[Federal Register Volume 61, Number 159 (Thursday, August 15, 1996)]
[Notices]
[Pages 42457-42458]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20786]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37539; File No. SR-NSCC-96-10]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Approving a Proposed Rule Change to Permit
Establishment of Alternative Settlement Cycles for Mutual Fund
Transactions Through the Fund/SERV System
August 8, 1996.
On April 4, 1996, National Securities Clearing Corporation filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change (File No. SR-NSCC-96-10) under Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'').\1\ On May 8, 1996, NSCC
filed an amendment to the proposed rule change.\2\ Notice of the
proposal was published in the Federal Register on June 26, 1996.\3\ No
comment letters were received. For the reasons discussed below, the
Commission is approving the proposed rule change.
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\1\ 15 U.S.C. 78(b)(1) (1988).
\2\ Letter from Julie Beyers, Associate Counsel, NSCC, to Jerry
Carpenter, Associate Director, Division of Market Regulation,
Commission (May 8, 1996).
\3\ Securities Exchange Act Release No. 37341 (June 20, 1996),
61 FR 33159.
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I. Description
The proposed rule change enables NSCC members using NSCC's Fund/
SERV system to select settlement cycles for mutual fund
transactions.\4\ The Fund/SERV system automatically establishes a
settlement cycle and assigns a settlement date to a mutual fund
transaction based on the transaction type.\5\ The proposed rule change
permits mutual fund transactions to settle on an expanded or shortened
settlement cycle upon agreement of the submitting parties. The date
established by the submitting parties for a transaction will be the
date used for all processing related to that particular transaction and
could be as short as the same day or as long as seven business days.
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\4\ FUND/SERV is an NSCC service that permits NSCC members to
process and to settle on an automated basis mutual fund purchase and
redemption orders and to transmit registration instructions.
\5\ For example, transactions involving shares of traditional
load mutual funds normally settle on a three business day settlement
cycle whereas transactions for shares of the same fund involving
401K accounts normally settle on a next day settlement cycle.
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When a member submits a mutual fund order and desires to establish
a settlement cycle other than that established by the Fund/SERV system,
the member will include in the order data the date on which the
transaction is to settle and a reason code for modifying the settlement
cycle. The contraparty has the opportunity to accept or reject the
transaction. The transaction also will be rejected by NSCC if the
specified settlement cycle is longer than seven business days. Once the
mutual fund transaction is accepted, NSCC will process the transaction
in accordance with the specified settlement cycle.
II. Discussion
Section 17A(b)(3)(F) of the Act requires that the rules of a
clearing agency, such as NSCC, be designed to promote the prompt and
accurate clearance and settlement of securities
[[Page 42458]]
transactions.\6\ The proposal gives to participants the flexibility to
establish alternative settlement cycles when agreed to by the parties.
Without such an alternative, parties to a transaction with a
nonstandard settlement cycle would either need to submit the trade to
FUND/SERV at a later date (to get an extended settlement cycle) or to
settle the trade outside of Fund/SERV. The proposal should allow mutual
fund transactions to settle more efficiently and may encourage the
settlement of more transactions through the automated Fund/SERV system.
Thus, the proposal promotes the prompt and accurate clearance and
settlement of mutual fund transactions.
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\6\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular with the requirements of Section 17A of the Act and the
rules and regulations thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (File No. SR-NSCC-96-10) be and
hereby is approved.
\7\ 15 U.S.C. 78s(b)(2).
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For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-20786 Filed 8-14-96; 8:45 am]
BILLING CODE 8010-01-M
