Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices 42743 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(6). 

5Each capitalized term not otherwise defined 

herein has its respective meaning as set forth in the 

Rules, By-Laws and Organization Certificate of DTC 

(the ‘‘Rules’’), available at http://www.dtcc.com/ 

legal/rules-and-procedures.aspx; the DTC 

Operational Arrangements (Necessary for Securities 

to Become and Remain Eligible for DTC Services) 

(‘‘Operational Arrangements’’), available at http://

www.dtcc.com/∼/media/Files/Downloads/legal/ 

issue-eligibility/eligibility/operationalarrangements.pdf; the Distributions Service Guide 

(the ‘‘Distributions Guide’’), available at http://

www.dtcc.com/∼/media/Files/Downloads/legal/ 

service-guides/Service%20Guide

%20Distributions.pdf; and the Guide to the 2018 

DTC Fee Schedule (‘‘Fee Guide’’), available at 

http://www.dtcc.com/∼/media/Files/Downloads/ 

legal/fee-guides/dtcfeeguide.pdf. 

6The proposed rule changes with respect to the 

Fee Guide would apply to Treasury Shares or 

Repurchased Debt Securities position adjustments 

in connection with distributions with a record date 

as well as to distributions with an effective date 

(i.e., mandatory corporate actions). For information 

on the process for reducing payment on Treasury 

Shares or Repurchased Debt Securities in 

connection with an effective date distribution, see 

Operational Arrangements, supra note 5, at 42–43. 

7 DTC also maintains internal records for 

scheduled fixed rate interest and principal 

payments. 

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 website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing also will be available for 

inspection and copying at the principal 

office of FINRA. All comments received 

will be posted without change. Persons 

submitting comments are cautioned that 

we do not redact or edit personal 

identifying information from comment 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–FINRA– 

2018–030, and should be submitted on 

or before September 13, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–18156 Filed 8–22–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83871; File No. SR–DTC– 

2018–007] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend the 

Process of the Reduction of Dividend 

or Interest Payments to a Participant 

on Treasury Shares or Repurchased 

Debt Securities 

August 17, 2018. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on August 9, 

2018, The Depository Trust Company 

(‘‘DTC’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change as described 

in Items I, II and III below, which Items 

have been prepared by the clearing 

agency. DTC filed the proposed rule 

change pursuant to Section 19(b)(3)(A) 

of the Act 3 and Rule 19b–4(f)(6) 4

thereunder. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change of DTC 

would amend the Operational 

Arrangements and the Distributions 

Guide‘‘ 5 to streamline the process for 

reducing payment to a Participant of a 

dividend or interest payment with 

respect to an equity or debt security, 

when such Participant held, on the 

record date for the distribution: (i) 

Shares of the security that had been 

repurchased by the issuer of the security 

(‘‘Treasury Shares’’) or (ii) debt that had 

been repurchased by the issuer of the 

debt (‘‘Repurchased Debt Securities’’). 

Specifically, DTC proposes to provide 

functionality to Participants so that a 

Participant that held Treasury Shares or 

Repurchased Debt Securities on the 

record date would use the Corporate 

Actions Web (‘‘CA Web’’) to reduce its 

entitlement to the distribution by the 

amount attributable to the Treasury 

Shares or Repurchased Debt Securities. 

The proposed rule change would also 

amend the Fee Guide to modify and 

clarify the fees associated with Treasury 

Shares or Repurchased Debt Securities 

adjustments.6 In addition, DTC would 

make ministerial and clarifying changes 

to the Operational Arrangements and 

the Fee Guide, as discussed below. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency 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 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

The proposed rule change would 

amend the Operational Arrangements 

and the Distributions Guide to 

streamline the process for reducing 

payment to a Participant of a dividend 

or interest payment with respect to an 

equity or debt security, when such 

Participant held, on the record date for 

the distribution, Treasury Shares or 

Repurchased Debt Securities. 

Specifically, DTC proposes to provide 

functionality to Participants so that a 

Participant that held Treasury Shares or 

Repurchased Debt Securities on the 

record date would use the CA Web to 

reduce its entitlement to the distribution 

by the amount attributable to the 

Treasury Shares or Repurchased Debt 

Securities. The proposed rule change 

would also amend the Fee Guide to 

modify and clarify the fees associated 

with Treasury Shares or Repurchased 

Debt Securities adjustments. In 

addition, DTC would make ministerial 

and clarifying changes to the 

Operational Arrangements and the Fee 

Guide, as discussed below. 

(i) Background 

A. Dividend and Interest Payments 

DTC receives information on dividend 

and interest payment distributions 

(each, an ‘‘announcement’’) from the 

issuer, the transfer agent or paying agent 

of the issuer (each, an ‘‘Agent’’), 

exchanges, trustees, and various other 

industry sources.7 An announcement of 

a distribution typically includes, among 

other things, a security description and 

CUSIP, record date, payable date, and 

either the rate per share for a dividend 

or the interest rate per $1,000 principal 

amount. DTC uses the information to 


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8 DTC typically publishes announcements via CA 

Web and International Organization for 

Standardization (‘‘ISO’’) 20022 messaging. For 

information about CA Web and ISO 20022, see 

Securities Exchange Act Release No. 79746 (January 

5, 2017), 82 FR 3372 (January 11, 2017) (SR–DTC– 

2016–014). 

9Examples of option types include elections for 

cash, securities, or a combination of both. 

10A Participant can obtain information about its 

Record Date Positions and entitlements from DTC 

through DTC’s Computer-to-Computer Facility 

(‘‘CCF’’) files, CA Web and ISO 20022. For 

information about CCF files, see Securities 

Exchange Act Release No. 79746 (January 5, 2017), 

82 FR 3372 (January 11, 2017) (SR–DTC–2016–014). 

It is the Participant’s responsibility to verify the 

accuracy of information against its own records, 

and to report any discrepancy to DTC. See 

Distributions Guide, supra note 5, at 24. 

11Since 2002, the issuer or Agent has been 

responsible for notifying DTC of a payment 

reduction due to Treasury Shares or Repurchased 

Debt Securities. See Securities Exchange Release 

No. 45994 (May 29, 2002), 67 FR 39452 (June 7, 

2002) (SR–DTC–2002–02). 

12 In 2011, DTC modified the process to require 

that the issuer or Agent also provide DTC with 

Participant(s) confirmation letters of the Treasury 

Shares or Repurchased Debt Securities that they 

held on the record date. Securities Exchange Act 

No. 65901 (December 6, 2011), 76 FR 77281, 77282 

(December 12, 2011) (SR–DTC–2011–10). 

13This adjustment only affects the captured 

Record Date Position for purposes of the 

publish a notice of the distribution to its 

Participants.8

With respect to a distribution with a 

record date (a ‘‘Record Date 

Distribution’’), DTC systemically 

captures the position in the subject 

security for each Participant as of the 

record date (‘‘Record Date Position’’). 

DTC calculates the distribution 

entitlement of each Participant based on 

its Record Date Position, the rate 

information in the announcement, and 

any elections of the Participant with 

respect to options offered by 

distribution event, if applicable.9 Each 

Participant may view its projected 

entitlements as calculated by DTC.10

Based on the aggregate entitlements of 

all Participants that had position in the 

CUSIP on the record date, DTC 

calculates the amount of funds (for an 

interest payment or cash dividend) and/ 

or shares of stock (for a stock dividend) 

it expects to receive from the Agent on 

the payable date (‘‘DTC Expected 

Payment’’). 

Typically, on the Business Day prior 

to the payable date, DTC will confirm 

the DTC Expected Payment with the 

Agent. On the payable date, DTC 

receives the payment of funds and/or 

shares of stock from the Agent. After 

DTC validates that it has received the 

full amount of the DTC Expected 

Payment, DTC will allocate the 

distribution to Participants in 

accordance with the entitlement of each 

Participant. 

B. Current Process for the Reduction of 

Payment on Treasury Shares or 

Repurchased Debt Securities (for Cash 

Dividend, Stock Dividend, or Interest 

Payments) 

An issuer may engage in a stock or 

debt buyback program, which may 

include repurchasing its securities 

through a broker dealer or market maker 

that is a Participant or a direct or 

indirect customer of a Participant. If the 

repurchased securities are neither 

cancelled by the issuer nor withdrawn 

from DTC by the Participant before the 

record date for a distribution, then the 

Participant would be holding Treasury 

Shares or Repurchased Debt Securities 

on the record date. 

A Participant that is holding Treasury 

Shares or Repurchased Debt Securities 

on the record date (which, by definition, 

the Participant holds directly or 

indirectly for the benefit of the issuer), 

should not receive a distribution 

payment with respect to such shares 

because, generally, an issuer does not 

make a distribution to itself. As such, an 

Agent should not include Treasury 

Shares or Repurchased Debt Securities 

when it calculates the total amount of a 

Record Date Distribution it will pay 

DTC on the payable date. 

However, DTC does not have 

independent knowledge of whether a 

Participant is holding Treasury Shares 

or Repurchased Debt Securities. If DTC 

is not aware that the Record Date 

Position of a Participant includes 

Treasury Shares or Repurchased Debt 

Securities, DTC would calculate its DTC 

Expected Payment based on the total of 

Record Date Positions of its Participants, 

including any Treasury Shares or 

Repurchased Debt Securities. The 

imbalance may not be discovered until 

DTC confirms the DTC Expected 

Payment with the Agent on the Business 

Day prior to the payable date, or even 

on the payable date, when DTC may 

receive a distribution from the Agent 

that is less than the DTC Expected 

Payment (because the Agent did not 

include the funds and/or shares of stock 

otherwise attributable to the Treasury 

Shares or Repurchased Debt Securities). 

DTC needs to be informed of the 

amount of any Treasury Shares or 

Repurchased Debt Securities that were 

held by any Participant on the record 

date, so DTC can reduce the captured 

Record Date Position of the relevant 

Participant, recalculate the expected 

entitlement of such Participant and 

adjust the DTC Expected Payment 

accordingly. For example, if ten shares 

of CUSIP X were credited to the account 

of a Participant on the record date for 

a dividend distribution for CUSIP X, the 

captured Record Date Position of the 

Participant would be ten shares of 

CUSIP X. Ordinarily, DTC would 

calculate the amount of the entitlement 

of the Participant to the dividend by 

applying the announced rate for the 

distribution to the Record Date Position 

of ten shares. However, assume that four 

of the ten shares of CUSIP X of the 

Participant’s Record Date Position were 

Treasury Shares. The Participant would 

not be entitled to receive a dividend for 

its entire Record Date Position of ten 

shares of CUSIP X. Once informed that 

the Participant was holding four shares 

of CUSIP X that were Treasury Shares 

on the record date, DTC would need to 

reduce the Record Date Position of the 

Participant by four shares. DTC would 

then need to recalculate the entitlement 

of the Participant by applying the 

announced rate to the adjusted Record 

Date Position of six shares of CUSIP X. 

As currently provided in the 

Operational Arrangements, an issuer or 

Agent must notify DTC in writing that 

one or more Participants held Treasury 

Shares or Repurchased Debt Securities 

on the record date, and that the DTC 

Expected Payment will be reduced by 

the amount attributable to the Treasury 

Shares or Repurchased Debt Securities 

held by the Participant(s). The issuer or 

Agent letter must include identification 

of the security, record date, payable 

date, the total number of Treasury 

Shares or Repurchased Debt Securities 

held at DTC on the record date, 

Participant name and number, and 

number of shares/principal value per 

Participant subject to the reduction.11

DTC must also receive a signed letter 

from each Participant that was holding 

the Treasury Shares or Repurchased 

Debt Securities that includes, among 

other things, a Participant officer-level 

authorization of the reduction, and an 

indemnification statement.12

The letters from the issuer or Agent 

and Participant(s) must be emailed to 

the designated DTC mailbox no later 

than three Business Days prior to the 

payable date. Once DTC receives the 

letters, DTC manually verifies the 

information in the letters against the 

applicable distribution announcement 

for CUSIP, record date, payable date, 

and rate, and validates the Record Date 

Position of the applicable Participant(s). 

DTC staff then use the Position 

Adjustment Tool (‘‘PAT’’), an existing 

internal function of its Participant 

Browser System (‘‘PBS’’), to reduce the 

Record Date Position of the 

Participant(s) by the amount of the 

Treasury Shares or Repurchased Debt 

Securities that were held by the 

Participant(s) on the record date.13 The 


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distribution. There is no change to the actual 

position held by the Participant. 

14The DTC Expected Amount would be 

recalculated accordingly. 

15Position adjustment fees are charged per 

adjustment irrespective of security-type or value of 

the distribution. These fees also apply to position 

adjustments with respect to distributions with an 

effective date. Position adjustments in connection 

with a distribution with an effective date are 

infrequent and may occur approximately once a 

year. 

16See Fee Guide, supra note 5, at 8. The fee was 

established in 2011 at forty dollars ($40) to recover 

costs. See Securities Exchange Act Release No. 

63659 (January 6, 2011), 76 FR 2430 (January 13, 

2011) (SR–DTC–2010–17). The fee was increased in 

2013 to fifty dollars ($50). See Securities Exchange 

Act Release No. 65597 (May 16, 2013), 78 FR 30382 

(May 22, 2013) (SR–DTC–2013–06). 

17See Fee Guide, supra note 5, at 8. The fee was 

established in 2011 at three hundred dollars ($300) 

to recover the increased costs of late adjustments as 

well as to discourage behavior that was keeping the 

industry from achieving peak efficiency (i.e., 

exception processing due to late submissions). See 

Securities Exchange Act Release No. 63659 (January 

6, 2011), 76 FR 2430 (January 13, 2011) (SR–DTC– 

2010–17). When DTC makes a position adjustment 

with less than two Business Days prior to the 

payable date, (i) it requires additional analysis, (ii) 

the payable date activities and calculations for the 

distribution are disrupted, and (iii) resources need 

to be diverted to perform research, resolve any 

imbalance with the Agent, and coordinate the 

return of any overpayment. The fee was increased 

in 2013 to three hundred and fifty dollars ($350) to 

further discourage exception processing and to 

more closely align to the amount of risk presented, 

as well as to the costs of additional research and 

analysis by DTC to ascertain exact event details, 

Participant entitlements and payment calculations. 

See Securities Exchange Act Release No. 65597 

(May 16, 2013), 78 FR 30382 (May 22, 2013) (SR– 

DTC–2013–06). Approximately two hundred and 

fifty dollars ($250) of the fee was attributable to cost 

recovery, the balance of approximately one hundred 

dollars ($100) was a charge to discourage exception 

processing. Since then, approximately 10% of all 

Record Date Position adjustments have been late. 

18The requirement to use the CA Web PAT 

functionality would only apply to Record Date 

Distributions. DTC will continue to use the existing 

manual process and forms with respect to 

distributions with an effective date. See Operational 

Arrangements, supra note 5, at 42–43. 

19Such errors may include, but are not limited to, 

data input errors, event misidentification, and 

entitlement calculation errors. Such errors could 

result in incorrect allocations which would need to 

be reversed and reallocated, thereby affecting 

payment finality. Even pre-allocation, such errors 

could lead to an imbalance with the Agent. If DTC 

cannot balance with the Agent, the allocation of the 

distribution could be delayed while DTC researches 

and resolves the issue and rebalances with the 

Agent. Reversed or delayed allocations could also 

impact Participants that had relied on the allocation 

to effect other securities transactions and would 

therefore impact the prompt and accurate clearance 

and settlement of securities transactions. 

20Since the requirement for Participant 

confirmation letters was added in 2011, DTC has 

increasingly relied on the Participant confirmation 

letters and DTC’s reconciliation with the issuer or 

Agent before the payable date. As such, DTC 

believes that the initial issuer or Agent letter would 

not be necessary in connection with a Participant’s 

position adjustment through the CA Web, because 

the entitlements would systemically be updated 

and would be more easily reconciled with the 

issuer or Agent. 

21PAT would continue to require overnight 

processing. 

22See supra note 16. 

projected entitlement of the 

Participant(s) to the distribution is then 

recalculated by applying the announced 

rate to the adjusted Record Date 

Position(s). The manual reduction must 

be completed on or before two Business 

Days prior to the payable date, because 

PAT requires overnight processing. On 

the Business Day prior to the payable 

date, DTC reviews and adjusts, as 

necessary, any of the elections the 

Participant(s) made prior to the position 

reduction (e.g., tax elections or dividend 

reinvestment) that may have been 

affected by the adjustment.14

C. Current Fees 

Currently, each Participant is charged 

fifty dollars ($50) per position 

adjustment,15 provided that the 

adjustment is made no later than two 

Business Days prior to the payable date 

(a ‘‘timely’’ position adjustment).16

If a Participant submits a position 

adjustment request less than two 

Business Days prior to the payable date 

(a ‘‘late’’ position adjustment), it is 

charged a fee of three hundred and fifty 

dollars ($350) reflecting (i) DTC costs 

associated with the adjustment, and (ii) 

a disincentive charge, in order to 

discourage late position adjustments, 

which require exception processing.17

(ii) Proposal 

A. Position Adjustment Tool 

DTC is in the process of migrating 

PAT from PBS to CA Web, and, 

pursuant to the proposed rule change, 

would make this functionality available 

to Participants for this purpose. The 

proposed rule change would provide 

that a Participant that held Treasury 

Shares or Repurchased Debt Securities 

on the record date must use the PAT 

functionality on the CA Web to reduce 

its Record Date Position by the amount 

of the Treasury Shares or Repurchased 

Debt Securities it held on the record 

date.18 By allowing Participants to use 

this functionality, and by removing 

direct DTC intervention, the proposed 

rule change would help automate and 

streamline the position adjustment 

process, reducing the risk of errors and 

delays associated with the manual 

submission and processing of Record 

Date Position adjustments.19 In 

addition, for timely position 

adjustments, an issuer or Agent would 

no longer be required to initiate the 

position adjustment.20

DTC believes that the process for a 

Participant to adjust its Record Date 

Position for a distribution using PAT 

functionality on CA Web would be 

straightforward. Currently, a Participant 

can view its Record Date Position and 

its entitlement with respect to a specific 

distribution event on the ‘‘Entitlements’’ 

tab on CA Web. Pursuant to the 

proposed rule change, the PAT 

functionality for a Record Date 

Distribution would be available on the 

Entitlements tab for any Participant that 

held a position on the record date. 

Using PAT, the Participant would 

reduce its Record Date Position in the 

subject CUSIP by the amount of 

Treasury Shares or Repurchased Debt 

Securities it held on the record date. 

The DTC system would then 

systemically recalculate the entitlement 

of the Participant based on the adjusted 

Record Date Position. 

The proposed rule change would not 

affect the existing deadline for 

submitting a timely Record Date 

Position adjustment.21 Therefore, a 

Participant would have to make its 

position adjustment through the CA 

Web no later than two Business Days 

prior to the payable date. If a Participant 

wants to adjust its entitlement less than 

two Business Days prior to the payable 

date, it would have to follow the 

existing manual process described 

above. 

B. Fee Change 

Pursuant to the proposed rule change, 

DTC would amend the Fee Guide to 

modify the fees associated with position 

adjustments with respect to Treasury 

Shares or Repurchased Debt Securities, 

in order to (i) align the fees with the 

operational costs of processing a Record 

Date Position adjustment and (ii) 

encourage Participants to process their 

own Record Date Position adjustments 

with the PAT functionality through CA 

Web, rather than relying on the manual 

and exception processing that is 

required for a late position adjustment. 

Under the proposed rule change, a 

Participant that adjusts its position no 

later than two Business Days prior to the 

payable date would be charged twentyfive dollars ($25) per adjustment, a 

decrease from the current fee of fifty 

dollars ($50).22 DTC believes that the 

lower fee would be appropriate because 

DTC would have reduced costs due to 

the decrease in DTC’s manual 

processing. 

In addition, DTC would increase the 

fee charged to the Participant for a 

position adjustment performed less than 

two Business Days prior to the payable 

date. The fee would be increased from 

three hundred and fifty dollars ($350) to 

five hundred dollars ($500) per 

adjustment. The purpose of the 

proposed increase is to encourage 


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23See supra note 17. Approximately two hundred 

and fifty dollars ($250) of the proposed fee would 

be attributable to cost, and the balance of 

approximately two hundred and fifty dollars ($250) 

would be a disincentive charge. 24See supra note 20. 

Participants to use the PAT 

functionality to perform Record Date 

Position adjustments by discouraging 

the late submissions of position 

adjustments, which would continue to 

require manual and exception 

processing.23

(iii) Proposed Rule Changes 

A. Operational Arrangements 

Section IV.C.2. 

Pursuant to the proposed rule change, 

the Operational Arrangements would be 

amended to add a paragraph under the 

current heading ‘‘Reduction of Payment 

on Treasury or Repurchased Securities 

(for Cash Dividend or Interest 

Payment),’’ which would be retitled 

‘‘Reduction of Payment on Treasury 

Shares or Repurchased Debt Securities 

(for Cash Dividend or Interest 

Payment)’’ to clarify that the process 

applies to both debt and equity 

securities. The proposed paragraph 

would state that ‘‘[a] Participant that 

holds treasury shares or repurchased 

debt securities (i.e., issuer buy-back) at 

DTC on the record date for a cash 

dividend or interest payment shall 

submit an instruction through the 

Corporate Actions Web (‘‘CA Web’’) to 

reduce its entitlement to the payment by 

the amount attributable to such treasury 

shares or repurchased securities. Such 

instruction must be submitted by the 

Participant no later than two business 

days prior to payable date; otherwise, an 

instruction will need to be manually 

submitted to DTC in accordance with 

the below process.’’ 

The proposed rule change would not 

substantively change the existing 

paragraph that describes the manual 

process that would be required of the 

issuer or Agent if a Participant does not 

submit an instruction through CA Web 

no less than two Business Days prior to 

the payable date. However, pursuant to 

the proposed rule change, the paragraph 

would be amended to clarify language. 

Specifically, the paragraph would 

reflect that the manual process would 

apply if the Participant does not submit 

an instruction through CA Web, and 

language about a deadline that is no 

longer applicable would be removed. 

Section IV.D.3. 

Pursuant to the proposed rule change, 

the Operational Arrangements would be 

amended to add a paragraph under the 

current heading ‘‘Reduction of Payment 

on Treasury or Repurchased Securities 

(for Stock Dividend Payments),’’ which 

would be retitled ‘‘Reduction of 

Payment on Treasury Shares (for Stock 

Dividend Payments)’’ to clarify that the 

process applies to equity securities. The 

proposed paragraph would state that 

‘‘[a] Participant that holds treasury 

shares at DTC on the record date for a 

stock dividend payment shall submit an 

instruction through the CA Web to 

reduce its entitlement to the distribution 

by the amount attributable to such 

treasury shares. Such instruction must 

be submitted by the Participant no later 

than two business days prior to payable 

date; otherwise, an instruction will need 

to be manually submitted to DTC in 

accordance with the below process.’’ 

The proposed rule change would not 

substantively change the existing 

paragraph that describes the manual 

process that would be required of the 

issuer or Agent if a Participant misses 

the cut-off for adjusting its Record Date 

Position with PAT. However, pursuant 

to the proposed rule change, the 

paragraph would be amended to 

streamline language. Specifically, the 

paragraph would reflect that it would 

apply if the Participant does not submit 

an instruction through CA Web no less 

than two Business Days prior to the 

payable date, and language about a 

deadline that is no longer applicable 

would be removed. 

Section VI.B.1. 

In addition, for consistency, DTC 

proposes to replace the current heading 

with ‘‘Reduction of Payment on 

Treasury Shares or Repurchased Debt 

Securities.’’ 

B. Distributions Guide 

As discussed above, pursuant to the 

proposed rule change, an issuer or 

Agent would no longer be required to 

initiate a Record Date Position 

adjustment with respect to Treasury 

Shares or Repurchased Debt 

Securities.24 Rather, a Participant that 

held Treasury Shares or Repurchased 

Debt Securities on the record date for a 

distribution would be able to directly 

adjust its own Record Date Position. As 

such, DTC is proposing to amend the 

Distributions Guide to add a section 

titled ‘‘Position Adjustment for 

Reduction of Payment on Treasury 

Shares or Repurchased Debt Securities 

(for Record Date Distributions).’’ The 

section would provide that ‘‘[t]o the 

extent that a participant is holding 

treasury shares or repurchased debt 

securities (i.e., issuer buyback) on the 

record date for a cash or stock dividend 

or interest payment, the participant may 

not be entitled to the distribution. The 

participant must utilize the position 

adjustment tool in CA Web to reduce its 

record date position of the subject 

CUSIP by the amount of the treasury or 

repurchased securities, so that it will 

not be funded on payable date for such 

securities. Position adjustments through 

CA Web must be made no later than two 

business days prior to payable date. On 

or after the business day prior to 

payable date, the adjustment will need 

to be manually processed, as further 

described in the Operational 

Arrangements, and the participant will 

be subject to an additional fee.’’ 

C. Fee Guide 

Pursuant to the proposed rule change, 

the Fee Guide would be amended to 

reflect that the fee charged to a 

Participant that adjusts its position with 

respect to Treasury Shares or 

Repurchased Debt Securities on or 

before two Business Days prior to the 

payable date would be twenty-five 

dollars ($25), a decrease from the 

current fee of fifty dollars ($50). The Fee 

Guide would also be amended to reflect 

that the fee charged to a Participant for 

a position adjustment performed less 

than two Business Days prior to the 

payable date would be increased from 

three hundred and fifty dollars ($350) to 

five hundred dollars ($500). 

For enhanced clarity, DTC is 

proposing to change the relevant 

heading in the Fee Guide from 

‘‘Treasury Shares’’ to ‘‘Treasury Shares 

or Repurchased Debt Securities 

Adjustments’’ to reflect that the process 

and fees apply to both equity and debt 

securities. For consistency, DTC would 

also modify the fee names under this 

heading from ‘‘Treasury Shares 

Adjustments’’ to ‘‘Treasury Shares or 

Repurchased Debt Securities 

Adjustments’’ and from ‘‘Late Treasury 

Shares Adjustments’’ to ‘‘Late Treasury 

Shares or Repurchased Debt Securities 

Adjustments.’’ 

Pursuant to the proposed rule change, 

DTC would modify the conditions listed 

in the Fee Guide to clarify the time at 

which an adjustment is late, in order to 

conform to current practice. For 

‘‘Treasury Shares or Repurchased Debt 

Securities Adjustments,’’ the condition 

would be modified to state: ‘‘Per 

adjustment made on or before 2 

business days prior to payable date.’’ 

For ‘‘Late Treasury Shares or 

Repurchased Debt Securities 

Adjustments,’’ the condition would be 

modified to state: ‘‘Per adjustment made 

less than 2 business days prior to 

payable date.’’ 

D. Implementation Timeframe 

DTC expects to implement the 

proposed changes no earlier than thirty 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices 42747 

25 15 U.S.C. 78q–1(b)(3)(F). 

26 15 U.S.C. 78q–1(b)(3)(D). 

27 15 U.S.C. 78q–1(b)(3)(F). 

28See supra note 19. 29 15 U.S.C. 78q–1(b)(3)(D). 30 17 CFR 240.17Ad–22(e)(21). 

(30) days after the date of filing, or such 

shorter time as the Commission may 

designate, and no later than October 1, 

2018. DTC would announce the 

implementation date of the proposed 

change by Important Notice, posted to 

its website. 

2. Statutory Basis 

DTC believes that the proposed rule 

change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a registered clearing agency. 

Specifically, DTC believes that the 

proposed rule change is consistent with 

Section 17A(b)(3)(F) of the Act 25 and 

Section 17A(b)(3)(D) of the Act 26 for the 

reasons described below. 

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

requires, inter alia, that the Rules be 

designed to promote the prompt and 

accurate clearance and settlement of 

securities transactions.27 By automating 

the Record Date Position adjustment 

process for Treasury Shares and 

Repurchased Debt Securities, thereby 

reducing the manual intervention by 

DTC, the proposed rule change would 

(i) increase the efficiency of the DTC 

centralized processing of dividend and 

interest payments by streamlining the 

Record Date Position adjustment 

process, and (ii) reduce the risk of errors 

and delays associated with manual 

processing,28 which DTC believes 

would promote the prompt and accurate 

clearance of securities transactions by 

DTC. In addition, the proposed rule 

change would make clarifying and 

ministerial changes to the Operational 

Arrangements and Fee Guide. Making 

clarifying and ministerial changes to 

help ensure that the procedures relating 

to position adjustments in connection 

with Treasury Shares or Repurchased 

Debt Securities are accurate and clear 

would facilitate Participants’ 

understanding of their rights and 

obligations with respect thereto. When 

Participants better understand their 

rights and obligations regarding DTC’s 

services, they can act in accordance 

with the Rules, which DTC believes 

would promote the prompt and accurate 

clearance and settlement of securities 

transactions by DTC. Therefore, DTC 

believes that these proposed rule 

changes would promote the prompt and 

accurate clearance and settlement of 

securities transactions, consistent with 

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

above. 

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

requires, inter alia, that the Rules 

provide for the equitable allocation of 

reasonable fees among Participants.29

DTC believes that the proposed rule 

change to the fee with respect to a 

timely position adjustment would 

provide for the equitable allocation of 

reasonable fees. DTC’s manual 

intervention in the Record Date Position 

adjustment process would be reduced 

because Participants would be able to 

use the PAT functionality to make their 

Record Date Position adjustments, and 

therefore DTC’s costs with respect to 

processing timely Record Date Position 

adjustments would decrease. Pursuant 

to the proposed rule change, the fee 

would be reduced to align with the 

anticipated decrease in operational costs 

for DTC, and therefore would be 

reasonable. In addition, the fee would 

continue to be charged on a per 

adjustment basis and would therefore be 

equitably allocated because all 

Participants that perform timely 

position adjustments would be treated 

equally under the proposal. 

DTC believes that the proposed rule 

changes to the fee with respect to a late 

position adjustment would provide for 

the equitable allocation of reasonable 

fees. Currently, the fee is designed (i) to 

align with DTC’s operational cost 

(approximately 71% of the fee), and (ii) 

to have a deterrent effect on late 

adjustments (approximately 29% of the 

fee). DTC’s operational costs for late 

position adjustments would not change 

pursuant to the proposed rule change. 

However, as noted above, under the 

current fee approximately 10% of 

Record Date Position adjustments 

continue to be late, which suggests that 

the disincentive portion of the current 

fee does not have a sufficient deterrent 

effect. Further, pursuant to the proposed 

rule change, the risks associated with 

the manual processing of late position 

adjustments—the risk of error and the 

associated risks of delayed allocation or 

re-allocation of the distribution—would 

be disproportionately greater than any 

risks associated with timely position 

adjustments. Currently, both timely and 

late Record Date Position adjustments 

carry the risks associated with manual 

processing. However, pursuant to the 

proposed rule change, only late Record 

Date Position adjustments would be 

subject to the risks of manual processing 

because timely Record Date Position 

adjustments would be performed 

through the CA Web. Given the 

insufficient deterrent effect of the 

current fee and the disproportionate 

risks of late position adjustments, DTC 

believes that discouraging late Record 

Date Position adjustments would be 

more crucial than before. As such, DTC 

believes that the proposed increase of 

the fee is reasonable because the 

increase from three hundred and fifty 

dollars ($350) to five hundred dollars 

($500) is a modest amount designed to 

provide a stronger disincentive to 

Participants from submitting late 

position adjustments. DTC believes that 

this stronger disincentive could reduce 

the number of late position adjustments 

and encourage Participants to use the 

PAT functionality through CA Web, 

thereby promoting an efficient process 

and avoiding the risks of manual 

processing, which could result in 

delayed allocations or otherwise affect 

payment finality. In addition, DTC 

believes that the proposed rule change 

provides for the equitable allocation of 

fees because all Participants that submit 

a late position adjustment would be 

equally subject to the fee, which would 

continue to be charged on a per 

adjustment basis irrespective of 

security-type or value of the 

distribution. Therefore, DTC believes 

that the proposed rule change would 

provide for the equitable allocation of 

reasonable fees among Participants, 

consistent with Section 17A(b)(3)(D) of 

the Act. 

In addition, the proposed rule change 

is designed to be consistent with Rule 

17Ad–22(e)(21) promulgated under the 

Act.30 Rule 17Ad–22(e)(21) requires 

DTC, inter alia, to establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

be efficient and effective in meeting the 

requirements of its participants and the 

markets it serves. The proposed rule 

change, as described above, would 

modify the Operational Arrangements 

and the Distributions Guide to 

streamline the position adjustment 

process for Participants that held 

Treasury Shares or Repurchased Debt 

Securities on the record date for a 

dividend or interest payment, which 

would enhance (i) efficiency in making 

such adjustments by reducing DTC’s 

manual intervention in the process, and 

(ii) effectiveness in making such 

adjustments by providing PAT 

functionality to Participants to make 

their own Record Date Position 

adjustments and discouraging manual 

processing. Therefore, by establishing a 

more efficient and effective process for 

Participants to reduce their entitlements 

to Record Date Distributions in respect 

of Treasury Shares or Repurchased Debt 

Securities, and consequently, for DTC to 

allocate Record Date Distributions, DTC 


daltland on DSKBBV9HB2PROD with NOTICES
42748 Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices 

31 15 U.S.C. 78q–1(b)(3)(I). 

32 Id. 

33 Id. 

34 Id. 

35 Id. 

36 15 U.S.C. 78q–1(b)(3)(F). 

37 15 U.S.C. 78q–1(b)(3)(I). 

38 Id. 

believes that the proposed change is 

consistent with the requirements of Rule 

17Ad–22(e)(21), promulgated under the 

Act, cited above. 

(B) Clearing Agency’s Statement on 

Burden on Competition 

DTC believes that the proposed rule 

change with respect to streamlining the 

process for reducing payment to a 

Participant of a dividend or interest 

payment, when such Participant held 

Treasury Shares or Repurchased Debt 

Securities on the record date for the 

distribution, would not have an impact 

on competition.31 Although the 

proposed rule change requires 

Participants to use the CA Web to make 

Record Date Position adjustments, the 

requirement to use the CA Web, which 

would facilitate the position adjustment 

process for all Participants, would not 

impose a burden on competition. The 

CA Web is an existing DTC platform 

that all Participants are required to use 

to access other types of services, and is 

already used by Participants to view 

their Record Date Positions and related 

entitlements. In addition, the 

requirement would apply equally to all 

Participants that held Treasury Shares 

or Repurchased Debt Securities on the 

record date for a dividend or interest 

payment. Therefore, DTC believes that 

the proposed rule change with respect 

to streamlining the process of Record 

Date Position adjustments would not 

impose a burden on competition. 

DTC believes that the proposed rule 

change to decrease the fee for a timely 

position adjustment may impact 

competition, but would not create a 

burden on competition.32 The decreased 

fee could promote competition by 

positively impacting Participants’ 

operating costs. Based on the foregoing, 

DTC believes that the proposed rule 

change would not impose a burden on 

competition, but may promote 

competition. 

DTC believes that the proposed rule 

change to increase the fee for a late 

position adjustment could have an 

impact on competition because it could 

create a burden on competition by 

increasing Participants’ fees and thereby 

negatively affect such Participants’ 

operating costs. However, DTC believes 

that any burden on competition would 

not be significant and would be 

necessary and appropriate in 

furtherance of the purposes of the Act, 

as permitted by Section 17A(b)(3)(I) of 

the Act.33 DTC believes any burden on 

competition would not be significant 

because (i) ideally, the fee would apply 

no one, as Participants would be 

discouraged from submitting late 

position adjustments, (ii) the fee would 

only apply when a Participant holds 

Treasury Shares or Repurchased Debt 

Securities on the record date of a 

dividend or interest distribution, and a 

Participant could only be charged once 

per distribution event, (iii) the fee 

would be charged on a per-adjustment 

basis, irrespective of security-type or 

value of the distribution, and would 

apply equally to any Participant that 

submits a late position adjustment, (iv) 

Participants can manage their late fees 

by making timely position adjustments, 

and (v) the amount of the increase, one 

hundred and fifty dollars ($150), is a 

modest amount that could be managed 

by Participants by making timely 

position adjustments. Therefore, DTC 

believes that the proposed rule change 

to the fee for late position adjustments 

would not impose a significant burden 

on competition.34

DTC believes that any burden on 

competition that may be created by the 

proposed rule change to increase the fee 

for late position adjustments would be 

necessary and appropriate in 

furtherance of the purposes of the Act, 

as permitted by Section 17A(b)(3)(I) of 

the Act.35 DTC believes that the 

proposed rule change to increase the fee 

for late position adjustments, in order to 

encourage streamlined processing of 

position adjustments and discourage 

manual and exception processing of 

position adjustments, would be 

necessary in furtherance of the purposes 

of the Act because the Rules must be 

designed to promote the prompt and 

accurate clearance and settlement of 

securities transactions.36 As discussed 

above, under the current fee 

approximately 10% of Record Date 

Position adjustments continue to be late, 

which suggests that the disincentive 

portion of the current fee does not have 

a sufficient deterrent effect. Further, 

pursuant to the proposed rule change, 

the risks associated with the manual 

processing of late position 

adjustments—the risk of error and the 

associated risks of delayed allocation or 

re-allocation of the distribution—would 

be disproportionately greater than any 

risks associated with timely position 

adjustments. Currently, both timely and 

late Record Date Position adjustments 

carry the risks associated with manual 

processing, but pursuant to the 

proposed rule change, only late Record 

Date Position adjustments would be 

subject to the risks of manual processing 

because timely Record Date Position 

adjustments would be performed 

through the CA Web. In light of the 

insufficient deterrent effect of the 

current fee and the disproportionate 

risks of late position adjustments, DTC 

believes that increasing the fee for late 

position adjustments is necessary in 

order to discourage late Record Date 

Position adjustments, which may lead to 

errors that could result in an imbalance 

with the Agent and delayed allocation 

or incorrect allocations which would 

need to be reversed and reallocated, 

thereby affecting payment finality. In 

addition, reversed or delayed 

allocations could also impact 

Participants that had relied on the 

allocation to effect other securities 

transactions. Thus, DTC believes that 

the proposed rule change to increase the 

fee for late position adjustments is 

designed to promote the prompt and 

accurate clearance and settlement of 

securities transactions and would 

therefore be necessary in furtherance of 

the purposes of the Act, as permitted by 

Section 17A(b)(3)(I) of the Act. 

DTC believes that the proposed rule 

change to increase the fee for late 

position adjustments, in order to 

encourage streamlined processing of 

position adjustments and to discourage 

manual and exception processing of 

position adjustments, would be 

appropriate in furtherance of the 

purposes of the Act, as permitted by 

Section 17A(b)(3)(I) of the Act.37 As 

discussed above, DTC believes that the 

current fee does not have a sufficient 

deterrent effect on late position 

adjustments. Therefore, DTC believes 

that it would be appropriate to increase 

the disincentive portion of the fee by 

one hundred and fifty dollars ($150) in 

order to strengthen the deterrent effect 

of the fee on late position adjustments. 

In addition, DTC believes that the 

proposed rule change provides for the 

equitable allocation of fees because all 

Participants that submit a late position 

adjustment would be equally subject to 

the fee, which would continue to be 

charged on a per adjustment basis 

irrespective of security-type or value of 

the distribution. Therefore, DTC 

believes that the proposed rule change 

to increase the late fee for late position 

adjustments would be appropriate in 

furtherance of the purposes of the Act, 

as permitted by Section 17A(b)(3)(I) of 

the Act.38

DTC does not believe that the 

proposed rule change with respect to 

the clarifying and ministerial changes to 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Notices 42749 

39 Id. 40 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Exchange initially filed the proposed fee 

change on August 1, 2018 (SR–CBOE–2018–054) for 

August 1, 2018 effectiveness. On business date 

August 9, 2018, the Exchange withdrew that filing 

and submitted this filing. 

the Operational Arrangements and the 

Fee Guide would have any impact on 

competition 39 because it would merely 

update the Operational Arrangements 

and the Fee Guide to make changes for 

accuracy and clarity, and therefore 

would not affect the rights and 

obligations of any Participant or other 

interested party. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

Written comments relating to this 

proposed rule change have not been 

solicited or received. DTC will notify 

the Commission of any written 

comments received by DTC. 

III. Date of Effectiveness of the 

Proposed Rule Change, and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: 

(i) Significantly affect the protection 

of investors or the public interest; 

(ii) impose any significant burden on 

competition; and 

(iii) become operative for 30 days 

from the date on which it was filed, or 

such shorter time as the Commission 

may designate, it has become effective 

pursuant to Section 19(b)(3)(A) of the 

Act and Rule 19b–4(f)(6) thereunder. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

DTC–2018–007 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–DTC–2018–007. This file 

number should be included on the 

subject line if email 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 website (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 website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of DTC and on DTCC’s website 

(http://dtcc.com/legal/sec-rulefilings.aspx). All comments received 

will be posted without change. Persons 

submitting comments are cautioned that 

we do not redact or edit personal 

identifying information from comment 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–DTC– 

2018–007 and should be submitted on 

or before September 13, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.40

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–18159 Filed 8–22–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83877; File No. SR–CBOE– 

2018–057] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the Options 

Regulatory Fee 

August 17, 2018. 

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 August 9, 

2018, Cboe Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘Cboe Options’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

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 its 

Fees Schedule relating to the Options 

Regulatory Fee. 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://www.cboe.com/ 

AboutCBOE/CBOELegalRegulatory

Home.aspx), at the Exchange’s Office of 

the Secretary, 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 

Exchange 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 

Exchange 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to decrease 

the Options Regulatory Fee (‘‘ORF’’) 

from $0.0049 per contract to $0.0028 per 

contract in order to help ensure that 

revenue collected from the ORF, in 

combination with other regulatory fees 

and fines, meets the Exchange’s total 

regulatory costs.3

The ORF is assessed by Cboe Options 

to each Trading Permit Holder (‘‘TPH’’) 

for options transactions cleared by the 

TPH that are cleared by the Options 


daltland on DSKBBV9HB2PROD with NOTICES