[Federal Register Volume 60, Number 214 (Monday, November 6, 1995)]
[Notices]
[Pages 56081-56082]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27427]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36437; File No. SR-DTC-95-15]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of a Proposed Rule Change Relating to Processing
Securities With Indexed Principal Features Through the Receiver
Authorized Delivery Facility
October 30, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on August 23, 1995, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change (File No.
SR-DTC-95-15) as described in Items I, II, and III below, which items
have been prepared primarily by DTC. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
\1\ 15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
DTC is filing the proposed rule change to require transactions in
securities issued under a Money Market Instrument (``MMI'') program
having an indexed principal \2\ feature and settling in DTC's Same Day
Funds Settlement (``SDFS'') system to be directed to DTC's Receiver
Authorized Delivery facility (``RAD'').\3\ RAD requires the receiver to
authorize the transaction prior to it being processed by DTC.
\2\ An ``indexed principal'' is principal directly derived by
reference to a currency, composite currency, commodity, or other
financial index.
\3\ For a description of DTC's RAD facility, refer to Securities
Exchange Act Release Nos. 25886 (July 8, 1988), 53 FR 26698 [File
No. SR-DTC-88-07] (notice of filing and immediate effectiveness of
the RAD facility) and 35720 (May 16, 1995), 60 FR 27360 [File No.
SR-DTC-95-07] (order granting accelerated approval of a $15 million
per transaction minimum threshold to utilize the RAD facility for
approval or cancellation of deliveries).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, DTC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. DTC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such
statements.\4\
\4\ The Commission has modified the text of the summaries
prepared by DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to ensure that DTC
participants receiving a valued delivery of MMI securities with an
indexed principal feature will receive complete and accurate
information about whether or not such securities have an indexed
principal feature. The value of MMI securities with an indexed
principal feature may change dramatically in a short period of time;
therefore, DTC's participants have asked DTC to develop controls to
ensure that participants have accurate information about this feature
before accepting delivery of such a security. DTC has responded to
these concerns by developing procedural changes that will reduce the
likelihood that a DTC participant will purchase this type of security
without full knowledge of its indexed principal feature.
Under the proposal, DTC will require mandatory authorization from
receivers of securities having an indexed principal feature before DTC
will process the transaction. DTC participants will transmit such
authorization via DTC's RAD facility.\5\ In addition, DTC will revise
its twenty and forty-eight character CUSIP descriptions to include a
unique identifier that will indicate that an issue has an indexed
principal feature.
\5\ The transactions will be directed to DTC's existing RAD
facility; however, they will be subject to a separate approval and
reporting process.
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DTC believes the proposed rule change is consistent with the
requirements of Section 17A of the Act \6\ and the rules and
regulations thereunder because it promotes the prompt and accurate
clearance and settlement of transactions in securities that settle in
same-day funds. The proposed rule change will be implemented in a
manner designed to safeguard the securities and funds in DTC's custody
or under its control.
\6\ 15 U.S.C. 78q-1 (1988).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
In June 1995, DTC released a memorandum to its participants about
DTC's efforts to provide more complete information regarding the
indexed principal feature of MMI securities. Written comments from DTC
participants or others have not been solicited on the proposed change;
however, State Street Bank and Trust Company (``State Street'')
submitted a comment letter to DTC expressing two concerns regarding the
proposed rule change. First, State Street wrote that it currently uses
DTC's Main Frame Dual Host System (``MDH'') for daily settlement
purposes rather than DTC's Participant Terminal System (``PTS''). State
Street explained that because the new RAD authorization function only
is available on PTS and not MDH, it would be forced to process the new
RAD authorizations manually. DTC responded to State Street's concern by
agreeing to enable them to process the new RAD authorizations through
MDH.
Secondly, State Street commented that DTC should be able to provide
accurate and complete issuance information without the need for an
additional RAD control. DTC responded in its letter to State Street
that DTC participants and the Public Securities Association (``PSA'')
asked DTC to develop a method of identifying securities with an indexed
principal feature and a procedure to affirmatively notify participants
when they take delivery of securities having such a feature. DTC
participants and the PSA requested the development of these procedures
to ensure that DTC participants know before taking delivery that a
particular security has an indexed principal feature. DTC believes that
the proposed rule change effectively addresses these requests.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which DTC consents, the Commission will:
(a) By order approve such proposed rule change or
[[Page 56082]]
(b) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room, 450 Fifth Street, NW., Washington,
D.C. 20549. Copies of such filing will also be available for inspection
and copying at the principal office of DTC. All submissions should
refer to the file number SR-DTC-95-15 and should be submitted by
November 27, 1995.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\7\
\7\ 17 CFR 200.30-3(a) (12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27427 Filed 11-3-95; 8:45 am]
BILLING CODE 8010-01-M
