Document ID: SEC-2018-1923-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Depository Trust Co.
Posted Date: 2018-12-14T05:00Z

[Federal Register Volume 83, Number 240 (Friday, December 14, 2018)]
[Notices]
[Pages 64401-64412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27078]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84768; File No. SR-DTC-2018-011]

Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend the Guide to the DTC Fee Schedule

December 10, 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 November 26, 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. DTC filed the proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rules 19b-
4(f)(2) and (f)(4) thereunder.\4\ 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)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(2) and (f)(4).
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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 Guide to the 
DTC Fee Schedule (``Fee Guide'') \5\ in order to (i) simplify the 
pricing structure, (ii) align fees with the costs of services provided 
by DTC, and (iii) encourage Participant practices that promote 
efficient market behavior. The proposed changes would include: (A) 
Grouping certain fee line items for related or similar services under 
one fee line item, (B) deleting fees with little or no activity, (C) 
updating certain fees to reflect DTC's costs in relation to the 
service, (D) decreasing certain fees in order to incentivize 
Participants to utilize certain DTC services that promote efficiency, 
both in the servicing of physical securities in the Custody Service and 
for the settlement of securities transactions at DTC, and (E) 
increasing a surcharge to discourage the late submission of certain 
underwriting documentation. In addition, the proposed rule change would 
also make

[[Page 64402]]

clarifying changes to the Fee Guide, as described in greater detail 
below.
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    \5\ Each capitalized term not otherwise defined herein has its 
respective meaning as set forth in the Fee Guide and the Rules, By-
Laws and Organization Certificate of DTC (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 proposed rule change would amend the Fee Guide in order to (i) 
simplify the pricing structure, (ii) align fees with the costs of 
services provided by DTC, and (iii) encourage Participant practices 
that promote efficient market behavior. The proposed changes will 
include: (A) Grouping certain fee line items for related or similar 
services under one fee line item, (B) deleting fees with little or no 
activity, (C) updating certain fees to reflect DTC's costs in relation 
to the service, (D) decreasing certain fees in order to incentivize 
Participants to utilize certain DTC services that promote efficiency, 
both in the servicing of physical securities in the Custody Service and 
for the settlement of securities transactions at DTC, and (E) 
increasing a surcharge to discourage the late submission of certain 
underwriting documentation. In addition, the proposed rule change would 
also make clarifying changes to the Fee Guide, as described in greater 
detail below.
(i) Background
    Participants are charged fees in accordance with the Fee Guide, 
based upon their activities and the services that they utilize. The Fee 
Guide lists approximately 283 individual fees. Certain fees need to be 
updated in order to better align with the costs incurred by DTC in 
providing those services.
    In response to feedback from Participants that the pricing 
structure is complex, DTC has undertaken a strategic review of its 
pricing and its pricing structure. As a result of the review, DTC 
developed an enhanced pricing strategy with the goals of reducing 
pricing complexity, aligning fees with costs, and encouraging 
Participant practices that promote efficient market behavior.\6\
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    \6\ DTC's affiliates, National Securities Clearing Corporation 
(``NSCC'') and Fixed Income Clearing Corporation (``FICC'') have 
undertaken similar reviews and are proposing changes to their 
respective fees.
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A. Simplify the Pricing Structure
(1) Fee Groupings
    As discussed above, Participants have indicated that the DTC 
pricing structure is complex. In response to this feedback, the 
proposed rule change would reduce the number of individual fee line 
items by creating new fee groupings that would consolidate separate fee 
line items for similar services or transactions. These fee line items 
would be grouped together into one line item with a standard fee, and 
the related fee condition may be modified to conform to the fee 
grouping. The standard fee would apply to each of the grouped services 
or transactions. In most cases, the proposed rule change would not 
change the amount charged to a Participant for each service or 
transaction within the fee grouping. However, in a few circumstances, 
the proposed standard fee may reflect an increase or decrease relative 
to the amount currently charged in order to either (i) align fees with 
costs or (ii) encourage Participant practices that promote efficient 
market behavior.
(2) Removing Fees With Little or No Activity
    The proposed rule change would remove fees for certain services 
that have little or no activity.\7\ Pursuant to the proposed rule 
change, DTC would delete these fees in order to further simplify the 
pricing structure by reducing the number of line items in the Fee 
Guide.
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    \7\ DTC examined how often all fees were charged over a period 
of no less than two years.
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B. Fee Realignment
    Pursuant to the proposed rule change, DTC would update certain fees 
in the Fee Guide to more closely reflect the costs incurred by DTC in 
providing the services. DTC believes that it is reasonable and 
appropriate to charge fees that properly align with DTC's costs. 
Aligning fees with costs adds efficiency to the market by allowing a 
Participant to more accurately evaluate the value of a service and to 
make business decisions accordingly. The primary goal of DTC with 
respect to the proposed realignment of fees is to reduce, where 
appropriate, the fees charged to Participants for services. Certain of 
the proposed fees that relate to services with declining volumes have 
been reduced because they consume fewer DTC resources. Other proposed 
fees have been reduced because certain streamlined processes have 
resulted in the reduction of processing costs for DTC. In both cases, 
pursuant to the proposed rule change, DTC, through these fee 
reductions, would be passing along its cost savings to Participants.
    Finally, a few proposed fees would result in fee increases in order 
to align with the costs incurred by DTC in providing the relevant 
services. Increasing a fee to align with the costs incurred by DTC in 
providing the service would allow DTC to efficiently offer the 
particular service, as well as continue to appropriately manage its 
resources for all its services, thereby enabling DTC to efficiently 
provide dependable and stable services to its Participants.
C. Promote Efficient Market Behavior
    DTC believes the proposed changes to reduce certain fees would 
encourage Participant use of certain DTC services that offer 
efficiencies that are designed to promote the prompt and accurate 
clearance and settlement of securities transactions (``efficient market 
behavior''). Pursuant to the proposed rule change, DTC would reduce 
certain fees for its Custody Service in order to encourage Participants 
to centralize the servicing of their physical securities at DTC, which 
already services the securities deposited at DTC by Participants for 
book-entry services. The Custody Service allows a Participant to 
outsource to DTC servicing of physical securities by depositing, among 
other things, securities not eligible for DTC book-entry services, 
including securities such as customer-registered custodial assets, 
restricted shares, and other DTC-ineligible securities such as 
certificated money market instruments (MMIs), private placements, and 
limited partnership interests.\8\ A Participant that does not use the 
Custody Service would otherwise need to secure its own physical 
securities as well as independently handle certain transactions, such 
as the transfer of physical securities and the handling of 
reorganization events. By utilizing the Custody Service, a Participant 
is able to benefit from, among other things, cost savings from the 
economies of scale offered by DTC, and the added efficiency of the 
limited depository services offered by DTC with respect to

[[Page 64403]]

securities held in its Custody Service.\9\ In addition, pursuant to the 
proposed rule change, DTC would also reduce or eliminate fees for 
certain settlement services in order to encourage Participants to 
submit their transactions earlier in day. The earlier submission of 
transactions by Participants results in more efficient settlement 
processing by increasing the volume of transactions processed in the 
night-cycle, which, in turn, enhances intraday settlement processing.
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    \8\ For further information about the Custody Service, see the 
Custody Service Guide, available at http://www.dtcc.com/~/media/
Files/Downloads/legal/service-guides/Custody.pdf.
    \9\ The limited depository services may include physical 
processing for the security on a Participant's behalf, such as 
facilitating the transfer of security certificates, and providing 
custody reorganization services.
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    Finally, pursuant to the proposed rule change, DTC would increase 
an underwriting surcharge charged to a Participant for the late 
submission of a letter of representations (``LOR'') or blanket letter 
of representations (``BLOR'') \10\ in order to increase the incentive 
for a Participant to submit its underwriting documentation in a timely 
manner. Failure of a Participant to submit a LOR or BLOR with respect 
to a security on time could delay the clearance and settlement of 
transactions in that security.
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    \10\ In order to make a book-entry only (``BEO'') issue eligible 
at DTC, the issuer must submit to DTC a LOR or BLOR prior to such 
issue being determined to be eligible. For more information on LORs 
and BLORs, see The DTC Operational Arrangements (Necessary for 
Securities to Become and Remain Eligible for DTC Services) at 4-6, 
available at http://www.dtcc.com/~/media/Files/Downloads/legal/
issue-eligibility/eligibility/operational-arrangements.pdf.
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D. Clarify the Fee Guide
    Pursuant to the proposed rule change, DTC would amend certain 
headings, fee names, and fee conditions to add clarity and conformity 
to the Fee Guide.
(ii) Proposed Fee Changes
    Pursuant to the proposed rule change, DTC would amend the Fee Guide 
as follows:
A. Simplify the Pricing Structure
(x) Fee Groupings With No Change to Fee Amount
Custody and Securities Processing/Securities Processing/Maintenance of 
Long Position (Registered Securities)
    (1) Frozen Letter. Currently, there are separate identified fees 
for (i) ``deliver,'' (ii) ``receive,'' and (iii) ``reject'' frozen 
letter transactions, each with a fee of $10.00. Pursuant to the 
proposed rule change, these fees would be consolidated and charged as a 
``Frozen letter deliver, receive or reject'' fee. The proposed rule 
change would not change the current amount of the fee. DTC believes 
that it would be appropriate to consolidate these fees because it would 
simplify the pricing structure by having one standard fee for frozen 
letter transactions.
Custody and Securities Processing/Securities Processing/General Asset 
Services
    (2) Researching of aged and other special items; Extraordinary 
processing/research fee for ICSR; Paying agent research. Pursuant to 
the proposed rule change, ``Researching of aged and other special 
items,'' ``Extraordinary processing/research fee for ICSR,'' and 
``Paying agent research'' line items would be consolidated and charged 
as a ``Researching fee.'' \11\ The proposed condition would read, ``per 
hour or per CUSIP, depending on the nature of the research.'' The 
proposed rule change would not affect the current fee of $100.00 per 
hour or CUSIP, as applicable. DTC believes that it would be appropriate 
to consolidate these fees because it would simplify the pricing 
structure by having one standard fee for these research activities.
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    \11\ As discussed below, certain other research fees with 
respect to Deposit Automation Management and New York Window 
Services would also be consolidated into the proposed ``Researching 
fee.''
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Custody and Securities Processing/Corporate Actions/Instruction 
Processing Fee
    (3) EDS/DRIP Election; Voluntary Corporate Action Base Election; 
Voluntary Corporate Action Election. These separate fees all relate to 
voluntary corporate action instructions. Pursuant to the proposed rule 
change, these fees would be consolidated and charged as a ``Corporate 
Action Instruction Fee.'' The proposed rule change would not affect the 
amount of the fee. Pursuant to the proposed rule change, the condition 
for the fee would read: ``Per voluntary and elective EDS/DRP 
instruction, up to 50 instructions per offer'' in order to reflect the 
consolidation of the fees for each instruction type. DTC believes that 
it would be appropriate to consolidate these fees because it would 
simplify the pricing structure by having one standard fee for 
transactions relating to instruction processing for voluntary corporate 
action events.
Custody and Securities Processing/Custody Services/Custody (Non-Core 
Services)
    (4) Custody inventory swing withdrawal; Custody inventory swing 
deposit. Pursuant to the proposed rule change, these fees would be 
consolidated and charged as a ``Custody inventory swing deposit or 
withdrawal'' fee. The condition for the fee would be modified to read: 
``Per deposit or withdrawal.'' The proposed rule change would not 
affect the current fee. DTC believes that it would be appropriate to 
consolidate these fees because it would simplify the pricing structure 
by having one standard fee for these related activities.
Custody and Securities Processing/Custody Services/Custody (Exception 
Processing)
    (5) Rejects. There are currently separate identified fees of 
$125.00 for (i) ``Transfer,'' (ii) ``Reorg,'' and (iii) ``Front-end 
reorg reject.'' \12\ Pursuant to the proposed rule change, these fees 
would be consolidated and charged as a ``Transfer, Reorg or Front-end 
reorg rejects'' fee. The proposed rule change would not affect the 
amount of the fee. DTC believes that it would be appropriate to 
consolidate the fees because it would simplify the pricing structure by 
having one standard fee for custody rejects.
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    \12\ There is also a $75.00 ``Custody Deposit'' fee, which would 
not be affected by the proposed rule change.
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Custody and Securities Processing/Deposit Services/Branch Deposits 
(Core Services)
    (6) Regular deposit received from a branch; Deposit of bearer 
securities received from a branch. Pursuant to the proposed rule 
change, these fees would be consolidated and charged as a ``Regular or 
bearer deposit received from a branch'' fee. The proposed rule change 
would not affect the current fee of $18.00 for each activity. DTC 
believes that it would be appropriate to consolidate the fees because 
it would simplify the pricing structure by having one standard fee for 
branch deposits.
Custody and Securities Processing/Deposit Services/Branch Deposits 
(Exception Processing),\13\ and Custody and Securities Processing/
Deposit Services/Deposit Automation Management (DAM)
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    \13\ To conform with the proposed fee groupings, the subheading 
``Branch Deposits (Exception Processing)'' would be modified to read 
``Branch Deposits and Deposit Automation Management (DAM) (Exception 
Processing).
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    (7) BDS TA deposit reject; Rejected deposit; Rejected reorg 
deposit. Pursuant to the proposed rule change, these fees would be 
consolidated and charged as a ``Rejected BDS TA deposit, Rejected DAM 
or Rejected Reorg deposits'' fee. The proposed rule change would not 
affect the current fee of $125.00 for each activity. DTC believes

[[Page 64404]]

that it would be appropriate to consolidate the fees because it would 
simplify the pricing structure by having one standard fee for branch 
deposit rejections.
    (8) Registered certificate deposit; Previous reverse split. 
Pursuant to the proposed rule change, these fees would be consolidated 
and charged as a ``Registered certificate deposit or Previous reverse 
split'' fee. The proposed rule change would not affect the current fee 
of $12.00 for each activity. DTC believes that it would be appropriate 
to consolidate the fees because it would simplify the pricing structure 
by having one standard fee for these DAM activities.
    (9) Research fee. Pursuant to the proposed rule change, this fee 
would be consolidated into the proposed ``Researching fee,'' as 
discussed above.\14\ For clarity and transparency, the ``Researching 
fee'' line item would also appear in this section. Pursuant to the 
proposed rule change, the proposed condition would read: ``per hour or 
per CUSIP, depending on the nature of the research.''
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    \14\ See supra note 11.
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Custody and Securities Processing/New York Window Services/Deliveries, 
and Custody and Securities Processing/New York Window Services/Receives 
\15\
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    \15\ To conform with the proposed fee groupings, the subheading 
``Deliveries'' that appears under the New York Window Services 
heading would be amended to ``Deliveries and Receives.'' The current 
subheading ``Receives'' would be deleted.
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    (10) ESS or FOSS delivery; ESS or FOSS reclaim delivery; ESS or 
FOSS receive; ESS or FOSS reclaim receive. Pursuant to the proposed 
rule change, each of these activities would be consolidated and charged 
as an ``ESS or FOSS delivery, receive or reclaim'' fee. The condition 
for the fee would be modified to read: ``Per delivery, per receive or 
per item for reclaim.'' The proposed rule change would not affect the 
current fee of $25.00. DTC believes that it would be appropriate to 
consolidate the fees because it would simplify the pricing structure by 
having one standard fee for these related and similar activities.
    (11) Internal cross-delivery; Internal cross-receive. Pursuant to 
the proposed rule change, these activities would be consolidated and 
charged as an ``Internal cross-delivery or receive'' fee. The condition 
for the proposed fee grouping would read: ``Per delivery or receive.'' 
The proposed rule change would not affect the current fee of $20.00 for 
each activity. DTC believes that it would be appropriate to consolidate 
the fees because it would simplify the pricing structure by having one 
standard fee for the service.
Custody and Securities Processing/New York Window Services/Other 
Services
    (12) Research. Pursuant to the proposed rule change, this fee would 
be consolidated into the proposed ``Researching fee,'' as discussed 
above.\16\ For clarity and transparency, the ``Researching fee'' line 
item would also appear in this section. Pursuant to the proposed rule 
change, the proposed condition would read: ``per hour or per CUSIP, 
depending on the nature of the research.''
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    \16\ See supra note 11.
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Custody and Securities Processing/Withdrawal Services/Direct 
Registration System (DRS)
    (13) Initiation of DRS Profile transaction; Cancellation of DRS 
Profile change. Pursuant to the proposed rule change, these fee line 
items would be consolidated and charged as an ``Initiation or 
cancellation of DRS Profile transaction'' fee. The condition for the 
fee grouping would read: ``Per transaction submitted or transaction 
cancelled before a Limited Participant Account action.'' The proposed 
rule change would not affect the current fee of $0.31 for each 
activity.
Custody and Securities Processing/Withdrawal Services/Municipal Bearer 
Bond Service, and Custody and Securities Processing/Withdrawal 
Services/Urgent Withdrawal, or Certificates-on-Demand, and Custody and 
Securities Processing/Withdrawal Services/Withdrawals-by-Transfer
    (14) Critical withdrawal request; Generation of WT (interface or 
window pickup); Direct mail by transfer agent (DMA)--Certificate. 
Pursuant to the proposed rule change, the fees for these activities 
would be consolidated and charged as a ``Physical Certificate: Critical 
withdrawal, WT (interface or window pick-up) or DMA withdrawal 
request'' fee. The condition for the fee would be modified to read: 
``Per request or assignment; special costs and TA fees additional.'' 
The proposed rule change would not affect the current fee of $500.00 
per request or assignment. DTC believes that it would be appropriate to 
consolidate the fees because it would simplify the pricing structure by 
having one standard fee for the service. In order to reflect the 
proposed consolidation, DTC is proposing to (i) modify the subheading 
of ``Urgent Withdrawal, or Certificates-on-Demand'' to ``Urgent 
Withdrawal, Certificates-on-Demand, or Withdrawals by Transfer,'' and 
(ii) delete the current subheading of ``Withdrawals by Transfer.''
Settlement Services/Book-Entry Delivery, Excluding MMIs
    (15) Stock loans and returns. In the current Fee Guide, there is a 
``Stock loans and returns'' fee of $0.25 per item; charged to the 
deliverer. The receiver of a stock loan or return is currently charged 
$0.11 under the fee ``Receive, regardless of time.'' Pursuant to the 
proposed rule change, both the deliverer and receiver would be charged 
a Stock loans and returns fee of $0.18, the average of the respective 
current fees. The proposed rule change would modify the condition of 
``Stock loans and returns'' fee to read: ``Per item; charged to 
deliverer and receiver.'' The purpose of the proposed rule change would 
be to simplify the pricing structure by having one standard fee for 
both sides of the transaction.
    (16) Receive, regardless of time. Pursuant to the proposed rule 
change, the fee name would be amended to reflect the proposed exclusion 
of stock loan receives and reclaim receives from this fee, in order to 
align with the proposed changes to the ``Stock loans and returns'' and 
``Reclaim'' fees. As such, DTC is proposing to amend the fee name to 
``Receive, regardless of time (excluding reclaims and stock loans and 
returns).''
    (17) Reclaim. In the current Fee Guide, there is a ``Reclaim'' fee 
of $0.45 per item; charged per delivery. Currently, the receive of a 
reclaim is charged $0.11 as a ``Receive, regardless of time'' fee. 
Pursuant to the proposed rule change, both a delivery and receive of a 
reclaim would be charged as a ``Reclaims'' \17\ fee of $0.26, the 
average of the respective current fees. The proposed rule change would 
modify the condition of ``Reclaims'' fee to read: ``Per delivery or 
receive.'' The purpose of the proposed rule change would be to simplify 
the pricing structure by having one standard fee for both sides of the 
transaction.
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    \17\ For conformity with other fee names in this section, DTC is 
proposing to change the fee name to ``Reclaims.''
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Settlement Services/Money Market Instruments (MMI) by Book-Entry Only
    (18) MMI DO; Maturity or reorganization presentment; Issuance 
instruction, both directly placed and dealer placed; Issuance deposit; 
MMI issuance receiver. Pursuant to the proposed rule change, these fees 
would be consolidated and charged as an ``MMI Transaction'' fee. The 
proposed rule change would not affect the current

[[Page 64405]]

fee of $1.00 for each transaction. To reflect the consolidation, DTC is 
proposing to modify the condition to read: ``Per item delivered, or 
received, issued or maturing.'' DTC believes that it would be 
appropriate to consolidate the fees because it would simplify the 
pricing structure by having one standard fee for these MMI 
transactions.
(y) Deletion of Fees With Little or No Volume
    The following fees have minimal or no activity. Pursuant to the 
proposed rule change, these fees would be deleted in order to simplify 
the pricing structure.
Custody and Securities Processing/General Asset Services
    (19) Transmission of image of deposit by fax or email, additional 
recipient.
    (20) Photocopying of statement or certificate.
    (21) Recording of certificate numbers.
Custody and Securities Processing/Municipal Bearer Bond Service
    (22) BEO issue.
Custody and Securities Processing/Corporate Actions/Instruction 
Processing Fees
    (23) Voluntary Corporate Action Bulk Election.
Custody and Securities Processing/Custody Services/Custody (Core 
Services)
    (24) Certified Mailing.
    (25) Photocopying and sending certificate or other document copies.
Custody and Securities Processing/Custody Services/Custody (Exception 
Processing)
    (26) Box-to-box audit count.
    (27) Customer audit count.
Custody and Securities Processing/Deposit Services/Branch Deposits 
(Exception Processing), and Custody and Securities Processing/Deposit 
Services/Deposit Automation Management (DAM)
    (28) Incorrect/no PDF-generated DAM deposit ticket attached.
    (29) Depository Facilities: Facility usage fee.
    (30) Depository Facilities: Facility deposit.
Custody and Securities Processing/Deposit Services/Restricted Deposits
    (31) Processing of trailing documents.
Custody and Securities Processing/New York Window Services/Other 
Services
    (32) Pass-through fees.
    (33) Long position.
Custody and Securities Processing/Reorganization Services/
Reorganization
    (34) Photocopy.
Custody and Securities Processing/Withdrawal Services/Direct 
Registration System (DRS)
    (35) Establishment of DRS account and subsequent mailing 
transaction.
    (36) Initiation of DRS Profile change using DRST via PTS or PBS.
    (37) Cancellation of DRS Profile change using DRST via PTS or PBS.
Custody and Securities Processing/Withdrawal Services/Interface 
Department
    (38) Sorting.
Forms
    (39) Forms provided by DTC.\18\
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    \18\ To conform with this change, the entire ``Forms'' section 
of the Fee Guide would be removed.
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B. Simplify the Pricing Structure/Realignment of Fee (Fee Groupings 
With a Fee Realignment)
Custody and Securities Processing/Securities Processing/Maintenance of 
Long Position (Registered Securities)
    (40) Less active issue. Currently, there are separate fees for 
registered corporate issues ($0.70) and registered municipal issues 
($1.29). Pursuant to the proposed rule change, the fee would be $0.70 
for either type of security. The proposed rule change would result in a 
fee decrease of $0.59 for registered municipal issues, which would 
better align the fee with declining volumes of less active registered 
municipal securities. As discussed above, certain fees that relate to 
services with declining volumes would be reduced because they consume 
fewer DTC resources. Pursuant to the proposed rule change, the new fee 
condition would read: ``For registered corporate issues, when a daily 
average of 15 or fewer participants have position or registered 
municipal issues, when a daily average of 1 or 2 participants have 
position.'' The purpose of the proposed rule change would be to (i) 
simplify the pricing structure by having one standard fee for the 
service and (ii) more closely align to DTC's decreased cost of 
providing the service for registered municipal securities.
Custody and Securities Processing/Withdrawal Services/Municipal Bearer 
Bond Service, and Custody and Securities Processing/Withdrawal 
Services/Urgent Withdrawal, or Certificates-on-Demand
    (41) COD \19\ (Municipal Bearer Bond Service); COD (Urgent 
Withdrawal, or Certificates-on-Demand). Currently, a COD under the 
Municipal Bearer Bond Service is charged a fee of $300.00, and other 
CODs are charged a fee of $240.00. Pursuant to the proposed rule 
change, the COD (Municipal Bearer Bond Service) fee line item would be 
consolidated with the COD (Urgent Withdrawal, or Certificates-on-
Demand) fee line item and charged as a ``COD'' fee, in the amount of 
$300.00. The proposed rule change would result in a fee increase of 
$60.00 for non-Municipal Bearer Bond Service CODs. The condition for 
the fee would be amended to read: ``Per withdrawal/COD.'' The purpose 
of the proposed rule change with respect to consolidating the fees 
would be to simplify the pricing structure by having one standard fee 
for these COD transactions. The purpose of the proposed rule change 
with respect to the fee increase would be to align to DTC's cost of 
providing the COD service, whether under the Municipal Bearer Bond 
Service or otherwise. Finally, in order to reflect the proposed 
consolidation, DTC is proposing to delete the subheading ``Municipal 
Bearer Bond Service.''
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    \19\ COD is an acronym for ``certificate on demand.''
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Settlement Services/Book-Entry Delivery, Excluding MMIs
    (42) Book-entry deliveries through CNS: Delivery to CNS; Receive 
from CNS. Currently, a Participant that delivers securities to the NSCC 
CNS \20\ account at DTC is charged $0.09 per item delivered; charged to 
both sides. A Participant that receives securities from the CNS account 
is charged $0.035 per item received, charged to both sides. Pursuant to 
the proposed rule change, each of these activities would be charged as 
a ``Delivery to/from CNS'' fee of $0.08, charged to both sides. To 
reflect the consolidation, DTC is proposing to delete the verbiage 
``Book-entry deliveries through CNS.'' The purpose of the proposed rule 
change with respect to consolidating the fees would be to simplify the 
pricing structure by charging a standard fee to both a deliverer and 
receiver in a CNS transaction. The purpose of the proposed rule change 
(with respect to

[[Page 64406]]

establishing a new fee for the fee grouping) would be to update the fee 
to better reflect the operational complexity, increased capacity, and 
system supports that are required to process CNS transactions at DTC.
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    \20\ CNS is an acronym for the NSCC ``Continuous Net 
Settlement'' system.
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    (43) Deliver order exception processing: Hold or release of pending 
DO that is recycling for insufficient position; Cancellation of pending 
DO. Currently, a Participant is charged $0.40 per item for ``Hold or 
release of a pending DO that is recycling for insufficient position.'' 
A Participant is currently charged $0.20 per item for ``Cancellation of 
pending DO.'' Pursuant to the proposed rule change, the hold or release 
of a pending DO and the cancellation of a pending DO would each be 
charged a fee of $0.24 per item, a weighted average that is based on 
the volume of each activity, under the fee name ``Hold, cancel or 
release of pending DO that is recycling for insufficient position.'' 
The purpose of the proposed rule change would be to (i) simplify the 
pricing structure by having one standard fee for similar activities and 
(ii) more closely align to DTC's costs incurred in relation to 
providing the service for each type of DO exception processing.
C. Simplify the Pricing Structure/Promote Efficient Market Behavior 
(Fee Groupings With a Fee Change To Promote Efficient Market Behavior)
Custody and Securities Processing/Deposit Services/Reorganization 
Deposits
    (44) Mandatory (regular or legal); Redemption or call (regular or 
legal). Currently, each of these reorganization deposit fees is $90.00 
per deposit. Pursuant to the proposed rule change, these fees would be 
consolidated and charged as a ``Mandatory, Redemption or Call Deposits 
(regular or legal)'' fee. Pursuant to the proposed rule change, the fee 
for ``Mandatory, Redemption or Call Deposits (regular or legal)'' would 
be $60.00, a $30.00 decrease from the current fees. The purpose of the 
proposed rule change would be to (i) simplify the pricing structure by 
having one standard fee for these related activities and (ii) 
incentivize Participants to utilize DTC to centralize, and enhance the 
efficiency of, the servicing of their securities.
Custody and Securities Processing/New York Window Services/Deliveries, 
and Custody and Securities Processing/New York Window Services/Receives
    (45) OTW \21\ delivery (including government securities); OTW 
reclaim delivery; OTW receive (including government receives); OTW 
reclaim receive. Pursuant to the proposed rule change, these fees would 
be consolidated and charged as an ``OTW delivery, receive or reclaim 
(including government securities)'' fee. The condition for the proposed 
fee grouping would be modified to read: ``Per delivery, per receive or 
per item for reclaim.'' Pursuant to the proposed rule change, the fee 
for the new fee grouping would be reduced to $40.00, a decrease of 
$10.00 from the current fees. The purpose of the proposed rule change 
with respect to consolidating the fees would be to simplify the pricing 
structure by having one standard fee for these related activities. The 
purpose of the proposed rule change with respect to the reduction of 
the fee would be to encourage Participants to utilize the OTW services, 
by incentivizing the presentation of more physical securities to DTC's 
central facility, and thereby promote processing efficiency.
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    \21\ OTW is an acronym for ``over-the-window.''
---------------------------------------------------------------------------

Underwriting Services/Late Surcharges
    (46) Late receipt of LOR or BLOR (on closing date); Late closing 
(after 2:00 p.m. eastern time). Currently, a Participant is charged a 
$300.00 surcharge for a ``Late receipt of LOR or BLOR (on closing 
date),'' and is charged a $400.00 surcharge for a ``Late closing (after 
2:00 p.m. eastern time).'' Pursuant to the proposed rule change, these 
surcharges would be consolidated and charged as a ``Late receipt of LOR 
or BLOR (on closing date) or Late Closing (after 2:00 p.m. eastern 
time)'' surcharge of $400. These surcharges are intended to align with 
DTC's cost in relation to a late submission or closing, as well as to 
incentivize Participants to move through the underwriting process in a 
timely manner. As such, DTC is proposing a $400.00 surcharge for this 
fee grouping, which would result in a surcharge increase of $100.00 for 
late submissions of LORs and BLORs. DTC is proposing the amount of $400 
for the standard surcharge in order to standardize the amount of the 
surcharge, and to further encourage Participants to submit underwriting 
documentation in a timely manner.
D. Fee Realignment
Custody and Securities Processing/Corporate Actions/Allocation Fees
    (47) Mandatory Corporate Actions. Pursuant to the proposed rule 
change, the fee would be reduced from $80.00 to $75.00. The purpose of 
the proposed rule change would be to align the fee with the costs of 
providing the service. The costs incurred by DTC are decreasing because 
of certain streamlined processes that have resulted in the reduction of 
processing costs for this service.
Custody and Securities Processing/Corporate Actions/Voluntary Event 
Handling Fee
    (48) Voluntary Corporate Action Handling. Pursuant to the proposed 
rule change, the fee would be reduced from $95.00 to $90.00. The 
purpose of the proposed rule change would be to align the fee with the 
costs of providing the service. The costs incurred by DTC are 
decreasing because of certain streamlined processes that have resulted 
in the reduction of processing costs for this service.
Settlement Services/Book-Entry Delivery, Excluding MMIs
    (49) Institutional receive or delivery (ID). Pursuant to the 
proposed rule change, this fee would be reduced from $0.05 per receive 
or delivery to $0.04 per receive or delivery. The purpose of the 
proposed reduction would be to more closely align the fee with DTC's 
decreased cost of providing the service, which is primarily handled as 
straight-through processing.
    (50) ID Net receive or delivery. Pursuant to the proposed rule 
change, this fee would be reduced from $0.025 per receive or delivery 
to $0.02 per receive or delivery. The purpose of the proposed reduction 
would be to more closely align the fee with DTC's decreased cost of 
providing the service, which is primarily handled as straight-through 
processing.
    (51) Fed DO. Pursuant to the proposed rule change, this fee would 
be reduced from $2.25 per item delivered or received to $1.50 per item 
delivered or received. The purpose of the proposed reduction is to more 
closely align the fee with DTC's cost of providing the service.
E. Promote Efficient Market Behavior
Custody and Securities Processing/Custody Services/Custody (Core 
Services)
    (52) Withdrawal and pickup (COD) between 8:30 a.m.-2:00 p.m. 
Pursuant to the proposed rule change, the fee would be reduced from 
$60.00 to $50.00. The purpose of the proposed rule change would be to 
incentivize Participants to utilize DTC to centralize, and enhance the 
efficiency of, the servicing of their physical securities.
    (53) Withdrawal and pickup (COD) between 2:00 p.m.-4:30 p.m. 
Pursuant to the proposed rule change, the fee would be reduced from 
$100.00 to $75.00. The purpose of the proposed rule change

[[Page 64407]]

would be to incentivize Participants to utilize DTC to centralize, and 
enhance the efficiency of, the servicing of their physical securities.
    (54) Withdrawal and subsequent deposit. Pursuant to the proposed 
rule change, the fee would be reduced from $20.00 to $15.00. The 
purpose of the proposed rule change would be to incentivize 
Participants to utilize DTC to centralize, and enhance the efficiency 
of, the servicing of their physical securities.
    (55) Withdrawal and shipment between 8:30 a.m.-2:00 p.m. Pursuant 
to the proposed rule change, the fee would be reduced from $70.00 to 
$55.00. The purpose of the proposed rule change would be to incentivize 
Participants to utilize DTC to centralize, and enhance the efficiency 
of, the servicing of their physical securities.
    (56) Withdrawal and shipment between 2:00 p.m.-4:30 p.m. Pursuant 
to the proposed rule change, the fee would be reduced from $110.00 to 
$80.00. The purpose of the proposed rule change would be to incentivize 
Participants to utilize DTC to centralize, and enhance the efficiency 
of, the servicing of their physical securities.
    (57) Custody reorg deposit. Pursuant to the proposed rule change, 
the fee would be reduced from $90.00 to $60.00. The purpose of the 
proposed rule change would be to incentivize Participants to utilize 
DTC to centralize, and enhance the efficiency of, the servicing of 
their physical securities.
Custody and Securities Processing/Custody Services/Custody (Exception 
Processing)
    (58) Reorg research. Pursuant to the proposed rule change, the fee 
would be reduced from $110.00 to $80.00. The purpose of the proposed 
rule change would be to incentivize Participants to utilize DTC to 
centralize, and enhance the efficiency of, the servicing of their 
physical securities.
Custody and Securities Processing/Deposit Services/Restricted Deposits
    (59) Restricted Deposit: Before 2:00 p.m. Pursuant to the proposed 
rule change, the fee would be reduced from $90.00 to $60.00. The 
purpose of the proposed rule change would be to incentivize 
Participants to utilize the restricted deposit services to centralize, 
and enhance the efficiency of, the servicing of their physical 
securities.
    (60) Restricted Deposit: After 2:00 p.m. eastern time. Pursuant to 
the proposed rule change, the fee would be reduced from $110.00 to 
$80.00. The purpose of the proposed rule change would be to incentivize 
Participants to utilize the restricted deposit services to centralize, 
and enhance the efficiency of, the servicing of their physical 
securities.
    (61) Reject of restricted deposit. Pursuant to the proposed rule 
change, this disincentive fee for rejections of restricted deposits 
would be eliminated. The purpose of the proposed rule change would be 
to remove any disincentive for Participants to utilize the restricted 
deposit service, and instead encourage Participants to utilize the 
restricted deposit service to centralize, and enhance the efficiency 
of, the servicing of their physical securities.
Settlement Services/Book-Entry Delivery, Excluding MMIs
    (62) Night deliver order. Pursuant to the proposed rule change, the 
fee would be reduced from $0.20 to $0.17 per item; charged to 
deliverer; applies to each DO submitted. DTC is proposing to reduce 
this fee in order to encourage Participants to submit their 
transactions earlier in day. The earlier submission of transactions by 
Participants results in more efficient settlement processing by 
increasing the volume of transactions processed in the night-cycle, 
which, in turn, enhances intraday settlement processing.
    (63) Deliver order exception processing: Dropped DO not completed 
because of insufficient deliverer position or collateral. Since the fee 
for ``Dropped DO not completed because of insufficient deliverer 
position or collateral'' may cause a Participant to delay making a 
particular delivery, the proposed rule change would eliminate the fee 
in order to encourage Participants to submit their transactions earlier 
in the day. The earlier submission of transactions by Participants 
results in more efficient settlement processing by increasing the 
volume of transactions processed in the night-cycle, which, in turn, 
enhances intraday settlement processing.
    (64) Deliver order exception processing: Insufficient receiver 
collateral or net debit cap. Since the fee for ``Insufficient receiver 
collateral or net debit cap'' may cause a Participant to delay making a 
particular delivery, the proposed rule change would eliminate the fee 
in order to encourage Participants to submit their transactions earlier 
in the day. The earlier submission of transactions by Participants 
results in more efficient settlement processing by increasing the 
volume of transactions processed in the night-cycle, which, in turn, 
enhances intraday settlement processing.
F. Clarify the Fee Guide
    DTC is proposing to amend the following provisions to clarify the 
Fee Guide:
Custody and Securities Processing/Securities Processing/Maintenance of 
Long Position (Registered Securities)
    (65) Average daily number of shares, rounded up to a multiple of 
100 shares. For clarity and transparency, the proposed rule change 
would amend the fee name to: ``Average daily number of shares (stocks, 
bonds and registered muni), rounded up to a multiple of 100 shares.'' 
The purpose of the proposed rule change is to clarify the types of 
securities that are included in the service.
    (66) BEO issue. For clarity and transparency, the proposed rule 
change would amend the fee name to: ``BEO issue (stocks, bonds and 
registered muni).'' The purpose of the proposed rule change is to 
clarify the types of securities that are included in the service.
    (67) Medium-term note, money market instrument, and commercial 
paper. For clarity and transparency, the proposed rule change would 
amend the fee name to: ``Medium-term note, money market instrument, 
registered muni and commercial paper.'' The purpose of the proposed 
rule change is to clarify the types of securities that are included in 
the service.
    (68) Issue that has been nontransferable for up to 6 years 
(surcharge). For clarity and transparency, the proposed rule change 
would amend the fee name to: ``Stock, bond, registered and bearer muni 
that have been nontransferable for up to 6 years (surcharge).'' The 
purpose of the proposed rule change is to clarify the types of 
securities that are included in the service.
    (69) Issue that remains nontransferable after 6 years (surcharge). 
For clarity and transparency, the fee name would be amended to: 
``Stock, bonds, registered and bearer muni that remain nontransferable 
after 6 years (surcharge).'' The purpose of the proposed rule change is 
to clarify the types of securities that are included in the service.
    (70) Swing of security position (receive or deliver). For clarity 
and transparency, the fee name would be amended to: ``Swing of security 
position (receive, or deliver (including stock dividend deliver)).'' 
The purpose of the proposed rule change is to clarify the types of 
securities that are included in the service.

[[Page 64408]]

Underwriting Services/Eligibility Fees
    (71) Equity Eligibility--Additional CUSIP Fee. For clarity and 
transparency, the first line of the fee condition would be modified to 
read: ``Per additional CUSIP;''. The purpose of the proposed rule 
change is to accurately reflect the existing underwriting fee-per-CUSIP 
structure, which consists of an initial fixed fee for the first CUSIP 
and an incremental fee for each additional CUSIP.\22\
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    \22\ Securities Exchange Act Release No. 71206 (December 30, 
2013), 79 FR 690 (January 6, 2014) (SR-DTC-2013-12).
---------------------------------------------------------------------------

    (72) Debt Eligibility--Additional CUSIP Fee. For clarity and 
transparency, the first line of the fee condition would be modified to 
read: ``Per additional CUSIP;''. The purpose of the proposed rule 
change is to accurately reflect the existing underwriting fee-per-CUSIP 
structure, which consists of an initial fixed fee for the first CUSIP 
and an incremental fee for each additional CUSIP.\23\
---------------------------------------------------------------------------

    \23\ Id.
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Expected Participant Impact
    In general, DTC anticipates that the proposed rule change would (i) 
have no impact on approximately 30% of Participants, (ii) result in fee 
reductions for approximately 49% of Participants, and (iii) result in 
fee increases for approximately 21% of Participants. These estimates 
were calculated against 2017 volume figures. In terms of the estimated 
fee increases, approximately 38% would have an increase of less than 
$1,000 per year, approximately 22% would have an increase between 
$1,000 and $10,000 per year, approximately 38% would have an increase 
between $10,000 and $75,000 per year, and approximately 2% would have 
an increase between $100,000 and $200,000 per year. These estimated 
impacts correlate to a Participant's business model and its use of the 
services affected by the proposed rule change. Taken collectively, the 
proposed rule change would reduce DTC's revenue by approximately 1%.
Participant Outreach
    Beginning in June 2018, DTC has conducted outreach to Participants 
in order to provide them with notice of the proposed changes to the 
affected fees. As of the date of this filing, no written comments 
relating to the proposed changes have been received in response to this 
outreach. The Commission will be notified of any written comments 
received.
Implementation Timeframe
    DTC would implement this proposal on January 1, 2019. As proposed, 
a legend would be added to the Fee Guide stating there are changes that 
became effective upon filing with the Commission but have not yet been 
implemented. The proposed legend also would include a date on which 
such changes would be implemented and the file number of this proposal, 
and state that, once this proposal is implemented, the legend would 
automatically be removed from the Fee Guide.
2. Statutory Basis
    DTC believes that this proposal is consistent with the requirements 
of the Act and the rules and regulations thereunder applicable to a 
registered clearing agency. Specifically, DTC believes that this 
proposal is consistent with Sections 17A(b)(3)(D) \24\ and 17A(b)(3)(F) 
\25\ of the Act and Rule 17Ad-22(e)(23)(ii),\26\ as promulgated under 
the Act, for the reasons described below.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78q-1(b)(3)(D).
    \25\ 15 U.S.C. 78q-1(b)(3)(F).
    \26\ 17 CFR 240.17Ad-22(e)(23)(ii).
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    (i) Section 17A(b)(3)(D) of the Act requires, inter alia, that the 
Rules provide for the equitable allocation of reasonable dues, fees, 
and other charges among participants.\27\ For the reasons set forth 
below, DTC believes that each of the proposed rule changes described 
above in Items II(A)1(ii)A-F would provide for the equitable allocation 
of reasonable dues, fees, and other charges among participants.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78q-1(b)(3)(D).
---------------------------------------------------------------------------

A. Simplify the Pricing Structure
    DTC believes that each of the proposed rule changes described in 
Items II(A)1(ii)A(x) (Simplify the Pricing Structure: Fee Groupings) 
and II(A)1(ii)A(y) (Simplify the Pricing Structure: Deletion of Fees 
with Little or No Volume) would provide for the equitable allocation of 
reasonable fees. Each of the proposed rule changes described in Item 
II(A)1(ii)A(x) would consolidate individual fee line items into a 
single fee line item. Each of the proposed rule changes described in 
Item II(A)1(ii)A(y) would delete a fee with little or no volume. Each 
fee for a service as described in Items II(A)1(ii)A(x) and 
II(A)1(ii)A(y) would continue to be charged (or not charged, with 
respect to the proposed fee deletions) to a Participant in accordance 
with (i) its utilization of the service, and (ii) the fee condition set 
forth in the Fee Guide, and would therefore be equitably allocated. In 
addition, the proposed rule changes described in Item II(A)1(ii)A(x) 
would not affect current fees, and would therefore continue to provide 
for reasonable fees. Further, the proposed rule changes described in 
Item II(A)1(ii)A(y), which would delete fees that have little or no 
volume, would be commensurate with DTC's minimal cost of providing the 
relevant service. Therefore, DTC believes that each of the proposed 
rule changes described in Items II(A)1(ii)A(x) and II(A)1(ii)A(y) would 
not affect the allocation or amount of fees, and would thereby continue 
to provide for the equitable allocation of reasonable fees, consistent 
with Section 17A(b)(3)(D) of the Act.\28\
---------------------------------------------------------------------------

    \28\ Id.
---------------------------------------------------------------------------

B. Fee Realignment
    DTC believes that each of the proposed rule changes with respect to 
the proposed realignment of fees, as described in Items II(A)1(ii)B 
(Simplify the Pricing Structure/Fee Realignment) \29\ and II(A)1(ii)D 
(Fee Realignment), would provide for the equitable allocation of 
reasonable fees. Each proposed fee for a service as described in Items 
II(A)1(ii)B and D would continue to be charged to a Participant in 
accordance with (i) its utilization of the service, and (ii) the fee 
condition set forth in the Fee Guide. DTC believes that, pursuant to 
the proposed rule changes described in Items II(A)1(ii)B and D, the 
proposed fees would continue to be equitably allocated because all 
Participants that utilize a particular service would be treated equally 
with respect to these fees under the proposal.\30\
---------------------------------------------------------------------------

    \29\ DTC believes that the consolidation of fee line items, in 
and of itself, would not affect the allocation or amount of fees. 
Therefore, to the extent that a proposed rule change described in 
Item II(A)1(ii)B (Simplify the Pricing Structure/Fee Realignment) 
addresses the consolidation of fee line items, DTC believes that 
such proposed rule change would continue to provide for the 
equitable allocation of reasonable fees. See supra Item II(A)2(i)A.
    \30\ As discussed above in the section titled ``Expected 
Participant Impact,'' the proposed rule change may result in fee 
increases or fee decreases for some Participants. A Participant may 
be impacted differently than another Participant due to its use of 
the various services with fees that would be affected by the 
proposed rule change, pursuant to its own particular business 
structure.
---------------------------------------------------------------------------

    DTC believes that each of the proposed rule changes described in 
Items II(A)1(ii)B (Simplify the Pricing Structure/Fee Realignment) and 
II(A)1(ii)D (Fee Realignment) would provide for reasonable fees. First, 
as discussed above, most of the proposed fee realignments described in 
Items II(A)1(ii)B and D would result in a fee reduction for a service. 
As described above, these fee reductions are being

[[Page 64409]]

proposed due to (i) declining volumes in connection with the service 
requiring fewer DTC resources and/or (ii) certain streamlined processes 
having resulted in the reduction of processing costs for DTC in 
connection with the service. In both cases, DTC, through the proposed 
fee reductions, would be passing along its cost savings to 
Participants. Therefore, DTC believes that such proposed fee reductions 
would continue to provide for the allocation of reasonable fees among 
Participants. Second, as discussed above, a few proposed fee 
realignments, as described in Items II(A)1(ii)B(41)-(43),\31\ would 
result in an increase to a fee for a service. Such proposed fee 
increases would allow those fees to remain commensurate with the costs 
of resources allocated by DTC in connection with the relevant services. 
The proposed fee increases to align with the costs incurred by DTC in 
providing the service would allow DTC to efficiently offer the service. 
Therefore, DTC believes that the proposed rule changes described in 
Items II(A)1(ii)B and D, would provide for the equitable allocation of 
reasonable fees, consistent with Section 17A(b)(3)(D) of the Act.\32\
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    \31\ Per email instruction from DTC's legal staff on December 4, 
2018, Commission staff revised this reference to correct a 
typographical error, changing ``B(43)-(45)'' to ``B(41)-(43).''
    \32\ 15 U.S.C. 78q-1(b)(3)(D).
---------------------------------------------------------------------------

C. Promote Efficient Market Behavior
    DTC believes that each of the proposed rule changes described in 
Items II(A)1(ii)C (Simplify the Pricing Structure/Promote Efficient 
Market Behavior) \33\ and II(A)1(ii)E (Promote Efficient Market 
Behavior) would provide for the equitable allocation of reasonable 
fees. Each proposed fee for a service as described in Items II(A)1(ii)C 
and E would continue to be charged to a Participant in accordance with 
(i) its utilization of the service, and (ii) the fee condition set 
forth in the Fee Guide. DTC believes that, pursuant to the proposed 
rule changes described in Items II(A)1(ii)C and E, the proposed fees 
would continue to be equitably allocated because all Participants that 
utilize a particular service (or submit a late BLOR or LOR) would be 
treated equally with respect to these fees under the proposal.\34\
---------------------------------------------------------------------------

    \33\ DTC believes that the consolidation of fee line items, in 
and of itself, would not affect the allocation or amount of fees. 
Therefore, to the extent that a proposed rule change described in 
Item II(A)1(ii)C (Simplify the Pricing Structure/Promote Efficient 
Market Behavior) addresses the consolidation of fee line items, DTC 
believes that such proposed rule change would continue to provide 
for the equitable allocation of reasonable fees. See supra Items 
II(A)2(i)A and B.
    \34\ See supra note 30.
---------------------------------------------------------------------------

    DTC believes that the each of the proposed rule changes described 
in Items II(A)1(ii)C (Simplify the Pricing Structure/Promote Efficient 
Market Behavior) and II(A)1(ii)E (Promote Efficient Market Behavior) 
would provide for reasonable fees. First, with the exception of the 
surcharge for the late submission of a LOR or BLOR, the proposed fee 
changes described in Items II(A)1(ii)C and E would reduce fees to 
encourage Participant use of certain DTC services that promote 
efficiency in the handling of physical securities or the processing of 
securities transactions for settlement. As such, DTC believes that 
these proposed fee reductions would result in reasonable fees because 
the use of these efficiencies offered by DTC could result in future 
decreased processing costs for Participants and for DTC, which, in 
turn, could be passed along to Participants. Second, DTC is proposing 
to increase the surcharge for the late submission of a LOR or BLOR from 
$300 to $400 in order to increase the incentive for a Participant to 
submit its underwriting documentation in a timely manner. DTC believes 
that the increase of this surcharge would be reasonable because 
Participants are already accustomed to the $400.00 surcharge for late 
closings, which is being consolidated into one line item with the late 
submission of LORs and BLORs surcharge. DTC also believes that the 
proposed fee would be reasonable because (i) the increase would be a 
modest amount ($100) that would only apply when a Participant submits a 
late LOR or BLOR, and (ii) a Participant can avoid the surcharge by 
submitting the LOR or BLOR on time. Therefore, DTC believes that each 
of the proposed rule changes described in Items II(A)1(ii)C and E would 
provide for the equitable allocation of reasonable fees, consistent 
with Section 17A(b)(3)(D) of the Act.\35\
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78q-1(b)(3)(D).
---------------------------------------------------------------------------

D. Clarify the Fee Guide
    DTC believes that each of the proposed rule changes described in 
Item II(A)1(ii)F (Clarify the Fee Guide) would provide for the 
equitable allocation of reasonable fees among participants. Each of the 
proposed rule changes described in II(A)1(ii)F would clarify a fee line 
item without affecting the amount of the existing fee for such line 
item. Each fee for a service as described in Item II(A)1(ii)F would 
continue to be charged to a Participant in accordance with (i) its 
utilization of the service, and (ii) the fee condition set forth in the 
Fee Guide. Therefore, DTC believes that each of the proposed rule 
changes described in Item II(A)1(ii)F would not affect the allocation 
or amount of fees, and would thereby continue to provide for the 
equitable allocation of reasonable fees, consistent with Section 
17A(b)(3)(D) of the Act.\36\
---------------------------------------------------------------------------

    \36\ Id.
---------------------------------------------------------------------------

    For the foregoing reasons, DTC believes that each of the proposed 
rule changes described in Items II(A)1(ii)A-F would provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
participants, consistent with Section 17A(b)(3)(D) of the Act.\37\
---------------------------------------------------------------------------

    \37\ Id.
---------------------------------------------------------------------------

    (ii) Section 17A(b)(3)(F) of the Act requires, inter alia, that the 
Rules be designed to promote the prompt and accurate clearance and 
settlement of securities transactions.\38\ For the reasons set forth 
below, DTC believes that each of the proposed rule changes described in 
Items II(A)1(ii)A-F is designed to promote the prompt and accurate 
clearance and settlement of securities transactions.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

A. Simplify the Fee Guide
    DTC believes that each of the proposed rule changes with respect to 
the consolidation of individual fee line items or deletion of fees, as 
described in Items II(A)1(ii)A(x) (Simplify the Pricing Structure: Fee 
Groupings), II(A)1(ii)A(y) (Simplify the Pricing Structure: Deletion of 
Fees with Little or No Volume), II(A)1(ii)B (Simplify the Pricing 
Structure/Fee Realignment), and II(A)1(ii)C (Simplify the Pricing 
Structure/Promote Efficient Market Behavior) is designed to promote the 
prompt and accurate clearance and settlement of securities 
transactions. DTC is proposing changes, as described in Items 
II(A)1(ii)A(x), II(A)1(ii)A(y), II(A)1(ii)B, and II(A)1(ii)C, that are 
designed to improve the accuracy and clarity of the Fee Guide by 
simplifying the Fee Guide through fee groupings or through the deletion 
of fees with little or no volume. Improving the accuracy and clarity of 
the Rules and Procedures, including the Fee Guide, would help 
Participants to better understand their rights and obligations 
regarding DTC services. When Participants better understand their 
rights and obligations regarding DTC services, they can act in 
accordance with the Rules and Procedures, which DTC believes would 
promote the prompt and accurate clearance and settlement of securities 
transactions by DTC. As such, DTC believes the proposed rule changes to 
simplify and clarify the Fee Guide are

[[Page 64410]]

consistent with Section 17A(b)(3)(F) of the Act.\39\
---------------------------------------------------------------------------

    \39\ Id.
---------------------------------------------------------------------------

B. Fee Realignment
    DTC believes that each of the proposed rule changes with respect to 
the proposed realignment of fees, as described in Items II(A)1(ii)B 
(Simplify the Pricing Structure/Fee Realignment) and II(A)1(ii)D (Fee 
Realignment) is designed to promote the prompt and accurate clearance 
and settlement of securities transactions. First, most of the proposed 
fee realignments described in Items II(A)1(ii)B and D would result in a 
fee reduction for a service to align with DTC's decreased costs in 
providing the service. Second, DTC would increase certain fees to align 
with the higher costs incurred by DTC in providing the relevant 
service. By aligning fees with costs, each of the proposed rule changes 
would add efficiency to the market by allowing a Participant to more 
accurately evaluate the value of a service and to make efficient 
decisions about the allocation of its resources within its business. In 
addition, the proposal to increase certain fees to align with the 
higher costs incurred by DTC in providing the service would allow DTC 
to more efficiently offer the related service and to continue to 
appropriately manage its resources for all its services. In this way, 
each of the proposed rule changes with respect to the proposed 
realignment of fees, as described in Items II(A)1(ii)B and II(A)1(ii)D 
would enable DTC continue to efficiently provide prompt and accurate 
clearance and settlement services to its Participants.
C. Promote Efficient Market Behavior
    DTC believes that each of the proposed rule changes described in 
Items II(A)1(ii)C (Simplify the Pricing Structure/Promote Efficient 
Market Behavior) and II(A)1(ii)E (Promote Efficient Market Behavior) is 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions. First, DTC is proposing to reduce or eliminate 
fees for certain settlement services in order to encourage Participants 
to submit their transactions earlier in the day. By encouraging the 
earlier submission of securities transactions by Participants, the 
proposed rule change is designed to promote efficient settlement 
processing by increasing the volume of transactions processed in the 
night-cycle, which, in turn, enhances intraday settlement processing of 
securities transactions. Therefore, by encouraging behavior that would 
promote efficient settlement processing of securities transactions, DTC 
believes that the proposed rule changes with respect to the reduction 
or elimination of fees for certain settlement services are designed to 
promote the prompt and accurate clearance and settlement of securities 
transactions.
    Second, DTC is proposing to reduce certain fees for its Custody 
Service in order to encourage Participants to centralize the servicing 
of their physical securities at DTC, which already services the 
securities deposited at DTC by Participants for book-entry services. By 
utilizing the Custody Service, a Participant is able to benefit from, 
among other things, cost savings from the economies of scale offered by 
DTC, and the added efficiency of the limited depository services 
offered by DTC with respect to securities held in its Custody Service. 
Therefore, by encouraging behavior that would promote added efficiency 
to the processing and handling of physical securities, DTC believes 
that the proposed rules changes to reduce certain fees for its Custody 
Service in order to encourage Participants to centralize the servicing 
of their physical securities at DTC are designed to promote the prompt 
and accurate clearance and settlement of securities transactions.
    Third, DTC is proposing to increase an underwriting surcharge for 
the late submission of a LOR or BLOR in order to encourage Participants 
to submit underwriting documentation in a timely manner. In this way, 
the proposed rule change is designed to deter behavior that could delay 
the prompt and accurate clearance and settlement of transactions in 
that security. Therefore, by deterring behavior that could delay the 
prompt and accurate settlement of transactions in a security, DTC 
believes that the proposed rule changes are designed to promote the 
prompt and accurate clearance and settlement of securities 
transactions.
D. Clarify the Fee Guide
    DTC believes that each of the proposed rule changes described in 
Item II(A)1(ii)F (Clarify the Fee Guide) is designed to promote the 
prompt and accurate clearance and settlement of securities 
transactions. Each of these changes would amend certain headings, fee 
names, and fee conditions to improve the accuracy and clarity of the 
Fee Guide. Improving the accuracy and clarity of the Rules and 
Procedures, including the Fee Guide, would help Participants to better 
understand their rights and obligations regarding DTC services. When 
Participants better understand their rights and obligations regarding 
DTC services, they can act in accordance with the Rules and Procedures, 
which DTC believes would promote the prompt and accurate clearance and 
settlement of securities transactions by DTC. As such, DTC believes the 
proposed rule changes to clarify the Fee Guide, as described in Item 
II(A)1(ii)F, are consistent with Section 17A(b)(3)(F) of the Act.\40\
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    \40\ Id.
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    For the foregoing reasons, DTC believes that each of the proposed 
rule changes described in Items II(A)1(ii)A-F are designed to promote 
the prompt and accurate clearance and settlement of securities 
transactions, consistent with Section 17A(b)(3)(F) of the Act.\41\
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    \41\ Id.
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    (iii) Rule 17Ad-22(e)(23)(ii) under the Act requires DTC to 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to provide sufficient information to 
enable participants to identify and evaluate the risks, fees, and other 
material costs they incur by participating in DTC.\42\
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    \42\ 17 CFR 240.17Ad-22(e)(23)(ii).
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    DTC believes that the proposed rule changes with respect to (1) 
simplifying the pricing structure of the Fee Guide through (x) fee 
groupings, as described in Items II(A)1(ii)A(x) (Simplify the Pricing 
Structure: Fee Groupings), II(A)1(ii)B (Simplify the Pricing Structure/
Fee Realignment), and II(A)1(ii)C (Simplify the Pricing Structure/
Promote Efficient Market Behavior), and (y) deleting fees with little 
or no volume, as described in Item II(A)1(ii)A(y) (Simplify the Pricing 
Structure: Deletion of Fees with Little or No Volume), and (2) 
clarifying the Fee Guide, as described in Item II(A)1(ii)F, by amending 
conditions and headings and by making conforming changes, would help 
ensure that the pricing structure of the Fee Guide is well-defined and 
clear to Participants. Having a well-defined and clear Fee Guide would 
help Participants to better understand the fees and help provide 
Participants with increased predictability and certainty regarding the 
fees they incur in participating in DTC. In this way, DTC believes the 
proposed rule changes to simplify the pricing structure of the Fee 
Guide and to clarify the Fee Guide, as described in Items 
II(A)1(ii)A(x), II(A)1(ii)A(y), II(A)1(ii)B, II(A)1(ii)C, and 
II(A)1(ii)F are consistent with Rule 17Ad-22(e)(23)(ii) under the Act, 
cited above.

[[Page 64411]]

(B) Clearing Agency's Statement on Burden on Competition

(i) Simplify the Fee Guide
    No Impact on Competition. DTC believes that each of the proposed 
rule changes with respect to the consolidation of individual fee line 
items, as described in Item II(A)1(ii)A(x) (Simplify the Pricing 
Structure: Fee Groupings), would not have an impact on competition.\43\ 
These proposed rule changes would improve the accuracy and clarity of 
the Fee Guide by simplifying the Fee Guide through fee groupings. 
Having an accurate and clear Fee Guide would facilitate Participants' 
understanding of the Fee Guide and their obligations thereunder, and so 
would not affect the rights and obligations of any Participant or other 
interested party. Therefore, DTC does not believe that the proposed 
changes with respect to the consolidation of individual fee line items, 
as described in Item II(A)1(ii)A(x), would have an impact on 
competition.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

    Impact on Competition. DTC believes that each of the proposed rule 
changes with respect to the deletion of fees with little or no volume, 
as described in Item II(A)1(ii)A(y) (Simplify the Pricing Structure: 
Deletion of Fees with Little or No Volume), may impact competition by 
potentially reducing Participants' operating costs. Therefore, DTC 
believes that the proposed rule changes with respect to the deletion of 
fees with little or no volume, as described in Item II(A)1(ii)A(y), 
would not impose a burden on competition, but may promote competition.
(ii) Fee Realignment
    Impact on Competition. DTC believes that each of the proposed rule 
changes with respect to the proposed adjustment of fees to align with 
DTC's costs, as described in Items II(A)1(ii)B (Simplify the Pricing 
Structure/Fee Realignment)\44\ and II(A)1(ii)D (Fee Realignment), may 
have an impact on competition, because these changes would result in 
either a fee decrease or fee increase to Participants for the relevant 
service.\45\
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    \44\ DTC believes that the consolidation of fee line items, in 
and of itself, would not have an impact on competition. See supra 
Item II(B)(i).
    \45\ 15 U.S.C. 78q-1(b)(3)(I).
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    First, the proposed rule changes that would result in a fee 
reduction for a service could promote competition by potentially 
reducing Participants' operating costs. Therefore DTC believes that the 
proposed rule changes to reduce fees in order to better align with 
costs would not impose a burden on competition, but may promote 
competition. Second, the proposed rule changes that would result in a 
fee increase for a service may impact competition by creating a burden 
on competition by negatively affecting such Participants' operating 
costs. However, DTC believes that any burden on competition that may be 
caused by these proposed rule changes would not be significant and 
would be necessary and appropriate in furtherance of the purposes of 
the Act, as permitted by Section 17A(b)(3)(I) of the Act.\46\
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    \46\ Id.
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    Burden on Competition Would Not Be Significant. DTC believes the 
burden on competition that may be imposed by the proposed fee increase 
for a non-Municipal Bearer Bond Service COD, as described in Item 
II(A)1(ii)B(41),\47\ would not be significant because it would be a 
nominal amount ($60.00) where Participants are already accustomed to 
paying a $300.00 fee for a similar service within the proposed fee 
grouping. In addition, DTC believes that the burden on competition that 
may be imposed by the proposed fee increase for receives from CNS, as 
described in Item II(A)1(ii)B(42),\48\ would not be significant. Even 
though the amount of the fee increase may appear significant relative 
to the current fee (a proposed increase from $0.035 to $0.08), DTC 
believes that the fee increase does not, in and of itself, mean that 
the burden on competition is significant. DTC does not believe that the 
fee increase would impose a significant burden on competition, because 
the impact of the fee increase would correlate to a Participant's 
particular business model and how CNS fits into that model, and 
therefore, Participants with similar business models and relationships 
with CNS would be similarly impacted. Finally, DTC believes that the 
burden on competition that may be imposed by the proposed fee increase 
for the cancellation of pending DO, as described in Item 
II(A)1(ii)B(43),\49\ would not be significant because the increase 
would be a nominal amount ($0.04) and the activity that triggers the 
fee occurs infrequently. Therefore, DTC believes that any burden on 
competition that may be caused by the proposed rule changes addressed 
immediately above would be insignificant.
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    \47\ Per email instruction from DTC's legal staff on December 4, 
2018, Commission staff revised this reference to correct a 
typographical error, changing ``B(43)'' to ``B(41).''
    \48\ Per email instruction from DTC's legal staff on December 4, 
2018, Commission staff revised this reference to correct a 
typographical error, changing ``B(44)'' to ``B(42).''
    \49\ Per email instruction from DTC's legal staff on December 4, 
2018, Commission staff revised this reference to correct a 
typographical error, changing ``B(45)'' to ``B(43).''
---------------------------------------------------------------------------

    Burden on Competition Would Be Necessary and Appropriate. DTC 
believes that any insignificant burden on competition that may be 
imposed by the proposed rule changes addressed immediately above would 
be necessary and appropriate in furtherance of the purposes of the Act, 
as permitted by Section 17A(b)(3)(I) of the Act.\50\ As discussed 
above, DTC believes that the proposed rule changes would (1) provide 
for the equitable allocation of reasonable fees,\51\ as required by 
Section 17A(b)(3)(D) of the Act,\52\ and (2) promote the prompt and 
accurate clearance and settlement of securities transactions,\53\ 
consistent with Section 17A(b)(3)(F) of the Act.\54\ Therefore, DTC 
believes that any insignificant burden on competition that may be 
imposed by the proposed rule changes addressed immediately above would 
be necessary and appropriate in furtherance of the purposes of the Act, 
specifically Section 17A(b)(3)(D) of the Act and Section 17A(b)(3)(F) 
of the Act, respectively, as permitted by Section 17A(b)(3)(I) of the 
Act.\55\
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    \50\ Id.
    \51\ See supra Item II(A)2(i)B.
    \52\ 15 U.S.C. 78q-1(b)(3)(D).
    \53\ See supra Item II(A)2(ii)B.
    \54\ 15 U.S.C. 78q-1(b)(3)(F).
    \55\ 15 U.S.C. 78q-1(b)(3)(I).
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(iii) Promote Efficient Market Behavior
    Impact on Competition. DTC believes that each of the proposed 
adjustments of certain fees to encourage efficient market behavior, as 
described in Items II(A)1(ii)C (Simplify the Pricing Structure/Promote 
Efficient Market Behavior)\56\ and II(A)1(ii)E (Promote Efficient 
Market Behavior), may have an impact on competition, because these 
proposed adjustments would result in either a fee decrease or fee 
increase to Participants for the relevant service.\57\ First, DTC 
believes that each of the proposed fee reductions for a service could 
promote competition by potentially reducing Participants' operating 
costs. Based on the foregoing, DTC believes that each of the proposed 
reduction of certain fees in order to promote efficient market 
behavior, as described in Items II(A)1(ii)C and II(A)1(ii)E, would not 
impose a burden on competition, but may promote competition. Second, 
DTC believes that the proposed increase of the surcharge for the late 
submission of a LOR or BLOR may impact competition, because

[[Page 64412]]

it could create a burden on competition by negatively affecting such 
Participants' operating costs. However, DTC believes that the burden on 
competition would not be significant and would be necessary and 
appropriate in furtherance of the purposes of the Act, as permitted by 
Section 17A(b)(3)(I) of the Act.\58\
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    \56\ DTC believes that the consolidation of fee line items, in 
and of itself, would not have an impact on competition. See supra 
Item II(B)(i).
    \57\ 15 U.S.C. 78q-1(b)(3)(I).
    \58\ Id.
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    Burden on Competition Would Not Be Significant. DTC believes that 
any burden on competition that may be imposed by the proposed increase 
of the surcharge for the late submission of a LOR or BLOR would be 
insignificant because (1) the increase would be a modest amount ($100) 
that would only apply when a Participant submits a late LOR or BLOR, 
and (2) a Participant can avoid the surcharge by submitting the LOR or 
BLOR on time.
    Burden on Competition Would Be Necessary and Appropriate. DTC 
believes that any insignificant burden on competition that is created 
by the proposed increase of the surcharge for the late submission of a 
LOR or BLOR would be necessary and appropriate in furtherance of the 
purposes of the Act, as permitted by Section 17A(b)(3)(I) of the 
Act.\59\ As discussed above, DTC believes that the proposed rule 
changes would (1) provide for the equitable allocation of reasonable 
fees,\60\ as required by Section 17A(b)(3)(D) of the Act,\61\ and (2) 
promote the prompt and accurate clearance and settlement of securities 
transactions,\62\ consistent with Section 17A(b)(3)(F) of the Act.\63\ 
Therefore, DTC believes that any insignificant burden on competition 
that may be imposed by the proposed rule changes addressed immediately 
above would be necessary and appropriate in furtherance of the purposes 
of the Act, specifically Section 17A(b)(3)(D) of the Act and Section 
17A(b)(3)(F) of the Act, respectively, as permitted by Section 
17A(b)(3)(I) of the Act.\64\
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    \59\ Id.
    \60\ See supra Item II(A)2(i)C.
    \61\ 15 U.S.C. 78q-1(b)(3)(D).
    \62\ See supra Item II(A)2(ii)C.
    \63\ 15 U.S.C. 78q-1(b)(3)(F).
    \64\ 15 U.S.C. 78q-1(b)(3)(I).
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(iv) Clarify the Fee Guide
    No Impact on Competition. DTC believes that each of the proposed 
clarifications to the Fee Guide, as described in Item II(A)1(ii)F 
(Clarify the Fee Guide), would not have an impact on competition.\65\ 
Each of these changes would amend certain headings, fee names, and fee 
conditions to improve the accuracy and clarity of the Fee Guide. Having 
an accurate and clear Fee Guide would facilitate Participants' 
understanding of the Fee Guide and their obligations thereunder, and so 
would not affect the rights and obligations of any Participant or other 
interested party. Therefore, DTC believes that each of the proposed 
clarifications to the Fee Guide, as described in Item II(A)1(ii)F 
(Clarify the Fee Guide), would not have an impact on competition.
---------------------------------------------------------------------------

    \65\ Id.
---------------------------------------------------------------------------

(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 \66\ and paragraph (f) of Rule 19b-4 
thereunder.\67\ 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 
investors, or otherwise in furtherance of the purposes of the Act.
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    \66\ 15 U.S.C. 78s(b)(3)(A).
    \67\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2018-011 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-2018-011. 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-2018-011 and should be submitted on 
or before January 4, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\68\
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    \68\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2018-27078 Filed 12-13-18; 8:45 am]
 BILLING CODE 8011-01-P