Document ID: SEC-2005-0173-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Depository Trust Co.
Posted Date: 2005-10-31T05:00Z

[Federal Register: October 31, 2005 (Volume 70, Number 209)]
[Notices]               
[Page 62356-62357]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31oc05-79]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52653; File No. SR-DTC-2005-15]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Eliminate the Use of Contra CUSIP Numbers To Segregate Partially-Called 
Positions of Participants in Variable Rate Demand Obligation Issues

October 21, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 3, 2005, 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. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested parties.
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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 eliminates the use of contra CUSIP numbers 
to segregate partially-called positions of participants in Variable 
Rate Demand Obligation (``VRDO'') issues. These positions will be 
handled in the same manner as all other issue types, with the 
partially-called positions being segregated in the Call Account under 
the issue's regularly assigned CUSIP number.

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 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.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by DTC.

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[[Page 62357]]

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

    The use of contra CUSIP numbers for VRDO partial calls was designed 
to facilitate the settlement of trades in called securities. The 
practice enables participants to process book-entry deliveries versus 
payment by the submission of Deliver Order (``DO'') transactions, with 
the ultimate receiving participants of the deliveries being credited 
with the call proceeds on redemption date. In practice, the use of 
contra CUSIPs for this purpose is inefficient for participants and for 
DTC. For example, DTC must maintain security master file linkages of 
the related CUSIP numbers and separately announce and process the 
interest payments due participants and their customers based on contra 
CUSIP positions. Furthermore, thousands of partially-called positions 
in contra CUSIP numbers are created each month, and DTC has determined 
that very few DOs are processed.
    In place of the use of contra CUSIP's, DTC will now process 
partially-called positions in VRDO issues in the same manner as all 
other issue types, with the partially-called positions being segregated 
in the Call Account under the issue's regularly assigned CUSIP number. 
DTC believes the rule change is consistent with Section 17A of the 
Act,\3\ as amended, because it will promote efficiency in processing 
partial calls of VRDO issues. The rule change will be implemented 
consistently with the safeguarding of securities and funds in the 
custody or control of DTC because DTC will be processing partial calls 
of VRDO issues in a similar manner to the way DTC processes partial 
calls of other issue types.
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    \3\ 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

    DTC has discussed this proposed rule change with various 
participants. DTC circulated an Important Notice on August 4, 2005, 
describing the proposal and inviting participants to direct comments 
and questions to DTC (Important Notice B 8359). DTC received 
one comment letter from the Regional Municipal Operations Association, 
which supported the rule change. DTC will notify the Commission of any 
additional 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 \4\ and Rule 19b-
4(f)(4) \5\ thereunder because it does not adversely affect the 
safeguarding of securities or funds in the custody or control of DTC or 
for which it is responsible and 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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    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 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-2005-15 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-DTC-2005-15. 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 Section, 100 F Street, 
NE., Washington, DC 20549. 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 https://login.dtcc.com/dtcorg/. 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-2005-15 and should be 
submitted on or before November 21, 2005.
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    \6\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
Jonathan G. Katz,
Secretary.
[FR Doc. E5-5997 Filed 10-28-05; 8:45 am]

BILLING CODE 8010-01-P