Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Boston Stock Exchange, Inc. Relating to the Reporting of Outside Assets and Liabilities Attributable to Broker-Dealers.

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34556; File No. SR-BSE-94-07]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by the Boston Stock Exchange, Inc. Relating to the Reporting of

Outside Assets and Liabilities Attributable to Broker-Dealers.

August 19, 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 May

2, 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. On

August 16, 1994, the Exchange submitted Amendment No. 2 to the proposed

rule change.\2\ The Commission is publishing this notice to solicit

comments on the proposed rule change, as amended, from interested

persons.

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\1\On May 12, 1994, the BSE filed Amendment No. 1 which corrects

a technical mistake in the original rule filing in the text of the

Rule, which no longer applies because in Amendment No. 2 the BSE

reformulated the proposed rule change. See letter from Karen Aluise,

Assistant Vice President, Boston Stock Exchange, to Sandy Sciole,

Branch Chief Commission, dated May 5, 1994.

\2\In Amendment No. 2 the Exchange submitted a revised Exhibit 2

to its filing. See letter from Karen Aluise, Assistant Vice

President, Boston Stock Exchange, to Amy Bilbija, Commission, dated

August 10, 1994.

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I. Self-Regulatory Organization's Statement of the Terms of Substance

of the Proposed Rule Change

The Boston Stock Exchange seeks to adopt a rule requiring broker-

dealers assigned to the Exchange as their Designated Examining

Authority to report to the Exchange all outside assets and liabilities

attributable to the broker-dealer. The text of the proposed rule is as

follows:

Chapter XXII--Financial Reports and Requirements--Aggregate

Indebtedness--Net Capital

Reporting of Assets and Liabilities Attributable to Broker-Dealers

Sec. 2(n) Broker-Dealers assigned to the Boston Stock Exchange as

their Designated Examining Authority (``DEA'') are required to:

(1) Submit to the Exchange Financial and Operational Combined

Uniform Single Report (``FOCUS'') reports, in compliance with

Securities and Exchange Commission Rule 17a-5, which must include all

assets and liabilities attributable to the broker-dealer.

(2) Report to the Exchange on a quarterly basis (or more often as

deemed appropriate by the Exchange) the following:

(a) All assets and liabilities attributable to the broker-dealer or

held by another entity for the broker-dealer's account. This shall

include:

(i) All checking accounts, brokerage accounts, debts, etc. in the

broker-dealer's name or guaranteed by the broker-dealer; and

(ii) Liabilities of other entities, broker-dealers or individuals

assumed by the broker-dealer;

(b) A description of any outstanding litigation or contracts which

may have a material financial impact on the broker-dealer or its

business; and

(c) A pro-forma consolidated capital computation of assets and

liabilities of any subsidiary or affiliate for which the broker-dealer

guarantees, endorses or assumes directly or indirectly the obligations

or liabilities.

(3) Immediately notify the Exchange of any financial matters,

including but not limited to litigation and contracts, which may have a

material impact on its capital and/or its equity requirements pursuant

to Exchange Rules.

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 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. 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 ensure that all

broker-dealers assigned to the Exchange as their Designated Examining

Authority (``DEA'') provide the Exchange with reports of all outside

assets and liabilities attributable to the broker-dealer. This will

enable the Exchange to independently review and confirm the capital

computations and consolidated financial condition of Exchange DEA

assigned broker-dealers, thereby enhancing its oversight

responsibilities in conjunction with the Commission's more stringent

reporting requirements under the Net Capital Rule.

2. Statutory Basis

The statutory basis for the proposed rule change is Section 6(b)(5)

of the Act, in that the rule is designed to prevent fraudulent and

manipulative acts and practices, to promote just and equitable

principles of trade, to foster cooperation and coordination with

persons engaged in regulating, clearing, settling, processing

information with respect to, and facilitating transactions in

securities, to remove impediments to and perfect the mechanism of a

free and open market and a national market system, and in general, to

protect investors and the public interest; and is not designed to

permit unfair discrimination between customers, issuers, brokers, or

dealers.

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 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

The Exchange has neither solicited nor received written comments on

the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of this notice in the Federal

Register or within such longer period (i) as the Commission may

designate up to 90 days of such date if it finds such longer period to

be appropriated 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. 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, N.W.,

Washington, D.C. 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-94-07 and should be

submitted by September 16, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-21009 Filed 8-25-94; 8:45 am]

BILLING CODE 8010-01-M