[Federal Register Volume 63, Number 125 (Tuesday, June 30, 1998)]
[Notices]
[Pages 35631-35632]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17384]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40121; File Nos. SR-DTC-98-12, SR-PTC-98-02]
Self-Regulatory Organizations; The Depository Trust Company;
Participants Trust Company; Notice of a Proposed Rule Change Relating
to a Proposed Merger Between The Depository Trust Company and
Participants Trust Company
June 24, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on May 29, 1998, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') and on June 2, 1998, Participants
Trust Company (``DTC'') filed with the Securities and Exchange
Commission (``Commission'') and on June 2, 1998, Participants Trust
Company (``PTC'') filed with the Commission proposed rule changes as
described in Items I, II, and III below, which items have been prepared
primarily by DTC and PTC. The Commission is publishing this notice to
solicit comments from interested persons on the proposed rule changes.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
I. Self-Regulatory Organizations' Statement of the Terms of
Substance of the Proposed Rule Changes
The proposed rule changes relate to the arrangements for a proposed
merger between DTC and PTC.
II. Self-Regulatory Organizations' Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
In its filing with the Commission, DTC and PTC included statements
concerning the purpose of and basis for the proposed rule changes and
discussed any comments they received on the proposed rule changes. The
text of these statements may be examined at the places specified in
Item IV below. DTC and PTC have 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 and PTC.
---------------------------------------------------------------------------
(A) Self-Regulatory Organizations' Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
In March 1998, PTC announced that it had decided to seek an
affiliation with DTC. The arrangements for the proposed merger provide
the following. PTC will merge with and into DTC, and DTC will make
certain payments to PTC's shareholders. For at least two years from the
effective date of the merger, DTC will provide the services currently
offered by PTC in a separate division of DTC (``Division''). The
current rules and procedures of PTC with respect to depository
services, the processing of transactions in PTC-eligible securities,
and the PTC participants fund will be incorporated into the rules and
procedures of DTC and will be applied to the business of the
Division.\3\ In addition, DTC will offer PTC participants that are not
DTC participants an opportunity to become participants of the Division.
---------------------------------------------------------------------------
\3\ DTC and PTC have informed the Commission that the changes to
DTC's rules and procedures to provide for the Division and to
accommodate the application of PTC's current rules and procedures to
Division business will be the subject of a future rule filing with
the Commission.
---------------------------------------------------------------------------
Under the proposed rule changes, PTC's users, most of which are
also DTC participants, will continue to have access to the depository
services offered by PTC. DTC and PTC believe that the proposed merger
should assist in eliminating redundant facilities and thereby should
reduce the costs of processing transactions in mortgage-backed
securities that are currently PTC-eligible.
DTC and PTC believe that the proposed rule changes are consistent
with the requirements of Section 17A of the Act \4\ and the rules and
regulations thereunder because the arrangements for the proposed merger
should assure that continued availability to PTC users of efficient and
cost-effective depository services and thereby should facilitate the
prompt and accurate clearance and settlement of transactions in PTC-
eligible securities. In addition, the proposed arrangements should
provide PTC participants with access to DTC's facilities and should be
implemented consistent with DTC's obligations to safeguard securities
and funds in its custody and control or for which it is responsible.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
(B) Self-Regulatory Organizations' Statement on Burden on Competition
DTC and PTC believe that the proposed arrangements will impose no
burden on competition. Securities depositories registered under Section
17A of the Act \5\ are utilities created to serve members of the
securities industry for the purpose of providing certain services that
are ancillary to the businesses in which industry members compete with
one another. Operating a securities depository requires a substantial
and continuing investment in infrastructure including securities
vaults, telecommunications links with users, data centers, and disaster
recovery facilities in order to meet the increasing needs of
participants and to respond to regulatory requirements.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
DTC and PTC believe that the current regulatory scheme and the
particular structure and nature of the depository industry provide
ample means to insure that the merger of PTC with and into DTC will
achieve regulatory objectives. Sections 17A and 19 of the Act \6\ and
the rules thereunder provide the Commission appropriate and effective
regulatory authority over DTC. DTC is
[[Page 35632]]
owned by its members who utilize its services, and its Board of
Directors is comprised of its members. DTC must assure a fair
representation of its member in the selection of its directors and
administrators. DTC's service fees are reviewed by its board and
subject to public notice and comment.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q-1 and 78s.
---------------------------------------------------------------------------
After the consummation of the proposed arrangements, securities
industry members will continue to have access to high quality, low cost
depository and clearing services provided under the mandate of the Act.
The overall cost to the industry of having such services available will
be reduced and thereby should permit a more efficient and productive
allocation of industry resources. Accordingly, DTC and PTC believe that
the proposed transaction advances the objectives of the national
clearance and settlement system without an inappropriate or unnecessary
burden upon competition.
(C) Self-Regulatory Organizations' Statement on Comments on the
Proposed Rule Changes Received from Members, Participation or Others
Written comments on the proposal from DTC participants, PTC
participants, or others have not been solicited or received. However,
the proposed arrangements have been reviewed and approved by PTC's
Board of Directors, which is comprised of representatives of the banks
and broker-dealers that are PTC's stockholders and participants. In
addition, DTC believes that the proposed arrangements are consistent
with recommendations made by the Vision 2000 Committee (``Committee''),
a committee of industry representatives of the Boards of DTC and the
National Securities Clearing Corporation. The Committee's report dated
September 1994 states that:
The industry currently owns a number of utilities that provide
services related to the comparison, clearing, settlement and
safekeeping of U.S. (and to a lesser degree, international)
securities. These utilities overlap in two ways. * * * We believe
that the industry's and, as important, the investors', overall costs
can be reduced and safety and soundness can be enhanced by
eliminating these overlaps where there is no clear advantage to
having specialization or competing development.\7\
---------------------------------------------------------------------------
\7\ The Committee's report is attached as Exhibit 2 to DTC's
filing, which is available for review and inspection in the
Commission's public reference room and through DTC.
---------------------------------------------------------------------------
III. Date of Effectiveness of the Proposed Rule Changes 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 or PTC consents, the Commission will:
(A) By order approve such proposed rule changes or
(B) Institute proceedings to determine whether the proposed rules
changes 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
changes are 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 changes that are filed
with the Commission, and all written communications relating to the
proposed rule changes 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 offices of DTC
and PTC. All submissions should refer to File Nos. SR-DTC-98-12 and SR-
PTC-98-02 and should be submitted by July 21, 1998.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
---------------------------------------------------------------------------
\8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-17384 Filed 6-29-98; 8:45 am]
BILLING CODE 8010-01-M
