70260 Federal Register / Vol. 79, No. 227 / Tuesday, November 25, 2014 / Notices 

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)(1). 

5 DTC’s Rules are available at http://dtcc.com/

legal/rules-and-procedures.aspx. 

6 15 U.S.C. 78q–1(b)(3)(C). 

7See Commission orders approving NSCC and 

DTC’s rule filings which implemented the current 

stock ownership structure that satisfies the fair 

representation requirements. Securities Exchange 

Act Release No. 41800 (August 27, 1999), 64 FR 

48694 (September 7, 1999) (SR–NSCC–1999–10); 

and Securities Exchange Act Release No. 41786 

(August 24, 1999), 64 FR 47882 (September 1, 1999) 

(SR–DTC–1999–17). 

8 15 U.S.C. 78s(b)(3)(A). 

9 17 CFR 240.19b–4(f). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73643; File No. SR–DTC– 

2014–11] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Clarify That 

Federal Reserve Banks, Central 

Counterparties, and Central Securities 

Depositories Shall Not Be Considered 

Either ‘‘Mandatory Purchaser 

Participants’’ or ‘‘Voluntary Purchaser 

Participants’’ 

November 19, 2014. 

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 November 

12, 2014, 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. DTC filed the proposed rule 

change pursuant to Section 19(b)(3)(A) 

of the Act3 and Rule 19b–4(f)(1) 

thereunder.4 The proposed rule change 

was effective upon filing with the 

Commission. 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 consists of 

amendments to Rule 31 of the Rules and 

Procedures (‘‘Rules’’) of DTC in order to 

clarify that Federal Reserve Banks, 

central counterparties, and central 

securities depositories shall not be 

considered either ‘‘Mandatory Purchaser 

Participants’’ or ‘‘Voluntary Purchaser 

Participants,’’ as such terms are defined 

therein, as more fully described below. 

II. Clearing Agency’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) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

Pursuant to the Third Amended and 

Restated Shareholders Agreement, dated 

as of December 7, 2005 (‘‘Shareholders 

Agreement’’), by and among The 

Depository Trust & Clearing Corporation 

(‘‘DTCC’’), DTC, National Securities 

Clearing Corporation (‘‘NSCC’’), Fixed 

Income Clearing Corporation (‘‘FICC’’) 

and the other parties thereto, and DTC 

Rule 31, Participants (as such term is 

defined in the Rules 5) other than (i) 

non-U.S. based central securities 

depositories, or (ii) Limited Participants 

(as such term is defined in the Rules) 

are required to be ‘‘Mandatory 

Purchaser Participants’’ (as such term is 

defined in Rule 31) and be parties to the 

Shareholders Agreement. Limited 

Participants are not permitted to 

purchase and own shares of DTCC 

common stock (‘‘Common Shares’’) or 

be parties to the Shareholders 

Agreement. 

DTC is proposing to amend Rule 31, 

as marked on Exhibit 5 hereto, in order 

to make clear Federal Reserve Banks, 

central counterparties, and central 

securities depositories shall not be 

considered either Mandatory Purchaser 

Participants or Voluntary Purchaser 

Participants (as such term is defined in 

Rule 31). DTC has interpreted Rule 31 

to exclude from its provisions: (1) 

Federal Reserve Banks, because it was 

never intended that such governmental 

authorities should be required to own 

shares in DTCC, notwithstanding that 

they may use certain services of DTC; 

and (2) central counterparties and 

central securities depositories, because 

link arrangements between DTC and 

these entities are for the purpose of 

extending clearing agency services 

across borders or among closely related 

activities and products, but not for 

ownership purposes. 

2. Statutory Basis 

The proposed rule change is 

consistent with the Act, and the rules 

and regulations thereunder, in 

particular Section 17A(b)(3)(C) which 

requires that the rules of DTC ‘‘assure a 

fair representation of its shareholders 

(or members) and participants in the 

selection of its directors and 

administration of its affairs . . . [and 

the Commission] may determine that 

the representation of participants is fair 

if they are afforded a reasonable 

opportunity to acquire voting stock of 

the clearing agency, directly or 

indirectly, in reasonable proportion to 

their use of such clearing agency.’’ 6

DTC implements and meets this 

requirement through DTC Rule 31, 

which afford DTC’s participants a 

reasonable opportunity to acquire voting 

stock indirectly in the clearing agency 

in reasonable proportion to their use of 

the clearing agency.7 The proposed rule 

change constitutes a stated policy, 

practice, or interpretation with respect 

to the meaning, administration, or 

enforcement of this existing rule. 

(B) Clearing Agency’s Statement on 

Burden on Competition 

The proposed rule change will not 

have any impact, or impose any burden, 

on competition. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

Written comments relating to the 

proposed rule change have not yet been 

solicited or received. DTC will notify 

the Commission of any 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) 8 of the Act and paragraph (f) 

of Rule 19b–4 9 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: 


wreier-aviles on DSK4TPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 227 / Tuesday, November 25, 2014 / Notices 70261 

10 17 CFR 200.30–3(a)(12). 

1See 17 CFR 240.17g–5(a)(3). 

2See Exchange Act Release No. 62120 (May 19, 

2010), 75 FR 28825 (May 24, 2010) (‘‘Order’’). 

3See id. at 28827–28 (setting forth conditions of 

relief). 

4See Exchange Act Release No. 63363 (Nov. 23, 

2010), 75 FR 73137 (Nov. 29, 2010) (‘‘First 

Extension Order’’). 

5See Exchange Act Release No. 65765 (Nov. 16, 

2011), 76 FR 72227 (Nov. 22, 2011) (‘‘Second 

Extension Order’’). 

6See Exchange Act Release No. 34–68286 (Nov. 

26, 2012), 77 FR 71201 (Nov. 29, 2012) (‘‘Third 

Extension Order’’). 

7See Exchange Act Release No. 34–70919 (Nov. 

22, 2013), 78 FR 70984 (Nov. 27, 2013) (‘‘Fourth 

Extension Order’’). 

8 17 CFR 240.17g–5(b) and (c). 

9 17 CFR 240.17g–5(a). 

10 15 U.S.C. 78o–7(a)(1)(B)(vi). 

11 17 CFR 240.17g–1. 

12 15 U.S.C. 78o–7(h). 

13See 17 CFR 240.17g–5(a)(3); see also Exchange 

Act Release No. 61050 (Nov. 23, 2009), 74 FR 63832 

(Dec. 4, 2009) (‘‘Adopting Release’’) at 63844–45. 

14Paragraph (b)(9) of Rule 17g–5 identifies the 

following conflict of interest: issuing or maintaining 

a credit rating for a security or money market 

instrument issued by an asset pool or as part of any 

asset-backed or mortgage-backed securities 

Continued 

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–2014–11 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–DTC–2014–11. 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 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 Web site 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 DTC’s Web site at 

http://dtcc.com/legal/sec-rulefilings.aspx. 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– 

2014–11 and should be submitted on or 

before December 16, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–27841 Filed 11–24–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73649; File No. S7–04–09] 

Order Extending Temporary 

Conditional Exemption for Nationally 

Recognized Statistical Rating 

Organizations From Requirements of 

Rule 17g–5 Under the Securities 

Exchange Act of 1934 and Request for 

Comment 

November 19, 2014. 

I. Introduction 

On May 19, 2010, the Securities and 

Exchange Commission (‘‘Commission’’) 

conditionally exempted, with respect to 

certain credit ratings and until 

December 2, 2010, nationally recognized 

statistical rating organizations 

(‘‘NRSROs’’) from certain requirements 

in Rule 17g–5(a)(3) 1 under the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’), which had a 

compliance date of June 2, 2010.2

Pursuant to the Order, an NRSRO is not 

required to comply with Rule 17g– 

5(a)(3) until December 2, 2010 with 

respect to credit ratings where: (1) The 

issuer of the structured finance product 

is a non-U.S. person; and (2) the NRSRO 

has a reasonable basis to conclude that 

the structured finance product will be 

offered and sold upon issuance, and that 

any arranger linked to the structured 

finance product will effect transactions 

of the structured finance product after 

issuance, only in transactions that occur 

outside the U.S. (‘‘covered 

transactions’’).3 On November 23, 2010, 

the Commission extended the 

conditional temporary exemption until 

December 2, 2011.4 On November 16, 

2011, the Commission extended the 

conditional temporary exemption until 

December 2, 2012.5 On November 26, 

2012, the Commission extended the 

conditional temporary exemption until 

December 2, 2013.6 On November 22, 

2013, the Commission extended the 

conditional temporary exemption until 

December 2, 2014.7 The Commission is 

extending the temporary conditional 

exemption exempting NRSROs from 

complying with Rule 17g–5(a)(3) with 

respect to rating covered transactions 

until December 2, 2015. 

II. Background 

Rule 17g–5 identifies, in paragraphs 

(b) and (c) of the rule, a series of 

conflicts of interest arising from the 

business of determining credit ratings.8

Paragraph (a) of Rule 17g–5 9 prohibits 

an NRSRO from issuing or maintaining 

a credit rating if it is subject to the 

conflicts of interest identified in 

paragraph (b) of Rule 17g–5 unless the 

NRSRO has taken the steps prescribed 

in paragraph (a)(1) (i.e., disclosed the 

type of conflict of interest in Exhibit 6 

to Form NRSRO in accordance with 

Section 15E(a)(1)(B)(vi) of the Exchange 

Act 10 and Rule 17g–1) 11 and paragraph 

(a)(2) (i.e., established and is 

maintaining and enforcing written 

policies and procedures to address and 

manage conflicts of interest in 

accordance with Section 15E(h) of the 

Exchange Act).12 Paragraph (c) of Rule 

17g–5 specifically prohibits seven types 

of conflicts of interest. Consequently, an 

NRSRO is prohibited from issuing or 

maintaining a credit rating when it is 

subject to these conflicts regardless of 

whether it had disclosed them and 

established procedures reasonably 

designed to address them. 

In December 2009, the Commission 

adopted subparagraph (a)(3) to Rule 

17g–5. This provision requires an 

NRSRO that is hired by an arranger to 

determine an initial credit rating for a 

structured finance product to take 

certain steps designed to allow an 

NRSRO that is not hired by the arranger 

to nonetheless determine an initial 

credit rating—and subsequently monitor 

that credit rating—for the structured 

finance product.13 In particular, under 

Rule 17g–5(a)(3), an NRSRO is 

prohibited from issuing or maintaining 

a credit rating when it is subject to the 

conflict of interest identified in 

paragraph (b)(9) of Rule 17g–5 (i.e., 

being hired by an arranger to determine 

a credit rating for a structured finance 

product) 14 unless it has taken the steps 


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