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12 In addition to these proposed changes to the 

reopening process, the Exchanges also proposed 

other technical and non-substantive changes to 

their rules in order to facilitate the substantive 

changes explained above. See Notices, supra note 

3. CboeEDGA and CboeEDGX also proposed nonsubstantive changes to conform CboeEDGA Rule 

11.7 and CboeEDGX 11.7 to CboeBZX Rule 11.24. 

See CboeEDGA Notice and CboeEDGX Notice, 

supra note 3. 

13 15 U.S.C. 78f. In approving these proposed rule 

changes, the Commission has considered the 

proposed rule changes’ impact on efficiency, 

competition, and capital formation. See 15 U.S.C. 

78c(f). 

14 15 U.S.C. 78f(b)(5). 

15See Notices, supra note 3, and Amendments 

No. 1, supra note 4. 

16See Amendments No. 1, supra note 4. 

17 15 U.S.C. 78s(b)(2). 

18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(4). 

5Capitalized terms not defined herein are defined 

in the Rules, By-Laws and Organization Certificate 

of DTC (‘‘Rules’’) available at http://www.dtcc.com/ 

∼/media/Files/Downloads/legal/rules/dtc_rules.pdf. 

6Available at https://www.dtcc.com/legal/rulesand-procedures. The Settlement Guide constitutes 

Procedures of DTC relating to its Settlement 

services. Pursuant to the Rules, the term 

‘‘Procedures’’ means the Procedures, service guides, 

and regulations of DTC adopted pursuant to Rule 

27, as amended from time to time. See Rule 1, 

Section 1, infra note 7. DTC’s Procedures are filed 

with the Commission. They are binding on DTC and 

each Participant in the same manner as they are 

bound by the Rules. See Rule 27, infra note 7. 

7Available at https://www.dtcc.com/legal/rulesand-procedures. Pursuant to Rule 2, Section 3, an 

entity that uses DTC’s Pledge services must enter 

into an agreement with DTC satisfactory to DTC. 

See Rule 2, Section 3, supra note 5. In this regard, 

DTC requires a Pledgee that is not a Participant to 

sign a Pledgee’s Agreement. Participants enter into 

a Participant’s Agreement that binds them to the 

Rules and Procedures (including, but not limited to, 

those related to Pledge activity), and are not 

required by DTC to enter into a separate Pledgee’s 

Agreement. See also Rule 2, Section 1, supra note 

5 (providing terms of the Participant’s Agreement). 

proposing to retain a separate trigger 

that would allow the re-opening process 

to be initiated immediately when the 

Exchanges receive both a two-sided 

quotation and a trade from the listing 

exchange.12

III. Discussion and Commission’s 

Findings 

The Commission has carefully 

reviewed the proposed rule changes, as 

modified by Amendments No. 1, and 

finds that they are consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange, in 

particular, the requirements of Section 

6(b) of the Act and the rules and 

regulations thereunder.13 Specifically, 

the Commission finds that the 

proposals, as modified by Amendments 

No. 1, are consistent with Section 

6(b)(5) of the Act,14 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and in general, to protect 

investors and the public interest. 

As described above, the Exchanges 

seek to harmonize their respective 

processes for re-opening trading in a 

security when a trading halt, 

suspension, or pause in that security is 

lifted and trading in that security 

resumes outside regular trading hours. 

In the Exchanges’ view, applying their 

midpoint re-opening procedures in 

these circumstances, regardless of 

whether a security is a Tape A, B, or C 

security, would: (1) Provide greater 

consistency with the process currently 

used by the each of the Exchanges in 

other circumstances, (2) provide greater 

certainty as to how orders will be 

handled across security types, and (3) 

potentially provide executions that 

better reflect the applicable market for 

the security.15 The Exchanges have 

stated that the proposal to not retain a 

separate trigger whereby the reopening 

process for Tape B and C securities 

would be initiated immediately when 

the Exchange receives both a two-sided 

quotation and a trade from the listing 

exchange would harmonize the 

reopening process with that for Tape A 

securities, simplify the re-opening 

process to be followed during these 

timeframes, and ensure that sufficient 

time is provided for the midpoint to 

accurately reflect the market in those 

securities.16

The Commission believes that the 

proposals are reasonably designed to 

facilitate a more orderly and efficient reopening process following the 

resumption of trading after a trading 

halt, suspension, or pause during each 

of the Exchanges’ extra-hours sessions. 

By providing a more consistent and 

harmonized approach to each of the 

Exchanges’ re-opening procedures, the 

proposals should promote greater 

certainty, reduce the likelihood of 

confusion, and facilitate the resumption 

of orderly trading under such 

circumstances. 

Therefore, the Commission finds that 

the proposals, as modified by 

Amendments No. 1, are consistent with 

the Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,17 that the 

proposed rule changes (SR–CboeBYX– 

2021–012, SR–CboeBZX–2021–035, SR– 

CboeEDGA–2021–011, and SR– 

CboeEDGX–2021–025), as modified by 

Amendments No. 1, be, and hereby are, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13917 Filed 6–29–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92249; File No. SR–DTC– 

2021–005] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing of and Immediate Effectiveness 

of Proposed Rule Change To Modify 

the DTC Settlement Service Guide and 

the Form of DTC Pledgee’s Agreement 

June 24, 2021. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on June 15, 

2021, The Depository Trust Company 

(‘‘DTC’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change as described 

in Items I, II and III below, which Items 

have been prepared primarily by the 

clearing agency. DTC filed the proposed 

rule change pursuant to Section 

19(b)(3)(A) of the Act 3 and Rule 19b– 

4(f)(4) thereunder.4 The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change 5 would 

modify the DTC Settlement Service 

Guide (‘‘Settlement Guide’’) 6 and the 

form of DTC Pledgee’s Agreement 

(‘‘Pledgee’s Agreement’’),7 as described 

below. Specifically, the proposed rule 

change would revise text in the 


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8Pursuant to Rule 1, the defined term ‘‘Pledge’’ 

in the Rules means, inter alia, ‘‘creating or 

providing for a security interest in a Certificated or 

Uncertificated Security, a Securities Account or a 

Securities [sic] Entitlement in accordance with the 

NYUCC.’’ See Rule 1, supra note 5. Pursuant to 

Rule 1, the term ‘‘NYUCC’’ means the Uniform 

Commercial Code of New York, as amended from 

time to time. See Rule 1, supra note 5. Pursuant to 

Rule 1, the term ‘‘Certificated Security’’ has the 

meaning given to the term ‘‘certificated security’’ in 

Section 8–102 of the NYUCC. See Rule 1, supra 

note 5. Pursuant to Section 8–102 of the NYUCC, 

‘‘certificated security’’ means a security that is 

represented by a certificate. See NYUCC 8–102. 

Pursuant to Rule 1, the term ‘‘Uncertificated 

Security’’ has the meaning given to the term 

‘‘uncertificated security’’ in Section 8–102 of the 

NYUCC. See Rule 1, supra note 5. Pursuant to 

Section 8–102 of the NYUCC, ‘‘uncertificated 

security’’ means a security that is not represented 

by a certificate. Pursuant to Rule 1, the term 

‘‘Securities Account’’ (1) as used with respect to a 

Participant or Pledgee, means an account 

maintained by DTC for the Participant or Pledgee 

to which Securities transactions of the Participant 

or Pledgee effected through the facilities of DTC are 

debited and credited in the manner specified in the 

Rules and Procedures; and (2) as used with respect 

to DTC, means an internal account of DTC to which 

Securities transactions are debited and credited to 

DTC. See Rule 1, supra note 5. Pursuant to Rule 1, 

the term ‘‘Security Entitlement’’ has the meaning 

given to the term ‘‘security entitlement’’ in Section 

8–102 of the NYUCC. The interest of a Participant 

or Pledgee in a Security credited to its Account is 

a Security Entitlement. See id. Pursuant to Section 

8–102 of the NYUCC, ‘‘security entitlement’’ means 

the rights and property interest of an entitlement 

holder with respect to a financial asset specified in 

Part 5. See NYUCC § 8–102. NYUCC § 8–501(b) 

provides that a person acquires a ‘‘security 

entitlement’’ when, inter alia, a securities 

intermediary indicates by book entry that a 

financial asset has been credited to the person’s 

securities account. The absence of the crediting of 

a financial asset to an account of a Pledgee and the 

fact that an account of a Pledgee is not a securities 

account under Article 8 mean that the Pledgee has 

not acquired a security entitlement under Article 8. 

See NYUCC § 8–501(b). Pursuant to Section 8–102, 

‘‘entitlement holder’’ means a person identified in 

the records of a securities intermediary as the 

person having a security entitlement against the 

securities intermediary. If a person acquires a 

security entitlement by virtue of Section 8–501(b)(2) 

or (3), that person is the entitlement holder. See 

NYUCC § 8–102. 9See supra note 8. 

10See Rule 2, Section 3, supra note 5. 

11See id. 

Settlement Guide and Pledgee’s 

Agreement to clarify the text with 

respect to the processing of book entries 

of Pledge-related 8 activity at DTC. The 

proposed revisions would reflect in the 

text of the Settlement Guide and 

Pledgee’s Agreement that Pledged 

Securities remain credited to a Pledgor’s 

Account unless the Pledgee makes a 

demand for the Pledged Securities, as 

described below. In this regard, the 

respective texts of the Settlement Guide 

and the Pledgee’s Agreement currently 

indicate that Pledged Securities are 

credited to a Pledgee’s Account. As 

discussed below, the proposed rule 

change relates to a technical aspect of 

the operational processing of Pledge 

transactions and would not impact the 

rights or obligations of a Participant or 

Pledgee are. The text of the proposed 

changes to the rules of DTC are 

described in greater detail below. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency 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 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

The proposed rule change of DTC 

would modify the Settlement Guide and 

the form of Pledgee’s Agreement, as 

described below. Specifically, the 

proposed rule change would revise text 

in the Settlement Guide and Pledgee’s 

Agreement to clarify the text with 

respect to the processing of book entries 

of Pledge-related 9 activity at DTC. The 

proposed revisions would reflect in the 

text of the Settlement Guide and 

Pledgee’s Agreement that Pledged 

Securities remain credited to a Pledgor’s 

Account unless the Pledgee makes a 

demand for the Pledged Securities, as 

described below. In this regard, the 

respective texts of the Settlement Guide 

and the Pledgee’s Agreement currently 

indicate that Pledged Securities are 

credited to a Pledgee’s Account. As 

discussed below, the proposed rule 

change relates to a technical aspect of 

the operational processing of Pledge 

transactions and would not impact the 

rights or obligations of a Participant or 

Pledgee. 

The following discussion is provided 

by DTC and includes, but is not limited 

to, its own analysis of applicable state 

law provisions that DTC believes are 

relevant for purposes of describing the 

proposed rule change. 

Background 

Eligibility for Pledge Services 

The Pledge services of DTC are 

available to banks, trust companies, 

broker-dealers and other Persons 

approved by DTC, which have entered 

into an agreement with DTC that is 

satisfactory to it, for the purpose of 

effecting a Pledge of Deposited 

Securities to such banks, trust 

companies, broker-dealers and other 

Persons.10 A Pledgee may but need not 

be a Participant. A Pledgee is required 

by DTC to sign a Pledgee’s Agreement 

unless it is also a Participant. 

Participants are not required to sign a 

separate Pledgee’s Agreement to use 

DTC’s pledge services because the 

Participant’s Agreement binds the 

Participant to DTC’s Rules and 

Procedures, including those relating to 

Pledge-related activity. Only a Pledgee 

that is a Participant may receive a 

Pledge Versus Payment.11

Book Entry of Pledges and Legal Effect 

As indicated above, the definition of 

a ‘‘Security Entitlement’’ in the DTC 

Rules incorporates the definition of 

such term in Article 8 of the NYUCC 

and notes that ‘‘[t]he interest of a 

Participant or Pledgee in a Security 

credited to its Account is a Security 

Entitlement.’’ 

However, as more fully discussed 

below, while the Settlement Guide and 

the Pledgee’s Agreement make reference 

to the movement of Securities to a 

Pledgee’s Account, from an operational 

standpoint, DTC does not in fact credit 

a Security to an Account of a Pledgee; 

what the Pledgee receives is not a 

Security Entitlement. The Securities 

remain credited to the Pledgor’s account 

until the Pledgee releases the Pledged 

Securities or makes a demand for the 

Pledged Securities, as discussed below. 

Rather, a notation is placed on the 

Account of the Pledgor that the 

Securities are Pledged to the Pledgee, 

and the Securities remain in Pledged 

status until the Pledgee instructs 

otherwise. 

As described below, this bookkeeping 

method does not adversely impact the 

rights of the Pledgee in that the Pledgee 

maintains Control over the Pledged 

Securities, and the Pledged Securities 

cannot be used by the Pledgor for any 

other transaction unless the Pledgee 

releases the Securities from the Pledged 

status through an instruction to DTC. 

DTC’s Description of Pledge 

The Settlement Guide states that: 

‘‘[w]hen pledging securities to a 

pledgee, the pledgor’s position is moved 

from the pledgor’s general free account 

to the pledgee’s account which prevents 

the pledged position from being used to 

complete other transactions. Likewise, 

the release of a pledged position would 

move the pledged position back to the 

pledgor’s general free account where it 


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12See Settlement Guide, supra note 6 at 3–4. 

13See Rule 9(B), supra note 5. 

14NYUCC § 8–507(a). 

15See NYUCC § 9–106(a). 

16NYUCC § 8–106. 

17See NYUCC § 1–102. 

18See NYUCC § 8–106. 

19See Rule 9(B), supra note 5. 

would then be available to complete 

other transactions.’’ 12

Paragraph 2 of DTC’s form of 

Pledgee’s Agreement provides that: 

‘‘[s]o long as Pledgee shall maintain a 

Depository Trust account, Depository Trust, 

upon the pledge to Pledgee of securities held 

by Depository Trust for the account of any 

depositor in Depository Trust, will make 

appropriate entries on its books transferring 

the securities from the account of such 

depositor to the account of Pledgee and shall 

maintain such securities in the account of 

Pledgee until instructed by Pledgee to release 

such securities to the account of the pledgor, 

to deliver such securities to the order of 

Pledgee or to transfer such securities on the 

books of Depository Trust to the account of 

a depositor in Depository Trust other than 

the pledgor.’’ 

The descriptions of DTC’s Pledge 

arrangements in the (1) Settlement 

Guide, with respect to the text shown 

above, and as more fully described 

below, and (2) form of Pledgee’s 

Agreement are imprecise because in 

practice DTC does not move or transfer 

the securities from an account of the 

Pledgor to an account of the Pledgee, as 

more fully described below. 

The definition of a ‘‘Security 

Entitlement’’ in the DTC Rules 

incorporates the definition of such term 

in Article 8 of the NYUCC and notes 

that ‘‘[t]he interest of a Participant or 

Pledgee in a Security credited to its 

Account is a Security Entitlement.’’ 

However, since DTC is not in fact 

crediting a Security to an Account of a 

Pledgee, what the Pledgee receives is 

not a Security Entitlement. 

The definition of an ‘‘Entitlement 

Holder’’ in the DTC Rules incorporates 

the definition of such term in Article 8 

of the NYUCC (as to which see below) 

and notes that ‘‘[a] Participant or 

Pledgee is an Entitlement Holder with 

respect to a Security credited to its 

Account’’. 

However, since DTC is not in fact 

crediting a Security to an Account of a 

Pledgee, the Pledgee is not an 

Entitlement Holder. However, the 

Pledgee maintains Control of the 

Pledged Securities as more fully 

described below. A key to a Pledgee 

exercising its Control is its ability to 

instruct through DTC an Entitlement 

Order for the delivery, Pledge release or 

withdrawal of a security. 

Entitlement Order 

The definition of an ‘‘Entitlement 

Order’’ in the Rules incorporates the 

definition of such term in Article 8 of 

the NYUCC that ‘‘[a]n instruction from 

a Participant or Pledgee to the 

Corporation with respect to a Delivery, 

Pledge, Release or Withdrawal of a 

Security credited to a Securities 

Account is an Entitlement Order’’. 

Note that the definition of an 

Entitlement Order does not require that 

the Security be credited to a Securities 

Account of the instructor. The breadth 

of this definition allows permitted 

entities, such as Pledgees, to issue 

Entitlement Orders to DTC in respect of 

Securities credited to Securities 

Accounts belonging to others. 

DTC Rule 9(B) 13 provides that: 

‘‘[i]f [DTC] receives an instruction 

from a Pledgee to effect a Delivery or 

Withdrawal of Pledged Securities, such 

instruction shall have the effect of 

notifying [DTC] that the Pledgee elects 

not to Release the Pledged Securities 

but, rather, to assert its Control over the 

Pledged Securities by the transfer of a 

greater interest in the Pledged Securities 

to itself or another Person. [DTC] shall 

accept such an instruction as a 

representation that the Pledgee is acting 

in accordance with applicable law, rules 

or regulations, agreements or any 

adjudication thereof.’’ 

Under NYUCC Section 8–507(a),14 a 

securities intermediary satisfies its duty 

to comply with an Entitlement Order if 

it acts with respect to the duty as agreed 

upon by the entitlement holder and the 

securities intermediary. DTC satisfies its 

duty to comply with an Entitlement 

Order if it acts with respect to the duty 

as agreed upon by the Entitlement 

Holder and the Securities Intermediary. 

In the case of Security Entitlements 

Pledged on the books of DTC, DTC 

satisfies its duty to comply with an 

Entitlement Order by complying with 

the Entitlement Order of the Pledgee. 

Control 

Under NYUCC Section 9–106(a),15

‘‘[a] person has control of a certificated 

security, uncertificated security, or 

security entitlement as provided in 

Section 8–106’’.16

Under NYUCC Section 8–106(d), ‘‘[a] 

purchaser has ‘‘control’’ of a security 

entitlement if: 

(1) the purchaser becomes the 

entitlement holder; 

(2) the securities intermediary has 

agreed that it will comply with 

entitlement orders originated by the 

purchaser without further consent by 

the entitlement holder; or 

(3) another person has control of the 

security entitlement on behalf of the 

purchaser or, having previously 

acquired control of the security 

entitlement, acknowledges that it has 

control on behalf of the purchaser.’’ 

Under NYUCC Section 1–102,17 a 

purchaser is ‘‘a person that takes by 

purchase’’ with ‘‘purchase’’ being 

defined as ‘‘taking by sale, lease, 

discount, negotiation, mortgage, pledge, 

lien, security interest, issue or reissue, 

gift, or any other voluntary transaction 

creating an interest in property’’. 

NYUCC Section 8–106(f) further 

provides that ‘‘[a] purchaser has 

‘‘control’’ under subsection (c)(2) or 

(d)(2) even if any duty of the issuer or 

the securities intermediary to comply 

with instructions or entitlement orders 

originated by the purchaser is subject to 

any condition or conditions (other than 

further consent by the registered owner 

or the entitlement holder).’’ 

Official Comment 4 to NYUCC 

Section 8–106 18 notes that: 

‘‘[s]ubsection (d)(2) provides that a 

purchaser has control if the securities 

intermediary has agreed to act on 

entitlement orders originated by the 

purchaser if no further consent by the 

entitlement holder is required. Under 

subsection (d)(2), control may be 

achieved even though the original 

entitlement holder remains as the 

entitlement holder.’’ 

Example 6 of Official Comment 4 is 

illustrative: 

‘‘Able & Co., a securities dealer, grants 

Alpha Bank a security interest in a security 

entitlement that includes 1000 shares of XYZ 

Co. stock that Able holds through an account 

with Clearing Corporation. Able causes 

Clearing Corporation to transfer the shares 

into a pledge account, pursuant to an 

agreement under which Able will continue to 

receive dividends, distributions, and the like, 

but Alpha has the right to direct dispositions. 

As in Example 3, Alpha has control of the 

1000 shares under subsection (d)(2).’’ 

In the case of security entitlements 

Pledged on the books of DTC, because 

DTC will comply with the instructions 

of a Pledgee as provided for in Rule 

9(B),19 which is an agreement between 

DTC and its Participants and Pledgees, 

a Pledgee has control of such security 

entitlements under NYUCC Section 8– 

106(d)(2) even when the Pledged 

Securities remain credited to the 

account of the Pledgor. 

DTC’s Pledge arrangements operate 

pursuant to the DTC Rules and the 

NYUCC. When Security Entitlements 

are Pledged to a Pledgee through the 

facilities of DTC, the Pledgee has a 

security interest in such Pledged 


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20The interest transferred is, however, only a 

security interest if the Pledgor and Pledgee have an 

agreement outside of DTC that constitutes a security 

agreement under applicable law and as to which the 

other requirements for attachment and 

enforceability of a security interest have been 

satisfied. The agreement is entered into by the 

parties outside of DTC, and DTC does not have 

knowledge or information on the existence of such 

an agreement between the parties. 

21The definition of ‘‘Control’’ in the Rules 

incorporates the definition of such term in Article 

8 of the NYUCC and notes that ‘‘[a] Pledgee has 

Control of Pledged Securities until they are 

Delivered, Released or Withdrawn by the Pledgee.’’ 

See Rule 1, Section 1, supra note 5. 

22The definition of an ‘‘Entitlement Order’’ in the 

Rules incorporates the definition of such term in 

Section 8–102 of the NYUCC and notes that ‘‘[a]n 

instruction from a Participant or Pledgee to the 

Corporation with respect to a Delivery, Pledge, 

Release or Withdrawal of a Security credited to a 

Securities Account is an Entitlement Order’’. As 

noted above, pursuant to Section 8–102, 

‘‘entitlement order’’ means a notification 

communicated to a securities intermediary 

directing transfer or redemption of a financial asset 

to which the entitlement holder has a security 

entitlement. See NYUCC 8–102. 

23As mentioned above, the interest transferred is, 

however, only a security interest if A and B have 

an agreement outside of DTC that constitutes a 

security agreement under applicable law and as to 

which the other requirements for attachment and 

enforceability of a security interest have been 

satisfied. 24See Settlement Guide, supra note 6 at 3–4. 

25See Settlement Guide, supra note 6 at 8–9. 

26See Settlement Guide, supra note 6 at 10. 

Security Entitlements.20 A Pledgee has 

‘‘control’’ under Articles 8 and 9 of the 

NYUCC and under the DTC Rules of any 

Security Entitlements Pledged to it 

through the facilities of DTC,21 and the 

Pledgee is empowered to issue 

Entitlement Orders 22 to DTC to direct 

the release, delivery or withdrawal of 

any such Pledged Security Entitlements. 

Example of a Pledge by a Participant to 

a Pledgee 

When Security Entitlements credited 

to Participant A’s account at DTC are 

Pledged to Pledgee B through the 

facilities of DTC, B has a security 

interest in such Pledged security 

entitlements.23

B does not itself have ‘‘security 

entitlements’’ to the underlying 

securities and B is not an ‘‘entitlement 

holder’’ as such terms are defined in the 

NYUCC. 

However, B as Pledgee would have 

‘‘control’’ under Articles 8 and 9 of the 

NYUCC and under the Rules of any 

Security Entitlements Pledged to it 

through the facilities of DTC, and B is 

empowered to issue Entitlement Orders 

to DTC to direct the release, delivery or 

withdrawal of any such Pledged 

Security Entitlements. 

Proposed Rule Change 

Proposed Change to Text of Settlement 

Guide 

Pursuant to the proposed rule change, 

DTC would revise the text of the 

Settlement Guide to reflect that Pledged 

Securities would not move to an 

Account of the Pledgee. As discussed 

above, the movement of the securities is 

not required to effect a Pledge and does 

not impact the rights of Pledgor or 

Pledgee under the Rules or the NYUCC. 

Rather Pledged Securities continue to be 

credited to the Pledgor’s account, 

however with a system notation 

showing the status of the position as 

Pledged by the Pledgor to the Pledgee. 

This status systemically prevents the 

Pledged position from being used to 

complete other transactions, which is 

consistent with the Pledgee’s Control 

over the Pledged Securities, as 

discussed above. Likewise, the release 

of a Pledged position results in the 

removal of the notation of the Pledge 

status of the position and the position 

would become available to the Pledgor 

to complete other transactions. 

The changes to the Settlement Guide 

text are technical in nature, and while 

enhancing clarity with respect to the 

book entries performed by DTC as they 

relate to Pledge activity, the change 

would not impact the rights or 

obligations of Participants and Pledgees. 

In this regard, the applicable sections of 

the Settlement Guide would be revised 

to (1) clarify the text with respect 

operational aspect of book entries of 

Pledges, as discussed above, (2) make 

changes to text for readability necessary 

in the context of the proposed 

clarification, and (3) revise text for 

consistency related to the use of the 

defined terms, including, but not 

limited to, Delivery Versus Payment, 

Pledge, Pledgee, Pledgor and Pledge 

Versus Payment, as follows: (italicized 

text indicates additions; [bracketed] text 

indicates deletions): 

(a) Text included in Item 3 (Collateral 

Loans) set forth under the heading 

‘‘Settlement Transactions’’ 24 would be 

revised as follows: 

‘‘The collateral loan service allows a 

Participant (the [pledgor] Pledgor) to [pledge] 

Pledge securities as collateral for a loan or for 

other purposes and also request the release 

of [pledged] Pledged securities. This service 

allows such [pledges] Pledges and [pledge] 

Pledge releases to be made free, meaning that 

the money component of the transaction is 

settled outside of the depository, or valued, 

meaning that the money component of the 

transaction is settled through DTC as a debit/ 

credit to the [pledgor’s] Pledgor’s and 

[pledgee’s] Pledgee’s DTC money settlement 

account. When [pledging] Pledging securities 

to a [pledgee] Pledgee, the [pledgor’s] 

Pledgor’s position [is moved from the 

Pledgor’s general free account to the 

Pledgee’s account] continues to be credited to 

the Pledgor’s account, however with a system 

notation showing the status of the position as 

Pledged by the Pledgor to the Pledgee. This 

status systemically [which] prevents the 

[pledged] Pledged position from being used 

to complete other transactions. Likewise, the 

release of a [pledged] Pledged position 

[would move the pledged position back to 

the] results in the removal of the notation of 

the Pledge status of the position and the 

position would become [pledgor’s general 

free account where it would then be] 

available to the Pledgor to complete other 

transactions.’’ 

(b) Text included under the heading 

‘‘About the Product’’ that appears under 

the heading ‘‘Collateral Loan 

Program’’ 25 would be revised as 

follows: 

‘‘The Collateral Loan Program allows you 

to [pledge] Pledge securities [from] held in 

your general free account as collateral for a 

loan or for other purposes (such as Letters of 

Credit) to a [pledgee] Pledgee participating in 

the program. You can also request the 

[pledgee] Pledgee to release [pledge] Pledged 

securities [back to your general free account]. 

These [pledges] Pledges and releases can be 

free (when money proceeds are handled 

outside DTC) or valued (when money 

proceeds are applied as debits and credits to 

the [pledgee’s] Pledgee’s and [pledgor’s] 

Pledgor’s money settlement accounts). A 

Pledgee may, but need not be, a Participant. 

Only a Pledgee which is a Participant may 

receive valued [pledges] Pledges.’’ 

(c) Text included under the heading 

‘‘Pledges to the Options Clearing 

Corporation’’ 26 would be revised as 

follows: 

‘‘A Participant writing an option on any 

options exchange may fully collateralize that 

option by [pledging] Pledging the underlying 

securities by book-entry through DTC to the 

Options Clearing Corporation (OCC). If the 

option is called (exercised), the securities 

may be released and delivered to the holder 

of the call. If the option contract is not 

exercised, OCC validates a release of the 

[pledged] Pledged securities [, which are then 

returned to the Participant’s general free 

account].’’ 

(d) Text included under the heading 

‘‘Release of Deposits with Options 

Clearing Corporation on Expired 

Options’’ would be revised as follows: 

‘‘OCC automatically releases securities 

deposited with it to cover margin 

requirements on an option contract when the 

option contract expires. [The securities are 

then allocated to your general free account.] 

Notification of the released securities is 

received via the Collateral Loan Services 

functionality in the Settlement User Interface 

or automated output.’’ 

(e) In addition to any proposed 

changes to apply generally with respect 

to the Settlement Guide text as 

described above, text included under 


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Federal Register / Vol. 86, No. 123 / Wednesday, June 30, 2021 / Notices 34811 

27See Settlement Guide, supra note 6 at 15–16. 

28See Securities Exchange Act Release No. 40191 

(July 10, 1998), 63 FR 38444 (July 16, 1998) (SR– 

DTC–98–5). 29 15 U.S.C. 78q–1(b)(3)(F). 

the heading ‘‘Shared Control 

Accounts’’ 27 would be revised to delete 

text shown below that states ‘‘Pledgee 

accounts continue to be available at 

DTC.’’ This sentence was added to the 

text when Shared control account 

arrangements were added to the 

Procedures 28 to clarify that the existing 

Pledge-related services would continue 

to be offered. As both the original 

Pledge program and the Shared control 

account process are both established 

programs, DTC believes the sentence is 

no longer necessary. 

About the Product 

Shared control accounts are available 

as an alternative to ‘‘agreement to 

pledge’’ arrangements. 

Background 

When a Participant [pledges] Pledges 

securities to [the pledgee account of] a 

[pledge] Pledgee at DTC (sometimes 

called a ‘‘hard pledge’’), the securities 

are under the sole control of the 

[pledgee] Pledgee. Only the [pledgee] 

Pledgee can redeliver or release the 

securities. [Pledgee accounts continue to 

be available at DTC.] 

Shared control accounts are available 

at DTC as an alternative to agreement to 

[pledge] Pledge (sometimes called 

‘‘agreement to deliver’’) arrangements. A 

[pledgee] Pledgee has control over 

securities delivered by a Participant to 

the Participant’s shared control account 

at DTC since the [pledge] Pledgee has 

the ability to redeliver the securities 

without further consent by the 

Participant. Until the [pledgee] Pledgee 

redelivers the securities, the Participant 

has the flexibility to redeliver or make 

substitutions for the securities without 

obtaining the [pledgee’s] Pledgee’s 

release of the securities. 

Shared controls are separately 

identified in DTC’s Reference Directory. 

Participants interested in establishing a 

shared control account should contact 

their Relationship Manager. 

Procedures for DTC Shared Control 

Accounts 

The following procedures are an 

addition to DTC’s Procedures for 

Pledgees. 

1. Any Participant may establish a 

shared control account at DTC and may 

designate any DTC [pledgee] Pledgee to 

be the [pledgee] Pledgee for that shared 

control account. A Participant may 

deliver securities (or other financial 

assets) by a [free pledge] Free Pledge 

from any of its DTC accounts (the 

‘‘original account’’) to its shared control 

account in order to grant a security 

interest or other interest in the securities 

to the [pledgee] Pledgee. The shared 

control account is an account of the 

Participant and is identified with a 

separate account number from any other 

account of the Participant. A Participant 

may establish multiple shared control 

accounts, but only one [pledge] Pledge 

can be designated for each shared 

control account. 

2. Except as modified by these 

procedures, the operation of a shared 

control account is identical to the 

operation of a DTC [pledge] Pledge 

[account] and all DTC procedures 

applicable to [pledge] Pledge [accounts] 

are applicable to shared control 

accounts. No [deliveries vs. payment] 

Deliveries Versus Payment, [pledges vs. 

payment] Pledges Versus Payment, or 

physical deposits can be made to a 

shared control account and no 

[deliveries vs. payment ] Pledges Versus 

Payment, [pledges vs. payment] Pledges 

Versus Payment, or physical 

withdrawals can be made from a shared 

control account. A Participant should 

not deliver securities to another 

Participant’s shared control account. In 

the instructions for a delivery of 

securities to a shared control account, 

the mandatory hypothecation code field 

should be completed in the same 

manner as it is for a Pledge made 

without the use of a shared control 

[delivery to a pledge] account. The DTC 

fees and charges for a transaction 

involving a shared control account are 

the same as the fees and charges for a 

Pledge transaction that does not 

[involving] involve a [pledge] Pledge 

account. The DTC monthly account 

usage charges applicable to a shared 

control account are charged to the 

Participant. The DTC reports and 

statements to the Participant and the 

[pledge] Pledge for a transaction 

involving a shared control account are 

the same as the reports and statements 

for a transaction involving a [pledge] 

Pledge that does not involve a shared 

control account. 

3. [As with a pledge account, 

voting]Voting rights on the securities 

credited to a shared control account are 

assigned to the Participant. Cash 

dividend and interest payments and 

other cash distributions on such 

securities are credited to the original 

account. Distribution of securities for 

which the ex-distribution date is on or 

prior to the payable date or in which the 

distribution is payable in a different 

security are also credited to the original 

account. Any stock splits or other 

distributions of the same securities for 

which the ex-distribution date is after 

the payable date are credited to the 

shared control account. 

4. The securities credited to a shared 

control account cannot be designated as 

or included in the collateral for any 

obligation of the Participant or the 

[pledgee] Pledgee to DTC. DTC has no 

lien or other interest in any securities 

credited to a shared control account.’’ 

Proposed Change to Text of the 

Pledgee’s Agreement 

Pursuant to the proposed rule change, 

DTC would revise the text of the 

Pledgee’s Agreement to reflect that 

Pledged Securities do not move to a 

Pledgee account. The change is 

technical in nature and while enhancing 

clarity with respect to the book entries 

performed by DTC as they relate to 

Pledge activity, the change would not 

impact the rights or obligations of 

Participants and Pledgees pursuant to 

the Rules, Settlement Guide and/or the 

Pledgee’s Agreement. In this regard, the 

applicable text of the Pledgee’s 

Agreement would be revised as follows: 

(italicized text indicates additions; 

[bracketed] text indicates deletions): 

‘‘[s]o long as Pledgee shall maintain a 

Depository Trust account, Depository 

Trust, upon the pledge to Pledgee of 

securities held by Depository Trust for 

the account of any depositor in 

Depository Trust, will make appropriate 

entries on its books to indicate the 

pledge of [transferring] the securities 

from [the account of] such depositor to 

the [account of] Pledgee and shall 

maintain such securities [in the account 

of] with a notation that the securities are 

pledged by the depositor to the Pledgee 

until instructed by Pledgee to release 

such securities to the [account of the] 

pledgor, to deliver such securities to the 

order of Pledgee or to transfer such 

securities on the books of Depository 

Trust to the account of a depositor in 

Depository Trust other than the 

pledgor.’’ 

Effective Date 

The proposed rule change would 

become effective upon filing. 

2. Statutory Basis 

Section 17A(b)(3)(F) of the Act,29

requires that the rules of the clearing 

agency be designed, inter alia, to 

promote the prompt and accurate 

clearance and settlement of securities 

transactions. DTC believes that the 

proposed rule change is consistent with 

this provision of the Act for the reasons 

described below. 

As described above, the proposed rule 

change would allow Participants and 


jbell on DSKJLSW7X2PROD with NOTICES
34812 Federal Register / Vol. 86, No. 123 / Wednesday, June 30, 2021 / Notices 

30 Id. 

31 15 U.S.C 78s(b)(3)(A). 

32 17 CFR 240.19b–4(f). 33 17 CFR 200.30–3(a)(12). 

Pledgees to more readily understand the 

Rules and Procedures relating to the 

processing of book entries of Pledges at 

DTC by (1) clarifying text to more 

accurately reflect the operational 

process of how book entries of Pledges 

are entered on DTC’s system, and (2) 

making changes to text for readability 

necessary in the context of the proposed 

clarification. By clarifying the Rules to 

facilitate Participants’ and Pledgees’ 

ability to understand the operational 

processes relating to Pledge services, 

and in particular with respect to how 

book-entries are made on DTC’s system 

with respect to Pledge transactions, DTC 

believes that the proposed changes 

would facilitate Participants’ and 

Pledgees’ ability to process Pledge 

transactions by enhancing their 

understanding of how Securities subject 

to a Pledge transaction are credited to 

and held in a Pledgee’s Account 

pending either their release from Pledge 

or the exercise of a demand for the 

Pledged Securities by the Pledgee. 

Therefore, by facilitating the ability of 

Participants to understand how bookentries of Securities movements are 

performed and how Pledged Securities 

are held, DTC believes the proposed 

rule change would promote the prompt 

and accurate clearance and settlement of 

securities transactions, consistent with 

Section 17A(b)(3)(f) of the Act.30

(B) Clearing Agency’s Statement on 

Burden on Competition 

DTC does not believe that the 

proposed rule change would have any 

impact on competition because it would 

merely make technical clarifying 

changes and changes for enhanced 

readability to the text of the Settlement 

Guide and the Pledgee’s Agreement that 

would not otherwise affect Participants’ 

and Pledgees’ rights or obligations. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

Written comments relating to this 

proposed rule change were received by 

DTC and were filed as an Exhibit 2 to 

the proposal, as required by the Form 

19b–4 and the General Instructions 

thereto. 

The proposed rule change was 

originally filed with the Commission in 

April 2021 and posted to the website of 

DTC’s parent company, The Depository 

Trust and Clearing Corporation 

(‘‘DTCC’’). However, because the filing 

did not satisfy a regulatory formatting 

requirement, the Commission had to 

reject the filing and it was subsequently 

removed from the DTCC website. 

In the time it has taken for DTC to 

refile the proposal, DTC has received 

several written comments, which, again, 

were filed as an Exhibit 2 to the 

proposal. Although DTC understands 

those comments to be generally 

supportive of the proposed changes, 

based on DTC’s review of each of the 

comments, DTC believes there is a 

general misunderstanding of the 

purpose of this proposed rule change. 

For the sake of clarity, and as more 

fully described above, this proposed 

rule change will not alter DTC’s current 

practices. Rather, it will merely clarify 

how securities Pledged through DTC are 

recorded in DTC’s system. More 

specifically, and as more fully described 

above, the Settlement Guide currently 

states that Securities Pledged through 

DTC are held in an account of the 

Pledgee. However, in practice, the 

Securities remain in the Pledgor’s 

account but are marked as Pledged. This 

is the existing practice today and will 

not change. Rather, the proposed change 

will clarify the text of the Settlement 

Guide to better reflect the current 

practice. The change will not affect the 

legal rights or obligations of the parties 

involved in the pledge. 

DTC will notify the Commission of 

any additional written comments 

received by DTC. 

III. Date of Effectiveness of the 

Proposed Rule Change, and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A) 31 of the Act and paragraph 

(f) 32 of Rule 19b–4 thereunder. At any 

time within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

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. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

DTC–2021–005 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–DTC–2021–005. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, 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 website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of DTC and on DTCC’s website 

(http://dtcc.com/legal/sec-rulefilings.aspx). All comments received 

will be posted without change. Persons 

submitting comments are cautioned that 

we do not redact or edit personal 

identifying information from comment 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–DTC– 

2021–005 and should be submitted on 

or before July 21, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.33

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13912 Filed 6–29–21; 8:45 am] 

BILLING CODE 8011–01–P 


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