Document ID: SEC-2011-1925-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2011-12-12T05:00Z

[Federal Register Volume 76, Number 238 (Monday, December 12, 2011)]
[Notices]
[Pages 77281-77283]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31737]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65901; File No. SR-DTC-2011-10]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rules Relating to Existing Operational Arrangements Involving 
Eligibility of Securities

 December 6, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on November 25, 2011, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change described 
in Items I and II below, which items have been prepared primarily by 
DTC. DTC filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) and Rule 19b-4(f)(4) thereunder so that the proposed 
rule change was effective upon filing with the Commission.\2\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(iii) and 17 CFR 240.19b-4(f)(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 update the existing 
contractual operational arrangements necessary for a securities issue 
to become and remain eligible for the services at DTC.\3\
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    \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/2011/dtc/2011-10.pdf.
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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\
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    \4\ The Commission has modified the text of the summaries 
prepared by NSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

(1) Purpose
    DTC's operational arrangement (``Operational Arrangement'' or 
``OA'') was first published in June 1987 and subsequently updated in 
June 1988, February 1992, December 1994, January 1998, May 2002, and 
most recently in January 2009.\5\ The OA is designed to maximize the 
number of issues of securities that may be made eligible for DTC 
services and to provide for the orderly processing of such securities 
and the timely payments to DTC participants. DTC's experience 
demonstrates that when participants, issuers, underwriters, agents (as 
such terms are defined in the DTC rules or in the OA), and their 
counsel are aware of DTC's requirements, those requirements may be more 
readily met. DTC is now proposing to update the OA to clarify DTC's 
processes and to mitigate certain risk associated with those processes. 
Additionally, DTC is proposing to make several ministerial changes, 
including changes related to methods of notification, and to add 
clarifying language to provide a more concise description of OA 
procedures.
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    \5\ Securities Exchange Act Release 24818 (August 19, 1987), 52 
FR 31833 (August 24, 1987) (File No. SR-DTC-87-10); 25948 (July 27, 
1988), 53 FR 29294 (August 3, 1988) (File No. SR-DTC-88-13); 30625 
(April 30, 1992), 57 FR 18534 (April 30, 1992) (File No. SR-DTC-92-
06); 35342 (February 8, 1995), 60 FR 8434 (February 14, 1995) (File 
No. SR-DTC-94-19); 39894 (April 21, 1998), 63 FR 23310 (April 28, 
1998) (File No. SR-DTC-97-23); 45994 (May 29, 2002), 68 FR 35037 
(June 11, 2003) (File No. SR-DTC-2002-02); 59199 (January 6, 2009), 
74 FR 1266 (January 12, 2009) (File No. SR-DTC-2008-14).
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    The primary differences between the proposed amended OA and the OA 
as filed with the Commission in 2009 are as follows:
    1. Matters that were previously the subject of proposed rule change 
filings with the Commission but were never incorporated into the OA:
    a. In March 2010, DTC filed with the Commission a proposed rule 
change modifying the required notification method for the assumption or 
termination of transfer agent services.\6\ DTC is now proposing to 
update the OA to reflect those methods for notifying DTC of transfer 
agency changes.
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    \6\ Securities Exchange Release Act No. 61620 (March 1, 2010) 75 
FR 10539 (March 8, 2010) (File No. SR-DTC-2010-04).
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    b. In May 2010, DTC filed with the Commission a proposed rule 
change updating DTC procedures regarding the Participant Tender Offer 
Program in order to provide DTC participants with a more efficient 
process for making elections regarding corporate action events which 
DTC deemed appropriate for processing.\7\ DTC is now proposing to 
update the OA to reflect that process.
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    \7\ For Securities Exchange Act Release No. 62119 (May 18, 2010) 
75 FR 29374 (May 25, 2010) (File No. SR-DTC-2010-08).
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    c. In November 2010, DTC filed with the Commission a proposed rule 
change to automate the approval process relating to providing trustee 
access to the Security Position Report Service at the point of 
eligibility.\8\ DTC is now proposing to update the OA to reflect that 
process.
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    \8\ Securities Exchange Release Act No. 63245 (November 4, 2010) 
75 FR 69150 (November 10, 2010) (File No. SR-DTC-2010-10).
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    d. In April 2011, the Commission approved a DTC proposed rule 
change amending the requirements for transfer agents to maintain a 
balance certificate in the Fast Automated Securities Transfer Program 
(``FAST'').\9\ DTC is now proposing to update the OA to specify that 
transfer agents participating in FAST that act for issues participating 
in the Direct Registration System no

[[Page 77282]]

longer need to maintain a balance certificate.
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    \9\ Securities Exchange Act Release No. 64191 (April 5, 2011), 
76 FR 20061 (April 11, 2011) (File No. SR-DTC-2010-15).
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    e. In August 2011, the Commission approved a DTC proposed rule 
change relating to processing early redemptions of certain certificates 
of deposit.\10\ DTC is now proposing to update the OA to reflect those 
changes.
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    \10\ Securities Exchange Act Release Numbers 64864 (July 12, 
2011) 76 FR 42149 (July 18, 2011) (File No. SR-DTC-11-06).
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    2. In January 2011, DTC published an Important Notice to provide 
issuers and their transfer agents guidance on key criteria and 
processes applicable to eligibility for book-entry delivery and 
depository services.\11\ DTC is now proposing to update the OA in order 
to be consistent with the Important Notice and to clarify DTC's 
eligibility process.
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    \11\ DTC Important Notice B0006-11 available at http://www.dtcc.com/downloads/legal/imp_notices/2011/dtc/set/0006-11.pdf.
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    3. For purposes of consistency, DTC is proposing to include an 
Important Legal Information Section in the OA, which adopts language 
from current DTC's Rules and Procedures.
    4. The following processes in order to mitigate risk associated 
with processing:
    a. DTC is proposing to require an issuer or its transfer agent 
obtain a new CUSIP number from Standard & Poor's CUSIP Service Bureau 
in order to facilitate the adequate processing of a corporate action 
event, such as an interest payment. This change should reduce the 
number of processing problems associated with corporate.
    b. DTC is proposing to add language to the OA to establish that the 
record date for equity securities must coincide with the established 
ex-date announced by the applicable stock exchange on which the 
security is listed. Additionally, DTC is proposing to require that if a 
security is listed on an exchange or trading in the secondary market, 
the issuer must distribute a shareholder notice to the respective 
exchange that announces the issuer's intent to effect a corporate 
action. These changes are consistent with current practice and should 
help mitigate risk associated with corporate actions.
    c. DTC is proposing to update the OA to require that agents send 
payments of less than $1 billion in same-day funds no later than 1 p.m. 
eastern time and to send payments of $1 billion or more in same day 
funds no later than 12 p.m. eastern time in order to facilitate the 
timely processing of payments. This change reflects the current 
industry practice relating to reorganization payments.
    d. DTC is proposing to require issuer and their agents to annually 
certify that their bank account numbers on DTC's records are accurate.
    e. DTC is proposing to codify established practice of requiring the 
issuer or agent to provide DTC a notice of reduction in the stock 
distribution or dividend amount due DTC as a result of the reduction of 
treasury or repurchased shares (i.e., an issuer ``buy back'') held on 
deposit by DTC on record date. As proposed, the issuer or agent will be 
required to provide specified information together with the participant 
or participants' confirmation letters preferable five business days but 
no fewer than three business days prior to the payable date for that 
security. Failure of a participant to comply with notification to DTC 
to effect timely adjustments to the participant's accounts could 
jeopardize the same-day distribution of payments to the participant and 
beneficial owners holding through it. DTC is also proposing to add a 
disincentive fee for participants that submit instructions to DTC 
outside of the established timeframes.
    5. DTC is proposing to include corrections and clarifications in 
the OA relating to corporate action notification and processing 
requirements. These changes reflect current practice with agents and 
include requirements for what needs to be provided to DTC in the event 
that the terms of an offer are amended.
(2) Statutory Basis
    The proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to DTC because 
it should facilitate the prompt and accurate clearance and settlement 
of securities transactions by clarifying provisions in the DTC's OA 
pertaining to existing eligibility requirements and processes. In so 
doing, these clarifications should in turn expedite the process of 
making securities eligible for DTC services and reduce risk associated 
with processing corporate reorganization events.

(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 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)(iii) of the Act \12\ and Rule 19b-4(f)(4) \13\ 
thereunder because it is a change in an existing service that does not 
adversely affect the safeguarding of securities or funds in the custody 
or control of the clearing agency and does not significantly affect the 
respective rights or obligations of the clearing agency or persons 
using the service. 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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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(4).
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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-2011-10 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-2011-10. 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

[[Page 77283]]

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 NSCC 
and on NSCC's Web site at http://www.dtcc.com/downloads/legal/rule_filings/2011/dtc/2011-10.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-2011-10 and should be submitted on or before January 
3, 2012.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31737 Filed 12-9-11; 8:45 am]
BILLING CODE 8011-01-P