Document ID: SEC-2021-1687-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Depository Trust Co.
Posted Date: 2021-11-30T05:00Z

[Federal Register Volume 86, Number 227 (Tuesday, November 30, 2021)]
[Notices]
[Pages 68004-68006]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-26067]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93669; File No. SR-DTC-2021-016]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Make Certain Revisions and Clarifications to the Rules

November 24, 2021.
    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 15, 2021, 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 the clearing agency. DTC filed the proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(4) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \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)(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 modifications to DTC's Rules, 
Bylaws and Organization Certificate (``Rules'') to (1) incorporate into 
the Rules the governing law of agreements and other documents provided 
to DTC pursuant to the Rules; (2) incorporate in the Rules the 
affirmative undertakings that Participants currently make in onboarding 
membership agreements; (3) clarify that Participants shall appoint a 
duly authorized representative in connection with their membership, and 
remove the requirement that DTC approve the form of power of attorney 
or resolutions of the Participant's board of directors that evidences 
such authorization; and (4) clarify DTC's ability to rely on electronic 
signatures on agreements and other documents provided to DTC pursuant 
to the Rules, as described in greater detail below.\5\
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    \5\ Capitalized terms not defined herein are defined in the 
Rules, available at https://www.dtcc.com/legal/rules-and-procedures. 
Unless otherwise indicated by the context, the term ``Participant'' 
as used herein includes the term ``Limited Participant.''
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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, the clearing agency 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. The clearing agency has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

[[Page 68005]]

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    DTC is proposing amendments that would clarify, simplify and 
improve the disclosures in the Rules, primarily related to onboarding 
and other membership documentation between DTC and its Participants. 
DTC, along with its affiliates, National Securities Clearing 
Corporation and Fixed Income Clearing Corporation, has recently 
completed a review of the templates of onboarding agreements and other 
documents that are provided to DTC in connection with a firm's 
application for membership, and the templates of agreements and 
documents Participants may provide to DTC during the course of their 
membership pursuant to the Rules. In connection with this review, DTC 
is proposing to make certain revisions and clarifications to the Rules.
    More specifically, the proposed rule changes would (1) incorporate 
into the Rules the governing law of agreements and other documents 
provided to DTC pursuant to the Rules; (2) incorporate in the Rules the 
affirmative undertakings that Participants currently make in onboarding 
membership agreements; (3) clarify that Participants shall appoint a 
duly authorized representative in connection with their membership, and 
remove the requirement that DTC approve the form of power of attorney 
or resolutions of the Participant's board of directors that evidences 
such authorization; and (4) clarify DTC's ability to rely on electronic 
signatures on agreements and other documents provided to DTC pursuant 
to the Rules, as described in greater detail below.
Proposed Revisions to Rules Regarding Governing Law
    DTC is proposing to revise Section 4 of Rule 1 (Definitions; 
Governing Law), which currently states that the Rules are governed by 
New York law.\6\ The proposed change would revise Section 4 of Rule 1 
to include a statement that agreements and other documents that are 
entered into between DTC and its Participants are also governed by New 
York law, unless otherwise expressly provided. Currently, agreements 
and other documents entered into between DTC and its Participants 
either include a governing law provision or are governed by New York 
law through the application of both Section 4 of Rule 1, which provides 
that the rights and obligations under the Rules are governed by New 
York law, and the DTC membership agreements, which provide that the 
Rules (including Section 4 of Rule 1) govern the matters and 
transactions between DTC and its Participants.
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    \6\ Id.
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    This proposed change would both clarify the governing law of the 
agreements and other documents entered into between DTC and its 
Participants pursuant to the Rules, and would allow DTC to simplify 
those documents by removing the governing law provisions in such 
documents.
Proposed Revisions To Incorporate Participant Undertakings Into the 
Rules
    DTC is proposing to revise Section 1 of Rule 2 (Participants and 
Pledgees) to incorporate affirmative undertakings that Participants 
currently make in their onboarding membership agreements.\7\ This 
section currently provides that an applicant for membership with DTC 
shall sign and deliver to DTC an agreement under which the applicant 
would agree to the affirmative undertakings that are listed in this 
Section 1 of Rule 2.\8\ These undertakings include, for example, to 
abide by the Rules and be bound by all the provisions thereof, and to 
pay any amounts that become payable by the Participant to DTC pursuant 
to the Rules.\9\
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    \7\ Section 1 of Rule 2, id.
    \8\ Id.
    \9\ See Sections 1(a) and (d) of Rule 2, id.
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    To simplify and standardize the membership onboarding 
documentation, DTC is proposing to revise Section 1 of Rule 2 to state 
directly that Participants agree to each of the undertakings listed in 
that section. DTC would also make an identical revision to Rule 9(D) 
(Settling Banks) regarding the undertakings of Settling Banks. In 
connection with this proposed change, DTC would remove these 
undertakings from the template membership agreement, which already 
provides that Participants are bound by the Rules.
Proposed Revisions to Requirements Related to Participants' Authorized 
Representatives
    DTC is proposing to revise Sections 1 and 2 of Rule 7 (Participant 
Representatives), which describes Participants' requirement to appoint 
an authorized representative in connection with their membership with 
DTC.\10\ Currently, Section 1 of Rule 7 provides that a Participant may 
designate an authorized representative that is not either a general 
partner or an officer of the Participant, by either a power of attorney 
or resolutions of the Participant's board of directors, and requires 
such power of attorney and resolutions be in a form approved by 
DTC.\11\ Section 2 of Rule 7 requires Participants to provide DTC with 
the signatures of individuals who are authorized representatives for 
purposes of conducting business with DTC.\12\
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    \10\ Sections 1 and 2 of Rule 7, id.
    \11\ Id.
    \12\ Id.
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    In order to simplify the onboarding membership requirements, DTC is 
proposing to amend Section 1 of Rule 7 to clarify that a Participant's 
representative must be duly appointed and authorized, and to remove 
references to a power of attorney or resolutions of the Participant's 
board of directors. The proposed change would also remove the 
requirement that DTC approve the form of power of attorney or 
resolutions of the Participant's board of directors that evidences the 
due authorization of that representative.
    Finally, DTC is proposing to remove Section 2 of Rule 7, which 
includes the requirement that Participants provide DTC with the 
signatures of representatives who are authorized to conduct business 
with DTC.\13\ In connection with this proposed change, DTC would 
renumber the remaining sections in Rule 7.
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    \13\ Id.
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Proposed Revisions to Rules Regarding DTC's Reliance on Electronic 
Signatures
    DTC is proposing to revise Rule 26, which is currently titled 
``Facsimile Signatures'' and lists the circumstances in which DTC would 
rely on an electronic signature.\14\ The proposed revision to this Rule 
26 would rename the rule to remove the word ``Facsimile,'' and would 
also revise the rule to clarify that DTC may rely on an electronic 
signature with respect to any and all agreements and other documents 
delivered pursuant to the Rules. DTC would also remove reference to the 
circumstances in which it would accept an electronic signature, to make 
clear that DTC would do so in any circumstances. The proposed revisions 
would clarify and modernize the language in Rule 26, which still refers 
to outdated modes of electronic communication, such as telex, and would 
align the language in this Rule to language used in the New York 
Electronic Signatures and Records Act.\15\
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    \14\ Id.
    \15\ N.Y. State Tech. Law Sec.  304(2) (McKinney 2021).

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[[Page 68006]]

2. Statutory Basis
    Section 17A(b)(3)(F) of the Act requires that the rules of DTC be 
designed to, among other things, promote the prompt and accurate 
clearance and settlement of securities transactions.\16\ DTC believes 
the proposed changes are consistent with the requirements of Section 
17A(b)(3)(F) of the Act because such changes would clarify and improve 
the transparency of the Rules and would allow DTC to simplify the 
membership agreements and other documentation provided to it by 
Participants pursuant to the Rules.
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    \16\ 15 U.S.C. 78q-1(b)(3)(F).
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    More specifically, the proposed changes would make clarifications 
to the Rules regarding (i) Participants' duly authorized 
representatives in connection with their memberships; and (ii) DTC's 
ability to rely on electronic signatures on agreements and other 
documents provided to it pursuant to the Rules. The proposed changes 
would also update the Rules in order to allow DTC to simplify the 
onboarding and other membership agreements and documents by 
incorporating in the Rules (1) the governing law of agreements and 
other documents provided to DTC pursuant to the Rules; and (2) the 
affirmative undertakings that Participants currently make in onboarding 
membership agreements.
    By enhancing the clarity and transparency of the Rules, and 
allowing DTC to simplify the membership agreements and other documents, 
the proposed changes would allow Participants to more efficiently and 
effectively conduct their business in accordance with the Rules, which 
DTC believes would promote the prompt and accurate clearance and 
settlement of securities transactions. As such, DTC believes that the 
proposed changes would be consistent with Section 17A(b)(3)(F) of the 
Act.\17\
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    \17\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    DTC does not believe the proposed rule changes would impact 
competition. The proposed rule changes would merely enhance the clarity 
and transparency of the Rules and would simplify the documentation that 
is provided to DTC by Participants pursuant to the Rules. Therefore, 
the proposed changes would not affect DTC's operations or the rights 
and obligations of membership. As such, DTC believes the proposed rule 
changes would not have any impact on competition.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    DTC has not received or solicited any written comments relating to 
this proposal. If any written comments are received, they will be 
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
    Persons submitting comments are cautioned that, according to 
Section IV (Solicitation of Comments) of the Exhibit 1A in the General 
Instructions to Form 19b-4, the Commission does not edit personal 
identifying information from comment submissions. Commenters should 
submit only information that they wish to make available publicly, 
including their name, email address, and any other identifying 
information.
    All prospective commenters should follow the Commission's 
instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/how-to-submit-comments. General 
questions regarding the rule filing process or logistical questions 
regarding this filing should be directed to the Main Office of the 
Commission's Division of Trading and Markets at 
[email protected] or 202-551-5777.
    DTC reserves the right to not respond to any comments received.

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) \18\ of the Act and paragraph (f) \19\ of Rule 19b-4 
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.
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    \18\ 15 U.S.C 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f).
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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 [email protected]. Please include 
File Number SR-DTC-2021-016 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-DTC-2021-016. 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 website (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 website 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 DTCC's website 
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-DTC-2021-016 and should be submitted on 
or before December 21, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-26067 Filed 11-29-21; 8:45 am]
BILLING CODE 8011-01-P