Document ID: SEC-2023-0253-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Depository Trust Co.
Posted Date: 2023-03-07T05:00Z

[Federal Register Volume 88, Number 44 (Tuesday, March 7, 2023)]
[Notices]
[Pages 14221-14224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04581]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97009; File No. SR-DTC-2023-002]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Modify the Operational Arrangements

March 1, 2023.
    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 February 17, 2023, 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 by the clearing agency. DTC filed the proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(4) thereunder.\4\ 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).
    \4\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change \5\ consists of modifications to the DTC 
Operational Arrangements (Necessary for Securities to Become and Remain 
Eligible for DTC Services) (``OA'') \6\ to add to its existing Legal 
Notice System (``LENS'') a means of receiving certain index reference 
rate information for posting to LENS. Specifically, the proposal would 
provide a Web-based, centralized process to facilitate the receipt and 
posting of LENS notice information, for Participants, on benchmark 
replacement rates and related details \7\ (``replacement rate 
information'') from issuers, trustees and agents of Securities that are 
currently benchmarked to the London Inter-Bank Offered Rate (``LIBOR'') 
index,\8\ as described in greater detail below.
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    \5\ Each capitalized term not otherwise defined herein has its 
respective meaning as set forth the Rules, By-Laws and Organization 
Certificate of DTC (the ``Rules''), available at http://www.dtcc.com/legal/rules-and-procedures.aspx.
    \6\ Available at http://www.dtcc.com/~/media/Files/Downloads/
legal/issue-eligibility/eligibility/operational-arrangements.pdf. 
The OA is a Procedure of DTC. Pursuant to the Rules, the term 
``Procedures'' means the Procedures, service guides, and regulations 
of DTC adopted pursuant to Rule 27, as amended from time to time. 
See Rule 1, Section 1, supra note 5. They are binding on DTC and 
each Participant in the same manner that they are bound by the 
Rules. See Rule 27, supra note 5.
    \7\ Details related to the replacement rate include, but are not 
be limited to, (i) the replacement rate selected; (ii) identifying 
information for the issue, such as the CUSIP number; (iii) whether 
the replacement rate information being submitted is new or an update 
to a prior LENS submission; and (iv) identifying details relating to 
the submitter of the replacement rate information, including name 
and entity type (e.g., paying agent, trustee, issuer, etc.). See 
also DTCC LIBOR Replacement Index Communication Tool User Guide, 
available at https://www.dtcc.com/-/media/Files/Downloads/Settlement-Asset-Services/Issuer-Services/Libor-Tool-User-Guide.pdf.
    \8\ LIBOR is an indicative measure of the average interest rate 
at which major global banks can borrow from one another. LIBOR is 
quoted in multiple currencies and multiple terms, or ``maturities,'' 
using data reported by private-sector banks. See SEC Staff Statement 
on LIBOR Transition--Key Considerations for Market Participants 
(December 7, 2021), Staff of the Securities and Exchange Commission, 
available at https://www.sec.gov/news/statement/staff-statement-libor-transition-20211207.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency 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. The

[[Page 14222]]

clearing agency has prepared summaries, set forth in sections A, B, and 
C below, of the most significant aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    The proposed rule change consists of modifications to the OA to add 
to LENS a means of receiving certain index reference rate information 
for posting to LENS. Specifically, the proposal would provide a Web-
based, centralized process to facilitate the receipt and posting of 
LENS notice information, for Participants, on replacement rate 
information from issuers, trustees and agents of Securities that are 
currently benchmarked to the LIBOR index.
Background
LENS
    A LENS notice is a notice of information provided to DTC often by 
an issuer, trustee, transfer agent, or other third party that is intend 
for holders of Securities on deposit at DTC. Parties submitting LENS 
notices may have a legal or regulatory obligation or other interest in 
distributing the notice information to holders of the Securities. The 
notices are delivered to DTC because DTC's nominee, Cede & Co., is the 
registered holder of the applicable Securities and/or DTC is the 
appropriate qualified registered securities depository \9\ with respect 
to the issue.
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    \9\ Pursuant to Rule 17Ad-16 under the Act, an ``appropriate 
qualified registered securities depository'' shall mean the 
qualified registered securities depository that the Commission so 
designates by order or, in the absence of such designation, the 
qualified registered securities depository that is the largest 
holder of record of all qualified registered securities depositories 
as of the most recent record date. 17 CFR 240.17Ad-16(f).
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    LENS notices are generally delivered to DTC via email.\10\ If a 
notice is delivered to DTC in accordance with applicable Procedures set 
forth in the OA, DTC then posts the notice to LENS, where notices are 
then available for viewing by Participants.\11\ A Participant may share 
the notices with their customers that may hold a beneficial interest in 
the subject Security on the books of the Participant.
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    \10\ See OA, supra note 6, at 23-25.
    \11\ Id. Participant fees for single-use access and 
subscriptions to LENS are set forth in the DTC Fee Guide. See DTC 
Fee Guide, available at https://www.dtcc.com/-/media/Files/Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf, at 25.
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Proposed Expansion of LENS
    DTC understands that issuers of Securities that currently use LIBOR 
(USD) as a reference rate will need to choose a replacement benchmark 
and disseminate information on replacement rates to holders ahead of 
the LIBOR retirement date, which is scheduled for June 30, 2023.\12\
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    \12\ See ARRC LIBOR Legacy Playbook (July 11, 2022) (``ARRC 
Playbook''), available at https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2022/LIBOR_Legacy_Playbook.pdf, at 1.
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    This proposed rule change is intended to help facilitate the 
centralized receipt and dissemination of such replacement rate 
information through LENS, without requiring the submission of 
individual LENS notice emails for posting. Specifically, the proposal 
will update the OA to (i) establish a new LENS tool for receiving 
replacement rate information on Securities currently benchmarked to 
LIBOR (i.e., the LIBOR Replacement Index Communication Tool 
(``Communication Tool'')), and (ii) provide for the posting of that 
replacement rate information to LENS.\13\
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    \13\ The Communication Tool was developed by DTC, in 
consultation with the Alternative Reference Rate Committee 
(``ARRC'') and other financial industry organizations. The ARRC is a 
group of private-market participants convened by the Board of 
Governors of the Federal Reserve System and the Federal Reserve Bank 
of New York to help ensure a successful transition from LIBOR to an 
alternative reference rate, such as the Secured Overnight Financing 
Rate (``SOFR''). ARRC is comprised of a diverse set of private-
sector entities with a presence in markets affected by LIBOR, and a 
wide array of official-sector entities, including banking and 
financial sector regulators, as ex-officio members. See ARRC 
website, available at https://www.newyorkfed.org/arrc/about.
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    While DTC will continue to use email for submission of all other 
LENS notice types, the LENS Communication Tool will offer a more 
efficient and effective process to receive and disseminate potentially 
high volumes \14\ of replacement rate information through LENS in a 
compressed time period.
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    \14\ DTC believes over 100,000 issuances may require the 
dissemination of replacement rate information in connection with the 
pending retirement of LIBOR.
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Proposed Rule Change
    Pursuant to the proposed rule change, the OA will be revised to 
include a new section on the Communication Tool (``New Section''). The 
New Section will explain that the Communication Tool is designed to 
help issuers, trustees and agents communicate via LENS certain LIBOR 
benchmark replacement rate information for Securities that are 
converting from LIBOR (USD) to an alternative reference rate. The New 
Section will provide a link to DTCC's LIBOR transition web page,\15\ 
where the Communication Tool will be available, and will note that 
links to the Communication Tool also may be available via the DTCC 
website, Important Notices, direct communications with issuers, 
trustees and agents, and other websites.
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    \15\ Available at https://www.dtcc.com/settlement-and-asset-services/issuer-services/libor-transition. The web page will 
include, among other things, a LIBOR Replacement Index Communication 
Tool User Guide to help issuers, trustees and agents navigate and 
use the Communication Tool, including step-by-step instructions and 
descriptive information on forms and required data fields.
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    Regarding use of the Communication Tool, the New Section will 
explain that users must first complete an automated verification 
process.\16\ Once verified, access will be granted and the user will be 
able an input replacement rate information (i) for multiple securities 
at one time, using templates in the Communication Tool, or (ii) for an 
individual Security, not using a template.\17\ In either case, the user 
also will have the option to upload accompanying documentation to 
include with the inputted replacement rate information, all of which 
will be posted to LENS.
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    \16\ Users will be required to provide their business contact 
information for verification purposes.
    \17\ Template options will vary based on template format and the 
alternative reference rate chosen (e.g., SOFR or a different 
reference rate). The templates are included as an Exhibit 3 to this 
proposal.
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    The New Section will explain that once the user has successfully 
input all replacement rate information (and uploaded any accompanying 
documentation), the user may review the information and make any 
changes, if necessary. If satisfied with the information provided, the 
user may submit the information for posting to LENS. Once submitted to 
LENS, the user will be able to save, export, and print a copy of the 
posted information for the user's own records.
    The New Section will note that (i) all replacement rate information 
and any accompanying documentation (if applicable) submitted by the 
user will be posted to LENS in a standardized format reflecting the 
information submitted by the user; (ii) users should retain a copy of 
all replacement rate information that they submit for their own 
records; and (iii) the Communication Tool will be decommissioned and 
the New Section deleted by DTC on September 30, 2024, as explained 
further below.
    Finally, the New Section will include a disclaimer that DTC does 
not review any information submitted through the Communication Tool for 
accuracy, completeness, or confidential information. Rather, it is the 
full and sole responsibility of the user submitting the information to 
ensure that the information is accurate, complete, and does not include 
any

[[Page 14223]]

information that would otherwise be deemed as confidential or material 
non-public information.
Effective Date
    The proposed rule change will be implemented on February 24, 2023.
Termination Date
    As indicated above, LIBOR is expected to be retired on June 30, 
2023. DTC believes that demand and use of the Communication Tool will 
gradually reduce after that date. Therefore, in anticipation of the 
Communication Tool no longer being needed by September 30, 2024, 
pursuant to this proposed rule change, the Communication Tool will be 
decommissioned September 30, 2024, and the New Section proposed herein 
would be removed from the OA.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act \18\ requires that the rules of the 
clearing agency be designed, inter alia, to, generally, protect 
investors and the public interest. As described above, the proposed 
rule change would help facilitate the communication of LIBOR 
replacement rate information provided through the new LENS 
Communication Tool and posted to LENS. As with other information posted 
to LENS, Participants may then communicate such replacement rate 
information to their customers that hold affected Securities. In this 
regard, DTC believes that the proposed rule change would help protect 
investors and the public interest by promoting fair and transparent 
markets through facilitation of the distribution of replacement rate 
information to Participants, who may then pass the information to their 
clients.
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    \18\ 15 U.S.C. 78q-1(b)(3)(F).
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    Rule 17Ad-22(e)(21) \19\ promulgated under the Act requires, inter 
alia, that DTC, a covered clearing agency, establish, implement, 
maintain and enforce written policies and procedures reasonably 
designed to, as applicable, be efficient and effective in meeting the 
requirements of its participants and the markets it serves. As 
described above, the proposed rule change would update the OA to 
establish the Communication Tool--a Web-based, centralized means for 
DTC to receive replacement rate information more efficiently and 
effectively than via an email submission--and to provide for the 
posting of that replacement rate information to LENS for Participant 
consumption. In this regard, DTC believes that the proposed rule change 
would provide a more streamlined approach for issuers, trustees and 
agents to disseminate replacement rate information to Participants, and 
ultimately investors, regarding Securities that they may hold and 
processed through DTC. Therefore, DTC believes that the proposed rule 
change would help promote efficiency and effectiveness in DTC meeting 
the requirements of its participants and the markets it serves, 
consistent with Rule 17Ad-22(e)(21).
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    \19\ 17 CFR 240.17Ad-22(e)(21).
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(B) Clearing Agency'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.
    As described above, the proposed rule change consists of changes to 
the OA that will provide for the implementation of the Communication 
Tool to accommodate the submission of replacement rate information for 
posting to LENS. The Communication Tool will be publicly available on 
DTCC's LIBOR transition web page. Use of the Communication Tool to 
submit replacement rate information will be free of charge and there 
will be no additional charge for Participants to receive such 
replacement rate information as part of their existing LENS 
subscription.\20\
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    \20\ Although existing Participant fees for the use of LENS 
would continue to apply, LENS is an optional service and 
Participants are only charged if they choose to participate in the 
service.
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    DTC has not received or solicited any written comments relating to 
this proposal. If any written comments are received, they would be 
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
    Persons submitting comments are cautioned that, according to 
Section IV (Solicitation of Comments) of the Exhibit 1A in the General 
Instructions to Form 19b-4, the Commission does not edit personal 
identifying information from comment submissions. Commenters should 
submit only information that they wish to make available publicly, 
including their name, email address, and any other identifying 
information.
    All prospective commenters should follow the Commission's 
instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/how-to-submitcomments. General questions 
regarding the rule filing process or logistical questions regarding 
this filing should be directed to the Main Office of the Commission's 
Division of Trading and Markets at [email protected] or 202-
551-5777.
    DTC reserves the right to not respond to any comments received.

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) \21\ of the Act and paragraph (f) \22\ of Rule 19b-4 
thereunder. At any time within 60 days of the filing of the proposed 
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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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 17 CFR 240.19b-4(f).
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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 [email protected]. Please include 
File Number SR-DTC-2023-002 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-DTC-2023-002. 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 website (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

[[Page 14224]]

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 website 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 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of DTC and on DTCC's website (http://dtcc.com/legal/sec-rule-filings.aspx). All comments received will be posted without 
change. Persons submitting comments are cautioned that we do not redact 
or edit personal identifying information from comment submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-DTC-2023-002 
and should be submitted on or before March 28, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04581 Filed 3-6-23; 8:45 am]
BILLING CODE 8011-01-P