[Federal Register Volume 59, Number 169 (Thursday, September 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21570]
[[Page Unknown]]
[Federal Register: September 1, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34600; File No. SR-DTC-94-05]
Self-Regulatory Organizations; The Depository Trust Company;
Order Approving a Proposed Rule Change Establishing a Service for
Routing of Securities Certificates and Related Documentation to DTC
August 25, 1994.
On October 15, 1993, The Depository Trust Company (``DTC'') filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change (File No. SR-DTC-94-05) pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal
was published on June 23, 1994, in the Federal Register to solicit
comments on the proposed rule change.\2\ One comment letter was
received.\3\ For the reasons discussed below, the Commission is
approving the proposed rule change.
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\Securities Exchange Act Release No. 34224 (June 16, 1994), 59
FR 32473 [File No. SR-DTC-94-05].
\3\The comment letter is discussed in Section II of this order.
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I. Description of the Proposal
The purpose of the proposed rule change is to establish procedures
for a new service, the branch receive processing service. The service
will allow participants to route securities certificates and related
documentation from their branches and other satellite offices directly
to DTC rather than to the participants' own central locations for
processing before being deposited at DTC. Under current practice,
participants route all of their certificates and related documentation
from their branches and other satellite offices to their own central
location for processing. Such processing typically results in the
routing of items which are DTC-eligible to DTC and items which are not
DTC-eligible elsewhere. Under the branch receive processing service,
DTC, rather than the participants' central locations, will receive the
certificates and related documentation directly from the participants'
branches and satellite offices. DTC will process both eligible and non-
eligible certificates and the related documentation and will route the
certificates as directed by the participants.\4\
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\4\Letter from Jack R. Wiener, Associate Counsel, DTC, to Jerry
Carpenter, Assistant Director, Division of Market Regulation
(``Division''), SEC (July 8, 1994).
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A participant using the service will transmit on a daily basis to
DTC through computer-to-computer batch processing or by use of dual
frame main host the details of incoming branch receive items. These
transmissions will include the specific identification of the courier
packages coming from the branches and certain basic information about
the contents of each package. These transmissions can be matched by DTC
against DTC's own database of eligible securities to identify special
processing items (e.g., securities deposited on the record date for
dividend or interest payment and securities that are the subject of
reorganization activities).
Upon receipt of each package, DTC will verify its contents and will
advise the participant of any discrepancies discovered. Using optical
disk technology, DTC will record the contents of the packages and the
details of each received item (e.g., certificate numbers and document
types). DTC will transmit updates on the status of branch receive
processing to the participant throughout the day. These updates will
provide the participant with specific information on the status of
particular items. Optical disk images of items received also can be
made available to the participant on a terminal by transmission or by
other means. If transmission is chosen, images of a problem item can be
transmitted intraday to help resolve the problem while images of
completed items can be transmitted overnight for recordkeeping
purposes.
Once processed, branch received items will be routed as directed by
the participant. Routing instructions may be for routine deposit to the
participant's DTC account, for return to the participant, or for
transfer to another location for further processing. End-of-day
balancing procedures will permit the participant to separate these
positions as required by it for its own internal purposes.
The branch receive service also will provide for the processing of
various exception items. DTC will be able to process for collection
next-payable interest coupons attached to incoming bearer bonds and
incoming reorganization items including past-due items. Incoming items
which are missing documentation necessary for transfer purposes will be
held at DTC in a pending status until the necessary documentation is
received. Generally, DTC does not expect to hold such items more than
thirty days.\5\
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\5\Telephone conversation between Jack Wiener, Associate
Counsel, DTC, and Jerry W. Carpenter, Assistant Director, and
Margaret J. Robb, Staff Counsel, Division, SEC (July 12, 1994).
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II. Comments
One comment letter was received with regard to the proposed rule
change.\6\ In its letter, the Securities Information Center (``SIC''),
commented on DTC's representation that if requested by a participant it
will be able to handle all inquiries to the SIC on branch receive items
and then report the results to the participant. SIC's letter stated
that while SIC had discussed this topic with DTC, an agreement that it
would be possible for DTC to provide such a service had not been
reached. In response to SIC's comment letter, DTC has represented to
the Commission that at this time it will not be involved in the SIC
process on behalf of any participant.\7\ Should DTC decide to perform
such services for its participants in the future, DTC will file with
the Commission an appropriate rule filing under Section 19(b) of the
Act.\8\ SIC did not oppose any other aspects of the proposed rule
change.
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\6\Letter from John E. Boehmke, General Manager, Securities
Information Center, to Jonathan G. Katz, Secretary, Securities and
Exchange Commission (July 13, 1994).
\7\Telephone conversation with Jack Wiener, Associate Counsel,
DTC, and Jerry W. Carpenter, Assistant Director, and Margaret J.
Robb, Staff Counsel, Division, SEC (August 8, 1994).
\8\It is the Division's understanding that discussions between
DTC and SIC are continuing with respect to the feasibility of DTC
offering such a service.
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III. Discussion
The Commission believes that the proposal is consistent with the
Act and particularly with Section 17A of the Act.\9\ Section
17A(b)(3)(F) requires that a clearing agency's rules be designated to
remove impediments to and perfect the mechanism of a national system
for prompt and accurate clearance and settlement of securities
transactions.\10\ The proposed rule change should further efficiency in
the processing of securities certificates and related documentation by
eliminating most of the certificate processing responsibilities of
those participants electing to use the branch receive processing
service and by reducing the movement of physical securities
certificates. This reduction in the processing and movement of physical
securities certificates should also improve efficiency by reducing the
instances of erroneous processing and loss that sometimes occur with
the processing and movement of physical certificates.
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\9\15 U.S.C. 78q-1 (1988).
\10\15 U.S.C. 78-1(b)(3)(F) (1988).
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IV. Conclusion
The Commission finds that the proposal is consistent with the
requirements of the Act and particularly with Section 17A of the Act
and the rules and regulations thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-DTC-94-05) be, and hereby
is, approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-21570 Filed 8-31-94; 8:45 am]
BILLING CODE 8010-01-M
