[Federal Register Volume 59, Number 191 (Tuesday, October 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24517]
[[Page Unknown]]
[Federal Register: October 4, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34729; File No. SR-NSCC-94-16]
Self Regulatory Organizations; National Securities Clearing
Corporation; Notice of Filing of Proposed Rule Change Modifying
Comparison Procedures for Corporate Bond and Unit Investment Trust
Transactions and Modifying the Fee Structure for Correction Fees
September 27, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on August 9, 1994, the
National Securities Clearing Corporation (``NSCC'') 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 NSCC. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change will modify NSCC's trade comparison
procedures for corporate bond and unit investment trust (``UIT'')
transactions and corresponding correction fees.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NSCC 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. NSCC 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 the
Statutory Basis for, the Proposed Rule Change
Since 1993, NSCC has been redesigning its bond comparison system to
accelerate the processing (i.e., submission and comparison) of bond
transactions to achieve higher rates of trade comparison at earlier
points in the comparison process. NSCC believes accelerated processing
will help to increase certainty and reduce risk in the clearance and
settlement of debt transactions. The first phase of this redesign
process enhanced the processing of transactions in municipal securities
and was implemented by NSCC on August 13, 1993.\2\ The primary purpose
of the current proposed rule change is to expand the accelerated
comparison system to include the processing of transactions in
corporate bonds and UITs. the proposed rule change also will permit
NSCC to provide comparison services for baby bonds (i.e., corporate
bonds having a par value of less than $1,000) and new issue trading.
The proposed rule change also will modify the fee structure for
correction fees.
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\2\For a detailed description of the municipal securities phase
of the bond comparison system, refer to Securities Exchange Act
Release No. 32747 (August 13, 1993), 58 FR 44530 [File No. SR-NSCC-
93-2] (order approving a proposed rule change establishing a program
relating to comparison procedures for municipal securities
transactions).
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Under the proposed rule change, the cutoff time for submission of
original trade input for all corporate bond and UIT transactions will
be moved from 1:00 p.m. on the day following trade date (``T+1'') to
2:00 a.m. on T+1. These trades will be reported back to members by 8:00
a.m. on T+1. Adjustments to original trade input will have to be made
prior to the time specified by NSCC on T+1, which will be 6:00 p.m.
NSCC will accept trade input for trade-for-trade processing of
corporate baby bonds. If transactions are submitted as a mixed lot
(i.e., submissions including baby bonds and round lots), the baby bond
and the round lot portions of the transaction will be separated by NSCC
upon input.
At the option of members, corporate bond and UIT transactions will
be compared when the net buy side and sell side aggregate principal
amounts can be matched for a particular security, even if the relevant
principal amounts are specified in more than one buy side and/or more
than one sell side submission, if the transactions would have been
compared had such buy side and sell side principal amounts each been
specified on a single submission.
Because correction processing occurs at the New York and American
Stock Exchanges and at the National Association of Securities Dealers
before the trade input is transmitted to NSCC, Add-by-Seller tickets,
as well as Delete-by-Seller, Delete Add-by-Seller and Delete-by-Buyer
instructions, will no longer be accepted under the proposed rule.\3\
This change is being proposed in order to standardize correction
processing.
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\3\For a complete description of the New York Stock Exchange,
American Stock Exchange and National Association of Securities
Dealers corrections processing systems, refer to Securities Exchange
Act Release Nos. 26773 (May 1, 1989), 54 FR 20227 [File No. SR-NYSE-
89-03] (order approving the New York Stock Exchange's system for the
resolution of uncompared transactions); 28069 (May 29, 1990), 55 FR
23324 [File No. SR-AMEX-90-01] (order approving the Intra-Day
Comparison System for resolving uncompared transactions); and 28583
(November 1, 1990), 55 FR 46120 [File No. SR-NASD-89-25] (order
granting accelerated approval of amendment to proposed rule change
relating to the Automated Confirmation Transaction Service).
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NSCC will provide comparison services for corporate bond new issue
transactions on the same basic terms and conditions as are currently
provided for municipal securities transactions with the exception of
syndicate takedown processing.\4\ Original trade input for new issue
corporate bond transactions will be accepted until the third day prior
to the initial settlement date for the issue. Original input may set
forth either (1) A final settlement price and a settlement date that is
either the initial settlement date or a specified number of days after
the initial settlement date or (2) a dollar price. Original trade input
that is submitted between three and five days prior to the initial
settlement date but does not set forth a final settlement price and
settlement date or does not set forth a dollar price will be treated as
regular input. Any corporate bond new issue transactions that remain
uncompared at the opening of business on the day prior to the initial
settlement date will be deleted from NSCC's system.\5\
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\4\NSCC defines ``new issue'' transactions in this context to
mean transactions which are to settle on the initial settlement date
for an issue or a specified number of days after the initial
settlement date.
\5\This means that some new issue transactions may not be able
to be put through the entire range of available trade resolution
procedures prior to being dropped. In the extreme case, new issue
submissions made on the second day prior to the initial settlement
date that do not compare will be dropped without any opportunity for
resolution. These unresolved trades will be reported on a separate
unresolved trade report, and any trade dropped without the
opportunity for resolution may be resubmitted after the initial
settlement date.
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NSCC's fee structure relating to correction fees will be amended to
reflect that correction capabilities will be accelerated in conformity
with comparison capabilities. These fee changes will conform all bond
correction fees to the fees implemented in connection with municipal
securities transaction processing in that participants will be charged
for supplemental input on or after T+1.\6\ Currently, NSCC charges
participants for supplemental input relating to corporate bond and UIT
transactions on or after T+2. In addition, the bond system correction
fees for ``don't know'' and ``questioned trade'' input will be deleted
because NSCC no longer processes such transactions. The proposed rule
change also makes certain conforming changes and deletions to NSCC's
Procedures in order to reflect greater uniformity in NSCC's bond
comparison system and to eliminate certain language which has become
obsolete.
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\6\For a detailed description of NSCC's correction fees or
municipal securities transactions, refer to Securities Exchange Act
Release No. 34193 (June 10, 1994), 59 FR 31284 [File No. SR-NSCC-94-
08] (notice of filing and immediate effectiveness of a proposed rule
change modifying NSCC's fee schedule for correction fees).
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The proposed changes to NSCC's comparison procedures should help
achieve higher rates of trade comparison at earlier points in the
comparison process and thus increase certainty and reduce risk in the
clearance and settlement of corporate bond and UIT transactions.
Moreover, the expansion of corporate bond processing to cover baby bond
and new issue transactions will promote the prompt and accurate
clearance and settlement of securities transactions. Therefore, NSCC
believes the proposed rule change is consistent with Section 17A of the
Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
NSCC does not believe that the proposed rule will have an impact or
impose a burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
NSCC has not solicited or received any comments. NSCC will notify
the Commission of any written comments received by NSCC.
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 such proposed rule, 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 submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street N.W., Washington, D.C. 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. Sec. 552, will be available for inspection and copying in
the Commission's Public Reference Section, 450 Fifth Street N.W.,
Washington, D.C. 20549. Copies of such filing will also be available
for inspection and copying at the principal office of NSCC. All
submissions should refer to File No. SR-NSCC-94-16 and should be
submitted by October 25, 1994.
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) (1993).
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[FR Doc. 94-24517 Filed 10-3-94; 8:45 am]
BILLING CODE 8010-01-M
