[Federal Register Volume 61, Number 218 (Friday, November 8, 1996)]
[Notices]
[Pages 57933-57934]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28697]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37916; File No. SR-DTC-96-17]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of a Proposed Rule Change Relating to the Movement of
Securities Positions Within a Collateral Group
November 1, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on October 4, 1996, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change (File No.
SR-DTC-96-17) 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.
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\1\ 15 U.S.C. Sec. 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 offer a new service to
its participants to permit movement of securities positions within a
collateral group. In addition, DTC proposes to charge a fee for this
new service of $.43 per transaction.
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.\2\
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\2\ 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 offer a new service
to DTC participants that permits movement of securities positions
within a collateral group. Rule 15c3-3 under the Act \3\ requires,
among other things, that broker-dealers maintain control of fully-paid
or excess margin securities they hold for the accounts of customers
(``customer fully-paid securities''). In 1988, DTC developed the Memo
Segregation Service (``Memo Seg'') in order to assist broker-dealer
participants in complying with Rule 15c3-3. Using Memo Seg, a
participant can create a ``memo'' position within its free account
enabling a participant to avoid making an unintended delivery of a
designated quantity of customer fully-paid securities that either are
in the participant's free account or are expected to be received into
that account.
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\3\ 17 CFR 240.15c3-3 (1996).
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However, some participants prefer to comply with Rule 15c3-3 by
moving customer fully-paid securities from their free account to an
additional DTC account established by the participant. Several months
ago, DTC was asked to consider developing a new service that would
accommodate transfers of customer fully-paid securities from a
participant's free account to an additional account within the same
collateral group and do so using certain procedures that would be less
expensive than a regular book-entry delivery.\4\
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\4\ A participant with multiple accounts may group its accounts
into ``families'' (i.e., ``collateral groups'') and instruct DTC to
allocate a specified portion of its overall collateral and net debit
cap to each family.
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Since transfers of securities from one account to another within
the same collateral group of a participant have no effect on the
participant's collateral monitor or net debit position, DTC can
eliminate certain processing steps associated with other kinds of book-
entry deliveries. \5\ The unit cost and proposed fee for this new
service is $.43 per transaction.
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\5\ For example, because a participant's collateral monitor and
net debit position are not affected by transfers within a collateral
group, DTC credit and collateral controls need not be checked prior
to such transfer.
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DTC believes the proposed rule change will help broker-dealer
participants protect customer fully-paid securities in order to comply
with Rule 15c3-3 under the Act by allowing them to move such securities
from participants' free account to an additional DTC account within the
same collateral group. This should permit participants to more easily
maintain control of customer fully-paid securities they hold.
Furthermore, 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 DTC will implement the proposed rule
change in a manner designed to safeguard the securities and funds in
DTC's custody or under its control.
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\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
The proposed rule change has been discussed with a limited number
of DTC participants. Written comments from DTC participants have not
been solicited or received on the proposed rule change.
[[Page 57934]]
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
(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, N.W., 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, N.W., 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-96-17 and
should be submitted by November 29, 1996.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12) (1996).
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Jonathan G. Katz,
Secretary.
[FR Doc. 96-28697 Filed 11-7-96; 8:45 am]
BILLING CODE 8010-01-M
