Document ID: SEC-2006-1524-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Depository Trust Co.
Posted Date: 2006-11-27T05:00Z

[Federal Register: November 27, 2006 (Volume 71, Number 227)]
[Notices]               
[Page 68662-68664]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27no06-137]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54775; File No. SR-DTC-2006-14]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change To Amend Its Certificate of Organization To Provide for the 
Issuance of an Additional 500,000 Shares of DTC Series A Preferred 
Stock

November 17, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 6, 2006, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') and on November 14, 2006, amended, 
the proposed rule change described in Items I, II, and III below, which 
items have been prepared primarily by DTC. The Commission is publishing 
this notice and order to solicit comments from interested

[[Page 68663]]

persons and to grant accelerated approval of the proposal.
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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 purposed rule change relates to changes to DTC's Certificate of 
Organization to provide for the issuance of an additional 500,000 
shares of DTC 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.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by DTC.
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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 to provide 
for the issuance of up to $150 million of Series A Preferred Stock as 
thereafter authorized by the Board of Directors.\3\ In February 2000, 
the Board decided to increase the capital of DTC by issuing 750,000 
shares of variable rate, noncumulative, nonvoting Series A Preferred 
Stock at the par value of $100 per share and to reduce the mandatory 
deposits to the Participants Fund by a corresponding amount.\4\ 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 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.
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    \3\ The amended Certificate of Organization was the subject of a 
DTC rule filing previously approved by the Commission. Securities 
Exchange Act No. 41529 (June 15, 1999), 64 FR 33333 (June 22, 1999) 
[File No. SR-DTC-99-08].
    \4\ This restructuring of DTC's Participants Fund was the 
subject of a rule filing previously approved by the Commission. 
Securities Exchange Act No. 43197 (August 23, 2000), 65 FR 52459 
(August 29, 2000) [File No. SR-DTC-00-02].
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    In order to further increase capital,\5\ DTC is proposing to amend 
its Certificate of Organization to provide for the issuance of an 
additional 500,000 shares of Series A Preferred Stock at the par value 
of $100 per share and to further reduce mandatory cash deposits by a 
corresponding amount.\6\ The proceeds of the reductions of the 
mandatory cash deposits will be used to pay the purchase price of the 
shares, and all reductions and payments will be settled through the 
facilities of DTC with no action required on the part of any 
participant.
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    \5\ DTC, as a depository institution, is subject to risk-based 
capital guidelines issued by the Board of Governors of the Federal 
Reserve. To be considered ``well capitalized'' under these 
guidelines, DTC must maintain a Tier I Leverage Ratio of at least 3% 
and Tier I Risk Based Capital Ratio of at least 8%. The issuance of 
the additional Series A Preferred Stock will enable DTC to continue 
to meet these requirements.
    \6\ The issuance of an additional 500,000 shares will increase 
the outstanding amount of Preferred Stock to $125 million and will 
reduce the mandatory cash portion of the Participants Fund deposit 
to $475 million, maintaining the total mandatory amount at $600 
million.
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    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act\7\ and the rules and regulations 
thereunder applicable to DTC because the proposed rule change will not 
affect the safeguarding of securities and funds in DTC's custody or 
control for which it is responsible.
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    \7\ 15 U.S.C. 78q-1.
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(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

    Section 17A(b)(3)(F) \8\ of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in the custody or control of the clearing agency or 
for which it is responsible. For the reasons set forth below, the 
Commission finds that DTC's proposed rule change is consistent with 
DTC's obligations under the Act.
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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    The Series A Preferred Stock will be used in conjunction with and 
will have the characteristics of required deposits to the Participants 
Fund. The proposed rule change enables DTC to increase its capital base 
and maintain the same level of assets for use in the event of a 
participation default without imposing any additional financial burden 
on its participants and enables DTC to continue to meet the risk-based 
capital guidelines issued by the Board of Governors of the Federal 
Reserve. Therefore, the Commission finds that the rule change is 
consistent with DTC's obligation to assure the safeguarding of 
securities and funds which are in its custody or control or for which 
it is responsible.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice of filing because approving the proposed rule change prior to 
the thirtieth day after the date of publication of notice of filing 
will allow DTC to implement the proposed rule change prior to the end 
of the year.

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-2006-14 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-2006-14. 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

[[Page 68664]]

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-2006-14 and should be submitted on or before December 18, 2006.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
Nancy M. Morris,
Secretary.
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    \9\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E6-19961 Filed 11-24-06; 8:45 am]

BILLING CODE 8011-01-P