Federal Register / Vol. 61, No. 124 / Wednesday, June 26, 1996 / Notices 33159

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

2Letter from Julie Beyers, Associate Counsel,

NSCC, to Jerry Carpenter, Assistant Director,

Division of Market Regulation, Commission (May 8,

1996).

3The Commission has modified parts of these

statements.

securities may require negotiation of the

transaction price, agreement on the

currency of settlement and time to

obtain Rule 144A compliance

documentation.

The NASD has determined that the

time of ‘‘execution’’ with respect to a

transaction in a PORTAL security shall

be the point when all of the terms of the

trade have been agreed to and the

parties are ready to send the transaction

to clearance and settlement. So long as

the terms of the transaction remain

outstanding, the transaction would not

be deemed to be executed because the

parties are not ready to enter ‘‘into a

purchase, sale or transfer of a PORTAL

security.’’ With respect to the transfer of

documents demonstrating compliance

with Rule 144A or any other applicable

exemption, it appears that the transfer of

such documentation may occur at some

later time although the seller would

have previously determined the

exemption to be relied on. Thus, the

time when documentation supporting

reliance on Rule 144A or any other

applicable exemption is completed

would not affect the time when an

‘‘execution’’ of a transaction in a

PORTAL security is deemed to occur.

(b) The NASD believes that the

proposed rule change is consistent with

the provisions of Section 15A(b)(6) of

the Act in that the establishment of a

pilot to develop criteria for designation

of securities that should be subject to

last sale display and to initiate trade

reporting under the pilot will allow the

NASD to surveil transactions in

restricted securities that are designated

in The PORTAL Market and will

prevent fraudulent and manipulative

acts and practices, will promote just and

equitable principles of trade, and will

remove impediments to and prefect the

mechanism of a free and open market.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD does not believe that the

proposed rule change will result in any

burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act, as amended.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments were neither

solicited nor received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 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

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 NASD consents, the

Commission will:

(A) By order approved 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, 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 in Washington, D.C. 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 July 17, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority, 17 CFR 200.30–3(a)(12).

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–16291 Filed 6–25–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37341; File No. SR–NSCC–

96–10]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing of

Proposed Rule Change To Permit

Establishment of Alternative

Settlement Cycles for Mutual Fund

Transactions Through the Fund/SERV

System

June 20, 1996.

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

Securities Exchange Act of 1934

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

April 4, 1996, National Securities

Clearing Corporation (‘‘NSCC’’) filed

with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change and described in

Items I, II, and III below, which items

have been prepared primarily by NSCC.

On May 8, 1996, NSCC filed an

amendment to its proposed rule

change.2 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 proposed rule change will modify

NSCC’s Rules to enable NSCC members

using NSCC’s Fund/SERV system to

establish settlement cycles for mutual

fund transactions other than that which

would be automatically assigned by

Fund/SERV.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NSCC 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. NSCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements.3

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of the proposed rule

change is to enable NSCC members

using NSCC’s Fund/SERV system to

establish settlement cycles for mutual

fund transactions other than that which

would be automatically assigned by

Fund/SERV. Fund/SERV is an NSCC

service that permits NSCC members to

process and to settle on an automated

basis mutual fund purchase and

redemption orders and to transmit

registration instructions.

Currently, the Fund/SERV system

automatically establishes a settlement

cycle and assigns a settlement date to a

mutual fund transaction based on the

underlying security type. The proposed

rule change will permit mutual fund

transactions to settle on an expanded or
33160 Federal Register / Vol. 61, No. 124 / Wednesday, June 26, 1996 / Notices

4A 401K account is a cash or deferred profit

sharing plan as described in Section 401(k) of the

Internal Revenue Code of 1986, as amended.

5 15 U.S.C. § 78q–1 (1988).

6Letter from Alan Rubin, Vice President, Smith

Barney, to Chris Hayes, NSCC (January 15, 1996).

1The Exchange’s minor rule plan is administered

pursuant to PHLX Rule 970, ‘‘Floor Procedure

Advices: Violations, Penalties, and Procedures,’’

which contains Advices with accompanying fine

schedules. Pursuant to paragraph (c)(1) of Rule

19d–1 under the Act, a self-regulatory organization

(‘‘SRO’’) is required to file promptly with the

Commission notice of any ‘‘final’’ disciplinary

action taken by the SRO. Pursuant to paragraph

(c)(2) of Rule 19d–1, any disciplinary action taken

by the SRO for violation of an SRO rule that has

been designated a minor rule violation pursuant to

the plan shall not be considered ‘‘final’’ for

purposes of Section 19(d)(1) of the Act if the

sanction imposed consists of a fine not exceeding

$2500 and the sanctioned person has not sought an

adjudication, including a hearing, or otherwise

exhausted his or her administrative remedies. By

deeming unadjudicated minor violations as not

final, the Commission permits the SRO to report

violations on a periodic (quarterly), as opposed to

immediate, basis.

shortened settlement cycle upon

agreement of the submitting parties. The

date established by the submitting

parties for a transaction will be the date

used for all trade processing relating to

that particular transaction and could be

as short as the same day or as long as

seven business days.

As a result of the expansion of the

types of businesses conducted by

broker-dealers, the mutual fund

industry has requested that NSCC

modify the Fund/SERV system to enable

broker-dealers to establish settlement

dates with respect to specific

transactions. For example, a transaction

involving shares of traditional load

mutual funds normally settles on a three

business day settlement cycle, whereas

a transaction for shares of the same fund

involving a 401K account 4 normally

settles on a next day settlement cycle.

The proposed modifications to the

Fund/SERV system will allow NSCC

members to make an adjustment to the

settlement cycle for mutual fund

transactions in order to accommodate

the need for different settlement cycles.

Under the proposed rules, a member

which submits a mutual fund order and

desires to establish a settlement cycle

other than that established by the Fund/

SERV system would include in the

order data the date on which the

transaction is to settle and a reason code

for modifying the settlement cycle. The

contraparty would then have the

opportunity to accept or to reject the

transaction. The transaction also would

be rejected by NSCC if the specified

settlement cycle is longer than seven

business days. Once accepted NSCC

will process the mutual fund transaction

in accordance with the specified

settlement cycle.

The proposed rule change is

consistent with the requirements of

Section 17A of the Act, and the rules

and regulations thereunder because it

will facilitate the prompt and accurate

clearance and settlement of securities

transactions.5

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

NSCC does not believe that the

proposed rule change will have an

impact on or impose a burden on

competition.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

NSCC solicited comments from the

Investment Company Institute Broker

Dealer Advisory Committee on

November 10, 1995. NSCC received one

letter from Smith Barney 6 requesting

certain formatting features. Based on

this letter, NSCC has made certain

modifications to the Fund/SERV system.

NSCC will notify the Commission of any

additional written comments 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 self-regulatory

organization 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, 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 provisions of

5 U.S.C. 552, will be available for

inspection and copying in the

Commission’s Public Reference Room in

Washington, D.C. Copies of such filing

will also be available for inspection and

copying at the principal office of NSCC.

All submissions should refer to the file

number SR–NSCC–96–10 and should be

submitted by July 17, 1996.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–16293 Filed 6–25–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37322; File No. SR–PHLX–

96–20]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Relating to Contrary Exercise Advices

for Expiring Equity Options

June 18, 1996.

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

Securities Commission Act of 1934

‘‘(Act’’), 15 U.S.C. § 78s(b)(1), notice is

hereby given that on May 30, 1996, the

Philadelphia Stock Exchange, Inc.

(‘‘PHLX’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change as described in Items I, II,

and III 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

Pursuant to Rule 19b–4 of the Act, the

PHLX proposes to adopt new Floor

Procedure Advice (‘‘Advice’’) F–26,

‘‘Equity Options Contrary Exercise

Advices,’’ to add certain provisions of

paragraph (b), ‘‘Exercise Cut-Off for

Expiring Options,’’ of PHLX Rule 1042,

‘‘Exercise of Equity Option Contracts,’’

to the PHLX’s Floor Procedure Advice

Handbook. The PHLX proposes to

include Advice F–26 in the Exchange’s

minor rule violation enforcement and

reporting plan (‘‘minor rule plan’’).1