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[Federal Register Volume 77, Number 37 (Friday, February 24, 2012)]
[Notices]
[Pages 11175-11177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-4279]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66413; File No. SR-DTC-2012-01]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Automate the ``Full Call'' Notification Process Relating to Money 
Market Instruments and Reduce the Time Frame Within Which Notices Are 
Required To Be Submitted

February 16, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder

[[Page 11176]]

notice is hereby given that on February 8, 2012, 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 primarily by DTC. DTC 
filed the proposed rule change pursuant to Section 19(b)(3)(A) \3\ of 
the Act and Rule 19b-4(f)(4) \4\ thereunder so that the proposed rule 
change was effective upon filing with the Commission. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \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)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change would automate the ``full call'' 
notification process relating to Money Market Instruments (``MMIs'') 
and would reduce the time frame within which such notices are required 
to be submitted to DTC.\5\
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    \5\ DTC is also making an unrelated change to its settlement 
processing schedule for The Options Clearing Corporation (``OCC'') 
services in response to a request from OCC.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, DTC 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. DTC has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    1. DTC requires that an issuer or its agent notify DTC in a timely 
manner in the event of a full or partial redemption of outstanding debt 
securities. Currently, DTC requires that an MMI Issuing/Paying Agent 
(``IPA'') send DTC full call information by email to DTC's redemption 
processing area no later than the close of business on the business day 
before or if possible two business days before the Publication Date, 
which except as otherwise noted in DTC's Operational Arrangements 
(``OA''), is no fewer than 30 calendar days or more than 60 calendar 
days prior to the Redemption Date.
    In April 2011, members of the Securities Industry and Financial 
Markets Association Money Market Committee (``SIFMA MMI Committee'') 
sent a written request to DTC regarding the ``full call'' notification 
process for MMIs.\6\ The SIFMA MMI Committee requested that DTC 
reevaluate its procedures regarding notification time frames for 
processing certain transactions in MMIs (``Request'').\7\ The financial 
services industry, and the money market sector in particular, is 
responding to various significant regulatory changes including, the 
Basel III capital directives (``Basel III''). In particular, the 
industry is concerned that the anticipated implementation of a 
Liquidity Coverage Ratio under Basel III will have significant 
consequences on the cost of short-term funds for major international 
banks and that the commercial paper market will need to adapt to these 
changes. DTC was advised that the ability to issue callable commercial 
paper with very short notice periods would be beneficial to banks in 
managing the new Liquidity Coverage Ratio. The industry has indicated 
that affected banks may shift a significant percentage of commercial 
paper issuances into a callable format over time.
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    \6\ The SIFMA MMI Committee includes MMI dealers and IPAs.
    \7\ DTC, in consultation with the industry, agreed that these 
process changes for MMIs would only apply to full calls. A partial 
call undergoes a different process using a ``lottery'' mechanism 
that requires more time for the holders to elect their option and 
for operational processing. Given the additional time constraints, 
it was agreed that DTC would shorten the window only for full calls.
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    DTC has reviewed its current processes and has determined that it 
is feasible to automate its processes as they relate to the SIFMA MMI 
Request. In so doing, DTC would reduce operational risk in the 
processing of MMI full call notices and at the same time would support 
the Request. In order to facilitate this automation, DTC will create a 
function that will provide IPAs with the ability and option to input 
MMI full call information directly into DTC's systems through an input 
screen in the Settlement Web or through an automated message format. 
The announcement information will be available through the existing 
Reorg Inquiry for Participants (``RIPS'') function on DTC's Participant 
Terminal System (``PTS'') and as an intraday file to which Participants 
will be able to subscribe. The information will also be included in end 
of day redemption output files. As a result of this automation, DTC 
will be able to reduce the notification time frame on full call MMIs so 
that effective April 26, 2012, DTC will modify the timing of a full 
call announcement so that IPAs have the option to send notification to 
DTC up until noon on the day before the maturity date for those IPAs 
that use the full call automation input mechanism.
    Additionally, at the request of the Options Clearing Corporation 
(``OCC''), DTC is making unrelated updates to its Settlement Service 
Guide in order to make changes to certain OCC cutoff times. These two 
cutoffs were originally established to allow OCC as Pledgee (as defined 
in the DTC rules and procedures) sufficient time to receive and input 
Participant release requests to the OCC internal system and then to 
create and send approved releases back to DTC. When first introduced, 
this was a manual process. In 1997, DTC extended the cutoffs to the 
current times to reflect automation in OCC's process.\8\ OCC has now 
requested that DTC extend the cutoffs further in order to allow 
Participants additional time to process their release requests since 
the current process is no longer manual and is instead a ``real-time'' 
messaging between DTC and OCC. Effective upon the date of this filing, 
DTC will extend the OCC cutoffs described above to 6:15 pm.
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    \8\ See DTC Important Notice B2287 dated December 2, 
1997 in which DTC made changes to OCC's cutoffs.
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    2. The proposed rule change is consistent with the requirements of 
the Act, the rules and regulations thereunder, and the CPSS/IOSCO 
Recommendations for Securities Settlement Systems applicable to DTC. 
The proposed rule changes modify existing DTC services in order to make 
the redemption announcement process, as it relates to MMIs, and the 
processing of pledge releases through the OCC, more efficient. As such, 
these are changes to existing services, which will not adversely affect 
the safeguarding of securities and funds in DTC's control or custody 
and which will not significantly affect the rights or obligations of 
the clearing agency or persons using the service.

B. Self-Regulatory Organization's Statement on Burden on Competition

    DTC does not believe that the proposed rule change will have any 
impact or impose any burden on competition.

[[Page 11177]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments relating to the proposed rule change have not yet 
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

    The foregoing rule change was filed pursuant to Section 19(b)(3)(A) 
of the Act and paragraph (f)(4) of Rule 19b-4 and therefore, became 
effective on filing. At any time within sixty days of the filing of 
such 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 [email protected]. Please include 
File Number SR-DTC-2012-01 on the subject line.

Paper comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-DTC-2012-01. 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 Web site (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 Web site 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 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at DTC's principal office and on DTC's Web site 
at www.dtc.org. All comments received will be posted without change; 
the Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly.
    All submissions should refer to File Number SR-DTC-2012-01 and 
should be submitted on or before March 16, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-4279 Filed 2-23-12; 8:45 am]
BILLING CODE 8011-01-P
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