Federal Register / Vol. 60, No. 84 / Tuesday, May 2, 1995 / Notices 21577

11 DTC’s operational arrangements were

published in a June 1987 memorandum and were

updated in both June 1988 and February 1992. For

a complete description of the operational

arrangements memorandum, refer to Securities

Exchange Act Release No. 24818 (August 19, 1987),

52 FR 31833 [File No. SR–DTC–87–10] (order

approving the implementation of DTC’s operational

arrangements for the eligibility of security issues),

and Securities Exchange Act Release No. 30625

(April 30, 1992), 57 FR 18534 [File No. SR–DTC–

92–06] (order approving modifications to DTC’s

operational arrangements).

12Supra note 9.

13 15 U.S.C. 78s(b)(2) (1988).

14 17 CFR 200.30–3(a)(12) (1994).

1 15 U.S.C. 78s(b) (1988).

2Securities Exchange Act Release No. 34835

(October 13, 1994), 59 FR 52851.

principles for the processing of

principal and income payments in

same-day funds.11 Towards this end, the

operational arrangements memorandum

incorporates the relevant provisions of

the ‘‘Standards for Principal and Income

Payments Guidelines’’ established by

the U.S. Working Committee of the

Group of Thirty. Pursuant to this rule

change, the relevant provisions of these

principles, as set forth below, will

become a part of DTC’s income and

reorganization/redemption payments

standards.

First, all new issues are required to

meet depository-eligibility requirements

and must be structured so that all

payments to depositories of principal

and income are made in same-day funds

on payment date by 2:30 p.m. Eastern

Standard time.

Second, for all depository-eligible

issues already outstanding, paying

agents must remit to DTC all principal

and income payments in same-day

funds on payment date by 2:30 p.m.

Eastern Standard time according to

existing arrangements between the

paying agent and DTC. Recognizing that

paying agents for certain issues may

need to modify their current business

arrangements to account for this change,

DTC will continue through July 31,

1996, to pay the same rebates it now

pays to paying agents that pay

municipal interest and municipal and

corporate redemptions to DTC in sameday funds on payment date.12

However, once DTC converts to sameday funds settlement for all security

transactions, DTC will make all

payments to its participants on payment

date in same-day funds. As a result,

DTC will not have funds resulting from

overnight investing available to rebate to

paying agents. Recognizing that

participants will benefit by receiving all

their expected payments in same-day

funds on payment date DTC will charge

participants in proportion to their

holdings in each issue for which a

rebate applies the funds needed to pay

the rebate from the date of the

conversion to same-day funds

settlement for all security transactions

until July 31, 1996. With respect to

payments made on or after August 1,

1996, these charges to participants will

no longer be required. The rebate will

not be applied to payments of corporate

interest, dividends, and reorganizations

for which the paying agents already pay

DTC in same-day funds on payment

date and which currently are not subject

to interest earnings rebates. However,

DTC will require that 100% of corporate

interest, dividend, and reorganization

payments to paid to DTC in same-day

funds on payment date by 2:30 p.m.

Eastern Standard time.

Third, DTC will require paying agents

to provide DTC with the CUSIP

numbers for each issue for which

payment is being sent as well as the

dollar amount of the payment for each

issue no later than noon Eastern

Standard time on the payment date.

Notification of payment details should

be made using automated

communications.

Finally, if an issuer or agent

continually fails to make payment as

called for in DTC’s guidelines, DTC may

decide to systematically prevent the

allocation of such payments to

participants on the payable date.

Eventually, DTC also may elect to deny

depository-eligibility to issues brought

to market by noncomplying issuers or

agents.

II. Discussion

Section 17A(b)(3)(F) of the Act

requires that the rules of a clearing

agency be designed to promote the

prompt and accurate clearance and

settlement of securities transactions and

to foster cooperation and coordination

with persons engaged in the clearance

and settlement of securities

transactions. The Commission believes

that the proposed rule change is

consistent with Section 17A(b)(3)(F)

because it provides a framework for the

conversion of principal and income

payments to same-day funds. Making

principal and income payments in

same-day funds is consistent with the

goal of prompt and accurate clearance

and settlement because it will give

participants same-day access to their

funds. Requiring paying agents to

provide DTC with the corresponding

CUSIP numbers for each issue for which

payment is being made will make the

processing of such payments more

accurate. The Commission also believes

that the guidelines for converting to a

same-day funds payment standard for

principal and interest payments are

consistent with the goal of fostering

cooperation and coordination among

persons engaged in the clearance and

settlement of securities transactions.

Specifically, in order to allow paying

agents time to modify their current

business practices, DTC will continue to

pay rebates through July 31, 1996, to

those paying agents currently making

payments to DTC in same-day funds on

payment date for municipal interest and

municipal and corporate redemption

payments.

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,13 that the

proposed rule change (File No. SR–

DTC–94–19) be, and hereby is,

approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–10790 Filed 5–1–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35647; File No. SR–MSTC–

94–12]

Self-Regulatory Organization; Midwest

Securities Trust Company; Order

Granting Temporary Approval of

Proposed Rule Change Enabling

Midwest Securities Trust Company To

Enter Into Contracts With Participants

To Provide Custodial, Transactional,

and Related Services

April 25, 1995.

On October 11, 1994, the Midwest

Securities Trust Company (‘‘MSTC’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) a

proposed rule change (File No. SR–

MSTC–94–12) pursuant to Section 19(b)

of the Securities Exchange Act of 1934

(‘‘Act’’).1 Notice of the proposal

appeared in the Federal Register on

October 19, 1994, to solicit comment

from interested persons.2 For the

reasons discussed below, the

Commission is approving the proposed

rule change through October 1, 1995.

I. Description of the Proposal

The purpose of the proposed rule

change is to permit MSTC to enter into

contracts with any of its participants

whereby MSTC will provide certain
21578 Federal Register / Vol. 60, No. 84 / Tuesday, May 2, 1995 / Notices

3Letter from George T. Simon, Foley & Lardner,

to Jonathan Kallman, Associate Director, Division of

Market Regulation, Commission (January 23, 1995).

4 15 U.S.C. 78q–1(b)(3)(F) (1988).

5 15 U.S.C. 78q–1 (1988).

6 15 U.S.C. 78s(b)(2) (1988).

7 17 CFR 200.30–3(a)(12) (1994).

custodial and transactional processing

services for the participant with respect

to the participant’s certificated

securities. The proposed services will

consist, among other things, of

processing and accepting physical

deposits of certificates, processing the

physical withdrawal of certificates, and

providing incidental services in

connection thereto. Book-entry

movements of deposited securities will

not be permitted.3

Under the proposal, MSTC will

provide all custodial and transactional

processing services on a negotiated basis

with its participants. MSTC will not be

obligated to enter into such contracts

with any participant, and if it chooses

to enter into such a contract with any

participant, it will not be obligated to

enter into a contract with similar terms

with any other participant.

II. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder and

more specifically with the requirements

of Section 17A(b)(3)(F).4 Section

17A(b)(3)(F) requires that the rules of a

clearing agency be designed to remove

impediments to and perfect the

mechanism of a national system for the

prompt and accurate clearance and

settlement of securities transactions.

The Commission believes that MSTC’s

service is consistent with this

obligation.

MSTC’s new service will provide

custodian, transaction processing, and

related data-entry services with respect

to participants’ certificated securities.

Participants have been experiencing a

continual decline in their activity

associated with the processing of

physical securities primarily due to the

increase in book-entry eligibility of

securities at the clearing agency level.

Many participants no longer find it

desirable to maintain their own

custodial operations. As a result, MSTC

has been requested to provide such

custodial and processing services as part

of MSTC’s operations.

The Commission believes that

MSTC’s proposed rule change should

help to minimize inefficient procedures

employed by individual participants by

concentrating these operations in one

centralized facility. As a result, the

individual participants will be able to

eliminate their own custodial operations

and the high fixed costs associated with

them while maintaining the required

safeguarding of these securities.

III. Conclusion

For the reasons stated above, the

Commission finds that MSTC’s proposal

is consistent with Section 17A of the

Act 5 and the rules and regulations

thereunder.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,6 that the

proposed rule change (File No. SR–

MSTC–94–12) be, and hereby is,

approved until October 1, 1995.

For the Commission of the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–10788 Filed 5–1–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35650; File No. SR–NYSE–

95–08]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the New York Stock Exchange, Inc.,

Relating to Listed Company Relations

Proceedings

April 26, 1995.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on March 3, 1995, the

New York Stock Exchange, Inc.

(‘‘NYSE’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change as described in Items I, II

and III below, which Items have been

prepared by the self-regulatory

organization. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change consists of

new Rule 103C concerning procedures

relating to initiation and conduct of a

review of the relationship between a

listed company and its specialist

organization. The text of the proposed

Rule 103C is attached as Exhibit A.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

self-regulatory organization 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.

The self-regulatory organization has

prepared summaries, set forth in

Sections A, B, and C below, of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The Exchange proposes to adopt new

Rule 103C (Listed Company Relations

Proceedings) to provide its listed

companies and specialist units with a

procedure for resolving non-regulatory

issues that may arise between them. The

Exchange believes that the relationship

between a listed company and its

specialist unit is a significant one.

Specialist units work to foster and

promote sound mutual understanding

and effective communications with their

listed companies, but situations may

occasionally arise in which one or both

sides cannot easily resolve differences

with respect to non-regulatory issues.

Such issues might include, for example,

misunderstandings with respect to the

frequency and adequacy of

communications between a company

and its specialist unit. Proposed new

Rule 103C contains a formal procedure

by which a listed company could make

a written notification (known as an

‘‘Issuer Notice’’) to the Exchange’s New

Listings and Client Services Division of

its desire to commence a proceeding to

mediate and resolve such issues. The

Exchange’s Quality of Markets

Committee (‘‘QOMC’’), a Board of

Directors level committee, would be

responsible for oversight of the Listed

Company Relations Proceeding

(‘‘LCRP’’) through a subcommittee

consisting of the two Exchange vicechairmen, a senior Exchange official,

and two listed company representatives,

all of whom would be appointed from

the QOMC membership. This

subcommittee would work with the

listed company and the specialist unit

through written submissions and

meetings designed to produce an action

plan with specific steps for resolution of

the matter. At regular intervals of three,

six and nine months, the subcommittee

would work with the parties to resolve

their issues. The listed company could

conclude the LCRP at any time during

the process if it believed that matters

had been satisfactorily addressed.