8434 Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Notices

1 17 CFR 200.30–3(a)(12) (1994).

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

2Letter from Piku Thakkar, Assistant Counsel,

DTC, to Peter R. Geraghty, Division of Market

Regulation, Commission (January 24, 1995).

3Same-day funds, which are also known as ‘‘Fed

funds’’, are immediately available for redelivery on

the day of receipt.

4 During 1993, a total of 392,000 new issues were

made eligible for DTC’s services. This was 99.94%

of all new issues submitted to DTC’s Underwriting

Department for eligibility determinations. These

figures include equity, corporate debt, municipal

debt, and U.S. Government and Agency securities.

In the unusual circumstance where the processing

characteristics of a new issue that is being

structured would not meet DTC’s operational

arrangements, if contacted early enough in the

planning process DTC staff often is able to assist in

suggesting restructuring alternatives that would

permit the issue to be made depository eligible.

5 DTC’s operational arrangements memorandum

was published in June 1987 and was 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).

Under Rule 8.51, the firm quote size

minimum will not apply whenever a

‘‘fast market’’ is declared under rule 6.6,

and may be suspended for any class or

series on a case by case basis as

determined by the Market Performance

Committee.

CBOE believes the proposed rule

change will contribute to a market that

will instill an increasing customer

confidence and ability to transact

business in an increasingly efficient

manner. CBOE believes the proposed

rule change is consistent with Section

6(b) of the Securities Exchange Act of

1934 (the ‘‘Exchange Act’’) in general

and furthers the objectives of Section

6(b)(5) in particular by providing rules

that perfect the mechanisms of a free

and open market and that protect

investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

CBOE does not believe that the

proposed rule change will impose any

inappropriate burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

No written comments were solicited

or received with respect to the proposed

rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 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

90 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:

(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, NW.,

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

Section, 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 CBOE. All submissions should

refer to the file number in the caption

above and should be submitted by

March 7, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to the delegated

authority.1

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–3618 Filed 2–13–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35342; File No. SR–DTC–

94–19]

Self-Regulatory Organizations; The

Depository Trust Company; Notice of

Filing of Proposed Rule Change

Regarding Implementation of New

Guidelines Regarding Principal and

Income Payments in a Same-Day

Funds Environment

February 8, 1995.

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

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

December 5, 1994, 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 DTC. On January

24, 1995, DTC amended the proposed

rule change to include a statement that

the proposed rule change did not

impose any burden on competition not

necessary or appropriate in furtherance

of the purposes of the Act.2 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

modifications to the existing operational

arrangements necessary for a securities

issue to become eligible for DTC’s

services. Specifically, the rule change

calls for changes to the processing of

principal and income distributions in a

same-day funds environment.3

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 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

DTC’s operational arrangements are

designed to maximize the number of

issues that can be made depository

eligible while ensuring orderly

processing and timely payments to

participants. DTC’s experience

demonstrates that when issuers,

underwriters, and their counsel are

aware of DTC’s requirements those

requirements can be met almost without

exception.4 The purpose of the

proposed rule change is to incorporate

in DTC’s operational arrangements

memorandum principles for the

processing of principal and income

payments in same-day funds.5 Towards

this end, the operational arrangements

memorandum will incorporate the

relevant provisions of the ‘‘Standards
Federal Register / Vol. 60, No. 30 / Tuesday, February 14, 1995 / Notices 8435

6The MSRB has, however, raised questions about

how these guidelines would be enforced.

7 17 CFR 200.30–3(a)(12) (1994).

for Principal and Income Payments

Guidelines’’ established by the U.S.

Working Committee of the Group of

Thirty. These principles will become a

part of DTC’s income and

reorganization/redemption payments

standards.

First, DTC proposes that all new

issues be required to meet depositoryeligibility 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 to pay through July

31, 1996, the same rebates as paid now

to paying agents that result from paying

agents municipal interest and municipal

and corporate redemptions to DTC in

same-day funds on payment date.

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

transactions, DTC will not have

investment funds available to rebate to

paying agents because DTC intends to

make all payments to its participants on

payment date in same-day funds.

Recognizing that participants will

benefit by receiving all their expected

payments in same-day funds on

payment date, from the date of the

conversion to same-day funds

settlement for all security transactions

until July 31, 1996, DTC will charge

participants in proportion to their

holdings in each issue for which a

rebate applies the funds needed to pay

the rebate. 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 in which

the paying agent already pays DTC in

same-day funds on payment date. These

payments currently are not subject to

interest earnings rebates. However, DTC

will require that 100% of corporate

interest, dividend, and reorganization

payments be 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 the guidelines, DTC may

decide to systematically prevent the

allocation of such payments to

participants on the payable date.

Eventually, DTC may also elect to deny

depository eligibility to issues brought

to market by non-complying issuers or

agents.

The proposal also seeks to amend the

operational arrangements memorandum

to introduce the use of a ‘‘Blanket Letter

of Representations.’’ This document will

be submitted by an issuer to DTC only

once for all issues thus eliminating the

need for individual letters of

representations for book-entry-only

issues under certain circumstances.

DTC believes that the proposed rule

change is consistent with the

requirements of Section 17A of the Act

and the rules and regulations

thereunder applicable to DTC because

the proposal will facilitate the prompt

and accurate clearance and settlement of

securities transactions by promoting the

immobilization of securities.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

DTC indicated that it did not believe

that the proposed rule change would

impose any burden on competition not

necessary or appropriate in the

furtherance of the purposes of the Act.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

DTC’s operational arrangements were

developed in close consultation with

many bond trustees, issuers’ agents,

participants, and industry groups

throughout the country in order to

assure that these processing standards

can be met. DTC has disseminated these

memoranda widely to corporate and

public finance professionals,

underwriters, bond counsel, and issuers

so that they may consider whether

documentation relating to issues sought

to be made depository-eligible

adequately accommodates these

requirements.

In addition, both industry

organizations and self-regulatory

organizations have endorsed the four

principles discussed above. These

organizations include the American

Bankers Association, the Bank

Depository User Group, the Government

Finance Officers Association, the

Municipal Securities Rulemaking Board

(‘‘MSRB’’),6 the Public Securities

Association, and the Reorganization

Division, Dividend Division, Securities

Operations Division, and the Operations

Committee of the Securities Industry

Association.

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:

(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, NW.,

Washington, DC 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

Section, 450 Fifth Street, NW.,

Washington, DC. 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

No. SR–DTC–94–19 and should be

submitted by March 7, 1995.

For the Commission, by the Division of

Market Regulation, pursuant to the delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–3566 Filed 2–13–95; 8:45 am]

BILLING CODE 8010–01–M