[Federal Register Volume 62, Number 164 (Monday, August 25, 1997)]
[Notices]
[Pages 44997-44998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22526]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38950; File No. SR-DTC-97-07]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of a Proposed Rule Change Relating to Disclosure
Requirements for Transactions Involving Inflation Indexed Securities
through the Institutional Delivery System
August 19, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on May 19, 1997, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change (File No.
SR-DTC-97-07) 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 on the proposed rule change from interested
persons.
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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 amend Section M of
DTC's participant operating procedures in accordance with certain
disclosure requirements for transactions involving inflation indexed
securities processed through DTC's Institutional Delivery (``ID'')
system.
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 that 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
submitted by DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
PSA The Bond Market Trade Association (``PSA'') on behalf of its
members and all other registered brokers and dealers, received no-
action and interpretive relief from the Commission and the Treasury
(collectively ``interpretive relief'') \3\ regarding the application of
certain regulations to inflation indexed securities issued by the U.S.
Treasury Department (``Treasury''). The purpose of the proposed rule
change is to enable broker-dealers that use DTC's ID system for
generating confirmations for their customer transactions to comply with
the disclosure requirements set forth in the interpretative relief.
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\3\ Letter from Robert L.D. Colby, Deputy Director, Division of
Market Regulation, Commission, to Paul Saltzman, Senior Vice
President and General Counsel, PSA The Bond Market Association,
(January 17, 1997); letter from Richard L. Gregg, Commissioner,
Bureau of the Public Debt, Department of the Treasury, to Michael A.
Macchiaroli, Associate Director, Division of Market Regulation,
Commission (January 17, 1997).
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The interpretative relief requires broker-dealers to disclose in
confirmations for inflation indexed securities that yield to maturity
may vary due to inflation adjustments or provide disclosure to similar
effect. A broker-dealer using the ID system can enter data in the
security type field identifying the security as an inflation indexed
security by using a designated acronym (i.e., ``ITS''). Under the
proposed rule change, DTC will add procedures to its ID system to
provide that when the designated acronym identifying an inflation
indexed security appears in the security type field of the ID
confirmation, the required disclosure will be deemed to be a part of
the ID confirmation for that transaction.
The interpretative relief also requires confirmations involving
inflation indexed securities for when-issued transactions and for
transactions in the Treasury's Separate Trading of Registered Interest
and principal of Securities (``STRIPS'') program to disclose the real
yield (i.e., nominal yield not adjusted for inflation) for the
securities.\4\ Under the proposed rule change, a broker-dealer using
the ID system to send confirmations for such transactions will be able
to disclose the real yield by entering that figure either in the yield
field or in the special instructions field of trade data submitted to
the ID system.
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\4\ PSA The Bond Market Association Trading Practice Guidelines
for Inflation Indexed Securities (December 18, 1996).
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DTC believes the proposed rule change is consistent with the
requirements of Section 17A of the Act \5\ and the rules and
regulations thereunder because the proposed rule change will assure the
safeguarding of securities and funds which are in the custody or
control of DTC by facilitating the confirmation of transactions in
inflation indexed securities through the use of DTC's system.
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\5\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC perceives no impact on competition by reason of the proposed
rule change.
[[Page 44998]]
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
The proposed rule change was developed through discussions with PSA
acting on behalf of its members and with several participants. Written
comments from DTC participants or others 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 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. 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 Room, 450 Fifth Street, NW., Washington,
DC 20549. Copies of such filing will also be available for inspection
and copying at the principal office of DTC. All submissions should
refer to the file number SR-DTC-97-07 and should be submitted by
September 15, 1997.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-22526 Filed 8-22-97; 8:45 am]
BILLING CODE 8010-01-M'
