[Federal Register Volume 60, Number 11 (Wednesday, January 18, 1995)]
[Notices]
[Pages 3685-3686]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1196]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35219; International Series Release No. 770; File No. 
SR-ISCC-94-4]


Self-Regulatory Organizations; International Securities Clearing 
Corporation; Order Approving Proposed Rule Change Relating to a Data 
Transmission Link With Monte Titoli, S.P.A.

January 11, 1995.
    On August 9, 1994, the International Securities Clearing 
Corporation (``ISCC'') submitted a proposed rule change (File No. SR-
ISCC-94-4) to the Securities and Exchange Commission (``Commission'') 
pursuant to Section 19(b) of the Securities Exchange Act of 1934 
(``Act'').\1\ Notice of the proposal appeared in the Federal Register 
on September 22, 1994.\2\ The Commission received no comments. This 
order approves the proposal.

    \1\15 U.S.C. 78s(b) (1988).
    \2\Securities Exchange Act Release No. 34679 (September 15, 
1994), 59 FR 48652.
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I. Description of the Proposal

    ISCC has entered into a contract to establish a data transmission 
link with Monte Titoli (``MT'').\3\ The link will permit MT to hold 
U.S. securities listed on Italian stock exchanges in The Depository 
Trust Company (``DTC'') through ISCC. The service agreement, dated June 
1, 1992, between ISCC and MT provides that ISCC will sponsor an account 
for MT at DTC which will provide MT access to certain DTC services.\4\

    \3\MT provides settlement and depository services for securities 
listed on Italian stock exchanges.
    \4\Under the service agreement, ISCC upon instructions received 
from MT will: (1) Accept receives of securities by book-entry 
through DTC; (2) initiate book-entry delivery of securities on 
deposit at DTC; (3) initiate reclamations of securities received at 
DTC; (4) make delivery of due bill checks or payments received by 
ISCC with respect to securities; (5) initiate messages to other DTC 
participants through the broadcast function of DTC; (6) process 
securities on deposit at DTC and securities subject to a 
reorganization, takeover, or similar action provided that requisite 
funds, if applicable, have been received in advance; (7) withdraw 
rights exited from DTC and deliver such rights to the agent 
designated by MT along with instructions received with respect to 
such rights; (8) at the discretion of ISCC, facilitate withdrawals-
by-transfer of securities on deposit at DTC; and (9) order proxy 
materials for securities on deposit at DTC and complete such proxy 
materials as instructed.
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    ISCC on behalf of MT will initiate book-entry deliveries for no 
value and will accept receives of securities by book-entry for no 
value.\5\ Both the receive and deliver functions will be pursuant to 
instructions received from MT, and such instructions will identify the 
MT member for whom the receipt or delivery is being effected.\6\ In 
special circumstances and at ISCC's discretion, DTC's withdrawal-by-
transfer service also may be utilized. In such case, the securities 
will be delivered as directed by MT. MT will deposit with ISCC 
collateral to cover MT's obligations to ISCC.\7\ To the extent that any 
money settlement is required, ISCC will receive payment in the form of 
an official bank check or a wire transfer through the MT designated 
correspondent bank.

    \5\The related money settlements for the securities movements 
will take place between the parties outside of ISCC.
    \6\As reflected on the DTC, records securities deposits will 
form the basis for the bookkeeping entries at MT on behalf of MT's 
participants.
    \7\The amount of the deposit shall be the average of the three 
highest one-month fees over the prior twelve months plus the amount 
ISCC is required to deposit with DTC with respect to the sponsored 
account. However, the amount of MT's cash deposit with ISCC cannot 
be less than $50,000.
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    On each business day at about 4:00 p.m., ISCC will transmit a 
preliminary settlement statement which will detail the net amount due 
to ISCC from MT or from ISCC to MT. Under the service agreement, MT 
agrees to pay to ISCC all [[Page 3686]] fees and charges in connection 
with ISCC's provision of services and any assessment that ISCC must pay 
to DTC.\8\ The preliminary settlement statement also will indicate 
dividend and possibly interest payments received by ISCC from DTC with 
respect to shares on deposit.

    \8\Because the account is limited to free movements of 
securities, monetary obligations to DTC should be limited to the 
payments of fees for DTC services. Under the sponsored account 
relationship, DTC will look to ISCC for any liability related to 
activity in that account.
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    ISCC will transmit a final settlement statement by 10:00 a.m. of 
the business day following the day the related preliminary settlement 
statement were sent. The final settlement statement will indicate sums 
paid by MT. Dividend and interest credited to the ISSC/MT account at 
DTC will be reflected in the final settlement statement. The final 
settlement statement also will reflect a debit for the total dividend 
and interest ISSC pays to MT's withholding bank.
    MT has agreed to consult with ISCC's auditors with regard to MT's 
financial condition, and MT will furnish its financial statements to 
ISCC. Further, MT has agreed to appoint a registered agent in the U.S. 
for service of process and will provide ISCC of proof of such 
appointment. MT will be subject to jurisdiction in New York for the 
resolution of disputes arising from the link. MT will be assigned one 
ISCC account number for use on behalf of MT members.

II. Discussion

    The Commission believes that the proposed rule change is consistent 
with Section 17A of the Act and therefore is approving the proposal. 
Specifically, the Commission believes the proposal is consistent with 
Section 17A(b)(3)(F) of the Act in that it promotes the prompt and 
accurate clearance and settlement of securities transactions. Without 
the linkage, purchasers of U.S. securities on the Italian stock 
exchange would be required to make individual arrangements for the 
custody of their stock.
    ISSC's provision of this service to MT enables MT to settle 
transactions in U.S. securities more efficiently. Further, the link 
between ISCC and MT should standardize the processing of U.S. 
securities traded on a foreign exchange in accordance with U.S. 
practices and procedures. The uniform standards should reduce record 
keeping errors and thereby enhance the accuracy of the settlement of 
securities transactions. In addition, this standardization should 
promote foreign investment in U.S. securities which trade on foreign 
exchanges.
    In the initial order granting ISCC temporary registration as a 
clearing agency, the Commission stated that the development of 
efficient and comparable automated national and international 
clearance, settlement, and payment systems is one of the more important 
international goals.\9\ In that order, the Commission stressed the 
importance of developing linkages between existing clearance and 
settlement systems in light of the increase in foreign activity in U.S. 
stocks. This linkage agreement will increase the accessibility of the 
U.S. securities market to foreign investors by giving Italian investors 
a more efficient method of settling U.S. securities.

    \9\Securities Exchange Act Release No. 26812 (May 12, 1989), 54 
FR 21691.
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III. Conclusion

    For the reasons stated above, the Commission finds that ISCC's 
proposal is consistent with Section 17A of the Act.\10\

    \10\15 U.S.C. 78g-1 (1988).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (File No. SR-ISCC-94-4) be and 
hereby is, approved.

    \11\15 U.S.C. 78s(b)(2) (1988).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\12\

    \12\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-1196 Filed 1-17-95; 8:45 am]
BILLING CODE 8010-01-M