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[Federal Register Volume 74, Number 66 (Wednesday, April 8, 2009)]
[Notices]
[Pages 16028-16029]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-7977]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59695; File No. SR-DTC-2009-02]

Self-Regulatory Organizations; The Depository Trust Company; 
Order Approving Proposed Rule Change To Implement a Maturity 
Presentment Pend Function to Replace the Maturity Presentment 
Contingency System

April 2, 2009.

I. Introduction

    On January 13, 2009, The Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') proposed 
rule change SR-DTC-2009-02 pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ The proposed rule change 
was published for comment in the Federal Register on February 19, 
2009.\2\ No comment letters were received on the proposal. This order 
approves the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 59388 (Feb. 11, 2009), 
74 FR 7714.
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II. Description

    The proposed rule change implements a Maturity Presentment Pend 
function (``IPA MP Pend Function'') that will replace the Maturity 
Presentment Contingency System.

A. Current MMI Maturity Payment Procedure: Maturity Presentment 
Contingency System

    Currently, as part of DTC's Money Market Instrument (``MMI'') 
program maturity payment procedures, DTC sweeps maturing MMI positions 
from investors' custodians accounts and generates Maturity Presentments 
(``MPs'') \3\ to the designated Issuing Agent or Paying Agent's 
(collectively, ``IPA'') accounts. DTC debits the IPA's account by the 
amount of the maturity proceeds for settlement that day and credits the 
same amount to the investor's custodian account for payment that day. 
Because MPs are processed against an IPA's DTC account, IPAs may refuse 
to pay for a specific issuer's MP in the event that the issuer defaults 
on its obligation to the IPA. DTC allows IPAs to enter refusal to pay 
notifications through the Participant Terminal System (``PTS'') until 3 
p.m. Eastern Time on the date of maturity.\4\
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    \3\ References to MPs also cover other payment obligations of 
MMI issuers such as periodic payments and periodic interest 
payments.
    \4\ If the IPA refuses to pay, then DTC follows its Defaulting 
Issuer procedures, which include devaluing the collateral value of 
all of the defaulting issuer's MMI to zero, reversing all of the 
issuer's issuances and maturities processed that day, notifying DTC 
participants of the default, and blocking all further issuances by 
the issuer from entering DTC. If an IPA then contacts DTC to reverse 
the refusal to pay instruction, DTC undoes all the actions it took 
under its Defaulting Issuer procedures.
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    Under extraordinary circumstances or in times of unusual market 
stress, DTC may use the Maturity Presentment Contingency System 
(``MPCS'') after consultation with the Commission on the days following 
a disaster to allow IPAs to review and manually release MPs. IPAs are 
able to release MPs for processing on a CUSIP or issuer acronym level 
basis. At the close of settlement, MPs that have not been released are 
rolled into the next business day's processing queue for presentation 
along with that day's scheduled obligations. This process continues 
until all maturities are funded and the IPA releases the MP, the IPA 
notifies DTC of its refusal to pay, or the MPCS contingency procedure 
is terminated.

B. Proposed MMI Maturity Payment Procedure: Maturity Presentment Pend 
Function

    DTC is enhancing its systems in order to provide IPAs the ability 
to monitor their credit exposure to MMI issuers. DTC's IPA MP Pend 
Function will enable IPAs to review and manually release MPs in the 
ordinary course of business. IPAs will have the ability to set the pend 
request anytime prior to the MP sweep or at any point during the day 
for unknown rate maturities, based on acronym, product type, or the 
issuer MMI base CUSIP number. Each day by

[[Page 16029]]

3 p.m. Eastern Time, the IPA will be required to (1) release all items 
held in pend or (2) invoke its right to refuse to pay.\5\ If the IPA 
takes no action by 3 p.m. Eastern Time, the pending items will be 
released by DTC for normal processing.
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    \5\ The IPA MP Pend Function differs from the MPCS in this 
regard. Under the MPCS system, IPAs are not required to release 
items or invoke their right to refuse to pay each day since the MPs 
not acted on are rolled over into the next business day's processing 
queue.
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    All MP Pend requests will be time-stamped and will be immediately 
effective. Participants with MMI positions will be able to ascertain 
which MPs have been placed in pend status by the IPA.
    Each time it uses the IPA MP Pend Function to create a pend request 
or make a change to its profile, the IPA will be required to represent 
and warrant that it has authority to submit the request appearing on 
the IPA's screen and that it will either release the items held in pend 
by 3 p.m. Eastern Time on the date of maturity or by such time 
communicate to DTC that it refuses to pay. Additionally, the IPA must 
acknowledge that it understands and agrees that all MPs will be 
released for normal processing if it does not communicate its intention 
to refuse to pay DTC by 3 p.m. Eastern Time. In extraordinary 
circumstances, DTC will maintain its ability to set the pend request 
based on an issuer acronym, product, program, base number, or globally 
for all IPAs or for individual IPAs. In all circumstances, the IPA will 
maintain its right to notify DTC of its refusal to pay.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a registered clearing agency. In particular, 
the Commission believes the proposal is consistent with the 
requirements of Section 17A(b)(3)(F),\6\ which requires, among other 
things, that the rules of a clearing agency are designed to remove 
impediments to and perfect the mechanisms of a national system for the 
prompt and accurate clearance and settlement of securities 
transactions.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. 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\7\ and the 
rules and regulations thereunder.
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    \7\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-DTC-2009-02) be, and 
hereby is, approved.\9\
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    \8\ 15 U.S.C. 78s(b)(2).
    \9\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-7977 Filed 4-7-09; 8:45 am]
BILLING CODE 8010-01-P
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