[Federal Register Volume 62, Number 178 (Monday, September 15, 1997)]
[Notices]
[Pages 48331-48332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24303]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39031; File No. SR-DTC-97-07]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Disclosure Requirements for Transactions Involving 
Inflation Indexed Securities Through the Institutional Delivery System

September 8, 1997.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act''), notice is hereby given that on May 19, 1997, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change 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 from interested persons on the proposed rule change.
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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 amend Section M of 
DTC's participant operating procedures in accordance with certain 
disclosure requirements for transactions involving inflation indexed 
securities processed through DTC's Institutional Delivery (``ID'') 
system.

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 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 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

    PSA The Bond Market Trade Association (``PSA'') on behalf of its 
members and all other registered brokers and dealers, received no-
action and interpretive relief from the Commission and the Treasury 
(collectively ``interpretive relief'') \3\ regarding the application of 
certain regulations to inflation indexed securities issued by the U.S. 
Treasury Department (``Treasury''). The purpose of the 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 disclosure requirements set forth in the interpretive relief.
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    \3\ Letter from Robert L.D. Colby, Deputy Director, Division of 
Market Regulation, Commission, to Paul Saltzman, Senior Vice 
President and General Counsel, PSA The Bond Market Association, 
(January 17, 1997); letter from Richard L. Gregg, Commissioner, 
Bureau of the Public Debt, Department of the Treasury, to Michael A. 
Macchiaroli, Associate Director, Division of Market Regulation, 
Commission (January 17, 1997).
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    The interpretative relief requires broker-dealers to disclose in 
confirmations for inflation indexed securities that yield to maturity 
may vary due to inflation adjustments or provide disclosure to similar 
effect. A broker-dealer using the ID system can enter data in the 
security type field identifying the security as an inflation indexed 
security by using a designated acronym (i.e., ``ITS''). Under the 
proposed rule change, DTC will add procedures to its ID system to 
provide that when the designated acronym identifying an inflation 
indexed security appears in the security type field of the ID 
confirmation, the required disclosure will be deemed to be a part of 
the ID confirmation for that transaction.
    The interpretative relief also requires confirmations involving 
inflation indexed securities for when-issued transactions and for 
transactions in the Treasury's Separate Trading of Registered Interest 
and Principal of Securities (``STRIPS'') program to disclose the real 
yield (i.e., nominal yield not adjusted for inflation) for the 
securities.\4\ Under the proposed rule change, a broker-dealer using 
the ID system to send confirmations for such transactions will be able 
to disclose the real yield by entering that figure either in the yield 
field or in the special instructions field of trade data submitted to 
the ID system.
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    \4\ PSA The Bond Market Association Trading Practice Guidelines 
for Inflation Indexed Securities (December 18, 1996).
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    DTC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act \5\ and the rules and 
regulations thereunder because the proposed rule change will assure the 
safeguarding of securities and funds which are in the custody or 
control of DTC by facilitating the confirmation of transactions in 
inflation indexed securities through the use of DTC's ID system.
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    \5\ 15 U.S.C. 78q-1.
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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 PSA 
acting on behalf of its members and with 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) \6\ of the Act and pursuant

[[Page 48332]]

to Rule 19b-4(e)(4) \7\ promulgated thereunder because the proposal 
effects a change in an existing service of a registered clearing agency 
that does not adversely affect the safeguarding of securities or funds 
in the custody or control of DTC or for which it is responsible and 
does not significantly affect the respective rights or obligations of 
DTC or persons using the service. At any time within sixty days of the 
filing of such rule change, the Commission may summarily abrogate such 
rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 240.19b-4(e)(4).
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    On August 25, 1997, notice of filing of File No. SR-DTC-97-07 was 
incorrectly published in the Federal Register as a proposed rule change 
filed pursuant to Section 19(b)(2).\8\ This notice of the proposed rule 
change supersedes that release and correctly publishes notice of filing 
of File No. SR-DTC-97-07 as a proposed rule change filed pursuant to 
Section 19(b)(3)(A). The proposed rule change became immediately 
effective upon filing with the Commission on May 19, 1997.
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    \8\ Securities Exchange Act Release No. 38950 (August 19, 1997), 
62 FR 44997.
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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, 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 Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing also will be available for 
inspection and copying at the principal office of DTC. All submissions 
should refer to File No. SR-DTC-97-07 and should be submitted by 
October 6, 1997.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-24303 Filed 9-11-97; 8:45 am]
BILLING CODE 8010-01-M