Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change Relating to Implementation of a Three-Day Settlement Standard

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35422; File No. SR-BSE-95-05]

Self-Regulatory Organizations; Boston Stock Exchange, Inc.;

Notice of Filing of Proposed Rule Change Relating to Implementation of

a Three-Day Settlement Standard

February 28, 1995.

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

(``Act''),\1\ notice is hereby given that on February 21, 1995, the

Boston Stock Exchange, Incorporated (``BSE'') filed with the Securities

and Exchange Commission (``Commission'') a proposed rule change as

described in Items I, II, and III below, which items have been prepared

by BSE. The Commission is publishing this notice to solicit comments on

the proposed rule change from interested persons.

\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

BSE proposes to modify its rules to implement a three business day

settlement standard for securities transactions. [[Page 12794]]

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

Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, BSE 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. BSE 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

On October 6, 1993, the Commission adopted Rule 15c6-1 under the

Act which establishes three business days after the trade date

(``T+3'') instead of five business days (``T+5'') as the standard

settlement cycle for most securities transactions.\2\ The rule will

become effective June 7, 1995.\3\

\2\Securities Exchange Act Release No. 33023 (October 6, 1993),

58 FR 52891.

\3\Securities Exchange Act Release No. 34952 (November 9, 1994),

59 FR 59137.

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The proposed rule change will amend BSE's definitions of

transactions nominated as ``Regular Way,'' ``Buyer's or Seller's

Option,'' and ``Next Day'' contained in Chapter II, Section 6 of BSE's

rules and will amend Chapter X, Section 1 of BSE rules regarding the

settlement of ``Cash and Ex-Dividend Transactions.'' Under the proposed

rule change, regular way settlement will occur on the third business

day after the trade, and buyer's or seller's option trades will settle

between four business days and 180 days following the contract date

except that BSE may provide otherwise in specific issues or classes of

securities. Next day trades will be able to settle on the first or

second business day following the date of the contract. Securities will

trade without (i.e., ``ex'') any dividend, right, or privilege on the

second full business day preceding the record date except that when the

record date is on a holiday the securities will trade ``ex'' on the

third preceding full business day.

The proposed rule change also amends Chapter XV, Section 14 of BSE

rules, ``Claims and Reports against Specialist.'' This proposed change

will shorten the time periods in which members can file claims of

erroneous or omitted transactions against specialists. Claims regarding

lack of a comparison of a reported transaction will have to be made

within three days of the original trade date of five days to comport

with the changes in the settlement cycle. Claims regarding the

omissions of reports and erroneous trade comparisons will have to be

made within five business days instead of ten business days. The latter

changes still will exceed the settlement cycle; however, they will

exceed the settlement cycle by only two days instead of five thus

reducing the risk associated with such claims. Finally, Chapter XXVIII,

subparagraph (4) requires that customers provide their agent

instructions within certain time frames for delivery versus payment and

receipt versus payment transactions. The time frames contained in

subparagraph (4)(i) and (ii) will be shortened by two business days.

The BSE's implementation of this proposed rule change will be

consistent with the ``T+3'' conversion schedule which the National

Securities Clearing Corporation has proposed for industry use. The

schedule is as follows:

------------------------------------------------------------------------

Settlement

Trade date cycle Settlement date

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June 2 Friday................ 5 day..... June 9 Friday.

June 5 Monday................ 4 day..... June 9 Friday.

June 6 Tuesday............... 4 day..... June 12 Monday.

June 7 Wednesday............. 3 day..... June 12 Monday.

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If the Commission determines to alter the exemptions currently

provided in Rule 15c6-1, BSE may need to undertake additional rule

amendments. It is intended that the proposed rule change will become

effective on the same date as Commission Rule 15c6-1.

The proposed rule change is consistent with Section 6(b)(5) of the

Act in that it is designed to promote just and equitable principles of

trade, to foster cooperation and coordination with persons engaged in

regulating, clearing, processing information with respect to, and

facilitating transactions in securities.

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

BSE 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

No written comments were either solicited or 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 BSE consents, the Commission will:

(A) By order approve such 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 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. 552, will be available for inspection and copying in the

Commission's Public Reference Section, 450 Fifth Street NW.,

Washington, DC 20549. Copies of such filing also will be available for

inspection and copying at the principal office of BSE.

All submissions should refer to File No. SR-BSE-95-05 and should be

submitted by March 29, 1995.

For the Commission by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secrtary.

[FR Doc. 95-5585 Filed 3-7-95; 8:45 am]

BILLING CODE 8010-01-M