Federal Register / Vol. 65, No. 223 / Friday, November 17, 2000 / Notices 69591

16 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1).

2Thomson Financial ESG is a wholly owned

subsidiary of Thomson Financial, a Thomson

Corporation subsidiary. 3 DTCC was created in 1999 as a holding

company for DTC and the National Securities

Clearing Corporation (‘‘NSCC’’).

4TISI is a wholly owned subsidiary of Thomson

Financial, a Thomson Corporation subsidiary.

Thomson Corporation is a global electronic

information company.

5 IAG is a Swiss corporate affiliate of TISI.

6The term ‘‘U.S. regulated aspects’’ of the GJV’s

activities refers to any services that would require

registration with the Commission as a clearing

agency, an exemption from such registration, or

designation as a ‘‘qualified vendor’’ as defined in

New York Stock Exchange Rule 387(a)(5), in

National Association of Securities Dealers Rule

11860(a)(5), and in similar rules of other selfregulatory organizations. Such activities, therefore,

would include the GJV’s proposed ETC and

centralized matching services for institutional

transactions settling in the U.S., including crossborder transactions between a U.S. broker-dealer

and an institution located abroad.

7Profits distributed to DTCC that are not retained

by DTCC will be available for rebate to the

participants of DTCC’s wholly-owned subsidiaries,

DTC and NSCC subject to such determination by

DTCC’s Board of Directors.

8The Commission has stated that matching is a

clearing agency function that requires an entity that

performs matching to register as a clearing agency

or obtain an exemption from registration as a

clearing agency. However, an entity that only

provides a matching services does not have to be

subject to the full range of clearing agency

regulation. Securities Exchange Act Release No.

39829 (April 6, 1998), 63 FR 17943 [File No. S7–

10–98]. In 1999, the Commission granted Thomson

an an exemption from clearing agency registration

to provide matching services. Securities Exchange

Act Release No. 41377 (May 7, 1999), 64 FR 25948

[File No. 600–31]. GJV Matching Services-US, LLC

has applied for exemption from clearing agency

registration from the Commission. Securities

Exchange Act Release No. 43540 (November 9,

2000), [File No. 600–32].

9The Commission has modified the text of the

summaries prepared by DTC.

10See, e.g., Securities Industry Association

Institutional Transaction Processing Committee

White Paper (December 1, 1999).

11 Generally, the TradeSuite Business consists of

the following products: TradeMessage, TradeMatch,

TradeSettle and TradeHub.

12 Generally, the ESG Business consists of the

following products: ALERT, OASYS, OASYS

Global, MarketMatch, and ITM Benchmarks.

SR–CBOE–00–44 and should be

submitted by December 8, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.16

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29449 Filed 11–16–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43541; File No. SR–DTC–

00–10]

Self-Regulatory Organizations;

Depository Trust Company; Notice of

Filing of Proposed Rule Change

Relating to the Combination of the

Depository Trust Company’s

TradeSuite Institutional Trade

Processing Services With ThomsonFinancial ESG’s Institutional Trade

Processing Services

November 9, 2000.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

August 22, 2000, 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. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested parties.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change being filed

by DTC is DTC’s proposal to combine its

TradeSuite family of institutional traderelated services (‘‘TradeSuite Business’’)

with the institutional trade processing

services offered by Thomson Financial

ESG (‘‘ESG Business’’) 2 in a proposed

joint venture, the Global Joint Venture

(‘‘GJV’’), between The Depository Trust

& Clearing Corporation (‘‘DTCC’’)3,

Thomson Information Services Inc.

(‘‘TISI’’) 4, and Interavia, A.G. (‘‘IAG’’).5

The proposal is as follows:

• After receipt of all necessary

regulatory approvals, DTC will transfer

existing assets of the TradeSuite

Business, TISI will transfer existing U.S.

assets of the ESG Business, and IAG will

transfer existing non-U.S. assets of the

ESG Business to the GJV between DTCC,

TISI, and IAG.

• Certain support functions and other

services will be provided to the GJV by

DTCC, DTC, and TISI pursuant to

service contracts.

• The GJV will provide post-trade,

presettlement related services, including

execution notification, allocation,

electronic trade confirmation (‘‘ETC’’),

central matching, operational and

standing databases (i.e., trade

enrichment), and communications

between trading parties and their

settlement agents.

• The GJV’s governance arrangements

will be designed to assure that the ‘‘U.S.

regulated aspects’’ of the GJV’s

activities,6 including the pricing

structure for the fees to be charged to

users of such services, will be subject to

the control of users.

• The GJV will be operated on a forprofit basis. Fifty percent of any profits

not retained by the GJV will be

distributed to DTCC.7

• The GJV will provide its ETC

service and its central matching service

through its wholly owned subsidiary,

the GJV Matching Services—US, LLC,

which has applied for an exemption

from registration as a clearing agency.8

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 these statements.9

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The expansion of the global economy,

the tremendous growth in transaction

levels in both domestic and cross-border

markets, and the emergence of

electronic trading vehicles has resulted

in dramatic increases in securities

trading volumes. This growth in volume

is beginning to constrain the capacity of

financial institutions to process trades

efficiently so that they settle on time.

Operations professionals in both

domestic and foreign securities markets

have concluded that the current

sequential and fragmented electronic

trade confirmation/affirmation model

must be made more efficient and that

broader industry connectivity to

electronic systems must be encouraged

so that these systems will be used for

the large number of cross-border

transactions that still rely upon the

telephone and telefax for the

communication of trade and settlement

information.10

According to DTC, the combination of

the TradeSuite 11 and ESG Business 12

and the linking of their current services

and customers could produce

immediate benefits. For example, DTC

estimates that 12% of institutional

trades processed in TradeSuite are

affirmed on trade date and that only

87% are affirmed by noon of T+2. By

introducing allocations processed in the

ESG Business’ OASYS system to the

TradeSuite Business’ TradeMatch, a

much larger percentage of trades can be

affirmed earlier in the settlement cycle.

69592 Federal Register / Vol. 65, No. 223 / Friday, November 17, 2000 / Notices

13 15 U.S.C. 78q–1.

14The GJV Class B Interests, which will have the

right to vote on matters that do not relate to U.S.

regulated aspects as well as to share in the GJV’s

profits attributable to its domestic business, will be

owned 50% by DTCC, 45% by TISI, and 5% by

IAG. The GJV Class C Interests, which will have the

right to vote on matters that do not relate to U.S.

regulated aspects as well as to share in the GJV

profits attributable to its foreign business, will be

owned 50% by DTCC and 50% by IAG.

15 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

Earlier affirmation would allow brokerdealers and their institutional customers

to identify and resolve the exceptions

and potential fails much earlier in the

settlement cycle.

In the longer term, the combination of

TradeSuite’s and ESG’s systems

development expertise and other

resources would enable the proposed

joint venture to develop and market

globally a single integrated ‘‘workflow’’

approach to trade management for both

domestic and cross-border transactions.

This development would facilitate the

industry’s goal of achieving straightthrough processing, which would help

manage the tremendous growth in

trading volumes and prepare for the

transition to shorter settlement cycles.

In addition, the DTC resources to be

transferred to the GJV or provided to the

GJV pursuant to a services contract are

for the most part resources that are

already fully dedicated to the

TradeSuite Business. Therefore,

implementation of the subject proposal

will not deprive DTC of resources

needed for it to provide its other

services in a safe and sound manner.

Furthermore, all existing services of the

TradeSuite and ESG Businesses will

continue uninterrupted during and after

the transfer to the GJV.

DTC believes that the proposed rule

change is consistent with the

requirements of Section 17A of the

Act 13 and the rules and regulations

thereunder applicable to DTC because

the implementation of the subject

proposal will facilitate the prompt and

accurate clearance and settlement of

institutional transactions.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The proposed rule change will not

impose any burden on competition. The

proposed joint venture will serve

members of the securities industry and

will be governed by its users. DTCC

(which itself is owned by, and whose

board represents, users) will own 50.1%

of the GJV Class A Interests and only

Class A Interests will have the right to

vote on matters relating to the U.S.

regulated aspects of the GJV’s activities

that are submitted to Interestholders.14

The GJV board of directors will be

composed of eight Managers, seven of

whom shall be voting Managers and one

of whom, the President of the GJV, shall

be a non-voting Manager. Of the seven

voting Managers, two will be appointees

of DTCC and may be DTCC directors or

officers (‘‘DTCC Board

Representatives’’). Two voting Managers

will be appointed by TISI and IAG,

acting jointly. The remaining three

voting Managers will be representatives

of the global securities industry, two of

whom will be nominees of DTCC. Board

decisions involving U.S. regulated

aspects of the GJV’s business will

require the affirmative vote of at least

one of the two DTCC Board

Representatives. In addition, the

approval of both Interestholders will be

required for many significant matters.

The purpose of the joint venture will

be to introduce significant efficiencies

into trade processing by combining two

existing businesses with complementary

positions and strengths. The joint

venture will combine these two

businesses to offer the securities

industry an integrated system for trade

processing which will assist firms in

dealing with unprecedented levels of

securities trading. The joint venture will

also be a positive response to the

expected industry and regulatory

mandate to reduce settlement cycles

worldwide and thereby to reduce risk

affecting the national clearance and

settlement system.

The joint venture will cooperate with

other post-trade presettlement

processing systems in order to achieve

interoperability.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

Written comments on the proposal

from DTC participants or others have

not yet been solicited or received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within thirty-five days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

ninety days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

(A) By order approve such proposed

rule change or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549–0609. 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 inspection and copying in

the Commission’s Public Reference

Section, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing also will be available for

inspection and copying at the principal

office of DTC.

All submissions should refer to file

No. SR–DTC–00–10 and should be

submitted by December 8, 2000.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29448 Filed 11–16–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43535; File No. SR–NASD–

00–65]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by National

Association of Securities Dealers, Inc.

Relating to Rule 10334 of the NASD

Code of Arbitration Procedure

November 8, 2000.

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 November

3, 2000, the National Association of

Securities Dealers, Inc. (‘‘NASD’’),

through its wholly owned subsidiary,

NASD Dispute Resolution, Inc. (‘‘NASD

Dispute Resolution’’) filed with the

Securities and Exchange Commission