Document ID: SEC-2013-1564-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2013-09-05T04:00Z

[Federal Register Volume 78, Number 172 (Thursday, September 5, 2013)]
[Notices]
[Pages 54696-54697]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-21561]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70291; File No. SR-DTC-2013-10]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change in Order To Terminate the 
Sealed Envelope Service, Which Is Part of The Depository Trust 
Company's Custody Service

August 30, 2013.
    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 August 22, 2013, 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 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    As more fully discussed below, the proposed rule change is to 
terminate the Sealed Envelope Service, which is part of DTC's Custody 
Service.

II. Clearing Agency'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

Purpose
    In 2002, DTC launched the Sealed Envelope Service (the ``Service'') 
as a service extension to DTC's Custody Service.\3\ The Service was 
designed to provide physical custody to Participants for documents or 
instruments that are not securities, such as loan agreements, wills, 
deeds, mortgages, contracts and option agreements. The Service strictly 
prohibits the deposit of securities certificates as well as tangible 
assets such as currency, gold coins or jewelry. DTC initially launched 
the Service in response to a request from Participants to assist in 
fully outsourcing their vaults to DTC. Subsequently, there has not been 
much use of the Service by Participants, and it is, accordingly, not 
economically efficient to maintain the Service.
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    \3\ Securities Exchange Act Release No. 46018 (Jun. 3, 2002), 67 
FR 39454 (Jun. 7, 2002) (SR-DTC-2002-03).
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    Currently, DTC allows for these non-security items to be held in 
custody in a sealed envelope in one of DTC's vaults. The envelopes are 
such that the contents cannot be viewed when sealed. DTC does not open 
any sealed envelopes, but x-rays all packages and envelopes received to 
assure [sic] no dangerous contents. DTC also assigns a user-CUSIP 
number for tracking and record keeping purposes. The depositing 
Participant is required to list the contents of the envelope on the 
outside of the envelope. Participants balance their sealed envelopes 
daily with DTC in the same manner as they presently do for securities 
held in the Custody Service. DTC does not verify the contents of the 
envelope and this has presented a concern since DTC has no way of 
knowing whether the contents qualify for the Service.

[[Page 54697]]

    As part of the Hurricane Sandy storm recovery, DTC has determined 
that it is not recovering its costs from usage of the Service by only a 
few Participants. Only fifteen Participants currently use the Service, 
with one of those Participants representing approximately 85% of the 
total volume. All fifteen of these Participants have been notified of 
DTC's intention to discontinue the Service and none of the Participants 
have objected. Accordingly, upon approval by the SEC, DTC will 
terminate the Service. DTC will work with the Participants that 
currently use the Service to develop a timeline that is not unduly 
burdensome to return the existing sealed envelope inventory.
Statutory Basis
    DTC believes the proposed rule change, as described above, is 
consistent with the requirements of the Act, specifically Section 
17A(b)(3)(F),\4\ and the rules and regulations thereunder applicable to 
DTC, because the change, which terminates the Service, eliminates risk 
to the depository associated with the safeguarding of items in DTC's 
physical custody and therefore enhances DTC's ability to safeguard 
securities or funds in its custody or control or for which it is 
responsible.
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    \4\ 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.

(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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove 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 email to rule-comments@sec.gov. Please include 
File Number SR-DTC-2013-10 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-2013-10. 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 also will be available for inspection 
and copying at the principal office of DTC and on DTC's Web site at 
http://dtcc.com/legal/rule_filings/dtc/2013.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-2013-10 and should be submitted on 
or before September 26, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-21561 Filed 9-4-13; 8:45 am]
BILLING CODE 8011-01-P