[Federal Register Volume 60, Number 90 (Wednesday, May 10, 1995)]
[Notices]
[Pages 24950-24951]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11518]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35675; File No. SR-MSRB-95-3]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Proposed Rule Change Relating to the 
Submission of Transaction Information for Confirmation, Clearance, and 
Settlement of Transactions With Customers

May 4, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 23, 1995, the 
Municipal Securities Rulemaking Board (``MSRB'') file with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared primarily by the MSRB. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.

    \1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB is filing proposed amendments to MSRB rule G-15 regarding 
the confirmation, clearance, and settlement of transactions with 
customers. The amendments would require dealers to submit delivery 
versus payment and receipt versus payment (``DVP/RVP'') customer 
transactions to an automated confirmation/acknowledgement system no 
later than the end of trade date (``T''). The MSRB requests that the 
amendments be made effective thirty days after approval by the 
Commission.

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 MSRB 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 
texts of these statements may be examined at the places specified in 
Item IV below. The MSRB has prepared summaries, set forth in section 
(A), (B), and (C) below, of the most significant aspects of such 
statements.\2\

    \2\The Commission has modified the text of the summaries 
prepared by MSRB.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

     On October 5, 1993, the Commission adopted Rule 15c6-1 under the 
Act, which establishes three business days after the trade date 
(``T+3'') instead of five business days (``T+5'') as the standard 
settlement time frame for most broker-dealer transactions.\3\ 
Recognizing the differences between the corporate and municipal 
securities markets and the unique role the MSRB has in overseeing the 
municipal securities market, the Commission did not include municipal 
securities within the scope of Rule 15C6-1.\4\ The Commission, however, 
did formally request that the MSRB undertake a commitment to T+3 
settlement for municipal securities to ensure consistency in settlement 
cycles in the corporate and municipal markets.

    \3\Securities Exchange Act Release No. 33023 (October 6, 1993), 
58 FR 52891 (release adopting Rule 15c6-1). On November 16, 1994, 
the Commission changed the effective date of Rule 15c6-1 from June 
1, 1995 to June 7, 1995. Securities Exchange Act Release No. 34952 
(November 9, 1994), 59 FR 59137.
    \4\Securities Exchange Act Release No. 33023 (October 6, 1993), 
58 FR 52891.
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    On February 29, 1995, the Commission approved amendments to MSRB 
rules G-12 on uniform practice and rule G-15 on confirmation, 
clearance, and settlement of transactions with customers. These 
amendments established three business days as the standard settlement 
time frame for regular-way transactions in municipal securities.\5\ The 
MSRB has been reviewing its rules to determine whether or not 
additional rule changes are necessary to facilitate the movement to T+3 
settlement. The MSRB has determined that amendment rule G-15 is 
necessary to facilitate T+3 settlement for municipal securities 
transactions.

    \5\Securities Exchange Act Release No. 35427 (February 28, 
1995), 60 FR 12798 [File No. SR-MSRB-94-10].
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    Currently, rule G-15(d) states that a dealer shall give or send to 
a DVP/RVP customer a confirmation with respect to an execution of an 
order no later than the close of business on the next business day 
after execution (``T+1'').\6\ The rule currently does not specify the 
timing for the submission of transaction data to an automated 
confirmation/acknowledgement system although the rule does require 
nearly all municipal securities transactions with institutional 
customers to be process in such a system.\7\ Under the proposed rule 
change, giving or sending of the confirmation and the submission of 
transaction data to an automated confirmation/acknowledgement system 
would occur on the trade date rather than T+1.\8\ In a T+3 environment, 
less time will exist for the necessary communications between dealers 
and institutional customers to clear and settle transactions. The 
proposed rule change accordingly would require the 
[[Page 24951]] communication between dealers and institutional 
customers begin on trade date. In addition, the success of the proposed 
Phase II of the MSRB's Transaction Reporting Program will depend on 
timely and accurate submission of institutional customer transaction 
data on trade date to the automated confirmation/acknowledgement 
system.\9\

    \6\The terms ``DVP/RVP customer'' and ``institutional customer'' 
both refer to transactions between dealers and customers that are 
settled on a delivery versus payment or receipt versus payment 
basis.
    \7\The automated clearance and settlement process includes 
several steps. Initially, dealers submit transaction information to 
an automated confirmation/acknowledgement system followed by the 
institutional customer receiving notification requesting 
acknowledgement of the transaction through the automated system. 
Once the institutional customer acknowledges the transaction, the 
transaction is then ready for automated settlement to occur at the 
depository on settlement date.
    \8\Rule G-15(a) states that a confirmation containing certain 
information must be given or sent to each customer. Some dealers use 
the automated confirmation/acknowledgement system as the exclusive 
mechanism for confirming transactions to DVP/RVP customers (i.e., no 
paper confirmation is sent). The MSRB has stated that use of the 
automated confirmation/acknowledgement system to deliver a 
confirmation meeting the information requirements of rule G-15(a) is 
permissible as long as all information required by rule G-15(a) is 
included on the electronic confirmation generated by that system. 
The MSRB, however, has not specified that the automated 
confirmation/acknowledgement system is the exclusive mechanism for 
sending confirmation information required by rule G-15(a) to DVP/RVP 
customers. Some dealers continue to use both the automated 
confirmation/acknowledgement system and also send paper 
confirmations.
    \9\For a complete description of Phase II of the MSRB's 
Transaction Reporting Program, refer to ``Transaction Reporting 
Program for Municipal Securities: Phase II,'' MSRB Reports, Vol. 15, 
No. 1 (April 1995).
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    Section 15B(b)(2)(C) of the Act provides that the MSRB has the 
authority to adopt rules:

    To foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect 
to, and facilitating transactions in municipal securities, to remove 
impediments to and perfect the mechanism of a free and open market 
in municipal securities, and, in general, to protect investors and 
the public interest * * *.\10\

    \10\15 U.S.C. 78o-3(b)(2)(C) (1988).
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    The MSRB believes the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Act because the proposal will facilities 
clearance and settlement of municipal securities in a T+3 environmental 
by helping to ensure a more timely confirmation and acknowledgement of 
DVP/RVP customer transactions.

B. Self-Regulatory Organization's Statement on Burden on Competition

    the MSRB does not believe that the proposed rule change will impose 
any burden on competition 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 MSRB has neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety 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 self-regulatory organization consents, 
the Commission will:
    (A) By order approve such 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. People 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 submissions, 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 in the 
Commission's Public Reference Section. Copies of the filing will also 
be available for inspection and copying at the MSRB's principal 
offices. All submissions should refer to File No. SR-MSRB-95-3 and 
should be submitted by May 31, 1995.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\11\

    \11\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-11518 Filed 5-9-95; 8:45 am]
BILLING CODE 8010-01-M