Document ID: SEC-2011-1018-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2011-07-18T04:00Z

[Federal Register Volume 76, Number 137 (Monday, July 18, 2011)]
[Notices]
[Pages 42149-42150]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-17957]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64864; File No. SR-DTC-2011-06]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change To Amend Rules Relating to the 
Early Redemption of Certificates of Deposit

 July 12, 2011.
    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 July 1, 2011, The Depository Trust Company (``DTC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II 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 persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The purpose of DTC's proposed rule change is to amend its 
Redemption Service Guide as it relates to the early redemption of 
certain Certificates of Deposit held at DTC.\3\
---------------------------------------------------------------------------

    \3\ The text of the proposed rule change is attached as Exhibit 
5 to DTC's filing, which is available at http://www.dtcc.com/downloads/legal/rule_filings/2010/dtc/2011-06.pdf.
---------------------------------------------------------------------------

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.\4\
---------------------------------------------------------------------------

    \4\ The Commission has modified the text of the summaries 
prepared by DTC.
---------------------------------------------------------------------------

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    Recently, several issuers of Certificates of Deposit (``CDs'') have 
contacted DTC in an attempt to redeem or call their CDs prior to the 
maturity date. The master certificate of these CDs did not expressly 
specify that they were callable or subject to redemption. In some 
instances, the issuer offered to pay DTC participants the principal 
plus interest through the date of maturity. In other instances, the 
issuer offered to pay principal plus interest only through the date of 
redemption. Because the master certificates did not expressly indicate 
the CDs could be redeemed early, a number of DTC participants expressed 
their concerns that the CDs had been sold to investors without 
disclosing the possibility of early redemption.
    Over the past several months, DTC has worked with the industry, 
including the Retail Fixed Income Committee of The Securities Industry 
and Financial Markets Association (``SIFMA''), to better understand the 
issues related to the early termination of CDs that do not contain 
express early termination provisions. As a result of these 
consultations, DTC is now proposing to amend its Redemption Service 
Guide to state that DTC will not process early redemptions or calls on 
CDs unless (i) There is an explicit provision in the master certificate 
that permits early termination by the issuer and specifies the payment 
to be made in connection therewith or (ii) written consent to an early 
redemption in a form designed by DTC is obtained by the issuer from all 
of the holders of the CD. Furthermore, in the event that an issuer 
sends such payment to DTC in contravention of the proposed rule, DTC 
will return the payment to the issuer, less any costs associated with 
facilitating the attempted redemption and return of funds.
    The proposed rule change is consistent with the requirements of the 
Act, as amended, (``Act'') and the rules and regulations thereunder 
applicable to DTC because it clarifies the terms and conditions under 
which DTC will permit the early redemption of certain CDs and thus 
facilitates the prompt and accurate clearance and settlement of 
transactions involving these CDs.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC does not believe that the proposed rule change would 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.

[[Page 42150]]

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

    Within forty-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 or disapprove the 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-2011-06 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 submission should refer to File Number SR-DTC-2011-06. 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 Web site viewing and 
printing in the Commission's Public Reference Section, 100 F Street, 
NE., Washington, DC 20549-1090, on official business days between the 
hours of 10 a.m. and 3 p.m. Copies of such filings will also 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/2011/dtc/2011-06.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-2011-06 and should be submitted on or before [insert date 21 
days from publication in the Federal Register].

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
---------------------------------------------------------------------------

    \5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-17957 Filed 7-15-11; 8:45 am]
BILLING CODE 8011-01-P