[Federal Register Volume 60, Number 2 (Wednesday, January 4, 1995)]
[Notices]
[Pages 517-518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35155; File No. SR-CHX-94-26]
Self-Regulatory Organizations; Chicago Stock Exchange,
Incorporated; Notice of Filing of Proposed Rule Change Relating to
Implementation of a Three-Day Settlement Standard
December 27, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on November 30, 1994, the
Chicago Stock Exchange, Incorporated (``CHX'') filed 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 CHX. On December 14, 1994, CHX filed an
amendment to the proposed rule change.\2\ The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
\1\15 U.S.C. Sec. 78s(b)(1) (1988).
\2\Letter from David Rusoff, Foley & Lardner, to Christine
Sibille, Division of Market Regulation, Commission (December 16,
1994).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The purpose of this proposed rule change is to amend CHX's rules to
accommodate the implementation of a three business day settlement
standard for securities transactions.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
It its filing with the Commission, CHX included statements
concerning the propose of and basis for the purposed 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. CHX 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
On October 13, 1993, the Commission adopted Rule 15c6-1 under the
Act which establishes a three-day settlement standard for most
securities transactions. Rule 15c6-1 becomes effective June 7, 1995.\3\
CHX's proposed rule change will amend its rules relating to delivery
time frames, ex-dates, and liability for erroneous reports in order to
comply with Rule 15c6-1 and a three business day settlement standard.
\3\Securities Exchange Act Releases Nos. 33023 (October 6,
1993), 58 FR 52891 (order adopting Rule 15c6-1) and 34952 (November
9, 1994), 59 FR 59137 (order changing effective date from June 1,
1995, to June 7, 1995).
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Under Article XX, Rule 9 of CHX's rules, regular way settlement
currently requires delivery five business days after the trade date
(``T+5''). Under the proposal, regular way settlement will occur three
business days after the trade date (``T+3''). Seller's option trades
currently can settle not less than six business days nor more than
sixty days following the day of the contract. Under the proposed rule
change, seller's option trades can settle not less than four business
days (``T+4'') nor more than sixty days following the day of the
contract. Trades made for next day delivery permit delivery on the next
business day following the day of the contract. Currently, such trades
also may specify in the contract that delivery will occur on the
second, third, or fourth full business day following the day of the
contract. The proposal will eliminate the ability to specify the third
or fourth full business day. Rule 9 also will be amended to eliminate
references to the fourth and fifth full business day preceding the
final day so that only on the second and third full business day for
subscription must bids and offers be made for next day settlement.
Article XXVII, Rule 1 will be amended to provide that transactions
in stocks shall be ex-dividend or ex-rights on the second business day
preceding the record date rather than on the fourth business day. With
regard to a record date on other than a business day, transactions in
stocks will be ex-dividend or ex-rights on the third preceding business
day rather than on the fifth business day.
Article XXVII, Rule 2 prescribes when ex-warrant trading will
begin. The ex-warrant period will be changed to the second business day
preceding the date of expiration of the warrants instead of the fourth
business day. When warrant expiration occurs on other than a business
day, the ex-warrant period will begin on the third business day
preceding the expiration date instead of on the fifth business day.
Article XXX, Rule 15 applies to erroneous comparisons and other
errors. All claims which involve erroneous comparisons will need to be
made within two business days of the original trade date rather than
within three business days. Claims which concern the omission of a
report which was properly due will need to be made [[Page 518]] within
two business days of the date the order should have been executed
rather than three business days. Claims which involve a lack of
comparison of a reported transaction will need to be made within two
business days of the original trade rather than three business days.
The CHX's implementation of the proposed rule change will be
consistent with the June 1995 T+3 conversion schedule which the
National Securities Clearing Corporation has developed for industry
use. The schedule is as follows.
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Trade date Settlement cycle Settlement date
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June 2 Friday.......... 5 day.................. June 9 Friday.
June 5 Monday.......... 4 day.................. June 9 Friday.
June 6 Tuesday......... 4 day.................. June 12 Monday.
June 7 Wednesday....... 3 day.................. June 12 Monday.
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If the Commission determines to alter the exemptions currently
provided in Rule 15c6-1, CHX may need to undertake additional rule
amendments. It is intended that the proposed rule change become
effective the same date as Rule 15c6-1.
CHX believes that the proposed rule change is consistent with
Section 6(b)(5) of the Act in that it protects investors and the public
interest by reducing the risk to clearing corporations, their members,
and public investors which is inherent in settling securities
transactions. This is accomplished by reducing the time period for
settlement of most securities transactions which will correspondingly
decrease the number of unsettled trades in the clearance and settlement
system at any given time.
The proposed change also is consistent with proposed rule 15c6-1
which requires brokers or dealers to settle most securities
transactions no later than the third business day after the date of the
contract unless otherwise expressly agreed to by the parties at the
time of the transaction.
(B) Self-Regulatory Organization's Statement on Burden on Competition
CHX does not believe that the proposed rule change will impose a
burden on competition.
(C) Self-Regulatory Organization's Statement of Comments on the
Proposed Rule Change Received from Members, Participants or Others
No written comments were solicited or 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 the 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 submission
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 at the
principal office of CHX. All submissions should refer to (File No. SR-
CHX-94-26) and should be submitted by January 25, 1995.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27 Filed 1-3-95; 8:45 am]
BILLING CODE 8010-01-M