Document ID: SEC-2018-1004-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Depository Trust Co.
Posted Date: 2018-06-29T04:00Z

[Federal Register Volume 83, Number 126 (Friday, June 29, 2018)]
[Notices]
[Pages 30806-30808]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13980]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83511; File No. SR-DTC-2018-005]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the DTC Operational Arrangements To Add Clarifying Text Relating 
to the Processing of Unit Investment Trust Securities Through the DTC 
Investor's Voluntary Redemptions and Sales Service

June 25, 2018.
    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 June 20, 2018, 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 the clearing agency. 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

    The proposed rule change \3\ consists of proposed modifications to 
the DTC Operational Arrangements (Necessary for Securities to Become 
and Remain Eligible for DTC Services) (``OA'') \4\ to provide enhanced 
transparency within DTC's Procedures \5\ relating to requirements for 
Securities issued by unit investment trusts (``Units'') to be processed 
through DTC's Investor's Voluntary Redemptions and Sales Service 
(``IVORS''), as described below.
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    \3\ Each capitalized term not otherwise defined herein has its 
respective meaning as set forth in the Rules, By-Laws and 
Organization Certificate of The Depository Trust Company 
(``Rules''), available at http://www.dtcc.com/~/media/Files/
Downloads/legal/rules/dtc_rules.pdf.
    \4\ Available at http://www.dtcc.com/~/media/Files/Downloads/
legal/issue-eligibility/eligibility/operational-arrangements.pdf.
    \5\ Pursuant to the Rules, the term ``Procedures'' means the 
Procedures, service guides, and regulations of DTC adopted pursuant 
to Rule 27, as amended from time to time. See Rule 1, Section 1, 
supra note 3, at 13.
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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 proposed rule change consists of proposed modifications to the 
OA to provide enhanced transparency within the DTC Procedures relating 
to DTC's requirements for Units to be processed through IVORS, as 
discussed below.
Background
    A unit investment trust is an investment company that buys and 
holds a generally fixed portfolio of stocks, bonds or other securities 
for a fixed period of time. Units are sold by a sponsor, which is the 
issuer of the Units, to investors who receive a share of principal and 
dividends, or interest. When Units mature, an investor may redeem 
matured Units with the transfer agent for the Units, or sell Units to 
the sponsor for a cash payment (such redemptions and sales jointly 
referred to herein as ``Redemptions'').\6\ The sponsor may also allow a 
holder of maturing Units to ``rollover'' the Units by redeeming the 
maturing Units for a comparable issue of Units (``Rollover'').
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    \6\ See Securities Exchange Act Release No. 39852 (April 10, 
1998), 63 FR 19545 (April 20, 1998) (``1998 Release'').
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    Units that meet DTC's eligibility requirements \7\ may be Deposited 
for book-entry services at DTC and be held by Participants on behalf of 
investors. Redemptions and Rollovers of Units held at DTC must be 
processed through IVORS.\8\ IVORS allows a Participant to

[[Page 30807]]

surrender Units for value via book-entry, which Units are processed in 
accordance with standing instructions (``Standing Instructions'') 
provided by the sponsor or transfer agent for the Units through DTC's 
Participant Terminal System (``PTS''),\9\ an electronic interface that 
allows Participants to submit instructions to DTC and make inquiries in 
DTC's system. The transfer agent and the sponsor must each maintain a 
DTC Participant Account in order to facilitate the settlement of 
Redemptions.\10\
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    \7\ See OA, supra note 4 at 1-3 (setting forth requirements for 
Securities to be made eligible for DTC book-entry services).
    \8\ See OA, supra note 4 at 43-44.
    \9\ See 1998 Release, supra note 6, and Securities Exchange Act 
Release No. 50279 (August 27, 2004), 69 FR 54169 (``2004 Release'').
    \10\ See id.
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    In this regard, and as approved in the 1998 Release, in order to be 
eligible for processing through IVORS, (i) Units must be DTC-eligible 
and held in DTC's FAST program,\11\ (ii) the transfer agent, which is 
the Fast Agent for the Units, must be a DTC Participant and (iii) the 
sponsor, or the sponsor's clearing agent, i.e., a Participant that acts 
on the sponsor's behalf with respect to the settlement of transactions 
in Units issued by the sponsor, must be a DTC Participant (``IVORS 
Eligibility Requirements'').\12\
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    \11\ DTC's FAST program allows a transfer agent which is 
approved by DTC to be a ``FAST Agent'' to act as custodian for DTC 
and increase or decrease the amounts of a balance certificate 
representing Securities eligible for DTC book-entry services. See 
OA, supra note 4 at 15.
    \12\ See 1998 Release, supra note 6.
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    As indicated above, the OA currently states the requirement that 
IVORS must be used for the processing of Redemptions and Rollovers for 
Units held at DTC. The applicable OA text does not include references 
to requirements relating to IVORS processing that were approved in the 
1998 and 2004 Releases, in particular: (i) The use of Standing 
Instructions by a sponsor and/or FAST Agent \13\ and (ii) the IVORS 
Eligibility Requirements.\14\ Pursuant to this rule filing, in order to 
provide enhanced transparency within the OA to users of DTC services 
with regard to the use of IVORS for the processing of Redemptions and 
Rollovers, DTC proposes to amend the OA to include text stating these 
requirements.
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    \13\ See supra note 9.
    \14\ See supra note 12.
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    In addition, currently existing text in the OA relating to the 
processing of Units uses the term ``UIT'' interchangeably to describe 
both a unit investment trust and Units. In order to further enhance the 
transparency of the text of the Subject Section, as defined below, to 
more clearly distinguish between unit investment trusts and the 
securities issued by them, DTC would revise the applicable OA text to 
define Securities issued by unit investment trusts as ``Units.'' The 
text would continue to refer to unit investment trusts as UITs.
Proposed Changes to the OA
    Pursuant to the proposed rule change, DTC would amend the OA to 
revise Section VI.C.1.a. (Use of DTC's Investor's Voluntary Redemptions 
and Sales to sponsor) (``Subject Section''), relating to Redemption and 
Rollover processing through IVORS, to add text stating (i) the IVORS 
Eligibility Requirements and (ii) a provision relating to the 
processing of Redemptions and Rollovers in accordance with Standing 
Instructions provided by the sponsor or FAST Agent for the Units, as 
described above. Specifically, the proposed rule change would add the 
following within the existing text of that section as it relates to the 
description of Redemption and Rollover activities:
    ``IVORS will only be available for these activities if (1) the 
subject Unit is DTC-eligible, (2) the subject Unit is held through the 
FAST program, (3) the FAST Agent for the Unit is a Participant of DTC, 
and (4) the Unit's lead sponsor or its clearing agent is a Participant. 
Redemptions and rollovers are processed in accordance with standing 
instructions provided by the FAST Agent and/or sponsor of the Unit 
through PTS.''
    In addition, DTC would revise the text of the Subject Section to 
define Securities issued by unit investment trusts (i.e., Units, as 
defined above) as ``Units,'' as described above.
Effective Date
    The proposed rule change would become effective upon filing with 
the Commission.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Securities Exchange Act of 1934 
(``Act'') \15\ requires that the rules of the clearing agency be 
designed, inter alia, to promote the prompt and accurate clearance and 
settlement of securities transactions. DTC believes that the proposed 
rule change is consistent with this provision of the Act because by 
adding text within the Procedures set forth in the OA regarding DTC's 
requirements for the processing of Redemptions and Rollovers of Units 
through IVORS and more clearly distinguishing in the text of the 
Subject Section between unit investment trusts and Units, the proposed 
rule change would provide enhanced transparency for Participants with 
respect to the Procedures relating to such processing, including better 
facilitating Participants' understanding of the requirements relating 
to the processing of Units held by them at DTC. Therefore, by providing 
Participants with enhanced transparency with regard to the Procedures 
relating to the processing of Redemptions and Rollovers of Units 
through IVORS, and therefore facilitating Participants ability to 
understand the requirements relating to the processing of Units held by 
them at DTC, DTC believes that the proposed rule change would promote 
the prompt and accurate clearance and settlement of securities 
transactions consistent with the Act.
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    \15\ 15 U.S.C. 78q-1(b)(3)(F).
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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 competition. The proposed rule change would merely provide 
enhanced transparency with respect to existing Procedures relating to 
the processing of Redemptions and Rollovers through IVORS by adding 
text to the OA that is consistent with requirements previously approved 
by the Commission.\16\ Therefore, the proposed rule change would not 
affect the rights or obligations of Participants, and as such, would 
not impact competition.
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    \16\ See supra note 9.
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    Written comments relating to this proposed rule change have not 
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 has become effective pursuant to Section 
19(b)(3)(A) of the Act \17\ and paragraph (f) of Rule 19b-4 
thereunder.\18\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily 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

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investors, or otherwise in furtherance of the purposes of the Act.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f).
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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 [email protected]. Please include 
File Number SR-DTC-2018-005 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-2018-005. 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 website (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 website 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 website 
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-DTC-2018-005 and should be submitted on 
or before July 20, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-13980 Filed 6-28-18; 8:45 am]
 BILLING CODE 8011-01-P