[Federal Register Volume 61, Number 35 (Wednesday, February 21, 1996)]
[Notices]
[Pages 6669-6670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3840]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36842; File No. SR-DTC-95-25]
Self-Regulatory Organizations; The Depository Trust Company;
Order Approving a Proposed Rule Change to Allow Participants to Make
Intraday Withdrawals of Principal and Income Payments
February 14, 1996.
On November 15, 1995, the Depository Trust Company (``DTC'') filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change (File No. SR-DTC-95-25) pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ to allow participants to
make intraday withdrawals of principal and income payments (``P&I
payments''). Notice of the proposal was published in the Federal
Register on January 17, 1996.\2\ The Commission
[[Page 6670]]
received no comment letters. For the reasons discussed below, the
Commission is approving the proposed rule change.
\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ Securities Exchange Act Release No. 36686 (January 5, 1995),
61 FR 1199.
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I. Description of the Proposal
In a memorandum dated July 29, 1994, which was issued jointly with
the National Securities Clearing Corporation (``NSCC'') and which
described the planned conversion of DTC's money settlement system to an
entirely same-day funds settlement (``SDFS'') system, DTC announced
plans to offer a service for intraday withdrawal of P&I payments. The
service was developed in response to participants' requests to have the
funds resulting from P&I payments available for participants' use prior
to the time of DTC's money settlement at the end of the day. DTC plans
to begin the new service in the first quarter of 1996.
In the current next-day funds settlement (``NDFS'') environment,
P&I payment allocations are credited to participants' accounts on a
regular basis at a specific time during the day. Under the proposed
rule change, P&I payment allocations for SDFS issues will be credited
to participants' money settlement accounts throughout each processing
day as funds are received by DTC from issuers and their paying agents.
Only P&I payments that have been received by DTC and credited to a
participant's account will be available for withdrawal. Withdrawal
requests for P&I payments will be subject to the risk management
controls of the SDFS system (i.e., collateral monitor and net debit
caps). Any withdrawal request that is blocked due to insufficient
collateral or a net debit cap will recycle until enough collateral or
settlement credits have been generated to satisfy the collateral or net
debit cap deficiency or until the end of the recycle period on that
day. Any early withdrawal requests still recycling at the end of the
recycle period will be dropped from the system, and the P&I payment
allocation will be included in the end-of-day settlement.
II. Discussion
Section 17A(b)(3)(F) of the Act \3\ requires that the rules of a
clearing agency be designed to promote the prompt and accurate
clearance and settlement of securities transactions and to assure the
safeguarding of securities and funds which are in the custody or
control of the clearing agency or for which it is responsible. The
Commission believes that DTC's proposal is consistent with DTC's
obligations under Section 17A(b)(3)(F) because the procedures should
facilitate the prompt and accurate settlement of P&I payments by
allowing participants to withdraw P&I credits prior to end-of-day
settlement. Intraday withdrawal of P&I credits also should help provide
liquidity in the clearance and settlement system by providing
participants with a source of intraday liquidity. The Commission also
believes the procedures are consistent with DTC's obligations to assure
the safeguarding of securities and funds in its custody or control
because DTC only will permit participants to withdraw early those P&I
credits that DTC has actually received from an issuer's paying agent or
that DTC has an expectation based on a paying agent's historical
compliance with DTC's P&I payment policy that such payments will be
received.\4\ Furthermore, DTC will subject intraday P&I payment
withdrawal requests to its risk management controls (i.e., collateral
monitor and net debit caps). This should ensure that withdrawal
requests that will cause a participant to have insufficient collateral
or exceed their net debit cap will recycle until enough collateral or
settlement credits are generated in the participant's account.
\3\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
\4\ As part of its preparation for the SDFS conversion, DTC has
secured intraday and overnight lines of credit that will be
available to fund early P&I credit withdrawals for which DTC has not
actually received payments from the issuer's paying agent but for
which DTC expects such payments based on the paying agent's
historical compliance with DTC's P&I payment policy. For a further
description of DTC's policy regarding P&I payments to participants,
refer to Securities Exchange Act Release No. 36837 (February 13,
1996), [File No. SR-DTC-96-02] (notice of filing and immediate
effectiveness of a proposed rule change regarding P&I payments to
participants).
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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 Section 17A(b)(3)(F) 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-95-25) be, and hereby
is, approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
\5\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-3840 Filed 2-20-96; 8:45 am]
BILLING CODE 8010-01-M
