[Federal Register Volume 64, Number 7 (Tuesday, January 12, 1999)]
[Notices]
[Pages 1838-1839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-590]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40871; File No. SR-BSE-98-15]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the Boston
Stock Exchange, Inc. Relating to Mandatory Year 2000 Testing
December 31, 1998.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 23, 1998, the Boston Stock Exchange, Inc. (``BSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons and to approve the
proposal on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange seeks to adopt mandatory Year 2000 testing and
reporting guidelines. The text of the proposed rule change is below.
Proposed new language is italicized.
* * * * *
CHAPTER XXXIII
Boston Exchange Automated Communication Order-routing Network
(BEACON)
Year 2000 Testing
Sec. 8(a) Each member and member organization shall participate
in testing of computer systems designed to prepare for Year 2000, in
a manner and frequency prescribed by the Exchange, and shall provide
to the Exchange reports related to such testing as requested by the
Exchange.
(b) The Exchange may exempt a member or member organization from
this requirement if that member cannot be accommodated in the
testing schedule by the organization conducting the test, if the
member does not employ computers in its business, or for other good
reasons.
(c) Every member of the Exchange that clears securities
transactions on behalf of other broker-dealers must take reasonable
measures to ensure that each broker-dealer for which it clears
securities transactions conducts testing with such member.
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 Exchange 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 Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to specifically mandate
that all Exchange member firms, unless exempt, participate in Year 2000
(``Y2K'') tests and report on Y2K remediation progress. The Exchange is
proposing that the rule expire on January 2, 2001 so that the Exchange
will be empowered to continue requiring testing and reporting as
necessary to correct any Y2K problems which may not be resolved prior
to January 1, 2000, as well as any unforeseen problems which may arise
after January 1, 2000. Unresolved programming issues could result in
erroneous data causing significant disruption in the securities
industry,
[[Page 1839]]
and the various levels of testing occurring today will help to identify
where additional work is required. Thus the Exchange seeks to mandate
compliance with testing guidelines and will discipline members that
fail to participate in the required Y2K testing and reporting of
progress to the Exchange.
Testing requirements may include participation in Securities
Industry Association (``SIA'') sponsored industry-wide point-to-point
tests and extended point-to-point tests. Reporting requirements may
include compliance with Commission-mandated B/D reports and any
Exchange requested reports, questionnaires or surveys regarding
preparations, preparedness and/or results.\3\
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\3\ The potential scope of BSE's testing and reporting
requirements was clarified during a conversation between Karen
Aluise, Vice President, BSE, and Joshua Kans, Attorney, Division of
Market Regulation, Commission, December 22, 1998.
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In addition, the Exchange proposes to exempt members and member
organizations from this requirement if they cannot be accommodated in
the testing schedule by the organization conducting the test, if they
do not employ computers in their business, or for other good reasons.
Furthermore, the Exchange proposes to require that any member of the
Exchange that clears securities transactions on behalf of other broker-
dealers must take reasonable measures to ensure that each broker-dealer
for which it clears securities transactions conducts testing with such
member.
2. Basis
The Exchange believes that the statutory basis for the proposed
rule change is section 6(b)(5) of the Act,\4\ which requires that an
exchange have rules that are designed to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, 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.
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\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is 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
No written comments were either solicited or received.
III. Commission's Findings and Order Granting Accelerated Approval
of Proposed Rule Change
After careful consideration, the Commission has concluded, for the
reasons set forth below, that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder. Mandating Year 2000 testing and reporting is consistent
with section 6(b)(5) of the Act, which, among other aspects, requires
that the rules of an exchange promote just and equitable principles of
trade, foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in securities, and remove impediments to
and perfect he mechanism of a free and open market and a national
market system. The Commission believes that the proposed rule change
will facilitate the BSE's and member firms' efforts to ensure the
securities markets' continued smooth operation during the period
leading up to and beyond January 1, 2000.
The Exchange has requested that the Commission approve the proposed
rule change prior to the 30th day after the date of publication of
notice of the filing in the Federal Register to ensure that as many
firms as possible participate in Year 2000 testing. The Commission
finds good cause for approving the proposed rule change prior to the
30th day after the date of publication of notice of the filing in the
Federal Register. It is vital that self-regulatory organizations
(``SROs'') such as the BSE have the authority to mandate that their
member firms participate in Year 2000 testing and that they report test
results (and other Year 2000 information) to the SROs. The proposed
rule change will help the BSE participate in coordinating Year 2000
testing, including industry-wide testing, and in remediating any
potential Year 2000 problems. This, in turn, will help ensure that the
industry-wide tests and the BSE's Year 2000 efforts are successful. The
proposed rule change will also help the BSE work with its member firms,
the SIA, and other SROs to minimize any possible disruptions the Year
2000 may cause.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. 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 Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
BSE. All submissions should refer to File No. SR-BSE-98-15 and should
be submitted by February 2, 1999.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\5\ that the proposed rule change (SR-BSE-98-15) is hereby approved on
an accelerated basis.\6\
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\5\ 15 U.S.C. 78s(b)(2).
\6\ In approving the proposal, the Commission has considered the
rule's impact on efficiency, competition and capital formation. 15
U.S.C. 78c(f).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-590 Filed 1-11-99; 8:45 am]
BILLING CODE 8010-01-M