[Federal Register Volume 63, Number 207 (Tuesday, October 27, 1998)]
[Page 57342]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28639]



[Release No. 34-40579; File No. SR-DTC-98-7]

Self-Regulatory Organizations; The Depository Trust Company; 
Order Granting Approval 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

October 20, 1998.
    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) 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 July 1, 1998.\2\ 
No comment letters were received. For the reasons discussed below, the 
Commission is approving the proposed rule change.

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 40119 (June 24, 1998), 
63 FR 36008.

I. Description

    The rule change provides a mechanism for issuing and paying agents 
(``IPAs'') and dealers to communicate securities information, 
specifically Pre-Issuance Messaging (``PIM'') instructions, related to 
the issuance of money market instruments (``MMI''). Although the PIM 
service is designed to accommodate all types of MMIs, initially the PIM 
service will be utilized only for commercial paper (``CP''). 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.
    Under the rule change, IPAs and dealers can send PIM instructions 
to each other by using DTC as a conduit or central switch for the 
messages. PIM instructions will be sent electronically to DTC. DTC will 
not perform any processing on the instructions but will instead 
automatically route them to the recipient indicated in the sender's 
    PIM employs several levels of system security in addition to 
allowing IPAs and dealers to utilize their own passeword 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.

II. Discussion

    Section 17A(b)(3)(F) of the Act \3\ requires that the rules of a 
clearing agency be designed to perfect the mechanism of a national 
system for the prompt and accurate clearance and settlement of 
securities transactions. The Commission believes that PIM should enable 
dealers and IPAs to better communicate issuance instructions to one 
another prior to the IPAs' issuing CP by book entry through DTC or 
through physical certificates outside DTC. As a result, the rule change 
should help perfect the national clearance and settlement system. 
Therefore, the Commission believes that DTC's proposed rule change is 
consistent with its statutory obligation under Section 17A(b)(3)(F) of 
the Act.

    \3\ 15 U.S.C. 78q-1(b)(3)(F).

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular with Section 17A of the Act and the rules and regulations 
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-98-7) be and hereby is 

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\

    \4\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-28639 Filed 10-26-98; 8:45 am]