Document ID: SEC-2022-0010-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Depository Trust Co.
Posted Date: 2022-01-05T05:00Z

[Federal Register Volume 87, Number 3 (Wednesday, January 5, 2022)]
[Notices]
[Pages 528-532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-28569]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93885; File No. SR-DTC-2021-018]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend the Reorganizations Guide and the Fee Guide

December 30, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 29, 2021, 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 by the clearing agency. DTC filed the proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rules 19b-
4(f)(2) and (f)(4) thereunder.\4\ 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).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(2) and (f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change \5\ consists of amendments to the 
Reorganizations Guide and the Fee Guide to (i) postpone the retirement 
of DTC's legacy computer to computer facility (``CCF'') files for 
corporate actions entitlements and allocations (``CCF Entitlements and 
Allocations Files'') \6\ to January 1, 2023,

[[Page 529]]

and (ii) amend the Fee Guide to apply the CCF File Fee to Participants 
that consume CCF Entitlements and Allocations Files \7\ between January 
1, 2022 and December 31, 2022, as more fully described below.
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    \5\ Each term not otherwise defined herein has its respective 
meaning as set forth in the Rules, By-Laws and Organization 
Certificate of DTC (the ``Rules''), the Guide to the DTC Fee 
Schedule (``Fee Guide''), and the Reorganizations Service Guide 
(``Reorganizations Guide''), available at http://www.dtcc.com/legal/rules-and-procedures.aspx.
    \6\ Each of the CCF Entitlements and Allocations Files falls 
into one of two categories (each, a ``File Category''): (i) Pre-
allocation (``Pre-Allocation CCF Files''), which includes files 
containing a Participant's allocation projections and entitlements, 
or (ii) allocation/post-allocation (``Allocation/Post-Allocation CCF 
Files''), which includes files containing information on a 
Participant's allocations and pending allocations. See Important 
Notice 13851-20 (August 27, 2020), available at https://www.dtcc.com/legal/important-notices.
    \7\ There are three types of CCF files representing the 
corporate actions lifecycle: Corporate actions announcements (``CCF 
Announcements Files''); the CCF Entitlements and Allocations Files; 
and corporate actions instructions from Participants through CCF 
files (``CCF Corporate Actions Instructions Files''). All CCF 
Announcement Files were retired as of December 31, 2018. See 
Securities Exchange Act Release No. 79746 (January 5, 2017), 82 FR 
3372 (January 11, 2017) (SR-DTC-2016-014). CCF Corporate Actions 
Instructions Files have not yet been retired and are not subject to 
this proposed rule change.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency 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. The clearing agency has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    The proposed rule change would amend the Reorganizations Guide and 
the Fee Guide to (i) postpone the retirement of CCF Entitlements and 
Allocations Files to January 1, 2023, and (ii) amend the Fee Guide to 
apply the CCF File Fee to Participants that consume CCF Entitlements 
and Allocations Files between January 1, 2022 and December 31, 2022, as 
more fully described below.
(i) Retirement of CCF Entitlements and Allocations Files and CCF File 
Fee
A. Background
    On November 19, 2020, DTC filed a rule change (the ``CCF Retirement 
Filing'') \8\ that amended the Reorganizations Guide and the Fee Guide 
to (i) set a retirement date for CCF Entitlements and Allocations Files 
of January 1, 2022, and (ii) apply a $50,000,000 CCF File Fee, per File 
Category (Pre-Allocation or Allocation/Post-Allocation) of CCF 
Entitlements and Allocations Files, to Participants that continued to 
consume CCF Entitlements and Allocations Files between January 1, 2021 
and December 31, 2021 (``Original Fee Period'').
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    \8\ See Securities Exchange Act Release No. 90490 (November 23, 
2020), 85 FR 76645 (November 30, 2020) (SR-DTC-2020-016).
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    As discussed in the CCF Retirement Filing, DTC has been informing 
Participants that corporate actions CCF files \9\ will be retired and 
will be replaced by ISO 20022 messaging since 2011.\10\ ISO 20022 
messaging offers enhanced efficiency and transparency in the corporate 
action lifecycle because, in contrast to the proprietary function and 
activity codes of CCF Files, ISO 20022 is a business-model-based 
standard for the development of messages for the international 
financial services industry.
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    \9\ There are three event groups for CCF files for corporate 
actions. Participants subscribe to the CCF files for each event 
group separately. The event groups are (i) distributions 
(``Distributions''), such as cash and stock dividends, principal and 
interest, and capital gain distributions; (ii) redemptions 
(``Redemptions''), such as full and partial calls, final paydowns, 
and maturities; and (iii) reorganizations (``Reorganizations''), 
which include both mandatory and voluntary reorganizations such as 
exchange offers, conversions, Dutch auctions, mergers, puts, reverse 
stock splits, tender offers, and warrant exercises.
    \10\ See Securities Exchange Act Release No. 63886 (February 10, 
2011), 76 FR 9070 (February 16, 2011) (SR-DTC-2011-02) (indicating 
that DTC will continue to support its legacy proprietary CCF files 
until 2015.)
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    DTC has been working with Participants to specifically support 
their orderly transition from CCF Entitlements and Allocations Files to 
ISO 20022 messaging since 2013. DTC began providing Participants with 
parallel entitlements and allocations ISO 20022 messaging in 2013 
(Distributions), 2015 (Redemptions) and 2017 (Reorganizations). In 
addition, since 2016, DTC had been communicating with Participants 
about the deadline for retirement of the CCF Entitlements and 
Allocation Files and postponed the projected retirement date multiple 
times.\11\ Finally, in 2020, DTC filed the CCF Retirement Filing and 
continued to work with Participants to support their orderly migration 
away from the CCF Entitlements and Allocations Files to ISO 20022 
messaging before the January 1, 2022.
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    \11\ See Important Notice 2538-16 (January 21, 2016), supra note 
6; Important Notice 4381-16 (November 4, 2016), supra note 6; 
Important Notice 5099-17 (February 2017), supra note 6; Important 
Notice 7488-18 (February 28, 2018), supra note 6; Important Notice 
9861-18 (October 9, 2018), supra note 6.
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B. Proposed Rule Change
    Most Participants have successfully migrated from CCF Entitlements 
and Allocations Files to ISO 20022 messaging. However, DTC understands 
that a few Participants are still testing the ISO 20022 messages and 
that not all will be ready to transition away from the CCF Entitlements 
and Allocations Files before January 1, 2022.
    Therefore, pursuant to this proposed rule change, DTC would 
postpone the retirement date of the CCF Entitlements and Allocation 
Files to January 1, 2023, and would charge Participants the $50,000 CCF 
File Fee for each File Category of CCF Entitlements and Allocations 
Files that they consume between January 1, 2022 and December 31, 2022 
(the ``New Fee Period''). The CCF File Fee would be charged to the 
Account of the Participant, upon the Participant's first receipt of CCF 
Entitlements and Allocations Files in a particular File Category during 
the New Fee Period. The CCF File Fee would cover all CCF Entitlements 
and Allocations Files within that File Category during the New Fee 
Period.
    Pursuant to the proposed rule change, DTC would amend the 
description of the CCF File Fee in the Fee Guide to conform with the 
proposed rule change. DTC would also amend the Reorganizations Guide to 
reflect the January 1, 2023 retirement date for CCF Entitlements and 
Allocations Files. Specifically, in the ``Preparing to Use the 
Services'' subsection of the ``How Reorganizations Work'' section of 
the Reorganizations Guide, DTC is proposing to replace ``*CCF files 
associated with entitlements and allocations will be retired as of 
January 1, 2022'' with ``*CCF files associated with entitlements and 
allocations will be retired as of January 1, 2023.''
Implementation Date
    DTC will implement the proposed changes on January 1, 2022. DTC 
will announce the implementation date of the proposed rule change in an 
Important Notice posted on its website.
    As proposed, a legend would be added to the Reorganizations Guide 
and the Fee Guide stating there are changes that became effective upon 
filing with the Commission but have not yet been implemented. The 
proposed legend also would include that the implementation date will be 
January 1, 2022. In addition, the proposed legend would state that the 
legend would automatically be removed upon the implementation of the 
proposed changes.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act requires, inter alia, that the 
Rules be designed to promote the prompt and

[[Page 530]]

accurate clearance and settlement of securities transactions.\12\
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
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    As described above, the proposed rule change would (i) postpone the 
retirement of CCF Entitlements and Allocations Files to January 1, 
2023, and (ii) apply the CCF File Fee to Participants that continue to 
consume CCF Entitlements and Allocations Files during the New Fee 
Period. By postponing the retirement of CCF Entitlements and 
Allocations Files to January 1, 2023, the proposed rule change would 
allow Participants to minimize potential business interruptions by 
undertaking an orderly and organized migration from CCF files to the 
more efficient ISO 20022 standard. Similarly, by charging a CCF File 
Fee to those Participants that continue to receive CCF Entitlements and 
Allocations Files after December 31, 2021, the proposed rule change 
would encourage Participants to accelerate system development and the 
adoption of the ISO 20022 standard. In this manner, the proposed rule 
change would encourage and facilitate the transition to the ISO 20022 
standard, which provides efficiencies and enhanced transparency in 
processing corporate actions and the settlement activities related 
thereto. Accordingly, DTC believes that the proposed rule change would 
promote the prompt and accurate clearance and settlement of securities 
transactions, consistent with the requirements of Section 17A(b)(3)(F) 
of the Act, cited above.
    Section 17A(b)(3)(D) of the Act requires that the Rules provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among its Participants.\13\ DTC believes that the proposed rule change 
to apply the CCF File Fee to Participants that continue to consume CCF 
Entitlements and Allocations Files during the New Fee Period would 
provide for the equitable allocation of reasonable fees.
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    \13\ 15 U.S.C. 78q-1(b)(3)(D).
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    DTC believes that the proposed application of the CCF File Fee 
would be equitably allocated because the CCF File Fee (i) would only be 
charged to those Participants that have delayed their migration from 
CCF Entitlements and Allocations Files beyond December 31, 2021 \14\ 
and (ii) would be applied in accordance with the Participant's use of a 
particular File Category.
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    \14\ As discussed above, DTC has been communicating with 
Participants about the migration from CCF files to the ISO 20022 
standard for corporate actions events since 2011. Since 2013, DTC 
has been communicating with Participants about targeted retirement 
dates for CCF Entitlements and Allocations Files and has, at the 
request of Participants, postponed the projected dates numerous 
times. Before October 2018, DTC had always told Participants that 
there would not be any charges for the continued consumption of CCF 
Entitlements and Allocations Files. After the CCF Retirement Filing 
most Participants did complete development and fully adopted the ISO 
20022 standard for entitlements and allocations information, 
illustrating the effectiveness of the CCF File Fee.
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    Further, DTC believes that the application of the $50,000 CCF File 
Fee would be reasonable. As discussed above, Participants that did not 
complete their migration to ISO 20022 by January 1, 2021 were charged 
the $50,000 CCF File Fee for each File Category of CCF Entitlements and 
Allocations Files that they consumed during the Original Fee Period. 
Most Participants completed their migration during the Original Fee 
Period, which DTC believes is due, in part, to the application of the 
CCF Fee. Based on this prior experience with the CCF File Fee, DTC 
believes that the CCF File Fee in the amount of $50,000 provides the 
necessary encouragement for Participants to accelerate their system 
development for their adoption of the ISO 20022 standard for 
entitlements and allocations information.\15\ Further, during the 
application of the CCF File Fee to CCF Entitlements and Allocations 
Files during the Original Fee Period, DTC had not received any negative 
feedback from Participants suggesting that the $50,000 fee was overly 
burdensome.\16\
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    \15\ The CCF File Fee is not designed to cover costs incurred by 
DTC as a result of continuing to service CCF files.
    \16\ DTC also had charged a similar $50,000 CCF File Fee to 
Participants that continued to receive the CCF Announcements Files 
between 2016-2018, in order to encourage Participants to migrate 
from CCF Announcements Files to ISO 20022 messaging. DTC believes 
that the CCF File Fee provided a strong incentive for Participants 
to accelerate their migration from the CCF format to the ISO 2002 
standard, thereby allowing DTC to retire all of the CCF 
Announcements Files by December 31, 2018. See Securities Exchange 
Act No. 76811 (December 31, 2015), 81 FR 826 (January 7, 2016) (SR-
DTC-2015-013) (postponing retirement of CCF Announcements Files and 
implementation of a $50,000 CCF File Fee to encourage prompt 
transition to the ISO 20022 standard); and see also Securities 
Exchange Act Release No. 79746 (January 5, 2017), 82 FR 3372 
(January 11, 2017) (SR-DTC-2016-014) (establishing the retirement 
date for CCF Announcement Files).
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    Therefore, DTC believes that the proposed rule change regarding the 
CCF File Fee provides for the equitable allocation of reasonable dues, 
fees, and other charges among its Participants, consistent with Section 
17A(b)(3)(D) of the Act, cited above.

(B) Clearing Agency's Statement on Burden on Competition

    DTC believes that the proposed rule change with respect to 
postponing the retirement of CCF Entitlements and Allocations Files to 
January 1, 2023 would not have any impact on competition. The proposed 
rule change would provide any Participant that has not completed its 
migration from CCF Entitlements and Allocation Files with additional 
time to complete its testing and development of its systems, and 
finalize the transition to ISO 20022 messaging. Therefore, DTC believes 
that the proposed rule change with respect to postponing the retirement 
of CCF Entitlements and Allocations Files to January 1, 2023 would not 
have a burden on competition.\17\
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    \17\ 15 U.S.C. 78q-1(b)(3)(I).
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    DTC believes that the proposed rule change with respect to amending 
the Fee Guide to apply the CCF File Fee to Participants that continue 
to consume CCF Entitlements and Allocations Files during the New Fee 
Period could have an impact on competition because it could create a 
burden on competition.\18\ Although the proposed application of the CCF 
File Fee is designed to incentivize Participants to accelerate their 
adoption of the ISO 20022 standard, DTC recognizes and appreciates that 
charging the fee could negatively affect such Participants' operating 
costs. However, DTC believes that any burden on competition would not 
be significant and would be necessary and appropriate in furtherance of 
the purposes of the Act, as permitted by Section 17A(b)(3)(I) of the 
Act.\19\
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    \18\ Id.
    \19\ Id.
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    DTC believes any burden on competition would not be significant 
because (i) the fee would only be charged once per File Category, upon 
the Participant's first receipt of CCF Entitlements and Allocations 
Files for a File Category during the New Fee Period, and (ii) the 
application of the CCF File Fee for a File Category would cover the 
consumption of all CCF Entitlements and Allocations Files within that 
File Category during the New Fee Period. In addition, based on DTC's 
prior use of the CCF File Fee for CCF Announcements Files \20\ and CCF 
Entitlements and Application Files, DTC has no indication that the 
amount of the fee creates a significant burden on any Participant.
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    \20\ See supra note 16.
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    DTC believes that any burden on competition that may be created by 
the proposed change to amend the Fee Guide to apply the CCF File Fee to 
Participants that continue to consume CCF Entitlements and Allocations 
Files during the New Fee Period would be

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necessary and appropriate in furtherance of the purposes of the Act, as 
permitted by Section 17A(b)(3)(I) of the Act.\21\ DTC believes that 
this proposed change would be necessary because some Participants have 
yet to adopt the ISO 20022 standard, despite at least seven years of 
communication and prompting on the issue.\22\ As noted above, the ISO 
20022 standard provides efficiencies and enhanced transparency in 
processing corporate actions and the settlement activities related 
thereto. Thus, DTC believes that the proposed rule change would promote 
the prompt and accurate clearance and settlement of securities 
transactions, consistent with Section 17A(b)(3)(F) of the Act.\23\
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    \21\ Id.
    \22\ See supra notes 10 and 11.
    \23\ 15 U.S.C. 78q-1(b)(3)(F).
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    DTC believes that the proposed rule change to apply the CCF File 
Fee to Participants that continue to consume CCF Entitlements and 
Allocations Files during the New Fee Period would be appropriate in 
furtherance of the purposes of the Act, as permitted by Section 
17A(b)(3)(I) of the Act.\24\ DTC's prior experience with the $50,000 
CCF File Fee and the successful retirement of CCF Announcements Files 
illustrates that a $50,000 CCF File Fee provides the necessary 
encouragement for Participants to accelerate their system development 
for the full adoption of the ISO 20022 standard. Further, during the 
application of the CCF File Fee to CCF Announcements Files, DTC had not 
received any negative feedback from Participants that suggested that 
the $50,000 fee was overly burdensome; nor did DTC receive any 
objections during the application of the CCF File Fee to CCF 
Entitlements and Allocations Files during the Original Fee Period that 
suggested that the $50,000 fee was overly burdensome. Accordingly, DTC 
believes that application of the $50,000 CCF File Fee would be 
appropriate here in order to incentivize Participants to accelerate 
their migration to the ISO 20022 standard. In addition, as discussed 
above, DTC believes that the proposed application of the CCF File Fee 
would be equitably allocated because the CCF File Fee (i) would only be 
charged to those Participants that have delayed their migration from 
CCF Entitlements and Allocations beyond December 31, 2021 and (ii) 
would be applied in accordance with the Participant's use of a 
particular File Category.
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    \24\ 15 U.S.C. 78q-1(b)(3)(I).
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    Therefore, for these reasons, DTC believes that a perceived 
competitive burden of the proposed rule change to apply the CCF File 
Fee to Participants that continue to consume CCF Entitlements and 
Allocations Files during the Fee Period would be necessary and 
appropriate in furtherance of the purposes of the Act, as permitted by 
Section 17A(b)(3)(I) of the Act.\25\
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    \25\ 15 U.S.C. 78q-1(b)(3)(I).
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    DTC has not received or solicited any written comments relating to 
this proposal. If any written comments are received, DTC will amend 
this filing to publicly file such comments as an Exhibit 2 to this 
filing, as required by Form 19b-4 and the General Instructions thereto.
    Persons submitting written comments are cautioned that, according 
to Section IV (Solicitation of Comments) of the Exhibit 1A in the 
General Instructions to Form 19b-4, the Commission does not edit 
personal identifying information from comment submissions. Commenters 
should submit only information that they wish to make available 
publicly, including their name, email address, and any other 
identifying information.
    All prospective commenters should follow the Commission's 
instructions on How to Submit Comments, available at https://www.sec.gov/regulatory-actions/how-to-submit-comments. General 
questions regarding the rule filing process or logistical questions 
regarding this filing should be directed to the Main Office of the 
Commission's Division of Trading and Markets at 
[email protected] or 202-551-5777.
    DTC reserves the right to not respond to any comments received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \26\ of the Act and paragraph (f) \27\ 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.
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    \26\ 15 U.S.C 78s(b)(3)(A).
    \27\ 17 CFR 240.19b-4(f).
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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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-DTC-2021-018 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-DTC-2021-018. 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 website (https://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 website 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 the filing also will be available 
for inspection and copying at the principal office of DTC and on DTCC's 
website (https://dtcc.com/legal/sec-rule-filings.aspx). All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-DTC-2021-018 and should be submitted on 
or before January 26, 2022.

[[Page 532]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2021-28569 Filed 1-4-22; 8:45 am]
BILLING CODE 8011-01-P