Document ID: SEC-2009-0791-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish an Alternate Choice in DTC's Profile Modification System Indemnity Insurance Program
Posted Date: 2009-06-12T04:00Z

[Federal Register: June 12, 2009 (Volume 74, Number 112)]
[Notices]               
[Page 28085-28086]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12jn09-109]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60036; File No. SR-DTC-2009-09]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish an Alternate Choice in DTC's Profile Modification System 
Indemnity Insurance Program

June 3, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 11, 2009, 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 the proposal pursuant to Section 19(b)(3)(A)(iii) of 
the Act \2\ and Rule 19b-4(f)(4) \3\ thereunder so that the proposal 
was effective upon filing with the Commission. The Commission is 
publishing this notice to solicit comments on the 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).
    \3\ 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

    The purpose of the rule change is to establish an alternate choice 
in DTC's Profile Modification System Indemnity Insurance Program.

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.\4\
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    \4\ 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 Profile Modification System (``Profile'') is an electronic 
communication hub between transfer agents that participate in the 
Direct Registration System (``DRS''), which transfer agents are Limited 
Participants (``Limited Participants'') of DTC, and broker-dealers that 
participate in DRS, which broker-dealers are DTC Participants 
(``Participants;'' Participants together with Limited Participants are 
collectively referred to as ``Users'').\5\ Profile allows Participants 
to submit an investor's instruction to move a share position from the 
investor's DRS account at the transfer agent to the Participant's 
account at DTC (``Electronic Participant Instruction''). Profile also 
allows Limited Participants to submit an investor's instruction to move 
its share position from the Participant's account at DTC to the DRS 
account at the transfer agent (``Electronic Limited Participant 
Instruction;'' Electronic Limited Participant Instruction and 
Electronic Participant Instruction are collectively referred to as 
``Electronic Instructions''). A User submitting an Electronic 
Instruction through Profile is required to agree to a Participant 
Terminal System (``PTS'') screen indemnity (``Screen Indemnity'').\6\
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    \5\ For a description of Profile, see Securities Exchange Act 
Release No. 41862 (September 10, 1999), 64 FR 51162 (September 21, 
1999) (order approving implementation of Profile).
    \6\ The Screen Indemnity protects, among others, the party 
delivering the share position from liability in connection with the 
transaction arising from a User's breach of the representation of 
authority and consent to initiate the transaction. For a broader 
description of the Screen Indemnity, see Securities Exchange Act 
Release No. 42704 (April 19, 2000), 65 FR 24242 (April 25, 2000) 
(order approving modification of Profile to incorporate use of the 
Screen Indemnity).
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    On August 22, 2005, the Commission approved a rule filing 
establishing the DTC Profile Indemnity Insurance Program (``PIP''),\7\ 
on as an alternative to the existing DTC Profile Surety Program 
(``PSP'').\8\ Profile users who agree to the Screen Indemnity have the 
option to procure Profile Indemnity Insurance (``Insurance'') relating 
to a particular transaction according to the value of each individual 
securities transaction. The Insurance option provides a coverage limit 
of $25 million per transaction with an annual aggregate limit of $100 
million. In addition to any pass-through fee from the insurer, DTC 
charges users participating in PIP an annual administration fee of $250 
and a $27.50 per transaction fee.
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    \7\ Securities Exchange Act Release No. 42422 (September 14, 
2005), 70 FR 55196 (September 20, 2005).
    \8\ Under PSP, each user of Profile that agrees to the Screen 
Indemnity must procure a surety bond to back its obligations under 
such indemnity (``Surety Bond''). Participation in PSP requires the 
payment of an annual premium of $3,150 to a surety provider and a 
DTC administration fee of $250. The current PSP surety provider 
provides for a coverage limit of $3 million per transaction with an 
annual aggregate limit of $6 million. The Commission approved a rule 
filing establishing an alternate to PSP in June 2008 (``PSP II''). 
Securities Exchange Act Release No. 58042 (June 26, 2008), 73 FR 
39067 (July 8, 2008).
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    DTC is proposing to provide Profile users an option to procure 
insurance with a different coverage limit than that currently offered 
(``PIP II''). The coverage limit for PIP II will be $7.5 million per 
transaction with an annual aggregate limit of $15 million. PIP II users 
will be required to pay an annual premium of $6,000 to an insurance 
provider and a DTC administration fee of $250. The intent of this 
program is to provide an alternative insurance option for Profile users 
with high volume and moderate value and also for contingency planning 
if a provider is no longer able to provide insurance or surety. Users 
will be permitted to participate with each provider but will continue 
to be required to select only one provider per Profile transaction.
    The insurance company issuing the insurance policy will either be a 
company selected by DTC as the administrator of such insurance program, 
or an insurance company selected by the User. If a User elects to use 
an insurance company other than the one DTC has selected, the insurance 
company selected must issue its insurance policy in a form consistent 
with the policy issued by the insurance company selected by DTC.
    The proposed rule change is consistent with Section 17A of the 
Act,\9\ as amended, because it modifies an existing service by 
establishing an alternate choice for Profile insurance users to provide 
a broader range of options to safeguard transactions processed within 
Profile.
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    \9\ 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.

[[Page 28086]]

(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 proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-
4(f)(4) \11\ thereunder because the proposed rule change effects a 
change in an existing service of a registered clearing agency that: (i) 
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 (ii) 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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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 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-2009-09 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-2009-09. 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 Room, 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/dtc/2009-09.pdf. 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-2009-09 and should be 
submitted on or before July 6, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-13808 Filed 6-11-09; 8:45 am]

BILLING CODE 8010-01-P