Document ID: SEC-2014-0551-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2014-04-03T04:00Z

[Federal Register Volume 79, Number 64 (Thursday, April 3, 2014)]
[Notices]
[Pages 18748-18749]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-07470]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71828; File No. SR-DTC-2014-03]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Update Existing Procedures as They Relate to Processing Mandatory 
Corporate Actions

March 28, 2014.
    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 March 27, 2014, 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 DTC. DTC filed the proposed rule change pursuant to 
Section 19(b)(3)(A)(ii) \3\ of the Act and Rule 19b-4(f)(4) \4\ 
thereunder; the proposed rule change was effective upon filing with the 
Commission. 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)(ii).
    \4\ 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

    As discussed below, this rule change will mitigate risk associated 
with mandatory corporate actions processing by eliminating inaccurate 
allocations caused by Participants' adjusting their positions after the 
position capture. The change will also bring operational efficiencies 
to DTC by reducing the number of post allocation adjustments.

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

1. Purpose
    DTC processes mandatory corporate actions through its 
Reorganization, Dividends, Proxy (``RDP'') system. Currently, when 
processing a mandatory corporate action in which new securities are 
exchanged for existing securities held at DTC, one day prior to 
processing allocation of the new securities to Participant Accounts, 
the RDP system will automatically identify the positions of the 
existing securities in the Participant's Account (including the 
Segregated Account) to allocate the new securities in accordance with 
the Participant's holdings of the existing securities on the day 
preceding the effective date of the corporate action, referred to as 
``position capture.'' However, in certain instances, between its 
segregated position and free position, a Participant may have adjusted 
its position between its segregated position and free position,\5\ or 
may have delivered out the securities from its accounts.
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    \5\ The Sub-Accounting Service allows Participants to protect 
securities on deposit at DTC by moving them from their free position 
to their segregated position. The securities remain segregated and 
unavailable for any transactions until the Participant authorizes 
DTC to release them and return them to their free position.
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    To eliminate discrepancies due to these changes between the time of 
position capture and allocation, DTC is updating its systems to add a 
second position capture immediately prior to allocation (referred to as 
``real-time position capture''). This real time position capture will 
recognize any adjustments a Participant made between the time of 
position capture and the time of allocation. This change will mitigate 
risk associated with mandatory corporate actions processing by self-
correcting allocations for changes made between position capture and 
real-time position capture. The change will also improve efficiency by 
reducing the number of post allocation adjustments.
Implementation Timeframe
    DTC expects to implement these changes by end of the first quarter 
of 2014. DTC will announce the

[[Page 18749]]

implementation date by Important Notice.
2. Statutory Basis
    By adding real time position capture immediately prior to 
allocation, the proposed rule change streamlines processes associated 
with corporate action events and mitigates risk associated with such 
processing; it allows for more prompt and accurate crediting of 
corporate action securities to the Accounts of Participants. Therefore, 
DTC believes the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to DTC, in particular Section 17A(b)(3)(F) \6\ of the Act 
which requires that DTC's Rules be designed to promote the prompt and 
accurate clearance and settlement of securities transactions.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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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. As stated above, the 
proposed change adds a real-time position capture to facilitate 
accurate corporate actions processing which will benefit all 
Participants' equally and should have no effect on competition within 
or without DTC.

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 rule change became effective on March 27, 2014, 
pursuant to Section 19(b)(3)(A) \7\ of the Act and paragraph (f)(4) of 
Rule 19b-4 \8\ thereunder. At any time within 60 days of the filing of 
the proposed rule change, the Commission 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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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(2)
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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 rule-comments@sec.gov. Please include 
File No. SR-DTC-2014-03 on the subject line.

Paper Comments

     Send 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-2014-03. 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 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 Web site 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 such filings will also be available 
for inspection and copying at the principal office of DTC.
    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. SR-DTC-2014-03 and 
should be submitted on or before April 24, 2014.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-07470 Filed 4-2-14; 8:45 am]
BILLING CODE 8011-01-P