Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Notices 3015

3NWI and NWII both permit the deliver of either

Level 2 or Level 3 Nasdaq service. Subscription to

Level 3 is limited to NASD members that meet the

financial and operational requirements for market

making. Subscription to Level 2 Nasdaq service is

open to non-members as well as members because

it does not provide the functionality needed to enter

quotations as a market maker. Extension of the

NWII fees to non-member subscribers will be the

subject of a separate Rule 19b–4 filing. Meanwhile,

any non-members converted to NWII will continue

to pay the prevailing rate for NWI functionality.

4 17 CFR 200.30–3(a)(12).

1 15 U.S.C. § 78s(b)(1) (1988).

pass-through of the actual cost borne by

NSMI.

Regarding the proposed testing fees,

these have been calculated to recover

NSMI’s actual costs in accommodating

members’ requests for testing of

specialized communications interfaces

with NSMI’s central processing

facilities. Typically, such testing occurs

when new broker-dealer subscribers are

added to an existing computer-tocomputer interface (‘‘CTCI’’) maintained

by a service bureau or when a brokerdealer (with its own digital interface)

has effected a major change in its

internal systems/software applications.

The scope, purpose, and longevity of the

test are determined by the subscriber.

NSMI participates in the testing process

by providing a test environment that

closely approximates the production

environment for the service(s) which the

subscriber wishes to test (e.g., the

Automated Transaction (‘‘ACT’’)

service). Derivation of the testing fees

involved a review of NSMI testing logs

for 1993; the computation of direct and

indirect costs allocable to tests actually

performed; and the breakdown of those

costs into hourly rates. In sum, the

proposed testing fees would passthrough the actual costs incurred by

NSMI in accommodating subscribers’

testing needs. No testing fee would be

assessed in circumstances where major

systems/software change instituted by

NSMI have prompted the subscriber’s

test.

The NASD believes that the proposed

rule change is consistent with the

requirements of Section 15A(b)(5) of the

Act. Section 15A(b)(5) specifies that the

rules of a national securities association

shall provide for the equitable allocation

of reasonable dues, fees, and other

charges among members, issuers, and

other persons using any facility or

system that the Association operates or

controls. It should be noted that the

proposed NWII fees will be payable

exclusively by NASD member firms that

receive Level 2 or Level 3 Nasdaq

service via the NWII offering. As

described earlier, NWII is being

implemented in phases with all current

NWI subscribers in a defined area being

converted to NWII.3 Thus, beginning

January 1, 1995, all NASD members that

are converted to NWII will be liable for

the new fees; NWI subscribers will

continue to pay the NWI service fees

until they are coverted.

The NASD believes that the proposed

NWII fees are reasonable in that they

were calculated to recover the projected

costs of operating and maintaining the

NWII software, hardware, and the EWN.

The development costs associated with

NWII have been expensed by NSMI and

will not be recovered through the

proposed NWII fees. Although higher

than the existing fees for NWI, the NWII

fees are believed reasonable that

subscribers will be provided the

increased functionality embedded in the

new software package, increased

network capacity to accommodate

future growth in traffic and business

volume, and upgraded hardware

capable of more rapid processing of

message traffic to and from market

participants.

Regarding the proposed testing fees,

these have been calculated to recover

the actual costs incurred by NSMI to

accommodate the testing requirements

of CTCI and digital interface

subscribers. All entities that would be

required to pay these testing fees are

either NASD members or service

bureaus that incur testing charges will

pass them on to their broker-dealer

customers. Hence, the affected NASD

members will ultimately pay the testing

charge incurred by their service

bureaus.

Based on the foregoing factors, the

NASD submits that both categories of

proposed fees are reasonable and

designed to achieve an equitable

allocation of operating costs among

NASD members utilizing the affected

NSMI services.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD believes that the proposed

rule change will not result in 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

Comments were neither solicited nor

received.

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) of the Act and

subparagraph (e) of Rule 19b–4

thereunder, because the proposal

constitutes a change in a ‘‘due, fee or

other charge’’ or specific automated

services provided to NASD member

firms. At any time within 60 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 NW.,

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. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to the file

number in the caption above and should

be submitted by February 2, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–716 Filed 1–11–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35193; File No. SR–PSE–

94–27]

Self-Regulatory Organizations; Pacific

Stock Exchange Incorporated; Notice

of Filing of Proposed Rule Change

Relating to Implementation of a ThreeDay Settlement Standard

January 4, 1995.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

December 19, 1994, the Pacific Stock

Exchange Incorporated (‘‘PSE’’) filed

with the Securities and Exchange
3016 Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Notices

2Securities Exchange Act Release No. 33023

(October 6, 1993), 58 FR 52891.

3Securities Exchange Act Release No. 34952

(November 9, 1994), 59 FR 59137.

4NSCC 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 (a T+4 settlement day) and from Wednesday,

June 7 (the first T+3 settlement day).

Commission (‘‘Commission’’) a

proposed rule change as described in

Items I, II, and III below, which items

have been prepared primarily by PSE.

The Commission is publishing this

notice to solicit comments on the

proposed rule change from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

PSE proposed to modify its rules to

implement a three business day

settlement standard for securities

transactions.

II. Self-Regulatory Organization’s

Statement Regarding the Proposed Rule

Change

In its filing with the Commission, PSE

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 PSE 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

securities transactions.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.

Accordingly, in order to accommodate

the implementation of the new

settlement standard established by the

Commission’s Rule 15c6–1, PSE will

amend the following rules.

Rule 5.7 currently provides that

transactions in stocks traded ‘‘regular’’

shall be ‘‘ex-dividend’’ or ‘‘ex-rights’’ as

the case may be, on the fourth business

day preceding the record date fixed by

the company or the date of the closing

of transfer books, except when the

Board rules otherwise. PSE is proposing

to replace the term ‘‘fourth’’ in this

provision with the term ‘‘second.’’ Rule

5.7 also currently provides that should

such record date or such closing of

transfer books occur upon a day other

than a business day this rule shall apply

for the fifth preceding business day. The

PSE is proposing to replace the term

‘‘fifth’’ in this provision with the term

‘‘third.’’

Rule 5.9(a)(2) currently provides that

for transactions settling on a ‘‘regular

way’’ basis, bids and offers in securities

admitted to dealings on an ‘‘issued’’

basis shall be made for delivery on the

fifth business day following the day of

the contract. The PSE proposes to

replace the term ‘‘fifth’’ with the term

‘‘third.’’

Rule 5.9(a)(3) currently provides that

for transactions settling on a ‘‘seller’s

option’’ basis, bids and offers in

securities admitted to dealings on an

‘‘issued’’ basis shall be made for

delivery at the option of the seller

within the time specified in the option,

which time shall be not less than six

business days nor more than sixty days

following the date of the contract,

except that the PSE may provide

otherwise in specific issues of

securities. The PSE proposes to replace

the term ‘‘sixth’’ in this rule with the

term ‘‘fourth.’’

Rule 5.9(a)(4) currently provides that

for transactions settling on a ‘‘next day’’

basis, bids and offers in securities

admitted to dealings on an ‘‘issued’’

basis shall be made for delivery on the

next full business day following the day

of the contract. For rights and warrants

this rule generally is applicable only

during the five business days preceding

the final day for trading therein. The

PSE proposes to replace the term ‘‘fifth’’

in this rule with the term ‘‘third.’’

Rule 9.12(a)(4) currently provides that

no member organization shall grant

delivery versus payment (‘‘DVP’’) or

receipt versus payment (‘‘RVP’’)

privileges to a customer without

obtaining an agreement from the

customer to provide instructions to its

agent no later than the fourth day after

the trade date for RVP trades or no later

than the third business day after trade

date for DVP trades. The PSE proposes

to shorten these time frames to the

second day after trade date for RVP

trades and the first day after trade date

for DVP trades.

Finally, the PSE has agreed to an

implementation plan proposed by the

National Securities Clearing Corporation

(‘‘NSCC’’) for transition to a T+3

settlement cycle.4 The schedule is as

follows.

Trade date

Settlement

cycle

Settlement date

June 2 Friday 5 day June 9 Fri.

June 5 Monday.4 day June 9 Fri.

June 6 Tuesday.4 day June 12 Mon.

June 7 Wednesday.3 day June 12 Mon.

If the Commission determines to alter

the exemptions currently provided in

Rule 15c6–1, the PSE may be required

to file additional rule amendments.

The PSE believes that the proposal 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 is

designed to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

PSE 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

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 PSE 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
Federal Register / Vol. 60, No. 8 / Thursday, January 12, 1995 / Notices 3017

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

2 17 CFR 240.19b-4 (1991).

3See Securities Exchange Act Release No. 28146

(June 26, 1990), 55 FR 27917 (‘‘Joint OTC/UTP Plan

Order’’). The Commission has approved an

extension of the effectiveness of the Joint OTC/UTP

Plan through January 12, 1995. See Securities

Exchange Act Release No. 34371 (July 13, 1994), 59

FR 37103 (order approving Amendment No. 1 to

File No. S7–24–89) (‘‘Joint OTC/UTP Plan

Extension Order’’).

4See Securities Exchange Act Release No. 31672

(December 30, 1992), 58 FR 3054 (order approving

File No. SR–PHLX–92–04) (‘‘1992 Phlx Pilot

Order’’). See also Securities Exchange Act Release

No. 33408 (December 30, 1994), 59 FR 1045 (‘‘1993

Phlx Pilot Extension Order’’).

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

Section, 450 Fifth Street, N.W.,

Washington, DC. 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of the PSE. All submissions

should refer to File No. SR–PSE–94–27

and should be submitted by February

21, 1995.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–814 Filed 1–11–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35191; File No. SR–PHLX–

94–70]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Philadelphia Stock

Exchange, Inc., Proposing To Extend

its OTC/UTP Pilot Program

January 3, 1995.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 and Rule 19b-4 thereunder,2

notice is hereby given that on December

27, 1994, the Philadelphia Stock

Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I and II below, which Items have

been prepared by the self-regulatory

organization. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Phlx, pursuant to Rule 19b-4 of

the Act, proposes to extend the

effectiveness of the pilot program and

its accompanying rules regarding the

trading of Nasdaq/National Market

(‘‘Nasdaq/NMS’’) securities on the

Exchange pursuant to unlisted trading

privileges (‘‘Phlx OTC/UTP Pilot

Program’’) for a six-month period

ending June 30, 1995.

The Exchange requests the

Commission to find good cause,

pursuant to Section 19(b)(2) of the Act,

for approving the proposed rule change

prior to the thirtieth day after

publication in the Federal Register. Due

to the non-controversial nature of the

Phlx OTC/UTP Pilot Program, coupled

with its previously scheduled expiration

date of December 31, 1994, the Phlx

respectfully requests accelerated

approval of this filing.

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

self-regulatory organization 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 III 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.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

In 1985, the Commission published

its policy to allow the extension of

unlisted trading privileges (‘‘UTP’’) by

national securities exchanges in certain

over-the-counter (‘‘OTC’’) securities,

provided that certain terms and

conditions are satisfied. On June 26,

1990, the Commission approved a joint

transaction reporting plan (‘‘Joint OTC/

UTP Plan’’ or ‘‘Plan’’) submitted by the

National Association of Securities

Dealers, Inc. (‘‘NASD’’), the American

Stock Exchange, the Boston Stock

Exchange, the Midwest Stock Exchange

(‘‘MSE,’’ currently operating as the

Chicago Stock Exchange, or ‘‘Chx’’), and

the Phlx.3 The Joint OTC/UTP Plan

governs the collection, consolidation,

and dissemination of quotation and

transaction information for Nasdaq/

NMS securities traded on exchanges and

by NASD market makers.

The current proposed rule change will

continue the Phlx OTC/UTP Pilot

Program that provides for trading of

Nasdaq/NMS securities on the Exchange

pursuant to UTP. Although the Chx has

been trading Nasdaq/NMS securities

since 1987, the Phlx obtained temporary

approval of its rules to facilitate trading

Nasdaq/NMS securities in late 1992,4

and began trading the securities in

February 1993. Since that time, the Phlx

has been operating the program without

any adverse consequences or

developments which negatively effect

the program. Therefore, the Exchange

seeks an extension of the Phlx OTC/UTP

Pilot Program to further develop the

overall OTC/UTP program.

Since April 1994, the Phlx has

temporarily suspended making markets

in OTC/UTP securities. However, the

Phlx desires to keep the program in

place for future use once certain

elements of the Joint OTC/UTP Plan are

worked out between the NASD and the

other participants in the Plan.

2. Statutory Basis

This proposal is consistent with the

Section 6(b)(5) of the Act and the rules

and regulations promulgated

thereunder. Specifically, the proposal is

calculated to promote just and equitable

principles of trade and to protect

investors and the public interest. Due to

the non-controversial nature of the Phlx

OTC/UTP Pilot Program, coupled with

the previously scheduled expiration of

the Phlx’s OTC/UTP privileges, the Phlx

requests accelerated approval of this

filing.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Phlx does not believe that the

proposed rule change will be a 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. Solicitation of Comments

Interested persons are invited to

submit written data, views and