[Federal Register Volume 63, Number 33 (Thursday, February 19, 1998)]
[Notices]
[Pages 8508-8509]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4095]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39647; File No. SR-DTC-97-12]


Self-Regulatory Organizations; the Depository Trust Company; 
Notice of Filing of Proposed Rule Change to Establish a Voluntary 
Redemption and Sales Service for Depository Eligible Units of Unit 
Investment Trusts

February 11, 1998.
    Pursuant to Section 19(b)(1) of the Securities and Exchange Act of 
1934 (``Act''),\1\ notice is hereby given that on June 27, 1997, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') and on January 22, 1998, amended 
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 proposed rule change will allow DTC to establish procedures for 
a redemption and sales service for depository eligible unit investment 
trusts (``UITs'') to be called the investor's voluntary redemptions and 
sales service (``IVORS'').

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

    DTC is establishing IVORS to provide its participants with a secure 
and efficient redemption and sales service for DTC-eligible units in 
UITs. IVORS will offer two basic UIT services: (1) Redemption of units 
with the UIT transfer agent for cash payment and (2) sale of units to 
the UIT sponsor for cash payment. IVORS initially will be available to 
eligible DTC participants by way of DTC's participant terminal system 
(``PTS'').
    IVORS will be available only if (1) the UIT units are DTC-eligible 
and are held in DTC's fast automated securities transfer (``FAST'') 
system; \3\ (2) the FAST transfer agent currently is or agrees to 
become a full service DTC participant; and (3) the UIT's lead sponsor 
or its clearing agent agrees to participate in IVORS as a DTC 
participant. When a specific UIT becomes eligible for IVORS, its FAST 
transfer agent will submit initial standing instructions for the UIT to 
an IVORS data base on PTS regarding participants' ability to redeem or 
to sell units through IVORS. The UIT sponsor will be able to make daily 
changes to those standing instructions by way of PTS. When a 
participant holding units in its DTC account submits a request through 
IVORS to surrender the units for their value, IVORS will determine 
which of the two basic services (i.e., redemption or sale) is available 
for the units based on the standing instructions for the particular UIT 
CUSIP number in the IVORS database.
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    \3\ DTC has informed the Commission that DTC-eligible UIT units 
usually are held in the FAST system.
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    After the determination of whether to surrender the units through a 
redemption or sale has been made, IVORS will then process the 
transaction. On the date of the participant's request to surrender the 
units (i.e., trade date or ``T''), IVORS will move the surrendered 
units from the participant's free position to its ``IVORs pending 
surrender segregation account.'' Before the end of the day on T+2, 
either the FAST transfer agent or the UIT sponsor will enter into IVORS 
the redemption price (if the units are to be redeemed) or the purchase 
price (if the units are to be sold) plus the accrued dividend per unit. 
Both redemptions and sales of units through IVORS will be settled on 
T+3.
    IVORS automatically will calculate the settlement value of the 
redemption or sale and will generate a deliver order (``DO'') to move 
the units versus payment of the settlement value from the redeeming 
participant's IVORS pending surrender segregation account either to the 
FAST transfer agent's DTC participant account (in the case of a 
redemption) or to the UIT sponsor's DTC participant account (in the 
case of a sale). If the units are being redeemed, IVORS automatically 
will generate a second DO to remove the units from the FAST transfer 
agent's DTC participant account. If the units are being sold, the units 
will remain in the UIT sponsor's DTC account until the UIT sponsor 
later delivers them to a secondary-market purchaser or redeems them by 
way of IVORS.
    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A(b)(3)(A) of the Act \4\ and the rules and 
regulations thereunder because it will promote efficiencies in the 
clearance and settlement of securities transactions.
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    \4\ 15 U.S.C. 78q-1(b)(3)(A).

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[[Page 8509]]

(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, or 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 solicited participant comments on the proposed rule change. 
It has taken into account participant input in the development of this 
proposal.
    DTC's planning department with several UIT sponsors and trustee/
transfer agents in the process of developing the IVORS service. The 
proposal for IVORS was distributed to the executive committee of the 
Reorganization Division Inc. of the Securities Industry Association 
(``SIA''). Slides of the proposed service were also presented during 
annual meetings of the SIA Reorganization Division.
    In response to DTC newsletter articles regarding the IVORS proposal 
and discussions with participant service representatives on their field 
trips, over a dozen participants requested copies of the IVORS proposal 
and offered to participate in a pilot of the new service.

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, including whether the proposed rule 
change is consistent with the Act. 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 Section, 450 Fifth Street, N.W., 
Washington, D.C. 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-97-12 and should be 
submitted by March 12, 1998.

    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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-4095 Filed 2-18-98 8:45 am]
BILLING CODE 8010-01-M