Document ID: SEC-2012-0008-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Depository Trust Co.
Posted Date: 2012-01-04T05:00Z

[Federal Register Volume 77, Number 2 (Wednesday, January 4, 2012)]
[Notices]
[Pages 315-316]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33716]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66063; File No. SR-DTC-2011-13]

 Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Revise Fees for Equity and Debt Derivatives

December 28, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4\2\ thereunder, notice is hereby given that 
on December 15, 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, which Items have been 
prepared primarily by DTC. DTC filed the proposed rule change pursuant 
to Section 19(b)(3)(A)(ii) of the Act and Rule 19b-4(f)(2) thereunder 
so that the proposed rule change was effective upon filing with the 
Commission.\3\ 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)(ii) and 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change would revise fees for equity and debt 
derivatives.

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 such statements.\4\
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    \4\ 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

    There are certain types of equity and debt derivatives, as they are 
classified at DTC, that represent debt of an issuer whose coupon and 
yield are derived from the performance of an underlying stock, basket 
of stock, commodity or other index. Due to the unique nature of equity 
and debt derivatives, as opposed to the typical common stock or 
corporate bond (which are considered ``Basic'' at DTC), DTC currently 
assesses Participants a ``Complex Eligibility Fee'' as part of the DTC 
eligibility process.\5\ As more fully described below, the purpose of 
this rule change is to provide a reduction in the complex eligibility 
processing fee on equity and debt derivatives based on volume.
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    \5\ DTC's eligibility process typically involves a legal review 
of registration exemptions and evaluation of asset servicing 
requirements that are not standardized.
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    Recent demand has changed the dynamics of the market for equity and 
debt derivatives. The asset servicing set-up is becoming more 
standardized as issuers are limiting the corporate action variations in 
order to realize operational efficiencies through economies of scale. 
For example, some issuers are choosing two or three basic payment 
structures with similar call features for all the equity or debt 
derivatives they issue. The ability to issue these products under a 
``program-like'' structure has created a variation of a debt and equity 
derivative that requires an eligibility review more similar to that of 
products currently considered ``Basic'' at DTC.

[[Page 316]]

This is because the legal requirements of the subsequent issuances 
remain unchanged from the base prospectus and the asset servicing 
requirements generally follow a few basic structures. As such, DTC has 
proposed to adjust its Fee Schedule to reflect the following tiered 
pricing:
    (i) A Participant closing 15 or more equity or debt derivatives in 
a day will be assessed the current ``Complex Eligibility Fee'' ($750) 
for the first 14 issuances.
    (ii) Beginning with the 15th issuance, the fee will be reduced to 
the current ``Basic Eligibility Fee'' ($350 or $500 depending on single 
versus multi CUSIP).
    Issuances that contain the option to receive the underlying stock 
at maturity will not qualify for the tiered pricing and will continue 
to be assessed the ``Complex Eligibility Fee'' because they still 
require a manually intensive set-up process.
    The proposed fee revisions are consistent with DTC's overall 
pricing philosophy to align service fees with underlying costs, 
discourage manual and exception processing, and encourage 
immobilization and dematerialization of securities. DTC intends for 
these fee adjustments to be effective January 2, 2012.
    DTC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act \6\ and the rules and 
regulations thereunder applicable to DTC because it would clarify and 
update DTC's fee schedule to facilitate the equitable allocation of 
reasonable dues, fees, and other charges among DTC's participants.
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    \6\ 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 impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

(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 yet 
been solicited or received by DTC.

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

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(ii) of the Act \7\ and Rule 19b-4(f)(2) \8\ 
thereunder because it is establishing or changing a due, fee, or other 
charge applicable only to a member. At any time within sixty days of 
the filing of such 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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    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \8\ 17 CFR 240.19b-4(f)(2).
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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 rule-comments@sec.gov. Please include 
File Number SR-DTC-2011-13 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-2011-13. 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 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 Room, 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 filing also will be available for 
inspection and copying at DTC's principal office and on DTC's Web site 
at http://www.dtcc.com/downloads/legal/rule_filings/2011/dtc/SR-DTC-2011-13.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-2011-13 and 
should be submitted on or before January 25, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-33716 Filed 1-3-12; 8:45 am]
BILLING CODE 8011-01-P