[Federal Register Volume 63, Number 91 (Tuesday, May 12, 1998)]
[Notices]
[Pages 26237-26238]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12554]


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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.
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    \1\ 15 U.S.C. 78s(b)(1).
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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\
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    \2\ The Commission has modified the text of the summaries 
prepared by DTC.
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(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 security-related transactions as agreed to by 
two or more HUB users.\5\ Occasionally, HUB

[[Page 26238]]

users may also transmit trade data to recordkeeping vendors where the 
custody and accounting functions are performed by two different 
parties.
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    \3\ Currently, 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 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).
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    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.
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    \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.
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    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\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-12554 Filed 5-11-98; 8:45 am]
BILLING CODE 8010-01-M