[Federal Register Volume 59, Number 135 (Friday, July 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17256]
[[Page Unknown]]
[Federal Register: July 15, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34346; File No. SR-BSE-94-05]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the Boston
Stock Exchange, Inc. Relating to Its Net Capital and Equity Rule
July 11, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on
April 11, 1994, the Boston Stock Exchange, Inc. (``BSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change\1\ as described in Items I,
II and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\On April 25, 1994, the BSE filed Amendment No. 1 which
corrects several technical mistakes in the original rule filing in
the text of the Rule. On June 20, 1994, the BSE filed Amendment No.
2 which removed the Early Warning Alert Notification provision from
BSE's Rules because, as the Exchange members are bound by
Sec. 2.(a)(iii) of the Rules to be subject to the SEC's Early
Warning Alert Notification, such provision was duplicative. See
letters from Karen Aluise, Assistant Vice President, Boston Stock
Exchange, to Amy Bilbija, Commission, dated April 20, 1994, and June
20, 1994, respectively.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Boston Stock Exchange proposes to amend its Capital and Equity
Requirements to conform to the current requirements as set forth in SEC
Rule 17a-11. The text of the proposed rule change is as follows: new
language [deleted language].
Chapter XXII--Capital and Equity Requirements
Sec. 2[.](a) All members and member organizations [using the
facilities of the Boston Stock Exchange Clearing Corporation (``the
facilities'') doing business on the floor of the Exchange and; who
clears transactions for another broker or dealer or; maintains
accounts for another broker or dealer or; introduces accounts to
another broker or dealer or; maintains customer accounts] shall at
all times--
(i) Maintain net capital not less than that prescribed by SEC
Rule 15c3-1 (17 CFR 240.15c3-1); [and]
(ii) [b] Be subject to Appendix D of SEC Rule 15c[ ]3-1 in
regard to Satisfactory Subordination Agreements[.] and
(iii) Be subject to the reporting requirements set forth under
SEC Rule 17a-11 and the SEC's Early Warning Rule contained therein.
* * * * *
[Early Warning Alert Notification
Sec. (c)(3) All specialists assigned to the Exchange as their
Examining Authority shall be required to compute net capital and
must immediately deliver written notice to the Exchange, identifying
what action is being taken to alleviate the alert status, whenever
one of the following occurs:
(i) Net capital falls below required minimum levels;
(ii) Net capital falls below 120% of its minimum requirement; or
(iii) Specialist fails to comply with the following financial
responsibility requirements:
(A) Fails to make and keep current books and records;
(B) Discovers or is notified by an independent accountant of the
existence of any material inadequacy; or
(C) When the Exchange learns that the specialist has failed to
file a notice under this section.
Note: Where a specialist is assigned to another Examining
Authority, that specialist shall be required to comply with the
provisions as set forth by its assigned Examining Authority or SEC
Rule 15c3-1 and the reporting requirements set forth under SEC Rule
17a-11. Whenever the Exchange provides a specialist with an early
warning alert notice, such specialist must respond by verifying the
alert in writing. If a specialist fails to respond to the early
warning alert sent by the Exchange, it shall be considered a valid
alert and the specialist shall be notified by the Exchange that it
must comply with the provisions of this rule as set forth above.]
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 self-regulatory organization
included statements governing 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 III below. The self-regulatory organization 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
1. Purpose
The purpose of the proposed rule change is to amend certain
provisions of the net capital and equity rule to conform to the current
requirements as set forth in SEC Rules 15c3-1 and 17a-11. The proposed
changes to Section 2(a) will expand the scope of the rule to require
that all members comply with SEC Rule 15c3-1 regarding net capital
which became effective on April 1, 1994, and as such supersede the
current Exchange rule. The proposed changes to Section 2(c)(3)
eliminates the Exchange's Early Warning Alert Notification procedure
and replaces it with the SEC's Early Warning provisions as set forth in
SEC Rule 17a-11.
2. Statutory Basis
The statutory basis for the proposed rule change is Section 6(b)(5)
of the Act, in that the capital and equity requirements of the Exchange
are designed to protect investors and the public interest by ensuring
that Exchange members doing business on the Floor have adequate funds
to cover losses that they might incur in the everyday transaction of
business.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. 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, NW., Washington, DC 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 at
the Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of the BSE. All
submissions should refer to File No. SR-BSE-94-05 and should be
submitted August 5, 1994.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the BSE's proposal to amend its Capital
and Equity Requirements Rule is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to a national
securities exchange. Specifically, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Act, in
that the capital and equity requirements of the Exchange are designed
to protect investors and the public interest by ensuring that Exchange
members doing business on the Floor have adequate funds to cover losses
that they might incur in the everyday transaction of business.\2\
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\2\15 U.S.C. 78f(b)(5) (1988). See generally Securities Exchange
Act Release Nos. 34295 (July 1, 1994) and 33838 (March 30, 1994)
approving similar changes with respect to conforming exchange rules
to the revised SEC Net Capital Requirements for the Pacific Stock
Exchange (``PSE'') and Philadelphia Stock Exchange (``Phlx''),
respectively. The Discussion in those approval orders are
incorporated herein.
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice of filing thereof in the Federal Register. The Commission
believes that accelerated approval of the proposal is appropriate in
order to allow the BSE to amend the Exchange's current net capital and
equity rule to conform to Rules 15c3-1 and 17a-11 of the Act. In
addition, the Commission previously noticed for comment and approved
similar filings of the PSE and the Phlx. No comments were received on
those files.\3\
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\3\See note 2, supra.
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It Is Therefore Ordered, pursuant to Section 19(b)(2)\4\ that the
proposed rule change (SE-BSE-94-05) is hereby approved.
\4\15 U.S.C. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-17256 Filed 7-14-94; 8:45 am]
BILLING CODE 8010-01-M
