[Federal Register Volume 60, Number 100 (Wednesday, May 24, 1995)]
[Notices]
[Pages 27572-27573]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12692]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35735; File No. SR-BSE-95-09]


Self-Regulatory Organizations; Boston Stock Exchange, 
Incorporated; Notice of Filing of Proposed Rule Change Regarding 
Depository Eligibility Requirements

May 18, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 18, 1995, the Boston 
Stock Exchange, Incorporated (``BSE'') filed 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 BSE. The Commission is publishing this notice to solicit 
comments 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

    BSE proposes to adopt a rule which will set forth depository 
eligibility requirements for issuers that apply to list their 
securities on BSE.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, BSE 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 self-regulatory organization has prepared summaries, 
set forth in sections (A), (B), and (C) below, of the most significant 
aspects of such statements.\2\

    \2\ The Commission has modified the language in these sections.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    Under the proposed rule change, BSE will adopt a uniform depository 
eligibility rule for issuers that desire to list their securities on 
BSE. The uniform rule has been developed by the Legal and Regulatory 
Subgroup of the U.S. Working Committee of the Group of Thirty in 
coordination with each of the national securities exchanges and the 
National Association of Securities Dealers (``NASD''). It is 
anticipated that each national securities exchange and the NASD will 
file rule changes proposing adoption of depository eligibility 
standards substantially similar to BSE's proposed rule and will seek to 
make such changes effective contemporaneously with the effective date 
of the transition from a five-day (``T+5'') to a three-day (``T+3'') 
settlement cycle. The transition is set to occur June 7, 1995.\3\

    \3\ Securities Exchange Act Release Nos. 33023 (October 6, 
1993), 58 FR 52891 (adoption of Rule 15c6-1) and 34952 (November 9, 
1994), 59 FR 59137 (change of effective date of Rule 15c6-1 from 
June 1, 1995 to June 7, 1995).
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    The proposed rule change will require issuers to ensure that 
securities to be listed on BSE have been included in the file of 
eligible issues maintained by a securities depository registered as a 
clearing agency under Section 17A of the Act.\4\ This requirement will 
not apply to a security if the terms of such security cannot be 
reasonably modified to meet the criteria for depository eligibility at 
all securities depositories.

    \4\ 15 U.S.C. 78q-1 (1988).
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    The proposed rule change sets forth additional requirements that 
must be met before a security will be deemed to be ``depository 
eligible,'' as such term is used in Chapter III, Section 7 of the BSE 
rules (``uniform book-entry settlement rule'').\5\ The proposed rule 
specifies different requirements for depository eligibility depending 
upon whether a new issue is distributed by an 
[[Page 27573]] underwriting syndicate before or after the date a 
securities depository system is available for monitoring repurchases of 
the distributed shares by syndicate members (``flipping tracking 
system'').

    \5\ Pursuant to BSE's uniform book-entry settlement rule, trades 
by a member in depository eligible securities generally must be 
settled by book-entry through a securities depository.
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    Currently, a flipping tracking system is being developed that will 
include a securities depository service that (i) can be activated upon 
the request of the managing underwriter for a period of time that the 
managing underwriter specifies, (ii) in certain circumstances, will 
require the delivering participant to provide to the depository 
information sufficient to identify the seller of such shares as a 
precondition to the processing of book-entry delivery instructions for 
distributed shares, and (iii) will report to the managing underwriter 
the identity of any other syndicate member or selling group member 
whose customer(s) sold distributed shares (but will not report to the 
managing underwriter the identity of such customer[s]) and, in certain 
circumstances, will report to such syndicate member or selling group 
member the identity of such customer(s). Prior to the availability of a 
flipping tracking system, the managing underwriter may delay the date a 
security is deemed ``depository eligible'' for up to three months after 
trading has commenced in the security. After the availability of a 
flipping tracking system, a new issue will be deemed to be depository 
eligible upon commencement of trading on BSE.
    The proposed rule change is consistent with Section 6(b)(5) of the 
Act \6\ in that it is designed to remove impediments to and 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 is designed to reduce the number of transactions in depository 
eligible securities for which settlement is effected by the physical 
delivery of securities. By requiring that transactions between member 
firms and transactions between member firms and clients that settle on 
a delivery-versus-payment or receipt-versus-payment basis occur only 
with rare exceptions in a book-entry environment, the efficiency of the 
U.S. settlement system will be enhanced and the systemic risk of that 
system will be reduced.

    \6\ 15 U.S.C. 78f(b)(5) (1988).
(B) Self-Regulatory Organization's Statement on Burden on Competition

    BSE 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

    BSE 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 BSE 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.
    BSE has requested accelerated effectiveness of the proposed rule 
change in order that the rule can become effective on June 7, 1995.\7\

    \7\ Supra note 3 and accompanying text.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 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. Sec. 552, will be available for inspection and copying in 
the Commission's Public Reference Section, 450 5th Street, N.W., 
Washington, D.C. 20549. Copies of such filings will also be available 
for inspection and copying at the principal office of BSE. All 
submissions should refer to file number SR-BSE-95-09 and should be 
submitted by June 14, 1995.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\

    \8\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-12692 Filed 5-23-95; 8:45 am]
BILLING CODE 8010-01-M