Document ID: SEC-2014-1833-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2014-11-03T05:00Z

[Federal Register Volume 79, Number 212 (Monday, November 3, 2014)]
[Notices]
[Pages 65268-65270]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-26004]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73443; File No. SR-DTC-2014-10]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change in Connection With the 
Modifications To Require Receiver Authorized Delivery Approval for DTC 
Processing of Institutional Delivery Transactions

October 28, 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 October 16, 2014, The Depository Trust Company (``DTC'') filed with 
the Securities Exchange Commission (``Commission'') the proposed rule 
change as described in Item I, II and III below, which Items have been 
prepared by DTC. The Commission is publishing this notice to solicit 
comments on the proposed change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of changes to the DTC Settlement 
Service Guide (the ``Guide'') \3\ to require Participants to use the 
Receiver Authorized Delivery (``RAD'') function to accept (i.e., 
``match'') any affirmed institutional delivery transaction (``ID 
Transaction'') prior to DTC processing of the related securities 
delivery.\4\
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    \3\ The Guide is available at http://www.dtcc.com/~/media/Files/
Downloads/legal/service-guides/Settlement.ashx.
    \4\ Terms not otherwise defined herein have the meaning set 
forth in the Rules.
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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. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

(1) Purpose
    DTC proposes to modify the Guide to require Participants to use RAD 
to accept any affirmed ID Transaction prior to DTC processing of the 
respective delivery of securities.
    RAD allows a receiver of valued deliveries of securities 
(``Receiver'') to manage which deliveries to accept, or to reject, 
prior to further processing by DTC. Prior to the proposed rule change, 
pursuant to a recent rule change (the ``Prior RAD Change'') \5\ DTC has 
instituted the requirement that all Deliver Orders and Payment Orders 
be approved through RAD for further processing at DTC. The purpose of 
the Prior RAD Change and this proposed rule change is to establish a 
consistent internal ``matching'' system for book-entry deliveries at 
DTC, by which the agreement of the Participant delivering securities 
(``Deliverer'') and Receiver is

[[Page 65269]]

confirmed with respect to each delivery for purposes of DTC settlement.
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    \5\ Securities Exchange Act Release No. 72576 (Jul. 9, 2014); 79 
FR 41335 (Jul. 15, 2014) (SR-DTC-2014-06).
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    ID Transactions generally have not required RAD approval, because 
these transactions are externally pre-matched through Omgeo, LLC: the 
Guide has permitted Participants, at their option, to apply RAD.\6\ 
Instead of RAD, a Participant may use the same-day reclaim process to 
return securities to the original Deliverer without the acceptance of 
the latter. This process creates uncertainty for Participants and DTC 
with respect to ID Transactions as to whether securities would be 
delivered or reclaimed on the same day without the prior acceptance of 
the Receiver or original Deliverer, as applicable.
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    \6\ Receivers may optionally set their DTC profile to route ID 
Transactions to RAD.
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    Pursuant to the proposed rule change, DTC would amend the Guide to 
eliminate this uncertainty by providing that ID Transactions would only 
be processed for delivery once the intended Receiver has approved the 
transaction in RAD.\7\ Same day reclaims would also be subject to RAD 
approval by the original Deliverer. As with any securities delivery, 
these transactions would be subject to risk management controls.\8\
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    \7\ For processing efficiency, the proposed change to the Guide 
would offer Participants the option to set their system profile to 
allow affirmed ID Transactions to be automatically accepted in RAD. 
However, Participants would no longer have an option to allow ID 
Transactions to bypass RAD.
    \8\ DTC risk management controls, including Collateral Monitor 
and Net Debit Cap (as defined in DTC Rule 1), are designed so that 
DTC may complete system-wide settlement notwithstanding the failure 
to settle of its largest Participant or affiliated family of 
Participants. The Collateral Monitor tests that a Receiver has 
adequate collateral to secure the amount of its net debit balance 
and the Net Debit Cap limits the net debit balance of a Participant 
so that it cannot exceed DTC liquidity resources for settlement. See 
DTC Rules, http://dtcc.com/~/media/Files/Downloads/legal/rules/
dtc_rules.ashx.
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    Additionally, the Guide would be updated for technical changes to: 
(i) Update the text for consistency to reflect that all valued Deliver 
Orders, Payment Orders, ID Transactions, MMI transactions, reclaims, 
pledges and releases of pledged securities would be subject to RAD; 
(ii) update the text for consistency to reflect that all reclaims would 
be subject to risk management controls and remove references to system 
functions related to reclaims that have become obsolete; (iii) add an 
email address to which Settling Banks seeking to adjust Net Debit Caps 
may send their requests, in addition to via mail or overnight delivery 
to the existing mailing address; (iv) indicate where Participants may 
access certain system functions via Settlement Web either in addition 
to, or in lieu of, PBS/PTS; (v) eliminate references to fees, relating 
to the ID Net service, which are redundant since those fees are also 
listed in DTC's fee schedule; and (vi) delete reference to the 
population of a ``third party'' field on DTC's system screens for the 
ID Net service which is no longer applicable.
    Implementation. The effective date of the proposed rule change 
would be announced via a DTC Important Notice.
(2) Statutory Basis
    The proposed rule change would reduce uncertainty relating to 
settlement of securities deliveries for ID transactions through DTC by 
requiring acceptance by the receiving party prior to delivery. 
Therefore, the proposed rule change is consistent with the provisions 
of Section 17A(b)(3)(F) \9\ of the Act which requires that the rules of 
the clearing agency be designed, inter alia, to promote the prompt and 
accurate clearance and settlement of securities transactions. In 
addition, the proposed rule change is consistent with Rule 17Ad-
22(d)(12) of the Act \10\ which requires that a clearing agency 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to ensure that final settlement occurs 
no later than the end of the settlement day and requires that intraday 
or real-time finality be provided where necessary to reduce risks.
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    \9\ 15 U.S.C. 78q-1(b)(3)(F).
    \10\ 17 CFR 240.17Ad-22(d)(12).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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 have not yet 
been solicited or received with respect to this filing.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove 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, 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 email to rule-comments@sec.gov. Please include 
File No. SR-DTC-2014-10 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 No. SR-DTC-2014-10. 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-rule-filings.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 No. SR-DTC-2014-10 and should be 
submitted on or before November 24, 2014.

[[Page 65270]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26004 Filed 10-31-14; 8:45 am]
BILLING CODE 8011-01-P