[Federal Register Volume 61, Number 118 (Tuesday, June 18, 1996)]
[Notices]
[Pages 30931-30932]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15349]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34- 37303; File No. SR-DTC-96-09]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of a Proposed Rule Change Relating to the 
Establishment of Procedures to Establish a Drop Window Service.

June 11, 1996
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 25, 1996, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-DTC-96-09) 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.
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    \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

    DTC is filing a proposed rule change that establishes procedures 
for a transfer agent drop service (``Drop Service''). The Drop Service 
will provide transfer agents located outside of New York City with a 
central location within the Borough of Manhattan to receive and deliver 
securities.

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 that 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.\2\
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    \2\ The Commission has modified the text of the statements DTC 
submitted.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    DTC proposes to offer a Drop Service in order to provide transfer 
agents located outside of New York City with a central location within 
Manhattan for the receipt of securities from banks, broker-dealers, 
depositories, and shareholders. DTC's Drop Service will enable transfer 
agents to comply with New York Stock Exchange Rule 496 and American 
Stock Exchange Rule 891. These rules require a transfer agent seeking 
qualification as a transfer agent for securities listed on the 
respective exchanges to maintain an office acceptable to the exchange 
and the issuer located south of Chambers Street in the Borough of 
Manhattan, City of New York to receive and deliver securities.
    In the past, some transfer agents located outside of New York City 
complied with these rules by using a drop service offered by the New 
York office of the Midwest Clearing Corporation (``MCC''). However, in 
1996 MCC withdrew from the clearing business and no longer offers a 
drop service.\3\ DTC proposes to offer the DTC Drop Service to replace 
the drop facility offered by MCC and to ensure continuity of service to 
transfer agents. In connection with the Drop Service, DTC will provide 
ancillary services to transfer agents such as the inspection of 
securities, maintenance of records regarding the receipt and delivery 
of securities, facilitation of rush transfers, cancellation of 
certificates, and advice regarding legal and regular transfer 
requirements.\4\
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    \3\ For a complete discussion of MCC's and Midwest Securities 
Trust Company's (``MSTC'') withdrawal from the clearing and 
depository business, refer to Securities Exchange Act Release No. 
36684 (January 5, 1996), 61 FR 1195 [File Nos. SR-CHX-95-27, SR-DTC-
95-22, SR-MCC-95-04, SR-MSTC-95-10, SR-NSCC-95-15] (order approving 
MCC's and MSTC's withdrawal from the clearance and settlement, 
securities depository, and branch receive businesses).
    \4\ A more detailed description of these services is set forth 
in Section II of DTC's Drop Service Agreement which describes the 
terms under which DTC's service will be provided. The Drop Service 
Agreement is attached as Exhibit 2 to DTC's proposed rule change and 
is available through DTC or through the Commission's Public 
Reference Room. All transfer agents are required to execute the Drop 
Service Agreement in order to use DTC's Drop Service.
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    DTC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act because it promotes efficiencies 
in the prompt and accurate clearance and settlement of securities 
transactions, specifically the transfer of record ownership. DTC 
estimates that 80% of securities delivered to transfer agents through a 
drop service originate as DTC deposits, withdrawals by transfer, and 
denomination changes. By establishing a central drop facility at DTC, 
certificates will be sent directly to a transfer agent from DTC, rather 
than from DTC to a separate drop location in Manhattan and ultimately 
to the transfer agent. Therefore, DTC's Drop Service will promote 
efficiencies in the transfer of record ownership. DTC's Drop Service 
also will reduce the expenses associated with the transfer of record 
ownership by centralizing the recording and filming of securities 
received by transfer agents. Moreover, DTC believes the Drop Service 
will foster cooperation and coordination between DTC and other entities 
engaged in the clearance and settlement of securities transactions.

(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

    DTC has not solicited or received comment 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 DTC consents, the Commission will:

[[Page 30932]]

    (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. 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 the file number SR-DTC-96-09 should be submitted by July 9, 
1996.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-15349 Filed 6-17-96; 8:45 am]
BILLING CODE 8010-01-M