Document ID: SEC-2009-0563-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Depository Trust Co.
Posted Date: 2009-04-22T04:00Z

[Federal Register: April 22, 2009 (Volume 74, Number 76)]
[Notices]               
[Page 18415-18416]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22ap09-85]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59774; File No. SR-DTC-2009-08]

 
Self-Regulatory Organizations; the Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Settlement Service Guide and Settlement Progress 
Payments

April 15, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 3, 2009, 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 
primarily by DTC. DTC filed the proposed rule change pursuant to 
Section 19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-4(f)(4) thereunder 
\3\ so that the proposal was effective upon filing with the Commission. 
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\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \3\ 17 CFR 240.19b-4(f)(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 will (i) amend DTC's Settlement Service 
Guide's instructions regarding withdrawals of intraday principal and 
income payments for non-money market instrument issues and (ii) update 
certain aspects of DTC's Settlement Progress Payments (``SPP'') 
procedures.

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.

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

    DTC is amending the procedures governing a participant's withdraw 
of principal and income (``P&I'') payments for non-money market 
instrument issues that DTC has received from paying agents and 
allocated to a participant's settlement account. The changes include 
the address and fax number to which a participant must send the wire 
instruction form to and the information that must be included in that 
form as well as a clarification that the funds must be wired to the 
participant's DTC settlement bank.\4\
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    \4\ The rule change does not change the option for a participant 
to submit P&I withdrawal requests electronically.
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    DTC is also amending its SPP procedures. As background, an SPP is a 
payment sent from a DTC participant to DTC through Fedwire when a DTC 
participant has insufficient collateral \5\ or is at its net debit 
cap.\6\ The SPP creates a credit to the participant's settlement 
account thereby reducing their net debit and allowing the participant 
to continue to receive deliveries into their participant account.
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    \5\ ``Collateral'' is defined in DTC's rules as the sum of (i) 
the participant's Actual Fund Deposit, (ii) the participant's Actual 
Preferred Stock Investment, (iii) the participant's Net Additions, 
and (iv) any SPPs wired by the participant to DTC's account at the 
Federal Reserve Bank of New York.
    \6\ A net debit cap helps ensure that DTC can complete 
settlement, even if a participant fails to settle.
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    Under this rule change, DTC will implement a new automated SPP 
return functionality that will permit participants to request that DTC 
return all or a portion of an SPP and to have these payments wired to 
the participant's settlement bank account \7\ intraday and before the 
settlement period. DTC states that these changes should simplify the 
SPP return process and should allow participants to maximize the early 
return of available liquidity.\8\
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    \7\ Under DTC's rules, a settling bank is a participant that is 
a bank or trust company subject to supervision or regulation 
pursuant to Federal or State banking laws and a party to an 
effective ``Settling Bank Agreement.''
    \8\ The upcoming reduction in debit caps for ``families'' will 
likely cause increased volume in SPPs. See Securities Exchange Act 
Release No. 59148 (Dec. 23, 2008), 73 FR 80481 (Dec. 31, 2008).
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    Prior to this rule change, DTC would return only the full amount of 
a SPP provided that returning the SPP would not result in a negative 
collateral monitor \9\ or cause the participant's net settlement debit 
to exceed its net debit cap.\10\ DTC would debit the full amount of the 
SPP from the participant's settlement account and return the funds 
through Fedwire to the participant's original sending bank. If a 
participant only had sufficient collateral or debit cap to return a 
portion of the SPP, DTC would not process the request until the full 
amount of the SPP could be returned. Furthermore, return requests 
required manual approval from DTC's Settlement Operations.
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    \9\ DTC tracks collateral in a participant's account through the 
Collateral Monitor (``CM''). The CM reflects the amount that the 
collateral in the account exceeds the net debit in the account. When 
processing a transaction, DTC verifies that the participant's CM 
would not become negative when the transaction completes. If the 
transaction would cause the participant to have a negative CM, the 
transaction will recycle until the participant has sufficient 
collateral to complete.
    \10\ Withdrawals that are blocked as a result of insufficient 
collateral or net debit cap will recycle until enough collateral or 
settlement credits are generated to satisfy the collateral or net 
debit cap deficiency or until the end of the recycle period when 
transactions that have not successfully completed are dropped by the 
system.
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    The changes to DTC's SPP function also include new wire 
instructions and parameters for using the new automated SPP Return 
function.\11\
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    \11\ The updated wire instructions are attached as Exhibit 5 to 
DTC's rule filing.
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    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \12\ and the rules and 
regulations thereunder applicable to DTC. The proposed rule change will 
not affect the

[[Page 18416]]

safeguarding of funds or securities in DTC's custody and control or for 
which it is responsible because it allows for a more efficient 
processing of P&I withdrawals and SPP returns.
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    \12\ 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

    DTC has not solicited or received written comments relating to the 
proposed rule change. DTC will notify the Commission of any written 
comments it receives.

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)(iii) of the Act \13\ and Rule 19b-4(f)(4) \14\ thereunder 
because it effects a change in an existing service of a registered 
clearing agency that does not adversely affect the safeguarding of 
securities and funds in the custody or control of the clearing agency 
or for which it is responsible and does not significantly affect the 
respective rights or obligations of the clearing agency or persons 
using the service. At any time within 60 days of the filing of the 
proposed rule change, the Commission may summarily abrogate 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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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 e-mail to rule-comment@sec.gov. Please include 
File No. SR-DTC-2009-08 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 No. SR-DTC-2009-08. 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 Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. to 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.dtc.org/impNtc/mor/index.html. 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 No. SR-DTC-2009-08 and should be submitted on or 
before May 13, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-9239 Filed 4-21-09; 8:45 am]

BILLING CODE 8010-01-P