Document ID: SEC-2010-0593-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2010-04-22T04:00Z

[Federal Register: April 22, 2010 (Volume 75, Number 77)]
[Notices]               
[Page 21072-21074]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22ap10-127]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61922; File No. SR-DTC-2010-07]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Enhance its Existing Processing Relating to End of Day Liquidity

DATE: April 15, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on

[[Page 21073]]

March 31, 2010, The Depository Trust Company (``DTC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change described in Items I, II, and III below, which items have been 
prepared primarily by DTC. DTC filed the proposal pursuant to Section 
19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-4(f)(4) \3\ thereunder so 
that the proposal was effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the rule 
change from interested parties.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \3\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

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

    The proposed rule change would amend DTC's rules in order to 
enhance its existing processing as it relates to end of day liquidity. 
Upon implementation of the new function, DTC participants 
(``Participants'') would be able to set a profile in the Participant 
Browser System (``PBS'') so that they can request that excess funds be 
wired to their settling bank account at approximately 3:20 p.m. eastern 
time.

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 these 
statements.\4\
---------------------------------------------------------------------------

    \4\ 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

    On December 23, 2009, DTC filed a rule change with the Commission 
to extend its Settlement Progress Payment (``SPP'') \5\ and Principal & 
Income (``P&I'') \6\ withdrawal cutoff times from 3 p.m. eastern time 
to 3:20 p.m. eastern time.\7\ This change was consistent with DTC's 
objective to maximize the early return of available liquidity to 
Participants.
---------------------------------------------------------------------------

    \5\ A SPP is a payment sent intraday via Fedwire to DTC when a 
Participant has insufficient collateral or is at its net debit cap.
    \6\ P&I allocations are credited to a Participant's settlement 
account throughout each processing day as payments are received.
    \7\ See Securities Exchange Act Release No. 61318 (January 8, 
2010), 75 FR 10542 (March 8, 2010) (SR-DTC-2009-18).
---------------------------------------------------------------------------

    In an effort to further maximize the early return of available 
liquidity to Participants, DTC will implement a new optional profile 
(``profile'') in PBS. By setting its profile in PBS appropriately, a 
Participant can create a standing instruction to have excess funds 
wired to its DTC Settling Bank \8\ at approximately 3:20 p.m. eastern 
time after the largest provisional net credit \9\ (``LPNC'') is 
released to Participants at 3:05 p.m. eastern time. If a Participant 
chooses to use the profile, the Participant will be required to set the 
profile either to retain a minimum credit balance amount or at zero. A 
Participant's funds will not be to wired funds to its Settling Bank 
account if that would create a debit balance or cause the participant 
to have insufficient collateral.\10\ If a Participant has more than one 
SPP or P&I wire instruction on file with DTC, the Participant will be 
required to set its profile to indicate to which account the funds 
should be wired at its Settling Bank. In the event of a systemic, 
operational, or other crisis event, DTC will have the ability to freeze 
the profile.
---------------------------------------------------------------------------

    \8\ ``Settling Bank'' means a Participant that is a bank or 
trust company, subject to supervision or regulation pursuant to 
Federal or State banking laws, and is a party to an effective 
Settling Bank Agreement.
    \9\ The LPNC discourages some Participants from requesting funds 
until later in the day when activity has stabilized. LPNC procedures 
provisionally withhold from Participants the benefit of the largest 
net settlement credit they would have received in any Money Market 
Instrument (``MMI'') program during most of the processing day. This 
net credit is the Participant's LPNC (referred to as provisional 
because of its reversible nature). The LPNC is neither made 
available to the Participant as collateral to support its net debit 
nor deemed a credit in the calculation of the Participant's net 
debit. Because transactions in a failing MMI issue would be reversed 
only if DTC is informed of the default by 3 p.m., eastern time, LPNC 
procedures remain in effect only until approximately 3:05 p.m., 
eastern time, at which time, assuming no issuer default, the credit 
becomes final (i.e., it is no longer ``provisional'') and is applied 
to calculate the Participant's collateral and net debit.
    \10\ The term ``collateral'' of a Participant on any Business 
Day means the sum of (i) the Participant's Actual Participants Fund 
Deposit, (ii) the Participant's Actual Preferred Stock Investment, 
(iii) all of the Participant's Net Additions, and (iv) any SPPs 
wired by the Participant to DTC's account at the Federal Reserve 
Bank of New York in the manner specified in DTC's procedures. A 
Participant must always have sufficient collateral to support its 
debit balance.
---------------------------------------------------------------------------

    DTC is also modifying its procedures as they relate to the intraday 
return of SPPs and withdrawal of P&I allocations. Currently, 
Participants are able to withdraw the sum of all P&I payments allocated 
to their account subject to DTC's risk management controls. 
Participants are also able to request that DTC return all or a portion 
of an SPP submitted earlier in the day provided they have sufficient 
collateral and net debit cap \11\ to do so. In order to streamline the 
processing of securities transactions, DTC is modifying its procedures 
so that a Participant may request the return of an SPP and withdraw a 
P&I allocation only if it will not create a debit balance for the 
Participant. DTC is also updating its P&I withdrawal process in order 
to make it more efficient. Withdrawals that are blocked as a result of 
insufficient collateral or net debit cap will no longer recycle until 
enough collateral or settlement credits are generated to satisfy the 
collateral or net debit cap deficiency. Instead a withdrawal request 
will be completed when the Participant makes the request or it will 
drop if there is insufficient collateral or net debit cap thereby 
requiring the Participant to submit a new withdrawal request.
---------------------------------------------------------------------------

    \11\ A Participant's ``net debit cap'' is the maximum amount by 
which a Participant's Gross Debit Balance may exceed its Gross 
Credit Balance.
---------------------------------------------------------------------------

    Additionally, DTC is making technical updates to its Settlement 
Processing Schedule in order to properly reflect the input methods 
available to Participants.\12\ These changes will necessitate revisions 
to the existing DTC Settlement Guide.
---------------------------------------------------------------------------

    \12\ In 2008, DTCC completed a multi-year initiative to 
transition all Participant Terminal System (``PTS'') functions to 
the Participant Browser System (``PBS''). Now, rather than toggle 
between the two tools, Participants can manage all their needs via 
the Web-based PBS, which is more flexible than PTS and offers 
greater functionality.
---------------------------------------------------------------------------

    The proposed rule change is consistent with Section 17A of the 
Act,\13\ as amended, and the rules and regulations thereunder 
applicable to DTC. The proposed rule change will maximize the early 
return of available liquidity to Participants and will be implemented 
consistently with the safeguarding of securities and funds in DTC's 
custody or control or for which it is responsible because all of DTC's 
risk management controls will continue to be in effect.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

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

    DTC does not believe that the proposed rule change will have any 
impact or impose any burden on competition.

[[Page 21074]]

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

    Written comments relating to the proposed rule change were not and 
are not intended to be 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 proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-
4(f)(4) \15\ thereunder because the proposed rule change effects a 
change in an existing service of DTC that: (i) Does not adversely 
affect the safeguarding of securities or funds in the custody or 
control of DTC or for which it is responsible and (ii) does not 
significantly affect the respective rights or obligations of DTC or 
persons using the service. At any time within sixty days of the filing 
of the 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

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 rule-comments@sec.gov. Please include 
File Number SR-DTC-2010-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Elizabeth 
M. Murphy, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-DTC-2010-07. 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 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 
a.m. and 3 p.m. Copies of such filings also will be available for 
inspection and copying at the principal office of DTC and on DTC's Web 
site at http://www.dtcc.com/downloads/legal/rule_filings/2010/dtc/
2010-07.pdf. 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-
2010-07 and should be submitted on or before May 13, 2010.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Florence E. Harmon,
Deputy Secretary.
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2010-9279 Filed 4-21-10; 8:45 am]
BILLING CODE 8011-01-P