[Federal Register Volume 63, Number 91 (Tuesday, May 12, 1998)]
[Notices]
[Pages 26237-26238]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12554]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39955; File No. SR-DTC-98-2]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change Adding the HUB Mailbox Service
to the Institution Delivery System
May 4, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on February 10, 1998, the
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change (File No.
SR-DTC-98-2) 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 from interested persons on 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
The proposed rule change will add the HUB Mailbox Service (``HUB
Mailbox'') to DTC's Institutional Delivery (``ID'') system.
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
The purpose of the proposed rule change is to add the HUB Mailbox
to the services provided by the ID system.\3\ The HUB Mailbox will
allow investment managers and custodian banks \4\ to exchange messages
regarding; (1) securities purchases; (2) securities sales; (3)
reconciliation data relating to securities positions and cash
movements; and (4) other security-related transactions as agreed to by
two or more HUB users.\5\ Occasionally, HUB
[[Page 26238]]
users may also transmit trade data to recordkeeping vendors where the
custody and accounting functions are performed by two different
parties.
---------------------------------------------------------------------------
\3\ Currently, the ID system enables broker-dealers to exchange
conformation and affirmation messages with investment managers and
custodian banks. For a complete description of the services provided
by the ID system refer to Securities Exchange Act Release Nos. 33466
(January 12, 1994), 59 FR 3139 [File No. SR-DTC-93-07] (order
approving proposed rule change relating to the enhanced ID system);
34166 (June 6, 1994), 59 FR 31660 [File No. SR-DTC-94-01] (order
approving proposed rule change to add a standing instruction
database to the ID system); 34199 (June 10, 1994), 59 FR 31660 [File
No. SR-DTC-94-04] (order granting accelerated approval of a proposed
rule change to implement the interactive capabilities and the
electric mail features of the enhanced institutional delivery
system); 36050 (August 2, 1995), 60 FR 41139 [File No. SR-DTC-95-10]
(order approving proposed rule change to implementing advice of
confirm correction/cancellation feature and modifying the
authorization/exception processing feature of the institutional
delivery system); and 39832 (April 6, 1998), 63 FR 18062 [File No.
SR-DTC-95-23] (order approving proposed rule change implementing the
ID system).
\4\ Initially, broker-dealers will not have access to the HUB
Mailbox.
\5\ DTC anticipates that the HUB Mailbox will be used primarily
for exchanging messages regarding securities that are not eligible
for settlement at DTC. Telephone conversation among Jack Wiener,
Vice President and Senior Counsel, DTC, and Jeffrey Mooney, Special
Counsel, Division of Market Regulation (``Division''), Commission,
and Greg Dumark, Attorney, Division, Commission (March 2, 1998).
---------------------------------------------------------------------------
According to DTC, the HUB Mailbox was developed in cooperation with
the Industry Standardization for Institutional Trade Communication
(``ISITC'') \6\ to improve the delivery of ISITC messages. Therefore,
all information will be entered in an ISITC approved format initially,
but other formats may be used later if agreed upon by two or more HUB
users.
---------------------------------------------------------------------------
\6\ ISITC is a committee of investment managers, custodians, and
vendors which was established in 1991, has developed standard
message formats and operating protocols for transmitting information
concerning security-related transactions between and among
investment managers and custodians. ISITC's goals are to overcome
difficulties encountered by investment managers in communicating
with multiple custodians and to attain straight-through-processing.
Many ISITC members are DTC participants.
---------------------------------------------------------------------------
To use the HUB Mailbox, investment managers and custodian banks
will place formatted records into bundles for each addressee with
appropriately coded headers and trailers and DTC will route the bundles
to addresses' mailboxes for retrieval. Addressees will acknowledge
receipt of bundles through their mailboxes. All mail messages, both
delivered and undelivered, will be transferred at the end of each
business day between 2 a.m. and 3 a.m. (ET) to a separate file which
can be accessed directly on the next day. DTC will store mail messages
for up to five days. According to DTC, it will not do any processing
other than to direct mail to appropriate mailboxes.
Excerpts from the separate forms of agreement to be executed by HUB
Mailbox users are attached as Exhibits C, D, and E to the filing.
Exhibit C lists the fees to be charged for the service to investment
manager users, and Exhibit D lists the fees to be charged for the
service to custodians. Liability provisions, identical in both forms of
agreement, are found in Exhibit E.
DTC believes that the proposed rule change is consistent with the
requirements of Section 17A(b)(3)(F) of the Act and the rules and
regulations thereunder because it will increase the speed of data
transmissions between investment managers and custodians, thereby
promoting efficiencies in the clearance and settlement of securities
transactions.
(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC believes that no burden will be placed on competition as a
result of the proposed rule change.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
Written comments on the proposed rule change have not been
solicited from DTC participants. Nevertheless, DTC has tested the HUB
Mailbox in a pilot program with a few investment managers and custodian
banks. One of the participants in the pilot program characterized the
HUB Mailbox as ``the most efficient, secure and cost effective manner
to obtain reconciliation data daily.''
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which DTC consents, the Commission will:
(A) By order approve such proposed rule change or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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. SR-TDC-98-2 and should be
submitted by June 2, 1998.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\7\
---------------------------------------------------------------------------
\7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-12554 Filed 5-11-98; 8:45 am]
BILLING CODE 8010-01-M
