97-11792. Self-Regulatory Organizations; The Depository Trust Company; Order Approving a Proposed Rule Change Implementing the Dividend Processing Phase of the Custody Service for Non-depository Eligible Securities  

  • [Federal Register Volume 62, Number 88 (Wednesday, May 7, 1997)]
    [Notices]
    [Page 25008]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 97-11792]
    
    
    
    [[Page 25008]]
    
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    SECURITIES AND EXCHANGE COMMISSION
    
    [Release No. 34-38561; File No. SR-DTC-97-01]
    
    
    Self-Regulatory Organizations; The Depository Trust Company; 
    Order Approving a Proposed Rule Change Implementing the Dividend 
    Processing Phase of the Custody Service for Non-depository Eligible 
    Securities
    
    April 30, 1997.
        On January 23, 1997, The Depository Trust Company (``DTC'') filed 
    with the Securities and Exchange Commission (``Commission'') a proposed 
    rule change (File No. SR-DTC-97-01) 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 March 3, 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 USC 78s(b)(1).
        \2\ Securities Exchange Act Release No. 38323 (February 21, 
    1997), 62 FR 9473.
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    I. Description
    
        The rule change implements the third phase of DTC's custody service 
    to offer to its participants dividend processing services for certain 
    non-depository eligible securities.\3\ In connection with the new 
    service, DTC will announce, collect, and distribute dividend, interest, 
    periodic principal, and other distributions (``dividend payments'') to 
    participants that hold securities through DTC's custody service 
    (``custody issues'').
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        \3\ For a more detailed description of DTC's custody service, 
    refer to Securities Exchange Act Release No. 37314 (June 14, 1996), 
    61 FR 29158 [File No. SR-DTC-96-08] (order approving a proposed rule 
    change establishing custody service) (``June approval order'').
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        To facilitate the collection of dividends on custody issues and to 
    permit the book-entry movement of securities when a customer wishes to 
    move its account from one participant to another, DTC proposes to 
    register certificates held in its custody service in a second nominee 
    name, DTC & Co., when requested to do so by a participant.\4\ Such 
    registration is necessary so DTC under its nominee name DTC & Co. can 
    collect dividend payments relating to custody issues directly from 
    paying agents.\5\ Without such registration, paying agents would 
    disburse individual dividend payments for the custody issues directly 
    to the participant or participants' customer instead of to DTC.
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        \4\ In the June approval order, the Commission noted that 
    securities certificates will be held in customer or firm name only 
    and would not be transferred into DTC's nominee name utilized for 
    regular depository eligible securities, Cede & Co. Although the 
    basic custody service and the redemption and reorganization services 
    phases do not require custody issues to be registered in the new DTC 
    nominee name, participants wishing to use the dividend processing 
    feature of the custody service for custody issues must have such 
    custody issues registered in DTC's new nominee name of DTC & Co.
        \5\ Letter from Lori A. Brazer, Assistant Counsel, DTC (February 
    4, 1997).
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    II. Discussion
    
        Section 17A(b)(3)(F) \6\ of the Act provides that the rules of a 
    clearing agency be designed 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 the proposed rule 
    change is consistent with DTC's obligations under Section 17A(b)(3)(F) 
    because implementation of the dividend processing phase should increase 
    the use of the custody service by holders of custody issues. This 
    increase should result in more securities being held at the depository 
    facilities of a registered clearing agency, DTC, and being subject to 
    DTC's safekeeping procedures. Furthermore, because certificates held 
    through the custody service must be registered in DTC's second nominee 
    name, DTC & Co, to be eligible for dividend processing, such 
    registration will permit the book-entry movement of custody issues if a 
    customer wishes to move its position from one participant to another. 
    Accordingly, the dividend processing feature should help to reduce the 
    processing of physical certificates and therefore reduce the associated 
    risks.
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        \6\ 15 USC 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 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-97-01) be, and hereby 
    is, approved.
    
        For the Commission by the Division of Market Regulation, 
    pursuant to delegated authority.\7\
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        \7\ 17 CFR 200.30-3(a)(12).
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    Margaret H. McFarland,
    Deputy Secretary.
    [FR Doc. 97-11792 Filed 5-6-97; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
05/07/1997
Department:
Securities and Exchange Commission
Entry Type:
Notice
Document Number:
97-11792
Pages:
25008-25008 (1 pages)
Docket Numbers:
Release No. 34-38561, File No. SR-DTC-97-01
PDF File:
97-11792.pdf