Document ID: SEC-2010-0265-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2010-02-22T05:00Z

[Federal Register: February 22, 2010 (Volume 75, Number 34)]
[Notices]               
[Page 7641-7642]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22fe10-95]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61507; File No. SR-DTC-2010-03]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change To Eliminate the Option To 
Receive a Physical Certificate From DTC for Unsponsored American 
Depositary Receipts That Are Part of the Fast Automated Securities 
Transfer Program

February 5, 2010.
    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 January 19, 2010, 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. 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.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The purpose of this proposed rule change is to eliminate the option 
to receive a physical certificate from DTC for unsponsored American 
Depositary Receipts (``ADRs'') that are a part of DTC's Fast Automated 
Securities Transfer Program (``FAST'').

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.\3\
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    \3\ 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

    An ADR is a security that trades in the United States but 
represents a specified number of shares in a foreign corporation. ADRs 
are issued in the U.S. by depositary banks. An ADR issuance is 
``unsponsored'' when there is no formal agreement between the 
depositary bank(s) issuing the shares and the foreign company whose 
underlying shares are the basis for the ADR. Because there is no 
agreement between the issuer and a specific depositary, more than one 
depositary can be involved in the issuance and cancellation of the ADR 
in an unsponsored program. Unsponsored ADRs trade in the over-the-
counter market.
    Currently, in order to deposit an unsponsored ADR at DTC, a 
depositary bank that is also a DTC participant will have its transfer 
agent create a certificate for the new issue ADR, which is then 
deposited at DTC by the depositary bank. In an effort to eliminate some 
of the risks and costs related to the processing of securities 
certificates,\4\ DTC recently made unsponsored ADRs eligible for DTC's 
Fast Automated Securities Transfer Program (``FAST'').\5\
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    \4\ The costs and risks associated with physical certificates 
include, among other things, those associated with safekeeping, 
transfer, shipping, messengers, and insurance costs.
    \5\ FAST was designed to eliminate some of the risks and costs 
related to the creation, movement, processing, and storage of 
securities certificates. Under the FAST Program, FAST transfer 
agents hold FAST eligible securities in the name of Cede & Co. in 
custody and for the benefit of DTC. As additional securities are 
deposited or withdrawn from DTC, the FAST transfer agents adjust the 
size of DTC's position as appropriate and electronically confirm 
these changes with DTC. For more information relating to FAST, see 
Securities Exchange Act Release Nos. 13342 (March 8, 1977) [File No. 
SR-DTC-76-3]; 14997 (July 26, 1978) [File No. SR-DTC-78-11]; 21401 
(October 16, 1984) [File No. SR-DTC-84-8]; 31941 (March 3, 1993) 
[SR-DTC-92-15]; and 46956 (December 6, 2002) [File No. SR-DTC-2002-
15].
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    DTC's withdrawal-by-transfer (``WT'') service allows participants 
to instruct DTC to have securities assets which are held in the 
participant's DTC account reregistered in the name of the

[[Page 7642]]

participant, an investor, or a third party. Upon receipt of a WT 
instruction from a participant, DTC either sends a certificate to the 
transfer agent for reregistration in the name of the person or entity 
identified in the WT instruction or instructs the transfer agent to 
debit DTC's FAST position and to issue securities in the name of the 
person or entity identified in the WT instruction.
    As part of DTC's response to an industry effort to reduce the 
number of securities certificates in the U.S. market (sometimes 
referred to as ``dematerialization''),\6\ DTC initiated a program of 
steadily increasing its fees for WTs and other withdrawals to create 
strong disincentives for the use of physical certificates. Consistent 
with that program, DTC is now proposing to eliminate a participant's 
ability to use the WT service to have physical certificates issued for 
unsponsored ADRs that are a part of the FAST Program. DTC believes that 
this modification of its WT service reaffirms its goals of reducing the 
number of securities certificates in the U.S. markets. DTC participants 
will continue to have the ability to request a physical certificate 
directly from the transfer agent by using the DWAC process.\7\
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    \6\ For more information on dematerialization, see Securities 
Exchange Act Release No. 49405 (March 11, 2004), 69 FR 12922 (March 
18, 2004) ([File No. S7-13-04]).
    \7\ DWAC is a method of electronically transferring shares 
between a DTC Participant and the transfer agent for the shares. For 
more information about the DWAC service, see Securities Exchange Act 
Release No. 30283 (January 23, 1992), 56 FR 59307 (November 18, 
1991) (SR-DTC-91-16) (order granting approval of the DWAC service).
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    The proposed rule change is consistent with the requirements of the 
Securities Exchange Act of 1934, as amended (``Act''), and the rules 
and regulations thereunder because it modifies a DTC service in order 
to reduce the use of physical certificates and the inherent risks 
associated with the use of physical certificates and as such 
facilitates the prompt and accurate clearance and settlement of 
securities.

(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.

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

    Within thirty-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 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-2010-03 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-2010-03. 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/2010/dtc/2010-03.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-2010-03 and should be submitted on or before March 
15, 2010.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-3329 Filed 2-19-10; 8:45 am]
BILLING CODE 8011-01-P