Document ID: SEC-2008-1092-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Depository Trust Co.
Posted Date: 2008-08-07T04:00Z

[Federal Register: August 7, 2008 (Volume 73, Number 153)]
[Notices]               
[Page 46128-46129]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07au08-123]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58252; File No. SR-DTC-2008-05]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of a Proposed Rule Change Relating to Establishing a 
New Money Market Instrument Procedure Disincentive Fee

July 30, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 5, 2008, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') and on July 16, 2008, amended the 
proposed rule change and as described in Items I, II, and III below, 
which Items have been prepared primarily by DTC. The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change would establish a new disincentive fee for 
DTC's Money Market Instrument (``MMI'') settlement services.

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 such statements.

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

    The purpose of the proposed rule change is to add a new $10,000 
disincentive fee for ``reversal of a failure or refusal to pay 
instruction'' that will be listed in DTC's fee schedule for settlement 
services under the heading ``Money Market Instruments (MMI) by Book 
Entry Only.''
    As background, DTC automatically sweeps all maturing money market 
instruments' (``MMIs'') positions each morning from investors' 
custodian accounts and generates the appropriate maturity payment 
(``MP''). The MMIs are then delivered to the account of the appropriate 
issuer paying agent (``IPA''). DTC debits the IPA's account in the 
amount of the MP for settlement that day and credits the same MP amount 
to the investor's custodian account for payment that day to the 
investor.
    However, because MPs are processed automatically and randomly 
against the IPA's DTC account, IPAs can refuse to pay a specific 
issuer's MP if that issuer defaults on its obligation to the IPA. An 
IPA that refuses payment on an MMI must communicate its intention to do 
so to DTC by using the MP Refusal function on DTC's Participant 
Terminal System (``PTS''). This communication is referred to as an 
Issuer Failure/Refusal to Pay and it allows the paying agent to enter 
refusal to pay notifications for a particular defaulting issuer through 
PTS until 3:00 p.m., eastern time, on the maturity date. The paying 
agent understands that entering such a notification will cause DTC to 
follow its Defaulting Issuer procedures, which include devaluing the 
collateral value of all of the defaulting issuer's MMIs to zero, 
reversing all of the issuer's issuances and maturities processed that 
day, notifying DTC participants of the default, and blocking all 
further issuances by the issuer from entering DTC. If, thereafter, an 
IPA contacts DTC to complete all of the transactions that it previously 
cancelled through the MP Refusal Function, DTC must undo all the 
actions it took under its Defaulting Issuer procedures. This process of 
reversing a refusal or failure to pay instruction and effectively 
resettling the security is an operational burden to DTC and of great 
financial concern to investors and their custodians. Accordingly, DTC 
is proposing to implement a disincentive $10,000 fee to each IPA that 
requests such reversal. Additionally, DTC expects such fee to serve as 
a disincentive to IPAs that request such reversal.
    DTC states that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \2\ and the rules and 
regulations thereunder applicable to DTC because the disincentive fee 
is designed to deter the practice of requesting a refusal or failure to 
pay instruction, thereby promoting the prompt and accurate clearance 
and settlement of securities transactions.
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    \2\ 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 it receives.

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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (A) By order approve such proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 e-mail to rule-comments@sec.gov. Please include 
File

[[Page 46129]]

No. SR-DTC-2008-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File No. SR-DTC-2008-05. 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 Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. to 3 p.m. Copies of such filing also will be available for 
inspection and copying at DTC's principal office and on DTC's Web site 
at http://www.dtcc.com/legal/rule_filings/dtc/2008.php. 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 No. DTC-2008-05 and should be 
submitted on or before August 28, 2008.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\3\
Florence E. Harmon,
Acting Secretary.
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    \3\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E8-18070 Filed 8-6-08; 8:45 am]

BILLING CODE 8010-01-P