[Federal Register Volume 62, Number 41 (Monday, March 3, 1997)]
[Notices]
[Pages 9473-9474]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5079]



[[Page 9473]]

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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38323; File No. SR-DTC-97-01]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of a Proposed Rule Change Implementing the Dividend 
Processing Phase of the Custody Service for Certain Non-depository 
Eligible Securities

February 21, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 23, 1997, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-DTC-97-01) 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of the proposed rule change is to implement the 
dividend processing phase of DTC's custody service for certain non-
depository eligible securities. The Commission has already approved 
establishment of the basic custody service and the redemption and 
reorganization processing phase.\2\
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    \2\ Securities Exchange Act Release No. 37314 (July 14, 1996), 
61 FR 29158 [File No. SR-DTC-96-08] (order approving a proposed rule 
change establishing custody service) (``July approval order''). In 
the July approval order, the Commission required that DTC provide 
the Commission with at least thirty days advance notice of the 
implementation of reorganization processing (``Phase II''). The July 
approval order also required DTC to seek the Commission's reapproval 
of Phase II if the manner of implementation or operation of Phase II 
deviated from the plan described in the original filing [File No. 
SR-DTC-96-08]. DTC has represented to the Commission that the manner 
of implementation of Phase II does not differ substantially from the 
plan previously submitted, and therefore, DTC plans to implement 
Phase II of the custody service on April 1, 1997. Letter from Lori 
A. Brazer, Assistant Counsel, DTC (February 4, 1997).
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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 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.\3\
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    \3\ The Commission has modified the text of the summaries 
submitted by DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    Under the proposed rule change, DTC will implement the third phase 
of its custody service to offer to its participants dividend processing 
services for certain non-depository eligible securities.\4\ In 
connection with the new service, DTC will announce, collect, and 
distribute dividend, interest, periodic principal, and other 
distributions (``dividend payments'') to participants that hold 
securities through DTC's custody service (``custody issues'').
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    \4\ For a more detailed description of the custody service, 
refer to the July approval order, supra note 2.
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    In order to facilitate the collection of dividends on custody 
issues and to permit the book-entry movement of securities when a 
customer wishes to move his account from one participant to another, 
DTC proposes to register certificates held in its custody service in a 
second nominee name, DTC & Co., when requested to do so by a 
participant.\5\ DTC believes that such registration is necessary in 
order to permit DTC, under its nominee name DTC & Co., to collect 
dividend payments relating to custody issues directly from paying 
agents.\6\ Without such registration, paying agents would disburse 
individual dividend payments for the custody issues directly to the 
participant or participants' customer instead of DTC.
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    \5\ In the July approved order, the Commission noted that 
securities certificates will be held in customer or firm name only 
and would not be transferred into DTC's nominee name utilized for 
regular depository eligible securities, Cede & Co. Although the 
basic custody service and the redemption and reorganization services 
phases do not require custody issues to be registered in the new DTC 
nominee name, participants wishing to use the dividend processing 
feature of the custody service for custody issues must register such 
custody issues in the new nominee name of DTC & Co.
    \6\ Letter from Lori A. Brazer, Assistant Counsel, DTC (February 
4, 1997).
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    DTC believes that registration in its new nominee name will result 
in efficiencies for participants by enabling DTC to offer dividend 
collection and disbursement services for custody issues. DTC also 
believes that nominee name registration will facilitate the book-entry 
movement of custody issues if a customer wishes to move its position 
from one participant to another. Furthermore, DTC believes that 
registration into a second nominee name has the collateral benefit of 
identifying a security as a deposit that is eligible for only limited 
DTC custody services and not for full DTC book-entry services.
    DTC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act \7\ and the rules and 
regulations thereunder because it will promote the prompt and accurate 
clearance and settlement of securities transactions by reducing the 
costs and risks associated with the collection and disbursement of 
dividend payments. Furthermore, DTC believes that the proposed service 
will reduce processing expenses and labor costs for participants by 
establishing uniform procedures for clearance and settlement which will 
increase the protection of investors and persons facilitating 
transactions by and acting on behalf of investors.
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    \7\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, in the public interest, and for 
the protection of investors.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    DTC has not solicited participant comments 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:
    (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

[[Page 9474]]

Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 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, NW., Washington, DC 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-97-01 and 
should be submitted by March 24, 1997.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \28\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland
Deputy Secretary.
[FR Doc. 97-5079 Filed 2-28-97; 8:45 am]
BILLING CODE 8010-01-M