98-7429. Self-Regulatory Organizations; The Depository Trust Company; Order Approving a Proposed Rule Change Regarding the Custody Service for Securities That Are Not Depository Eligible

[Federal Register Volume 63, Number 55 (Monday, March 23, 1998)]
[Notices]
[Pages 13893-13894]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7429]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39761; File No. SR-DTC-97-09]


Self-Regulatory Organizations; The Depository Trust Company; 
Order Approving a Proposed Rule Change Regarding the Custody Service 
for Securities That Are Not Depository Eligible

March 16, 1998.
    On June 4, 1997, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change

[[Page 13894]]

(File No. SR-DTC-97-09) 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 September 19, 1997.\2\ No comment letters 
were received. For the reasons discussed below, the Commission is 
approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 39071 (September 12, 
1997), 62 FR 49279.
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I. Description

    DTC currently operates a custody service which offers custodian, 
transaction, and related processing services to participants in 
connection with certain securities that are not depository eligible 
(e.g., securities with certain transfer restrictions).\3\ The rule 
change permits DTC to enter into contracts with individual participants 
to provide customized processing services under the custody service. 
Under the rule change, DTC will not be obligated to enter into any such 
contracts with participants or to offer the same terms under any such 
contracts to all participants. DTC has advised the Commission that it 
will charge fees for customization of custody service based on a 
consistently applied methodology.
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    \3\ For a more detailed description of DTC's custody service, 
refer to Securities Exchange Act Release Nos. 38561 (April 30, 
1997), 62 FR 25008 [File No. SR-DTC-97-01] (order approving proposed 
rule change implementing the dividend processing phase of DTC's 
custody service) and 37314 (June 14, 1996) 61 FR 31989 [File No. SR-
DTC-96-08] (order approving proposed rule change establishing DTC's 
custody service).
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II. Discussion

    Section 17A(b)(3)(F) of the Act \4\ 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 proposed rule change is consistent with 
DTC's obligations under Section 17A of the Act because the rule change 
will allow DTC participants to remove certain certificates that are not 
depository eligible from their vaults and to deposit them into DTC's 
custody service. Depositing certificates into the custody service along 
with use of the custody service's securities processing services should 
help to reduce the costs, inefficiencies, and risks associated with the 
physical safekeeping of securities outside of DTC and thereby should 
promote the prompt and accurate clearance and settlement of 
transactions in securities. Moreover, the Commission believes that the 
proposal is consistent with DTC's obligations to safeguard securities 
and funds under its control because securities deposited into the 
custody services will be under DTC's usual procedures for the 
safekeeping of securities.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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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-97-09) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-7429 Filed 3-20-98; 8:45 am]
BILLING CODE 8010-01-M