Document ID: SEC-2009-1276-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The Depository Trust Company; Order Approving Proposed Rule Change To Eliminate One of the Indemnity Surety Programs in the Profile Modification System
Posted Date: 2009-09-08T04:00Z

[Federal Register: September 8, 2009 (Volume 74, Number 172)]
[Notices]               
[Page 46285]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08se09-149]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60594; File No. SR-DTC-2009-11]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Order Approving Proposed Rule Change To Eliminate One of the Indemnity 
Surety Programs in the Profile Modification System

August 31, 2009.

I. Introduction

    On June 11, 2009, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') proposed rule 
change SR-DTC-2009-11 pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'').\1\ The proposed rule change was 
published for comment in the Federal Register on July 20, 2009.\2\ No 
comment letters were received on the proposal. This order approves the 
proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 60304 (Jul. 14, 2009), 
74 FR 35221.
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II. Description

    The proposed rule change eliminates one of the Indemnity Surety 
Programs (``PSP II'') of DTC's Profile Modification System 
(``Profile'').\3\
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    \3\ DTC has created a Profile Indemnity Insurance Program (``PIP 
II'') to replace the PSP II. Securities Exchange Act Release No. 
60036 (Jun. 3, 2009), 74 FR 28085 (Jun. 12, 2009) [File No. SR-DTC-
2009-09].
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    On April 19, 2000, the Commission approved a DTC rule filing to 
establish Profile,\4\ an electronic communication system between 
transfer agents that are Direct Registration System (``DRS'') Limited 
Participants (``Limited Participants'') and broker-dealers that are DRS 
Participants (``Participants''). In May 2000, DTC implemented Profile. 
Profile allows Participants to submit electronically an instruction to 
move a share position from an account at the Limited Participant to the 
Participant's account at DTC (``Electronic Participant Instruction''). 
Profile also allows Limited Participants to submit an instruction for 
the movement of a share position from a Participant's account at DTC to 
an account at the Limited Participant (``Electronic Limited Participant 
Instruction;'' together with Electronic Participant Instruction, 
``Electronic Instruction''). A Participant or Limited Participant 
submitting an Electronic Instruction through Profile is required to 
agree to a Participant Terminal System (``PTS'') screen indemnity 
(``Screen Indemnity'').
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    \4\ Securities Exchange Act Release No. 42704 (Apr. 19, 2000), 
65 FR 24242 (Apr. 25, 2000) [File No. SR-DTC-2000-04].
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    On November 17, 2000, the Commission approved a DTC rule filing to 
establish the Profile Indemnity Surety Program (``PSP'').\5\ Under PSP, 
all users of Profile that agree to the Screen Indemnity as part of 
their use of Profile must procure a surety bond (``Surety Bond'') to 
back the representations under the Screen Indemnity.\6\
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    \5\ Securities Exchange Act Release No. 43586 (Nov. 17, 2000), 
65 FR 70745 (Nov. 27,
    2000) [File No. SR-DTC-2000-09].
    \6\ Participation in PSP requires the payment of an annual 
premium of $3,150 to a surety provider and an administration fee of 
$250 to DTC. The PSP surety provider provides for a coverage limit 
of $3 million per transaction with an annual aggregate limit of $6 
million. On September 14, 2005, the Commission approved a DTC rule 
filing to establish the Profile Indemnity Insurance Program 
(``PIP''), which serves as an alternative to PSP. Securities 
Exchange Act Release No. 52422 (Sept. 14, 2005), 70 FR 55196 (Sept. 
20, 2005) [File No. SR-DTC-2005-11]. PIP allows users of Profile 
that agree to the Screen Indemnity have the option to procure 
insurance relating to a particular securities transaction according 
to the value of the securities transaction. PIP 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 per transaction fee of $27.50.
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    On June 26, 2008, the Commission approved a DTC rule filing to 
establish PSP II,\7\ which provides for a coverage limit of $7.5 
million per transaction with an annual aggregate limit of $15 million. 
Users of PSP II are required to pay an annual premium of $6,000 to a 
surety provider and a DTC administration fee of $250.
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    \7\ Securities Exchange Act Release No. 58042 (Jun. 26, 2008), 
73 FR 39067 (July 8, 2008) [File No. SR-DTC-2008-04].
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    On June 3, 2009, the Commission approved a DTC rule filing to 
establish a new Profile Indemnity Insurance Program (``PIP II'') to 
replace PSP II.\8\ PIP II will account for the additional, larger value 
Profile transactions that DRS currently handles by providing the same 
coverage limits (i.e., $7.5 million per transaction with an annual 
aggregate limit of $15 million) at the same annual premium (i.e., 
$6,000 to a provider and a $250 administration fee to DTC) as PSP II 
without requiring users of Profile to procure a surety bond. Since PIP 
II will perform the same function of PSP II, DTC is eliminating PSP II.
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    \8\ Securities Exchange Act Release No. 60036 (Jun. 3, 2009) 74 
FR 28085 (Jun. 12, 2009) [File No. DTC-2009-09].
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III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a registered clearing agency. In particular, 
the Commission believes the proposal is consistent with the 
requirements of Section 17A(b)(3)(F),\9\ which requires, among other 
things, that the rules of a clearing agency are designed to remove 
impediments to and perfect the mechanisms of a national system for the 
prompt and accurate clearance and settlement of securities 
transactions.
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    \9\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \10\ and the 
rules and regulations thereunder.
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    \10\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (File No. SR-DTC-2009-11) be, 
and hereby is, approved.\12\
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    \11\ 15 U.S.C. 78s(b)(2).
    \12\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-21619 Filed 9-4-09; 8:45 am]

BILLING CODE 8010-01-P