[Federal Register Volume 63, Number 107 (Thursday, June 4, 1998)]
[Notices]
[Pages 30543-30544]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14829]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40045; File Nos. SR-DTC-98-09, SR-NSCC-98-05]


Self-Regulatory Organizations; The Depository Trust Company; 
National Securities Clearing Corporation; Notice of a Proposed Rule 
Change Relating to Direct Clearing Services and New York Window 
Services

May 29, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 13, 1998, The 
Depository Trust Company (``DTC'') and the National Securities Clearing 
Corporation filed with the Securities and Exchange Commission 
(``Commission'') proposed rule changes as described in Items I, II, and 
III below, which Items have been prepared primarily by DTC and NSCC. 
The Commission is publishing this notice to solicit comments from 
interested persons on the proposed rule changes.
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    \1\ 15 U.S.C. 79s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Changes

    Under the proposed rule changes, NSCC will discontinue providing 
its Direct Clearing Services (``Direct Clearing'') and New York Window 
Services (``Window''). DTC will begin to offer its participants most of 
the services currently offered by NSCC through Direct Clearing and the 
Window and will call the service the ``New York Window Services.''

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

    In its filing with the Commission, DTC and NSCC included statements 
concerning the purpose of and basis for the proposed rule changes and 
discussed any comments they received on the proposed rule changes. The 
text of these statements may be examined at the places specified in 
Item IV below. DTC and NSCC have 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 and NSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    Direct Clearing is a physical securities processing service which 
NSCC has provided since its inception to NSCC participants that do not 
have offices in New York City. The principal services of Direct 
Clearing include (i) processing of over-the-window receives and 
deliveries, (ii) processing transfers of physical securities 
certificates, and (iii) processing deliveries to designated agents in 
connection with reorganizations and other corporate actions. In the 
course of providing these and other Direct Clearing services, NSCC may 
have custody of participants' physical securities certificates 
including overnight custody for one or more days.\3\
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    \3\ For a more complete description of Direct Clearing, refer to 
Securities Exchange Act Release No. 32221 (April 26, 1993), 58 FR 
26570 [File No. SR-NSCC-93-03].
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    The Window was originally approved by the Commission as a pilot 
project for NSCC in 1993 \4\ and became a permanent service in 1994.\5\ 
The principal services of the Window are similar to those of Direct 
Clearing, but they initially were provided to NSCC participants located 
in New York City. NSCC organized the Window in order to centralize 
redundant services provided at many of its participants' offices that 
were based in New York City.
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    \4\ Securities Exchange Act Release No. 31861 (February 16, 
1993), 58 FR 9582 [File No SR-NSCC-93-03].
    \5\ Securities Exchange Act Release No. 34629 (September 9, 
1994), 59 FR 46680 [File No. SR-NSCC-94-12].
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    NSCC has proposed to discontinue providing Direct Clearing and the 
Window in order to focus its resources on the core businesses of NSCC. 
The proposed arrangements between NSCC and DTC should assist in 
eliminating redundant services and facilities and thereby should result 
in greater efficiencies while offering the current users of Direct 
Clearing and the Window the ability to receive similar services from 
DTC.
    Under the proposals, DTC will adopt new procedures for the 
operation of its New York Window Services.\6\ DTC's proposed procedures 
are substantially the same as NSCC's Rule 31 \7\ except that DTC's 
proposed procedures do not include provisions similar to section 4 of 
NSCC Rule 31, which relates to money settlement through the Window. 
Currently, it is anticipated that NSCC will discontinue providing 
Direct Clearing and the Window and DTC will begin offering its New York 
Window Services on July 10, 1998.
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    \6\ DTC's proposed procedures are attached as Exhibit 2 to DTC's 
filing which is available for inspection and copying at the 
Commission's public reference room and through DTC.
    \7\ The current version of NSCC Rule 31 was approved by the 
Commission in 1996. Securities Exchange Act Release No. 37631 
(September 3, 1996), 61 FR 47534 [File No. SR-NSCC-96-08].
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    DTC and NSCC believe that the proposed rule changes are consistent 
with the requirements of Section 17A of the Act \8\ and the rules and 
regulations thereunder because the proposed arrangements should provide 
for more efficient clearing and depository services and thereby should 
facilitate the prompt and accurate clearance and settlement of such 
transactions. In addition, DTC believes that the proposed rule changes 
will be implemented consistently with its obligation under Section 17A 
to safeguard securities and funds in its custody and control or for 
which it is responsible.
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    \8\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The proposed arrangements would impose no burden on competition. 
Securities depositories registered under Section 17A of the Act are 
utilities created to serve members of the securities industry for the 
purpose of providing certain services that are ancillary to the 
businesses in which industry members compete with one another.
    After consummation of the proposed arrangements between DTC and 
NSCC, securities industry members will continue to have access to high-
quality, low-cost depository services provided under the mandate of the 
Act.

(C) Self-Regulatory Organizations' Statement on Comments on the 
Proposed Rule Changes Received from Members, Participants or Others

    Written comments from DTC participants, NSCC participants, and 
others have not been solicited or received. NSCC and DTC have worked 
closely, however, with a users' group composed of many of the users of 
Direct Clearing and the Window in evaluating and planning the proposed 
transaction.

[[Page 30544]]

III. Date of Effectiveness of the Proposed Rule Changes 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 or NSCC consents, the Commission will:
    (A) By order approve such proposed rule changes or
    (B) Institute proceedings to determine whether the proposed rules 
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 
changes are 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. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule changes that are filed 
with the Commission, and all written communications relating to the 
proposed rule changes 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 and NSCC. All 
submissions should refer to File Nos. SR-DTC-98-09 and SR-NSCC-98-05 
and should be submitted by June 25, 1998.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-14829 Filed 6-3-98; 8:45 am]
BILLING CODE 8010-01-M