[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