Document ID: SEC-2007-1380-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Depository Trust Co.
Posted Date: 2007-10-03T04:00Z

[Federal Register: October 3, 2007 (Volume 72, Number 191)]
[Notices]               
[Page 56407-56409]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03oc07-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56552; File No. SR-DTC-2007-10]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change To Implement the New Issue 
Information Dissemination Service for Municipal Securities

September 27, 2007.
    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 August 16, 2007, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') and on 
September 12, 2007, amended \3\ the proposed rule change described in 
Items I, II, and III below, which items have been prepared primarily by 
DTC. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The amendment changed a misplaced word in a footnote.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change seeks approval to implement the New Issue 
Information Dissemination System (``NIIDS'') for municipal securities. 
NIIDS is an automated system developed by DTC at the request of the 
Securities Industry and Financial Markets Association (``SIFMA'') \4\ 
in order to improve the mechanism for disseminating new issue 
information regarding municipal securities.
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    \4\ The request originated from The Bond Market Association 
(``BMA''), which has since merged with the Securities Industry 
Association to form SIFMA.
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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.\5\
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    \5\ The Commission has modified the text of the summaries 
prepared by DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    Currently, Municipal Securities Rulemaking Board (``MSRB'') Rule G-
14 generally requires municipal securities dealers to report municipal 
securities transactions to the MSRB within 15 minutes of the time of 
the trade.\6\ Inter-dealer trades eligible for comparison by a clearing 
agency are required to be submitted through NSCC's Real Time Trade 
Matching System (``RTTM'') within the time frame in Rule G-14. They are 
subsequently reported to the MSRB by NSCC. NSCC requires certain 
securities information in order to process and report transactions 
involving those securities. Therefore, it is necessary that dealers 
trading newly issued municipal securities have the securities 
information needed for trade submission by the time the trade reporting 
is required.
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    \6\ MSRB Rule G-14 RTRS Procedures (a)(ii).
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    Pursuant to current practice in the municipal securities market, 
each information vendor works separately to obtain information from 
offering documents and underwriters. Each information vendor's success 
depends in large part upon the voluntary cooperation of the 
underwriters. It is not unusual for information vendors to have 
inconsistent information or for some information vendors to receive 
information before others. Consequently, critical new issue information 
may be missing or inaccurate in the automated trade processing systems 
used by dealers to report the initial trades in new issues. This can 
result in late trade reports or trade reports that must be canceled and 
resubmitted or amended because they contain with inaccurate data.
    NIIDS is designed to improve the process by which new issue 
information is provided by underwriters to information vendors by 
collecting information about a new issue from underwriters or their 
representatives in an electronic format and making that data available 
immediately to information vendors. NIIDS is designed to ensure that 
information is disseminated as quickly and efficiently as possible 
after the information is made available by the underwriters.
    To address concerns that dealers often lack timely access to 
electronically formatted securities information necessary to process 
and report municipal securities transactions in real-time, MSRB Rule G-
14 includes a three-hour exemption available to dealers transacting in 
``when, as, and if issued'' municipal securities that are not syndicate 
managers or members, that have not traded the issue, and that do not 
have the CUSIP information or indicative data for that issue in their 
securities master file (``Reporting Exemption'').\7\ The Reporting 
Exemption will expire on December 31, 2007. In order to prepare for the 
Reporting Exemption's expiration, SIFMA asked DTC to incorporate a 
centralized automated mechanism for the collection and dissemination on 
a real-time basis of the required information as part of the planned 
reengineering of DTC's underwriting system. DTC built NIIDS to help 
make

[[Page 56408]]

the collection and dissemination of new issue information with respect 
to municipal securities more efficient for the industry.
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    \7\ MSRB Rule G-14 RTRS Procedures (a)(ii)(C).
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    An industry working group of municipal securities dealers, SIFMA 
members, the MSRB, and DTC have identified key data elements required 
for the reporting, comparison, confirmation, and settlement of trades 
in municipal securities (``NIIDS Data Elements'').
    Initially, DTC is proposing to make NIIDS available to the 
municipal securities industry on an optional basis to allow dealers to 
have some experience with NIIDS before the MSRB mandates its use. Only 
DTC participants or those entities specifically authorized by a 
participant (``Correspondent'') may input information on NIIDS.\8\
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    \8\ Participants will be required to identify an authorized 
party at the Correspondent with whom DTC may interact.
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    To commence the process, the dissemination agent (``Dissemination 
Agent'') for a new issue must input the NIIDS Data Elements thereby 
requesting that DTC make the information available to the industry 
through NIIDS. DTC will not confirm the NIIDS Data Elements but rather 
will act as a conduit to pass along such information to data 
vendors.\9\ DTC anticipates the data vendors will then disseminate the 
information to the industry thereby allowing dealers to make timely 
reporting of their municipal trades. DTC will record the name of the 
Dissemination Agent who inputs the Data Elements and the time such 
information is submitted. DTC will begin disseminating the data when it 
has received authorization from the Dissemination Agent through NIIDS. 
In addition, NIIDS will contain the contact information for the 
Dissemination Agent that populated the NIIDS Data Elements for a 
particular issue to enable users of the data to contact them with 
questions or comments.
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    \9\ Data vendors or others that wish to receive NIIDS Data 
Elements must register in advance with DTC.
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    DTC is proposing to provide NIIDS to the industry in order to 
facilitate the collection and dissemination of new issue information in 
relation to municipal securities. As DTC is only a conduit of the 
information and does not confirm the validity of any of the NIIDS Data 
Elements, use of NIIDS will constitute an agreement that DTC shall not 
be liable for any loss in relation to the dissemination of NIIDS Data 
Elements. In the event that inaccurate information is input into NIIDS, 
the Dissemination Agent shall bear any and all liability related to 
such inaccuracies.
Optional Use of NIIDS
    The MSRB would like dealers to be able to use NIIDS before 
requiring them to so by rule.\10\ DTC anticipates that once the 
industry is able to use NIIDS, the MSRB will finalize the MSRB proposal 
that will effect the expiration of the Reporting Exemption (``Final 
MSRB Proposal'') and will file it with the Commission for approval. 
Concurrently, DTC plans to collaborate with the MSRB to conform NIIDS 
to the Final MSRB Proposal and will seek an approval order from the 
Commission to make use of NIIDS a prerequisite for municipal securities 
to be DTC-eligible. DTC intends to mandate the use of NIIDS for 
municipal securities in April 2008. DTC believes that members of the 
municipal securities industry will be using NIIDS during the period 
NIIDS is optional (``Test Period'') to become accustomed to using it. 
This may result in Dissemination Agents inputting incomplete NIIDS Data 
Elements while getting acquainted with NIIDS. Therefore, no one should 
rely on the accuracy of the NIIDS Data Elements during the Test Period 
but rather must continue to use existing authorized sources of such 
information.
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    \10\ The MSRB received comment on proposed rules that would 
require underwriters of municipal securities to participate in 
NIIDS. See MSRB Notice 2007-10 (March 5, 2007) at http://www.msrb.org.

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    DTC will not charge a service fee to underwriters that input or 
receive information through NIIDS. Additionally, DTC will not charge a 
service fee to information vendors that will receive information for 
further dissemination through NIIDS.\11\
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    \11\ DTC will charge a connectivity fee to underwriters, service 
providers, and information vendors that use NIIDS.
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    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \12\ and the rules and 
regulations thereunder because the proposed changes promote the prompt 
and accurate clearance and settlement of securities transactions by 
streamlining the collection and dissemination of new issue information 
for municipal securities throughout the industry.
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    \12\ 15 U.S.C. 78q-1.
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(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.

(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 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

    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, 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-2007-10 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-DTC-2007-10. 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

[[Page 56409]]

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 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/2007/dtc/2007-10.pdf and http://

ttp://

amendment.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-
2007-10 and should be submitted on or before October 18, 2007.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-19489 Filed 10-2-07; 8:45 am]

BILLING CODE 8011-01-P