Federal Register / Vol. 63, No. 91 /Tuesday, May 12, 1998 / Notices 26237

5When processing municipal bearer coupons

through CCS, DTC credits participants’ accounts on

the payable date of the coupons regardless of

whether it actually has received the interest

payment.

6 15 U.S.C. 78q–1(b)(3)(F).

7 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries prepared by DTC.

3Currently, the ID system enables broker-dealers

to exchange conformation and affirmation messages

with investment managers and custodian banks. For

a complete description of the services provided by

the ID system refer to Securities Exchange Act

Release Nos. 33466 (January 12, 1994), 59 FR 3139

[File No. SR–DTC–93–07] (order approving

proposed rule change relating to the enhanced ID

system); 34166 (June 6, 1994), 59 FR 31660 [File No.

SR–DTC–94–01] (order approving proposed rule

change to add a standing instruction database to the

ID system); 34199 (June 10, 1994), 59 FR 31660 [File

No. SR–DTC–94–04] (order granting accelerated

approval of a proposed rule change to implement

the interactive capabilities and the electric mail

features of the enhanced institutional delivery

system); 36050 (August 2, 1995), 60 FR 41139 [File

No. SR–DTC–95–10] (order approving proposed

rule change to implementing advice of confirm

correction/cancellation feature and modifying the

authorization/exception processing feature of the

institutional delivery system); and 39832 (April 6,

1998), 63 FR 18062 [File No. SR–DTC–95–23] (order

approving proposed rule change implementing the

ID system).

4 Initially, broker-dealers will not have access to

the HUB Mailbox.

5 DTC anticipates that the HUB Mailbox will be

used primarily for exchanging messages regarding

securities that are not eligible for settlement at DTC.

Telephone conversation among Jack Wiener, Vice

Continued

First, DTC will contact the corporate

paying agent before submitting the

coupons for payment to determine

whether the coupon proceeds are

payable in U.S. dollars. Only corporate

bearer bonds payable in either U.S.

dollars or Canadian funds are eligible

for CCS. Where the corporate bearer

bonds are payable in Canadian funds,

DTC will request the paying agent to

convert the funds to U.S. dollars in

accordance with the prevailing

exchange rate. DTC will not process

corporate bearer bonds through CCS

unless the paying agent is able to and

will convert Canadian funds to U.S.

dollars.

Second, DTC will suppress for

corporate bearer coupons the automatic

payment function that it applies to

municipal bearer coupons.5 By delaying

crediting participants’ accounts until it

has received the interest payments from

paying agents, DTC will avoid having to

adjust such accounts due to fluctuations

in exchange rates.

DTC requires that each shell

containing corporate bearer bond

coupons state the following information

on its face: the CUSIP number; a

description of issue including purpose,

series, date of issue, and maturity date;

the payable date; the quantity of

coupons enclosed; the dollar value of

individual coupons; the total shell value

unless payable in Canadian dollars; the

participant number; and the contact

number and telephone number of the

depositing participant. In addition, each

shell must be accompanied by a

completed deposit ticket, each of which

can cover up to twenty-five shells,

which provides the participant number,

the shell quantity, the total dollar value,

the CUSIP number per shell, the coupon

quantity per shell, the dollar value per

shell unless payable in Canadian

dollars, and whether the coupons are

future-due or past-due.

DTC will verify the number of shells

listed on the deposit ticket and give the

participant a time-stamped copy of the

ticket. If the number of shells listed on

the deposit ticket does not agree with

the physical number of shells, the entire

deposit will be rejected and sent back to

the participant.

II. Discussion

Section 17A(b)(3)(F) of the Act 6

requires that the rules of a clearing

agency be designed to remove

impediments to and to perfect the

mechanism of a national system for

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 provide a

more efficient method of settling the

payment of corporate bearer bond

coupons and should allow DTC

participants to centralize the processing

of the collection of coupons and the

receipt of interest payments.

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–97–17) be and hereby is approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–12459 Filed 5–11–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39955; File No. SR–DTC–

98–2]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing of Proposed Rule Change

Adding the HUB Mailbox Service to the

Institution Delivery System

May 4, 1998.

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

Securities Exchange Act of 1934

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

February 10, 1998, the Depository Trust

Company (‘‘DTC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change (File No. SR–DTC–98–2) 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 from interested persons on

the proposed rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change will add

the HUB Mailbox Service (‘‘HUB

Mailbox’’) to DTC’s Institutional

Delivery (‘‘ID’’) system.

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.2

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

The purpose of the proposed rule

change is to add the HUB Mailbox to the

services provided by the ID system.3

The HUB Mailbox will allow investment

managers and custodian banks 4 to

exchange messages regarding; (1)

securities purchases; (2) securities sales;

(3) reconciliation data relating to

securities positions and cash

movements; and (4) other securityrelated transactions as agreed to by two

or more HUB users.5 Occasionally, HUB
26238 Federal Register / Vol. 63, No. 91 /Tuesday, May 12, 1998 / Notices

President and Senior Counsel, DTC, and Jeffrey

Mooney, Special Counsel, Division of Market

Regulation (‘‘Division’’), Commission, and Greg

Dumark, Attorney, Division, Commission (March 2,

1998).

6 ISITC is a committee of investment managers,

custodians, and vendors which was established in

1991, has developed standard message formats and

operating protocols for transmitting information

concerning security-related transactions between

and among investment managers and custodians.

ISITC’s goals are to overcome difficulties

encountered by investment managers in

communicating with multiple custodians and to

attain straight-through-processing. Many ISITC

members are DTC participants.

7 17 CFR 200.30–3(a)(12).

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

users may also transmit trade data to

recordkeeping vendors where the

custody and accounting functions are

performed by two different parties.

According to DTC, the HUB Mailbox

was developed in cooperation with the

Industry Standardization for

Institutional Trade Communication

(‘‘ISITC’’) 6 to improve the delivery of

ISITC messages. Therefore, all

information will be entered in an ISITC

approved format initially, but other

formats may be used later if agreed upon

by two or more HUB users.

To use the HUB Mailbox, investment

managers and custodian banks will

place formatted records into bundles for

each addressee with appropriately

coded headers and trailers and DTC will

route the bundles to addresses’

mailboxes for retrieval. Addressees will

acknowledge receipt of bundles through

their mailboxes. All mail messages, both

delivered and undelivered, will be

transferred at the end of each business

day between 2 a.m. and 3 a.m. (ET) to

a separate file which can be accessed

directly on the next day. DTC will store

mail messages for up to five days.

According to DTC, it will not do any

processing other than to direct mail to

appropriate mailboxes.

Excerpts from the separate forms of

agreement to be executed by HUB

Mailbox users are attached as Exhibits

C, D, and E to the filing. Exhibit C lists

the fees to be charged for the service to

investment manager users, and Exhibit

D lists the fees to be charged for the

service to custodians. Liability

provisions, identical in both forms of

agreement, are found in Exhibit E.

DTC believes that the proposed rule

change is consistent with the

requirements of Section 17A(b)(3)(F) of

the Act and the rules and regulations

thereunder because it will increase the

speed of data transmissions between

investment managers and custodians,

thereby promoting efficiencies in the

clearance and settlement of securities

transactions.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

DTC believes that no burden will be

placed on competition as a result of the

proposed rule change.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

Written comments on the proposed

rule change have not been solicited from

DTC participants. Nevertheless, DTC

has tested the HUB Mailbox in a pilot

program with a few investment

managers and custodian banks. One of

the participants in the pilot program

characterized the HUB Mailbox as ‘‘the

most efficient, secure and cost effective

manner to obtain reconciliation data

daily.’’

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 DTC 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, N.W.,

Washington, D.C. 20549. 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, N.W.,

Washington, D.C. 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–TDC–98–2 and

should be submitted by June 2, 1998.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–12554 Filed 5–11–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39957; File No. SR–NASD–

98–34]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

National Association of Securities

Dealers, Inc.; Relating to Cancellations

and Suspensions for Failure To

Comply with Arbitration Award

May 5, 1998.

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

Securities Exchange Act of 1934

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

May 1, 1998, the National Association of

Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’) 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 NASD Regulation, Inc.

(‘‘NASD Regulation’’). 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 Association proposes to amend

that portion of Rule 9514 of the Rules

of the Association relating to review of

non-compliance with arbitration awards

and settlements. The Association

proposes to change the composition of

the hearing panels used in such

proceedings. Below is the text of the

proposed rule change. Proposed new

language is italicized; proposed

deletions are in brackets.

9514. Hearing and Decision.

* * * * *

(b) Designation of Party for the

Association and Appointment of

Hearing Panel

If a member, association person, or

other person subject to a notice under

Rule 9512 or 9513 files a written request

for a hearing, an appropriate department

or office of the Association shall be