Document ID: SEC-2008-1188-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2008-08-27T04:00Z

[Federal Register: August 27, 2008 (Volume 73, Number 167)]
[Notices]               
[Page 50661-50663]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27au08-87]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58407; File No. SR-DTC-2008-10]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Make Technical Changes to the Collateral Loan System

August 21, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 1, 2008, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change described 
in Items I, II, and III below, which items have been prepared primarily 
by DTC. DTC filed the proposal pursuant to Section 19(b)(3)(A)(iii) of 
the Act \2\ and Rule 19b-4(f)(4) \3\ thereunder so that the proposal 
was effective upon filing with the Commission. The Commission is 
publishing this notice to solicit comments on the rule change from 
interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \3\ 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of the rule change is to (i) modify record layouts for 
the Collateral Loan System to comply with the new Symbology series key 
defined by the Options Symbology Initiative (``OSI'') and (ii) 
implement record layout changes that will allow The Options Clearing 
Corporation (``OCC'') members to process collateral loan transactions 
directly against OCC sub-accounts.\4\
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    \4\ For more information regarding the record layout changes, 
see DTC Important Notice B 3577-08. http://www.dtcc.com/downloads/
legal/imp_notices/2008/dtc/set/3577-08.pdf.
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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 these 
statements.\5\
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    \5\ The Commission has modified the text of the summaries 
prepared by DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Options Symbology Initiative
    Currently organizations that support trading in listed options 
typically use a three to five alpha character representation. The first 
three characters identify the option root symbol, and the remaining two 
alpha characters identify the expiration month, call/put indicator, and 
strike price. In an effort to standardize option symbols and overhaul 
the existing method of identifying exchange-listed options contracts, 
OCC is spearheading an industry-wide adoption of the OSI.\6\
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    \6\ For more information about The Options Clearing 
Corporation's Options Symbology Initiative see the most recent plan 
at http://www.theocc.com/initiatives/symbology/implementation_
plan.jsp.
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    The OSI supports the elimination of alpha codes that are currently 
used to denote expiration month, call/put code, and strike price. As a 
result, DTC is proposing to modify its record layouts for DTC's 
Collateral Loan System to

[[Page 50662]]

comply with the new Symbology series key defined by the OSI. DTC 
believes these changes will increase efficiency and improve the 
mechanism for participants to perform under the OSI initiative.
2. OCC Sub-Accounting Initiative
    The purpose of the OCC sub-accounting initiative is to eliminate 
the need for multiple OCC clearing member numbers. OCC sub-accounting 
also allows OCC clearing members to separate retail and professional 
customers for purposes of reserve/PAIB computations \7\ and to separate 
traditional and portfolio margin customers for purposes of portfolio 
margining. In support of the OCC sub-accounting initiative, OCC has 
requested that DTC implement record layout changes that will allow OCC 
members to process collateral loan transactions directly against these 
OCC sub-accounts.
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    \7\ Commission customer protection rules require firms to 
compute the amount a clearing firm must place in a reserve account 
to back their customers' assets. There are effectively two 
calculations: One for retail customers (``Reserve'') and one for the 
proprietary accounts of introducing brokers (``PAIB''). Under both 
of these calculations the clearing firm is allowed to take as a 
debit in the calculation OCC's clearing level margin associated with 
these customers' positions. At the clearinghouse level both Reserve 
and PAIB customers are cleared in the customer range, and currently 
only one margin requirement is produced. Since the OCC margin 
requirement is comprised of both Reserve and PAIB clients, clearing 
firms do not use the OCC margin requirement as a debit in their 
computations. As a result, firms have to post more in their Reserve 
accounts since they cannot use the offsets provided for under 
Commission customer protection rules.
    OCC sub-accounting would provide clearing firms with the ability 
to maintain subaccounts under the customer range for Reserve 
customers and PAIB customers. As a result, OCC could compute two 
separate margin requirements to which the clearing firm can post 
collateral and apply Reserve and PAIB calculations. This would free 
up additional liquidity for clearing firms that currently cannot 
include the OCC margin in the customer protection rule computations 
due to the inability to create a subaccount.
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    The OCC has mandated that modifications for the OSI and the OCC 
sub-accounting initiative be implemented simultaneously because both 
initiatives require modifications to input and output file formats as 
well as some of DTC's screen based applications on the Participant 
Terminal System (``PTS'') and Participant Browser Services 
(``PBS'').\8\ OCC has requested that DTC implement these changes on 
August 8, 2008, so that OCC members can begin to migrate to the new 
formats. OCC has mandated that OCC members be ready to use the new 
formats by October 10, 2008.
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    \8\ Participants use DTC's Collateral Loan function on the PTS 
to pledge securities to OCC in order to meet OCC's option 
collateralization requirements. Participants can also use PTS to 
input requests for the release of securities pledged to OCC, and OCC 
can use PTS to approve or cancel release requests.
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    The proposed rule change is consistent with Section 17A of the 
Act,\9\ as amended, because it will reduce operational and financial 
risks associated with multiple OCC clearing member numbers thereby 
promoting the prompt and accurate clearance and settlement of 
securities transactions. Additionally, record layout modifications will 
increase efficiency and improve the mechanism for DTC Participants to 
perform under the OSI initiative.
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    \9\ 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 received by DTC.

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

    The foregoing proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-
4(f)(4) \11\ thereunder because the proposed rule change effects a 
change in an existing service of a registered clearing agency that: (i) 
does not adversely affect the safeguarding of securities or funds in 
the custody or control of the clearing agency or for which it is 
responsible and (ii) does not significantly affect the respective 
rights or obligations of the clearing agency or persons using the 
service. At any time within sixty days of the filing of the proposed 
rule change, the Commission may summarily abrogate 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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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(4).
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-DTC-2008-10 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 Number SR-DTC-2008-10. 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. and 3 p.m. Copies of such filings also will be available for 
inspection and copying at the principal office of DTC and on DTC's Web 
site at http://www.dtcc.com/downloads/legal/rule_filings/2008/dtc/
2008-10.pdf. 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-
2008-10 and should be submitted on or before September 17, 2008.
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    \12\ 17 CFR 200.30-3(a)(12).

[[Page 50663]]

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    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-19822 Filed 8-26-08; 8:45 am]

BILLING CODE 8010-01-P