[Federal Register: May 25, 2006 (Volume 71, Number 101)]
[Notices]
[Page 30211-30213]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25my06-118]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53826; File No. SR-NYSE-2005-90]
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change and Amendment No. 1 To Allow
Certain Institutional Customers To Elect Not To Receive Account
Statements
May 18, 2006.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Exchange Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is
hereby given that on December 21, 2005, the New York Stock Exchange,
Inc. (``NYSE'' or the ``Exchange'') filed with the Securities and
Exchange Commission (``SEC'' or the ``Commission'') the proposed change
to NYSE Rule 409 (Statements of Accounts to Customers) as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. On March 28, 2006, the NYSE filed Amendment No. 1 to the
proposed rule change.\4\ 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. 78s(b)(1).
\2\ 15 U.S.C. 78a et seq.
\3\ 17 CFR 240.19b-4.
\4\ In Amendment No. 1, a partial amendment, the NYSE proposed
additional changes to the text of proposed amended Rule 409, which
are incorporated in the proposed rule text below.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend NYSE Rule 409 to allow
institutional customers conducting a Delivery versus Payment and
Receive versus Payment (``DVP/RVP'') business to elect not to receive
account statements.
The text of the proposed rule change is set forth below. Italics
indicate new text that would be added to the current text of NYSE Rule
409.
Rule 409.
Statements of Accounts to Customers
(a) Except with the permission of the Exchange, or as otherwise
provided by this paragraph, member organizations shall send to their
customers statements of account showing security and money positions
and entries at least quarterly to all accounts having an entry, money
or security position during the preceding quarter. Quarterly statements
need not be sent to a customer pursuant to Rule 409(a) if:
(1) The customer's account is carried solely for the purpose of
execution on a Delivery versus Payment/Receive versus Payment basis
(DVP/RVP);
(2) All transactions effected for the account are done on a DVP/RVP
basis in conformity with Rule 387;
(3) The account does not show security or money positions at the
end of the quarter;
(4) The customer consents to the suspension of such statements in
writing. Such consents must be maintained by the member organization in
a manner consistent with Exchange Rule 440 and Rule 17a-4 under the
Securities Exchange Act of 1934;
(5) The member organization undertakes to provide any particular
statement or statements to the customer promptly upon request; and
(6) The member organization undertakes to promptly reinstate the
delivery of such statements to the customer upon request.
Nothing in this rule shall be seen to qualify or condition the
obligations of a member organization under SEC Rule 15c3-2 concerning
quarterly notices of free credit balances on statements.
For purposes of this rule, a DVP/RVP account is an arrangement
whereby payment for securities purchased is to be made to the selling
customer's agent and/or delivery of securities sold is to be made to
the buying customer's agent in exchange for payment at time of
settlement, usually in the form of cash.
(b) through (g)--No change.
Supplementary Material--No change.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In filing the proposed rule change and Amendment No. 1 with the
Commission, the Exchange included statements concerning the purpose of,
and basis for, the proposed rule change, as amended. The text of these
statements may be examined at the places specified in Item IV below.
The Exchange has prepared summaries, set forth in Sections A, B, and C
below, of the most significant aspects of such statements.
[[Page 30212]]
A. Self-Regulatory Organization's Statement of Purpose of, and
Statutory Basis for, the Proposed Rule Change
(1) Purpose
Waiving of Customer Statements for Institutional DVP/RVP Accounts.
NYSE Rule 409, in pertinent part, specifies the obligations of member
organizations with respect to customer statements, including frequency
of delivery and elements of content.
NYSE Rule 409(a) requires that, except with the permission of the
Exchange, members and member organizations shall send statements at
least quarterly to customers for accounts showing security and money
positions and entries during the preceding quarter. The Exchange
proposes amendments to the Rule that would provide relief from this
requirement for customer accounts that are carried solely for the
purpose of DVP/RVP transactions. A DVP/RVP account is an arrangement
whereby delivery of securities sold is made to the buying customer's
bank in exchange for payment, usually in cash, at settlement. Such
accounts must comply with the requirements outlined in NYSE Rule 387
(COD Orders).\5\
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\5\ NYSE Rule 387 sets out specific prerequisites for the
acceptance of such orders:
(1) The member or member organization must have previously
received the name and address of the agent, together with its
customer number;
(2) The order must note the payment on delivery or collect on
delivery nature of the trade;
(3) The member or member organization must deliver to the
customer a confirmation in the specified form; and
(4) The member organization must have obtained an agreement from
the customer regarding the furnishing of appropriate instructions
for the settlement of the trade.
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Due to the nature of DVP/RVP accounts, their statements do not
generally reflect any cash balance or security position at the end of a
quarter. Consequently, DVP/RVP customers (chiefly institutional
customers) generally rely on confirmations (issued pursuant to SEC Rule
10b-10) or trade runs for transaction-related information. Such records
provide critical transactional information (such as security name and
price, commission or markup, trade date, settlement date, etc.) in a
timely fashion (trade date +1). According to the NYSE, such records are
preferred by institutional investors, who have no desire to receive
voluminous quarterly statements.
Accordingly, the Exchange proposes amendments to Rule 409 that
would relieve member organizations of the obligation to send quarterly
statements to customers with such accounts if: (1) The customer's
account is carried solely for the purpose of execution on a DVP/RVP
basis; (2) all transactions effected for the account are done on a DVP/
RVP basis in conformity with Rule 387; (3) the account does not show
security or money positions at the end of the quarter; (4) the customer
consents to the suspension of such statements in writing and such
consents are maintained by the member organization in a manner
consistent with Exchange Rule 440 and Rule 17a-4 under the Exchange
Act; (5) the member organization undertakes to provide any particular
statement or statements to the customer promptly upon request; and (6)
the member organization undertakes to promptly reinstate the delivery
of such statements to the customer upon request.
Nothing in the proposed amended rule would be seen to qualify or
condition the obligations of a member organization under SEC Rule 15c3-
2 concerning quarterly notices of free credit balances on statements.
For purposes of the proposed amended rule, a DVP/RVP account is an
arrangement whereby payment for securities purchased is to be made to
the selling customer's agent and/or delivery of securities sold is to
be made to the buying customer's agent in exchange for payment at time
of settlement, usually in the form of cash.
By requiring affirmative consent, the ability of the customer to
receive quarterly statements is preserved, and the member organization
is precluded from unilaterally terminating delivery of such statements.
The customer would also retain the right to reinstate the delivery of
statements at any time, and to resume receipt of statements promptly
upon request.
In sum, the Exchange believes that the proposed amended rule would
provide reasonable regulatory flexibility by allowing customers to
decline delivery of statements that are of little or no use to them.
Correspondingly, the proposed amended rule would result in substantial
cost savings to member organizations in that they would no longer be
required to produce and deliver unwanted and unnecessary records.\6\
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\6\ In correspondence dated October 26, 2004, and May 22, 2003,
that the NYSE received from Mr. Lawrence Morillo, Chairman of the
Securities Industry Association STP Legal and Regulatory
Subcommittee, it was estimated that it would not be unreasonable to
expect a firm to realize savings of $100,000 per year in statement
production and mailing costs.
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(2) Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the requirements of the Exchange Act and the rules and regulations
thereunder applicable to a national securities exchange, and in
particular, with the requirements of section 6(b)(5) of the Exchange
Act.\7\ Section 6(b)(5) requires, among other things, that the rules of
an exchange be designed to promote just and equitable principles of
trade, to remove impediments to and perfect the mechanism of a free and
open market and national market system, and in general, to protect
investors and the public interest. The Exchange believes the proposed
rule change is designed to promote just and equitable principles of
trade, perfect the mechanism of a free an open market, and protect
investors by permitting DVP/RVP customers to avoid receiving unwanted,
voluminous quarterly account statements.
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\7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change would not
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Exchange Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange 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 date of 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 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 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, including whether the proposed rule
change, as amended, is consistent with the Exchange Act. Comments may
be submitted by any of the following methods:
[[Page 30213]]
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSE-2005-90 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2005-90. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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, 100 F Street,
NE., Washington, DC 20549. Copies of such filing also will be available
for inspection and copying at the principal office of the NYSE. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSE-2005-90 and should be
submitted on or before June 15, 2006.
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).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-8053 Filed 5-24-06; 8:45 am]
BILLING CODE 8010-01-P