Document ID: SEC-2007-0448-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Depository Trust Co.
Posted Date: 2007-03-23T04:00Z

[Federal Register: March 23, 2007 (Volume 72, Number 56)]
[Notices]               
[Page 13842-13843]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23mr07-134]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55488; File No. SR-DTC-2007-02]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Related to Fees Charged to the CDS Clearing and Depository Services, 
Inc.

March 19, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 26, 2007, 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change would permit DTC, effective February 1, 
2007, to cease to charge fees for ``Covered Services'' in ``Omnibus 
Accounts'' (as each term is defined below) to the CDS Clearing and 
Depository Services, Inc. (``CDS''), formerly, the Canadian Depository 
for Securities Ltd., in exchange for CDS agreeing not to charge DTC for 
such services.\2\
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    \2\ The National Securities Clearing Corporation (``NSCC'') has 
submitted a similar proposed rule change (File No. SR-NSCC-2007-02).
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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 such 
statements.\3\
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    \3\ The Commission has modified parts of these statements.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to facilitate the 
efficient processing of cross-border securities transactions between 
the U.S. and Canada. CDS is a participant in both DTC and NSCC. CDS 
holds securities in the name of Cede & Co., DTC's nominee name, in one 
or more omnibus accounts at DTC and also has a clearance account at 
NSCC (collectively the ``CDS Omnibus Accounts'').\4\
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    \4\ For purposes of this rule filing, the term ``CDS Omnibus 
Accounts'' shall not include CDS's additional accounts established 
pursuant to the Multiple Account Number Agreement, dated October 27, 
2006 between CDS and NSCC and the Additional Account Agreement, 
dated October 27, 2006 between DTC and CDS.
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    In 1998, the SEC approved a proposed rule change to allow DTC to 
open an omnibus account at CDS thereby creating a two-way DTC-CDS 
interface.\5\ DTC is a participant in CDS and holds securities in the 
nominee name of CDS & Co., CDS's nominee name, in one or more omnibus 
accounts in the depository and the settlement service operated by CDS 
(``CDSX'') (``DTC Omnibus Accounts''). The two-way interface allows but 
does not require DTC positions in CDS-eligible issues to be held in 
DTC's account at CDS. The CDS Omnibus Accounts and the DTC Omnibus 
Accounts shall be collectively referred to as the ``Omnibus Accounts.'' 
In 2005, the Commission approved a proposed rule change to allow DTC to 
operate the Canadian-Link Service, which enables DTC Participants to 
clear and settle transactions with CDS Participants through an omnibus 
account maintained by DTC at CDS.\6\
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    \5\ Securities Exchange Act Release No. 40523 (October 6, 1998), 
63 FR 54739 (October 13, 1998) (File No. SR-DTC-97-22).
    \6\ Securities Exchange Act Release No. 52784 (November 16, 
2005), 70 FR 70902 (November 23, 2005) [File No. SR-DTC-2005-08].
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    In order to more efficiently facilitate cross-border clearance and 
settlement DTC, NSCC and CDS have agreed not to charge each other for 
Covered Services \7\ in Omnibus Accounts.
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    \7\ ``Covered Services'' includes such services as: (a) 
Messaging and conversion of messages, (b) clearing, (c) monthly 
account charges, (d) deliveries/receives, (e) deposits and 
withdrawals, (f) custody, (g) asset servicing (dividends, 
reorganizations), (h) tax services, including U.S. and Canadian tax 
withholding, as applicable, and non-U.S. Tax Relief and Foreign 
Currency Payments via the Elective Dividend Service (EDS), (i) 
communications/networking, (j) money settlement (and roll-up), (k) 
reconciliation, and (l) any other services agreed to between DTC, 
NSCC and CDS in writing.
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    Currently, DTC, NSCC, and CDS charge fees in accordance with their 
respective standard fee schedules for securities clearing, settlement, 
and asset servicing in their respective Omnibus Accounts in exchange 
for CDS no longer charging DTC and NSCC for similar services. The 
proposed rule change would provide that instead of invoicing each other 
each month for services in the Omnibus Accounts, DTC and NSCC will no 
longer charge CDS for Covered Services in Omnibus Accounts. As most of 
the activity processed in each of the Omnibus Accounts relates to 
reciprocal services which are charged to DTC, NSCC and CDS respectively 
at different rates (e.g., DTC would be charged in accordance with the 
standard CDS fee schedule and vice versa), not charging each other for 
Covered Services will ensure that the fees of DTC and CDS are more 
equitably aligned.
    DTC, NSCC, and CDS will continue to charge their respective 
participants for activity in the Omnibus Accounts.
    This proposed rule change is consistent with the requirements 
Section 17A of the Act and the rules and regulations thereunder because 
it recognizes that most of the activity in the Omnibus Accounts 
represents the processing of reciprocal activity in similar services 
used by each of the entities which are charged to DTC, NSCC, and CDS at 
different rates. As such, it provides for a more equitable allocation 
of fees charged by DTC and NSCC.

[[Page 13843]]

(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC does not believe that the proposed rule change would 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

    Because the foregoing rule change changes fees charged clearing 
members by DTC, it has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \8\ and Rule 19b-4(f)(2) \9\ thereunder. At 
any time within sixty days of the filing of the 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.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 17 CFR 240.19b-4(f)(2).
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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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-DTC-2007-02 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 20549-1090.

All submissions should refer to File Number SR-DTC-2007-02. 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 the principal office of DTC and on DTC's 
Web site at http://www.dtc.org.

    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-2007-02 
and should be submitted on or before April 13, 2007.

    For the Commission, by the Division of Market Regulation, 
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. E7-5351 Filed 3-22-07; 8:45 am]

BILLING CODE 8010-01-P