[Federal Register Volume 60, Number 28 (Friday, February 10, 1995)]
[Notices]
[Pages 8102-8104]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3326]



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

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35332; File No. SR-DTC-95-04]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change Establishing a Link Between 
the Institutional Delivery System and Other Compatible Electronic Trade 
Confirmation Systems

February 3, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 26, 1995, 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 
by DTC. The Commission is publishing this notice to solicit 
[[Page 8103]] comments on the proposed rule change from interested 
persons.

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

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

    The proposed rule change establishes relationships between The 
Depository Trust Company (``DTC'') and trade confirmation systems 
operated by other organizations that would provide for, among other 
things, the automated settlement in DTC of transactions introduced to 
DTC by such other systems (e.g., confirmed and affirmed in such other 
systems). Under this proposal, DTC would link its Institutional 
Delivery (``ID'') system with another compatible electronic trade 
confirmation system (the ``Other System'').\2\ DTC is prepared at this 
time to link the ID system with any Other System in the manner 
described below and estimates that a link in that manner could be 
implemented within three months from the time when the vendor of the 
Other System indicates a desire to establish the link. DTC will 
consider and may implement additional methods of linking the ID system 
which are different from the link described below.

    \2\The establishment of the link between the ID system and the 
Other System would be subject to the Other Systems obtaining any 
necessary or appropriate approvals by regulatory agencies, such as 
approval in regard to compliance with Rule 10b-10 under the 
Securities Exchange Act of 1934 if the Other System will confirm 
transactions.
---------------------------------------------------------------------------

    Where a broker and its institutional customer in a trade use the 
Other System, and the agent (i.e., the institution's custodian) and/or 
any interested parties use the ID system, notice of order execution 
(sometimes called advice of execution), institution instructions 
(sometimes called trade allocation), confirmation and affirmation for 
the trade will occur in the Other System, in which case the Other 
System will transmit a confirmation, in DTC format, to the ID system. 
DTC will then process the trade in the ID system, which includes 
transmitting an ID system message to the Other System containing the ID 
system control number for the trade and transmitting confirmations to 
any agent and interested parties who use the ID system. DTC will not 
transmit confirmations to the broker and the institution. The Other 
System will transmit to the ID system the affirmation from the Other 
System, in DTC format, containing the ID system control number. If the 
trade involves a DTC-eligible issue, the trade will be settled by book-
entry at DTC in the normal way for an affirmed trade in the ID system.
    DTC will be responsible for all quality control reporting with 
respect to all trades processed through the link, and the vendor of the 
Other System will furnish DTC with whatever data from the Other System 
is needed for that purpose.
    Except as stated in this paragraph, DTC will charge its usual ID 
system fees for a transaction processed through the link. In the above 
example, DTC will not charge confirmation fees to the broker or 
institution because it will not send confirmations to either of them. 
Fees for any services provided by the ID system directly to the broker 
or institution will continue to be billed to and paid by the 
appropriate party. In order to encourage the development of links 
between the ID system and Other Systems where both the broker and the 
institution use the Other System, the ID system fees charged in that 
case to the vendor of the Other System with respect to confirmation 
activity will be limited to $0.10 per trade during the period ending on 
December 31, 1995. DTC continually examines its fees, and the fees 
associated with the link between the ID system and Other Systems may be 
changed after December 31, 1995.\3\

    \3\Any such fee changes would be filed with the Commission in 
accordance with the requirements of the Securities Exchange Act of 
1934.
---------------------------------------------------------------------------

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 examined at the places specified in Item 
IV below. DTC 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

    Currently, a large number of DTC users interact operationally with 
DTC through intermediaries selected by them, including ``service 
bureaus.'' Pursuant to standing instructions from these users, DTC 
currently links with these intermediaries in providing a wide range of 
DTC services to users, including the automated delivery and receipt of 
ID system confirmations and affirmations and related reports. In 
addition, DTC currently links the ID system with systems operated by 
the other two registered securities depositories in the United States 
on a ``private label'' basis. In those links, confirmation and 
affirmation for a trade occur in the ID system, but any parties 
involved in the trade who use the other depository's system submit all 
data and communications regarding the trade to the other depository and 
receive all such data and communications from the other depository. On 
behalf of those parties, the other depository submits to and receives 
from DTC on an omnibus basis all data and communications regarding the 
trade in the course of ID system processing. DTC is likely to enter 
into similar arrangements with other organizations in the United States 
and abroad.
    The purpose of the proposed rule change is to establish a new 
method of linking the ID system in addition to the current 
arrangements.
    DTC believes the proposed rule change is consistent with the 
requirements of the Securities Exchange Act of 1934 and the rules and 
regulations thereunder applicable to DTC since the proposed rule change 
will facilitate the processing of transactions in securities where 
different trade confirmation systems are involved. The proposed rule 
change will be implemented consistently with the safeguarding of 
securities and funds in DTC's custody or control or for which it is 
responsible since the proposed rule change relates to DTC's existing ID 
system.

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

    DTC perceives no adverse impact on competition by reason of the 
proposed rule change.

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

    Written comments from DTC Participants or others have not been 
solicited or received on the proposed rule change.

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 the self-regulatory organization consents, 
the Commission will: [[Page 8104]] 
    (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. Sec. 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 File No. SR-DTC-95-04 and should be 
submitted within March 3, 1995.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\

    \4\17 CFR 200.30-3(a)(12) (1994).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-3326 Filed 2-9-95; 8:45 am]
BILLING CODE 8010-01-M