Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing of a Proposed Rule Change Relating to NYSE's Customer Account Transfer Contracts Rule and Its Related Interpretations.

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34246; File No. SR-NYSE-94-21]

June 22, 1994.

Self-Regulatory Organizations; New York Stock Exchange, Inc.;

Notice of Filing of a Proposed Rule Change Relating to NYSE's Customer

Account Transfer Contracts Rule and Its Related Interpretations.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''),\1\ notice is hereby given that on June 16, 1994, New York

Stock Exchange, Inc. (``NYSE'') 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

NYSE. 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. Sec. 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 primary purpose of NYSE's proposed rule change is to amend

Exchange Rule 412, Customer Account Transfer Contracts and its related

Interpretations. The proposed amendments are an effort to incorporate

into the account transfer process enhancements to the Automated

Customer Account Transfer System (``ACATS'') which have been developed

by the National Securities Clearing Corporation (NSCC) and other

registered clearing agencies.

II. Self-Regulatory Organization's Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, NYSE included statements

concerning the purpose of and basis for the proposed rule change. The

text of these statements may be examined at the places specified in

Item IV below. NYSE 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

The purpose of the proposed rule change is to amend rule 412,

Customer Account Transfer Contracts, and its related Interpretations.

The proposed amendments are intended to increase the speed and

efficiency of the account transfer process by reducing the time period

for transferring customers' cash/margin and retirement accounts from

ten to seven business days. This will be accomplished by reducing the

five business day validation period for accounts to three business days

and reducing the delivery period from five business days to four

business days [Rule 412(b)]. The interpretation permitting a ten day

validation period for retirement accounts will be deleted [Rule 412,

Interpretation (f)/01].

NYSE's proposed rule change also will mandate the use of an

automated system for transferring mutual fund positions where a member

organization is a participant in a registered clearing agency which has

such a facility. This will provide a link between broker-dealer

participants and mutual fund participants for reregistration of mutual

fund positions and will reduce fails. It also will reduce manual

processing and the associated costs [Rule 412(e)(2)].

Under the proposed rule change, member organizations participating

in a registered clearing agency with automated residual credit

processing capabilities will be required to utilize such facilities to

transfer residual credit positions (e.g., dividends, interest, etc.)

which accrue to an account after transfer. Credit balances accruing in

a transferred account will have to be transferred within ten business

days for a six month period following transfer. The required time

periods will apply to all member organizations regardless of whether

they are participants in a clearing agency [Rule 412(e)(3)].

The proposed rule change will permit partial customer account

transfers to be accomplished through the existing automated transfer

system. Presently, partial transfers are accomplished outside of the

system. The time frames required by Rule 412 for transfer of entire

accounts will not apply to partial transfers. However, member

organizations are expected to expedite partial transfers of customer

accounts [Rule 412, Interpretation (a)/01)].

NYSE's proposed rule change will facilitate communication between

organizations and will improve exchange oversight by providing more

explicit reason codes for when accounts may be rejected [Rule 412,

Interpretation (b)(1)/02]. Member organizations that receive an account

transfer related claim letter will be required to resolve the claim

within five business days or respond in writing setting forth specific

reasons for denying the claim [Rule 412(d)].

The shortening of the time period for transferring accounts from

ten to seven days is appropriate in view of enhanced automation of the

process by member organizations and clearing agencies and will be

beneficial to both customers and member organizations. In addition, the

reduction of time allowable for account transfers is consistent with

the three day settlement period, which has been mandated by the

Commission for June 1995.

The development by registered clearing agencies of automated

systems to transfer mutual funds and residual credit balances and their

mandatory use will benefit both customers and member organizations by

increasing efficiency, reducing paperwork and providing significant

cost savings. Permitting partial account transfers to be accomplished

through existing automated account transfer systems will provide member

organizations with the ability to utilize these facilities where they

will provide the most efficient and expeditious transfer. The use of

more explicit reject codes will reduce unnecessary back office

operations functions and will allow the NYSE to be better able to

determine the exact reason for excessive rejects. The amendments to

require the resolution or denial of claim letters within five business

days will provide a regulatory framework in an area where no specific

requirements currently exist and will expedite resolution of such

claims.

The amendments relating to use of an automated system for

transferring mutual fund positions, Rule 412(e)(2), and residual credit

processing, Rule 412(e)(3), will become effective one hundred eighty

calendar days after Commission approval of the amendments. All other

amendments referred to above will become effective ninety days after

Commission approval.

The statutory basis for the proposed change is based upon Section

6(b)(5) of the Act in that it fosters cooperation and coordination with

persons engaged in facilitating transactions in securities. This is so

because the procedures contained in the proposed rule are intended to

expedite transfer of customer securities accounts between member

organizations. The change also generally protects investors and the

public interest by requiring expeditious transfer of accounts.

B. Self-Regulatory Organization's Statement on Burden on Competition

NYSE believes that the proposal does not impose any 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

Statements were neither solicited nor received.

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 the proposed rule change 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. 10549.

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 the above-

referenced self-regulatory organization. All submissions should refer

to File No. SR-NYSE-94-21 and should be submitted by July 20, 1994.

For the Commission by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-15711 Filed 6-28-94; 8:45 am]

BILLING CODE 8010-01-M