[Federal Register Volume 60, Number 178 (Thursday, September 14, 1995)]
[Notices]
[Pages 47785-47786]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22848]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36206; File No. SR-DTC-95-12]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to the Extension of the Payment of Rebates to Paying Agents 
During the Conversion to a Same-day Funds Payment Standard

September 8, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 14, 1995, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-DTC-95-12) 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 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 Statement of the Terms of Substance of 
the Proposed Rule Change

    DTC is extending until October 1, 1996, the payment of rebates to 
qualifying agents that pay municipal interest and corporate and 
municipal redemptions in same-day funds on the payable date.\2\

    \2\ The Commission previously approved a proposed rule change 
filed by DTC in which the rebate payments were to end on July 31, 
1996. Securities Exchange Act Release No. 35649 (April 26, 1995), 60 
FR 21576 [File No. SR-DTC-94-19] (order approving a proposed rule 
change implementing new guidelines for principal and income payments 
in a same-day funds environment).

[[Page 47786]]

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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 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.\3\

    \3\ 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

    In DTC's next-day funds settlement system and prior to the 
implementation of the Group of Thirty's principal and income payment 
guidelines,\4\ paying agents generally made payments in same-day funds 
to DTC for corporate income payments (e.g., dividends and interest) and 
reorganization actions (e.g., tenders and exchanges) for a majority of 
issues. Although corporate and municipal redemption payments and 
municipal income payments could be paid in next-day funds, paying 
agents generally made these payments in same-day funds on payment date 
to ensure their timely arrival at DTC. DTC invested these funds 
overnight and rebated to the paying agents interest on the funds as 
compensation for holding the funds overnight.

    \4\ For a complete description of the principal and interest 
payment guidelines, refer to Securities Exchange Act Release No. 
35649, supra note 2.
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    DTC has paid such rebates for many years; however, once DTC 
converts to same-day funds settlement for all security issues, DTC will 
make all payments to its participants on the payable date in same-day 
funds. As a result, DTC will not have interest earned from overnight 
investing available to rebate to paying agents. Therefore, DTC 
determined that it would cease paying such rebates to paying agents. 
Recognizing that participants would benefit by receiving all their 
expected payments in same-day funds on the payable date and in order to 
give agents time in which to modify their business practices in order 
to compensate for the loss of the rebates, DTC initially proposed to 
continue to pay rebates from the date of the conversion to same-day 
funds settlement for all security issues through July 31, 1996. In 
order to accomplish this, DTC determined that it would charge to 
participants, in proportion to their holdings in each issue for which a 
rebate would apply, the funds needed to pay the rebates from the date 
of the conversion through July 31, 1996.
    In order to give paying agents additional time in which to modify 
their practices and procedures, the members of the Same-Day Funds 
Payment Task Force of the U.S. Working Committee of The Group of Thirty 
Clearance and Settlement Project requested that DTC extend the payment 
of agent rebates from August 1, 1996, through September 30, 1996. 
Therefore, DTC now proposes to extend the payment of such rebates until 
September 30, 1996. With respect to payments made on or after October 
1, 1996, charges to participants will no longer be made.
    The rebates will not be applied to payments of corporate interest, 
dividends, and reorganizations for which the paying agents already pay 
DTC in same-day funds on the payable date and which currently are not 
subject to interest earning rebates. However, DTC will require that 
100% of corporate interest, dividends, and reorganization payments be 
paid to DTC in same-day funds on the payable date by 2:30 p.m. Eastern 
Standard time.
    DTC believes the proposed rule change is consistent with the 
requirements of Section 17A(b)(3)(F) of the Act \5\ because the 
extension of the payment of rebates to paying agents during the 
modification of their business practices will foster cooperation and 
coordination among persons engaged in the clearance and settlement of 
securities transactions.

    \5\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC does not believe the proposed rule change will impact or impose 
a burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

(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.
III. Date of effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
(3) was provided to the Commission for its review at least five days 
prior to the filing date; and (4) does not become operative for thirty 
days from the date of its filing on August 14, 1995, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A)(iii)\6\ of 
the Act and Rule 19b-4(e)(6)\7\ thereunder. In particular, the 
Commission believes the proposed rule change does not significantly 
affect the protection of investors or the public interest and does not 
impose any significant burden on competition. At any time within sixty 
days of the filing of the proposed 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, or otherwise in furtherance of the 
purposes of the Act.

    \6\15 U.S.C. 78s(b)(3)(A)(iii) (1988).
    \7\17 CFR 240.19b-4(e)(6) (1994)
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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. 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 will also be available 
for inspection and copying at the principal office of DTC. All 
submissions should refer to the File No. SR-DTC-95-12 and should be 
submitted by October 5, 1995.

    For the commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\

    \8\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-22848 Filed 9-13-95; 8:45 am]
BILLING CODE 8010-01-M