[Federal Register Volume 64, Number 57 (Thursday, March 25, 1999)]
[Notices]
[Pages 14478-14479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7281]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41191; File No. SR-DTC-98-26]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Order Granting Accelerated Approval of a Proposed
Rule Change Relating to the Establishment of an Interface With National
Securities Clearing Corporation Regarding the Automated Customer
Account Transfer Service
March 19, 1999.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 18, 1998, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I and II below, which items have been prepared
primarily by DTC. The Commission is publishing this notice and order to
solicit comments from interested persons and to grant accelerated
approval of the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
Under the proposed rule change, DTC will establish an interface
with National Securities Clearing Corporation (``NSCC'') to allow
certain DTC participants that are not NSCC members to participate in
NSCC's Automated Customer Account Transfer Service (``ACATS'')
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\
---------------------------------------------------------------------------
\2\ The Commission has modified the text of the summaries
prepared by DTC.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
Under the proposed rule change, DTC will give its participants that
are not direct members of NSCC access to NSCC's ACATS via DTC's
Participant Terminal System, NSCC's PC Web Direct service, or both and
later through DTC's computer to computer facility. Through ACATS, DTC
participants will be able to transfer customer accounts in an automated
manner with standardized input and output.\3\
---------------------------------------------------------------------------
\3\ The program will begin as a pilot involving approximately 16
DTC participants that are not NSCC members. Thereafter, if the
program is successful, it will be made generally available to all
DTC participants.
---------------------------------------------------------------------------
Currently, ACATS enables NSCC members to effect automated transfers
of customer accounts among themselves.\4\ On November 10, 1998, the
Commission approved a proposed rule change by NSCC to expand the types
of eligible ACATS participants and kinds of accounts that may be
transferred.\5\ NSCC's rule change permits a qualified securities
depository (``QSD'') such as DTC to effect customer account transfers
in ACATS on behalf of its participants.\6\
---------------------------------------------------------------------------
\4\ ACATS complements New York Stock Exchange (``NYSE'') and
National Association of Securities Dealers (``NASD'') rules which
require NYSE and NASD members to use automated, clearing agency
customer account transfer services and to effect customer account
transfers within specified time frames.
\5\ Securities Exchange Act Release No. 40657 (November 10,
1998), 63 FR 63952 [File No. SR-NSCC-98-06].
\6\ QSD is defined in NSCC Rule 1 as a registered clearing
agency which has entered into an agreement with NSCC pursuant to
which it will act as a securities depository for NSCC and effect
book-entry transfers of securities to and by NSCC with respect to
NSCC's CNS system.
---------------------------------------------------------------------------
As recently revised, ACATS will allow ACATS participants to
transfer an account from one institution to another in a standardized,
book-entry environment utilizing NSCC's links to DTC, The Option
Clearing Corporation, Government Securities Clearing Corporation, the
MBS Division of DTC, and approximately 120 mutual fund families through
the ACATS-Fund/SERV link.
DTC will enter into an agreement with NSCC which will permit ACATS
to be sued for the transfer of accounts between two DTC participants or
between a DTC participant and an NSCC member. DTC will also enter into
an agreement with each DTC participant that wants to use the ACATS
interface.\7\
---------------------------------------------------------------------------
\7\ A draft agreement between NSCC and DTC and a draft agreement
for DTC participants that want to use the ACATS interface are
attached as exhibits to DTC's filing, which is available for
inspection and copying at the Commission's Public Reference Room and
through DTC.
---------------------------------------------------------------------------
Transactions under the arrangement will be effected under DTC's
present rules. Transfers between DTC participants (e.g., bank-to-bank
transfers) will be free. Transfers between a DTC participant and an
NSCC member (e.g., bank-to-broker transfers) and vice versa will also
be free. Transfers of account cash balances associated with account
transfers will be part of end of day net settlement.
DTC believes that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to DTC since the proposed rule change will increase
efficiency in processing participant transactions.
(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.
[[Page 14479]]
(C) Self-Regulatory Organization's Statement of Comments on the
Proposed Rule Change Received From Members, Participants or Others
The ``ACATS for Banks'' proposal appeared in the March 1996 program
agenda advisory committee agenda, which is a DTC communication
mechanism to present new programs and other issues to DTC customers.
The results of comments by DTC participants appeared in the August 1996
program agenda proposals report. Ninety-eight participants responded to
the proposal, and more than 70% of those that approved of the proposal
through that, of the several possible means of facilitating these
account transfers, a link to the NSCC ACATS system was the most
desirable approach. Since NSCC had already committed to a wholesale
redesign of ACATs, bringing banks into the system was made an integral
part of the redesign.
As part of the ACATS redesign, NSCC set up several focus groups,
including a group of banks and representatives of bank industry groups,
to discuss improvements to ACATS and DTC's role in account transfers.
This led to a bank advisory group and, thereafter, to joint NSCC/DTC
educational awareness seminars held in various cities around the
country during February and March of 1998. All DTC participants were
invited, and 16 DTC participants signed up to participate in a pilot.
To date, 62 DTC participants have expressed an interest in ACATS.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder and particularly with the requirements of Section 17A(b) (3)
(F).\8\ Section 17A(b)(3)(1)(F) 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 the
proposed rule change is consistent with DTC's obligations under Section
17A(b)(3)(F) of the Act. ACATS provides a more efficient method for the
transfer of customer assets. The rule change will make the benefits of
ACATS available to a number of DTC participants that presently do not
have access to ACATS.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
---------------------------------------------------------------------------
DTC has requested that the Commission approve the proposed rule
change subsequent to the thirtieth day after publication of the notice
of the filing. The Commission finds good cause for approving the
proposed rule change rule change prior to the thirtieth day after the
publication of notice because such approval will allow DTC's interface
the ACATS to become operative with NSCC's implementation of the newly
designed ACATS system. The Commission points out that this proposed
rule change was discussed in NSCC's rule filing regarding the new ACATs
system to which no written comments were received.\9\
---------------------------------------------------------------------------
\9\ Securities Exchange Act Release Nos. 40487 (September 28,
1998), 63 FR 53479 and 40657 (November 10, 1998), 63 FR 63952.
---------------------------------------------------------------------------
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, 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 Section, 450 Fifth Street, N.W.,
Washington, D.C. 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. SSR-DTC-98-26 and should be
submitted by April 15, 1999.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-DTC-98-26) be and hereby is
approved on an accelerated basis.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-7281 Filed 3-24-99; 8:45 am]
BILLING CODE 8010-01-M
