Document ID: SEC-2007-0277-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Depository Trust Co.
Posted Date: 2007-02-23T05:00Z

[Federal Register: February 23, 2007 (Volume 72, Number 36)]
[Notices]               
[Page 8217-8218]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23fe07-99]                         

[[Page 8217]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55306; File No. SR-DTC-2006-21]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Fee in Connection With Its Offering of a Mechanism by Which It 
Collects and Passes-Through Fees Owed by Participants to American 
Depositary Receipt Agents for Certain Issues

February 15, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 29, 2006, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change 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)(ii) of the Act \2\ and Rule 19b-4(f)(2) \3\ thereunder so 
that the proposal was effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the rule 
change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \3\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of the rule change is to modify DTC's fee for offering 
the mechanism by which it collects and passes-through fees owed by 
participants to American Depositary Receipt (``ADR'') agents for 
certain issues.

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

    Typically, an ADR agent is authorized under its agreement with the 
issuer to impose a custody fee on holders of the issue. A common 
practice for collection of this fee is for the ADR agent to subtract 
the amount of the fee from the gross dividend payable to the ADR 
holders. This practice is effectuated by DTC announcing to participants 
both the gross dividend rate and the net dividend rate after deduction 
of the ADR custody fee, and the ADR agent paying DTC the net dividend 
and DTC allocating the net dividend to participants. However, a number 
of ADR issues do not pay periodic dividends, which prevents the 
associated fees from being collected through the above-described 
mechanism.
    Pursuant to discussions with industry representatives and in order 
to facilitate a more efficient ADR fee collection process, DTC recently 
introduced a mechanism by which it collects from participants and 
passes through to ADR agents custody fees for issues that do not pay 
periodic dividends as such fees are reported to DTC by the ADR 
agents.\5\ DTC discussed that proposal with three divisions of the 
Securities Industry Association (``SIA''), the Corporate Actions 
Division, Dividends Division, and Securities Operations Divisions 
(``SOD''). The SOD Regulatory and Clearance Committee prepared and sent 
to DTC a memorandum on DTC's proposal. The memorandum concluded that 
DTC should collect such fees through its normal monthly billing 
process.\6\
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    \5\ Securities Exchange Act Release No. 34-53970 (June 12, 
2006), 71 FR 34974 (June 16, 2006) [File No. SR-DTC-2006-08].
    \6\ Memorandum from Albert Howell, Chairman, Regulatory & 
Clearance Committee, Securities Operations Division, Securities 
Industry Association, to William Hodash, Managing Director, The 
Depository Trust and Clearing Company (March 7, 2006).
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    In order to cover costs incurred in collecting fees associated with 
ADR issues that do not pay periodic dividends, DTC currently retains a 
collection charge equal to three percent (3%) of the ADR agent fee 
amount collected from each participant up to a maximum of $4,000 per 
CUSIP per participant position. DTC does not retain a fee if the 
computed collection charge is less than $50.
    Due to recently implemented processing improvements, DTC has 
determined that the costs incurred in providing the collection function 
have decreased. DTC is modifying the fee it retains for this service by 
changing the frequency of the charge from one levied per CUSIP per 
participant position to one levied per CUSIP only. DTC is also changing 
the maximum amount collected from $4,000 per CUSIP per participant 
position to $10,000 per CUSIP. DTC projects that these changes will 
result in an overall reduction in the charges DTC retains for this 
service in an amount consistent with the overall reduction in the cost 
of offering the service. The modified fee became effective January 2, 
2007.
    DTC believes the proposed rule change is consistent with Section 
17A of the Act,\7\ as amended, because it updates its fee schedule. As 
such, it provides for the equitable allocation of fees among its 
participants and aligns fees for services with the associated cost to 
deliver the service.
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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

    The foregoing proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A)(ii) of the Act \8\ and Rule 19b-4(f)(2) 
\9\ thereunder because the rule establishes a due, fee, or other 
charge. 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.

[[Page 8218]]

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-2006-21 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-2006-21. 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 filings also will be 
available for inspection and copying at the principal office of DTC and 
on DTC's Web site at https://login.dtcc.com/dtcorg/. 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-2006-21 and should be 
submitted on or before March 16, 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. E7-3072 Filed 2-22-07; 8:45 am]

BILLING CODE 8010-01-P