Federal Register / Vol. 61, No. 97 / Friday, May 17, 1996 / Notices 24989

5As part of the proposed rule change, the

Exchange has moved existing Interpretation and

Policies .01–.03 of Rule 37(a), Article XX, currently

found at the end of subparagraph (a) of Rule 37, to

the end of Rule 37, and renumbered existing

Interpretation and Policy .01 of Rule 37 as

Interpretation and Policy .04.

6See Amendment No. 1, supra note 1.

Article XX of the CHX Rules contains the

Exchange’s trading rules. Article XX, Rule 1

currently states that the rules contained in Article

XX have general applicability to Exchange

Contracts made on the Exchange during the Primary

Trading Session, and, to the extent determined by

the Exchange, to Exchange Contracts not made on

the Exchange.

Article XXI, Rule 1 currently requires each

Exchange member to promptly advise the Exchange

of each of his or her transactions that are executed

on the Floor of the Exchange during the Primary

Trading Session or through the Portfolio Trading

System.

7For a description of operation of the Exchange’s

Secondary Trading Session, see Securities Exchange

Act Release No. 33991 (May 2, 1994), 59 FR 23904

(May 9, 1994) (File No. SR–CHX–93–23).

8See Amendment No. 1, supra note 1.

9 15 U.S.C. 78f(b)(5).

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

2Letter from Anthony H. Davidson, Attorney,

MBSCC, to Michele Bianco, Division of Market

Regulation (‘‘Division’’), Commission (November 1,

1995).

3Securities Exchange Act Release No. 36557

(December 6, 1995), 60 FR 64083.

4Letters from Anthony H. Davidson, Attorney,

MBSCC, to Michele Bianco, Division, Commission

(January 30, 1996) and to Jerry Carpenter, Associate

[sic] Director, Division, Commission (April 12,

1996). The January 30, 1996, amendment adds a

definition of related participant to MBSCC’s

Procedures consistent with language in MBSCC’s

original filing. The April 15, 1996, amendment

provides that a participant requesting a waiver from

the eligibility requirements must provide MBSCC

with certain assurances. The amendments were

technical amendments that did not require

republication of notice.

5 ‘‘Related participant’’ is any affiliate (as defined

in Rule 12b–2 of the Act) or entity that is used or

intended to be used in whole or in part to

Continued

broker in order to send an order to the

CHX during the PPS. Because the PPS

will be an extension of the Exchange’s

daily auction market, all the Exchange’s

rules applicable to floor trading during

the Exchange’s Primary Trading

Session, as modified by proposed

Interpretation and Policy .05 of Rule 37,

Article XX, will continue to be

applicable.5 For example, specialists

will be required to quote markets and

trading will occur based on real-time

price and quote changes.

To accomplish the foregoing, the

Exchange is amending Article XX, Rule

1 and Article XXI, Rule 1 to make it

clear that these rules also apply to the

PPS.6 The Exchange is also amending

Interpretation and Policy .02 of Rule 37,

Article XX to make it clear that although

GTX orders are executable after the

close of the PPS (i.e., in the Exchange’s

Secondary Trading Session), they are

executed based on trading that occurs in

a security in a primary market’s afterhours closing price trading session, at

that closing price, and are not

executable based on trading in, or the

closing price established in, the PPS.7

Finally, the Exchange is also

amending Article IX, Rule 10(b) to

provide that if trading on the Exchange

is halted during the Primary Trading

Session pursuant to Article XX, Rule

10A, and such trading halt is still in

effect at the close of the Primary Trading

Session, the PPS scheduled for that day

will be cancelled.8

2. Statutory Basis

The proposed rule change is

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

Act 9 in that it is designed to promote

just and equitable principals of trade, to

remove impediments to and to perfect

the mechanism of a free and open

market and a national market system,

and, in general, to protect investors and

the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange 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 35 days of the publication of

this notice in the Federal Register or

within such longer period (i) as the

Commission may designate up to 90

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-regualtory organization

consents, the Commission will:

(A) By order approve the 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, N.W.,

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 at

the Commission’s Public Reference

Section, 450 Fifth Street, N.W.,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the Exchange. All submissions

should refer to File No. SR–CHX–96–13

and should be submitted June 7, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–12467 Filed 5–16–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37205; File No. SR–

MBSCC–95–08]

Self-Regulatory Organizations; MBS

Clearing Corporation; Order Approving

Proposed Rule Change Relating to

Eligibility Changes for Settlement

Balance Order Settlement

May 13, 1996.

On October 17, 1995, MBS Clearing

Corporation (‘‘MBSCC’’) filed a

proposed rule change (File No. SR–

MBSCC–95–08) with the Securities and

Exchange Commission (‘‘Commission’’)

pursuant to Section 19(b) of the

Securities Exchange Act of 1934 (‘‘Act’’)

relating to eligibility changes for

Settlement Balance Order (‘‘SBO’’)

settlement.1 On November 1, 1995,

MBSCC filed an amendment to the

proposed rule change.2 Notice of the

proposal was published in the Federal

Register on December 13, 1995, to

solicit comments from interested

persons.3 On January 30, 1996, and

April 15, 1996 MBSCC filed additional

amendments to the proposed rule

change.4 No comments were received.

As discussed below, this order approves

the proposed rule change.

I. Description

The proposed rule change modifies

MBSCC’s procedures to provide that

MBSCC will reject trades destined for

SBO settlement between multiple

accounts of a participant as well as

between a participant’s account and an

account of a related participant.5 As a
24990 Federal Register / Vol. 61, No. 97 / Friday, May 17, 1996 / Notices

contravene the purposes of the proposed rule

change. Letter from Anthony H. Davidson,

Attorney, MBSCC, to Michele Bianco, Division,

Commission (November 1, 1995).

6MBSCC has received two requests for a waiver.

Letter from John J. Rioux, Vice President and

Assistant General Counsel, J.P. Morgan & Co.

Incorporated, to George Parasole, Director of

Member Services, MBSCC (February 1, 1996) and

letter from Edward K. McCarthy, General Counsel,

Liberty Brokerage Inc., to George Parasole, Director

of Member Services, MBSCC (February 7, 1996).

7Letter from Anthony H. Davidson, Attorney,

MBSCC, to Jerry Carpenter, Assistant Director,

Division, Commission (April 15, 1996).

8 15 U.S.C. 78q–1 (1988).

9 15 U.S.C. 78q–1(b)(3)(F) (1988).

10Such guidelines permit the over delivery or

under delivery of two percent of the par amount of

securities to be delivered. MBSCC’s cash

adjustment procedures pro rate the resulting

positive or negative balances to the MBSCC

participants with netted out positions.

11 15 U.S.C. 78s(b)(2) (1988).

12 17 CFR 200.30(a)(12) (1995).

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

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 36150

(August 23, 1995), 60 FR 45197 (August 30, 1995).

4Securities Exchange Act Release No. 36492

(November 20, 1995), 60 FR 58422 (November 27,

1995).

5Under the proposal, the MSRB will bill only for

those trades for which the buy and sell sides

ultimately have agreed on trade details such as

price, transaction amount, and value.

6Rule G–14 requires that in each inter-dealer

transaction the clearing dealer identify the

executing dealer on whose half the transaction is

reported. Nevertheless, trades are reported lacking

the executing broker’s identifier. The fees due on

those trades will appear on the clearing dealer’s

invoice assigned to ‘‘blank’’.

result of being rejected, such trades

must settle on a trade-for-trade basis. A

participant may request a waiver of this

restriction by providing to MBSCC such

assurances as MBSCC may request.6

These assurances may include but are

not limited to (i) a letter describing the

reason for the request and the applicable

accounts for which relief is sought and

containing a representation that the use

of multiple accounts is not for the

purpose of influencing MBSCC’s

clearance and settlement process or (ii)

an opinion of counsel relating to the use

of multiple accounts that is satisfactory

to MBSCC.7

II. Discussion

The Commission believes the

proposal is consistent with the

requirements of Section 17A of the Act.8

Specifically, Section 17A(b)(3)(F) 9

states that the rules of a clearing agency

must be designed to assure the

safeguarding of securities and funds

which are in the custody or control of

the clearing agency or for which it is

responsible and to protect investors.

Under the SBO processing, MBSCC

makes cash adjustments to account for

variances in the par amount of securities

delivered by participants as permitted

by the Public Securities Association

guidelines.10 MBSCC believes that the

ability to include trades among related

accounts could cause a perception that

participants might influence the amount

of their cash adjustments through

submissions of internal trades.

Specifically, MBSCC believes it could

be possible for a participants to create

and submit to MBSCC for SBO

settlement fictitious trades between

related accounts that would permit the

participant to share in a positive cash

balance adjustment. By reducing the

possibility that a participant can

manipulate SBO settlement in such a

manner, the proposed rule change

should further MBSCC’s ability to

safeguard the funds in its custody or

control and to protect investors.

III. Conclusion

For the reasons stated above, the

Commission finds that MBSCC’s

proposal is consistent with Section 17A

of the Act.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,11 that the

proposed rule change (File No. SR–

MBSCC–95–08) be and hereby is

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–12469 Filed 5–16–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37197; File No. SR–MSRB–

95–13]

Self-Regulatory Organizations; Order

Approving Proposed Rule Changes by

the Municipal Securities Rulemaking

Board Relating to Fee Assessments

and Reporting of Sales or Purchases

Pursuant to Rules A–13, A–14, and G–

14

May 10, 1996.

I. Introduction

On August 11, 1995 the Municipal

Securities Rulemaking Board (‘‘Board’’

or ‘‘MSRB) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 and Rule 19b–4

thereunder,2 a proposed rule change to

change the fees assessed under Rules A–

13 and A–14, as well as to change the

reporting requirements under Rule G–

14. The proposed rule change was

published for comment in the Federal

Register (‘‘Original Proposal’’).3 In

November 1995, the MSRB submitted

Amendment No. 1 to the proposed rule

change which was also published for

comment (‘‘Amended Proposal’’).4 The

Commission received twenty-three

comment letters in all. For the reasons

discussed below, the Commission is

approving the proposal.

II. Description and Scope of the

Proposed Rule Change

The proposal changes the MSRB’s

existing fee structure to impose,

effective March 1, 1996, transactionbased fees on inter-dealer transactions.

The proposal establishes a transaction

fee of $.005 per $1,000 par value of

bonds on all inter-dealer sales

transactions, and effective October 1,

1995, increases the annual fee,

applicable to each broker, dealer, and

municipal securities dealer who

conducts municipal securities business,

from $100 to $200. Effective March 1,

1996, the proposal permits the MSRB to

use reported transaction information for

the purpose of assessing transaction

fees.

Rule G–14 requires each inter-dealer

transaction that is eligible for automated

comparison to be reported to the MSRB

through National Securities Clearing

Corporation, the central facility provider

for the automated comparison process.

The corollary change to Rule G–14

under the proposal authorizes the MSRB

to use the reported transaction

information to assess inter-dealer

transaction fees. The MSRB will send

monthly invoices to dealers that report

inter-dealer sales transactions on their

own behalf, and/or on behalf of another

dealer.5 The dealer will be responsible

for the timely payment of the entire fee

amount to the MSRB, but the MSRB

expects that clearing dealers will pass

through the fees to executing dealers

based upon their transaction volume. To

assist the clearing dealer, the invoice

will separate out the fees due on the

transactions submitted by the clearing

dealer on behalf of identified executing

dealers.6 As improvements are made in

the timely and accurate reporting of

transactions under Rule G–14, including

the correct identification of executing

brokers, the MSRB will consider

revisions in the billing procedure to

accommodate direct billing of executing

brokers.

As explained in its filing, the proposal

is intended to increase revenue to the

MSRB to cover budgetary expenditures.

The MSRB anticipates its technology

expenditures to rise over the next few

years as it implements transparency