Document ID: SEC-2006-0542-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Depository Trust Co.
Posted Date: 2006-04-26T04:00Z

[Federal Register: April 26, 2006 (Volume 71, Number 80)]
[Notices]               
[Page 24770-24771]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26ap06-131]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53679; File No. SR-DTC-2006-05]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Provide Centralized Billing Process Relating to the Profile 
Modification System in DRS

April 19, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 17, 2006, 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 pursuant to Section 19(b)(3)(A)(iii) and Rule 19b-
4(f)(4) thereunder so that the proposed rule change was effective upon 
filing with the Commission.\2\ 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).
    \2\ 15 U.S.C. 78s(b)(3)(A)(iii) and 17 CFR 240.19(b)(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 proposed rule change is to provide a centralized 
billing process for fees related to certain transactions in the Profile 
Modification System (``Profile'') facility of the Direct Registration 
System (``DRS'').

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.\3\
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    \3\ The Commission has modified the text of the summaries 
prepared by the DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In 1996 through the efforts of a joint industry working committee, 
DTC (1) Established procedures for DRS that enabled an investor to 
transfer his securities positions registered in his name and held in 
book-entry form on the records of the issuer maintained by the transfer 
agent to his broker-dealer to be held in street name at DTC and vice 
versa and (2) established a new category of participants, DRS limited 
participants, which authorized qualifying transfer agents to use 
certain services of DTC related to DRS.\4\ In 2000, DTC enhanced its 
DRS facility by implementing Profile as a feature of DRS.\5\ Profile is 
an electronic messaging system that allows a DTC participant or a DRS 
limited participant (i.e., a transfer agent) to send instructions to 
transfer investors' book-entry position from one to the other.
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    \4\ Securities Exchange Act Release No. 37931 (November 7, 
1996), 61 FR 58600 (November 15, 1996), [File No. SR-DTC-96-15].
    \5\ Securities Exchange Act Release No. 42704 (April 19, 2000), 
65 FR 24242 (April 25, 2000), [File No. SR-DTC-00-04].
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    When a DTC participant uses Profile to send instructions to a 
transfer agent in order to transfer an investor's book-entry positions 
from the transfer agent to the broker-dealer's account at DTC, a DTC 
participant must enter certain identifying criteria of the investor 
into Profile. If the submitted identifying criteria does not match the 
information

[[Page 24771]]

the DRS limited participant has on its securityholder records, the 
result is a ``Profile reject,'' which in many cases results in a fee 
being assessed by the DRS limited participant to the DTC participant. 
Currently these fees are assessed and collected by DRS limited 
participants outside of the auspices of DTC. The manual processing of 
these fees is a costly and labor-intensive process for both DTC 
participants and DRS limited participant. In order to make this process 
more efficient and cost effective, DTC participants and DRS limited 
participants have asked DTC to centralize the billing and collection 
process for Profile reject fees.
    Accordingly, DTC proposes a centralized process for the billing and 
collection of such reject fees.\6\ Participation in the centralized 
billing process will be voluntary for both DTC participants and DRS 
limited participants. A fee schedule for Profile reject fees will be 
supplied by each DRS limited participant at the time of its enrollment 
and can be changed by providing DTC with notice of fee changes no later 
than 60 calendar days prior to such change taking effect. DTC will 
permit only one fee increase in any 24 month period. DTC participants 
that join the program may elect to opt out of participating with one or 
more DRS limited participants at the time they enroll in the 
centralized billing program or at any time after enrollment. Reject 
fees will appear on DTC participants' monthly billing statements, and 
the appropriate fees will be credited to the respective DRS limited 
participant's account.
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    \6\ DTC has the authority under its rules to collect from its 
participants fees and charges from third parties. See Securities 
Exchange Act Release No. 51870 (June 17, 2005), 70 FR 36678 (June 
24, 2005) [File No. SR-DTC-2005-03].
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    DTC will not take part in any dispute between a DRS limited 
participant and a DTC participant relating to assessed fees. If a 
dispute is brought to the attention of DTC and cannot be resolved by 
the two parties, DTC will reverse the charge in the next billing 
cycle,\7\ and the two parties will have to work outside of the billing 
system and DTC to resolve the dispute. Along with the billing 
statements, DTC will supply to both DTC participants and DRS limited 
participants a full report listing each instruction that generated the 
reject, date of reject, and reason for the reject. To offset the cost 
of building and maintaining the centralized billing process, DTC will 
assess each DRS limited participant a fee equal to 5% of the total fees 
collected through the Profile centralized billing process each month 
for that DRS limited participant.
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    \7\ Billing cycles run for 30 days.
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    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \8\ and the rules and 
regulations thereunder applicable to DTC because it will promote 
efficiencies for DTC participants and DRS limited participants using 
Profile and DRS services generally.
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    \8\ 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 impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

(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 the 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 19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(4) \10\ 
thereunder because it is effecting a change in an existing service of a 
registered clearing agency that 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 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 such rule change, the Commission could have 
summarily abrogated such rule change if it appeared to the Commission 
that such action were 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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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 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-2006-05 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-DTC-2006-05. 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, http://www.dtcc.com. 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-2006-05 and should be submitted on 
or before May 17, 2006.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-6249 Filed 4-25-06; 8:45 am]

BILLING CODE 8010-01-P