[Federal Register Volume 60, Number 155 (Friday, August 11, 1995)]
[Notices]
[Pages 41139-41140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19837]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36050; File No. SR-DTC-95-10]
Self-Regulatory Organizations; The Depository Trust Company;
Order Approving a Proposed Rule Change Implementing the Advice of
Confirm Correction/Cancellation Feature and Modifying the
Authorization/Exception Processing Feature of the Institutional
Delivery System
August 2, 1995.
On April 27, 1995, The Depository Trust Company (``DTC'') filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change (File No. SR-DTC-95-10) under Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ to implement the Advice
of Confirm Correction/Cancellation feature and modify the
Authorization/Exception Processing feature of the Institutional
Delivery system (``ID''). Notice of the proposal was published in the
Federal Register
[[Page 41140]]
on June 1, 1995.\2\ No comment letters were received. For the reasons
discussed below, the Commission is approving the proposed rule change.
\1\ 15 U.S.C. 78(b)(1) (1988).
\2\ Securities Exchange Act Release No. 35758 (May 24, 1995), 60
FR 28636.
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I. Description
In a previous filing with the Commission, DTC described several
enhancements to the ID System that it planned to implement, including
the Advice of Confirm Correction/Cancellation feature and the
modification of Authorization/Exception processing.\3\ These are the
subject of this approval order.
\3\ Securities Exchange Act Release No. 33466 (January 1994), 59
FR 3139 [File No. SR-DTC-93-07] (order approving proposed rule
change relating to the enhanced ID system) (``Enhanced ID Filing'').
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The Advice of Confirm Correction/Cancellation feature is one of
three electronic mail features described in the Enhanced ID filing.\4\
The Advice of Confirm Correction/Cancellation feature enables an
institution or its agent which has received a confirmation through the
ID system to notify the broker-dealer of the reason(s) why the
institution disagrees with the confirmation. This communication from
the institution, which is sometimes called a ``DK'' (i.e., don't know)
of the trade, enables the broker-dealer to take steps to resolve the
discrepancy between its records of the trade and the institution's
records. The Advice of Confirm Correction/Cancellation also was
described in another DTC filing as a feature which will enable a prime
broker to DK a trade when it receives an ID confirmation from an
executing broker.\5\
\4\ The other two electronic mail features (i.e., Notice of
Order Execution and Institution Instructions) were previously
approved by the Commission. For a complete description of these
features, refer to Securities Exchange Act Release No. 34199 (June
10, 1994), 59 FR 31660 [File No. SR-DTC-94-04] (order granting
accelerated approval of a proposed rule change to implement the
interactive capabilities and the electronic mail features of the
enhanced ID system).
\5\ Securities Exchange Act Release No. 34779 (October 3, 1994),
59 FR 34779 [File No. SR-DTC-94-13] (order granting accelerated
approval on a temporary basis through May 31, 1995, of a proposed
rule change implementing the prime broker option in the ID system).
More recently, DTC filed a proposed rule change modifying
features of the prime broker option in the ID system. For a complete
description of that filing, refer to Securities Exchange Act Release
No. 35971 (July 14, 1995), 60 FR 37696 [File No. SR-DTC-95-11]
(notice of filing and immediate effectiveness of proposed rule
change relating to modifications to the prime broker option in the
Institutional Delivery System).
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The proposal also modifies Authorization/Exception processing by
increasing the number of trades which can be processed and by extending
the period during which the process can be used.\6\ Prior to the
modification, only ID trades which were schedules to settle on the
third day following the trade date (``T+3'') or later could be
authorized or excepted from settlement through an instruction submitted
or excepted from settlement through an instruction submitted on
settlement date minus one (``S-1''). The modification allows
authorization or exception of trades settling on T+1 and later through
an instruction submitted on any of the twenty-three business days from
S-1 through S+21.
\6\ The Authorization/Exception function affords participants
twenty-three business days to authorize for or except from automated
settlement any eligible, affirmed next day funds settlement
(``NDFS'') or same-day funds settlement (``SDFS'') trade in an
interactive environment.
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II. Discussion
Sections 17A(b)(3)(A) and (F) of the Act \7\ 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. The Commission believes that DTC's proposal is
consistent with Section 17A of the Act \8\ because the proposal should
promote efficiencies in the clearance and settlement of securities
transactions by increasing the number of trades eligible and by
expanding the timeframe for Authorization/Exception processing. The
proposal also should promote efficiencies by improving communications
among the parties to institutional trades by making the Advice of
Confirm Correction/Cancellation feature more interactive and automated.
These changes should help DTC participants settle trades in a three-day
settlement cycle.\9\
\7\ 15 U.S.C. 78q-1(b)(3)(A) and (F) (1988).
\8\ 15 U.S.C. 78q-1 (1988).
\9\ On October 6, 1993, the Commission adopted Rule 15c6-1 under
the Act, which establishes three business days after the trade date
instead of five business days as the standard settlement timeframe
for most broker-dealer transactions. The rule became effective June
7, 1995. Securities Exchange Act Release Nos. 33023 (October 6,
1993), 58 FR 52891 (release adopting Rule 15c6-1); 34952 (November
9, 1994), 59 FR 59137 (release changing the effective date of the
three day settlement cycle).
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III. Conclusion
The Commission finds that DTC's proposal is consistent with the
requirements of the Act and particularly with Section 17A 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-95-10) be, and hereby is
approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\10\
\10\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-19837 Filed 8-10-95; 8:45 am]
BILLING CODE 8010-01-M