Document ID: SEC-2014-0612-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2014-04-11T04:00Z

[Federal Register Volume 79, Number 70 (Friday, April 11, 2014)]
[Notices]
[Pages 20285-20287]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08123]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71888; File No. SR-DTC-2014-02]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Amend the DTC Settlement Service Guide to Clarify the Largest 
Provisional Net Credit Procedures

April 7, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 20286]]

(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on March 27, 2014, the Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change \3\ as described in Items I, II and III below, 
which Items have been prepared primarily by DTC. DTC filed the proposed 
rule change pursuant to Section 19(b)(3)(A) \4\ of the Act and Rule 
19b-4(f)(4) \5\ thereunder, which renders the proposal 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\ 17 CFR 240.19b-4.
    \3\ Exhibit 5 of this proposed rule change filing shows the text 
of the rule changes to be made by DTC. File No. SR-DTC-2014-02, 
Exhibit 5, http://www.sec.gov/rules/sro/dtc.shtml.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

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

    As discussed below, the proposed rule change would clarify DTC's 
existing Largest Provisional Net Credit (``LPNC'') \6\ Procedures 
within DTC's Settlement Service Guide (the ``Service Guide'').\7\
---------------------------------------------------------------------------

    \6\ DTC Rule 1 (Definitions), available at http://www.dtcc.com/en/legal/rules-and-procedures.aspx.
    \7\ Service Guide, available at http://www.dtcc.com/~/media/
Files/Downloads/legal/service-guides/Settlement.ashx.
---------------------------------------------------------------------------

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.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    With regard to processing of Money Market Instruments (``MMI''), 
DTC employs the LPNC risk management control to mitigate the risks 
associated, on the same business day, with: (i) the insolvency of an 
MMI issuer or refusal to pay (``RTP'') on a MMI maturity obligation by 
the applicable MMI Issuing and Paying Agent, and (ii) a DTC 
Participant's (``Participant'') failure to settle or DTC's ceasing to 
act for the Participant. In this regard, on each processing day, DTC 
withholds intraday credit from each MMI Participant for the sum of the 
two largest aggregate net credits with respect to an issuer's acronym 
for purposes of calculating the Participant's net settlement balance 
and collateral monitor. This provides protection in the event that MMI 
transactions are reversed in DTC's system in accordance with the DTC 
Rules & Procedures (``Rules'') as a result of an issuer failure or 
RTP.\8\
---------------------------------------------------------------------------

    \8\ Such reversals override DTC's net debit cap and collateral 
monitor risk controls.
---------------------------------------------------------------------------

    DTC most recently updated its Rules relating to LPNC in 2013.\9\
---------------------------------------------------------------------------

    \9\ Securities Exchange Act Release No. 68983 (Feb. 25, 2013), 
78 FR 13924 (Mar. 1, 2013) (SR-DTC-2012-10).
---------------------------------------------------------------------------

    Pursuant to this rule filing, DTC proposes clarifications to the 
LPNC Procedures in the Service Guide, including: (i) providing an 
example illustrating the composition of the LPNC calculation; and (ii) 
making other technical changes relating to the description of the LPNC 
process and timeframes.
2. Statutory Basis
    The proposed rule change clarifies the terms associated with 
processing of MMI transactions and associated risk controls. As a 
result, the proposed rule change is consistent with the requirements of 
the Act and the rules and regulations thereunder applicable to DTC, and 
in particular, with Section 17A(b)(3)(F) \10\ of the Act. This section 
requires that the Rules be designed to promote the prompt and accurate 
clearance and settlement of securities transactions and, in general, to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

3. Implementation Timeframe
    The proposed rule change is effective immediately.

(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. As stated above, the 
proposed change merely provides clarifications to the Service Guide and 
will not impact any Participant's access to, or use of, DTC services. 
In addition, the proposal does not impact the costs of Participants' 
use of DTC services.

(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 with respect to this filing.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The forgoing [sic] rule change has become effective pursuant to 
Section 19(b)(3)(A) \11\ of the Act and paragraph (f)(4) \12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

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 No. SR-DTC-2014-02 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File No. SR-DTC-2014-02. 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 20287]]

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 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 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/legal/sec-rule-filings.aspx. 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 No. SR-DTC-2014-02 and should be 
submitted on or before May 2, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2014-08123 Filed 4-10-14; 8:45 am]
BILLING CODE 8011-01-P