[Federal Register Volume 63, Number 135 (Wednesday, July 15, 1998)]
[Notices]
[Pages 38221-38222]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18764]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40179; File Nos. SR-DTC-98-09, SR-NSCC-98-05]


Self-Regulatory Organizations; The Depository Trust Company; 
National Securities Clearing Corporation; Order Approving a Proposed 
Rule Change Relating to Direct Clearing Services and New York Window 
Services

July 8, 1998.
    On May 13, 1998, The Depository Trust Company (``DTC'') and the 
National Securities Clearing Corporation (``NSCC'') filed with the 
Securities and Exchange Commission (``Commission'') proposed rule 
changes (File Nos. SR-DTC-98-09 and SR-NSCC-98-05) pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'').\1\ Notice of 
the proposals was published in the Federal Register on June 4, 1998.\2\ 
No comment letters were received. For the reasons discussed below, the 
Commission is approving the proposed rule changes.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 40045 (May 29, 1998), 63 
FR 30543.
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I. Description

    Under the rule changes, NSCC will discontinue its Direct Clearing 
Services (``Direct Clearing'') and New York Window Services 
(``Window''). DTC will offer its participants most of the services 
currently offered by NSCC through Direct Clearing and the Window 
through a new service called the New York Window Services.
    Direct Clearing is a physical securities processing service which 
NSCC provides to its participants that do not have offices in New York 
City. The principal services of Direct Clearing include (i) processing 
over-the-window receives and deliveries, (ii) processing transfers of 
physical securities certificates, and (iii) processing deliveries to 
designated agents in connection with reorganizations and other 
corporate actions. In the course of providing these and other Direct 
Clearing services, NSCC may have custody of participants' physical 
securities certificates including overnight custody for one or more 
days.\3\ The principal services of NSCC's Window are similar to those 
of Direct Clearing, but they initially were provided to NSCC 
participants located in New York City. NSCC has decided to discontinue 
providing Direct Clearing and the Window in order to focus its 
resources on its core businesses.
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    \3\ For a more complete description of Direct Clearing, refer to 
Securities Exchange Act Release No. 32221 (April 26, 1993) 58 FR 
26570 [File No. SR-NSCC-93-03]
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    Under the rule changes, DTC is adopting new procedures for the 
operation of its New York Window Services. DTC's procedures for its New 
York Window Services are substantially the same as NSCC's Rule 31 \4\ 
except that DTC's new procedures do not include provisions similar to 
section 4 of NSCC Rule 31, which relates to money settlement through 
the Window. Currently, it is anticipated that NSCC will discontinue 
providing Direct Clearing and the Window and that DTC

[[Page 38222]]

will begin offering its New York Window Services on July 13, 1998.\5\
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    \4\ The current version of NSCC Rule 31 was approved by the 
Commission in 1996. Securities Exchange Act Release No. 37631 
(September 3, 1996), 61 FR 47534 [File No. SR-NSCC-96-08].
    \5\ Conversation between Jeffrey T. Waddle, Associate Counsel, 
DTC, and Theodore R. Lazo, Attorney-Adviser, Division of Market 
Regulation, Commission (June 17, 1998).
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II. Discussion

    Section 17A(b)(3)(F) of the Act \6\ requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions and to assure the 
safeguarding of securities and funds which are in the custody or 
control of the clearing agency or for which it is responsible. The 
Commission believes that the proposed rule changes are consistent with 
DTC's and NSCC's obligations under Section 17A(b)(3)(F). The Commission 
believes that the arrangements between DTC and NSCC should ensure that 
securities transactions that are currently processed through Direct 
Clearing and the Window will be processed efficiently through DTC's New 
York Window Services. In addition, the Commission believes that DTC's 
procedures for its New York Window services, which are similar to those 
the Commission previously approved for NSCC, should assure the 
safeguarding of securities and funds which are in its custody or 
control or for which it is responsible.
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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 
proposals are 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 changes (File Nos. SR-DTC-98-09 and SR-NSCC-98-
05) be and hereby are 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. 98-18764 Filed 7-14-98; 8:45 am]
BILLING CODE 8010-01-M