[Federal Register Volume 63, Number 240 (Tuesday, December 15, 1998)]
[Notices]
[Pages 69127-69128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33133]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 40762, File No. SR-DTC-98-20]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to the Institutional Delivery System
December 8, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on October 1, 1998, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') and on November 12, 1998, amended
the proposed rule change 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 from interested persons on
the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The proposed rule change modifies the Advice of Correction/
Cancellation function in DTC's Institutional Delivery system.
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
Current, DTC's Institutional Delivery (``ID'') system allows a
broker-dealer to submit requests to cancel incorrect confirmations
through its Advice of Correction/Cancellation function (``AOCC'').\3\
In cases where the confirmation is not yet affirmed, DTC eliminates the
confirmation from the ID system processing and distributes a
cancellation message to all parties receiving the original
confirmation. In cases where the confirmation has been affirmed, DTC
does not immediately eliminate the confirmation from the ID system but
instead distributes an ``attempt to cancel'' message on behalf of the
broker to alert parties that the trade should not be settled. If no
action is taken by S+21, the system automatically eliminates the
confirmation.
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\3\ The ID system's AOCC function is one of three electronic
mail features that enables an institution or its agent which has
received a confirmation through the ID system to notify the broker
of the reason(s) why the institution disagrees with the
confirmation. This communication allows the broker-dealer to resolve
the discrepancies between its records of the trade and the
institution's records. See Securities Exchange Act Release No. 33466
(January 1994), 59 FR 3139 [File No. SR-DTC-93-07] (order approving
rule changes relating to enhancements to DTC's ID system); 36050
(August 2, 1995), 60 FR 41139, [File No. SR-DTC-95-10] (order
approving rule changes relating to modifications of the AOCC feature
and Authorization/Exception processing in DTC's ID system).
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The purpose of the proposed rule change is to modify DTC's AOCC
function by allowing the affirming party to reverse an affirmed
confirmation so that the confirmation would not be eligible for any
further action other than an outright cancellation by the broker-
dealer. By permitting a reversal, confirmations will be eliminated in a
more timely manner thereby fostering greater certainty of trade
information available on the ID system. The reversal action, which may
be the response to an attempt to cancel by the broker-dealer or may be
initiated by the affirming party, will be permitted up to 10:00 a.m. on
the business day before the settlement date (S-1). Once a reversal
action is executed, the trade will be deleted from the ID system, and
subsequent reaffirmation of the reversed ID confirmation will not be
permitted. In keeping with existing AOCC function procedures, the ID
system will provide notification to all parties upon the systems's
receipt of an AOCC that authorizes a reversal of an affirmed
confirmation.
DTC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \4\ and the rules and
regulations thereunder because it promotes efficiencies in the
clearance and settlement of transactions in securities by facilitating
the cancellation of
[[Page 69128]]
affirmed confirmations which should not be settled and allows the
records of trades to reflect the transactions more accurately.
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\4\ 15 U.S.C. 78q-1
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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 that is 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
No comments on the proposed rule change were solicited or received.
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)(iii) \5\ of the Act and pursuant to Rule 19b-4(e)(4) \6\
promulgated thereunder because the proposal effects a change in an
existing service of a registered clearing agency that does not
adversely affect the safeguarding of securities or funds in the custody
or control of the clearing agency or for which it is responsible and
does not significantly affect the respective rights or obligations of
DTC or persons using the service. At any time within sixty days of the
filing of such rule change, the Commission may summarily abrogate 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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\5\ 15 U.S.C. 78s(b)(3)(A)(iii).
\6\ 17 CFR 240.19b-4(e)(4).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 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. Sec. 552, will be available for inspection and copying in
the Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filing also will be available for
inspection and copying at the principal office of DTC. All submissions
should refer to File No. SR-DTC-98-20 and should be submitted by
January 3, 1999.
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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-33133 Filed 12-14-98; 8:45 am]
BILLING CODE 8010-01-M
