Federal Register / Vol. 76, No. 69 / Monday, April 11, 2011 / Notices 20061 

1 15 U.S.C. 78s(b)(1). 

2Securities Exchange Act Release No. 63320 

(November 16, 2010), 75 FR 71473 (November 23, 

2010). 

3Letters from Charles V. Rossi, President, 

Securities Transfer Association (December 14, 2010) 

and Candice Fordin, Associate Counsel, The 

Depository Trust & Clearing Corporation (February 

22, 2011). 

4FAST reduces the movement of certificates 

between DTC and transfer agents, thereby reducing 

the costs and risks associated with the creation, 

movement, and storing of certificates. For a 

description of DTC’s current rules relating to FAST, 

see Securities Exchange Act Release Nos. 34–13342 

(March 8, 1977) (File No. SR–DTC–76–3); 34–14997 

(July 26, 1978) (File No. Sr–DTC–78–11); 34–21401 

(October 16, 1984) (File No. SR DTC–84–8); 34– 

31941 (March 3, 1993) (SR–DTC–92–15); and 34– 

46956 (December 2, 2002) (File No. SR–DTC 2002– 

15). In addition, see Securities Exchange Act 

Release No. 34–60196 (June 30, 2009) 74 FR 33496 

(File No. SR–DTC–2006–16). 

5 DRS allows registered owners to hold their 

assets on the records of the transfer agent in bookentry form rather than in certificated form and 

provides investors with an alternate approach to 

holding their securities either in certificated form 

or in ‘‘street’’ name. Securities on deposit at DTC are 

considered ‘‘DRS eligible’’ if the issuer’s by-laws 

permit the issuance of book entry shares and the 

CUSIP number has been designated as FAST 

eligible by DTC. ‘‘Participating in DRS’’ means that 

the issuer and its transfer agent have complied with 

DTC’s requirements to participate in the DRS 

program and actually allow investors to hold shares 

in DRS. Issuers that participate in DRS have 

acknowledged that the use of electronic registration 

of securities is a valid method to evidence 

ownership of their issued securities. 

6Supra note 3. 

7Through DTC’s DWAC service, participants are 

permitted to make deposits and withdrawals 

directly with a transfer agent for an issue evidenced 

by a balance certificate registered in the name of 

Cede & Co. and held for DTC by a transfer agent. 

Issues eligible under DTC’s Fast Automated 

Securities Transfer (‘‘FAST’’) are eligible for DTC’s 

DWAC service. For more information about the 

DWAC service, see Securities Exchange Act Release 

No. 30283 (January 23, 1992), 57 FR 3658 (January 

30, 1992) (SR–DTC–91–16). 

8 In addition to the requirement that an issue be 

eligible and participating in DRS, DTC’s proposed 

rule change also requires that issue be exchange 

traded. The STA did not raise any concerns in its 

comment letter regarding this aspect of the 

proposal. Nonetheless, DTC stated in its comment 

letter that by waiving the requirement to maintain 

a balance certificate for only those issues that are 

listed on an exchange, DTC is able to rely on the 

due diligence of the exchange to provide a level of 

issuer transparency that DTC might not otherwise 

be able to attain. 

9 15 U.S.C. 78q–1(b)(3)(F). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64191; File No. SR–DTC– 

2010–15] 

Self-Regulatory Organizations; The 

Depository Trust Company; Order 

Granting Approval of a Proposed Rule 

Change To Amend Rules Relating to 

the Requirement To Maintain a Balance 

Certificate in the Fast Automated 

Securities Transfer Program 

April 5, 2011. 

I. Introduction 

On November 5, 2010, The Depository 

Trust Company (‘‘DTC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) proposed rule change 

SR–DTC–2010–15 pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’).1 Notice of the proposal 

was published in the Federal Register 

on November 23, 2010.2 The 

Commission received two comment 

letters.3 For the reasons discussed 

below, the Commission is granting 

approval of the proposed rule change. 

II. Description 

Under DTC’s FAST program, transfer 

agents participating in FAST (‘‘FAST 

transfer agents’’) hold DTC securities in 

the form of balance certificates.4 The 

balance certificates are registered in the 

name of DTC’s nominee, Cede & Co., 

and evidence the record ownership by 

Cede & Co. of each issue for which the 

FAST transfer agent acts as transfer 

agent. The Balance Certificate 

Agreement is executed by each FAST 

transfer agent and DTC and sets forth 

the rights and obligations of FAST 

transfer agents and DTC. As additional 

securities are deposited or withdrawn 

from DTC, the appropriate FAST 

transfer agent adjusts the denomination 

of the balance certificate and 

electronically confirms theses changes 

with DTC. 

Because transfer agents electronically 

confirm with DTC the adjustments to 

the denomination of the balance 

certificates and balances with DTC on a 

daily basis the number of shares 

represented by the balance certificate, 

some FAST transfer agents requested 

that DTC remove the requirement that 

they custody a balance certificate. As a 

result, DTC has proposed to remove the 

requirement that FAST transfer agents 

maintain a balance certificate for only 

those securities whose issuers are 

‘‘participating’’ in the direct registration 

system (‘‘DRS’’).5

Accordingly, pursuant to the rule 

change being approved by this Order, 

DTC will remove the requirement that 

FAST transfer agents maintain a balance 

certificate for those exchange listed 

issues that are DRS eligible and that are 

participating in DRS. However, DTC 

will continue to reserve its rights to 

draw down from the FAST balance and 

to receive in lieu of a DRS position a 

certificate registered in DTC’s nominee 

name of Cede & Co. and reflecting any 

number of shares up to and including 

the total amount of shares due DTC from 

the FAST transfer agents. 

III. Comment Letters 

The Commission received two 

comment letters, one from the Securities 

Transfer Association (‘‘STA’’) raising 

several concerns about the filing and the 

other from DTC responding to the STA’s 

comments.6 While the STA strongly 

supports DTC’s proposed rule to 

eliminate the requirement for FAST 

agents to maintain a balance certificate 

for issues participating in DRS, the STA 

believes the requirement to maintain a 

balance certificate should also be 

eliminated for those issues eligible for 

DRS but not participating. The STA 

reasons that DRS eligible issues can be 

electronically reflected on the transfer 

agent’s records and can still be moved 

electronically through a Deposit 

Withdrawal at Custodian transaction 

(‘‘DWAC’’).7 The STA also noted that the 

proposed requirement that reserves the 

right for DTC to request a certificate may 

be problematic for those issuers that do 

not issue certificates. 

DTC’s comment letter responded to 

both concerns raised by the STA. First, 

DTC contended that companies that 

have issued securities that are fully 

eligible and participating in DRS have 

authorized the use of a statement to 

evidence ownership. Without this 

authorization by the issuer, DTC argues, 

there is no ability to get an electronic 

statement from the issuer’s transfer 

agent and therefore no inherent 

approval of statement form as a valid 

evidence of ownership.8

Second, with regards to the provision 

of DTC’s proposal reserving the right for 

DTC to request a certificate, DTC 

maintained that currently all issuers 

eligible and participating in DRS are 

required to maintain and provide DTC 

upon request a FAST balance certificate. 

DTC stated that it cannot anticipate 

every situation that may arise where it 

is in DTC’s best interest to certificate the 

FAST balance but there are times when 

obtaining a certificate is necessary, such 

as when the issuer’s transfer agent or the 

issuer itself no longer meets the criteria 

to be in the FAST program. 

IV. Discussion 

Section 17A(b)(3)(F) of the Act 

requires, among other things, that the 

rules of a clearing agency be designed to 

assure the safeguarding of securities and 

funds which are in the custody or 

control of the clearing agency or for 

which it is responsible.9 The 

Commission finds that DTC’s proposed 

rule change is consistent with its 

obligations under the Exchange Act 

because it should allow DTC to reduce 

the costs and risks associated with the 

creation, storage, transfer, and 


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20062 Federal Register / Vol. 76, No. 69 / Monday, April 11, 2011 / Notices 

10 In approving this proposal, the Commission has 

considered its impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f). 

11 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 62252 

(June 10, 2010), 75 FR 34186 (June 16, 2010) (SR– 

ISE–2010–48). 

4See Securities Exchange Act Release No. 63506 

(December 9, 2010), 75 FR 78301 (December 15, 

2010) (SR–ISE–2010–117). 

5See Securities Exchange Act Release No. 62884 

(September 10, 2010), 75 FR 56618 (September 16, 

2010) (SR–ISE–2010–66). 

6 15 U.S.C. 78f(b)(5). 

7 15 U.S.C. 78k–1(a)(1). 

replacement of physical certificates, 

specifically in this case the balance 

certificates, which should in turn allow 

DTC to better safeguard the securities 

which are in its custody or control or for 

which it is responsible. 

While the Commission understands 

the STA would like to further promote 

dematerialization by eliminating the 

need for FAST agents acting for issues 

that are eligible but not participating in 

DRS to maintain a balance certificate, 

we agree with DTC that at this time 

allowing only those issues where the 

issuer has expressly provided that 

statements are evidence of ownership to 

eliminate maintaining the balance 

certificate better safeguards the 

securities being custodied by the FAST 

agent on DTC’s behalf. Furthermore, the 

proposed rule change may encourage 

those issuers that have made their 

securities eligible but are not 

participating in DRS to participate in 

DRS, which would further facilitate the 

STA’s goal of reducing the use of 

physical certificates. 

With regards to the STA’s concern 

that requiring issuers or their transfer 

agents to provide a balance certificate 

upon request, the proposed rule change 

does not change DTC’s current 

requirements relating to certificating 

FAST balance positions and therefore 

should not present any new issues for 

issuers or FAST transfer agents. DTC 

was simply making clear in the 

proposed rule change that it is 

continuing to reserve the right to request 

such a certificate. 

Accordingly, for the reasons stated 

above the Commission believes that the 

proposed rule change is consistent with 

DTC’s obligation under Section 17A of 

the Exchange Act, as amended, and the 

rules and regulations thereunder.10

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and in 

particular with the requirements of 

Section 17A of the Act and the rules and 

regulations thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act, that the 

proposed rule change (File No. SR– 

DTC–2010–15) be and hereby is 

approved. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–8553 Filed 4–8–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64193; File No. SR–ISE– 

2011–17] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change To Amend ISE Rule 2102 To 

Extend the Pilot Program 

April 5, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on March 31, 

2011, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change as described 

in Items I and II below, which items 

have been prepared by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 2102 (Hours of Business) to extend 

the expiration of the pilot rule. 

The text of the proposed rule change 

is available on the Exchange’s Internet 

Web site at http://www.ise.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

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 Exchange proposes to amend ISE 

Rule 2102 to extend the expiration of 

the pilot rule. Initial amendments to ISE 

Rule 2102 to allow the Exchange to 

pause trading in an individual stock 

when the primary listing market for 

such stock issues a trading pause were 

approved by the Commission on June 

10, 2010 on a pilot basis to end on 

December 10, 2010.3 The pilot was then 

extended to expire on April 11, 2011.4

On September 10, 2010, ISE Rule 2102 

was amended again to expand the pilot 

rule to apply to the Russell 1000® Index 

and other specified exchange traded 

products.5 The Exchange now proposes 

to extend the date by which this pilot 

rule will expire to the earlier of August 

11, 2011 or the date on which a limit 

up/limit down mechanism to address 

extraordinary market volatility, if 

adopted, applies. Extending this pilot 

program will provide the exchanges 

with a continued opportunity to assess 

the effect of this rule proposal on the 

markets. 

2. Basis 

The statutory basis for the proposed 

rule change is Section 6(b)(5) of the 

Act,6 which requires the rules of an 

exchange to promote just and equitable 

principles of trade, 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. The proposed rule 

change also is designed to support the 

principles of Section 11A(a)(1) 7 of the 

Act in that it seeks to assure fair 

competition among brokers and dealers 

and among exchange markets. The 

Exchange believes that the proposed 

rule meets these requirements in that it 

promotes uniformity across markets 

concerning decisions to pause trading in 

a security when there are significant 

price movements. 


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