Document ID: SEC-2006-0016-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Depository Trust Co.
Posted Date: 2006-01-09T05:00Z

[Federal Register: January 9, 2006 (Volume 71, Number 5)]
[Notices]               
[Page 1457-1459]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09ja06-82]                         

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53032; File No. SR-DTC-2005-19]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to Enhancements of the SMART/Track Service

December 28, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on November 10, 2005, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') and on December 22, 2005, amended 
the proposed rule change as described in Items I, II, and III below, 
which Items have been prepared primarily by DTC. DTC filed

[[Page 1458]]

the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the 
Act \2\ and Rule 19b-4(f)(4) thereunder \3\ whereby 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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

    The proposed rule change will enhance DTC's current SMART/Track 
service by adding an internet-based service called ``SMART/Track for 
Buy-Ins.'' The service will ultimately replace DTC's existing buy-in 
service of its Participant Exchange (``PEX'') system and will provide 
additional features to enable users to track buy-in notices throughout 
their lifecycle.

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\
---------------------------------------------------------------------------

    \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

    This rule filing will establish an internet-based buy-in service 
called ``SMART/Track for Buy-Ins.'' \5\ The service will ultimately 
replace DTC's current PEX platform and will be more user-friendly. It 
will provide real-time open buy-in information and will enable 
automated communication, warehousing, and tracking of various types of 
buy-in related notices that are required by the rules of other self-
regulatory organizations (``SROs'').\6\ Through the service, users will 
be able to create and transmit notices, view notices they have received 
or sent, make changes to notices (if not yet transmitted) according to 
stated parameters, reject notices as applicable, and search archives 
for active and aged notices. The service will have several features 
that will be implemented in phases.
---------------------------------------------------------------------------

    \5\ See DTC Important Notice B8796 (Nov. 23, 2005) 
available online at http://www.dtc.org/impNtc/ope/ope_8796.pdf. 

SMART/Track was established in 2004 and featured a stock loan recall 
notification service. Securities Exchange Act Release No. 50029 
(July 15, 2004), 69 FR 43870 (July 22, 2004). DTC later added a 
corporate action liability notification service [Securities Exchange 
Act Release No. 50887 (Dec. 20, 2004), 69 FR 77802 (Dec. 28, 2004)] 
and an agency lending disclosure service to SMART/Track. [Securities 
Exchange Act Release No. 52104 (July 21, 2005), 70 FR 43730 (July 
28, 2004)].
    \6\ E.g., New York Stock Exchange (``NYSE'') Rule 282 and 
American Stock Exchange Rule 783. NYSE Rule 282 was recently amended 
to, among other things, eliminate the requirement for paper buy-in 
notices to permit electronic notices, including those from DTC. 
Securities Exchange Act Release No. 52842 (Nov. 28, 2005), 70 FR 
72321 (Dec. 2, 2005) [File No. SR-NYSE-2005-50].
---------------------------------------------------------------------------

    The first phase of the service will be National Securities Clearing 
Corporation's (``NSCC'') Continuous Net Settlement (``CNS'') buy-in 
execution notices. DTC participants will send these notices to CNS 
through SMART/Track. After CNS validates these notices (e.g. verifies 
certain details of the buy-in execution such as the quantity of the 
buy-in) the DTC participant that was bought-in will be notified of its 
liability through a SMART/Track notice.\7\
---------------------------------------------------------------------------

    \7\ Any notice or report received by participants through SMART/
Track will be in addition to (and will not replace) any notices or 
reports currently being distributed to participants by their SRO 
with respect to their buy-in activity.
---------------------------------------------------------------------------

    The second phase of the service will permit DTC participants to 
transmit CNS Notices of Intent to Buy-In and Buy-In Orders for 
processing. CNS will send notification to the DTC participant being 
bought-in of its potential liability through SMART/Track.
    Notices pertaining to buy-ins other than CNS buy-ins (``non-CNS 
buy-ins'') \8\ and Municipal Securities Rulemaking Board (``MSRB'') 
closeouts will be the final function implemented on SMART/Track. Users 
will be able to create and transmit to the designated counterparty buy-
in intent notices and MSRB closeout notices through SMART/Track. Users 
receiving such buy-in notice or MSRB closeout notice will be able to 
accept or reject the notice online. The sender of such buy-in notice or 
MSRB closeout notice will be able to cancel a notice in any status, 
extend the delivery date, or change the quantity or amount.
---------------------------------------------------------------------------

    \8\ Non-CNS buy-ins include NYSE, AMEX, NASD, and NSCC Balance-
Order buy-ins.
---------------------------------------------------------------------------

    Once fully implemented, the buy-in service will feature:
     Online cancellation and updating of a buy-in notice.
     Search and sort capability on any field in a buy-in 
notice.
     Audit trail with a complete record of actions taken 
regarding a notice, including time, date, and the person taking the 
action.
     Links to DTC systems to indicate if the security subject 
to a buy-in is undergoing a dividend or corporate action or has been 
chilled for delivery.
     Automatic archiving.
     Seven-year record retention that is easily available 
online.
    SMART/Track for Buy-Ins is subject to DTC's gross negligence and 
willful misconduct standard of liability for information services.
    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \9\ and the rules and 
regulations thereunder because it will promote the prompt and accurate 
clearance and settlement of securities transactions by providing 
important and timely notifications relating to buy-ins between 
participant counterparties.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

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

    Written comments relating to the proposed rule change have not yet 
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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) \10\ of the Act and Rule 19b-4(f)(4) \11\ thereunder 
because it effects a change in an existing service of DTC that does not 
adversely affect the safeguarding of securities or funds in DTC's 
control or for which DTC is responsible and does not significantly 
affect DTC's or its participants' respective rights or obligations. At 
any time within 60 days of the filing of such 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and

[[Page 1459]]

arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 No. SR-DTC-2005-19 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

    All submissions should refer to File No. SR-DTC-2005-19. 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 Section, 100 F Street, 
NE., Washington, DC 20549. 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 submission 
should refer to File No. SR-DTC-2005-19 and should be submitted on or 
before January 30, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
Nancy M. Morris,
Secretary.
---------------------------------------------------------------------------

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

 [FR Doc. E6-45 Filed 1-6-06; 8:45 am]

BILLING CODE 8010-01-P