51326 Federal Register / Vol. 73, No. 170 / Tuesday, September 2, 2008 / Notices 

7 15 U.S.C. 78s(b)(3)(A). 

8 17 CFR 240.19b–4(f)(6). 

9 17 CFR 200.30–3(a)(12). 

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

2The exact text of the DTC’s proposed rule 

change can be found at http://www.dtcc.com/legal/ 

rule_filings/dtc/2008. 

3The Commission has modified portions of the 

text of the summaries prepared by the DTC. 

4For more information on DRS, see Securities 

Exchange Act Release No. 37931 (November 7, 

1996) 61 FR 58600 (November 15, 1996) (File No. 

SR–DTC–96–15). 

(iii) by its terms, does not become 

operative for thirty days after the date of 

the filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest; provided that the selfregulatory organization has given the 

Commission written notice of its intent 

to file the proposed rule change, along 

with a brief description and text of the 

proposed rule change, at least five 

business days prior to the date of filing 

of the proposed rule change, or such 

shorter time as designated by the 

Commission, the proposed rule change 

has become effective pursuant to 

Section 19(b)(3)(A) of the Act 7 and Rule 

19b–4(f)(6) thereunder.8 At any time 

within sixty days of the filing of such 

proposed rule change, the Commission 

may summarily abrogate 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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–CBOE–2008–87 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2008–87. This file 

number should be included on the 

subject line if e-mail 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 Web site (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 inspection and copying in 

the Commission’s Public Reference 

Room 100 F Street, NE., Washington, DC 

20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of the self-regulatory 

organization. All comments received 

will be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–CBOE–

2008–87, and should be submitted on or 

before September 23, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–20229 Filed 8–29–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58404; File No. SR–DTC–

2008–08] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing of Proposed Rule Change To 

Eliminate the Ability To Obtain a 

Physical Certificate From DTC for 

Issues That Are Eligible and 

Participating in the Direct Registration 

System 

August 21, 2008. 

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

Securities Exchange Act of 1934 

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

July 9, 2008, The Depository Trust 

Company (‘‘DTC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) proposed rule change 

No. SR–DTC–2008–08. The Commission 

is publishing this notice to solicit 

comments from interested parties on the 

proposed rule change as described in 

Items I, II, and III below, which items 

have been prepared primarily by the 

DTC.2

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

DTC is proposing to amend its 

Withdrawal-by-Transfer (‘‘WT’’) service 

to eliminate the ability of participants to 

receive physical certificates for 

securities positions withdrawn from 

participants’ accounts at DTC when the 

issue of such securities is eligible and 

participating in the Direct Registration 

System. 

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 

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 these statements.3

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Over the last four decades, securities 

ownership has evolved from investors 

holding physical certificates to evidence 

their ownership to investors having 

book-entry positions. The Direct 

Registration System (‘‘DRS’’) was 

implemented in support of an industry 

initiative to eliminate physical 

certificates in equity securities, 

paralleling the evolution of book-entry 

form of ownership in other investment 

instruments, such as mutual funds, 

treasury and government agency 

securities, municipal bonds, and 

options. DRS permits an investor to 

hold a securities position in book-entry 

form on the books of the issuer rather 

than in certificated form or indirectly 

through a financial intermediary in 

street name. DRS allows an investor to 

transfer at any time his or her DRS 

position from the issuer to a financial 

intermediary or vice versa through the 

facilities of DTC. Additionally, an 

investor holding a DRS position may 

obtain a physical certificate if the issuer 

provides for the issuance of certificates.4


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Federal Register / Vol. 73, No. 170 / Tuesday, September 2, 2008 / Notices 51327 

5Puerto Rico is currently the only jurisdiction 

requiring equity securities to be certificated. 

6Securities Exchange Act Release Nos. 54290 

(August 8, 2006), 71 FR 47262 (August 16, 2006) 

[File No. SR–Amex–2006–40]; 54289 (August 8, 

2006), 71 FR 47278 (August 16, 2006) [File No. SR–

NYSE–2006–29]; 54288 (August 8, 2006), 71 FR 

47276 (August 16, 2006) [File No. SR–NASDAQ–

2006–008]; and 54410 (September 7, 2006), 71 FR 

54316 (September 14, 2006) [File No. SR–

NYSEArca–2006–31]. 

7Based on a SIFMA webinar held on June 24, 

2008. 

8For more information on straight through 

processing and dematerialization initiatives, see 

Securities Exchange Act Release No. 49405 (March 

11, 2004), 69 FR 12922 (March 18, 2004) [File No. 

S7–13–04]. 

9 DTC charges approximately $125.00 per 

transaction for a WT instruction requesting a 

physical certificate for an issue participating in DRS 

and $6.00 per transaction for a WT instruction 

requesting a DRS position. 

10 Issues that participate in the DRS program 

allow investors to hold their assets in DRS bookentry form on the books of the issuer. 

11 DWAC is a method of electronically 

transferring shares between participants and the 

transfer agent as custodian. For more information 

about the DWAC service, see Securities Exchange 

Act Release No. 30283 (January 23, 1992), 57 FR 

3658 (January 30, 1992) [File No. SR–DTC–91–16] 

(order granting approval of the DWAC service). 12 15 U.S.C. 78q–1. 

In 2003, the Securities Industry and 

Financial Markets Association 

(‘‘SIFMA’’), which was formerly the 

Securities Industry Association, took the 

lead in lobbying state legislatures, 

particularly Delaware, to eliminate the 

requirement for companies to issue 

certificates and to allow companies the 

option of issuing securities in bookentry form. As a result of this industry 

initiative, all states now allow for equity 

ownership in book-entry form.5 U.S. 

exchanges have also adopted new listing 

rules that require all exchange-listed 

securities to be eligible to participate in 

DRS.6 Today there are over 7,500 issues 

eligible to participate in DRS with more 

than 375 issues no longer offering 

investors the option of receiving a 

physical certificate. Industry 

representatives estimate that investors 

hold approximately forty million 7 bookentry accounts on the records of the 

issuers or their transfer agents. 

Currently, DTC participants (i.e., 

broker-dealers and banks) use the 

Withdrawal-by-Transfer (‘‘WT’’) service 

to instruct DTC to reregister securities 

assets in the participant’s account in the 

name of an individual investor, a firm, 

or a third party name. The reregistered 

assets can be issued in certificate form 

or in a DRS position. On receipt of a WT 

instruction from a participant, DTC 

either (i) sends a certificate to the issuer 

or the issuer’s transfer agent for 

reregistration in the name of the person 

or entity identified in the WT 

instruction or (ii) instructs the issuer or 

the issuer’s transfer agent to debit DTC’s 

position and issue securities in the 

name of the person or entity identified 

in the WT instruction. 

WT volumes at DTC have decreased 

from 27,000 daily transactions in 1980 

to approximately 1,200 daily 

transactions to date in 2008. Eightyeight percent (88%) of all WTs 

submitted by participants involve DRS 

eligible issues. Due primarily to 

participants’ voluntary change in their 

firm policies of ‘‘defaulting to DRS’’

(i.e., requesting a DRS statement rather 

than a physical certificate for their 

customers), approximately forty-one 

percent (41%) of all WTs submitted in 

May 2008 were processed as DRS 

positions, rather than as physical 

certificates. This trend away from 

certificate issuance is expected to 

continue throughout 2008. 

As part of DTC’s response to the 

financial services industry’s initiative to 

achieve ‘‘straight-through processing’’ of 

securities transactions, which is based 

in part on the elimination of physical 

certificates in the U.S. market,8 DTC 

began a program of steadily increasing 

its fees for WTs as a disincentive to use 

of physical certificates.9

In an effort to further reduce the 

industry’s dependency on physical 

certificates, DTC is proposing to 

eliminate the issuance of physical 

certificates through its WT service for 

issues that are participating in DRS. 

DTC believes the modification of its WT 

service reaffirms its goals of reducing 

the costs and risk associated with 

processing physical certificates. 

Pursuant to the proposed rule change, 

beginning January 1, 2009, DTC would 

no longer permit participants to request 

the issuance of a certificate on a WT 

instruction if the issue is participating 

in DRS. Instead, DTC would instruct the 

issuer or its transfer agent to establish a 

DRS position and provide a DRS 

statement in lieu of a physical certificate 

for all issues that are participating in 

DRS.10 An investor or the investor’s 

custodian will still be able to obtain a 

physical certificate by taking the 

investor’s DRS statement directly to the 

issuer or its transfer agent for 

conversion to a certificate or by using 

DTC’s Deposit and Withdrawal at 

Custodian (‘‘DWAC’’) process.11

The rule change also proposes on or 

after July 1, 2009, to eliminate a 

participant’s ability to obtain a physical 

certificate through the WT service for 

issues eligible but not participating in 

DRS on or after July 1, 2009 

(‘‘elimination date’’). For the small 

number of issues that have not become 

eligible to participate in DRS by the 

elimination date, WT instructions 

requesting a physical certificate may 

continue to be processed through 

DWAC or Rush WT processes. 

Additionally, the rule change is 

proposing to eliminate DTC’s Direct 

Mail by the Depository (‘‘DMD’’) service 

for all issues in the fourth quarter of 

2009. As a result, DTC would no longer 

mail certificates to investors or their 

third parties. Participants would still be 

able to use the Direct Mail by Agent 

(‘‘DMA’’) service, in which transfer 

agents provide DRS statements or 

physical certificates to investors or their 

appointed third parties. Physical 

certificates could also be obtained 

through DTC’s Central Delivery 

processes in which DTC mails the 

physical certificates in bulk to the 

participant or allows the participant to 

pick up the certificate. 

2. Statutory Basis 

DTC believes the proposed rule 

change is consistent with the 

requirements of Section 17A of the Act, 

as amended,12 and the rules and 

regulations thereunder because the 

proposed rule change will promote the 

prompt and accurate clearance and 

settlement of securities transactions by 

modifying a DTC service in order to 

reduce the inherent risks associated 

with physical certificates. 

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. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

DTC has neither solicited nor received 

written comments 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: 

(A) By order approve such proposed 

rule change or 


erowe on PROD1PC64 with NOTICES
51328 Federal Register / Vol. 73, No. 170 / Tuesday, September 2, 2008 / Notices 

13 17 CFR 200.30–3(a)(12). 

1The Exchange recently changed its name to 

NASDAQ OMX PHLX, Inc. See Securities Exchange 

Act Release No. 58380 (August 18, 2008) (SR–Phlx2008–61). 

2 15 U.S.C. 78s(b)(1). 

3 17 CFR 240.19b–4. 

4See Securities Exchange Act Release No. 58168 

(July 16, 2008), 73 FR 42641 (July 22, 2008) 

(‘‘proposal’’). 

5On July 26, 2007, the Commission approved a 

proposed rule change filed by NASD to amend 

NASD’s Certificate of Incorporation to reflect its 

name change to Financial Industry Regulatory 

Authority, Inc., or FINRA, in connection with the 

consolidation of the member firm regulatory 

functions of NASD and NYSE Regulation, Inc. See 

Securities Exchange Act Release No. 56146 (July 26, 

2007), 72 FR 42190 (August 1, 2007). The FINRA 

rule book currently consists of both NASD rules and 

certain NYSE Rules that FINRA has incorporated. 

6See Securities Exchange Act Release No. 56971 

(December 14, 2007), 72 FR 72804 (December 21, 

2007) (SR–CBOE–2007–106). 

(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, 

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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–DTC–2008–08 in the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–DTC–2008–08. This file 

number should be included on the 

subject line if e-mail 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 Web site (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 inspection and copying in 

the Commission’s Public Reference 

Section, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3:30 

p.m. Copies of such filings also will be 

available for inspection and copying at 

the principal office of the DTC and on 

the DTC’s Web site, http:// 

www.dtcc.com. All comments received 

will be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–DTC–

2008–08 and should be submitted on or 

before September 23, 2008. For the 

Commission by the Division of Trading 

and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–20249 Filed 8–29–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58410; File No. SR–Phlx–

2008–53] 

Self-Regulatory Organizations; 

Philadelphia Stock Exchange, Inc. 

(n/k/a NASDAQ OMX PHLX, Inc.); Order 

Granting Approval of Proposed Rule 

Change Relating to an Exchange 

Member’s Conduct of Doing Business 

With the Public 

August 22, 2008. 

I. Introduction 

On July 11, 2008, the Philadelphia 

Stock Exchange, Inc. (‘‘Phlx’’ or 

‘‘Exchange’’) (n/k/a NASDAQ OMX 

PHLX, Inc.) 1 filed with the Securities 

and Exchange Commission 

(‘‘Commission’’ or ‘‘SEC’’), pursuant to 

Section 19(b)(1) of the Securities and 

Exchange Act of 1934 (‘‘Act’’),2 and 

Rule 19b–4 thereunder,3 a proposed rule 

change relating to the Exchange’s rules 

governing doing business with the 

public. On July 16, 2008, the 

Commission issued a release noticing 

the proposed rule change, which was 

published for comment in the Federal 

Register on July 22, 2008.4 The 

Comment period expired on August 12, 

2008. The Commission did not receive 

any comment letters in response to the 

proposed rule change. This order 

approves the proposed rule change. 

II. Description of Phlx Proposal 

Phlx proposed to amend Phlx Rules 

1024 (Conduct of Accounts for Options 

Trading), 1025 (Supervision of 

Accounts), 1027 (Discretionary 

Accounts), and 1049 (Communications 

to Customers) that govern an Exchange 

member organizations’ conduct of doing 

business with the public. Specifically, 

the proposed rule change would require 

that member organizations integrate the 

responsibility for supervision of a 

member organizations’ public customer 

options business into their overall 

supervisory and compliance programs. 

In addition, the proposal would require 

a member organization to strengthen its 

supervisory procedures and internal 

controls as they relate to its public 

customer options business. 

A. Integration of Options Supervision 

The purpose of the proposed rule 

change is to create a supervisory 

structure for options that is similar to 

that required by New York Stock 

Exchange (‘‘NYSE’’) Rule 342 and 

National Association of Securities 

Dealers (‘‘NASD’’) Rule 3010.5 The 

proposed rule change would eliminate 

the requirement that member 

organizations qualified to do a public 

customer business in options must 

designate a single person to act as 

Senior Registered Options Principal 

(‘‘SROP’’) for the member organization 

and that each such member organization 

designate a specific individual as a 

Compliance Registered Options 

Principal (‘‘CROP’’). Instead member 

organizations would be required to 

integrate the SROP and CROP functions 

into their overall supervisory and 

compliance programs. The proposed 

rule change is substantively similar to 

recent amendments to the rules of the 

Chicago Board Options Exchange, Inc. 

(‘‘CBOE’’) which were approved by the 

Commission.6

The SROP concept was first 

introduced by Phlx and other options 

exchanges during the early years of the 

development of the listed options 

market. Initially, member organizations 

were required to designate one or more 

persons qualified as Registered Options 

Principals (‘‘ROPs’’) having supervisory 

responsibilities in respect of the 

member organization’s options business. 

As the number of ROPs at larger 

member organizations began to increase, 

Phlx imposed an additional requirement 

that member organizations designate 

one of their ROPs as the SROP. This was 

intended to eliminate confusion as to 

where the compliance and supervisory 

responsibilities lay by centralizing in a 

single supervisory officer overall 

responsibility for the supervision of a 


erowe on PROD1PC64 with NOTICES