(Volume 15, Number 3) October 1995
ROUTE TO: Manager, Muni Department Trading Sales Operations Compliance
On June 28, 1995, the Securities and Exchange Commission approved an amendment to rule G-15(d) on Delivery/Receipt vs. Payment (DVP/RVP) transactions.[1] The amendment requires dealers to give or send DVP/RVP customers confirmations, in accordance with the requirements of rule G-15(a), on trade date and to submit DVP/RVP customer transactions for automated confirmation/acknowledgement no later than the end of trade date. The amendment is set to become effective on July 28, 1995.
The amendment is a part of the Board's ongoing actions to facilitate T+3 settlement in the municipal securities industry. The amendment will also help to ensure timely submission of transaction information to a confirmation/acknowledgement system operated by a registered securities clearing agency. The Board is planning to report DVP/RVP customer transaction information in Phase II of the Board's Transaction Reporting Program. This transaction information also will be included in the surveillance data base for use by the enforcement agencies.
Currently, rule G-15(d) on DVP/RVP customer transactions prohibits a broker, dealer or municipal securities dealer from granting DVP/RVP privileges to a customer unless certain procedures are followed within certain time periods with respect to the clearance and settlementof the transaction. Rule G-15(d)(i)(C) states that dealers must give or send DVP/RVP customers a confirmation, in accordance with the requirements of rule G-15(a), with respect to the execution of a transaction no later than the close of business on the next business day after any such execution (T+1). Rule G-15(d)(ii) also requires that dealers use the facilities of a registered clearing agency for the confirmation/acknowledgement of all DVP/RVP customer transactions that are eligible for processing in such systems.
The amendment to rule G-15(d)(i)(C) and (d)(ii) now require dealers to: (i) give or send DVP/RVP customers a confirmation on trade date; and (ii) submit the transaction to an automated confirmation/acknowledgement system on trade date. The Board believes that this change is necessary not only for the recent compression of regular-way settlement from five to three business days, but also to assure the timely and accurate submission of institutional customer transaction information for reporting in Phase II of the Board's transaction reporting program.[2]
June 28, 1995
G-15. Confirmation, Clearance and Settlement of Transactions with Customers (a) - (c) No change. (d) Delivery/Receipt vs. Payment Transactions. (i) No broker, dealer or municipal securities dealer shall {accept an order from} *execute a transaction with* a customer pursuant to an arrangement whereby payment for securities received (RVP) or delivery against payment of securities sold (DVP) is to be made to or by an agent of the customer unless all of the following procedures are followed: (A) - (B) No changes. (C) the broker, dealer or municipal securities dealer shall give or send to the customer a confirmation in accordance with the requirements of section (a) of the rule with respect to the execution of the order not later than the {close of business on the next business} day {after} *of* {any} such execution; and (D) No change. (ii) Except as provided in this paragraph, no broker, dealer or municipal securities dealer shall effect a customer transaction for settlement on a delivery vs. payment or receipt vs. payment (DVP/RVP) basis unless the facilities of a clearing agency registered with the Securities and Exchange Commission (registered clearing agency) are used for automated confirmation and acknowledgement of the transaction. Each broker, dealer and municipal securities dealer executing a customer transaction on a DVP/RVP basis shall: (A) ensure that the customer has the capability, either directly or through its clearing agent, to acknowledge transactions in an automated confirmation/ {affirmation} *acknowledgement* system operated by a registered clearing agency; {and} (B) submit or cause to be submitted to a registered clearing agency all information and instructions required by the registered clearing agency for the production of a confirmation that can be acknowledged by the customer or the customer's clearing agent; *and (C) submit such transaction information to the automated confirmation/acknowledgement system on the date of execution of such transaction;* provided that a transaction that is not eligible for automated confirmation and acknowledgement through the facilities of a registered clearing agency shall not be subject to this paragraph (ii). (iii) No change. (e) No change.
[1] Securities Exchange Act Release No. 34-35917 (June 28,1995). [2] For a more complete discussion of the phase II of the Board's Transaction Reporting Program see "Transaction Reporting Program for Municipal Securities: Phase II," MSRB Reports, Vol. 15, No. 1 (April 1995).
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