[Federal Register Volume 60, Number 90 (Wednesday, May 10, 1995)]
[Notices]
[Pages 24950-24951]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11518]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35675; File No. SR-MSRB-95-3]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of Proposed Rule Change Relating to the
Submission of Transaction Information for Confirmation, Clearance, and
Settlement of Transactions With Customers
May 4, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on March 23, 1995, the
Municipal Securities Rulemaking Board (``MSRB'') file with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II, and III below, which Items have
been prepared primarily by the MSRB. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
\1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The MSRB is filing proposed amendments to MSRB rule G-15 regarding
the confirmation, clearance, and settlement of transactions with
customers. The amendments would require dealers to submit delivery
versus payment and receipt versus payment (``DVP/RVP'') customer
transactions to an automated confirmation/acknowledgement system no
later than the end of trade date (``T''). The MSRB requests that the
amendments be made effective thirty days after approval by the
Commission.
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 MSRB 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
texts of these statements may be examined at the places specified in
Item IV below. The MSRB has prepared summaries, set forth in section
(A), (B), and (C) below, of the most significant aspects of such
statements.\2\
\2\The Commission has modified the text of the summaries
prepared by MSRB.
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A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
On October 5, 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 time frame for most broker-dealer transactions.\3\
Recognizing the differences between the corporate and municipal
securities markets and the unique role the MSRB has in overseeing the
municipal securities market, the Commission did not include municipal
securities within the scope of Rule 15C6-1.\4\ The Commission, however,
did formally request that the MSRB undertake a commitment to T+3
settlement for municipal securities to ensure consistency in settlement
cycles in the corporate and municipal markets.
\3\Securities Exchange Act Release No. 33023 (October 6, 1993),
58 FR 52891 (release adopting Rule 15c6-1). On November 16, 1994,
the Commission changed the effective date of Rule 15c6-1 from June
1, 1995 to June 7, 1995. Securities Exchange Act Release No. 34952
(November 9, 1994), 59 FR 59137.
\4\Securities Exchange Act Release No. 33023 (October 6, 1993),
58 FR 52891.
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On February 29, 1995, the Commission approved amendments to MSRB
rules G-12 on uniform practice and rule G-15 on confirmation,
clearance, and settlement of transactions with customers. These
amendments established three business days as the standard settlement
time frame for regular-way transactions in municipal securities.\5\ The
MSRB has been reviewing its rules to determine whether or not
additional rule changes are necessary to facilitate the movement to T+3
settlement. The MSRB has determined that amendment rule G-15 is
necessary to facilitate T+3 settlement for municipal securities
transactions.
\5\Securities Exchange Act Release No. 35427 (February 28,
1995), 60 FR 12798 [File No. SR-MSRB-94-10].
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Currently, rule G-15(d) states that a dealer shall give or send to
a DVP/RVP customer a confirmation with respect to an execution of an
order no later than the close of business on the next business day
after execution (``T+1'').\6\ The rule currently does not specify the
timing for the submission of transaction data to an automated
confirmation/acknowledgement system although the rule does require
nearly all municipal securities transactions with institutional
customers to be process in such a system.\7\ Under the proposed rule
change, giving or sending of the confirmation and the submission of
transaction data to an automated confirmation/acknowledgement system
would occur on the trade date rather than T+1.\8\ In a T+3 environment,
less time will exist for the necessary communications between dealers
and institutional customers to clear and settle transactions. The
proposed rule change accordingly would require the
[[Page 24951]] communication between dealers and institutional
customers begin on trade date. In addition, the success of the proposed
Phase II of the MSRB's Transaction Reporting Program will depend on
timely and accurate submission of institutional customer transaction
data on trade date to the automated confirmation/acknowledgement
system.\9\
\6\The terms ``DVP/RVP customer'' and ``institutional customer''
both refer to transactions between dealers and customers that are
settled on a delivery versus payment or receipt versus payment
basis.
\7\The automated clearance and settlement process includes
several steps. Initially, dealers submit transaction information to
an automated confirmation/acknowledgement system followed by the
institutional customer receiving notification requesting
acknowledgement of the transaction through the automated system.
Once the institutional customer acknowledges the transaction, the
transaction is then ready for automated settlement to occur at the
depository on settlement date.
\8\Rule G-15(a) states that a confirmation containing certain
information must be given or sent to each customer. Some dealers use
the automated confirmation/acknowledgement system as the exclusive
mechanism for confirming transactions to DVP/RVP customers (i.e., no
paper confirmation is sent). The MSRB has stated that use of the
automated confirmation/acknowledgement system to deliver a
confirmation meeting the information requirements of rule G-15(a) is
permissible as long as all information required by rule G-15(a) is
included on the electronic confirmation generated by that system.
The MSRB, however, has not specified that the automated
confirmation/acknowledgement system is the exclusive mechanism for
sending confirmation information required by rule G-15(a) to DVP/RVP
customers. Some dealers continue to use both the automated
confirmation/acknowledgement system and also send paper
confirmations.
\9\For a complete description of Phase II of the MSRB's
Transaction Reporting Program, refer to ``Transaction Reporting
Program for Municipal Securities: Phase II,'' MSRB Reports, Vol. 15,
No. 1 (April 1995).
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Section 15B(b)(2)(C) of the Act provides that the MSRB has the
authority to adopt rules:
To foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect
to, and facilitating transactions in municipal securities, to remove
impediments to and perfect the mechanism of a free and open market
in municipal securities, and, in general, to protect investors and
the public interest * * *.\10\
\10\15 U.S.C. 78o-3(b)(2)(C) (1988).
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The MSRB believes the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Act because the proposal will facilities
clearance and settlement of municipal securities in a T+3 environmental
by helping to ensure a more timely confirmation and acknowledgement of
DVP/RVP customer transactions.
B. Self-Regulatory Organization's Statement on Burden on Competition
the MSRB does not believe that the proposed rule change will impose
any burden on competition 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
The MSRB has neither solicited nor received comments on the
proposed rule change.
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. People 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 submissions, 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. Copies of the filing will also
be available for inspection and copying at the MSRB's principal
offices. All submissions should refer to File No. SR-MSRB-95-3 and
should be submitted by May 31, 1995.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\11\
\11\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-11518 Filed 5-9-95; 8:45 am]
BILLING CODE 8010-01-M