[Federal Register Volume 63, Number 126 (Wednesday, July 1, 1998)]
[Notices]
[Pages 36008-36009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17435]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40119; File No. SR-DTC-98-7]
June 24, 1998.
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change Adding a New Service Providing
Pre-Issuance Messaging of Money Market Instruments Trade Details to
Issuing and Paying Agents and Dealers
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on April 22, 1998. The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change (File No.
SR-DTC-98-7) 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.
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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 will approve DTC's providing Pre-Issuance
Messaging (``PIM'') of money market instruments (``MMIs'') trade
details to issuing and paying agents (``IPAs'') and dealers.
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
DTC's proposed rule change seeks to provide a less expensive and
more efficient mechanism for IPAs and dealers to communicate securities
information, specifically PIM instructions, related to the issuance of
MMI. Although the PIM service is being designed to accommodate all
types of MMIs, it is anticipated that initially the PIM service will be
utilized only for commercial paper (``CP'').
According to DTC, the service will enable dealers and IPAs to
communicate issuance instructions to one another prior to the IPAs'
issuing CP by book-entry through DTC or through physical certificates
outside DTC.
Background
DTC begin operation of its CP program in October 1990 and handles
almost all CP issuances done in the United States today. The CP program
is designed to allow for the electronic issuance done in the United
States today. The CP program is designed for the electronic issuance of
CP in book-entry-only form. The transmission of issuance instructions
for IPAs to DTC for dealer-placed CP is central to the CP program.
Typically, between four and five messages are transmitted among IPAs
and dealers prior to each issuance of CP. Currently, these messages are
transmitted via dedicated links between a dealer and individual IPA.
Thus, dealers interacting with more than one IPA must create and
maintain multiple communications links. Typically, dealers maintain
seven or more separate links with IPAs.
As a result of the recommendation by dealer participant that DTC
investigate offering a pre-issuance messaging service, a working group
of dealers and IPA was formed in June of 1996 under the auspices of the
The Bond Market Association's Money Market Task Force. DTC has worked
closely with the Task Force on the development of the CP program and
again drew on its expertise for the PIM project.
Proposed Rule Change
Under the proposed rule change, IPAs and dealers could send PIM
instructions to each other by using DTC as a conduit or central switch
for the messages. PIM instructions would be sent electronically to DTC.
DTC would not perform any processing on the instructions but would
instead automatically route them to the recipient indicated in the
sender's instructions.
PIM employs several levels of system security in addition to
allowing IPAs and dealers to utilize their own password security per
message if they wish. As each message sent requires an acknowledgment
from the receiving party, it is unlikely that messages will be lost.
Should a message be undeliverable for some reason, DTC will issue a
notice to the message originator indicating the message could not be
delivered. The originator will then have to reissue a new message. DTC
will charge the sending party $.04 per message. There will be no charge
to the message receiver. Each user of the PIM Service will enter into a
PIM agreement with DTC.
DTC believes that the proposed rule change is consistent with the
requirements of Sections 17A(b)(3)(A) of the Act and the rules and
regulations thereunder because it encourages an efficient means of
communicating among dealers and IPAs in connection with the issuance of
MMIs.
(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 that is not necessary or appropriate in
furtherance of the purposes of the Act, in the public interest, and for
the protection of investors.
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 or received on the proposed rule change.
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 Fedeal 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 approved such proposed rule change or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
[[Page 36009]]
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, NW., Washington, DC 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. Sec. 552, will be available for inspection and copying in
the Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC 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-DTC-98-7 and should be submitted by July
22, 1998.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\3\
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\3\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-17435 Filed 6-30-98; 8:45 am]
BILLING CODE 8010-01-M
