[Federal Register Volume 63, Number 126 (Wednesday, July 1, 1998)]
[Notices]
[Pages 36008-36009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17435]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40119; File No. SR-DTC-98-7]
June 24, 1998.


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change Adding a New Service Providing 
Pre-Issuance Messaging of Money Market Instruments Trade Details to 
Issuing and Paying Agents and Dealers

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 22, 1998. The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-DTC-98-7) 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 approve DTC's providing Pre-Issuance 
Messaging (``PIM'') of money market instruments (``MMIs'') trade 
details to issuing and paying agents (``IPAs'') and dealers.

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's proposed rule change seeks to provide a less expensive and 
more efficient mechanism for IPAs and dealers to communicate securities 
information, specifically PIM instructions, related to the issuance of 
MMI. Although the PIM service is being designed to accommodate all 
types of MMIs, it is anticipated that initially the PIM service will be 
utilized only for commercial paper (``CP'').
    According to DTC, the service will enable dealers and IPAs to 
communicate issuance instructions to one another prior to the IPAs' 
issuing CP by book-entry through DTC or through physical certificates 
outside DTC.
Background
    DTC begin operation of its CP program in October 1990 and handles 
almost all CP issuances done in the United States today. The CP program 
is designed to allow for the electronic issuance done in the United 
States today. The CP program is designed for the electronic issuance of 
CP in book-entry-only form. The transmission of issuance instructions 
for IPAs to DTC for dealer-placed CP is central to the CP program. 
Typically, between four and five messages are transmitted among IPAs 
and dealers prior to each issuance of CP. Currently, these messages are 
transmitted via dedicated links between a dealer and individual IPA. 
Thus, dealers interacting with more than one IPA must create and 
maintain multiple communications links. Typically, dealers maintain 
seven or more separate links with IPAs.
    As a result of the recommendation by dealer participant that DTC 
investigate offering a pre-issuance messaging service, a working group 
of dealers and IPA was formed in June of 1996 under the auspices of the 
The Bond Market Association's Money Market Task Force. DTC has worked 
closely with the Task Force on the development of the CP program and 
again drew on its expertise for the PIM project.
Proposed Rule Change
    Under the proposed rule change, IPAs and dealers could send PIM 
instructions to each other by using DTC as a conduit or central switch 
for the messages. PIM instructions would be sent electronically to DTC. 
DTC would not perform any processing on the instructions but would 
instead automatically route them to the recipient indicated in the 
sender's instructions.
    PIM employs several levels of system security in addition to 
allowing IPAs and dealers to utilize their own password security per 
message if they wish. As each message sent requires an acknowledgment 
from the receiving party, it is unlikely that messages will be lost. 
Should a message be undeliverable for some reason, DTC will issue a 
notice to the message originator indicating the message could not be 
delivered. The originator will then have to reissue a new message. DTC 
will charge the sending party $.04 per message. There will be no charge 
to the message receiver. Each user of the PIM Service will enter into a 
PIM agreement with DTC.
    DTC believes that the proposed rule change is consistent with the 
requirements of Sections 17A(b)(3)(A) of the Act and the rules and 
regulations thereunder because it encourages an efficient means of 
communicating among dealers and IPAs in connection with the issuance of 
MMIs.

(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

    Written comments on the proposed rule change 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

    Within thirty-five days of the date of publication of this notice 
in the Fedeal 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 approved such proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

[[Page 36009]]

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, 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. Sec. 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-98-7 and should be submitted by July 
22, 1998.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\3\
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    \3\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-17435 Filed 6-30-98; 8:45 am]
BILLING CODE 8010-01-M