Document ID: SEC-2009-0230-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2009-02-19T05:00Z

[Federal Register: February 19, 2009 (Volume 74, Number 32)]
[Notices]               
[Page 7714-7715]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19fe09-83]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59388; File No. SR-DTC-2009-02]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change To Implement a Maturity 
Presentment Pend Function To Replace the Maturity Presentment 
Contingency System

February 11, 2009.
    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 January 13, 2009, 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. 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.
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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 to implement a Maturity Presentment 
Pend function (``IPA MP Pend Function'') that will replace the Maturity 
Presentment Contingency 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, 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\
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    \3\ 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

Current MMI Maturity Payment Procedure
    Currently, as part of DTC's Money Market Instrument (``MMI'') 
program maturity payment procedures, DTC sweeps maturing MMI positions 
from investors' custodians accounts and generates Maturity Presentments 
(``MPs'') \4\ to the designated Issuing Agent or Paying Agent's 
(collectively, ``IPA'') accounts. DTC debits the IPA's account by the 
amount of the maturity proceeds for settlement that day and credits the 
same amount to the investor's custodian account for payment that day. 
Because MPs are processed against an IPA's DTC account, IPAs may refuse 
to pay for a specific issuer's MP in the event that the issuer defaults 
on its obligation to the IPA. DTC allows IPAs to enter refusal to pay 
notifications through the Participant Terminal System (``PTS'') until 3 
p.m. Eastern Time on the date of maturity.\5\
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    \4\ References to MPs also cover other payment obligations of 
MMI issuers such as periodic payments and periodic interest 
payments.
    \5\ If the IPA refuses to pay, then DTC follows its Defaulting 
Issuer procedures, which include devaluing the collateral value of 
all of the defaulting issuer's MMI to zero, reversing all of the 
issuer's issuances and maturities processed that day, notifying DTC 
participants of the default, and blocking all further issuances by 
the issuer from entering DTC. If an IPA then contacts DTC to reverse 
the refusal to pay instruction, DTC undoes all the actions it took 
under its Defaulting Issuer procedures.
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    Under extraordinary circumstances or in times of unusual market 
stress, DTC may use the Maturity Presentment Contingency System 
(``MPCS'') on the days following a disaster and after consultation with 
the Commission to allow IPA banks to review and manually release MPs. 
IPAs are able to release MPs for processing on a CUSIP or issuer 
acronym level basis. At the close of settlement, MPs that have not been 
released are rolled into the next business day's processing queue for 
representation along with that day's scheduled obligations. This 
process continues until all maturities are funded and the IPA releases 
the MP, the IPA notifies DTC of its refusal to pay, or the MPCS 
contingency procedure is terminated.

[[Page 7715]]

Proposed MMI Maturity Payment Procedure
    DTC is proposing to enhance its systems in order to provide IPAs 
the ability to monitor their credit exposure to MMI issuers. DTC's 
proposed IPA MP Pend Function will enable IPAs to review and manually 
release MPs in the ordinary course of business. IPAs will have the 
ability to set the pend request anytime prior to the MP sweep or at any 
point during the day for unknown rate maturities, based on acronym, 
product type, or the issuer MMI base CUSIP number. Each day, DTC will 
require the IPA to (1) release all items held in pend or (2) invoke its 
right to refuse to pay.\6\ If the IPA takes no action by 3 p.m. Eastern 
Time, the pending items will be released by DTC for normal processing.
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    \6\ The IPA MP Pend Function differs from the MPCS in this 
regard. Under the MPCS system, IPAs are not required to release 
items held in pend or invoke their right to refuse to pay each day 
since the MPs are rolled over into the next business day's 
processing queue.
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    All MP Pend requests will be time-stamped and will be immediately 
effective. Participants with MMI positions will be able to ascertain 
which MPs have been placed in pend status by the IPA.
    Each time it uses the IPA MP Pend Function to create a pend request 
or make a change to its profile, the IPA will be required to represent 
and warrant that it has authority to submit the request appearing on 
the IPA's screen and that it will either release the items held in pend 
by 3 p.m. Eastern Time on the date of maturity or by such time 
communicate to DTC that it refuses to pay. Additionally, the IPA must 
acknowledge that it understands and agrees that all MPs will be 
released for normal processing if it does not communicate its intention 
to refuse to pay DTC by 3 p.m. Eastern Time. In extraordinary 
circumstances, DTC will maintain its ability to set the pend request 
based on an issuer acronym, product, program, base number, or globally 
for all IPAs or for individual IPAs. In all circumstances, the IPA will 
maintain its right to notify DTC of its refusal to pay.
    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \7\ and the rules and 
regulations thereunder because the proposed change will reduce the 
amount of late day reversals associated with an IPA's refusal to pay 
notification at 3 p.m. thereby reducing the operational and financial 
risks associated with reversals of refusals to pay and promoting the 
prompt and accurate settlement of securities transactions.
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    \7\ 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

    The proposal was developed in consultation with various industry 
organizations. 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-2009-02 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-DTC-2009-02. 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 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/2009/dtc/
2009-02.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-
2009-02 and should be submitted on or before March 12, 2009.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-3425 Filed 2-18-09; 8:45 am]

BILLING CODE 8011-01-P