[Federal Register Volume 59, Number 208 (Friday, October 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26763]
[Federal Register: October 28, 1994]
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POSTAL RATE COMMISSION
[Release No. 34-34880; File No. SR-Amex-94-44]
Self-Regulatory Organizations; American Stock Exchange, Inc.;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change Relating to the Commencement of the Use of the New York
Stock Exchange's Overnight Comparison System
October 21, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on October 17, 1994, the
American Stock Exchange, Inc. (``Amex'' 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 primarily by the Amex. On October 19, 1994, the Amex amended
its proposal to exclude all references to equity transactions.\2\ The
Commission is publishing this notice and order 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 Ivonne L. Nagy, Special Counsel, Legal &
Regulatory Policy Division, Amex, to Peter Geraghty, Senior
Attorney, Division of Market Regulation, Commission (October 19,
1994). In the future, the Amex intends to file under Section
19(b)(2) of the Act a proposed rule change to permit it to use the
New York Stock Exchange's Overnight Comparison System for the Amex
equities transactions.
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I. Self-Regulatory Organization's Statement of the Terms and
Substance of the Proposed Rule Change
The purpose of the proposed rule change is to permit the Amex to
begin using the New York Stock Exchange's Overnight Comparison System
(``OCS'') for all bond transactions executed at the Amex on and after
October 21, 1994.
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 Amex 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. Amex has prepared summaries, set forth in section (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 21, 1994, the Amex will commence use of the New York
Stock Exchange's OCS for the comparison of all Amex bond transactions
executed at the Amex. Transactions in Amex equities and options will
continue to be compared and processed through the Amex's Intra-Day
Comparison System (``IDC'').
The change from IDC to OCS for the comparison of all Amex bond
transactions will have no impact on the efficiency and capacity of the
electronic system. OCS will continue to deliver an automated, highly
flexible, and efficient system for capturing, comparing, and processing
bond trades as well as providing a greater measure of uniformity
between the Amex and New York Stock Exchange marketplaces. Essentially,
the same procedures presently in use for IDC will continue to apply to
OCS.
Specifically, the proposed rule change consists of amendments to
Amex Rules 700(e),\3\ 719(b),\4\ 729,\5\ and 731\6\ and the rescission
of Amex Rule 731A\7\ to require Amex members on and after October 21,
1994, to submit initial trade data for transactions in listed bonds
effected on the Amex through OCS for comparison. The proposal also will
enable Amex members to resolve through OCS all uncompared transactions
in listed bonds effected on the Amex for ``Regular Way,'' ``Next Day,''
and ``Seller Option'' settlement that are traded on an ``issued,''
``when listed,'' and ``when distributed'' basis. Uncompared
transactions that cannot be resolved on T+1 will be subject to close
out. However, if a transaction remains in the system and both parties
agree to the trade it will compare on T+2. In addition, OCS also will
compare ``Ex-Clearing House'' bond transactions (i.e. any transaction
in which the buying and selling parties to the trade agree to
physically settle the transaction between themselves) for ``Cash,''
``Next-Day,'' and ``Seller's Option'' settlement.
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\3\Amex Rule 700(e) ``References and Definition of Securities
Transactions.''
\4\Amex Rule 719(b) ``Next Day Comparison of Exchange
Transactions.''
\5\Amex Rule 729 ``Comparison of Seller's Option Contracts and
``When Issued'' Special Contracts.''
\6\Amex Rule 731 ``Resolution of Uncompared Transactions.''
\7\Amex Rule 731A ``Resolution of Uncompared Bond
Transactions.''
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The Amex will accept initial trade data submissions in all listed
bonds traded on the floor of the Amex from its clearing member
organizations and compare the data through OCS. The compared trades
then will be transmitted to the National Securities Clearing
Corporation (``NSCC'') where the transactions will be printed on
clearing members' contract sheets. NSCC then will complete the
clearance and settlement process. Any uncompared trade will remain in
OCS for resolution until resolved or canceled.\8\
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\8\Cancel means to remove the transaction from the system. When
there is an uncompared transaction and one party does not
acknowledge the transaction, the floor official can authorize the
close out of the transaction. However, where the transaction is
acknowledged by both parties but one party does not acknowledge the
transaction until T+2, the transaction must be canceled by the late
acknowledging party and must be resubmitted as an ``as of'' trade.
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Expanding the Amex's on-line comparison system to include bond
transactions will automate the Exchange's bond trade comparison and
resolution system and will shorten the comparison cycle from T+2 to
T+1. The Amex believes the proposal will reduce the risk exposure to
investors and to Amex members and will contribute to the prompt and
efficient clearance and settlement of securities transactions. The Amex
also believes that the proposed rule change is consistent with Section
6(b) of the Act and specifically with the objectives of Section 6(b)(5)
in that it will foster cooperation and coordination with persons
engaged in regulating, clearing, settling, processing information with
respect to, and facilitating transactions in securities and will
protect investors and the public interest.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Amex does not believe that the proposed rule change will impose
a 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
Comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Section 6(b)(5) of the Act requires that the rules of the Exchange
be designed to foster cooperation and coordination with persons engaged
in regulating, clearing, settling, processing information with respect
to, and facilitating transactions in securities and protect investors
and the public interest. The Commission finds that the proposed rule
change is consistent with Section 6(b)(5) in that it will expand Amex's
on-line comparison system to include bond transactions and will
automate Amex's bond trade resolution system. In addition, the proposal
will shorten the comparison cycle for bond transactions from T+2 to
T+1, which is consistent with the conversion to a three business day
settlement cycle.\9\
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\9\For a complete description of Commission Rule 15c6-1
mandating a three business day settlement cycle for most broker-
dealer transactions, refer to Securities Exchange Act Release No.
33023 (October 6, 1993), 58 FR 52891 [File No. S7-5-93] (``Rule
15c6-1 Adopting Release'').
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Amex has requested that the Commission find good cause for
approving the proposed rule change prior to the thirtieth day after the
date of publication of notice of the filing. The Commission finds good
cause for so approving the proposed rule change because it will allow
Amex members to begin utilizing the New York Stock Exchange's OCS for
bond transactions as soon as possible. In addition, Amex has
distributed two information circulars to its members concerning the use
of the New York Stock Exchange's OCS for bond transactions, and Amex
has not received any comments. Further, the Commission published for
comment the New York Stock Exchange's proposal to implement OCS,
received no comments, and subsequently approved the proposal.\10\
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\10\Securities Exchange Release Act No. 26527 (March 14, 1989);
54 FR 11470 [File No. SR-NYSE-88-36] (order granting approval to the
New York Stock Exchange's OCS).
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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. Sec. 552, will be available for inspection and copying at
the principal office of Amex. All submissions should refer to File No.
SR-Amex-94-44 and should be submitted by November 21, 1994.
It Is Therefore Ordered, pursuant to Section 19(b)(2) that the
proposed rule change is hereby approved.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\17 CFR 200.30-3(a)(12) (1994).
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Jonathan G. Katz,
Secretary.
[FR Doc. 94-26763 Filed 10-27-94; 8:45 am]
BILLING CODE 8010-01-M
