[Federal Register Volume 59, Number 60 (Tuesday, March 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-7276]


[[Page Unknown]]

[Federal Register: March 29, 1994]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33797; File No. SR-DTC-93-11]

 

Self-Regulatory Organizations; the Depository Trust Company; 
Order Approving a Proposed Rule Change Relating to Enhancements to the 
Automated Tender Offer Program

March 22, 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-93-11) pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal 
was published on December 17, 1993, in the Federal Register to solicit 
comments on the proposed rule change.\2\ No comments were received. For 
the reasons discussed below, the Commission is approving the proposed 
rule change.
---------------------------------------------------------------------------

    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\Securities Exchange Act Release No. 33322 (December 10, 
1993), 58 FR 66043 (File No. SR-DTC-93-11).
---------------------------------------------------------------------------

I. Description of the Proposal

    DTC is enhancing its Automated Tender Offer Program (``ATOP'') in 
order to improve the processing of tender and exchange offers at 
DTC.\3\ At present, a participant who wishes to submit a notice of 
guaranteed delivery\4\ in a tender offer being processed in ATOP must 
deliver outside of DTC a hard copy notice of guaranteed delivery to the 
tender or exchange agent. Under the proposed rule change, participants 
will be able to use ATOP to submit notices of guaranteed delivery in 
the same way that they can now use ATOP to submit letters of 
transmittal.\5\ When a participant utilizes ATOP to submit through 
DTC's Participants Terminal System (``PTS'') a notice of guaranteed 
delivery in a tender offer, the electronic instructions received by DTC 
from the participant and retransmitted to the tender or exchange agent 
will include a single character by which the participant acknowledges 
its receipt of and agreement to be bound by the notice of guaranteed 
delivery used in that offer.
---------------------------------------------------------------------------

    \3\For a description of ATOP, refer to Securities Exchange Act 
Release Nos. 27139 (August 14, 1989), 54 FR 34841 (File No. SR-DTC-
88-19) (order approving the ATOP program); 29168 (May 7, 1991), 56 
FR 22742 (File No. SR-DTC-91-04) (order granting accelerated 
approval on a temporary basis to modifications of ATOP); 30678 (May 
7, 1992), 57 FR 20541 (File No. SR-DTC-91-11) (order approving 
modifications of ATOP); and 32645 (July 16, 1993), 58 FR 39585 (File 
No. SR-DTC-92-12) (order approving mandatory use of ATOP).
    \4\Notices of guaranteed delivery, sometimes called protect 
letters, are documents submitted to the tender agent prior to the 
expiration of the tender offer whereby the offeror submitting the 
notice guarantees delivery of securities after the expiration of the 
tender offer but before the expiration of the protection period. 
(The protection period usually lasts eight days after the expiration 
of the tender offer.)
    \5\For a description of submission of letters of transmittal 
under ATOP, refer to Securities Exchange Act Release No. 32645 (July 
16, 1993), 58 FR 39585 (File No. SR-DTC-92-12) (order approving 
mandatory use of ATOP).
---------------------------------------------------------------------------

    DTC also is modifying its DTC/Agent Letter of Agreement. Currently, 
each time DTC handles a tender offer with a tender or exchange agent, 
DTC and the agent sign a hardcopy DTC/Agent Letter of Agreement which 
makes DTC's Voluntary Offerings Program Agents Procedures, including 
the ATOP procedures, applicable to the tender offer. DTC then adds 
attachments to the DTC/Agent Letter of Agreement to cover special 
procedures to be followed in the offer. Under the proposed rule change, 
DTC is eliminating the hardcopy DTC/Agent Letter of Agreement for each 
tender offer and will use PTS to communicate with a tender or exchange 
agent regarding each tender offer. The current form of the DTC/Agent 
Letter of Agreement will be replaced with a hardcopy Master Agreement 
which a tender or exchange agent will sign once. The Master Agreement 
will provide that the Master Agreement and DTC's Voluntary Offerings 
Program Agents Procedures will apply to all tender offers done 
thereafter through ATOP for which the tender or exchange agent acts. 
After a tender or exchange agent has entered into the Master Agreement 
with DTC, PTS will be used to confirm the agreement between the agent 
and DTC for each new tender offer in ATOP and to confirm any special 
procedures for that tender offer.

II. Discussion

    The Commission believes that the proposal is consistent with the 
Act and particularly with section 17A of the Act.\6\ Sections 17A(b)(3) 
(A) and (F) require that a clearing agency be organized and its rules 
be designed to facilitate and promote the prompt and accurate clearance 
and settlement of securities transactions.\7\ The proposed rule change 
further automates the processing of tender offers involving securities 
on deposit at DTC by eliminating the processing of hardcopy notices of 
guaranteed delivery, and thereby, further alleviates problems such as 
the risk of loss, delays during shipment, and the expense and labor 
involved in the handling of physical documents. Furthermore, the 
proposed rule change, which is an extension of DTC's existing, 
Commission-approved ATOP program,\8\ will be implemented consistently 
with the safekeeping requirements of sections 17A(b)(3) (A) and (F).\9\
---------------------------------------------------------------------------

    \6\15 U.S.C. 78q-1 (1988).
    \7\15 U.S.C. 78q-1(b)(3) (A) and (F) (1988).
    \8\Supra note 3.
    \9\15 U.S.C. 78q-1(b)(3) (A) and (F) (1988). Sections 17A(b)(3) 
(A) and (F) require that a clearing agency be organized and its 
rules be designed to assure the safeguarding of securities and funds 
in the clearing agency's custody or control or for which it is 
responsible.
---------------------------------------------------------------------------

III. 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-93-11) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-7276 Filed 3-28-94; 8:45 am]
BILLING CODE 8010-01-M