Document ID: SEC-2016-2021-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2016-11-18T05:00Z

[Federal Register Volume 81, Number 223 (Friday, November 18, 2016)]
[Notices]
[Pages 81830-81832]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27740]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79297; File No. SR-DTC-2016-012]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Modify the DTC Settlement Service Guide With Respect to Settlement 
Instructions Provided to DTC by Matching Utilities

November 14, 2016.
    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 November 3, 2016, 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) \3\ of the Act and Rule 19b-
4(f)(4) \4\ thereunder. The proposed rule change was effective upon 
filing with the Commission. 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 by DTC would make technical and clarifying 
changes to text in the DTC Settlement Service Guide (``Guide'') \5\ 
with respect to settlement instructions provided to DTC by Matching 
Utilities (as defined below) on behalf of Participants.\6\
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    \5\ Available at http://www.dtcc.com/~/media/Files/Downloads/
legal/service-guides/Settlement.pdf.
    \6\ Capitalized Terms not otherwise defined herein have the 
meaning set forth in the DTC Rules, By-laws and Organization 
Certificate (``DTC Rules''), available at http://www.dtcc.com/legal/rules-and-procedures.aspx, and the Guide, supra note 5.
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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
    DTC may accept eligible affirmed institutional transactions 
(``Institutional Transactions'') \7\ from an entity providing a 
matching service \8\ (``Matching Utility'') that is (i) a clearing 
agency registered pursuant to Section 17A of the Act, (ii) an entity 
that has obtained an exemption from such registration from the 
Commission, or (iii) a ``qualified vendor'' for trade confirmation/
affirmation services as defined by the rules of a self-regulatory 
organization.\9\ In addition, a Matching Utility must establish a 
connection to DTC in accordance with DTC's reasonable requirements in 
order to be able to submit Affirmed Transactions.
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    \7\ An Institutional Transaction is a securities transaction 
between a broker-dealer and its institutional customer (e.g., sell-
side firms, buy-side institutions, and custodians).
    \8\ A matching service is an electronic service by which an 
intermediary matches (i.e., reconciles) trade information from the 
counterparties to an Institutional Transaction, to generate an 
affirmed transaction (``Affirmed Transaction'') which is then used 
to provide settlement instructions for the Affirmed Transactions to 
the central securities depository, such as DTC, at which the 
Affirmed Transaction settles.
    \9\ See Securities Exchange Act Release No. 39829 (April 6, 
1998), 63 FR 17943 (April 13, 1998) at 17946 (providing interpretive 
guidance on types of entities that may provide a matching service).
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    Currently, Omgeo Global Joint Venture Matching Services--US, LLC 
(hereinafter ``Omgeo'') \10\ is the only Matching Utility that has 
established a connection with DTC. This is reflected in the text of the 
Guide which contains specific references to Omgeo with respect to DTC 
functions that are accessible to any Matching Utility that satisfies 
the connection requirements.
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    \10\ See [sic] Securities Exchange Act Release No. 44188 (April 
17, 2001), 66 FR 20494 (April 23, 2001) (600-31) for the order of 
the Commission granting Omgeo an exemption from registration as a 
clearing agency. Omgeo is a global provider of post-trade, pre-
settlement processing services for the institutional market.
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    The Commission recently approved two applications by two separate 
entities, for exemption from registration as a Clearing Agency to 
provide post-trade matching services for fixed income and equity trades 
(``Approved Exemptions'').\11\ According to the Commission's notice of 
the Approved Exemptions, these entities each indicated an intention to 
offer matching services that connect to DTC for settlement.\12\
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    \11\ Securities Exchange Act Release No. 76514 (November 24, 
2015), 80 FR 75387 (December 1, 2015) (600-33, 600-34) (Bloomberg 
STP LLC; SS&C Technologies, Inc.; Order of the Commission Approving 
Applications for an Exemption from Registration as a Clearing 
Agency; Notice).
    \12\ Id.
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    DTC proposes to revise the Guide to generalize references to 
Matching Utilities and make other changes, as set forth below.
    First, DTC would replace specific references to Omgeo in sections 
describing procedures for the ID Net Service (``ID Net'') and 
Shareholder Tracking Service to refer to a ``Matching Utility'' and 
delete provisions referencing to Omgeo by name.\13\
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    \13\ In this regard, the term Matching Utility would be defined 
in the Guide reflecting the definition provided above in this Form 
19b-4. The Commission notes that Form 19b-4 is attached to the 
filing, not to this Notice. The definition of Affirming Agency which 
appears in the ID Net section of the Guide and is the functional 
equivalent of the definition of Matching Utility as it relates to ID 
Net would be removed. Consistent with this change, references in the 
Guide to the term Affirming Agency would be replaced to use the term 
Matching Utility.
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    Second, text in the ID Net section of the Guide regarding DTC's 
acceptance of affirmed institutional transactions from Matching 
Utilities would be moved to a new section describing Affirmed 
Transactions more generally. The proposed new section would incorporate 
the definition of Affirmed Transactions, and expressly state DTC's 
current requirement that in order for a Matching Utility to establish 
and maintain a connection with DTC the Matching Utility must be able to 
balance with DTC in an automated way \14\ and

[[Page 81831]]

communicate transactions to and from DTC with the necessary mandated 
fields, i.e., transaction control number, DTC receiver and deliverer 
account number, CUSIP, message type, share quantity, market type, buy-
sell indicator, broker ID, ID agent internal account number, broker 
internal account number, agent bank ID, settlement amount, origination 
entity, recipient of message, institution, and settlement date.\15\
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    \14\ For each Matching Utility interfacing with DTC, DTC would 
require the Matching Utility to deliver a daily message on each 
business day shortly after noon from the Matching Utility with their 
accepted item counts of institutional delivery and ID Net (defined 
below) transaction totals for Settlement Date minus one 
transactions. DTC's system would compare the totals from the 
Matching Utility to its accepted item counts. If the totals match, 
an ``acknowledged balance'' balance file would be sent to the 
Matching Utility. If the totals do not match, DTC would respond with 
the list of Settlement Date minus one control numbers received from 
the Matching Utility, along with their respective transaction types 
for the originating Matching Utility to compare.
    \15\ A Matching Utility that intends to establish a new 
connection with DTC must promptly contact DTC in order to establish 
a plan to establish a connection and allow adequate time to develop 
and adequately test the interface prior to the date it expects to 
implement its connection to DTC.
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    Third, the Guide would clarify that (i) a Participant that is a 
counterparty to an Affirmed Transaction, as submitted to DTC by a 
Matching Utility, is deemed to have authorized the Matching Utility to 
provide an instruction to DTC, on the Participant's behalf, to process 
the Affirmed Transaction in accordance with DTC's Rules and Procedures 
\16\ and (ii) the submission of an Affirmed Transaction to DTC by the 
Matching Utility, on behalf of the Participant, constitutes the duly 
authorized instruction of the Participant to DTC to process the 
Affirmed Transaction in accordance with the Rules and Procedures.\17\
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    \16\ Pursuant to the Rules, the term ``Procedures'' means the 
Procedures, service guides, and regulations of the Corporation 
adopted pursuant to Rule 27, as amended from time to time. Rule 1, 
Section 1, supra [sic] note 6, at 13.
    \17\ DTC will attempt to process an eligible transaction in 
accordance with a duly authorized instruction of the Delivering 
Participant provided to DTC in this regard. See Rule 6, supra note 
6. Processing by DTC of the Delivery of the Securities subject of 
the transaction is subject to satisfaction of risk controls by the 
Participants to the transaction. Rule 9(B), Section 1, supra note 6. 
A Delivery is also subject to approval by the Receiver in the 
Receiver Authorized Delivery system before DTC will process the 
Delivery. Guide, supra note 5, at 57.
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    Fourth, the Guide would state that a Matching Utility that elects 
to enter into an arrangement to interoperate with another Matching 
Utility (``Interoperability Arrangement'') maintains the sole 
responsibility to ensure that its customers, including but not limited 
to DTC Participants that are customers of the Matching Utility, are 
operationally prepared to process Affirmed Transactions relating to the 
Interoperability Arrangement prior to the submission of such Affirmed 
Transactions to DTC.
    Finally, the proposed rule change would make technical and 
clarifying changes to the Guide to:
    (1) Clarify and streamline the text to improve readability;
    (2) Add background information regarding the Affirmed Transactions 
accepted by DTC;
    (3) Correct spelling, grammatical and typographical errors 
throughout and update tenses from future to present with respect to 
functions of ID Net and the Shareholder Tracking Service; and
    (4) Add a title page to the Guide.
Implementation Date
    The proposed rule change would become effective as of November 3, 
2016.
2. Statutory Basis
    Section 17A(b)(3)(F) \18\ of the Act requires that the rules of the 
clearing agency be designed, inter alia, to promote the prompt and 
accurate clearance and settlement of securities transactions. DTC 
believes that the proposed rule change is consistent with this 
provision because it would (i) clarify the text of the Guide with 
respect to fair access to DTC for those Matching Utilities that satisfy 
DTC's reasonable requirements so that DTC may accept Affirmed 
Transactions from them, (ii) clarify the responsibilities of Matching 
Utilities that intend to interoperate and submit related Affirmed 
Transactions to DTC, and (iii) clarify the terms pursuant to which a 
Participant's duly authorized instructions to process Affirmed 
Transactions are provided to DTC by a Matching Utility. Thus, by 
facilitating transparency in the Guide with respect to DTC's 
requirements for acceptance of Affirmed Transactions from Matching 
Utilities and clarifying the responsibilities of interoperating 
Matching Utilities in this regard, as well as by clarifying the terms 
pursuant to which a Participant's duly authorized instructions to 
process Affirmed Transactions are provided to DTC by a Matching 
Utility, the proposed rule change would promote the prompt and accurate 
clearance and settlement of securities transactions.
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    \18\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Clearing Agency'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 because it would merely 
update the Guide to make technical and clarifying changes and updates 
with respect to DTC's acceptance of Affirmed Transactions from Matching 
Utilities.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    DTC has not solicited and does not intend to solicit comments 
regarding the proposed rule change. DTC has not received any 
unsolicited written comments from interested parties. To the extent DTC 
receives written comments on the proposed rule change, DTC will forward 
such comments to the Commission. DTC has discussed the proposed rule 
change with Matching Utilities that have contacted DTC specifically 
with respect to establishing a connection with DTC.

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) \19\ of the Act and paragraph (f) of Rule 19b-4 \20\ 
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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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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 rule-comments@sec.gov. Please include 
File Number SR-DTC-2016-012 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-2016-012. 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 Web site (http://www.sec.gov/

[[Page 81832]]

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 Web site 
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 Web site (http://dtcc.com/legal/sec-rule-filings.aspx). 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-2016-012 and should be 
submitted on or before December 9, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-27740 Filed 11-17-16; 8:45 am]
 BILLING CODE 8011-01-P