96-3042. Self-Regulatory Organizations; The Depository Trust Company; Order Approving a Proposed Rule Change Relating to Processing Securities With Indexed Principal Features Through the Receiver Authorized Delivery Facility

[Federal Register Volume 61, Number 29 (Monday, February 12, 1996)]
[Notices]
[Pages 5433-5434]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3042]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36811; File No. SR-DTC-95-15]


Self-Regulatory Organizations; The Depository Trust Company; 
Order Approving a Proposed Rule Change Relating to Processing 
Securities With Indexed Principal Features Through the Receiver 
Authorized Delivery Facility

February 5, 1996.
    On August 23, 1995, The Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change (File No. SR-DTC-95-15) pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal 
was published in the Federal Register on November 6, 1995.\2\ No 
comment letters were received. For the reasons discussed below, the 
Commission is approving the proposed rule change.

    \1\ 15 U.S.C. Sec. 78s(b) (1) (1988).
    \2\ Securities Exchange Act Release No. 36437 (October 30, 
1995), 60 FR 56081.
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I. Description

    Under the rule change, DTC will require transactions in securities 
issued under a Money Market Instrument (``MMI'') program having an 
indexed principal feature\3\ and settling in DTC's sameday funds 
settlement system to be directed to DTC's Receiver Authorized Delivery 
facility (``RAD'').\4\ RAD will require mandatory authorization from 
receivers of securities having an 

[[Page 5434]]
indexed principal feature before DTC will process the transaction.\5\

    \3\ A security with an indexed principal feature is one having 
its principal amount directly derived by reference to a currency, 
composite currency, commodity, or other financial index.
    \4\ 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 proposal to 
implement a $15 million per transaction minimum threshold to utilize 
the RAD facility for approval or cancellation of deliveries).
    \5\ Although these transactions will be directed to DTC's 
existing RAD facility, such transactions will be subject to a 
separate approval and reporting process.
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    Because the value of MMI securities with an indexed principal 
feature may change dramatically in a short period of time, DTC 
participants desire to have a mechanism by which they can determine 
whether a particular MMI issue has this feature before accepting a 
delivery. DTC determined that it could provide its participants the 
service they desired by processing these securities types through DTC's 
existing RAD facility and by revising its CUSIP descriptions to include 
a unique identifier that will indicate whether a particular issue has 
an indexed principal feature. In this way, DTC participants immediately 
will be able to tell from an issue's special CUSIP identifier that it 
has an index principal feature and then take appropriate action to 
affirmatively authorize or reject the delivery of the securities. These 
procedures should reduce the likelihood that a DTC participant 
inadvertently will complete a purchase transaction involving this type 
of security without full knowledge of its indexed principal feature.

II. Discussion

    Section 17A(b)(3)(F)\6\ of the Act requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. The Commission 
believes that DTC's proposed rule change is consistent with DTC's 
obligations under the Act before the new procedures will give DTC 
participants better information as to whether a particular issue of 
securities has an indexed principal feature. This should help DTC 
participants to avoid inadvertently completing a purchase transaction 
in a securities issue having an indexed principal feature when such a 
purchase is not intended.

    \6\ 15 U.S.C. Sec. 78q-1 (b) (3) (F) (1988).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act and the 
rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b) (2) of the Act, 
that the proposed rule change (File No. SR-DTC-95-15) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-3042 Filed 2-9-96; 8:45 am]
BILLING CODE 8010-01-M