[Federal Register Volume 64, Number 107 (Friday, June 4, 1999)]
[Notices]
[Pages 30077-30078]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14211]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41466; File No. SR-DTC-99-12]
Self-Regulatory Organizations; The Depository Trust Company;
Filing and Order Granting Accelerated, Temporary Approval of a Proposed
Rule Change Relating to the Admission of Non-U.S. Entities as Direct
Depository Participants
May 28, 1999.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on May 19, 1999, 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,
temporary approval of the proposed rule change through May 31, 2000.
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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 purpose of the proposed rule change is to extend the
Commission's temporary approval of DTC's admission criteria for
entities that are organized in a country other than the United States
(``non-U.S. entities'').
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 the text of the summaries
prepared by DTC.
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(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 extend the
Commission's temporary approval of DTC's admission criteria for non-
U.S. entities as direct DTC participants. The Commission originally
granted temporary approval on May 9, 1997.\3\ The admission criteria
permit well-qualified, non-U.S. entities to obtain direct access to
DTC's services without requiring the non-U.S. entities to obtain
financial guarantees from another DTC participant. According to DTC,
DTC established the program for admission of non-U.S. entities in
response to requests it received from certain participants. These
participants requested that DTC consider changes in its admissions
policy that would allow non-U.S. affiliates to become direct
participants without having to obtain financial guarantees from a DTC
participant that was a U.S. entity.
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\3\ For a complete discussion of the admission criteria, refer
to Securities Exchange Act Release No, 38600, International Release
No. 1078 (May 9, 1997), 62 FR 27086-01 [File No. SR-DTC-96-13]
(order temporarily approving a proposed rule change relating to the
admission of non-U.S. entities as direct depository participants).
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As of May 10, 1999, one non-U.S. entity has been approved for DTC
membership under the standards for admission of non-U.S. entities. DTC
is currently reviewing an application from another non-U.S. entity and
has received numerous inquiries from other non-U.S. entities. In 1999,
DTC expects
[[Page 30078]]
to admit, several non-U.S. entities. DTC is seeking an extension of the
temporary approval so it can complete the admission of these non-U.S.
entities and gain further experience with the admission standards of
non-U.S. entities and the unique risks posed by the activities of non-
U.S. entities as direct DTC participants.
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 promulgated because the admission criteria takes into
account the unique risks to DTC raised by the admission of non-U.S.
entities while not unfairly discriminating against non-U.S. entities
seeking admission as participants.
(b) Self-Regulatory Organization's Statement on Burden on Competition
While DTC acknowledges that the proposed additional admissions
criteria applicable to non-U.S. entities may impose some additional
burden, for the reasons stated above, we believe that any such burden
is necessary and 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
DTC has not sought or received comments on the proposed rule
change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Section 17A(b)(3)(F) of the Act requires 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.\4\ The Commission finds that the rule
change is consistent with this obligation because DTC's admission
criteria has been designed in a manner which takes into account
jurisdiction differences in regulatory structure and in business
operations of non-U.S. entities with respect to risk control and
management. Furthermore, DTC admission criteria should bind non-U.S.
entities to DTC's rules and procedures in a manner similar to domestic
participants and should lesson or eliminate the negative effects that
jurisdictional issues could have on DTC's exercise of its rights
against non-U.S. entities. Therefore, the Commission finds that the
admissions criteria will assist DTC in assuring the safeguarding of
securities and funds which are in its custody, control, or for which it
is responsible.
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\4\ 15 U.S.C. 78q-1(b)(3)(F).
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DTC has requested that the Commission find good cause for approving
the proposed rule change prior to the thirtieth day after publication
of the notice of the filing. The Commission finds good cause for
approving the proposed rule change prior to the thirtieth day after
publication of the notice of the filing because accelerated approval
will permit DTC to continue to use and study the effectiveness of its
admission criteria without interruption.
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 submission
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submissions, 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 Room, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such filings will also be available for
inspection and copying at the principal office of DTC. All submissions
should refer to the file number SR-DTC-99-12 and should be submitted by
June 25, 1999.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-DTC-99-12), be, and hereby
is, temporarily approved on an accelerated basis through May 31, 2000.
For the Commission by the Division of Market Regulation pursuant to
delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-14211 Filed 6-3-99; 8:45 am]
BILLING CODE 8010-01-M
