[Federal Register Volume 61, Number 124 (Wednesday, June 26, 1996)]
[Notices]
[Pages 33159-33160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16293]
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SECURITIES AND EXCHANGE COMMISSION
[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.
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\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ Letter from Julie Beyers, Associate Counsel, NSCC, to Jerry
Carpenter, Assistant Director, Division of Market Regulation,
Commission (May 8, 1996).
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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\
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\3\ The Commission has modified parts of these statements.
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(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
[[Page 33160]]
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.
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\4\ A 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.
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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\
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\5\ 15 U.S.C. Sec. 78q-1 (1988).
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(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.
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\6\ Letter from Alan Rubin, Vice President, Smith Barney, to
Chris Hayes, NSCC (January 15, 1996).
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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