[Federal Register Volume 60, Number 237 (Monday, December 11, 1995)]
[Notices]
[Pages 63554-63555]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30072]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36545; File No. SR-DTC-95-18]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of a Proposed Rule Change to Establish a Coupon 
Collection Service for Municipal Bearer Bonds

December 1, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 18, 1995, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-DTC-95-18) as described in Items I, II, and III below, which items 
have been prepared primarily by DTC. On October 30, 1995, DTC filed an 
amendment to the proposed rule change.\2\ The Commission is publishing 
this notice to solicit comments on the proposed rule change for 
interested persons.

    \1\ 15 U.S.C. 78s(b)(1) (1988).
    \2\ Letter from Piku K. Thakkar, Assistant Counsel, DTC, to Mark 
Steffensen, Esq., Division of Market Regulation (``Division''), 
Commission (October 26, 1995).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    DTC is filing the proposed rule change to establish a coupon 
collection service program in order to provide its participants with a 
cost effective method for the collection of interest relating to the 
coupons from municipal bearer bonds.

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 
Items IV below. DTC has prepared summaries, set forth in sections (A), 
(B), (C) below, of the most significant aspects of such statements.\3\

    \3\ The Commission has modified the text of the summaries 
prepared by DTC.
---------------------------------------------------------------------------

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

     DTC seeks to establish a coupon collection service in order to 
provide DTC's participants with a cost-effective method for the 
collection of interest relating to the coupons from municipal bearer 
bonds. This service will include collection of coupons which are due in 
the future as well as past due coupons for DTC eligible and ineligible 
municipal issues payable in the United States. Past due coupons will be 
accepted for up to three years after the payable date.
    DTC participants will be required to deposit coupons in a standard 
sealed envelope or ``shell'' with no more than two hundred coupons 
contained in any one shell. Only coupons for the same CUSIP number, 
series, and payable date can be enclosed in any one shell. Mutilated 
coupons will be required to be guaranteed by the depositing participant 
and placed into separate shells.\4\ DTC will require that each shell 
contain the following information on its face: (i) CUSIP number; (ii) a 
description of the issue including municipality, state, purpose, 
series, date of issue, and maturity date; (iii) payable date; (iv) 
quantity of coupons enclosed; (v) dollar value of individual coupons; 
(vi) total shell value; (vii) participant number; and (viii) contact 
name and telephone number of the depositing participant. All shells 
must be accompanied by a complete deposit ticket that includes: (i) DTC 
participant number; (ii) shell quantity; (iii) total dollar value; (iv) 
CUSIP number per shall; (v) coupon quantity per shell; (vi) dollar 
value per shell; and (vii) whether the coupons are payable on a future 
date or are past due.\5\

    \4\ The validity of the coupon number, bond number, payable 
date, and payable amount of the mutilated coupon will be guaranteed 
by the depositing participant by a stamp affixed to the coupon 
executed by an authorized officer of such participant. In cases of a 
badly mutilated coupon, DTC may require a letter of indemnity. In 
the event a paying agent rejects a mutilated coupon, any credit made 
to the depositing participant's account with respect to such coupon 
will be reversed. Telephone conversation between Piku K. Thakkar, 
Assistant Counsel, DTC; Ann Reich, DTC; and Mark Steffensen, 
Attorney, Division, Commission (October 17, 1995).
    \5\ When the coupons are due in the future, each deposit ticket 
can have up to 50 shells attached to it, but each of the attached 
shells must have the same payable date. For past due coupons, shells 
with different deposit dates may be listed on the same deposit 
ticket. Letter from Piku K. Thakkar, Assistant Counsel, DTC, to Mark 
Steffensen, Esq., Division, Commission (October 26, 1995).
---------------------------------------------------------------------------

    DTC will verify the number of shells listed on the deposit ticket 
and give the participant a time-stamped copy of the ticket. If the 
number of shells listed on the deposit ticket does not agree with the 
physical number of shells, DTC will immediately reject the entire 
deposit and will return it to the participant. DTC will neither inspect 
nor verify the shell contents prior to presentation to the paying 
agent. The depositing participant is responsible for the integrity of 
the shell contents. In the event of a coupon shell loss, the 
participant will be required to provide DTC with a full description 
(including certificate number) of the coupons contained in the shell.
    Coupons may be rejected by the paying agent and returned to the 
depositing participant for a variety of reasons. The most common 
reasons for rejection are likely to include: (i) Mixed shell contents 
including mixed payable dates, mixed series or purposes, or mixed 
maturity years; (ii) incorrect count of shell contents; (iii) called 
certificate; (iv) mutilated coupon; (v) stopped certificate; \6\ or 
(vi) issue in default.

    \6\ A ``stopped certificate'' is a certificate for which a stop 
transfer instruction has been requested. A stop transfer instruction 
typically is initiated as the result of a lost or stolen stock 
certificate. Telephone conversation between Piku K. Thakkar, 
Assistant Counsel, DTC, and Mark Steffensen, Attorney, Division, 
Commission (September 26, 1995).
---------------------------------------------------------------------------

    DTC will act simply as a conduit between the participant and the 
paying agent. In this capacity, DTC will pass through rejected shells 
to DTC participants in the form received from the paying agent together 
with any paying agent documentation. DTC will neither inspect nor 
verify the contents of rejected shells. For shells rejected after the 
payable date, appropriate funds will be debited from the participant's 
account on the day the rejected coupons are returned to the 
participant.
    Interest for coupons for which the paying agent is located outside 
of New York City that are deposited at least 

[[Page 63555]]
eight business days prior to payable date will be credited to the 
participant on the payable date. Interest for coupons for which the 
paying agent is located outside of New York City that are deposited 
less than eight business days prior to payable date will be credited to 
the participant ten business days following the date of the deposit. 
Interest for coupons for which the paying agent is located in New York 
City that are deposited at least five business days prior to the 
payable date will be credited to the participant on the payable date. 
Interest for coupons for which the paying agent is located in New York 
City that are deposited less than five business days prior to payable 
date will be credited to the participant seven business days following 
the date of the deposit. Interest for past due coupons will be credited 
to the participant as if they were received less than eight business 
days prior to the original payable date if the paying agent is located 
outside New York City and less than five business days prior to the 
original payable date if the paying agent is located in New York 
City.\7\

    \7\ DTC will accept past due coupons into the coupon collection 
service program for up to three years after the original coupon 
payment date.
---------------------------------------------------------------------------

    DTC will credit the accounts of its depositing participants on the 
foregoing payable dates without regard to whether DTC actually has 
received the interest payment from the issuer or paying agent as of 
such date.\8\ All coupons deposited after 11:00 a.m. will be considered 
to be received the following business day. In addition, during the 
first quarter of 1996, a new Participant Terminal System function will 
be made available which will enable DTC participants to view the status 
of their coupon deposits.

    \8\ According to DTC, payments due DTC from issuers and paying 
agents are received on or before the payable date between 97 and 98 
percent of the time. Typically, late payments are the result of 
transmission problems or equipment failures that are unrelated to 
the ability of the issuer or paying agent to actually make such 
payments. Telephone conversation between Piku K. Thakkar, Assistant 
Counsel, DTC; Ann Reich, DTC; and Mark Steffensen, Attorney, 
Division, Commission (October 17, 1995).
---------------------------------------------------------------------------

    DTC proposes to charge its participants the following fees for this 
service:

Shells deposited a minimum of 15 days before payable date: $4.50.
Shells deposited less than 15 days before payable date (including past 
due coupons): $5.25.
Rejected shells: $15.00.

    DTC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act \9\ and the rules and 
regulations thereunder because it promotes efficiencies in the 
clearance and settlement of securities transactions. The proposed rule 
change will be implemented in a manner designed to safeguard the 
securities and funds in DTC's custody or under its control.

    \9\ 15 U.S.C. Sec. 78q-1 (1988).
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, in the public interest, and for 
the protection of investors.

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

    Written comments from DTC participants and others have not been 
solicited nor received.

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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which DTC consents, the Commission will:
    (a) By order approve such proposed rule change or
    (b) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
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 inspection and copying in the 
commission's Public Reference Room 450 Fifth Street, N.W., Washington, 
D.C. 20549. Copies of such filing will also be available for inspection 
and copying at the principal office of DTC. All submissions should 
refer to the file number SR-DTC-95-18 and should be submitted by 
January 2, 1996.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\

    \10\ 17 CFR 200.30-3(a)(12) (1994).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-30072 Filed 12-8-95; 8:45 am]
BILLING CODE 8010-01-M