Document ID: SEC-2022-1366-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Depository Trust Co.
Posted Date: 2022-10-19T04:00Z

[Federal Register Volume 87, Number 201 (Wednesday, October 19, 2022)]
[Notices]
[Pages 63541-63543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22655]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96060; File No. SR-DTC-2022-010]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend Procedures Set Forth in the Custody Guide and the Underwriting 
Guide Including the Policy Statement on the Eligibility of Foreign 
Securities

October 13, 2022.
    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 October 7, 2022, 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 Rule 19b-
4(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)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of amendments to Procedures \5\ 
set forth in the Custody Guide \6\ and the Underwriting Guide,\7\ as 
well as the Policy Statement on the Eligibility of Foreign Securities 
(``Policy Statement'') set forth in the Rules,8 9 to make 
technical and clarifying changes, as described in greater detail below.
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    \5\ Pursuant to the Rules, the term ``Procedures'' means the 
Procedures, service guides, and regulations of DTC adopted pursuant 
to Rule 27, as amended from time to time. Rule 1, Section 1, infra 
note 9. DTC's Procedures are filed with the Securities and Exchange 
Commission (``Commission''). They are binding on DTC and each 
Participant in the same manner that they are bound by the Rules. 
Rule 27, infra note 9.
    \6\ The Custody Guide, infra note 9, contains Procedures for 
DTC's Custody Service. The Custody Service allows a Participant to 
deposit (i) Securities not eligible for DTC book-entry services, 
(ii) Securities that would otherwise be eligible for DTC book-entry 
services but are not registered in the name of DTC's nominee, Cede & 
Co., and (iii) certain ``non-standard assets.'' Custody Guide, infra 
note 9, at 7. The Custody Service also includes DTC services for 
Deposit and Safekeeping, Withdrawal, Regular Transfer, Restricted 
Deposits and Transfer, Reorganization, Branch Deposits, and Physical 
Clearance and Settlement services. Custody Guide, infra note 9, at 
8.
    \7\ The Underwriting Guide, infra note 9, contains Procedures 
for DTC's Underwriting Service. The Underwriting Service allows 
Participants to request eligibility for Securities and deposit 
securities eligible for depository services. Underwriting Guide, 
infra note 9, at 7.
    \8\ The purpose of the Policy Statement is to set forth in an 
accessible manner the criteria and procedures for making the 
securities of foreign issuers (``Foreign Securities'') eligible for 
deposit and book-entry transfer through the facilities of DTC in 
accordance with the Securities Act of 1933 and the rules and 
regulations of the Commission thereunder. See Securities Exchange 
Act Release No. 56277 (August 17, 2007), 72 FR 48709 (August 24, 
2007) (File No. SR-DTC-2007-04).
    \9\ Each capitalized term not otherwise defined herein has its 
respective meaning as set forth in the Rules, By-Laws and 
Organization Certificate of The Depository Trust Company 
(``Rules''), available at http://www.dtcc.com/legal/rules-and-procedures.aspx, the DTC Custody Service Guide (``Custody Guide''), 
available at https://www.dtcc.com/~/media/Files/Downloads/legal/
service-guides/Custody.pdf and the DTC Underwriting Service Guide 
(``Underwriting Guide''), available at https://www.dtcc.com/~/media/
Files/Downloads/legal/service-guides/Underwriting-Service-Guide.pdf.
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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 Procedures \10\ set forth 
in the Custody Guide \11\ and the Underwriting Guide,\12\ as well as 
the Policy Statement on the Eligibility of Foreign Securities (``Policy 
Statement'') set forth in the Rules,\13\ to make technical and 
clarifying changes, as described below.
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    \10\ Pursuant to the Rules, the term ``Procedures'' means the 
Procedures, service guides, and regulations of DTC adopted pursuant 
to Rule 27, as amended from time to time. Rule 1, Section 1, supra 
note 9. DTC's Procedures are filed with the Securities and Exchange 
Commission (``Commission''). They are binding on DTC and each 
Participant in the same manner that they are bound by the Rules. 
Rule 27, supra note 9.
    \11\ The Custody Guide, supra note 9, contains Procedures for 
DTC's Custody Service. The Custody Service allows a Participant to 
deposit (i) Securities not eligible for DTC book-entry services, 
(ii) Securities that would otherwise be eligible for DTC book-entry 
services but are not registered in the name of DTC's nominee, Cede & 
Co., and (iii) certain ``non-standard assets.'' Custody Guide, supra 
note 9, at 7. The Custody Service also includes DTC services for 
Deposit and Safekeeping, Withdrawal, Regular Transfer, Restricted 
Deposits and Transfer, Reorganization, Branch Deposits, and Physical 
Clearance and Settlement services. Custody Guide, supra note 9, at 
8.
    \12\ The Underwriting Guide, supra note 9, contains Procedures 
for DTC's Underwriting Service. The Underwriting Service allows 
Participants to request eligibility for Securities and deposit 
securities eligible for depository services. Underwriting Guide, 
supra note 9, at 7.
    \13\ The purpose of the Policy Statement is to set forth in an 
accessible manner the criteria and procedures for making the 
securities of foreign issuers (``Foreign Securities'') eligible for 
deposit and book-entry transfer through the facilities of DTC in 
accordance with the Securities Act of 1933 and the rules and 
regulations of the Commission thereunder. See Securities Exchange 
Act Release No. 56277 (August 17, 2007), 72 FR 48709 (August 24, 
2007) (File No. SR-DTC-2007-04).

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[[Page 63542]]

Proposed Rule Change
Custody Guide
    The proposed rule change would make the following changes to the 
text of the Custody Guide.
    First, the section of the Custody Guide titled ``Requesting Custody 
Eligibility for a Security'' \14\ would be revised to delete text that 
directs Participants with questions regarding the section to a phone 
number for the DTC Underwriting Hotline.\15\ The more appropriate party 
for a Participant to contact is its relationship manager, which is 
already noted in the section.\16\ Deleting the reference to the 
Underwriting Hotline would provide greater clarity as to where 
Participants should direct their inquiries relating to this aspect of 
the Custody Service.
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    \14\ Custody Guide, supra note 9, at 20-21.
    \15\ Custody Guide, supra note 9, at 21.
    \16\ Custody Guide, supra note 9, at 20.
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    Second, the subsection titled ``Short-Term Maturity'' \17\ under 
the ``Custody Reorganization'' section of the Custody Guide would be 
deleted as the functionality described in the subsection will be 
retired. The functionality described in the subsection relates to a 
process for the automatic redemption of Securities with short terms to 
maturity, including, but not limited to, bankers' acceptances and 
certificates of deposit.\18\ This functionality provides that DTC will 
track payment details for short-term Securities held in the Custody 
Service and provides a projection report of maturities to occur within 
the next 5 Business Days to the applicable Participant for balancing 
purposes. DTC then arranges for the certificate to be automatically 
routed to an internal Short-Term Maturity Prep box (``Short-Term 
Maturity Box'') to then be presented to the paying agent on the payable 
date, along with a system-generated instruction for the paying agent to 
wire the proceeds to the bank account designated by the Participant.
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    \17\ Custody Guide, supra note 9, at 24.
    \18\ See Securities Exchange Act Release No. 42597 (March 30, 
2000), 65 FR 18399 (April 7, 2000) (File No. SR-DTC-99-26).
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    DTC is retiring this Short-Term Maturity functionality as it has 
not been used by a Participant in over five years, and such 
transactions have been rare since the implementation of the Short-Term 
Maturity functionality. Based on DTC's observation of existing 
Participant deposits and activity, DTC does not anticipate future 
demand for this process.
    Once the Short-Term Maturity process described in the subsection is 
discontinued, Participants holding any applicable Securities through 
the Custody Service would need to track any such maturity details on 
their own and provide appropriate instructions relating to matured 
Securities through the DTC system via the general Custody Service 
system functionality, as they would for other transaction types not 
otherwise specified in the Custody Guide, using the Participant 
Terminal System (PTS)/Participant Browser System (PBS) function CUST or 
via messaging.\19\
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    \19\ Custody Guide, supra note 9, at 16.
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    In discontinuing this function, the Custody Guide would be updated 
to delete, (i) a reference to the Short-Term Maturity Box under the 
heading ``Custody Reorganization Boxes,'' and (ii) a reference to 
short-term maturities under the heading ``Reorganization and Redemption 
Activities.''
    Finally, in the ``Copyright'' section of the Custody Guide, the 
date would be changed from 2021 to 2022.
Underwriting Guide
    The proposed rule change would make the following changes to the 
text of the Underwriting Guide.
    First, the heading titled ``Service Topics'' \20\ would be deleted. 
The heading follows a section titled ``Overview'' that explains that 
the Underwriting Guide describes services offered under the 
Underwriting Service and related requirements. Also, the ``Service 
Topics'' heading immediately precedes descriptions of the various 
service offerings that DTC provides as part of the Underwriting 
Service. Because the Overview section provides sufficient context for 
the reader to understand that the Underwriting Guide provides such 
descriptions, the inclusion of the ``Service Topics'' heading is not 
needed as a reference point for readers to understand the context or 
purpose of the service descriptions that follow. In this regard, DTC 
believes the elimination of this heading would enhance readability by 
reducing unnecessary wording.
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    \20\ Underwriting Guide, supra note 9, at 10.
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    Second, the section of the Underwriting Guide titled ``Custody 
Service'' \21\ would be deleted. Although, the section provides a brief 
overview of the Custody Service and related Procedures, the Custody 
Service is already described in the Custody Service Guide. So, 
inclusion of the description of the Custody Service within the 
Underwriting Guide is duplicative and unnecessary. The deletion of this 
section from the Underwriting Guide will not affect the Custody Service 
or the Procedures described in the Custody Guide.
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    \21\ Underwriting Guide, supra note 9, at 18.
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    Third, references to ``data distribution boxes'' and references to 
distributions of hard copy reports \22\ would be deleted from the 
Underwriting Guide. The glossary included in the Underwriting Guide 
defines data distribution boxes as receptacles located in the central 
delivery area of DTC used for distributing hard copy reports and 
notices to Participants.\23\ A subsection titled ``About the Product'' 
under the ``IPO Tracking System'' section of the Underwriting Guide 
provides that reports are issued daily in hard copy form and are 
distributed through DTC's data distribution boxes or DTC's Interface 
Department. The ``How the Product Works'' subsection of the ``IPO 
Tracking System'' section also contains a cross reference regarding 
instructions on data distribution boxes to the text in the ``About the 
Product'' subsection described above.
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    \22\ Underwriting Guide, supra note 9, at 8, 12 and 13.
    \23\ Underwriting Guide, supra note 9, at 8.
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    Today, IPO Tracking reports are transmitted in electronic format, 
and Participants no longer retrieve such reports in hard copy form. As 
such, DTC would update the Underwriting Guide to delete the above-
described references to data distribution boxes and distribution of 
hard copy reports from the glossary and the ``IPO Tracking System'' 
section.
    Finally, in the ``Copyright'' section of the Underwriting Guide, 
the date would be changed from 2021 to 2022.
Policy Statement
    The proposed rule change would make a technical amendment to the 
Policy Statement to align a provision of the Policy Statement with the 
Procedures.
    The Policy Statement covers eligibility provisions for both Foreign 
Securities deposited with DTC at the time that such Foreign Securities 
are first distributed (referred to as ``new issues'') and Foreign 
Securities deposited with DTC subsequent to the time that such Foreign 
Securities are first distributed (referred to as ``older issues'').
    Section 3 (``Section 3'') of the Policy Statement provides for a 
variety of measures designed to facilitate compliance by issuers and 
Participants with their obligations to DTC and pursuant to the federal 
securities laws.
    Among requirements for new issues, Section 3 references an 
``Eligibility Questionnaire'' that sets forth, inter alia, the basis on 
which the securities are

[[Page 63543]]

eligible for deposit and book-entry transfer through the facilities of 
DTC that must be provided by a Participant seeking eligibility of a 
Foreign Security. However, today, in accordance with the Procedures, 
namely the Underwriting Guide \24\ and the Operational Arrangements 
(Necessary for an Issue to Become and Remain Eligible for DTC Services) 
(``OA''),\25\ Participants submit eligibility requests through DTC's 
systems designated for this purpose.
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    \24\ Underwriting Guide, supra note 9, at 16.
    \25\ OA, available at https://www.dtcc.com/~/media/Files/
Downloads/legal/issue-eligibility/eligibility/operational-
arrangements.pdf at 6-19.
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    In this regard, the proposed rule change would make a technical 
change to the above-referenced text in the Policy Statement to remove 
the reference to an ``Eligibility Questionnaire'' and replace it with a 
reference to an ``eligibility request, to be submitted to the 
Corporation in accordance with the Procedures.''
2. Statutory Basis
    DTC believes that the proposed rule change is consistent with the 
requirements of the Securities Exchange Act of 1934 (``Act''), and the 
rules and regulations thereunder applicable to DTC, in particular 
Section 17A(b)(3)(F) \26\ of the Act.
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    \26\ 15 U.S.C. 78q-1(b)(3)(F).
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    Section 17A(b)(3)(F) of the Act requires, inter alia, that the 
rules of the clearing agency be designed to promote the prompt and 
accurate clearance and settlement of securities transactions.\27\ As 
described above, the proposed rule change revises the Custody Guide, 
the Underwriting Guide, and the Policy Statement to remove references 
to obsolete functions and make other technical changes. In this regard, 
the proposed rule change helps clarify the Procedures set forth in the 
Custody Guide, the Underwriting Guide, and the Policy Statement with 
respect to services and functions offered by DTC to Participants for 
processing of applicable transactions. Therefore, by improving the 
clarity of those documents with respect to those services and 
functions, the proposed rule change would help promote the prompt and 
accurate clearance and settlement of securities transactions, 
consistent with the requirements of the Act, in particular Section 
17A(b)(3)(F) of the Act, cited above.
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    \27\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    DTC does not believe that the proposed rule change will have an 
impact on competition because the proposed rule change consists of 
updates relating to obsolete functions and technical changes that would 
not significantly affect Participants' use of the applicable services.

(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, they would be 
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
    Persons submitting 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) \28\ of the Act and paragraph (f) \29\ 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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    \28\ 15 U.S.C. 78s(b)(3)(A).
    \29\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-DTC-2022-010 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-2022-010. 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 (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 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 
(http://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-2022-010 and should be submitted on 
or before November 9, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22655 Filed 10-18-22; 8:45 am]
BILLING CODE 8011-01-P