Document ID: SEC-2009-0051-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2009-01-12T05:00Z

[Federal Register: January 12, 2009 (Volume 74, Number 7)]
[Notices]               
[Page 1266-1268]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ja09-121]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59199; File No. SR-DTC-2008-14]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Existing Operational Arrangements

January 6, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 21, 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. 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 purpose of the proposed rule change is to modify DTC's existing 
Operational Arrangements (``OA'') necessary for a securities issue to 
become and remain eligible for the services of DTC.

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.\2\
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    \2\ 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

    DTC's OA was first published in June 1987.\3\ It was then updated 
in June 1988, in February 1992, in December 1994, in January 1998, and 
most recently in May 2002.\4\ DTC's OA is designed to maximize the 
number of issues that can be made eligible while ensuring orderly 
processing and timely payments to its participants. DTC's experience 
demonstrates that when issuers, underwriters, and their counsel are 
aware of DTC's requirements, those requirements can be met almost 
without exception. The purpose of this rule change is not substantive 
in nature in that it is merely an update to the OA in an attempt to 
assemble relevant requirements, including requirements resulting from 
Commission approval of prior DTC rule changes, in one place. 
Additionally, some clerical changes, reorganization, and clarification 
of language have been made in order to provide a concise and coherent 
version of the OA.
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    \3\ Securities Exchange Act Release No. 24818 (August 19, 1987), 
52 FR 31833 (August 24, 1987) (File No. SR-DTC-87-10).
    \4\ Securities Exchange Act Release Nos. 25948 (July 27, 1988), 
53 FR 29294 (August 3, 1988) (File No. SR-DTC-88-13); 30625 (April 
30, 1992), 57 FR 18534 (April 30, 1992) (File No. SR-DTC-92-06); 
35342 (February 8, 1995), 60 FR 8434 (February 14, 1995) (File No. 
SR-DTC-94-19); 39894 (April 21, 1998), 63 FR 23310 (April 28, 1998) 
(SR-DTC-97-23); and 45994 (May 29, 2002), 68 FR 35037 (June 11, 
2003) (File No. SR-DTC-2002-02).
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    The primary differences between the attached modified OA and the OA 
filed with the Commission in 2002 are as follows:

    1. In an effort to update the OA and make it more comprehensive, 
DTC has included a description of the following, all of which have 
been previously approved by the Commission:
    (a) In 1988, the Commission approved a DTC rule filing related 
to certificates of deposit.\5\ The OA has been updated to include a 
section describing procedures unique to retail certificates of 
deposit.
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    \5\ Securities Exchange Act Release No. 25870 (May 7, 1988), 53 
FR 25870 (May 12, 1988) (File No. SR-DTC-88-3).
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    (b) In 1994, the Commission approved a DTC rule filing which 
consisted of enhancements to the reorganization and deposit services 
of DTC. The OA has been updated accordingly to specify that issuers' 
agents are required to provide timely notification to DTC for 
conversions with variable rate (cash and share) entitlements.\6\
    (c) In 1995, the Commission approved a DTC rule filing in which 
DTC was designated as the ``appropriate qualified registered 
securities depository'' to receive notices of transfer agent changes 
pursuant to Rule 17Ad-16 of the Act.\7\ The OA has been updated to 
reflect the procedures for notifying DTC of transfer agency 
changes.\8\
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    \6\ Securities Exchange Act Release No. 34189 (June 9, 1994), 59 
FR 30818 (June 15, 1994) (File No. SR-DTC-94-06).
    \7\ 15 U.S.C. 78 et seq.
    \8\ Securities Exchange Act Release Act No. 35378 (February 15, 
1995), 60 FR 9875 (February 22, 1995) (File No. SR-DTC-95-02).
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    (d) In 1996, the Commission approved a DTC rule filing which 
established procedures for the Direct Registration System 
(``DRS'').\9\ DRS permits an investor to hold a security as the 
registered owner of the security in electronic form on the books of 
the issuer rather than (i) indirectly through a financial 
intermediary that holds the security in street name; or (ii) in the 
form of a certificate. The OA has been updated to include a 
description of DRS.
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    \9\ Securities Exchange Act Release Act No. 37931 (November 7, 
1996), 61 FR 58600 (November 15, 1996) (File No. SR-DTC-96-15).
    \10\ Securities Exchange Act Release Act No. 38564 (April 30, 
1997), 62 FR 25008 (May 7, 1997) (File No. SR-DTC-96-22).
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    (e) In 1997, the Commission approved a rule filing amending 
DTC's Return-of-Funds Policy.\10\ The rule change amended DTC's 
charge back and return of funds policies to shorten from ten 
business days to one business day after the payable date the period 
within which a paying agent can request that DTC return principal 
and income payments that have been allocated to participants. The 
rule change also amended the procedure so if a paying agent requests 
the return of a principal and income payment more than

[[Page 1267]]

one business day after a payable date, DTC will work with the paying 
agent and participants to resolve the matter, but DTC will not 
return the allocated payments without each participant's consent. 
The OA has been updated to describe DTC's Return-of-Funds Policy.
    (f) In 2005, DTC filed a rule change with the Commission in 
order to establish a fine for participants that are required to 
conduct connectivity testing for business continuity purposes and 
who fail to do so.\11\ The OA has been updated to reflect a 
description of DTC's business continuity procedure and to reflect 
its right to impose a fine for noncompliance.
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    \11\ Securities Exchange Act Release No. 52446 (September 15, 
2005), 70 FR 55435 (September 21, 2005) (File No. SR-DTC-2005-04).
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    (g) In 2005, the Commission approved a DTC filing which 
described Security Position Report type information, known as ``call 
lottery results'' for auction rate securities.\12\ The OA has been 
updated to include the description of auction rate securities.
    (h) In 2006, the Commission approved a DTC rule change in which 
DTC proposed to revise its Deposit Service, Custody Service, and 
Withdrawals-by-Transfer Service procedures based upon guidance from 
the U.S. Department of the Treasury's Office of Foreign Assets 
Control (``OFAC'') to DTC.\13\ The OA has been updated to reflect a 
description of DTC's OFAC procedures.
    (i) In 2007, the Commission approved a DTC rule change which 
consisted of new Rule 30, Canadian-Link Service. Rule 30 describes 
the operation of a service that DTC offers to participants, through 
the facilities of DTC and The CDS Clearing and Depository Services 
Inc. (``CDS'').\14\ Rule 30 permits participants using the service 
(``Canadian-Link Participants'') to: (i) Clear and settle valued 
securities transactions with participants of CDS (``CDS 
Participants'') and other Canadian-Link Participants in Canadian 
dollars and (ii) transfer Canadian dollars to or receive Canadian 
dollars from CDS Participants and other Canadian-Link Participants 
without any corresponding delivery or receipt of securities.\15\ The 
OA has been updated to describe this service.
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    \12\ Securities Exchange Act Release No. 52393 (September 8, 
2005), 70 FR 54598 (September 15, 2005) (File No. SR-DTC-2005-12).
    \13\ Securities Exchange Act Release No. 54120 (July 10, 2006), 
71 FR 40562 (July 17, 2006) (File No. SR-DTC-2005-14).
    \14\ Formerly known as ``The Canadian Depository for Securities 
Limited.''
    \15\ Securities Exchange Act Release Act No. 55239 (February 5, 
2007), 72 FR 6797 (February 13, 2007) (File No. SR-DTC 2006-15).
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    (j) In 2007, the Commission approved a rule filing intended to 
provide greater efficiency by making available more automated 
functions to be utilized for a broader range of voluntary 
reorganization events (e.g., DTC's Automated Tender Offer Program 
(``ATOP'')).\16\ The OA has been updated to include a description of 
these procedures.
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    \16\ Securities Exchange Act Release No. 56538 (September 26, 
2007), 72 FR 56409 (October 3, 2007) (File No. SR-DTC-2007-09).
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    (k) In 2007, DTC filed a rule change with the Commission in 
order to amend DTC's OA as it applies to structured securities.\17\ 
That rule filing: (i) Extended the deadline by which paying agents 
of such securities must submit periodic payment rate information to 
DTC to preferably five business days but no less than one business 
day prior to the payable date; (ii) extended the processing deadline 
for payment rate files from 7 p.m. Eastern Standard Time (``EST'') 
to 11:30 p.m. EST; (iii) established two classes of structured 
securities, ``conforming'' and ``non-conforming;'' (iv) imposed an 
exception processing fee which applies to certain structured 
securities whose features prevent paying agents from complying with 
the extended deadline; and (v) provided that DTC track and make 
publicly available reports on paying agent performance as it relates 
to timeliness and accuracy of structured securities payment rate 
information submitted to DTC. DTC has extended the deadlines by 
which paying agents of such structured securities must submit 
periodic payment rate information to DTC to no later than 3:00 am 
EST on the payable date and has extended the processing deadline for 
payment rate files to 3:00 am EST on the payable date. The OA has 
been updated to include this product and to reflect these 
extensions.
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    \17\ Securities Exchange Act Release No. 57542 (March 20, 2008), 
73 FR 16403 (March 27, 2008) (File No. SR-DTC-2007-11).
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    (l) In 2007, the Commission approved a DTC rule filing which 
provided that DTC's foreign currency payment option may be used: (i) 
In relation to securities denominated in U.S. dollars and (ii) 
regardless of whether the terms of the issue originally contemplated 
the option of payment in one or more currencies.\18\ The OA has been 
updated to reflect this change.
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    \18\ Securities Exchange Act Release No. 57298 (February 8, 
2008), 73 FR 8921(February 15, 2008) (File No. SR-DTC-2007-13).
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    (m) In 2007, the Commission approved a DTC rule change which 
added a new Policy Statement on the Eligibility of Foreign 
Securities to DTC's rules.\19\ The purpose of the policy statement 
is to set forth in a single place and in an accessible manner the 
criteria and procedures for making the securities of foreign issuers 
eligible for deposit and book-entry transfer through the facilities 
of DTC in accordance with the Securities Act of 1933 \20\ and the 
rules and regulations of the SEC thereunder. A description of the 
policy statement has been added to the OA.
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    \19\ Securities Exchange Act Release No. 56277 (August 17, 
2007), 72 FR 48709 (File No. SR-DTC-2007-04).
    \20\ 15 U.S.C. 77 et seq.
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    (n) In 2008, the Commission approved a DTC rule filing to 
implement the New Issue Information Dissemination System (``NIIDS'') 
for municipal securities. NIIDS is an automated system developed by 
DTC at the request of the Securities Industry and Financial Markets 
Association (``SIFMA'') in order to improve the mechanism for 
disseminating new issue information regarding municipal 
securities.\21\ DTC has mandated the use of NIIDS in connection with 
eligibility processing of municipal securities issuances in order to 
assist underwriters in meeting the reporting standards set forth by 
the Municipal Securities Rule Making Board (``MSRB''). The OA has 
been updated to include a description of NIIDS.
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    \21\ Securities Exchange Act Release No. 57513 (March 17, 2008), 
73 FR 15548 (March 24, 2008) (File No. SR-DTC-2007-10).
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    2. DTC has updated the OA to describe the modification in cutoff 
time for Fast Automated Securities Transfer (``FAST'') Agents to 
approve or reject a deposit or withdrawal instruction submitted by a 
participant. This adjustment was implemented on October 2, 2001.\22\
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    \22\ The modification explains that the cutoff has been changed 
to 5:30 p.m. EST from 6:30 p.m. EST. For more information regarding 
this change, see DTC Important Notice B2358-01 available at 
http://www.dtcc.com/downloads/legal/imp_notices/2001/dtc/exe/exe_
2358.pdf.
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    3. Additionally, DTC has updated the OA to indicate that 
voluntary unit separations \23\ are now processed under the FAST 
program. The volume of voluntary unit separations has declined 
significantly throughout the years (to one or two per year) thereby 
reducing the need for a separate program to process such 
transactions. Voluntary units have been processed under the Fast 
program since the late 1990s.
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    \23\ A unit is a security comprised of more than one class of 
securities such as common stock and warrants (``components''). In a 
voluntary unit separation, the separation and recombination between 
the security component and the security is done by the Participant 
and transfer agent using DTC's Deposit/Withdrawal At Custodian 
(``DWAC'') system.

    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \24\ and the rules and 
regulations thereunder applicable to DTC because the proposed rule 
change should facilitate the prompt and accurate clearance and 
settlement of securities transactions by expediting the process of 
making securities eligible for DTC's services.
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    \24\ 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 on 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

    No written comments relating to the proposed rule change have 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 rule change has become effective upon filing pursuant 
to Section

[[Page 1268]]

19(b)(3)(A)(iii) of the Act \25\ and Rule 19b-4(f)(4) \26\ thereunder 
because the proposed rule change effects a change in an existing 
service of DTC that (i) does not adversely affect the safeguarding of 
securities or funds in the custody or control of DTC or for which it is 
responsible and (ii) does not significantly affect the respective 
rights of the clearing agency or persons using the service. At any time 
within sixty days of the filing of such 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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    \25\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \26\ 26 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-2008-14 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-DTC-2008-14. 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, 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/legal/rule_filings/ficc/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 Number SR-DTC-2008-14 and should be 
submitted on or before January 29, 2009.

    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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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-349 Filed 1-9-09; 8:45 am]

BILLING CODE 8011-01-P