33156 Federal Register / Vol. 61, No. 124 / Wednesday, June 26, 1996 / Notices

1See, letter from Suzanne E. Rothwell, Associate

General Counsel, NASD, to Mark P. Barracca,

Branch Chief, Division of Market Regulation, SEC,

dated November 22, 1995.

2See, letter from Suzanne E. Rothwell, Associate

General Counsel, NASD, to Elizabeth MacGregor,

Branch Chief, Division of Market Regulation, SEC,

dated June 12, 1996.

3 Infra note 16.

4 In connection with the recent reorganization of

the NASD Manual, The PORTAL Market Rules that

were set forth in Schedule I to the NASD By-Laws

are now set forth in the Rule 5300 series of the

Market Rules. When adopted, the rule change

proposed herein will be modified to comply with

the new Manual form. See, NASD Notice to

Members 96–24 (April 1996).

5NASD Manual, Schedules to the By-Laws,

Schedule I, Part II, Sec. 2 (CCH ¶ 1953 (outlining

the requirements for the designation of securities in

the PORTAL Market).

6NASD Manual, Schedules to the By-Laws,

Schedule I, Part III, Secs. 8 and 9 (CCH) ¶¶ 1962–

1963 (setting forth the requirements for registration

of an NASD member as a PORTAL dealer and

PORTAL broker).

7 ‘‘Investor status information’’ includes

information on whether the contra-party was a QIB

under Rule 144A, a non-QIB institution, or an

individual or, alternatively, whether the transaction

is to an offshore market or is into the U.S. public

market.

8NASD Manual, Schedules to the By-Laws,

Schedule I, Part III, Secs. 4(a) and 6(b) (CCH)

¶¶ 1958, 1960 (describing certain information

required to be included in the weekly transaction

report and the monthly Surveillance Report

submitted to the NASD by PORTAL dealers and

PORTAL brokers).

9Because the PORTAL Non-Participant Report

includes both primary and secondary market data,

this data will not be used to develop statistics

regarding secondary market trading in PORTAL

securities.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–16292 Filed 6–25–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37317; File No. SR–NASD–

95–40]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc. Relating to PORTAL

Market Pilot of Member’s Reporting

Obligations

June 17, 1996.

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

Securities Exchange Act of 1934

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

hereby given that on October 4, 1995 the

National Association of Securities

Dealers, Inc. (‘‘NASD’’ or ‘‘Association’’)

filed with the Securities and Exchange

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

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by the NASD. On

November 22, 1995, the NASD filed

Amendment No. 1 to advise the

Commission that the NASD’s Board of

Governors approved this rule filing to

adopt a pilot of the PORTAL reporting

requirements.1 On June 12, 1996, the

NASD filed Amendment No. 2 to revise

a footnote to the proposed rule change.2

Initially, this footnote stated that the

investor status information requirement

concerning 144A transactions in the

U.S. private market would be satisfied if

the member provided the requisite

information with respect to the

member’s direct customer. The revision

clarifies the circumstances in which the

contra-party would be required to

provide investor status information and

affirms industry reliance on these

representations in determining whether

the buyer is a qualified institutional

buyer (‘‘QIB’’).3 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 NASD is proposing to amend

Schedule I to the NASD By-Laws

(‘‘PORTAL Rules’’) 4 that regulates The

PORTAL Market to establish a pilot for

one year for the reporting of the initial

placement (‘‘primary transactions’’) and

secondary transactions in securities

designated in the PORTAL Market as

PORTAL securities.5 The pilot will

apply to members of the NASD that are

designated in the PORTAL Market as

PORTAL dealers and PORTAL brokers 6

and to other members of the NASD that

transact business in PORTAL securities.

PORTAL dealers and PORTAL

brokers will be required to provide a

weekly transaction report to the

PORTAL system of secondary market

transactions in securities designated in

the PORTAL Market. The weekly

PORTAL transaction report by PORTAL

dealers and PORTAL brokers of such

secondary market transactions will

include all trade report information and

surveillance information as to the status

of the investor 7 and will be required to

be submitted no later than the Friday of

the following week with respect to the

prior calendar week’s transactions.

PORTAL dealers and PORTAL brokers

will also be required to submit a

monthly PORTAL Surveillance Report

to the PORTAL system that includes

trade report and investor status

information, but only with respect to

primary market transactions in PORTAL

securities.8 The monthly report will be

required to be submitted by the tenth

business day of the month with respect

to the primary offerings that occurred in

the prior calendar month.

The NASD is not proposing to modify

the current reporting requirements with

respect to other NASD members who are

not designated as PORTAL dealers and

PORTAL brokers. Such members are

required to submit by the fifth business

day of each month a PORTAL NonParticipant Report that includes trade

and investor status information with

respect to primary and secondary

market transactions that occurred in the

prior month in which no PORTAL

dealer or broker participated. It is

anticipated that the PORTAL NonParticipant Report will be submitted in

paper form.

The NASD will provide a report to the

SEC analyzing the information

generated from weekly transaction

reports submitted by PORTAL dealers

and PORTAL brokers during the first six

months of the pilot to determine

whether there is an identifiable group of

securities that have sufficient liquidity

and volume in the secondary market to

permit some form of last sale or other

display of transactions in order to

enhance price discovery.9 With respect

to the reporting of primary transactions

submitted in the monthly PORTAL

Surveillance Report, the NASD will

review such reports to determine

whether they provide sufficient support

to the NASD’s surveillance function to

justify their continued submission. The

pilot will also provide necessary

surveillance of transactions in PORTAL

securities.

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

NASD 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 NASD has

prepared summaries, set forth in

Sections (A), (B), and (C) below, of the

most significant aspects of such

statements.
Federal Register / Vol. 61, No. 124 / Wednesday, June 26, 1996 / Notices 33157

10See, supra note 6.

11NASD Manual, Schedules to the By-Laws,

Schedule I, Part IV, Sec. 1 (CCH) ¶ 1965 (setting

forth the requirements for registration of

institutional investors as PORTAL qualified

investors).

12Securities Exchange Act Rel. No. 33326 (Dec.

13, 1993); 58 FR 66388 (Dec. 20, 1993).

13THe NASD issued Notice to Members 95–34 in

May 1995 to survey its members with respect to

their transactions in PORTAL securities. The

purpose of the survey was to identify members of

the NASD that were not already PORTAL dealers

and PORTAL brokers that transact business in

PORTAL securities and, with respect to such

members, obtain information on the level of

transactions. Only nine members of the NASD

submitted a survey form, of which, only three

indicated that they had conducted transactions in

PORTAL securities in the prior six months.

Moreover, of the three, only one member had

transacted business in an amount of at least $250

million.

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

(a) Background

The Nasdaq Stock Market operates

The PORTAL Market for the trading of

privately placed securities that qualify

under Rule 144A under the Securities

Act of 1933. The PORTAL Market is the

only SEC-authorized system to provide

a trading market for the resale of

restricted securities. Securities that are

designated PORTAL securities are

eligible to receive a CUSIP number and

to be settled through the Depository

Trust Company (‘‘DTC’’). Participants in

the PORTAL Market include PORTAL

dealers, PORTAL brokers, and PORTAL

qualified investors (‘‘PORTAL

participants’’). Any member of the

NASD that is registered as a general

securities firm can become a PORTAL

dealer if the member meets the $10

million investment in securities test

under Rule 144A or as a PORTAL

broker, where the member cannot meet

the $10 million test.10 Investors that

meet the $100 million investment in

securities test under Rule 144A can be

registered as PORTAL qualified

investors.11 There are currently 115

participants in The PORTAL Market.

The PORTAL Market accepts

quotations from PORTAL dealers and

PORTAL brokers that are one- or twosided, firm or indicative. The PORTAL

Market requires neither firm quotations

nor market making. NASD members

may sell PORTAL securities to any

customers, regardless of whether the

customer is a participant in the

PORTAL market, so long as the

transaction is in compliance with Rule

144A or any other available exemption

from registration.

On December 13, 1993, the SEC

approved SR–NASD–91–05, which

adopted significant amendments to The

PORTAL Market Rules (formerly in

Schedule I to the NASD By-Laws).12 The

amendments were immediately effective

on the date of approval, with the

exception of the new reporting rules

which were to be effective on a date

announced by the NASD within six

months following publication in the

Federal Register. The NASD has not

announced a date of effectiveness for

the new reporting rules.

The reporting requirements approved

by the SEC required that members of the

NASD registered as PORTAL dealers

and PORTAL brokers enter a PORTAL

transaction report in the PORTAL

Market within 15 minutes of a

secondary market transaction. The

PORTAL transaction report included the

standard items of information relative to

a securities trade. PORTAL dealers and

PORTAL brokers were also required to

submit by the fifth business day of a

month a PORTAL Surveillance Report

that included the same trade data with

respect to the prior month’s primary and

secondary market transactions of

PORTAL securities and, with respect to

each such transaction, information on

whether the contra-party was a QIB

under Rule 144A, a non-QIB institution,

or an individual (‘‘investor status

information’’). NASD members that are

not registered as PORTAL dealers or

PORTAL brokers were also required to

submit a monthly PORTAL NonParticipant Report including the same

information with respect to primary and

secondary transactions that occurred in

the prior month.

The SEC’s December 13, 1993

approval order reflected in footnotes 48

and 49 thereof the concerns of several

commentators, including the Securities

Industry Association, regarding the need

for and the technological, staffing, and

costs related to the requirement that

PORTAL transaction reports for

secondary market transactions in

PORTAL securities be submitted to the

NASD within 15 minutes of the

transaction and that such reports would

be subject to last sale display. In

addition, the approval order referenced

in footnote 62 the undertaking of the

NASD that it would meet with members

of the International Operations

Association to determine the extent to

which broker/dealer firms have

decentralized computer and trade

processing systems operating in

different areas of their businesses, and

to determine further the views of market

participants regarding the timing of the

secondary market reporting

requirements.

Description of Proposed Rule Change

Commencing in February 1994, the

NASD entered into discussions with its

members that are currently PORTAL

brokers and PORTAL dealers. During

such meetings, members discussed the

unique problems associated with trade

reporting of primary and secondary

market transactions in restricted

securities designated in the PORTAL

Market. As a result of these concerns of

member firms, the implementation of

the reporting requirements approved by

the SEC has been delayed and the NASD

is proposing to establish a pilot for one

year for the reporting of primary and

secondary market transactions in

securities designated in the PORTAL

Market as PORTAL securities. The pilot

will apply to members of the NASD that

are designated in the PORTAL Market as

PORTAL dealers and PORTAL brokers

and to members of the NASD that are

not PORTAL dealers or PORTAL

brokers.13

Reporting Obligations of PORTAL

Dealers and PORTAL Brokers

Transactions in PORTAL securities

will be subject to the reporting

requirements set forth in Section 2(a) to

Part III of the PORTAL Market Rules.

Pursuant to Section 2(a), if both the

buyer and the seller to a transaction are

PORTAL dealers or PORTAL brokers,

the seller is obligated to report the

transaction to the PORTAL System. If

only one party to a transaction in

PORTAL securities is a PORTAL dealer

of PORTAL broker, that party is

obligated to report the transaction to the

PORTAL System. Where the reporting

party is the buyer, the PORTAL dealer

or PORTAl broker is required to provide

the investor status information with

respect to his status as a buyer.

Reporting Obligations of NASD

Members That Are Not PORTAL

Participants

The NASD is not proposing to modify

the reporting requirements with respect

to other NASD members who are not

designated as PORTAL dealers and

PORTAL brokers. Such members are

required by Section 2(b) and Section 5

of Part III of the PORTAL Rules to

submit by the fifth business day of each

month a PORTAL Non-Participant

Report to the Market Surveillance

Department of the NASD that includes

trade and investor status information

with respect to primary and secondary

market transactions that occurred in the

prior month. A member who is not a

PORTAL dealer or broker will only be

required to submit a PORTAL Non-
33158 Federal Register / Vol. 61, No. 124 / Wednesday, June 26, 1996 / Notices

14See, Securities Exchange Act Release No. 33327

(Dec. 13, 1993), 58 FR 67878 (Dec. 21, 1993).

15 If separate tranches of a security are rated

individually, the security does not qualify for the

exemption from the reporting requirements if any

tranche is rated below investment grade.

16While the identity of the contra-party is only

required with respect to the party with whom the

member is engaged in the transaction consistent

with Section 4 to Part III of the PORTAL Rules,

investor status information is required with respect

to the buyer or buyers in the transaction consistent

with Section 6 of Part III of the PORTAL Rules. If

the contra-party is purchasing as principal, the

investor status information would be provided with

respect to the contra-party. If the contra-party is

purchasing as agent, the investor status information

would be required with respect to the account(s) on

whose behalf the contra-party is purchasing. In

providing the investor status information, it is the

understanding of the NASD that it is industry

practice for members to rely on representations of

the agent/contra-party as to whether the buyer is a

qualified institutional buyer, a non-QIB institution,

or an individual.

Participant Report if it is the only

member participating in the transaction

or if the contra-party is a member that

is also not a PORTAL dealer or broker.

Pursuant to Section 2(b), the report must

be submitted by the seller, if both

parties to the transaction are members.

If only one party to the transaction is an

NASD member, the member is

responsible for filing the report. Because

the PORTAL Non-Participant Report

includes both primary and secondary

market data, this data will not be used

to develop statistics regarding secondary

market trading in PORTAL securities.

Securities Subject to Reporting

The pilot reporting requirements will

apply to all reportable PORTALdesignated securities. Reportable

PORTAL-designated securities include

all securities designated in the PORTAL

Market, except for nonconvertible debt

securities and nonconvertible preferred

stock issued prior to December 13, 1993

which are rated in one of the top four

generic rating categories by a nationally

recognized statistical rating organization

for which a request for deletion from the

list of reportable securities has been

made as set forth below.14 On December

13, 1993, the SEC approved

amendments to the rules of the DTC that

permitted DTC to make such investment

grade securities eligible for its bookentry delivery and other depository

services without the need for the

securities to also be designated for

inclusion in The PORTAL Market. Thus,

subsequent to that date, issuers of such

investment grade securities have the

option of not being PORTAL designated.

To the extent issuers have nonetheless

determined to obtain PORTAL

designation of their securities,

transactions in such securities will be

subject to the PORTAL pilot reporting

requirements unless a procedure is

followed that would result in

termination of the PORTAL designation

of the security.

With respect to investment grade

securities issued on or after December

13, 1993, such securities will be

included in the list of reportable

securities, unless PORTAL designation

of the issue has been terminated as a

result of the submission of an

appropriate modified letter of

representation by the issuer to DTC to

qualify for the investment grade

exemption from PORTAL designation

under DTC rules. This procedure would

require that the issuer agree to amend its

original letter of representation to

provide information on the investment

grade rating of the issue and to request

that the security be approved in DTC

under the exemption from PORTAL

designation for investment grade

securities. Upon acceptance by DTC of

the issuer’s modified letter of

representation, a letter must be

submitted to The PORTAL Market by a

PORTAL dealer or PORTAL broker that

is signed by an associated person of the

member with supervisory authority. The

letter must request that a security’s

designation be terminated and include a

copy of the letter of representation by

the issuer to DTC (as well as any other

documentation) to qualify for the

investment grade exemption from

PORTAL designation under DTC rules.

DTC and the PORTAL Market will

coordinate to promptly set a date for

termination of the security as a

PORTAL-designated security.

With respect to investment grade

securities designated in the PORTAL

Market prior to December 13, 1993, such

securities will be included in the list of

reportable PORTAL securities unless a

PORTAL dealer or PORTAL broker

submits a letter of representation signed

by an associated person of a member

with supervisory authority that

identifies each security that the member

believes is rated investment grade and

provides with respect to each such

security: (1) A statement whether the

security is a nonconvertible debt

security or a nonconvertible preferred

stock; (2) the rating of the security and/

or the lowest rating of any tranche of the

security; 15 and (3) the date the offering

was issued. Upon acceptance of this

submission by the PORTAL Market, the

security will be deleted from the list of

securities subject to the PORTAL pilot

reporting requirements, but the security

will not be terminated as a PORTALdesignated security.

The PORTAL Market is currently

developing a list of PORTAL securities

in order for PORTAL brokers and

dealers and other members to be able to

identify those securities subject to the

PORTAL pilot reporting requirements.

All securities designated in the PORTAL

Market will be included in the list,

unless: (1) a member has requested to

not include a security that is an

investment grade rated nonconvertible

debt security or preferred stock issued

prior to December 13, 1993; or (2) the

security’s designation has been

terminated pursuant to the procedures

set forth above for investment grade

rated nonconvertible debt or preferred

stock issued on or after December 13,

1993 or is terminated for another reason.

Investor Status Information

The PORTAL pilot will require that

the weekly transaction report and

monthly Surveillance Report of

PORTAL dealers and brokers include

investor status information. In

reviewing this requirement, which is

drawn from the provisions of the

PORTAL Rules, the NASD determined

that there are two situations where the

investor status information is not

relevant; the first is in connection with

sales to an offshore market and the

second relates to sales into the U.S.

public market (pursuant to a registration

statement, Rule 144 or any other

applicable exemption). The NASD

believes that the request of SEC staff for

information on investor status in the

reporting of a transaction to the

PORTAL system was intended to be

applicable to transactions within the

U.S. private market. The NASD,

therefore, determined that the required

reports by PORTAL dealers and

PORTAL brokers will permit the

investor status information field to

accept two alternative entries of either

‘‘Offshore’’ or ‘‘U.S. Public Market’’ to

indicate that the transaction is not in the

U.S. private market. Thus, with respect

to each reported transaction, members

may either enter the requisite investor

status information on the contra-party or

indicate that such information is not

applicable as the transaction is to an

offshore market or the U.S. public

market.16

Time of Execution

The PORTAL reporting requirements

under the pilot are triggered when a

trade is ‘‘executed.’’ The term

‘‘execution’’ is defined in the PORTAL

Rules as ‘‘entering into a purchase, sale

or transfer of a PORTAL security.’’

Members have requested clarification of

when a transaction in a PORTAL

security is considered executed in light

of the fact that transactions in restricted
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