Document ID: SEC-2022-0776-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Depository Trust Co.
Posted Date: 2022-06-07T04:00Z

[Federal Register Volume 87, Number 109 (Tuesday, June 7, 2022)]
[Notices]
[Pages 34726-34728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-12168]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95017; File No. SR-DTC-2022-005]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Eliminate Certain Fees Charged to Applicants

June 1, 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 May 24, 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 \5\ consists of modifications to the (i) 
DTC Fee Guide (``Fee Guide'') \6\ and (ii) Policy Statement on the 
Admission of Participants and Pledgees (``Policy Statement''),\7\ to 
eliminate certain fees charged to legal entities that formally make an 
application (``Application'') to DTC to become either a Participant \8\ 
(each, a ``Participant Applicant'') or a Pledgee \9\ (each, a ``Pledgee 
Applicant'') of DTC (Participant Applicants and Pledgee Applicants, 
referred to collectively as ``Applicants'').
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    \5\ Capitalized terms not defined herein are defined in the 
Rules, By-Laws and Organization Certificate of DTC (the ``Rules''), 
available at www.dtcc.com/~/media/Files/Downloads/legal/rules/
dtc_rules.pdf.
    \6\ Available at http://www.dtcc.com/~/media/Files/Downloads/
legal/fee-guides/dtcfeeguide.pdf?la=en.
    \7\ See Policy Statement, supra note 5.
    \8\ See Rule 2, Section 1, supra note 5.
    \9\ See Rule 2, Section 3, supra note 5.
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    More specifically, the Fee Guide will be amended to remove a charge 
to (A) each Participant Applicant of $5,000 in connection with its 
Application to become a Participant \10\ (``Participant Application 
Fee''), and (B) each Pledgee Applicant of $2,500 in connection with its 
Application to become a Pledgee \11\ (``Pledgee Application Fee'') 
(Participant Application Fee and Pledgee Application Fee, collectively 
referred to as ``Application Fees''). The Policy Statement will be 
amended to remove text relating to the Application Fees. These proposed 
changes are described in greater detail below.
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    \10\ See Fee Guide, supra note 6, at 16.
    \11\ Id.
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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 consists of modifications to the Fee Guide 
and Policy Statement to eliminate certain fees charged to Applicants. 
More specifically, the Fee Guide will be amended to remove the 
Application Fees. The Policy Statement will be amended to remove text 
relating to the Application Fees. These proposed changes are described 
in greater detail below.
Background
    DTC may approve an Applicant that is eligible for admission as a 
Participant or Pledgee \12\ only upon a determination by DTC that the 
Applicant meets reasonable standards of financial condition, 
operational capability and character at the time of its Application and 
on an ongoing basis thereafter.\13\ To facilitate DTC's review of an 
Application so that DTC may determine whether the Applicant satisfies 
these standards, the Applicant must satisfy DTC's Application 
requirements in form and substance satisfactory to DTC, including, but 
not limited to, required documentation (``Required Documentation''), in 
accordance with the Rules.\14\
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    \12\ See Rule 3 (setting forth qualifications for eligibility 
for Participants) and Section 3 of Rule 2 (setting forth Persons/
entity types that may become Pledgees), supra note 5.
    \13\ See Rule 2, supra note 5.
    \14\ See Rule 2 and the Policy Statement, supra note 5 (setting 
forth Required Documentation and other requirements that an 
Applicant must satisfy prior to DTC's approval of the Applicant's 
Application).
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    DTC charges each Applicant the applicable Application Fee as 
established by the Fee Guide.\15\ The Application Fees were implemented 
to help offset expenses associated with the review of Applications.\16\ 
Payment of the full amount of the Application Fee is due as of the date 
DTC provides the Applicant with access to DTC's online Application 
portal (``Portal'') \17\ and related payment instructions.\18\ An 
Application Fee is non-refundable \19\ regardless of the outcome of the 
respective Application (i.e., approval, disapproval or expiration).
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    \15\ See Fee Guide, supra note 6, at 16.
    \16\ See Securities Exchange Act Release No. 83544 (June 28, 
2018), 83 FR 31223 (July 3, 2018) (SR-DTC-2018-002).
    \17\ The Portal is a closed website that allows Applicants to 
retrieve the Application forms and templates for the Required 
Documentation, and to submit their completed Application materials, 
including Required Documentation, to DTC.
    \18\ See Fee Guide, supra note 6, at 16.
    \19\ See Policy Statement, supra note 5.
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    DTC's clearing agency affiliates, National Securities Clearing 
Corporation (``NSCC'') and Fixed Income Clearing Corporation 
(``FICC''), follow similar membership application processes and require 
similar documentation from their respective applicants as described 
above for DTC. However, despite following similar membership 
application processes, DTC charges Application Fees, while NSCC and 
FICC do not. DTC believes harmonizing its practice with its affiliates' 
practices would reduce inconsistency between the respective application 
processes and provide enhanced consistency relating to requirements for 
applicants, in particular where an entity applies to

[[Page 34727]]

become a Participant of DTC and a member of NSCC and/or FICC.
    Additionally, DTC believes that the Application Fees are not 
necessary because the amount collected from them is immaterial.\20\ 
Therefore, the elimination of the Application Fees will not have a 
material effect on DTC's overall recovery of costs and expenses 
associated with the application process, but it will help reduce costs 
for Applicants.
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    \20\ In 2020, six Participant Applications were opened, with a 
total amount $30,000 in Application Fees billed. In 2021, eight 
Participant Applications were opened with a total amount of $40,000 
in Application Fees billed.
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Proposed Rule Change
    To effectuate this proposed rule change, DTC will discontinue 
charging Application Fees and remove the Application Fees from the Fee 
Guide. Further, DTC will delete a reference to Application Fees and the 
following paragraph from the beginning of Section 3 of the Policy 
Statement:
    All applicants to become Participants or Pledgees must pay a non-
refundable application fee as specified in the Procedures for each 
application made by the applicant to DTC to become a Participant or 
Pledgee.
2. Statutory Basis
    Section 17A(b)(3)(D) of the Act \21\ requires that the Rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its participants. DTC believes the proposed 
elimination of the fees is consistent with this requirement. As stated 
above, the amount of revenue collected on an annual basis by DTC 
through Application Fees is not material to its recovery of costs and 
expenses associated with the application process or to DTC's annual 
revenue and expenses.\22\ Instead of charging the Application Fees to 
offset the costs to review Applications, DTC believes it would be more 
appropriate to absorb the costs as an operating expense through DTC's 
internal budget process.\23\ This approach also would be more 
consistent with that of its affiliates NSCC and FICC, which follow 
similar membership application review processes but do not charge 
membership application fees, as noted above.
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    \21\ 15 U.S.C. 78q-1(b)(3)(D).
    \22\ See DTC Financial Statements as of and for the Years Ended 
December 31, 2021 and 2020, and Report of Independent Registered 
Accounting Firm, available at https://www.dtcc.com/-/media/Files/Downloads/legal/financials/2021/DTC-Annual-Financial-Statements-2021-and-2020.pdf, at 3 (providing DTC's statement of income, which 
includes revenue and expenses for 2021 and 2020).
    \23\ See DTC Disclosure Framework, available at https://www.dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/DTC_Disclosure_Framework.pdf, at 123 (providing a description of 
DTC's formal budgeting process).
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    For these reasons, DTC believes that the proposed rule change is 
consistent with Section 17A(b)(3)(D) because it will help provide for 
the equitable allocation of reasonable fees among its participants.\24\
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    \24\ 15 U.S.C. 78q-1(b)(3)(D).
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(B) Clearing Agency's Statement on Burden on Competition

    DTC believes that the proposed rule change could impact competition 
by promoting it. That is, by eliminating the Applications Fees, 
Applicants could redirect those financial resources to other purposes 
that could benefit their competitive position.

(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 not to 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) \25\ of the Act and paragraph (f) \26\ 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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    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 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-2022-005 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-2022-005. 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

[[Page 34728]]

information that you wish to make available publicly. All submissions 
should refer to File Number SR-DTC-2022-005 and should be submitted on 
or before June 28, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-12168 Filed 6-6-22; 8:45 am]
BILLING CODE 8011-01-P