[Federal Register Volume 60, Number 28 (Friday, February 10, 1995)]
[Notices]
[Pages 8102-8104]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3326]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35332; File No. SR-DTC-95-04]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change Establishing a Link Between
the Institutional Delivery System and Other Compatible Electronic Trade
Confirmation Systems
February 3, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on January 26, 1995, The
Depository Trust Company (``DTC'') 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
by DTC. The Commission is publishing this notice to solicit
[[Page 8103]] comments on the proposed rule change from interested
persons.
\1\15 U.S.C. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change establishes relationships between The
Depository Trust Company (``DTC'') and trade confirmation systems
operated by other organizations that would provide for, among other
things, the automated settlement in DTC of transactions introduced to
DTC by such other systems (e.g., confirmed and affirmed in such other
systems). Under this proposal, DTC would link its Institutional
Delivery (``ID'') system with another compatible electronic trade
confirmation system (the ``Other System'').\2\ DTC is prepared at this
time to link the ID system with any Other System in the manner
described below and estimates that a link in that manner could be
implemented within three months from the time when the vendor of the
Other System indicates a desire to establish the link. DTC will
consider and may implement additional methods of linking the ID system
which are different from the link described below.
\2\The establishment of the link between the ID system and the
Other System would be subject to the Other Systems obtaining any
necessary or appropriate approvals by regulatory agencies, such as
approval in regard to compliance with Rule 10b-10 under the
Securities Exchange Act of 1934 if the Other System will confirm
transactions.
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Where a broker and its institutional customer in a trade use the
Other System, and the agent (i.e., the institution's custodian) and/or
any interested parties use the ID system, notice of order execution
(sometimes called advice of execution), institution instructions
(sometimes called trade allocation), confirmation and affirmation for
the trade will occur in the Other System, in which case the Other
System will transmit a confirmation, in DTC format, to the ID system.
DTC will then process the trade in the ID system, which includes
transmitting an ID system message to the Other System containing the ID
system control number for the trade and transmitting confirmations to
any agent and interested parties who use the ID system. DTC will not
transmit confirmations to the broker and the institution. The Other
System will transmit to the ID system the affirmation from the Other
System, in DTC format, containing the ID system control number. If the
trade involves a DTC-eligible issue, the trade will be settled by book-
entry at DTC in the normal way for an affirmed trade in the ID system.
DTC will be responsible for all quality control reporting with
respect to all trades processed through the link, and the vendor of the
Other System will furnish DTC with whatever data from the Other System
is needed for that purpose.
Except as stated in this paragraph, DTC will charge its usual ID
system fees for a transaction processed through the link. In the above
example, DTC will not charge confirmation fees to the broker or
institution because it will not send confirmations to either of them.
Fees for any services provided by the ID system directly to the broker
or institution will continue to be billed to and paid by the
appropriate party. In order to encourage the development of links
between the ID system and Other Systems where both the broker and the
institution use the Other System, the ID system fees charged in that
case to the vendor of the Other System with respect to confirmation
activity will be limited to $0.10 per trade during the period ending on
December 31, 1995. DTC continually examines its fees, and the fees
associated with the link between the ID system and Other Systems may be
changed after December 31, 1995.\3\
\3\Any such fee changes would be filed with the Commission in
accordance with the requirements of the Securities Exchange Act of
1934.
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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 it received on the proposed rule change. The
text of these statements may 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.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
Currently, a large number of DTC users interact operationally with
DTC through intermediaries selected by them, including ``service
bureaus.'' Pursuant to standing instructions from these users, DTC
currently links with these intermediaries in providing a wide range of
DTC services to users, including the automated delivery and receipt of
ID system confirmations and affirmations and related reports. In
addition, DTC currently links the ID system with systems operated by
the other two registered securities depositories in the United States
on a ``private label'' basis. In those links, confirmation and
affirmation for a trade occur in the ID system, but any parties
involved in the trade who use the other depository's system submit all
data and communications regarding the trade to the other depository and
receive all such data and communications from the other depository. On
behalf of those parties, the other depository submits to and receives
from DTC on an omnibus basis all data and communications regarding the
trade in the course of ID system processing. DTC is likely to enter
into similar arrangements with other organizations in the United States
and abroad.
The purpose of the proposed rule change is to establish a new
method of linking the ID system in addition to the current
arrangements.
DTC believes the proposed rule change is consistent with the
requirements of the Securities Exchange Act of 1934 and the rules and
regulations thereunder applicable to DTC since the proposed rule change
will facilitate the processing of transactions in securities where
different trade confirmation systems are involved. The proposed rule
change will be implemented consistently with the safeguarding of
securities and funds in DTC's custody or control or for which it is
responsible since the proposed rule change relates to DTC's existing ID
system.
(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC perceives no adverse 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
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 the self-regulatory organization consents,
the Commission will: [[Page 8104]]
(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, 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 Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such filing will also be available
for inspection and copying at the principal office of DTC. All
submissions should refer to File No. SR-DTC-95-04 and should be
submitted within March 3, 1995.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\4\
\4\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-3326 Filed 2-9-95; 8:45 am]
BILLING CODE 8010-01-M