[Federal Register Volume 63, Number 91 (Tuesday, May 12, 1998)]
[Notices]
[Pages 26236-26237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12459]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39960; File No. SR-DTC-97-17]


Self-Regulatory Organizations; The Depository Trust Company; 
Order Approving a Proposed Rule Change Relating to a Modification of 
the Coupon Collection Service

May 5, 1998.
    On August 7, 1997, The Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') and on 
December 22, 1997, amended a proposed rule change (File No. SR-DTC-97-
17) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'').\1\ Notice of the proposal was published in the Federal 
Register on January 27, 1998.\2\ No comment letters were received. For 
the reasons discussed below, the Commission is approving the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 39561 (January 20, 
1998), 63 FR 3941.
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I. Description

    DTC currently operates a coupon collection service (``CCS''), which 
provides DTC participants with a method for collecting interest payable 
on coupons from municipal bearer bonds. The rule change modifies CCS to 
include the collection of interest payable on coupons from corporate 
bearer bonds.\3\
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    \3\ Due to the additional processing and tracking of corporate 
bearer coupon deposits, DTC intends to file a proposed rule change 
with the Commission in the future to institute a surcharge for the 
handling of these deposits.
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    Currently, participants using CCS are required to deposit coupons 
in a standard sealed envelope or ``shell,'' each of which may contain 
no more than 200 coupons for the same CUSIP number, series, and payable 
date. DTC submits the contents of the shells to the appropriate issuer 
or paying agent and credits the interest to the participant's 
account.\4\ With certain exceptions, DTC will process corporate bearer 
bond coupons through CCS the same way that it currently processes 
municipal bearer bond coupons.
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    \4\ For a complete description of CCS, refer to Securities 
Exchange Act Release No. 35750 (January 22, 1996), 61 FR 2852 [File 
No. SR-DTC-95-18] (order approving proposed rule change).

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[[Page 26237]]

    First, DTC will contact the corporate paying agent before 
submitting the coupons for payment to determine whether the coupon 
proceeds are payable in U.S. dollars. Only corporate bearer bonds 
payable in either U.S. dollars or Canadian funds are eligible for CCS. 
Where the corporate bearer bonds are payable in Canadian funds, DTC 
will request the paying agent to convert the funds to U.S. dollars in 
accordance with the prevailing exchange rate. DTC will not process 
corporate bearer bonds through CCS unless the paying agent is able to 
and will convert Canadian funds to U.S. dollars.
    Second, DTC will suppress for corporate bearer coupons the 
automatic payment function that it applies to municipal bearer 
coupons.\5\ By delaying crediting participants' accounts until it has 
received the interest payments from paying agents, DTC will avoid 
having to adjust such accounts due to fluctuations in exchange rates.
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    \5\ When processing municipal bearer coupons through CCS, DTC 
credits participants' accounts on the payable date of the coupons 
regardless of whether it actually has received the interest payment.
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    DTC requires that each shell containing corporate bearer bond 
coupons state the following information on its face: the CUSIP number; 
a description of issue including purpose, series, date of issue, and 
maturity date; the payable date; the quantity of coupons enclosed; the 
dollar value of individual coupons; the total shell value unless 
payable in Canadian dollars; the participant number; and the contact 
number and telephone number of the depositing participant. In addition, 
each shell must be accompanied by a completed deposit ticket, each of 
which can cover up to twenty-five shells, which provides the 
participant number, the shell quantity, the total dollar value, the 
CUSIP number per shell, the coupon quantity per shell, the dollar value 
per shell unless payable in Canadian dollars, and whether the coupons 
are future-due or past-due.
    DTC will verify the number of shells listed on the deposit ticket 
and give the participant a time-stamped copy of the ticket. If the 
number of shells listed on the deposit ticket does not agree with the 
physical number of shells, the entire deposit will be rejected and sent 
back to the participant.

II. Discussion

    Section 17A(b)(3)(F) of the Act \6\ requires that the rules of a 
clearing agency be designed to remove impediments to and to perfect the 
mechanism of a national system for prompt and accurate clearance and 
settlement of securities transactions. The Commission believes that the 
proposed rule change is consistent with DTC's obligations under Section 
17A(b)(3)(F) because it should provide a more efficient method of 
settling the payment of corporate bearer bond coupons and should allow 
DTC participants to centralize the processing of the collection of 
coupons and the receipt of interest payments.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act and the 
rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-97-17) be and hereby is 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-12459 Filed 5-11-98; 8:45 am]
BILLING CODE 8010-01-M