Document ID: SEC-2009-0423-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2009-03-27T04:00Z

[Federal Register: March 27, 2009 (Volume 74, Number 58)]
[Notices]               
[Page 13488-13490]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27mr09-97]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59612; File No. SR-DTC-2009-06]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change To Amend Certificate of Incorporation To Increase Preferred 
Shares Issuance

March 20, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 27, 2009, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') and on March 10, 2009, amended the 
proposed rule change as described in Items I and II below, which items 
have been prepared primarily by DTC. The Commission is publishing this 
notice and order to solicit comments on the proposed rule change 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

    DTC is seeking to amend its Certificate of Incorporation to provide 
for the issuance of an additional 250,000 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),

[[Page 13489]]

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 (the ``1999 
Amendment'') to provide for the issuance of 1,500,000 shares of 
Preferred Stock, par value $100 per share.\3\ 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.
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    \3\ This amendment was approved by the New York State 
Superintendent of Banks and was also the subject of a DTC rule 
filing approved by the Commission. Securities Exchange Act Release 
No. 41529 (June 15, 1999), 64 FR 33333 (June 22, 1999) [File No. SR-
DTC-99-08].
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    DTC's Organization Certificate has been amended twice thereafter to 
provide for the issuance of variable rate noncumulative nonvoting 
shares of Series A Preferred Stock, par value $100 per shares, 
preferred over DTC's common stock as to dividends and in the event of 
liquidation (the ``Series A Preferred Stock''). In each case, mandatory 
cash deposits to the Participants Fund were reduced and the proceeds of 
the reductions of the mandatory cash deposits were used to pay the 
purchase price of the shares. The first such amendment, filed in 2000, 
provided for the issuance of 750,000 shares of Series A Preferred 
Stock, and the second amendment, filed in 2006, provided for the 
issuance of an additional 500,000 shares of Series A Preferred 
Stock.\4\
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    \4\ Securities Exchange Release Nos. 43197 (August 23, 2000), 65 
FR 52459 (August 29, 2000) [File No. SR-DTC-00-02] and 54775 
(November 17, 2006), 71 FR 68662 (November 27, 2006) [File No. SR-
DTC-2006-14].
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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 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 to further increase capital,\5\ DTC is proposing to amend 
its Certificate of Organization to provide for the issuance of an 
additional 250,000 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 250,000 shares will increase 
the outstanding amount of Series A Preferred Stock to $150 million 
and reduce the mandatory cash portion of the Participants Fund 
deposit to $450 million, maintaining the total mandatory amount at 
$600 million. At the end of the first quarter of 2009, the total 
mandatory Participants Fund deposits will be increased to $1.3 
billion, as recently approved by the Commission. Securities Exchange 
Release No. 59148 (December 23, 2008), 73 FR 62578 (October 14, 
2008) [File No. SR-DTC-2008-12].
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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 it will not affect the 
safeguarding of funds or securities in DTC's custody or control or for 
which it is responsible as it is merely a reallocation of the 
Participants Fund in order for DTC to increase its capital base while 
maintaining the same level of assets for use in the event of a 
Participant default. The proposed allocation will not impose any 
additional financial burden on DTC Participants.
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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 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 been 
solicited or received. DTC will notify the Commission if it receives 
additional comments.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2009-06 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-2009-06. 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, on official business days between the hours 
of 10 a.m. and 3 p.m. 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.dtcc.com/downloads/legal/rule_filings/2009/dtc/
2009-06.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-
2009-06 and should be submitted on or before April 17, 2009.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder and particularly with the requirements of

[[Page 13490]]

Section 17A(b)(3)(F).\8\ The Commission finds that the approval of 
DTC's rule change is consistent with this section because it will not 
affect the safeguarding of funds or securities in DTC's custody or 
control or for which it is responsible.
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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    DTC has requested that the Commission approve the proposed rule 
change prior to the thirtieth day after publication of the notice of 
the filing. The Commission finds good cause for approving the proposed 
rule change prior to the thirtieth day after the publication of notice 
because such approval will allow DTC to make the systems changes 
necessary to allocate to Participants these additional shares, along 
with the currently outstanding shares of Series A Preferred Stock, at 
the beginning of the second quarter of 2009 in accordance with DTC's 
Rule 4 (Participants Fund and Participants Investment).

V. Conclusion

    On the basis of the foregoing, the Commission finds the proposed 
rule change is consistent with the requirements of the Act, in 
particular Section 17A of the Act, and the rules and regulations 
thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (File No. SR-DTC-2009-06), as 
amended, be and hereby is approved on an accelerated basis.\10\
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    \9\ 15 U.S.C. 78s(b)(2).
    \10\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
     
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    \11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-6827 Filed 3-26-09; 8:45 am]