95-27. Self-Regulatory Organizations; Chicago Stock Exchange, Incorporated; Notice of Filing of Proposed Rule Change Relating to Implementation of a Three-Day Settlement Standard  

  • [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.
    
    ------------------------------------------------------------------------
           Trade date            Settlement cycle         Settlement date   
    ------------------------------------------------------------------------
    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.       
    ------------------------------------------------------------------------
    
        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
    
    

Document Information

Published:
01/04/1995
Department:
Securities and Exchange Commission
Entry Type:
Notice
Document Number:
95-27
Pages:
517-518 (2 pages)
Docket Numbers:
Release No. 34-35155, File No. SR-CHX-94-26
PDF File:
95-27.pdf