Document ID: SEC-2010-1733-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2010-11-12T05:00Z

[Federal Register Volume 75, Number 218 (Friday, November 12, 2010)]
[Notices]
[Pages 69514-69515]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-28442]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63254; File No. SR-DTC-2010-14]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change To Amend the Certificate of 
Organization To Authorize Additional Shares of Preferred Stock and 
Designate Shares as Series A Preferred Stock

November 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 October 22, 2010, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared primarily by DTC.\3\ 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\ 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/2010/dtc/2010-14.pdf.
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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 amend DTC's 
Certificate of Organization to authorize an additional 1,750,000 shares 
of preferred stock and to designate such shares as Series A preferred 
stock.

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

    In 1999, DTC's Certificate of Organization was amended (``1999 
Amendment'') to provide for the authorization and issuance of 1,500,000 
shares of preferred stock, par value $100 per share.\5\ The 1999 
Amendment also provided that the preferred stock could be issued in one 
or more classes having such designations, relative rights, preferences, 
or limitation as fixed by the Board of Directors of DTC at the time of 
issuance of any such preferred stock. DTC's Certificate of Organization 
has been amended three times thereafter to provide for the issuance of 
variable rate, noncumulative, nonvoting shares of Series A preferred 
stock, par value $100 per share, which are preferred over DTC's common 
stock as to dividends and in the event of liquidation (``Series A 
Preferred Stock''). The first such amendment (filed in 2000) provided 
for the issuance of 750,000 shares of the Series A Preferred Stock. The 
second amendment (filed in 2006) provided for the issuance of an 
additional 500,000 shares of Series A Preferred Stock. The third 
amendment (filed in 2009) provided for the issuance of an additional 
250,000 shares of Series A Preferred Stock.\6\
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    \5\ The amendment was the subject of a DTC proposed rule change 
approved by the Commission. Securities Exchange Act No. 34-41529 
(June 15, 1999), 64 FR 33333 (June 22, 1999) [File No. SR-DTC-1999-
08]. The amendment was also approved by the New York State 
Superintendent of Banks.
    \6\ Securities Exchange Release Nos. 34-43197 (August 23, 2000), 
65 FR 52459 (August 29, 2000) [File No. SR-DTC-2000-02]; 34-54775 
(November 17, 2006), 71 FR 68662 (November 27, 2006) [SR-DTC-2006-
14]; 34-59612 (March 20, 2009), 74 FR 13488 (March 27, 2009) [File 
No. SR-DTC-2009-06].
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    DTC participants are required to purchase and own shares of the 
Series A Preferred Stock in proportion to their use of DTC services. 
DTC treats the Series A Preferred Stock held by participants 
substantially the same as it treats the mandatory cash deposits made by 
participants to the Participants Fund for purposes of collateralizing 
securities transactions, limiting net debit positions, implementing 
default procedures, and allocating unrecovered losses.
    In order that DTC may further increase its capital,\7\ DTC is 
proposing to amend its Certificate of Organization \8\ to authorize an 
additional 1,750,000 shares of preferred stock at the par value of $100 
per share and to designate such shares as Series A Preferred Stock with 
such rights, preferences, and limitations as provided in its 
Certificate of Organization.\9\
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    \7\ DTC, as a member institution of the Federal Reserve System, 
is subject to capital guidelines issued by the Board of Governors of 
the Federal Reserve System. To be considered ``well-capitalized'' 
under these guidelines, DTC must, among other things, maintain a 
Total Risk-Based Capital Ratio of at least 10%, a Leverage Ratio of 
at least 5%, and a Tier 1 Risk-Based Capital Ratio of at least 6%. 
The issuance of the additional Series A preferred stock will enable 
DTC to continue to meet these requirements.
    \8\ In order to amend its Certificate of Organization to 
increase the authorized preferred stock, DTC is also required to 
seek approval from the New York State Banking Department. DTC has 
sought such approval concurrently with this rule filing. On October 
20, 2010, DTC's sole stockholder, The Depository Trust & Clearing 
Corporation, authorized DTC to make this amendment, as required by 
Section 8003 of the Banking Law of the State of New York.
    \9\ The authorization of an additional 1,750,000 shares will 
increase the number of authorized shares of Preferred Stock and of 
Series A Preferred stock to a total of 3,250,000 shares with a par 
value of $100 per share and a total value of $325 million.
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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 applicable to DTC, as well as CPSS/IOSCO 
Recommendations for Securities Settlement Systems applicable to DTC 
because the proposed rule change will not affect the safeguarding of 
securities and funds in DTC's custody or control or for which it is 
responsible.

(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 forty-five days of the date of publication of this notice in 
the Federal

[[Page 69515]]

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 or disapprove 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-2010-14 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-2010-14. 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/nscc/2010-11.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-2010-14 and should be submitted on or before December 3, 2010.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-28442 Filed 11-10-10; 8:45 am]
BILLING CODE 8011-01-P