[Federal Register Volume 60, Number 8 (Thursday, January 12, 1995)]
[Notices]
[Pages 3007-3008]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-815]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35197; File No. SR-Amex-94-57]


Self-Regulatory Organizations; American Stock Exchange, 
Incorporated; Notice of Filing of Proposed Rule Change Relating to 
Implementation of a Three-Day Settlement Standard

January 6, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that the American Stock Exchange 
Inc. (``Amex'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change on December 13, 1994, and filed 
an amendment thereto on December 23, 1994, as described in Items I, II, 
and III below, which items have been prepared primarily by Amex. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

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

    Amex proposes to modify its rules to implement a three business day 
settlement standard.

Self-Regulatory Organization's Statement Regarding the Proposed Rule 
Change

    In its filing with the Commission, Amex 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 Amex 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

    On October 6, 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 cycle for most broker-dealer trades.\2\ The rule will become 
effective June 7, 1995.\3\ In the release adopting Rule 15c6-1, the 
Commission concluded that a T+3 settlement cycle, as compared to the 
current T+5 settlement cycle, will reduce credit and liquidity risks 
and will increase efficiency in broker-dealer and clearing agency 
operations.

    \2\Securities Exchange Act Release No. 33023 (October 6, 1993), 
58 FR 52891.
    \3\Securities Exchange Act Release No. 34952 (November 9, 1994), 
59 FR 59137.
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    In order to accommodate the implementation of the new settlement 
standard pursuant to Commission's Rule 15c6-1, Amex will amend the 
following rules. Rule 17, which concerns transactions in rights and 
warrants, refers to five business days in describing when transactions 
preceding the final day of trading must be made only for ``cash'' 
settlement. ``Five'' will be changed to ``three.'' Rule 124(c) defines 
delivery conditions for ``regular way'' as the fifth business day 
following the contract. ``Fifth'' will be changed to ``third.'' Rule 
124(d) requires seller's option delivery to be made within the time 
specified in the option, which time shall not be less than six business 
days nor more than sixty days. ``Six'' will be changed to ``four.''
    Rule 179(a) requires during the five business days preceding the 
final day for trading in an issue of rights, every order entered on a 
specialist's book shall be for ``next day'' delivery. ``Fifth'' will be 
changed to ``third.'' Rule 179(b) dictates during the five final 
business days for trading in an issue of warrants, every order entered 
on a specialist's book shall be for ``cash,'' and during the three 
preceding business days every such order entered shall be for ``next 
day'' delivery. ``Fifth'' will be changed to ``third.'' Rule 179(c) 
requires during the five business days preceding the final day for 
trading in an expiring equity security, every order entered on the 
specialist's book shall be for ``next day'' delivery, and on the final 
day for trading in such equity security, every order entered on a 
specialist's book shall be for ``cash.'' ``Fifth'' will be changed to 
``third.''
    Rule 205C(2) requires that where an odd-lot dealer accepts 
``seller's option'' trades for delivery within not less than six 
business days nor more than thirty days following the day of the 
contract, such order shall be filled at a price below the effective 
round lot sale or bid regular way by the amount of any differential. 
``Six'' will be changed to ``four.''
    Rule 423 refers to fourth and third business days in discussing 
agent instructions with respect to receipt versus payment (``RVP'') or 
delivery versus payment (``DVP'') customer transactions. ``Fourth'' and 
``third'' will be changed to ``second'' and ``first.'' Rule 830 states 
that transactions in stocks shall be ex-dividend or ex-rights on the 
fourth business day preceding the record date. ``Fourth'' business day 
will be changed to ``second'' business day. With regard to a record 
date other than a business day, the ``fifth'' will be changed to the 
``third.'' The proposal also eliminates the distinction between New 
York City transfers and transfers outside New York City.
    Rule 858 directs settlement in contracts in bonds dealt in ``and 
interest.'' There shall be added to the contract price interest on the 
principle amount at the rate specified in the bond, which shall be 
computed up to but not including the day on which delivery is due, 
except that in the case of contracts made ``seller's option.'' 
Currently interest is computed only up to but not including the fifth 
business day following the day of the contract. The proposed rule 
change would compute the interest up to the day when delivery would 
have been due if the contract had been made ``regular way.''
    Rule 862 states that the notice for the return of loans of 
securities must be given before 3:45 P.M. on a business day and such 
return shall be made on the ``fifth'' business day following the day in 
which notice is given. ``Fifth'' will be changed to ``third.''
    Rule 866 requires for loans of securities to be deliverable on the 
``fifth'' business day following the day of the loan unless otherwise 
agreed to by the parties. ``Fifth'' will be changed to ``third.'' Rule 
882 refers to delivery of securities and due-bills after the record 
date or after the ``equivalent New York record date'' and requires the 
seller to pay or to deliver to the buyer the distribution made with 
respect to such security. With stock or cash dividends or rights to 
subscribe, the seller shall deliver to the buyer either the dividend or 
rights or a due-bill for such dividend or rights within five days after 
the record date or the equivalent New York record date. ``Fifth'' day 
will be changed to ``third.'' The proposal also eliminates 
[[Page 3008]] references to the equivalent New York record date.
    Amex has participated in meetings sponsored by the Commission among 
self regulated organizations, clearing corporations, and other industry 
participants and has kept its members informed of the forthcoming 
transition to T+3. As the effective date for implementation draws near, 
Amex will continue to educate its membership and to ascertain that they 
are informed and understand specific timing and cutover issues. The 
Amex's implementation of these rule changes will be consistent with the 
June 1995 conversion schedule which Amex and the National Securities 
Clearing Corporation (``NSCC'') have developed for industry use.\4\ The 
schedule is as follows.

    \4\NSCC will use two double-settlement days for the conversion. 
The first double-day settlement, scheduled for Friday, June 9, will 
incorporate trades from Friday, June 2 (the last T+5 settlement day) 
and from Monday, June 5 (a T+4 settlement day). The second double-
day settlement, scheduled for Monday, June 12, will include trades 
from Tuesday, June 6 (T+4 settlement day) and Wednesday, June 7 (the 
first T+3 settlement day). With respect to the two trade days on 
which ``regular way'' trades will settle on T+4, Amex rules will be 
temporarily deemed to be amended accordingly.

------------------------------------------------------------------------
       Trade date            Settlement cycle         Settlement date   
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June 2 Friday..........  5 day..................  June 9 Friday.        
June 5 Monday..........  4 day..................  June 9 Friday.        
June 6 Tuesday.........  4 day..................  June 12 Monday.       
June 7 Wednesday.......  3 day..................  June 12 Monday.       
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    If the Commission determines to alter the exemptions currently 
provided in Rule 15c6-1, the Amex may be required to file additional 
rule amendments.
    The proposed rule change is consistent with Section 6(b) of the Act 
in general and furthers the objectives of Section 6(b)(5) in particular 
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. This is accomplished 
by reducing the time period for settlement of most securities 
transactions which will correspondingly decrease the number of 
unsettled trades in the clearance and settlement system at any given 
time.
    The proposed change is also consistent with Commission Rule 15c6-1 
which requires brokers or dealers to settle most securities 
transactions no later than the third business day after the date of the 
contract unless otherwise expressly agreed to by the parties at the 
time of the transaction.

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

    Amex does not believe that the proposed rule change will impose any 
inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    No written comments were either solicited or received.

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 Amex 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. 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 in the 
Commission's Public Reference Section, 450 Fifth Street NW., 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of the Amex.
    All submissions should refer to File No. SR-Amex-94-57 and should 
be submitted by February 2, 1995.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-815 Filed 1-11-95; 8:45 am]
BILLING CODE 8010-01-M