[Federal Register Volume 63, Number 111 (Wednesday, June 10, 1998)]
[Notices]
[Pages 31818-31819]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15417]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40064; International Release No. 1138; File No. SR-DTC-
98-11]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Order Granting Accelerated Temporary Approval of a 
Proposed Rule Change Relating to the Admission of Non-U.S. Entities as 
Direct Depository Participants

June 3, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 29, 1998, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared 
primarily by DTC. The Commission is publishing this notice and order to 
solicit comments from interested persons and to grant accelerated 
temporary approval of the proposed rule change through May 31, 1999.
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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 purpose of the proposed rule change is to extend the 
Commission's temporary approval of DTC's criteria for entities that are 
organized in a country other than the United States (``non-U.S. 
entity'') to become direct DTC participants.

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 extend the 
Commission's temporary approval of DTC's admission criteria for non-
U.S. entities as direct DTC participants. The Commission originally 
granted temporary approval on May 9, 1997.\3\ The admission criteria 
would permit well-qualified, non-U.S. entities to obtain direct access 
to DTC's services without requiring the non-U.S. entities to obtain 
financial guarantees.
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    \3\ For a complete discussion of the admission criteria, refer 
to Securities Exchange Act Release No. 38600, International Release 
No. 1078 (May 9, 1997), 62 FR 27086-01 [File No. SR-DTC-96-13] 
(order temporarily approving a proposed rule change relating to the 
admission of non-U.S. entities as direct depository participants).
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    According to DTC, as of May 8, 1998, it has not admitted any non-
U.S. entities under the non-U.S. entities participation standards. DTC 
is currently reviewing an application from one non-U.S. entity, has 
sent an application to another non-U.S. entity, and has received 
numerous inquiries from other non-U.S. entities. DTC expects to admit 
in 1998 several non-U.S. entities under these standards.
    DTC is seeking an extension of the temporary approval so it can 
admit these non-U.S. entities and can gain experience with the new 
admission standards and with the unique risks posed by the activities 
of non-U.S. entities as direct DTC participants.
    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 promulgated because the admissions criteria takes into 
account the unique risks to DTC raised by the admission of non-U.S. 
entities while not unfairly discriminating against foreign entities 
seeking admission as participants.

B. Self-Regulatory Organization's Statement on Burden on Competition

    DTC acknowledges that the additional admissions criteria applicable 
to non-U.S. entities may impose some additional burden. DTC believes 
that any such burden is necessary and appropriate in furtherance of the 
purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were not and are not intended to be solicited with 
respect to the proposed rule change, and none were received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in the custody or control of

[[Page 31819]]

the clearing agency or for which it is responsible.\4\ The Commission 
believes that the rule change is consistent with this obligation 
because the admission criteria should bind non-U.S. entities to DTC's 
rules and procedures in a manner similar to U.S. domestic participant 
and should lesson or eliminate the negative effects that jurisdictional 
issues could have on DTC's exercise of its rights and remedies against 
a non-U.S. entity. Therefore, the Commission believes that the 
admissions criteria will assist DTC in assuring the safeguarding of 
securities and funds which are in its custody, control, or for which it 
is responsible.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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    DTC has requested that the Commission find good cause for approving 
the proposed rule change prior to the thirtieth day after publication 
of the notice of the filing. The Commission finds good cause for 
approving the proposed rule change prior to the thirtieth day after 
publication of the notice of the filing because accelerated approval 
will permit DTC to continue to use its admission criteria without 
interruption.\5\
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    \5\ The staff of the Board of Governors of the Federal Reserve 
System has concurred with the Commission's granting of accelerated 
approval. Telephone conversation between Kirsten Wells, Senior 
Analyst, Division of Reserve Bank Operations, Board of Governors of 
the Federal Reserve System, and Jeffrey Mooney, Special Counsel, 
Division of Market Regulation, Commission (June 3, 1998).
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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 submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
Copies of the submissions, 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 Room, 450 Fifth Street, NW., Washington, 
DC 20549. Copies of such filings will also be available for inspection 
and copying at the principal office of DTC. All submissions should 
refer to the file number SR-DTC-98-11 and should be submitted by July 
1, 1998.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-98-11) be, and hereby 
is, temporarily approved through May 31, 1999, on an accelerated basis.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-15417 Filed 6-9-98; 8:45 am]
BILLING CODE 8010-01-M