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What Are the Differences Between SEC Rules 15c6-1 and 15c6-2?

Question from StopFTDs, What Are the Differences Between SEC Rules 15c6-1 and 15c6-2?

Answer from AI:

The U.S. Securities and Exchange Commission (SEC) establishes rules that govern the securities industry. Two such rules are Rule 15c6-1 and the newer Rule 15c6-2 under the Securities Exchange Act of 1934. These rules pertain to the settlement cycle for securities transactions.

Rule 15c6-1: Standard Settlement Cycle

Rule 15c6-1 was established to standardize the settlement cycle for most broker-dealer securities transactions. Here are the key components of this rule:

  • 15c6-1(a): This subsection mandates that most securities transactions must settle within a specific number of business days after the trade date, known as T+2 (trade date plus two business days). This standard helps to reduce credit and market risks.
  • 15c6-1(b): This part provides exceptions to the standard settlement cycle for certain types of securities, such as government securities, municipal securities, commercial paper, and others that have different settlement customs.
  • 15c6-1(c): This subsection allows for the parties involved in a transaction to expressly agree to an alternate settlement cycle at the time of the transaction, either longer or shorter than the standard T+2.

Rule 15c6-2: Exception for Certain Securities

Rule 15c6-2 is a newer rule that provides an exception to the standard settlement cycle for certain securities that are limited to qualified institutional buyers and that meet certain other conditions.

  • 15c6-2(a): This subsection allows for an exception to the T+2 settlement cycle for transactions in securities that are expressly agreed upon by the parties to settle on a different specified date, provided that the transactions are between qualified institutional buyers and meet the conditions set forth in the rule.

Simplifying the Aim of These Rules

The primary aim of these rules is to ensure a timely and efficient settlement process for securities transactions. Rule 15c6-1 sets a standard settlement cycle to reduce risks associated with the time between the execution of a trade and its settlement. Rule 15c6-2 provides flexibility for certain institutional transactions that may benefit from a different settlement cycle due to the nature of the transaction or the parties involved.

It’s important to note that these rules are part of a complex regulatory framework designed to maintain the integrity of the securities markets. They help to manage the risks that can arise from the transfer of securities and the associated payment obligations.

For individuals or entities involved in securities transactions, understanding these rules is crucial. However, the application of these rules can be complex, and there may be additional considerations depending on the specific circumstances of a transaction. Therefore, consulting with a legal professional who specializes in securities law is recommended for personalized advice.

For more information on these rules, you can visit the SEC’s official documentation for Rule 15c6-1 and stay updated with the latest SEC releases for any amendments or the introduction of new rules like 15c6-2.

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