Document ID: SEC-2013-0922-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2013-05-17T04:00Z

[Federal Register Volume 78, Number 96 (Friday, May 17, 2013)]
[Notices]
[Pages 29186-29187]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-11758]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69562; File No. SR-DTC-2013-01]

Self-Regulatory Organizations; The Depository Trust Company; 
Order Approving Proposed Rule Change To Modify Its Practice Regarding 
the Collection of Participants' Required Participants Fund Deposits

May 13, 2013.

I. Introduction

    On March 20, 2013, The Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') proposed 
rule change SR-DTC-2013-01 (``Proposed Rule Change'') pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder.\2\ The Proposed Rule Change was published in 
the Federal Register on April 8, 2013.\3\ This order approves the 
Proposed Rule Change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Release No. 34-69276 (Apr. 2, 2013), 78 FR 20999 (Apr. 8, 
2013).
---------------------------------------------------------------------------

II. Description

    DTC filed the Proposed Rule Change to accelerate DTC's collection 
of a Participant's required deposit to DTC's Participants Fund in 
certain circumstances from two business days to the same day that the 
Participant is notified of the requirement, as described below.

A. Participants Fund

    Pursuant to Rule 4 of its Rules, By-laws, Organization Certificate 
(``DTC Rules''), DTC maintains resources funded by its Participants 
that is a liquidity resource and is available to satisfy any uninsured 
loss incurred by DTC, including a loss resulting from a Participant's 
failure to settle its transactions (``Participants Fund'').\4\ Each 
Participant's required deposit to the Participants Fund (``Required 
Participants Fund Deposit'') is calculated daily pursuant to an 
established formula.\5\ While the minimum deposit is $10,000, each 
Participant is required to make a deposit to the Participants Fund 
based upon a formula that takes into account the Participant's six 
largest intraday net debit peaks over a rolling 60 business-day 
period.\6\ Typically DTC collects new Participants Fund deposits once 
per month for each Participant.\7\ However, if the Participant's newly 
calculated Required Participants Fund Deposit is greater than its prior 
day's Required Participants Fund Deposit, and the difference thereof 
(i) equals or exceeds $500,000 and (ii) represents 25 percent or more 
of that Participant's newly calculated required fund deposit 
(``Threshold Amount and Percentage''), the Participant currently must 
deposit the difference, to the extent any excess amount of the 
Participant's Actual Participants Fund Deposit \8\ does not already 
satisfy the new requirement, in the Participants Fund within two 
business days.\9\
---------------------------------------------------------------------------

    \4\ See DTC Rules (http://dtcc.com/legal/rules_proc/dtc_rules.pdf).
    \5\ Id., Rule 4(a).
    \6\ See DTC Settlement Service Guide (http://dtcc.com/downloads/products/learning/Settlement.pdf). DTC may also require an 
additional deposit to the Participants Fund in the event that DTC 
becomes concerned with a Participant's financial soundness. See DTC 
Rules, supra note 4, Rule 9(A). Separately, a Participant may make a 
voluntary deposit to the Participants Fund (``Voluntary Participants 
Fund Deposit'') in excess of the amount required. See id., Rule 
4(c). These two provisions are not impacted by the Proposed Rule 
Change.
    \7\ See DTC Rules, supra note 4, Rule 4(b).
    \8\ See DTC Rules, supra note 4, Rule 4(b). ``Actual 
Participants Fund Deposit'' means the actual amount the Participant 
has deposited to the Participants Fund, including both its Required 
Participants Fund Deposit and any Voluntary Participants Fund 
Deposit. Id., Rule 1.
    \9\ See DTC Settlement Service Guide, supra note 6.
---------------------------------------------------------------------------

B. Proposed Rule Change

    In order to enhance its liquidity and risk coverage, DTC is 
accelerating the collection of Participants' Required Participants Fund 
Deposits, in the circumstances where DTC currently collects it within 
two business days, to the same day the Participant is notified of the 
requirement. In other words, for both the daily and monthly 
calculations that trigger collections, as described above, increased 
deposit requirements will be collected by DTC on a same-day basis, 
instead of within two business days.
    To account for this rule change, DTC is revising the text of its 
Settlement Services Guide to provide that where a Participant's 
calculated Required Participants Fund Deposit meets the Threshold 
Amount and Percentage, the increased amount must (to the extent any 
excess amount of the Participant's Actual Participants Fund Deposit 
does not already satisfy the new requirement) be deposited with DTC on 
the same business day as (i) the calculation of the increase, and (ii) 
a report or other notification of the change is made available to the 
Participant.
    As mentioned above, in order to harmonize the Participants Fund 
collection processes, monthly increases

[[Page 29187]]

will also be collected on a same-day basis and DTC is adding language 
to the Settlement Service Guide in this regard. In addition, DTC is 
adding language to the Settlement Service Guide to clarify that the 
relevant Guide provisions shall apply only to the calculation and 
collection of DTC Participants Fund deposits, as described in the 
Guide, and do not supersede or limit any provisions of the DTC Rules or 
any rights of DTC in accordance with applicable law and DTC's Rules and 
Procedures, including but not limited to transactions in securities and 
money payments.
    Finally, DTC is making certain clarifying and technical changes to 
the language as set forth in the ``Participants Fund'' section of its 
Settlement Service Guide, including (i) updating the description of the 
purpose of the Participants Fund, (ii) updating the use of defined 
terms, such as ``Participant,'' and (iii) updating and adding subject 
headings.

III. Discussion

    Section 19(b)(2)(C) of the Act directs the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
such proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to such 
organization.\10\ Section 17A(b)(3)(F) of the Act requires that, among 
other things, ``[t]he rules of the clearing agency are designed to 
promote the prompt and accurate clearance and settlement of securities 
transactions and . . . to assure the safeguarding of securities and 
funds which are in the custody or control of the clearing agency or for 
which it is responsible.'' \11\ Furthermore, Commission Rule 17Ad-
22(d)(11) regarding default procedures, adopted as part of the Clearing 
Agency Standards,\12\ requires that registered clearing agencies 
``establish, implement, maintain and enforce written policies and 
procedures reasonably designed to, as applicable: . . . establish 
default procedures that ensure that the clearing agency can take timely 
action to contain losses and liquidity pressures and to continue 
meeting its obligations in the event of a participant default.''\13\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78(s)(b)(2)(C).
    \11\ 15 U.S.C. 78q-1(b)(3)(F).
    \12\ Release No. 34-68080 (Oct. 22, 2012), 77 FR 66219 (Nov. 2, 
2012).
    \13\ 17 CFR 240.17Ad-22(d)(11).
---------------------------------------------------------------------------

    Here, as described above, DTC's proposed rule change to accelerate 
collection of increases in Participants' Required Participants Fund 
Deposits in certain circumstances from two business days to the same 
day that the Participant is notified of the increase should, generally, 
help further safeguard the securities and settlement process as a 
whole, as required by Section 17A(b)(3)(F) of the Act,\14\ since DTC 
will have access to the required funds, which are calculated by an 
established formula, more quickly. More specifically, this rule change 
should help improve DTC's ability to take timely action to contain 
losses and liquidity pressures and to continue meeting its obligations 
in the event of a Participant default, as required by Commission Rule 
17Ad-22(d)(11),\15\ by providing DTC with funds likely necessary to 
contain such losses and liquidity pressures in the event of a 
defaulting Participant.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78q-1(b)(3)(F).
    \15\ 17 CFR 240.17Ad-22(d)(11).
---------------------------------------------------------------------------

IV. Conclusion

    On the basis of the foregoing, the Commission finds the Proposed 
Rule Change is consistent with the requirements of the Act, 
particularly with the requirements of Section 17A of the Act,\16\ and 
the rules and regulations thereunder.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change SR-DTC-2013-01 be and hereby is 
approved.\18\
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(2).
    \18\ In approving the Proposed Rule Change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-11758 Filed 5-16-13; 8:45 am]
BILLING CODE 8011-01-P