[Federal Register Volume 63, Number 142 (Friday, July 24, 1998)]
[Notices]
[Pages 39918-39919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-19808]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40219; File No. SR-DTC-98-02]


Self-Regulatory Organizations; The Depository Trust Company; 
Order Granting Approval of a Proposed Rule Change to Implement the HUB 
Mailbox Service

July 16, 1998.
    On February 10, 1998, The Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change (File No. SR-DTC-98-02) pursuant to

[[Page 39919]]

Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'').\1\ 
Notice of the proposal was published in the Federal Register On May 12, 
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. 39955 (May 4, 1998), 63 
FR 26237.
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I. Description

    The rule change implements the HUB Mailbox service. The HUB Mailbox 
service will use the Institutional Delivery (``ID'') \3\ system's 
already-existing telecommunications facilities to allow investment 
managers and their custodians 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. 
Occasionally, HUB users may also transmit trade data to recordkeeping 
vendors in situations where the custodial and accounting functions are 
performed by two different parties. All information will be entered in 
an ISITC \4\ approved format initially, but other formats may be used 
later if agreed upon by two or more HUB users.\5\
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    \3\ 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 institutional delivery 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 implementing advice of confirm correction/cancellation 
feature and modifying the authorization/exception processing feature 
of the institutional delivery system); 39829 (April 6, 1998), 63 FR 
17943 [File No. S7-10-98] (interpretation that a ``matching'' 
service that compares securities trade information from a broker-
dealer's customer is a clearing agency function).
    \4\ ISITC (Industry Standardization for Institutional Trade 
Communication) is a global working committee of brokers, investment 
managers, custodians, and vendors which was established in 1991 and 
has developed standard message formats and operating protocols for 
transmitting information concerning security-related transactions.
    \5\ The notice of the proposed rule change, supra note 2, 
incorrectly stated that DTC developed the HUB Mailbox in cooperation 
with ISITC. It should have stated that DTC developed the HUB Mailbox 
service in cooperation with some ISITC members.
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    To use the HUB Mailbox, investment managers and custodians will 
place formatted records into bundles for each addressee with 
appropriately coded headers and trailers, and DTC will route the 
bundles to addressees' 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 2:00 AM and 3:00 AM (ET) to a separate 
file which can be accessed directly on the next day. DTC will store 
mail messages for up to five days. The HUB Mailbox service will not do 
any processing other than to direct mail to appropriate mailboxes.

II. Discussion

    Section 17A(b)(3)(F) of the Act \6\ requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. As discussed 
below, the Commission believes that DTC's proposed rule change is 
consistent with this obligation.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    The Commission believes that the electronic mail features of the 
HUB Mailbox service will enable users to reduce their reliance on 
facsimile transmissions when communicating information such as the 
details concerning securities purchases, sales, reconciliation, and 
other security related information. The Commission believes that 
transmitting this information electronically is more efficient and 
accurate than the methods currently used and therefore should help 
promote the prompt and accurate clearance and settlement of securities 
transactions.

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular with 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-98-02) be and hereby is 
approved.

    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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Jonathan G. Katz,
Secretary.
[FR Doc. 98-19808 Filed 7-23-98; 8:45 am]
BILLING CODE 8010-01-M