Document ID: SEC-2016-1002-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Depository Trust Co.
Posted Date: 2016-06-09T04:00Z

[Federal Register Volume 81, Number 111 (Thursday, June 9, 2016)]
[Notices]
[Pages 37232-37236]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-13614]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77991; File No. SR-DTC-2016-003]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change Pursuant to Which It Would 
Impose Deposit Chills and Global Locks and Provide Fair Procedures to 
Issuers

June 3, 2016.
    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 May 27, 2016, 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)(2) \3\ of the Act thereunder. 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)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of amendments to the Rules, By-
Laws and Organization Certificate of DTC (the ``Rules'') in order to 
add a Rule which establishes: (i) The circumstances under which DTC 
would impose and release a restriction on Deposits of an Eligible 
Security (a ``Deposit Chill'') or on book-entry services for an 
Eligible Security (a ``Global Lock''); and (ii) the fair procedures for 
notice and an opportunity for the issuer of the Eligible Security (the 
``Issuer'') to challenge the Deposit Chill or Global Lock (each, a 
``Restriction''), as described below.\4\
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    \4\ Each capitalized term not otherwise defined herein has its 
respective meaning as set forth in the Rules, available at http://www.dtcc.com/legal/rules-and-procedures.aspx.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency 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. The clearing agency has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    The proposal would add new Rule 33 (Deposit Chills and Global 
Locks) to establish: (i) The circumstances under which DTC would impose 
and release a Deposit Chill or a Global Lock; and (ii) the fair 
procedures for notice and an opportunity for the Issuer to challenge 
the Restriction, as described below.
(i) Background
A. DTC
    DTC is the nation's central securities depository, registered as a 
clearing agency under Section 17A of the Act.\5\ DTC's deposit and 
book-entry transfer services help facilitate the operation of the 
nation's securities markets. By serving as registered holder of 
trillions of dollars of Securities, DTC, on a daily basis, processes 
enormous volumes of securities transactions facilitated by book-entry 
movement of interests, without the need to transfer physical 
certificates.
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    \5\ See Securities Exchange Act Release No. 20221 (September 23, 
1983), 48 FR 45167 (October 3, 1983) (File No. 600-1).
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    DTC performs services and maintains Securities Accounts for its 
Participants, primarily banks and broker dealers, pursuant to its Rules 
and Procedures. Participants agree to be bound by the Rules and 
Procedures of DTC as a condition of their DTC membership.\6\ DTC allows 
a Participant to present Securities to be made eligible for DTC's 
depository and book-entry services. If a Security is accepted by DTC as 
meeting DTC's eligibility requirements for services \7\ and is 
deposited with DTC for credit to the Securities Account of a

[[Page 37233]]

Participant, it becomes an Eligible Security. Thereafter, Participants 
may deposit shares of that Eligible Security into their respective DTC 
accounts. To facilitate book-entry transfers and other services that 
DTC provides for its Participants with respect to Deposited Securities, 
the Deposited Securities are generally registered on the books of the 
Issuer (typically, in a register maintained by a transfer agent) in 
DTC's nominee name, Cede & Co. Deposited Securities that are eligible 
for book-entry services are maintained in ``fungible bulk,'' i.e., each 
Participant whose Securities of an issue have been credited to its 
Securities Account has a pro rata (proportionate) interest in DTC's 
entire inventory of that issue, but none of the Securities on deposit 
are identifiable to or ``owned'' by any particular Participant.\8\
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    \6\ See supra note 5.
    \7\ See Rule 5, supra note 4; DTC Operational Arrangements 
(Necessary for Securities to Become and Remain Eligible for DTC 
Services), January 2012 (the ``Operational Arrangements''), Section 
1, available at http://www.dtcc.com/~/media/Files/Downloads/legal/
issue-eligibility/eligibility/operational-arrangements.pdf.
    \8\ See Securities Exchange Act Release No. 19678 (April 15, 
1983), 48 FR 17603, 17605, n.5 (April 25, 1983) (describing fungible 
bulk); see also N.Y. Uniform Commercial Code, Sec.  8-503, Off. Cmt 
1 (``. . . all entitlement holders have a pro rata interest in 
whatever positions in that financial asset the [financial] 
intermediary holds'').
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    The Commission has recognized that DTC plays a ``critical 
function'' in the National Clearance and Settlement system.\9\ More 
recently, the federal Financial Stability Oversight Council, which was 
established pursuant to the Dodd-Frank Wall Street Reform and Consumer 
Protection Act,\10\ designated DTC as a Systemically Important 
Financial Market Utility (as defined therein).\11\
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    \9\ See Securities Exchange Act Release No. 47978 (June 4, 
2003), 68 FR 35037, 35041 (June 11, 2003) (File No. SR-DTC-2003-02).
    \10\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Pub. L. 111-203, 124 Stat. 1376 (2010).
    \11\ See Financial Stability Oversight Council, 2012 Annual 
Report, Appendix A, available at https://www.treasury.gov/initiatives/fsoc/Documents/2012%20Appendix%20A%20Designation%20of%20Systemically%20Important%20Market%20Utilities.pdf.
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B. Deposit Chills and Global Locks: Prior Procedures
    Previously, upon detecting suspiciously large deposits of a thinly 
traded Eligible Security, DTC imposed or proposed to impose a Deposit 
Chill as a measure to maintain the status quo while, pursuant to its 
Operational Arrangements,\12\ DTC required the Issuer to confirm by 
legal opinion of independent counsel that the Eligible Security 
fulfilled the requirements for eligibility. The Deposit Chill would be 
maintained until the Issuer provided a satisfactory legal opinion. The 
Deposit Chill could remain in place for years, due to an Issuer's non-
responsiveness, refusal, or inability to submit the required legal 
opinion.
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    \12\ See Operational Arrangements, Section I.A, supra note 7.
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    With respect to Global Locks, DTC previously imposed a Global Lock 
on an Eligible Security when a governmental or regulatory authority 
commenced a proceeding or action alleging violations of Section 5 of 
the Securities Act of 1933, as amended, with respect to such Eligible 
Security. A Global Lock could be released when the underlying 
enforcement action was withdrawn, dismissed on the merits with 
prejudice, or otherwise resolved in a final, non-appealable judgment in 
favor of the defendants allegedly responsible for the violations of 
federal securities laws. However, many enforcement actions are only 
resolved after several years \13\ and commonly without any definitive 
determination of wrongdoing.\14\
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    \13\ See, e.g., SEC v. Kahlon, 12-CV-517 (E.D. Tex., filed 
August 14, 2012); SEC v. Bronson, 12-cv-06421-KMK (S.D.N.Y., filed 
August 22, 2012). As of the date of this filing, neither case has 
been resolved.
    \14\ See, e.g., SEC v. Reiss, 13-cv-01537, dkt no. 10 (S.D.N.Y. 
2014) (issuing a final judgment against the defendant in an 
enforcement action, without the defendant admitting or denying the 
allegations).
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    The above describes, in part, the proposed procedures filed by DTC 
on December 5, 2013,\15\ in response to the Commission's opinion and 
order in In re International Power Group, Ltd. (``IPWG'') directing DTC 
to ``adopt procedures that accord with the fairness requirements of 
Section 17A(b)(3)(H).'' \16\ DTC withdrew the proposed rule change on 
August 18, 2014.\17\
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    \15\ See Securities Exchange Act Release No. 71132 (December 18, 
2013); 78 FR 77755 (December 24, 2013) (File No. SR-DTC-2013-11).
    \16\ See Securities Exchange Act Release No. 66611 (March 15, 
2012), 2012 SEC LEXIS 844 at *32 (March 15, 2012) (Admin. Proc. File 
No. 3-13687).
    \17\ See Securities Exchange Act Release No. 72860 (August 18, 
2014), 79 FR 49825 (August 22, 2014) (File No. SR-DTC-2013-11).
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    As a result of DTC's experiences following the IPWG decision and in 
connection with the previous proposed rule change, DTC has determined 
that its proposed procedures for imposing Deposit Chills and Global 
Locks are more appropriately directed to current trading halts or 
suspensions imposed by the Commission, the Financial Industry 
Regulatory Authority, Inc. (``FINRA''), or a court of competent 
jurisdiction, and therefore are more effective in targeting suspected 
securities fraud that is ongoing at the time the Restriction is 
imposed. In particular, with respect to Deposit Chills imposed pursuant 
to DTC's previous procedures, DTC believes that wrongdoers have 
seemingly taken into account DTC's Restriction process, and have been 
avoiding it by shortening the timeframe in which they complete their 
scheme, dump their shares into the market, and move on to another 
issue.
    Additionally, Global Locks were typically being imposed on the 
basis of a Commission enforcement action alleging securities law 
violations that had occurred in the past, and so could not affect the 
violative behavior (unless the alleged securities law violations were 
ongoing). In fact, it is DTC's understanding that, by the time of an 
enforcement action, the wrongdoers had long since transferred the 
subject securities. In addition, although a Global Lock bars book-entry 
settlements within DTC, it does not affect the trading of the issue, 
which occurs outside of DTC.
(ii) Proposal
A. Proposed Basis for the Imposition of Deposit Chills and Global Locks
    With this proposal, DTC would establish the basis for the 
imposition of Deposit Chills and Global Locks, premised on direct 
current judicial or regulatory intervention or the threat of imminent 
adverse consequences to DTC or its Participants. DTC believes that the 
proposed rule change would provide a basis for imposing and releasing 
Restrictions that is consistent with its obligations under applicable 
law.
    Under subsections (a) and (b) of Section 1 of the proposed rule, if 
FINRA or the Commission halts or suspends trading of an Eligible 
Security, DTC would impose a Global Lock. Similarly, under subsection 
(c) of Section 1 of the proposed rule, DTC would impose a Restriction 
if ordered to do so by a court of competent jurisdiction. Consistent 
with its mandate ``to promote the prompt and accurate clearance and 
settlement of securities transactions,'' \18\ DTC's facilities should 
not be available to settle transactions otherwise prohibited by the 
Commission, FINRA, or a court of competent jurisdiction. The imposition 
of a Global Lock on an Eligible Security for which trading is halted or 
suspended would prevent settlement of trades that continue despite the 
halt or suspension, and prevent a bad actor from liquidating a position 
through DTC in order to obtain the proceeds of fraudulent activities.
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    \18\ 15 U.S.C. 78q-1(b)(3)(F).
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    Notwithstanding subsections (a) and (b) of Section 1 of the 
proposed Rule, DTC recognizes that FINRA and the Commission issue 
trading halts and suspensions for numerous reasons, and so there may be 
certain limited circumstances where a Global Lock

[[Page 37234]]

would not further the regulatory purpose of such trading halt or 
suspension. Therefore, if DTC reasonably determines that such is the 
case, DTC may decline to impose a Global Lock. Some examples of when 
DTC may decline to impose a Global Lock include, but are not limited 
to, if FINRA issues a trading halt in all OTC equity securities due to 
a technical glitch; or if FINRA issues a trading halt clearly based on 
financial uncertainty in a foreign jurisdiction that doesn't affect 
DTC's ability to settle transactions.
    Finally, under subsection (d) of Section 1 of the proposed rule, 
DTC would impose a Restriction when it becomes aware of a need for 
immediate action to avert an imminent harm, injury, or other such 
material adverse consequence to DTC or its Participants that could 
arise from further Deposits of, or continued book-entry services with 
respect to, an Eligible Security. While it is impossible to anticipate 
all possible scenarios that may give rise to the need for action by DTC 
under this subsection (d) to avoid imminent harm, DTC does not 
anticipate that it would impose Restrictions pursuant to this 
formulation frequently. Some examples where this provision may be 
invoked include, but are not limited to, if DTC becomes aware that 
marketplace actors were about to deposit Securities at DTC in 
connection with an ongoing corporate hijacking, market manipulation, or 
in violation of other applicable laws; if an Issuer or its agent 
provides DTC with plausible information that Security certificates were 
stolen and were about to be deposited; or if an Issuer notifies DTC 
that shares of a Security had just been issued erroneously upon a 
conversion of previously satisfied notes.
    The concept of taking immediate action to avoid imminent harm to 
DTC or its Participants was recognized in the Commission's opinion in 
IPWG. The Commission ruled that, when faced with justifiable 
circumstances, DTC may design fair procedures ``in accordance with its 
own internal needs and circumstances,'' \19\ recognizing that:
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    \19\ IPWG, 2012 SEC LEXIS at *30, n.36.

    If DTC believes that circumstances exist that justify imposing a 
suspension of services with respect to an issuer's securities in 
advance of being able to provide the issuer with notice and an 
opportunity to be heard on the suspension, it may do so. However, in 
such circumstances, these processes should balance the identifiable 
need for emergency action with the issuer's right to fair procedures 
under the Exchange Act. Under such procedures, DTC would be 
authorized to act to avert an imminent harm, but it could not 
maintain such a suspension indefinitely without providing expedited 
fair process to the affected issuer.\20\
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    \20\ Id. at *29. See also In re Atlantis Internet Group 
(``Atlantis''), Securities Exchange Act Release. No. 75168 at 7-8, 
2015 SEC LEXIS 2394 at *18 (June 12, 2015) (Admin. Proc. File No. 3-
15432) (``DTC's imposition of the Global Lock without advance notice 
was an appropriate exercise of its authority to act to prevent 
imminent harm . . .'').
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B. Proposed Basis for the Release of Deposit Chills and Global Locks
    As part of DTC's process for imposing Restrictions premised on 
direct court or regulatory agency intervention or the prospect of 
imminent adverse consequences to DTC or its Participants, the proposed 
rule change provides corresponding criteria for releasing such 
Restrictions.
    As an initial matter, pursuant to the proposed rule change, DTC 
would release a Restriction when DTC reasonably determines that its 
imposition of the Restriction was based on a clerical mistake.
    In the case of a Global Lock imposed pursuant to subsections (a) or 
(b) of Section 1 of the proposed rule (FINRA trading halt or Commission 
trading suspension), under the proposed rule change, DTC would release 
the Global Lock when the halt or suspension of trading of the Eligible 
Security has been lifted. In the case of a Restriction imposed pursuant 
to subsection (c) of Section 1 of the proposed rule (order from a court 
of competent jurisdiction), under the proposed rule change, DTC would 
release the Restriction when a court of competent jurisdiction orders 
DTC to release the Restriction. Since trading would no longer be 
prohibited by FINRA, the Commission, or court order, respectively, 
there should not be any settlement restrictions, other than those 
otherwise provided in the Rules.
    Finally, in the case of a Restriction imposed pursuant to 
subsection (d) of Section 1 of the proposed rule (imminent adverse 
consequences to DTC or its Participants), pursuant to the proposed rule 
change, DTC would release the Restriction when it reasonably determines 
that the release of the Restriction would not pose a threat of imminent 
adverse consequences to DTC or its Participants, obviating the original 
basis for the Restriction.
    It is impossible to anticipate all possible scenarios that may give 
rise to a release of a Restriction under this basis. However, DTC 
anticipates that it would release such Restriction in a number of 
circumstances, including without limitation:
     When DTC determines that the perceived harm has passed or 
is significantly remote;
     when the basis for the Restriction no longer exists. For 
example, where DTC imposed a Deposit Chill on the basis of plausible 
information that certificates were stolen and about to be deposited, 
and DTC subsequently receives plausible information that the 
certificates have been recovered and will not be deposited, or where 
DTC imposed a Deposit Chill based on erroneously issued shares, and 
subsequently receives copies of a ``Stop transfer'' \21\ directive and 
cancellation of such shares before they have been deposited; or
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    \21\ A ``stop transfer'' is an order made to prevent the 
transfer of ownership of a security.
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     when an Eligible Security had been previously Globally 
Locked based on a Commission enforcement action but there is no 
indication that illegally distributed Securities are about to be 
deposited.
C. Proposed Fair Procedures
    DTC has developed the procedures in the proposed rule change to 
give the Issuer a timely notice of the Restriction, provide the Issuer 
an opportunity to submit a written challenge to the Restriction, 
provide a review and written determination by an independent officer, 
and maintain a complete record of the proceeding, consistent with 
Section 17A(b)(3)(H) of the Act \22\ and the Commission's opinion and 
order in IPWG.
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    \22\ 15 U.S.C. 78q-1(b)(3)(H).
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    Pursuant to the proposed rule change, DTC would send written notice 
(``Restriction Notice'') to the Issuer's last known business address 
and to the last known business address of the Issuer's transfer agent, 
if any, on record with DTC. The Restriction Notice would be sent within 
three Business Days of imposition of a Restriction and would set forth: 
(i) The basis for the Restriction; (ii) the date the Restriction was 
imposed; (iii) that the Issuer may submit a written response to DTC 
detailing the basis for release of the Restriction under proposed Rule 
33 (``the Restriction Response''); and (iv) that the Restriction 
Response must be received by DTC within twenty Business Days of 
delivery of the Restriction Notice.
    Once the Restriction Response is received by DTC, the proposed rule 
change provides that it would be reviewed by a DTC officer who did not 
have responsibility for the imposition of the Restriction. DTC may 
request additional information from the Issuer. After the officer's 
review is completed, DTC would provide a written decision (a 
``Restriction Decision'') to the Issuer.

[[Page 37235]]

Within ten Business Days of delivery of the Restriction Decision, the 
Issuer may submit a supplement (a ``Supplement'') for the sole purpose 
of establishing that DTC made a clerical mistake or mistake arising 
from an oversight or omission in reviewing the Restriction Response.
    If the Issuer submits a Supplement, the officer would provide a 
supplement decision (a ``Supplement Decision'') within ten Business 
Days after the Supplement was delivered. The Restriction Notice, the 
Restriction Response, the Restriction Decision, the Supplement, the 
Supplement Decision, and any other documents submitted in connection 
with these procedures would constitute the record for purposes of any 
appeal to the Commission.
    The proposed rule change would not affect DTC's ability (A) to lift 
or modify a Restriction; (B) to operationally restrict book-entry 
services, Deposits or other services in the ordinary course of 
business, as such restrictions do not constitute Deposit Chills or 
Global Locks for purposes of proposed Rule 33; (C) to communicate with 
the Issuer or its transfer agent or representative, if any, provided 
that substantive communications are memorialized in writing to be 
included in the record for purposes of any appeal to the Commission; or 
(D) to send out a Restriction Notice prior to the imposition of a 
Restriction.
    DTC believes that these procedures comport with Section 
17A(b)(3)(H) of the Act, which requires that a registered clearing 
agency that denies or limits access to the agency's services to a 
``person,'' it must ``provide a fair procedure.'' \23\ Such procedures 
require the clearing agency to give the person notice and an 
opportunity to address the specific grounds for denial or prohibition 
or limitation and to keep a record.\24\ In its decision in IPWG, the 
Commission ruled, inter alia, that issuers are ``persons'' for the 
purposes of Section 17A(b)(3).\25\
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    \23\ See id.
    \24\ See 15 U.S.C. 78q-1(b)(5)(B).
    \25\ IPWG, 2012 SEC LEXIS at *24.
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    Section 17A of the Act does not specify the nature of the fair 
procedures DTC must provide to ``persons,'' including issuers. In IPWG, 
the Commission observed that:

    Exchange Act Section 17A(b)(5)(B) states that, when a registered 
clearing agency determines that ``a person shall be . . . prohibited 
or limited with respect to access to services offered by the 
clearing agency, the clearing agency shall notify such person of, 
and give him an opportunity to be heard upon, the specific grounds 
for . . . prohibition or limitation under consideration and keep a 
record.'' \26\
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    \26\ Id.

    As stated in IPWG, ``DTC may design such [Section 17A procedures] 
in accordance with its own internal needs and circumstances.'' \27\ The 
Commission further ruled in IPWG that DTC ``should adopt procedures 
that accord with the fairness requirements of Section 17A(b)(3)(H), 
which may be applied uniformly'' in the cases where DTC denies or 
limits services with respect to an Issuer's Securities.
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    \27\ Id. at *30 n.36.
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    In the Commission's more recent opinion in Atlantis, the Commission 
upheld the notice, opportunity to be heard, and recordkeeping that DTC 
provided to a Globally Locked issuer. Significantly, the Commission 
held that Section 17A of the Act does not require DTC to hold a formal 
hearing in order to satisfy its obligations under Section 17A to 
provide Issuers with an opportunity to be heard.\28\
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    \28\ Id. at *19.
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    DTC believes that the procedures in proposed Rule 33 for giving 
notice of the Restriction to the Issuer with an opportunity to be heard 
are consistent with the fair procedures upheld by the Commission in 
Atlantis. In addition, consistent with the Commission's broad directive 
in IPWG, DTC believes that the proposed rule would establish uniform 
standards for the imposition of Restrictions, as well as the fair 
procedures for Issuers whose Securities are subject to a Restriction.
Implementation Timeframe
    DTC will announce the effective date via Important Notice upon the 
Commission's approval of the proposed rule change.
2. Statutory Basis
    DTC believes that 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) of the Act \29\ 
and Section 17A(b)(3)(H) of the Act.\30\
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    \29\ 15 U.S.C. 78q-1(b)(3)(F).
    \30\ 15 U.S.C. 78q-1(b)(3)(H).
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    Section 17A(b)(3)(F) of the Act \31\ requires, inter alia, that the 
rules of the clearing agency be designed to promote the prompt and 
accurate clearance and settlement of securities transactions, and to 
assure the safeguarding of securities and funds which are in the 
custody or control of the clearing agency or for which it is 
responsible. By establishing a framework for DTC to impose and release 
Restrictions, the proposed rule change would provide a mechanism for 
DTC to act quickly and efficiently to screen out, prior to deposit, or 
restrict, after deposit, Securities for which trading has been 
prohibited by the Commission, FINRA, or a court of competent 
jurisdiction, or which pose a threat of imminent adverse consequences 
to DTC or its Participants, to assure the safeguarding of Securities 
deposited to and held by DTC, consistent with the requirements of the 
Act, in particular Section 17A(b)(3)(F) of the Act, cited above.
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    \31\ 15 U.S.C. 78q-1(b)(3)(F).
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    Section 17A(b)(3)(H) of the Act, requires, inter alia, that the 
rules of a clearing agency are in accordance with the provisions of 
Section 17A(b)(5)(B) of the Act,\32\ and in general provide a fair 
procedure with respect to the prohibition or limitation by the clearing 
agency of any person with respect to access to services offered by the 
clearing agency. By establishing a procedure that would provide for: 
(A) Criteria for notice to an Issuer that a Deposit Chill or Global 
Lock has been imposed; (B) an explanation of the specific grounds upon 
which any Restriction has been imposed; (C) the actions that the Issuer 
may take to object to the Restriction; (D) the process DTC would 
undertake to review written submissions of the Issuer and to render a 
final decision concerning the Restriction; (E) the grounds upon which 
DTC may release the Restriction; and (F) the maintenance of a complete 
record for submission to the Commission in the event an Issuer appeals, 
the proposed rule change would provide Issuers with fair procedures 
with respect to Deposit Chills and Global Locks, consistent with the 
requirements of the Act, in particular Section 17A(b)(3)(H) of the Act, 
cited above.\33\
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    \32\ Section 17A(b)(5)(B) of the Act, 15 U.S.C. 78q-1(b)(5)(B) 
provides: ``In any proceeding by a registered clearing agency to 
determine whether a person shall be denied participation or 
prohibited or limited with respect to access to services offered by 
the clearing agency, the clearing agency shall notify such person 
of, and give him an opportunity to be heard upon, the specific 
grounds for denial or prohibition or limitation under consideration 
and keep a record. A determination by the clearing agency to deny 
participation or prohibit or limit a person with respect to access 
to services offered by the clearing agency shall be supported by a 
statement setting forth the specific grounds on which the denial or 
prohibition or limitation is based.''
    \33\ 15 U.S.C. 78q-1(b)(3)(H).
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(B) Clearing Agency's Statement on Burden on Competition

    DTC does not believe that the proposed rule change would have any 
impact on, or impose any burden on competition that is not necessary or

[[Page 37236]]

appropriate in furtherance of the purposes of the Act, because the 
proposed procedures as described above would apply to all Eligible 
Securities that may be subject to a Deposit Chill or Global Lock.

(C) Clearing Agency'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 been 
solicited or received with respect to this filing. To the extent DTC 
receives written comments on the proposed rule change DTC will forward 
such comments to the Commission.

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-2016-003 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-DTC-2016-003. 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 the filing also will be available 
for inspection and copying at the principal office of DTC and on DTCC's 
Web site (http://dtcc.com/legal/sec-rule-filings.aspx). 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-2016-003 and should be 
submitted on or before June 30, 2016.
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    \34\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
Brent J. Fields,
Secretary.
[FR Doc. 2016-13614 Filed 6-8-16; 8:45 am]
 BILLING CODE 8011-01-P