[Federal Register Volume 60, Number 199 (Monday, October 16, 1995)]
[Notices]
[Pages 53652-53653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25510]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36352; File No. SR-MSRB-95-14]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of a Proposed Rule Change Relating to the
Settlement Dates for ``When, As and If Issued'' Transactions, the
Confirmation of Inter-Dealer Transactions, and Providing New Issue
Information to Registered Securities Clearing Agencies
October 6, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on August 15, 1995, the
Municipal Securities Rulemaking Board (``MSRB'') filed with the
Securities and Exchange Commission (``Commission'') a proposed rule
change (File No. SR-MSRB-95-14) 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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of the proposed rule is to amend MSRB rules G-12 and G-
34 to modify the requirements for the setting of settlement dates for
``when, as and if issued'' transactions and for the confirmation of
inter-dealer transactions. The proposal also seeks to modify and
reorganize the requirements for providing new issue information to
registered securities clearing agencies. Finally, the proposal seeks to
make technical changes to rule language to clarify the different
processing requirements for transactions that are eligible for
automated comparison through the facilities of a registered clearing
agency as opposed to those that are not eligible. 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
text of these statements may be examined at the places specified in
Item IV below. The MSRB has prepared summaries, set forth in sections
(A), (B), and (C) below, of the most significant aspects of such
statements.\2\
\2\ The Commission has modified the text of the summaries
submitted by the MSRB.
---------------------------------------------------------------------------
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
On February 28, 1995, the Commission approved amendments to MSRB
rules G-12(b) and G-15(b) redefining regular-way settlement as three
rather than five business days (``T+3 settlement'').\3\ Since that
time, the MSRB has been reviewing its rules to determine other
appropriate changes to accommodate T+3 settlement within the municipal
securities market.
\3\ Securities Exchange Act Release No. 35427 (February 28,
1995), 60 FR 12798 [File No. SR-MSRB-94-10] (order approving
proposed rule change).
---------------------------------------------------------------------------
The proposed rule change seeks to amend MSRB rules G-12 and G-34 to
modify the requirements for setting settlement dates for ``when, as and
if issued'' transactions and for the confirmation of inter-dealer
transactions. The proposed change also seeks to modify and reorganize
the requirements for providing new issue information to registered
securities clearing agencies. Finally, the proposal also seeks to make
technical changes to rule language to clarify the different processing
requirements for transactions that are eligible for automated
comparison through the facilities of a registered clearing agency as
opposed to those that are not eligible. These amendments seek to
advance T+3 settlement in the municipal securities market and are
designed generally to facilitate automated clearance and settlement of
municipal securities and to support the MSRB's Transaction Reporting
Program.\4\
\4\ MSRB rule G-14 sets forth the Transaction Reporting
Procedures for inter-dealer transactions.
---------------------------------------------------------------------------
MSRB rule G-12(f) requires all inter-dealer transactions eligible
for automated comparison to be compared in an automated comparison
system operated by a registered clearing agency.\5\ Under the proposed
rule change, revised MSRB rule G-12(b) would require that the
settlement date for when, as and if issued (``when-issued'')
transactions eligible for automated comparison not be earlier than two
business days after notification of the initial settlement date for the
issue is provided by the managing underwriter to the register clearing
agency. These changes reflect current capabilities of the automated
comparison system to process when-issued transactions.
\5\ MSRB rule G-12(b) requires the underwriter to provide the
initial settlement date for a new issue to the registered clearing
agency offering automated comparison services as soon as the initial
settlement date is known or immediately upon a change. This
requirement continues in effect under the proposed rule change by
cross-reference in revised rule G-12(b)(2)(C) to new rule G-
34(a)(ii)(D)(2). Generally, the automated comparison system requires
two days advance notice of the initial settlement date of an issue
from the underwriter to process when-issued transactions for the
underwriter and all other dealers.
---------------------------------------------------------------------------
MSRB rule G-12(b) currently requires that the settlement date of a
when-issued transaction for the rare inter-dealer transactions not
eligible for automated comparison not be earlier than the fifth
business day following the date the physical confirmation indicating
final settlement date is sent (six days for syndicate transactions).\6\
The proposed rule change would require that the settlement date for
such ineligible when-issued transactions, including syndicate
transactions, not be earlier than the third business day following the
date that the confirmation indicating final settlement is sent.
\6\ Nearly all new issue municipal securities are eligible for
automated comparison with the exception of those that do not meet
the CUSIP numbering eligibility requirements.
---------------------------------------------------------------------------
The proposed rule change also would amend MSRB rule G-12(c)
concerning the sending of confirmations for inter-dealer transactions
not eligible for automated comparison. For such ineligible when-issued
transactions, the proposed rule change would reduce the time period for
sending (1) the initial confirmation from two business days to one
business day after trade date, and (ii) the final confirmation from
five business days to three business days prior to final settlement.
For regular-way transactions ineligible for automated comparison, the
proposed rule change would change the requirement for sending a
confirmation from one business day after trade date to trade date.
The changes to rules G-12(b) and G-12(c) generally accelerate the
timing for sending confirmations and allow for the settlement of when-
issued transactions in a shorter time frame. The MSRB
[[Page 53653]]
believes that these changes will allow for more efficient clearance and
settlement and will help conform the municipal securities market to the
shorter settlement cycle.
In addition, the proposed rule change would amend MSRB rule G-34 to
require underwriters to submit interest rate and final maturity
information about new issues to the registered clearing agency offering
comparison services as soon as such information is known and would
reformat the existing requirements of the rule. The MSRB is aware of
instances in which incomplete or inaccurate security descriptions for
new issue municipal securities are available in the initial days of
trading in the issue. The MSRB's Transaction Reporting Program and
participants in the municipal securities market rely on accurate and
complete security descriptions in the automated comparison system. The
new requirement is designed to ensure that the registered securities
clearing agencies have the information necessary to provide accurate
descriptions and to calculate accurately final money amounts. Because
the MSRB's Transaction Reporting Program is linked to the National
Securities Clearing Corporation's (``NSCC'') automated comparison
system,\7\ the proposed amendment also will facilitate accurate prices
and security descriptions in NSCC system.
\7\ As set forth in detail in MSRB rule G-14, brokers, dealers,
or municipal securities dealers must submit or cause the submission
of specified transaction information for any transaction eligible to
be compared in NSCC's automated system directly to NSCC or to
another registered clearing agency linked with NSCC for the purpose
of automated comparison.
---------------------------------------------------------------------------
The proposed rule change moves the requirement that underwriters
provide the registered clearing agency with notification of settlement
date as soon as it is known from rule G-12(b) to rule G-34. The
placement of this requirement within rule G-34 is part of the MSRB's
plan to include basic new issue requirements for underwriters within
one rule.\8\ Finally, the proposed rule change also makes technical
changes in rule language to clarify the different processing
requirements for transactions that are eligible for automated
comparison as opposed to those transactions that are ineligible for
automated comparison.
\8\ Rule G-34 currently requires underwriters, for new issue
municipal securities: (1) to apply for CUSIP numbers; (ii) to apply
for depository eligibility; and (iii) to communicate CUSIP numbers
and the initial trade date to syndicate and selling group members.
---------------------------------------------------------------------------
As set forth in Section 15B(b)(2)(C) \9\ of the Act, the MSRB has
the authority to adopt rules to foster cooperation with persons engaged
in regulating, clearing, settling, processing information with respect
to, and facilitating transactions in municipal securities. The MSRB
also has the authority to adopt rules 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. The MSRB believes the proposed rule change is consistent with
Section 15B(b)(2)(C) because the proposal should facilitate more
efficient clearance and settlement and should assist the municipal
securities market in conforming with T+3 settlement by fostering
efficient and accurate reporting of transaction information and
accelerating the confirmation and settlement time frames for when-
issued transactions.
\9\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------
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 because it would apply equally to all
brokers, dealers, and municipal securities dealers.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
In April 1995, the MSRB published for comment an earlier version of
the proposed rule change to rules G-12(b) and G-34. One comment letter
was received in response to this request.\10\ The commentator was
generally supportive of the proposed rule change. The proposed rule
change was revised by the MSRB at its July 1995 meeting to add
clarifying language to the amendments and to ensure consistency between
the requirements of rule G-12(b) and G-12(c).
\10\ In addition to submitting comments pertaining to two other
proposed rule changes by the MSRB, Goldman, Sachs & Co. stated that
it fully supports the amendments proposed in this rule filing (SR-
MSRB-95-14) but indicated that the mechanism for reporting prior to
award both the interest rate and final maturity for any new issue
will require some system developments. Letter from Edward C.
Brisotti, Vice President, Operations Division, Goldman, Sachs & Co.
to Judith A. Somerville, Uniform Practice Specialist, MSRB (May 31,
1995).
---------------------------------------------------------------------------
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 MSRB 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.
The MSRB requests that the Commission delay effectiveness of the
proposed rule change until thirty days after the approval by the
Commission is published in the Federal Register to ensure that
underwriting practices are in compliance with the rule change.
IV. Solicitation of Comments
Interested people 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, 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 Room. Copies of the filing will also be
available for inspection and copying at the principal offices of the
MSRB. All submissions should refer to File No. SR-MSRB-95-14 and should
be submitted by November 6, 1995.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\11\
\11\ 17 CFR 200.30-3(a)(12) (1994).
---------------------------------------------------------------------------
Jonathan G. Katz,
Secretary.
[FR Doc. 95-25510 Filed 10-13-95; 8:45 am]
BILLING CODE 8010-01-M
