[Federal Register Volume 61, Number 29 (Monday, February 12, 1996)] [Notices] [Pages 5433-5434] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 96-3042] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-36811; File No. SR-DTC-95-15] Self-Regulatory Organizations; The Depository Trust Company; Order Approving a Proposed Rule Change Relating to Processing Securities With Indexed Principal Features Through the Receiver Authorized Delivery Facility February 5, 1996. On August 23, 1995, The Depository Trust Company (``DTC'') filed with the Securities and Exchange Commission (``Commission'') a proposed rule change (File No. SR-DTC-95-15) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal was published in the Federal Register on November 6, 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. Sec. 78s(b) (1) (1988). \2\ Securities Exchange Act Release No. 36437 (October 30, 1995), 60 FR 56081. --------------------------------------------------------------------------- I. Description Under the rule change, DTC will require transactions in securities issued under a Money Market Instrument (``MMI'') program having an indexed principal feature\3\ and settling in DTC's sameday funds settlement system to be directed to DTC's Receiver Authorized Delivery facility (``RAD'').\4\ RAD will require mandatory authorization from receivers of securities having an [[Page 5434]] indexed principal feature before DTC will process the transaction.\5\ \3\ A security with an indexed principal feature is one having its principal amount directly derived by reference to a currency, composite currency, commodity, or other financial index. \4\ For a description of DTC's RAD facility, refer to Securities Exchange Act Release Nos. 25886 (July 8, 1988), 53 FR 26698 [File No. SR-DTC-88-07] (notice of filing and immediate effectiveness of the RAD facility) and 35720 (May 16, 1995), 60 FR 27360 [File No. SR-DTC-95-07] (order granting accelerated approval of proposal to implement a $15 million per transaction minimum threshold to utilize the RAD facility for approval or cancellation of deliveries). \5\ Although these transactions will be directed to DTC's existing RAD facility, such transactions will be subject to a separate approval and reporting process. --------------------------------------------------------------------------- Because the value of MMI securities with an indexed principal feature may change dramatically in a short period of time, DTC participants desire to have a mechanism by which they can determine whether a particular MMI issue has this feature before accepting a delivery. DTC determined that it could provide its participants the service they desired by processing these securities types through DTC's existing RAD facility and by revising its CUSIP descriptions to include a unique identifier that will indicate whether a particular issue has an indexed principal feature. In this way, DTC participants immediately will be able to tell from an issue's special CUSIP identifier that it has an index principal feature and then take appropriate action to affirmatively authorize or reject the delivery of the securities. These procedures should reduce the likelihood that a DTC participant inadvertently will complete a purchase transaction involving this type of security without full knowledge of its indexed principal feature. II. Discussion Section 17A(b)(3)(F)\6\ of the Act requires that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions. The Commission believes that DTC's proposed rule change is consistent with DTC's obligations under the Act before the new procedures will give DTC participants better information as to whether a particular issue of securities has an indexed principal feature. This should help DTC participants to avoid inadvertently completing a purchase transaction in a securities issue having an indexed principal feature when such a purchase is not intended. \6\ 15 U.S.C. Sec. 78q-1 (b) (3) (F) (1988). --------------------------------------------------------------------------- III. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of Section 17A of the Act 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-95-15) be, and hereby is, approved. For the Commission by the Division of Market Regulation, pursuant to delegated authority.\7\ Margaret H. McFarland, Deputy Secretary. [FR Doc. 96-3042 Filed 2-9-96; 8:45 am] BILLING CODE 8010-01-M