27578 Federal Register / Vol. 60, No. 100 / Wednesday, May 24, 1995 / Notices

6 15 U.S.C. 78s(b)(3)(A)(ii) (1988).

7 17 CFR 240.19b–4(e)(2) (1994).

8 17 CFR 200.30–3(a)(12) (1994).

1 15 U.S.C. 78s(b) (1988).

2Securities Exchange Act Release No. 35580

(April 7, 1995), 60 FR 19312.

3Securities Exchange Act Release Nos. 33023

(October 6, 1993), 58 FR 52891 (adopting Rule

15c6–1) and 34952 (November 9, 1994), 59 FR

59137 (changing effective date from June 1, 1995,

to June 7, 1995).

4Friday, June 2, will be the last trading day with

five business day settlement. Monday, June 5, and

Tuesday, June 6, will be trading days with four

business day settlement. Wednesday, June 7, will be

the first trading day with three business day

settlement. As a result, trades from June 2 and June

5 will settle on Friday, June 9. Trades from June 6

and June 7 will settle on Monday, June 12.

5 15 U.S.C. 78f (1988).

6The release adopting Commission Rule 15c6–1

stated, ‘‘[T]he value of securities positions can

change suddenly causing a market participant to

default on unsettled positions. Because the markets

are interwoven through common members, default

at one clearing corporation or by a major market

participant or end-user could trigger additional

failures resulting in risk to the national clearance

and settlement system.’’ Securities Exchange Act

Release No. 33023 (October 6, 1993), 58 FR 52891.

715 U.S.C. 78f (1988).

revisions by a memorandum dated

March 10, 1995, entitled ‘‘1995

Revisions of DTC Service Fees.’’

Because participants have supported

cost-based fees in the past and because

overall the subject fee changes are

modest, DTC believes that a formal

period for participant comment was not

necessary this year.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective pursuant to Section

19(b)(3)(A)(ii) 6 of the Act and Rule 19b–

4(e)(2) 7 thereunder because the rule

change establishes or changes a due, fee,

or other charge. At any time within sixty

days of the filing of such proposed rule

change, the Commission may summarily

abrogate such rule change if it appears

to the Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 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 in

the Commission’s Public Reference

Room, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of DTC. All submissions should

refer to the File No. SR–DTC–95–08 and

should be submitted by June 14, 1995.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–12699 Filed 5–23–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35724; File No. SR–CSE–

95–04]

Self-Regulatory Organizations; The

Cincinnati Stock Exchange

Incorporated; Order Approving

Proposed Rule Change Relating to

Implementation of a Three-Day

Settlement Standard

May 17, 1995.

On April 4, 1995, The Cincinnati

Stock Exchange Incorporated (‘‘CSE’’)

filed a proposed rule change (File No.

SR–CSE–95–04) with the Securities and

Exchange Commission (‘‘Commission’’)

pursuant to Section 19(b) of the

Securities Exchange Act of 1934

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

published in the Federal Register on

April 17, 1995, to solicit comments from

interested persons.2 The Commission

did not receive any comments. As

discussed below, this order approves

the proposed rule change.

I. Description

In October 1993, the Commission

adopted Rule 15c6–1 under the Act

which will become effective June 7,

1995.3 The rule establishes three

business days after the trade date

(‘‘T+3’’), instead of five business days

(‘‘T+5’’), as the standard settlement

cycle for most securities transactions.

Several of the CSE’s rules are

interrelated with the standard

settlement time frame. The purpose of

the proposed rule change is to amend

CSE’s rules in order that they are

consistent with a T+3 settlement

standard for securities transactions.

The following changes to CSE rules

are needed to implement the new

settlement standard established by Rule

15c6–1. Rule 3.8(b)(1)(iii) will require

that members receive reasonable

assurance from the customer that a

security will be delivered within three

business days of the execution of the

order. Rule 3.8(b)(2) will require that

members note on order tickets that the

customer has the ability to deliver stock

within three business days. Rule 11.4

will provide that transactions in stocks

(other than those made for ‘‘cash’’) shall

be ‘‘ex-dividend’’ or ‘‘ex-rights’’ on the

second business day preceding the

record date fixed by the company or the

date of the closing of transfer books

except when the Board of Trustees of

CSE rules otherwise. When the record

date or closing of transfer books occur

upon a day other than a business day,

transactions in stocks shall be ‘‘exdividend’’ or ‘‘ex-rights’’ on the third

preceding business day.

CSE has requested that the proposed

rule change become effective on the

same date as Rule 15c6–1, which will be

June 7, 1995. The transition from five

day settlement to three day settlement

will occur over a four day period.4

II. Discussion

The Commission believes the

proposal is consistent with the

requirements of Section 6 of the Act.5

Specifically, Section 6(b)(5) states that

the rules of the exchange must be

designed to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, and

processing information. On June 7,

1995, the new settlement cycle of T+3

will be established, as mandated by the

Commission’s Rule 15c6–1. As a result,

the CSE’s current rules based on a T+5

settlement cycle will be inconsistent

with this rule. This proposal will amend

the CSE’s rules to harmonize them with

the Commission Rule 15c6–1 and with

a T+3 settlement cycle.

In addition, the Commission believes

that the proposed rule change is

consistent with Section 6(b)(5) of the

Act in that it protects investors and the

public interest by reducing the risk to

clearing corporations, their members,

and public investors which is inherent

in settling securities transactions. The

reduction of the time period for

settlement of most securities

transactions will correspondingly

decrease the number of unsettled trades

in the clearance and settlement system

at any given time. Thus fewer unsettled

trades will be subject to credit and

market risk.6

IV. Conclusion

For the reasons stated above, the

Commission finds that CSE’s proposal is

consistent with Section 6 of the Act.7
Federal Register / Vol. 60, No. 100 / Wednesday, May 24, 1995 / Notices 27579

8 15 U.S.C. 78s(b)(2) (1988).

9 17 CFR 200.30(a)(12) (1994).

1 15 U.S.C. 78s(b)(1) (1988).

2 17 CFR 240.19b–4 (1994).

3Securities Exchange Act Release No. 33938

(Apr. 20, 1994), 59 FR 22033 (Apr. 28, 1994) (notice

of original proposal and Amendment No. 1).

4Securities Exchange Act Release No. 35428 (Feb.

28, 1995), 60 FR 12583 (Mar. 7, 1995) (notice of

Amendment No. 2).

5Securities Exchange Act Release No. 25263 (Jan.

11, 1988), 53 FR 1430 (Jan. 19, 1988) (order

approving SelectNet, previously referred to as the

Order Confirmation Transaction Service, on a

temporary, accelerated basis). See also, Securities

Exchange Act Release No. 25523 (Mar. 28, 1988), 53

FR 10965 (Apr. 4, 1988) (order extending temporary

approval of SelectNet); Securities Exchange Act

Release No. 25690 (May 11, 1988), 53 FR 17523

(May 17, 1988) (order granting permanent approval

of SelectNet).

6 In contrast, directed orders will continue to

identify the participant transmitting an order to

another participant.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,8 that the

proposed rule change (File No. SR–

CSE–95–04) be and hereby is approved,

effective June 7, 1995.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–12697 Filed 5–23–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35732; File No. SR–NASD–

94–9]

Self-Regulatory Organizations;

National Association of Securities

Dealers, Inc.; Order Approving

Proposed Rule Change to Provide

Non-member Viewing Access to

SelectNet and that the Transmission of

Broadcast Orders Through SelectNet

be Solely on an Anonymous Basis

May 18, 1995.

I. Introduction

On January 30, 1995, the National

Association of Securities Dealers, Inc.

(‘‘NASD’’ or ‘‘Association’’) filed with

the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

a proposed rule change pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’) 1 and Rule

19b–4 thereunder.2 The NASD seeks to

amend SelectNet in two ways: (a) to

provide real-time access to nonmembers to view all ‘‘broadcast’’ orders

in SelectNet; and (b) to provide that the

transmission of broadcast orders

through SelectNet be solely on an

anonymous basis.

Notice of the proposed rule change

appeared in the Federal Register on

April 28, 1994 3 and March 7, 1995.4

The Commission received letters from

four commenters in response to the

NASD’s proposal. For the reasons

discussed below, the Commission is

approving the proposed rule change.

II. Background

Originally referred to as the Order

Confirmation Transaction Service

(‘‘OCT’’) and approved by the

Commission in January 1988,5 the

NASD developed SelectNet in response

to the difficulties experienced in the

Nasdaq market during the market break

of October 1987. SelectNet is an

electronic screen-based order routing

system allowing market makers and

order-entry firms (collectively referred

to as ‘‘participants’’) to negotiate

securities transactions in Nasdaq

securities through computer

communications rather than relying on

the telephone.

To enter an order in SelectNet, a

participant enters the normal trade

information: security symbol, side (buy

or sell), transaction size, and price.

Participants may enter orders priced at,

above or below the inside bid or ask

and, thus, SelectNet offers the

opportunity to negotiate for a price

superior to the current inside quote. In

addition, participants may provide that

an order or counter-offer will be in

effect for anywhere from 3 to 99

minutes, specify a day order, or indicate

whether price or size are negotiable or

whether a specific minimum quantity is

acceptable. Participants may accept,

counter, or decline a SelectNet order. In

the event that a participant elects to

counter an offer, the service allows

negotiations to be conducted between

the participants by exchanging counteroffers until an agreement is reached.

Once agreement is reached, the

execution is ‘‘locked-in’’ and reported to

the tape.

Through SelectNet, participants may

either direct an order to a particular

market maker in the security, broadcast

to all market makers in the security, or

broadcast to all participants watching a

particular security (a feature known as

‘‘all call’’). The participants then may

negotiate the terms of the order through

counter-offers entered into the system.

SelectNet’s default setting provides

anonymity for broadcast orders.

However, a participant currently

entering a broadcast order may elect to

identify itself. After an anonymous

broadcast order is executed, each

participant to the transaction learns the

identity of the other. In contrast,

directed orders always display to the

receiving participant the identity of the

participant entering the order.

III. Description of the Rule Change

The NASD seeks to modify SelectNet

in two ways. First, it proposes to permit

non-member viewing access to orders

broadcast through SelectNet. Second,

the NASD proposes to require that

broadcast orders be entered on an

anonymous basis only.

A. Non-member Viewing Access to

Broadcast Orders

Under the NASD’s proposal, nonmembers will be permitted to view on

a real-time basis all orders broadcast

through SelectNet. Specifically, nonmembers will be able to view all

unexecuted broadcast SelectNet orders,

including the security name, the side of

the order (buy or sell), the quantity

available, the order price, the original

size of the order, the outstanding

portion, and the duration of the order

(from 3 to 99 minutes or all day). The

NASD will provide this information via

the Level 2 Nasdaq Workstation service,

to which non-members may subscribe.

In addition, the NASD will provide a

data feed of the broadcast SelectNet

information to data vendors who in turn

may provide the information to nonmembers. Under either alternative,

dissemination of SelectNet information

will be provided on a real-time basis.

Non-members, however, will not be

permitted to interact through SelectNet

with the order or be provided access to

orders directed from one participant to

another. Moreover, because the NASD’s

proposal will restrict all broadcast

orders to an anonymous basis, neither

members nor non-members will be able

to determine the identity of the

participant entering a broadcast order.

B. All Broadcast Orders will be on an

Anonymous Basis

As currently configured, SelectNet

allows a participant broadcasting an

order to elect either to identify itself or

to send the order anonymously. Under

this proposal, however, participants will

be limited to entering broadcast orders

on an anonymous basis.6 If two firms

begin negotiating the terms of a

broadcast order, however, the

participant that entered the order may

choose to identify itself to the contra

side.

IV. Comments

As noted above, the Commission

received letters from four commenters

in response to the proposal. Three of the

commenters addressed the proposal to

provide non-member viewing access,

with one of these commenters

supporting the proposal and the other

two opposing it; the fourth commenter