[Federal Register Volume 63, Number 81 (Tuesday, April 28, 1998)]
[Notices]
[Pages 23310-23311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-11168]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39894; File No. SR-DTC-97-23]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Modifying Issue Eligibility Requirements
April 21, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on January 5, 1998, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') 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 on the proposed rule change from interested persons.
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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 DTC's existing operational
arrangements necessary for a securities issue to become eligible for
the services of DTC.
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 parts of these statements.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
DTC's operational arrangements \3\ currently incorporate the
guidelines for income, reorganization, and redemption payments
(``principal and income payments'') established by the Same Day Funds
Payment Task Force of the U.S. Working Committee, Group of Thirty
Clearance and Settlement Project
[[Page 23311]]
(``P&I Task force'').\4\ The purpose of the proposed rule change is to
update DTC's issue eligibility requirements.\5\
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\3\ See Securities Exchange Act Release Nos. 24818 (August 19,
1987), 52 FR 31833; 25948 (July 27, 1988), 53 FR 29294; 30625 (April
23, 1992), 57 FR 18534; and 35649 (April 26, 1995), 60 FR 21576.
\4\ The U.S. Working Committee of the Group of Thirty is an
organization consisting of representatives from broker-dealers,
banks, and financial intermediaries charged with analyzing the
existing clearance and settlement systems in the U.S.
\5\ DTC included the text of its updated operational
arrangements as an exhibit to its proposed rule change which is
available for inspection and copying at the Commission's public
reference room and through DTC.
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DTC's operational arrangements include requirements that all
payments to DTC of principal and income be made in same-day funds on
payment date by 2:30 p.m. Eastern Time (``ET'') and that CUSIP
information be provided in automated form early enough to allow the
funds received to be matched with the related issues. In order to help
assure that these requirements are met, the operational arrangements
have been modified to require issuers to remit funds for all principal
and income payments to paying agents or intermediaries by 1:00 p.m. ET
or by such earlier time as required by the paying agent to guarantee
that DTC will receive payment in same-day funds by 2:30 p.m. ET on
payable date.\6\
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\6\ If an issuer or agent continually fails to make payments and
provide the related payment detail in a timely manner, DTC may
decide not to allocate such payments to participants on the payable
date.
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In addition, the current operational arrangements require the
submission of individual letters of representations (``LORs'') each
time an issuer wants to distribute securities of a type for which DTC
requires an LOR. DTC uses sixteen different LORs for various types of
municipal and corporate securities and money market instruments. The
modified arrangements introduce the use of a blanket LOR which an
issuer only needs to submit to DTC once for all issues. A blanket LOR
eliminates the need for the submission of individual LORs each time the
issuer wishes to distribute certain securities.\7\
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\7\ DTC undertakes to make available to issuers that execute
blanket LORs any future modifications in the operational
arrangements. Upon review, issuers will have the opportunity to
withdraw their blanket LORs.
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The proposed rule change replaces only three of the LORs with the
blanket LORs: the book entry only municipal bond LOR, the book entry
only municipal note LOR, and the book entry only municipal variable
rate demand obligation LOR.\8\ As issuers gain experience with the use
of blanket LORs, DTC will eliminate additional individual LORs.
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\8\ These LORs were chosen to be replaced first because these
securities types account for the highest volume of repeat requests
for DTC eligibility from issuers.
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DTC believes that the proposed rule change is consistent with
Section 17A(b)(3)(F) \9\ in that it should maximize the number of
issues that can be made depository eligible while ensuring orderly
processing and timely payments to participants.
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\9\ 15 U.S.C. 78q-1(b)(3)(F).
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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 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
The subject principal and income guidelines incorporated in the
proposed operational arrangements have been endorsed by the Corporate
Trust Advisory Board of the American Bankers Association, the Bank
Depository User Group, the Corporate Trust Advisory Committee of the
Corporate Fiduciaries Association of New York City, the New York
Clearing House Securities Committee, The Bond Market Association, and
the Securities Industry Association.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Because the foregoing rule change constitutes an interpretation
with respect to the meaning, administration, or enforcement of an
existing rule of DTC, it has become effective pursuant to Section
19(b)(3)(A)(i) of the Act \10\ and Rule 19b-4(e)(1) thereunder.\11\ At
any time within sixty days of the filing of the proposed 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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\10\ 15 U.S.C. 78s(b)(3)(A)(i).
\11\ 17 CFR 240.19b-4(e)(1).
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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 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 will also be available
for inspection and copying at the principal office of the DTC. All
submissions should refer to the File No. SR-DTC-97-23 and should be
submitted by May 19, 1998.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-11168 Filed 4-27-98; 8:45 am]
BILLING CODE 8010-01-M
