Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 44377 

8 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.83667 

(July 18, 2018), 83 FR 35044 (July 24, 2018) (SR– 

DTC–2018–006) (‘‘Notice’’). 

4Available at http://www.dtcc.com/legal/rulesand-procedures.aspx. Each capitalized term not 

otherwise defined herein has its respective meaning 

as set forth in the DTC Rules. 

5Collateral management generally involves 

calculating collateral requirements and facilitating 

the transfer of collateral between counterparties. 

See Securities Exchange Act Release No. 64796 

(July 1, 2011), 76 FR 39963, 39964 (July 7, 2011) 

(S7–28–11). 

6 DEGCL is a joint venture of The Depository 

Trust & Clearing Corporation, the corporate parent 

of DTC, and Euroclear S.A./N.V. and was formed for 

the purpose of offering global information, record 

keeping, and processing services for derivatives 

collateral transactions and other types of financing 

transactions. DEGCL offers service options for the 

selection of collateral to satisfy the collateral 

obligations of its users (‘‘DEGCL CMS’’). See 

Securities Exchange Act Release No. 80280 (March 

20, 2017), 82 FR 15081 (March 24, 2017) (SR–DTC– 

2017–001) (‘‘CMS Order’’) (providing additional 

information on DEGCL and DEGCL CMS). One 

option relates exclusively to Securities held at DTC, 

and is dependent on Rule 35. Id. 

7CMS Order, 82 FR at 21838. 

8Notice, 83 FR at 35044–45. 

9Notice, 83 FR at 35045. 

10 Id. 

11Sections 1(a)–(h) of Rule 3 provide the 

qualifications for a partnership, corporation or other 

organization or entity to be eligible to become a 

Participant. See DTC Rules, Rule 3, Sections 1(a)– 

(h), supra note 4. 

12 DTC states that in order to protect DTC, its 

Participants and Pledgees, a CMSP that wishes to 

act under the proposed changes to Rule 35 would 

need to be subject to regulatory oversight 

comparable to a Participant, as provided in 

proposed Section 2(b)(i) of Rule 35, or, if the entity 

is organized in a country other than the United 

States (a ‘‘non-U.S. entity’’), it would need to be 

regulated by a financial regulatory authority in the 

country in which it is organized, as provided in 

proposed Section 2(b)(ii) of Rule 35. Notice, 83 FR 

at 35045. Further, the proposed rule change would 

require that, in order to be eligible to become a 

CMSP, the non-U.S. entity must notify the 

Commission in writing of its intention to operate 

under Rule 35, as modified by the proposed 

changes. Id. While DTC reserves the right to request 

documentation and/or information relating to a 

CMSP’s compliance with the requirements of 

proposed Section 2 of Rule 35, it would be the sole 

responsibility of the Participant or Pledgee to 

evaluate and choose an appropriate CMSP that, at 

a minimum, satisfies the requirements. Id. Under 

proposed Section 2 of Rule 35, the designating 

Participant or Pledgee would remain liable as 

principal for the actions of its designated CMSP(s) 

on its behalf, and would indemnify DTC for any 

loss, liability, or expense as a result of any claim 

arising from (i) any act or omission of the CMSP, 

(ii) the provision of CMSP Reports to the CMSP by 

DTC, or (iii) DTC’s compliance with instructions of 

the CMSP. Id. 

13 Id. 

14 Id. 

15 Id. 

16 Id. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–18826 Filed 8–29–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83940; File No. SR–DTC– 

2018–006] 

Self-Regulatory Organizations; The 

Depository Trust Company; Order 

Granting Approval of Proposed Rule 

Change To Amend Rule 35 To Provide 

for Designated Accounts for Use With 

Designated Collateral Management 

Service Providers 

August 24, 2018. 

On July 9, 2018, The Depository Trust 

Company (‘‘DTC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) proposed rule change 

SR–DTC–2018–006 pursuant to Section 

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder.2 The proposed rule change 

was published for comment in the 

Federal Register on July 24, 2018.3 The 

Commission did not receive any 

comment letters on the proposed rule 

change. For the reasons discussed 

below, the Commission approves the 

proposed rule change. 

I. Description of the Proposed Rule 

Change 

The proposed rule change would 

amend the Rules, By-Laws and 

Organization Certificate of The 

Depository Trust Company (‘‘DTC 

Rules’’) 4 to revise DTC’s current Rule 

35—CMS Reporting (‘‘Rule 35’’). 

A. Background 

Currently, Rule 35 provides that a 

Participant of DTC (‘‘Participant’’) may 

establish a collateral management 

service (‘‘CMS’’) 5 sub-account (‘‘CMS 

Sub-Account’’), which authorizes DTCC 

Euroclear Global Collateral Ltd. 

(‘‘DEGCL’’) 6 to receive from DTC (i) a 

CMS report that provides information 

regarding securities credited to the CMS 

Sub-Account of such Participant at the 

time of the report (‘‘CMS Report’’), and 

(ii) CMS delivery information that 

provides real-time information 

regarding any delivery or pledge from, 

or delivery or release to, the CMS SubAccount (‘‘CMS Delivery 

Information’’).7

B. The Proposed Rule Change 

DTC proposes five changes to Rule 35: 

(1) Adding the term ‘‘CMSP’’ (i.e., a 

CMS provider) and its associated 

function; (2) adding the term ‘‘CMSP 

Accounts’’ and its associated function; 

(3) adding the term ‘‘CMSP Reports’’ 

and its associated function; (4) 

authorizing a CMSP to submit CMSP 

instructions (‘‘CMSP Instructions’’) on 

behalf of a Participant or a Pledgee of 

DTC (‘‘Pledgee’’); and (5) making 

ministerial changes to conform with the 

proposed changes, as well as making 

stylistic edits.8 Each of these proposed 

changes is described below. 

1. CMSP 

The proposal would add to Rule 35 

the term and function of a CMSP, which 

a Participant or Pledgee could then 

designate to act on its behalf under the 

rule, pursuant to the proposed changes.9

The term CMSP would replace the 

existing, singular designation of DEGCL 

to act under Rule 35 as a collateral 

management provider.10 A partnership, 

corporation, or other organization or 

entity could become a CMSP, under the 

proposed changes to Rule 35, if it 

satisfies three proposed criteria: (1) One 

or more Participants or Pledgees 

designate the entity as a CMSP for 

purposes of Rule 35; (2) the entity (i) 

satisfies at least one of the qualifications 

set forth in Section 1(a)–(h) of Rule 3 11

or (ii) is organized in a country other 

than the United States, is regulated by 

a financial regulatory authority in the 

country in which it is organized, and 

demonstrates that it has notified the 

Commission in writing of its intention 

to operate under Rule 35; 12 and (3) the 

entity establishes a connection to DTC, 

in accordance with the reasonable 

requirements of DTC, in order to be able 

to receive position and transaction 

information and to submit instructions 

to DTC in accordance with the DTC 

Rules and Procedures.13

As proposed, DTC may decline to 

accept an entity as a CMSP if it would 

present material risk to DTC, its 

Participants and Pledgees, or impose 

material costs to DTC.14 DTC states that 

some examples of circumstances in 

which DTC might reject an applicant as 

a CMSP include when DTC reasonably 

believes that acceptance of the applicant 

as a CMSP would (i) subject DTC to 

additional legal or regulatory regimes, to 

which it is not otherwise subject; (ii) 

expose DTC to additional technology 

risk; or (iii) cause DTC to be in violation 

of applicable law or regulation.15

2. CMSP Account 

The proposed rule change would add 

the term and function of a ‘‘CMSP 

Account’’ to Rule 35.16 Currently, Rule 

35 requires a Participant looking to 

utilize the services offered through Rule 

35 to designate an account for such 


amozie on DSK3GDR082PROD with NOTICES1
44378 Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 

17 Id. 

18 Id. 

19 Id. The proposed rule change would specify 

that, with respect to a CMSP Account, a Participant 

or Pledgee would retain the right to instruct DTC 

as otherwise provided in the DTC Rules and 

Procedures. Id. 

20 Id. 

21 Id. 

22 Id. 

23 Id. 

24 Id. 

25 Id. 

26 Id. 

27Notice, 83 FR at 35046. 

28 Id. 

29 Id. 

30 Id. 

31 Id. 

32 Id. 

33 Id. 

34 Id. 

35 Id. 

36For a CMSP Account of a Participant, that 

would include Delivery or Pledge. Id. For a CMSP 

Account of a Pledgee, that would include Delivery 

or Release. Id. 

37 DTC states that its risk management controls, 

including Collateral Monitor and Net Debit Cap (as 

defined in Rule 1, Section 1 of the Rules), are 

designed so that DTC may complete system-wide 

settlement notwithstanding the failure to settle of 

its largest Participant or Affiliated Family of 

Participants. Id. The Collateral Monitor tests 

whether a Participant has sufficient collateral for 

DTC to pledge or liquidate if that Participant were 

to fail to meet its settlement obligation. Id. Pursuant 

to these controls under applicable DTC Rules and 

Procedures, DTC states that it would not process 

any Delivery or Pledge instruction order from a 

CMSP Account that would cause the Participant to 

exceed its Net Debit Cap or to have insufficient DTC 

Collateral to secure its obligations to DTC. Id. DTC 

states that Deliveries would be processed in the 

same order and with the same priority as otherwise 

provided in the DTC Rules and Procedures (i.e., 

such Deliveries and Pledges would not take 

precedence over any other type of Delivery or 

Pledge in the DTC system). Id. 

38 Id. 

purposes (i.e., a CMS Sub-Account).17 A 

Pledgee, however, is not permitted to 

designate a CMS Sub-Account under the 

existing Rule 35. 

The proposed CMSP Account would 

replace the concept of the existing CMS 

Sub-Account and would allow either a 

Participant or a Pledgee to designate any 

account as a CMSP Account.18 Once 

established, a CMSP Account would 

allow the designated CMSP access and 

authority to provide instruction to DTC 

(as further described below) for the 

Delivery, Pledge, or Release of securities 

on behalf of a Participant or Pledgee, as 

applicable.19 As proposed, a Participant 

or Pledgee could designate one or more 

CMSP Accounts and, concurrently, 

designate one or more CMSPs with 

respect to each CMSP Account.20

A Participant’s or Pledgee’s 

designation of a CMSP for a CMSP 

Account would serve four functions: (1) 

The appointment of the CMSP to act on 

its Participant’s or Pledgee’s behalf for 

the purposes of Rule 35; (2) the 

authorization of the CMSP to receive 

CMSP Reports and to provide CMSP 

Instructions on behalf of its Participant 

or Pledgee; (3) the authorization of DTC 

to act in accordance with any CMSP 

Instruction of a Participant’s or 

Pledgee’s designated CMSP; and (4) the 

representation and warranty of the 

Participant or Pledgee that it is duly 

authorized to instruct DTC to provide 

CMSP Reports to the CMSP and to act 

in accordance with any CMSP 

Instruction.21

The proposed rule change would not 

substantially alter the current liability 

and indemnification provisions 

provided for in Rule 35.22 Specifically, 

the proposed rule change would provide 

that each Participant and Pledgee that 

designates a CMSP would indemnify 

DTC, and any nominee of DTC, against 

any loss, liability or expense as a result 

of any claim arising from the 

compliance of DTC with CMSP 

Instructions, except to the extent such 

loss, liability, or expense is caused 

directly by the DTC’s gross negligence 

or willful misconduct.23

3. CMSP Reports 

Rule 35 currently authorizes DEGCL, 

and only DEGCL, to receive position 

and transaction information from DTC 

on behalf of a Participant in the form of 

CMS Delivery Information and CMS 

Reports.24 The proposed rule change 

would permit a Participant or Pledgee to 

authorize a CMSP, which may or may 

not be DEGCL, to receive CMSP Reports 

(with respect to CMSP Accounts for 

which the CMSP is designated).25 The 

CMSP Information and CMSP Position 

Report are analogous to the reports 

currently provided to DEGCL under 

Rule 35 (i.e., CMS Report and CMS 

Delivery Information, respectively).26

Currently, Rule 35 defines ‘‘CMS 

Delivery Information’’ to mean, ‘‘with 

respect to CMS Securities and any 

Delivery or Pledge thereof from, or 

Delivery or Release thereof to, a CMS 

Sub-Account, a copy of any Delivery, 

Pledge, or Release message sent to the 

CMS Participant by DTC, including the 

following information: (x) The CUSIP, 

ISIN, or other identification number of 

such CMS Securities, and (y) the 

number of shares or other units or 

principal amount of such CMS 

Securities.’’ 27 DTC states that this 

definition was drafted to align with 

DEGCL specifications.28

Pursuant to the proposed rule change, 

the definition of ‘‘CMSP Information’’ 

would be drafted in more general terms 

to provide flexibility for the different 

collateral management service offerings 

of CMSPs (in addition to DEGCL).29

Pursuant to the proposed rule change, 

‘‘CMSP Information’’ would mean, 

‘‘with respect to a CMSP Account of a 

Participant or Pledgee, a copy of any 

message sent to the Participant or 

Pledgee by the Corporation.’’ 30 These 

messages would include, but would not 

be limited to, the Delivery, Pledge, and 

Release messages referenced in the 

definition of CMS Delivery Information 

in existing Rule 35.31

Similarly, Rule 35 currently defines 

‘‘CMS Report’’ to mean, ‘‘with respect to 

a CMS Participant and its CMS SubAccount, the following information 

identifying the CMS Securities that are, 

at the time of such report, credited to 

such CMS Sub-Account: (i) The CUSIP, 

ISIN, or other identification number of 

the CMS Securities, and (ii) the number 

of shares or other units or principal 

amount of the CMS Securities.’’ 32 DTC 

states that this definition was drafted to 

align with DEGCL specifications.33

Pursuant to the proposed rule change, 

the specific language ‘‘(i) the CUSIP, 

ISIN, or other identification number of 

the CMS Securities, and (ii) the number 

of shares or other units or principal 

amount of the CMS Securities’’ would 

be deleted from the definition of ‘‘CMSP 

Position Reports.’’ 34

Finally, similar to what is provided 

for in Rule 35 today, the proposed 

changes would provide that DTC would 

have no liability to any Participant or 

Pledgee as a result of providing one or 

more CMSP Reports to any CMSP 

pursuant to proposed Section 5 of Rule 

35.35

4. CMSP Instructions 

The proposed rule change would 

provide that a CMSP would be 

authorized to instruct DTC, on behalf of 

the Participant or Pledgee, for the 

Delivery, Pledge, or Release of securities 

credited to such Participant or Pledgee’s 

CMSP Account, as applicable.36 CMSP 

Instructions would be subject to the 

terms and conditions of the DTC Rules 

and Procedures applicable to Deliveries, 

Pledges, and Releases of securities 

generally, including risk management 

controls.37 DTC states that the purpose 

of this proposed change is to streamline 

collateral processing by CMSPs by 

allowing them to receive information 

directly from DTC and to take direct 

action on that information through 

CMSP Instructions, on behalf of 

Participants and Pledgees.38

The proposal would not preclude 

instructions by the Participant or 

Pledgee itself, or CMSP Instructions by 

another CMSP, with respect to the same 


amozie on DSK3GDR082PROD with NOTICES1
Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 44379 

39 Id. 

40 Id. 

41 Id. 

42 Id. 

43 Id. 

44 Id. 

45 Id. 

46 Id. 

47 Id. 

48Notice, 83 FR at 35046–7. 

49Notice, 83 FR at 35047. 

50 Id. 

51 Id. 

52 Id. 

53 Id. 

54 Id. 

55 Id. 

56 Id. 

57 Id. 

58 Id. 

59 Id. 

60 Id. 

61 Id. 

62 15 U.S.C. 78s(b)(2)(C). 

63 15 U.S.C. 78q–1(b)(3)(F); 17 CFR 240.17Ad– 

22(20). 

CMSP Account.39 Furthermore, the 

proposed changes to Rule 35 would 

provide that DTC has no liability (i) to 

a Participant or Pledgee for acting in 

accordance with, or relying upon, CMSP 

Instructions, or (ii) to any CMSP as a 

result of DTC acting in accordance with, 

or relying upon, instructions of any 

other Person, including, but not limited 

to, the Participant or Pledgee or any 

other designated CMSP.40

5. Ministerial Changes 

In connection with the foregoing, DTC 

proposes the following ministerial 

changes to Rule 35 in order to conform 

the existing rule text to the proposed 

changes, as well as to make stylistic 

edits: 41

Title. DTC proposes to replace the 

current title ‘‘CMS Reporting’’ with 

‘‘CMSP Reports and Instructions,’’ to 

reflect the amended substance of the 

proposed rule.42

Section 1. For stylistic consistency, 

DTC proposes to insert the title ‘‘Certain 

Defined Terms’’ for Section 1.43 DTC 

further proposes to (i) delete the 

definitions of CMS, CMS Participant, 

CMS Representative, CMS Securities, 

DEGCL, and DTCC; (ii) add definitions 

for CMSP, CMSP Account, CMSP 

Instruction, and CMSP Reports; (iii) 

replace the defined term ‘‘CMS Delivery 

Information’’ with ‘‘CMSP Information’’ 

and simplify the definition by referring 

to ‘‘a copy of any message sent to the 

Participant or Pledgee’’ with respect to 

a CMSP Account, instead of ‘‘a copy of 

any Delivery, Pledge, or Release 

message sent to the CMS Participant by 

DTC, including the following 

information: (x) The CUSIP, ISIN, or 

other identification number of such 

CMS Securities, and (y) the number of 

shares or other units or principal 

amount of such CMS Securities’’; and 

(iv) replace the defined term ‘‘CMS 

Report’’ with ‘‘CMSP Position Report’’ 

and simplify the definition by removing 

the DEGCL specifications of ‘‘(i) the 

CUSIP, ISIN, or other identification 

number of the CMS Securities, and (ii) 

the number of shares or other units or 

principal amount of the CMS 

Securities.’’ 44

Proposed Section 2 (New). DTC 

proposes to insert a new proposed 

Section 2, titled ‘‘Qualification as a 

CMSP.’’ 45 This section would identify 

the aforementioned requirements that 

an entity must satisfy to become a 

CMSP.46

Section 2 (Proposed Section 3). DTC 

proposes to renumber Section 2 to 

Section 3, and to change the title of 

proposed Section 3 to ‘‘CMSP 

Accounts.’’ 47 DTC also proposes to 

modify subsection (a) to delete DEGCL 

CMS-specific terms and to reflect that (i) 

a Participant or Pledgee can designate 

one or more CMSP Accounts, as well as 

designate one or more CMSPs for each 

CMSP Account, and (ii) as noted above, 

describe what the designation of a 

CMSP entails, with respect to a CMSP 

Account by a Participant or Pledgee 

would constitute.48 DTC further 

proposes to modify subsection (b) to 

remove CMS-specific references, to 

reflect the inclusion of Pledgees, 

CMSPs, and CMSP Instruction in the 

proposed rule, and to make ministerial 

changes.49 Additionally, DTC proposes 

to remove subsection (c) as it would be 

no longer relevant because it relates 

exclusively to DEGCL.50

Section 3 (Proposed Section 4). DTC 

proposes to renumber Section 3 as 

Section 4, and to change the title of the 

section to ‘‘Instructions on a CMSP 

Account.’’ 51 DTC further proposes to (i) 

modify subsection (a) to remove 

provisions relating to the transfer of 

securities to a CMS Sub-Account, and to 

insert a provision stating that a 

Participant or Pledgee retains its right to 

instruct DTC with respect to its CMSP 

Account, and (ii) modify subsection (b) 

to remove provisions relating to the 

transfer of securities to a CMS SubAccount, and to insert a provision 

specifying that a CMSP may instruct the 

Delivery, Pledge, or Release of securities 

to or from a CMSP Account for which 

it is designated pursuant to proposed 

Section 3 of Rule 35.52 Further, DTC 

proposes to insert the new subsection 

(c) that would state that all Deliveries, 

Pledges, and Releases to or from a CMSP 

Account would be subject to the terms 

and conditions of the DTC Rules and 

Procedures applicable to Deliveries, 

Pledges, and Releases of securities 

generally.53

Section 4. DTC proposes to delete this 

section, as it relates to DEGCL 

specifications for a CMS Report.54

Section 5. DTC proposes to replace 

the current title of ‘‘CMS Delivery 

Information’’ with ‘‘CMSP Reports.’’ 55

DTC is further proposing to insert 

proposed subsection (a) to provide for 

the provision of CMSP Position Reports 

and CMSP Information to each CMSP 

for each CMSP Account for which it is 

designated.56 DTC additionally 

proposes to delete language relating to 

DEGCL-specific requirements regarding 

‘‘CMS Delivery Information.’’ 57 Further, 

DTC proposes to incorporate the 

remaining language of Section 5, 

modified to conform to the defined 

terms of the proposed rule change, into 

proposed subsection (b).58

Section 6. DTC proposes to modify 

the section to (i) add references to 

CMSPs, Pledgees, CMSP Reports, and 

CMSP Instructions, (ii) remove 

references to CMS Participant, CMS 

Report, Delivery Information, and CMS 

Representative, and (iii) update a crossreference relating to CMSP Reports.59

DTC further proposes to add disclaimers 

of liability to (i) a Participant or Pledgee 

for acting in accordance with, or relying 

upon, CMSP Instructions, or (ii) any 

CMSP as a result of DTC acting in 

accordance with, or relying upon, 

instructions of any other Person, 

including, but not limited to, the 

Participant or Pledgee or any other 

designated CMSP, with respect to a 

CMSP Account.60

For additional clarity, DTC also 

proposes to make ministerial changes to 

(i) update articles, pronouns, and 

determiners, and (ii) modify language 

for stylistic conformity within the 

proposed rule.61

II. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Act 62

directs the Commission to approve a 

proposed rule change of a selfregulatory organization if it finds that 

such proposed rule change is consistent 

with the requirements of the Act and 

rules and regulations thereunder 

applicable to such organization. The 

Commission believes the proposal is 

consistent with the Act, specifically 

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

17Ad–22(e)(21) under the Act.63


amozie on DSK3GDR082PROD with NOTICES1
44380 Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 

64 15 U.S.C. 78q–1(b)(3)(F). 

65A ‘‘covered clearing agency’’ means, among 

other things, a clearing agency registered with the 

Commission under Section 17A of the Exchange 

Act (15 U.S.C. 78q–1 et seq.) that is designated 

systemically important by the Financial Stability 

Oversight Counsel (‘‘FSOC’’) pursuant to the 

Payment, Clearing, and Settlement Supervision Act 

of 2010 (12 U.S.C. 5461 et seq.). See 17 CFR 

240.17Ad–22(a)(5)–(6). On July 18, 2012, FSOC 

designated DTC as systemically important. U.S. 

Department of the Treasury, ‘‘FSOC Makes First 

Designations in Effort to Protect Against Future 

Financial Crises,’’ available at https://

www.treasury.gov/press-center/press-releases/ 

Pages/tg1645.asp. Therefore, DTC is a covered 

clearing agency. 

66 17 CFR 240.17Ad–22(e)(21). 

A. Consistency With Section 17A 

Section 17A(b)(3)(F) of the Act 64

requires, inter alia, that the rules of the 

clearing agency be designed to promote 

the prompt and accurate clearance and 

settlement of securities transactions. 

As described above, DTC proposes to 

make five core changes to Rule 35. First, 

DTC proposes to no longer reference 

DEGCL as the sole CMS provider under 

Rule 35 but, instead, to reference the 

new term CMSP and its associated 

functions. Specifically, the proposed 

change would allow any otherwise 

eligible partnership, corporation, or 

other organization or entity that meets 

the proposed criteria to offer collateral 

management services through DTC for 

the purpose of Rule 35. The 

Commission believes that by expanding 

Rule 35 to include a broader concept of 

a CMSP, not just one specific CMSP 

(i.e., DEGCL), the proposed change (i) 

opens up the opportunity for other 

collateral management providers to 

compete in offering their services under 

Rule 35, and (ii) affords Participants and 

Pledgees the opportunity to evaluate 

whether another entity could better 

meet its collateral management 

requirements. By increasing the 

opportunity for competition and 

selection, the proposed change should 

help collateral management providers, 

Participants, and Pledgees be better 

positioned to more efficiently effect the 

settlement of collateral transactions 

under Rule 35. Therefore, the change 

would help promote the prompt and 

accurate clearance and settlement of 

securities transactions. 

Second, as described above, DTC 

proposes to add to Rule 35 the term 

CMSP Account and its associated 

functions. As proposed, a CMSP 

Account would allow Pledgees, not just 

Participants, to use collateral 

management service offerings of CMSPs 

for the purposes of Rule 35. By 

establishing the ability for Pledgees to 

utilize collateral management services 

under Rule 35, through the proposed 

CMSP Account, the proposal affords 

Pledgees the same opportunities to 

manage such collateral transactions 

through DTC as Participants. The 

Commission believes that expanding 

Rule 35 to include Pledgees should help 

Pledgees more efficiently effect the 

settlement of their collateral 

transactions at DTC, thus helping to 

promote the prompt and accurate 

clearance and settlement of such 

securities transactions. 

Third, as described above, DTC 

proposes to add to Rule 35 the term 

CMSP Reports and its associated 

functions; namely, the CMSP Position 

Report and the CMSP Information. The 

CMSP Position Report would enable the 

CMSP to know what securities are 

credited to a Participant or Pledgee’s 

CMSP Account each day, while the 

CMSP Information would allow the 

CMSP to know the Participant’s or the 

Pledgee’s real-time correspondence with 

DTC. These two reports are designed to 

furnish the CMSP with information 

needed to calculate collateral 

requirements and facilitate the transfer 

of collateral between counterparties. As 

such, the Commission believes that the 

CMSP Position Report and CMSP 

Information would assist CMSPs in 

providing collateral management 

services, and thereby, promote the 

prompt and accurate clearance and 

settlement of those securities 

transactions. 

Fourth, as described above, the 

proposed rule change would allow a 

CMSP to instruct DTC to Deliver, 

Pledge, or Release securities credited to 

a CMSP Account, on behalf of a 

Participant or Pledgee. In doing so, the 

proposed rule change should help 

reduce the number of actions that a 

Participant or Pledgee that uses a CMSP 

would need to take in order to effect the 

settlement of collateral transactions at 

DTC. The Commission believes that the 

proposal would thereby help add 

efficiency to the clearance and 

settlement process by providing 

straight-through submission and 

processing of settlement instructions by 

a CMSP, without further actions by the 

Participant or Pledgee. As such, the 

proposed CMSP Instructions would 

help promote the prompt and accurate 

clearance and settlement of securities 

transactions. 

Fifth, as described above, the proposal 

would make ministerial changes to Rule 

35 to conform the existing language in 

Rule 35 to the proposed changes. The 

proposal would also make various 

stylistic edits to the rule text. These 

changes are designed to help ensure that 

the final rule text is coherent and all 

cross-references within the rule text are 

current. The Commission believes the 

ministerial and stylistic changes thereby 

would help Participants and Pledgees to 

better understand their rights and 

obligations with respect to the collateral 

management services provide under 

Rule 35. Therefore, the changes would 

help promote the prompt and accurate 

clearance and settlement of such 

transactions. 

As each of the aforementioned 

changes is designed to promote the 

prompt and accurate clearance and 

settlement of securities transactions, the 

Commission finds that the proposal is 

consistent with the requirements 

Section 17A(b)(3)(F). 

B. Consistency With Rule 17Ad– 

22(e)(21) 

Rule 17Ad–22(e)(21) promulgated 

under the Act requires, inter alia, a 

covered clearing agency 65 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.66

As described above, the proposal 

would amend Rule 35 to, generally, (i) 

broaden what entities may serve as a 

CMSP, (ii) allow Participants and 

Pledgees to utilize the services offered 

by Rule 35, (iii) and permit Participants 

and Pledgees to designate one or more 

CMSPs, with respect to a CMSP 

Account, to provide CMSP Instructions, 

as well as receive CMSP Information 

and CMSP Position Reports. With these 

proposed changes, the Commission 

believes that the proposal would grant 

both Participants and Pledgees the 

flexibility to establish and structure 

their respective CMSP Accounts, 

including the eligible CMSP that would 

service the accounts, in a manner that 

is most effective and efficient for the 

collateral management needs of that 

Participant or Pledgee and for the 

specifications of its designated CMSP(s). 

The proposed rule change also would 

make ministerial revisions and stylistic 

edits to Rule 35, as described above. 

These changes are designed to help 

Participants and Pledgees better 

understand their rights and obligations 

with respect to the services offered 

under Rule 35. By helping Participants 

and Pledgees better understand their 

rights and obligations with respect to 

Rule 35, the Commission believes that 

the proposed changes are designed to be 

efficient and effective in meeting the 

requirements of Participants and 

Pledgees that take advantage of DTC’s 

collateral management services under 

Rule 35. 


amozie on DSK3GDR082PROD with NOTICES1
Federal Register / Vol. 83, No. 169 / Thursday, August 30, 2018 / Notices 44381 

67 15 U.S.C. 78q–1. 

68 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

69 17 CFR 200.30–3(a)(12). 

1 12 U.S.C. 5465(e)(1). 

2 17 CFR 240.19b–4(n)(1)(i). 

3On December 18, 2017, DTC filed the advance 

notice as proposed rule change SR–DTC–2017–021 

with the Commission pursuant to Section 19(b)(1) 

of the Act and Rule 19b–4 thereunder (‘‘Proposed 

Rule Change’’). 15 U.S.C. 78s(b)(1) and 17 CFR 

240.19b–4, respectively. The Proposed Rule Change 

was published in the Federal Register on January 

8, 2018. Securities Exchange Act Release No. 82432 

(January 2, 2018), 83 FR 884 (January 8, 2018) (SR– 

DTC–2017–021). On February 8, 2018, the 

Commission designated a longer period within 

which to approve, disapprove, or institute 

proceedings to determine whether to approve or 

disapprove the Proposed Rule Change. Securities 

Exchange Act Release No. 82669 (February 8, 2018), 

83 FR 6653 (February 14, 2018) (SR–DTC–2017– 

021, SR–FICC–2017–021, SR–NSCC–2017–017). On 

March 20, 2018, the Commission instituted 

proceedings to determine whether to approve or 

disapprove the Proposed Rule Change. Securities 

Exchange Act Release No. 82912 (March 20, 2018), 

83 FR 12999 (March 26, 2018) (SR–DTC–2017–021). 

On June 25, 2018, the Commission designated a 

longer period for Commission action on the 

proceedings to determine whether to approve or 

disapprove the Proposed Rule Change. Securities 

Exchange Act Release No. 83509 (June 25, 2018), 83 

FR 30785 (June 29, 2018) (SR–DTC–2017–021, SR– 

FICC–2017–021, SR–NSCC–2017–017). On June 28, 

2018, DTC filed Amendment No. 1 to the Proposed 

Rule Change. Securities Exchange Act Release No. 

83628 (July 13, 2018), 83 FR 34263 (July 19, 2018) 

(SR–DTC–2017–021). DTC submitted a courtesy 

copy of Amendment No. 1 to the Proposed Rule 

Change through the Commission’s electronic public 

comment letter mechanism. Accordingly, 

Amendment No. 1 to the Proposed Rule Change has 

been publicly available on the Commission’s 

website at https://www.sec.gov/rules/sro/dtc.htm 

since June 29, 2018. The Commission did not 

receive any comments. The proposal, as set forth in 

both the advance notice and the Proposed Rule 

Change, each as modified by Amendments No. 1, 

shall not take effect until all required regulatory 

actions are completed. 

4Securities Exchange Act Release No. 82579 

(January 24, 2018), 83 FR 4310 (January 30, 2018) 

(SR–DTC–2017–803) (‘‘Notice’’). 

5Pursuant to Section 806(e)(1)(H) of the Clearing 

Supervision Act, the Commission may extend the 

review period of an advance notice for an 

additional 60 days, if the changes proposed in the 

advance notice raise novel or complex issues, 

subject to the Commission providing the clearing 

agency with prompt written notice of the extension. 

12 U.S.C. 5465(e)(1)(H). The Commission found that 

the advance notice raised novel and complex issues 

and, accordingly, extended the review period of the 

advance notice for an additional 60 days until April 

17, 2018. See Notice, supra note 4. 

6 12 U.S.C. 5465(e)(1)(D). 

7See 12 U.S.C. 5465(e)(1)(E)(ii) and (G)(ii); see 

Memorandum from the Office of Clearance and 

Settlement Supervision, Division of Trading and 

Markets, titled ‘‘Commission’s Request for 

Additional Information,’’ available at http://

www.sec.gov/rules/sro/dtc-an.shtml. 

8Securities Exchange Act Release No. 83743 (July 

31, 2018), 83 FR 38344 (August 6, 2018) (SR–DTC– 

2017–803). DTC submitted a courtesy copy of 

Amendment No. 1 to the advance notice through 

the Commission’s electronic public comment letter 

mechanism. Accordingly, Amendment No. 1 to the 

advance notice has been publicly available on the 

Commission’s website at http://www.sec.gov/rules/ 

sro/dtc-an.shtml since June 29, 2018. 

9 12 U.S.C. 5465(e)(1)(E) and (G); see 

Memorandum from the Office of Clearance and 

Settlement Supervision, Division of Trading and 

Markets, titled ‘‘Response to the Commission’s 

Request for Additional Information,’’ available at 

http://www.sec.gov/rules/sro/dtc-an.shtml. 

10Capitalized terms used herein and not 

otherwise defined herein are defined in the Rules. 

Therefore, the Commission finds that 

the proposal is designed to be efficient 

and effective in meeting the 

requirements of Participants and 

Pledgees, consistent with Rule 17Ad– 

22(e)(21) under the Act. 

III. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposal is 

consistent with the requirements of the 

Act, in particular the requirements of 

Section 17A of the Act 67 and the rules 

and regulations thereunder. 

It is therefore ordered, pursuant to 

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

proposed rule change SR–DTC–2018– 

006 be, and hereby is, approved.68

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.69

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–18784 Filed 8–29–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83953; File No. SR–DTC– 

2017–803] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

No Objection to an Advance Notice, as 

Modified by Amendment No. 1, To 

Adopt a Recovery & Wind-Down Plan 

and Related Rules 

August 27, 2018. 

On December 18, 2017, The 

Depository Trust Company (‘‘DTC’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) advance 

notice SR–DTC–2017–803 pursuant to 

Section 806(e)(1) of Title VIII of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act entitled the 

Payment, Clearing, and Settlement 

Supervision Act of 2010 (‘‘Clearing 

Supervision Act’’) 1 and Rule 19b– 

4(n)(1)(i) under the Securities Exchange 

Act of 1934 (‘‘Act’’) 2 to adopt a recovery 

and wind-down plan (‘‘R&W Plan’’) and 

related rules.3 The advance notice was 

published for comment in the Federal 

Register on January 30, 2018.4 In that 

publication, the Commission also 

extended the review period of the 

advance notice for an additional 60 

days, pursuant to Section 806(e)(1)(H) of 

the Clearing Supervision Act.5 On April 

10, 2018, the Commission required 

additional information from DTC 

pursuant to Section 806(e)(1)(D) of the 

Clearing Supervision Act,6 which tolled 

the Commission’s period of review of 

the advance notice until 60 days from 

the date the information required by the 

Commission was received by the 

Commission.7 On June 28, 2018, DTC 

filed Amendment No. 1 to the advance 

notice to amend and replace in its 

entirety the advance notice as originally 

filed on December 18, 2017.8 On July 6, 

2018, the Commission received a 

response to its request for additional 

information in consideration of the 

advance notice, which, in turn, added a 

further 60-days to the review period 

pursuant to Section 806(e)(1)(E) and (G) 

of the Clearing Supervision Act.9 The 

Commission did not receive any 

comments. This publication serves as 

notice that the Commission does not 

object to the proposed changes set forth 

in the advance notice, as modified by 

Amendment No. 1 (hereinafter, 

‘‘Advance Notice’’). 

I. Description of the Advance Notice 

In the Advance Notice, DTC proposes 

to (1) adopt an R&W Plan; and (2) 

amend the Rules, By-Laws and 

Organization Certificate of DTC 

(‘‘Rules’’) 10 to adopt Rule 32(A) (Winddown of the Corporation) and Rule 38 

(Market Disruption and Force Majeure) 

(each proposed Rule 32(A) and 

proposed Rule 38, a ‘‘Proposed Rule’’ 

and, collectively, the ‘‘Proposed 

Rules’’). 

DTC states that the R&W Plan would 

be used by the Board of Directors of 

DTC (‘‘Board’’) and DTC’s management 

in the event DTC encounters scenarios 

that could potentially prevent it from 

being able to provide its critical services 

as a going concern. 

DTC states that the Proposed Rules 

are designed to (1) facilitate the 

implementation of the R&W Plan when 

necessary and, in particular, allow DTC 

to effectuate its strategy for winding 

down and transferring its business; (2) 

provide Participants with transparency 

around critical provisions of the R&W 

Plan that relate to their rights, 

responsibilities and obligations; and (3) 

provide DTC with the legal basis to 

implement those provisions of the R&W 

Plan when necessary. 

A. DTC R&W Plan 

The R&W Plan would be structured to 

provide a roadmap, define the strategy, 

and identify the tools available to DTC 

to either (i) recover, in the event it 


amozie on DSK3GDR082PROD with NOTICES1