 2–24–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38291; File No. SR–NASD–

97–10]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc. Relating to the

Distribution of Information Concerning

the Availability of the NASD

Regulation, Inc. Public Disclosure

Program

February 14, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on February 11, 1997,

the National Association of Securities

Dealers, Inc. (‘‘NASD’’ or ‘‘Association’’)

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 NASD. The

Commission is publishing this notice to