[Federal Register Volume 63, Number 75 (Monday, April 20, 1998)]
[Notices]
[Pages 19545-19546]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10274]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39852; File No. SR-DTC-97-12]


Self-Regulatory Organizations; The Depository Trust Company; 
Order Approving a Proposed Rule Change To Establish a Voluntary 
Redemption and Sales Service for Depository Eligible Units of Unit 
Investment Trust

April 10, 1998.
    On June 27, 1997, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') and on January 
22, 1998, amended as proposed rule change (File No. SR-DTC-97-12) 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'').\1\ Notice of the proposal was published in the Federal 
Register on February 19, 1998.\2\ No comment letters were received. For 
the reasons discussed below, the Commission is approving the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 39647 (February 11, 
1998), 63 FR 8508.
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I. Description

    Under the rule change, DTC will establish the investor's voluntary 
redemptions and sales service (``IVORS''), a redemption and sales 
service for depository eligible units of unit investment trusts 
(``UITs''). IVORS will offer two basic UIT services: (1) redemption of 
units with the UIT transfer agent for cash payment and (2) sales of 
units to the UIT sponsor for cash payment. IVORS initially will be 
available to eligible DTC participants by way of DTC's participant 
terminal system (``PTS'').
    IVORS will be available only if: (1) the UIT units are DTC-eligible 
and are held in DTC's fast automated securities transfer (``FAST'') 
system; \3\ (2) the FAST transfer agent currently is or agrees to 
become a full service DTC participant; and (3) the UIT's lead sponsor 
or its clearing agent agrees to participant in IVORS as a DTC 
participant.
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    \3\ DTC has informed the Commission that DTC-eligible UIT units 
usually are held in the FAST system.
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    When a UIT becomes eligible for IVORS, its FAST transfer agent will 
submit initial standing instructions for the UIT to an IVORS database 
on PTS regarding participants' ability to redeem or to sell units 
through IVORS. The UIT sponsor will be able to make daily changes to 
those standing instructions by way of PTS. When a participant holding 
UIT units in its DTC account submits a request through IVORS to 
surrender the units for their value, IVORS will determine which of the 
two basic services (i.e., redemption or sale) is available for the 
units based on the standing instructions for the UIT in the IVORS 
database. The participant submitting the UIT units will have the choice 
of accepting the determination of which of the two services is 
available or canceling its request to surrender its units.
    On the date of the participant's request to surrender the units 
(``T''), IVORS will move the surrendered units from the participant's 
free position to its ``IVORS pending surrender segregation

[[Page 19546]]

account.'' Before the end of the day on T+2, either the FAST transfer 
agent or the UIT sponsor will enter into IVORS the redemption price (if 
the units are to be redeemed) or the purchase price (if the units are 
to be sold) plus the accrued dividend per unit. Both redemptions and 
sales of units through IVORS will be settled on T+3.
    IVORS automatically will calculate the settlement value of the 
redemption or sale and will generate a deliver order (``DO'') to move 
the units versus payment of the settlement value from the redeeming 
participant's IVORS pending surrender segregation account either to the 
FAST transfer agent's DTC participant account (in the case of a 
redemption) or to the UIT sponsor's DTC participant account (in the 
case of a sale). If the units are being redeemed, IVORS automatically 
will generate a second DO to remove the units from the FAST transfer 
agent's DTC participant account. If the units are being sold, the units 
will remain in the UIT sponsor's DTC account until the UIT sponsor 
later delivers them to a secondary-market purchaser or redeems them by 
way of IVORS.

II. Discussion

    Section 17A(b)(3)(F) of the Act \4\ requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. The Commission 
believes that the proposed rule change is consistent with DTC's 
obligations under Section 17A(b)(3)(F) because it should improve 
efficiency in the processing of UIT transactions by eliminating the 
certificate processing responsibilities of participants electing to use 
IVORS and by reducing the movement of physical securities certificates. 
This in turn should reduce the instances of erroneous processing and 
loss that sometimes occur with the movement of physical securities 
certificates.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act and the 
rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-97-12) be and hereby is 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-10274 Filed 4-17-98; 8:45 am]
BILLING CODE 8010-01-M