[Federal Register Volume 62, Number 186 (Thursday, September 25, 1997)]
[Notices]
[Pages 50414-50415]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25465]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39095; File No. SR-DTC-97-08]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Regarding the Memo Segregation Service
September 19, 1997.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act''), notice is hereby given that on June 1, 1997, The
Depository Trust Company (``TDC'') filed with the Securities and
Exchange Commission (``Commission'') 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
The proposed rule change will modify the procedures for
participants to control their collateral in connection with the use of
DTC's memo segregation service (``memo seg'').
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, and 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 developed memo seg to assist participants in their compliance
with Rule 15c3-3 under the Act.\3\ Rule 15c3-3, among other things,
requires that broker-dealers maintain control of all fully-paid and
excess margin securities they hold for the accounts of customers.\4\
Memo seg enables participants, particularly broker-dealer participants,
to segregate customer fully-paid and excess margin securities by
creating a memo position within their free accounts. This memo position
enables participants to protect themselves from unintended deliveries
of customer fully-paid and excess margin securities that either are in
the participant's free account or that may be received during the daily
processing cycle.
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\3\ For a detailed description of memo seg, refer to Securities
Exchange Act Release No. 26250 (November 3, 1988), 53 FR 45638 (File
No. SR-DTC-88-16) (order permanently approving DTC's proposed rule
change).
\4\ 17 CFR 240.15c3-3.
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One of DTC's primary risk management controls to protect DTC in the
event of a participant's failure to settle is DTC's collateralization
procedures. These procedures are designed to assure that a
participant's net debit does not exceed the total collateral available
in its account. One of the methods available to a participant to
collateralize its account is to give DTC a standing instruction that
designates as collateral those securities in its free account at the
start of the processing day. Currently, this instruction would apply to
all securities in the participant's free account, including securities
for which a memo seg position has been created.
Accordingly, the proposed rule change will amend DTC's participant
collateralization procedures to exclude start-of-day memo seg positions
from classification as collateral even if the participant has given DTC
a standing instruction to designate as collateral all securities in its
free account. If a participant subsequently wishes to utilize memo seg
positions as collateral, it will be permitted to do so by giving DTC
the appropriate instructions. DTC believes that the proposed rule
change will assist participants in retaining the protections of memo
seg from one day to the next which should reduce the potential for
unintended deliveries of customer fully paid or excess margin
securities.
DTC believes that the proposed rule change is consistent with the
requirements of Section 17A(b)(3)(A) of the Act \5\ and the rules and
regulations thereunder because it promotes efficiencies in the
clearance and settlement of securities transactions.
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\5\ 15 U.S.C. 78q-1(b)(3)(A).
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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.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \6\ and Rule 19b-4(e)(4) thereunder \7\ because
it effects a change in an existing service of DTC that (i) does not
adversely affect the safeguarding of securities or funds in the custody
or control of DTC or for which it is responsible and (ii) does not
significantly affect the respective rights or obligations of DTC or
persons using the service. At any time within sixty days of the filing
of such rule change, the Commission may summarily abrogate such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors,
[[Page 50415]]
or otherwise in furtherance of the purposes of the Act.
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(e).
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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, N.W., Washington, D.C. 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, N.W.,
Washington, D.C. 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-97-08 and should be
submitted by October 16, 1997.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-25465 Filed 9-24-97; 8:45 am]
BILLING CODE 8010-01-M
