[Federal Register Volume 63, Number 153 (Monday, August 10, 1998)]
[Notices]
[Pages 42650-42651]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21304]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40300; File No. SR-DTC-98-15]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of a Proposed Rule Change to Incorporate the Rules and
Procedures of Participants Trust Company, To Increase the Size of the
Board of Directors, and To Amend the Rules Regarding the Use of the
Participants Fund
August 3, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on July 13, 1998, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') and on July 30, 1998, amended the
proposed rule change 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
Under the proposed rule change, in connection with the proposed
merger of Participants Trust Company (``PTC'') and DTC,\2\ DTC will
incorporate the rules and procedures of PTC into its rules and
procedures and will increase the size of its Board of Directors. DTC is
also proposing to amend its rules
[[Page 42651]]
regarding the use of its participating fund.
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\2\ For a description of the proposed merger, refer to
Securities Exchange Act Release No. 40121 (June 24, 1998), 63 FR
35631 [File Nos. SR-DTC-98-12, SR-PTC-98-02] (notice of proposed
rule change relating to proposed merger between DTC and PTC).
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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.\3\
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\3\ 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 and PTC have entered into a merger agreement under which PTC
will merge with and into DTC. DTC will form a mortgage-backed
securities division (``MBS Division'') to deliver the depository
services currently provided by PTC to its participants with respect to
PTC-eligible securities. Under the merger agreement, the MBS Division
will remain in place until at least September 30, 2000. Current PTC
participants will be given the opportunity to become participants and
limited purpose participants in the MBS Division. The cash and
securities presently constituting the PTC participants fund will be
transferred to a new MBS Division participants fund.
Under the proposed rule change, DTC will adopt PTC's rules and
procedures, with certain modifications, as the rules and procedures of
the MBS Division.\4\ DTC intends to incorporate PTC's rules without
altering the rights and responsibilities of either PTC participants or
DTC participants.
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\4\ The full text of the proposed rules of the MBS Division is
included in DTC's proposed rule filing which is available for
inspection and copying at the Commission's public reference room and
through DTC.
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The merger agreement also provides that as of the effective date of
the merger a person initially nominated by PTC's Board shall become a
member of DTC's Board. This new director position is to remain in place
at least until September 30, 2000. In order to accommodate the new
director position, the proposed rule change will amend DTC's By-Laws to
increase the number of directors on its Board from seventeen to
eighteen.
Virtually all of PTC's participants are also DTC participants.\5\
DTC participants are entitled to acquire DTC stock based upon their use
of DTC's services. The amount of each DTC participant's entitlement is
recalculated each year, and participants that purchase DTC's stock are
permitted to vote in the election of DTC's Board of Directors. After
DTC and PTC merge, the calculation of each participant's entitlement to
acquire DTC stock will take full account of its use of services
provided through the MBS Division. DTC believes that expansion of the
Board in this manner should provide additional assurances to current
PTC participants that DTC's Board will be aware of their service needs.
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\5\ The only exceptions are Federal Home Loan Mortgage
Corporation (a limited purpose participant), Federal National
Mortgage Association, and The Federal Reserve Bank of Cleveland.
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In addition to the amendments regarding the creation of the MBS
Division, DTC is amending the rules relating to the use of its
participants fund. Under the proposed rule change, DTC's Rule 4 will be
amended to make clear that if DTC were to cease providing some or all
of its services, it could use the participants fund to cover wind-down
costs that are not covered by service fee revenues or other available
resources.
DTC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \6\ and the rules and
regulations thereunder. DTC believes that the proposal should assure
the 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, DTC believes that its governance procedures
should continue to allow its participants to have a fair opportunity to
acquire DTC voting stock in proportion to their use of DTC's services.
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\6\ 15 U.S.C. 78q-1.
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(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.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
DTC has not solicited or received comments on the proposed rule
change. Informally, a number of participants have expressed support of
the subject proposals.
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, 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. 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-98-15 and should be submitted by August
31, 1998.
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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Jonathan G. Katz,
Secretary.
[FR Doc. 98-21304 Filed 8-7-98; 8:45 am]
BILLING CODE 8010-01-M
