[Federal Register Volume 60, Number 206 (Wednesday, October 25, 1995)]
[Notices]
[Pages 54739-54740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26430]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36384; File No. SR-DTC-95-19]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change Relating to Compliance With Confirmation Disclosure 
Requirements Through the Use of the Institutional Delivery System

October 17, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 4, 1995, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared 
primarily by DTC. The Commission is publishing this notice and order to 
solicit comments from interested persons and to grant accelerated 
approval of the proposed rule change.

    \1\15 U.S.C. Sec. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    DTC proposes to make additions to its Participant Operating 
Procedures\2\ to enable broker-dealers that use DTC's Institutional 
Delivery (``ID'') system for generating confirmations for their 
customer transactions to comply with certain disclosure requirements of 
Rule 10b-10 under the Act.\3\

    \2\The additions to DTC's Participant Operating Procedures, 
Section M--ID System, are attached as exhibit 2 to DTC's filing 
(File No. SR-DTC-95-19) and are available for review in the 
Commission's Public Reference Section.
    \3\17 CFR 240.10b-10 (1994).
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II. Self-Regulatory Organizations'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 section (A), 
(B), 

[[Page 54740]]
and (C) below, of the most significant aspects of such statements.\4\

    \4\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 1994, the Commission adopted amendments to rule 10b-10.\5\ 
Subsequently, the Division of Market Regulation issued a no-action 
letter to the Public Securities Association (``PSA'') on behalf of its 
members and all other brokers and dealers temporarily exempting them 
from certain disclosure requirements of paragraphs (a)(7), (a)(8), and 
(a)(9) of Rule 10b-10 until November 1, 1995.\6\

    \5\For a complete discussion of the amendments, refer to 
Securities Exchange Act Release No. 34962 (November 10, 1994), 59 FR 
59612.
    \6\Letter from Catherine McGuire, Chief Counsel, Division of 
Market Regulation, Commission, to George P. Miller, Esq., Vice 
President and Associate General Counsel, PSA (September 29, 1995).
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    The purpose of this proposed rule change is to enable broker-
dealers that use DTC's ID system for generating confirmations for their 
customer transactions to comply with the following three disclosure 
requirements upon the expiration of the temporary exemption.
    (1) Amended Rule 10b-10 requires broker-dealers that are not 
members of the Securities Investor Protection Corporation (``SIPC'') to 
disclose that fact in trade confirmations. A broker-dealer using the ID 
system to send confirmations can disclose that fact by including a 
statement such as ``[Name of broker-dealer] is not a member of SIPC'' 
in the Special Instructions field of trade data submitted to the ID 
System. A broker-dealer can enter up to 256 characters of free-form 
text in the Special Instructions field to be included in the 
confirmation.
    (2) Amended Rule 10b-10 requires broker-dealers to disclose in the 
case of a debt security other than a government security that the 
security is not rated by a nationally recognized statistical rating 
organization if that is the case. A broker-dealer using the ID system 
can disclose that fact by entering ``Not Rated'' or ``N/R'' in the 
Special Instructions field. The proposed rule change adds a statement 
that defines the codes ``Not Rated'' or ``N/R'' in DTC's Procedures for 
the ID system in the material describing the Special Instructions 
field.
    (3) Amended Rule 10b-10 requires broker-dealers to disclose in 
confirmations for asset-backed securities that are continuously subject 
to prepayment that the yield of the security depends on the rate of 
prepayments and that certain information concerning the factors that 
affect yield will be furnished upon written request. By using one of 
several acronyms, a broker-dealer using the ID system can enter data in 
the Security Type field to identify the security as one of several 
types of securities that meet the Rule 10b-10 definition of asset-
backed securities. The proposed rule change adds a provision to DTC's 
Procedures for the ID System in the material setting forth the 
provisions deemed to be part of a confirmation stating that when one of 
several designated acronyms appears in the Security Type field of the 
ID confirmation, the required disclosure is deemed to be a part of the 
ID confirmation for that transaction.
    DTC believes the proposed rule change is consistent with the 
requirements of Section 17A(b)(3)(F)\7\ of the Act and the rules and 
regulations thereunder applicable to DTC because the proposed rule 
change will facilitate the confirmation of transactions through the use 
of DTC's ID system. DTC states that 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 because the 
proposed rule change relates to DTC's existing ID system.

    \7\15 U.S.C. 78q-1(b)(3)(F) (1988).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC perceives no 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

    The proposed rule change was developed through discussions with the 
PSA, acting on behalf of its members, and several participants. 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

    Section 17A(b)(3)(F) of the Act requires the rules of a clearing 
agency be designed to promote the prompt and accurate clearance and 
settlement of securities transactions and to foster cooperation and 
coordination with persons engaged in the clearance and settlement of 
securities transactions. The Commission believes the proposed rule 
change is consistent with these requirements because it should 
facilitate the prompt and accurate clearance and settlement of 
securities transactions by enabling DTC participants to continue to 
confirm and affirm institutional transactions through the ID system in 
compliance with the additional disclosure requirements of amended Rule 
10b-10.
    DTC has requested that the Commission find good cause for approving 
the proposed rule change prior to the thirtieth day after publication 
of the notice of filing. The Commission finds good cause for so 
approving because accelerated approval will allow DTC participants to 
begin utilizing the ID system to comply with the disclosure 
requirements of Rule 10b-10 before the expiration of the temporary 
exemption on November 1, 1995.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
Copies of the submissions, 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 at the 
Commission's Public Reference Section, 450 5th Street NW., Washington, 
DC 20549. Copies of such filings will also be available at the 
principal office DTC. All submissions should refer to File No. SR-DTC-
95-19 and should be submitted by November 15, 1995.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-95-19) be, and hereby 
is, approved.

    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. 95-26430 Filed 10-24-95; 8:45 am]
BILLING CODE 8010-01-M