[Federal Register Volume 63, Number 240 (Tuesday, December 15, 1998)]
[Notices]
[Pages 69127-69128]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33133]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 40762, File No. SR-DTC-98-20]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Institutional Delivery System

December 8, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 1, 1998, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') and on November 12, 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 modifies the Advice of Correction/
Cancellation function in DTC's Institutional Delivery system.

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

    Current, DTC's Institutional Delivery (``ID'') system allows a 
broker-dealer to submit requests to cancel incorrect confirmations 
through its Advice of Correction/Cancellation function (``AOCC'').\3\ 
In cases where the confirmation is not yet affirmed, DTC eliminates the 
confirmation from the ID system processing and distributes a 
cancellation message to all parties receiving the original 
confirmation. In cases where the confirmation has been affirmed, DTC 
does not immediately eliminate the confirmation from the ID system but 
instead distributes an ``attempt to cancel'' message on behalf of the 
broker to alert parties that the trade should not be settled. If no 
action is taken by S+21, the system automatically eliminates the 
confirmation.
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    \3\ The ID system's AOCC function is one of three electronic 
mail features that enables an institution or its agent which has 
received a confirmation through the ID system to notify the broker 
of the reason(s) why the institution disagrees with the 
confirmation. This communication allows the broker-dealer to resolve 
the discrepancies between its records of the trade and the 
institution's records. See Securities Exchange Act Release No. 33466 
(January 1994), 59 FR 3139 [File No. SR-DTC-93-07] (order approving 
rule changes relating to enhancements to DTC's ID system); 36050 
(August 2, 1995), 60 FR 41139, [File No. SR-DTC-95-10] (order 
approving rule changes relating to modifications of the AOCC feature 
and Authorization/Exception processing in DTC's ID system).
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    The purpose of the proposed rule change is to modify DTC's AOCC 
function by allowing the affirming party to reverse an affirmed 
confirmation so that the confirmation would not be eligible for any 
further action other than an outright cancellation by the broker-
dealer. By permitting a reversal, confirmations will be eliminated in a 
more timely manner thereby fostering greater certainty of trade 
information available on the ID system. The reversal action, which may 
be the response to an attempt to cancel by the broker-dealer or may be 
initiated by the affirming party, will be permitted up to 10:00 a.m. on 
the business day before the settlement date (S-1). Once a reversal 
action is executed, the trade will be deleted from the ID system, and 
subsequent reaffirmation of the reversed ID confirmation will not be 
permitted. In keeping with existing AOCC function procedures, the ID 
system will provide notification to all parties upon the systems's 
receipt of an AOCC that authorizes a reversal of an affirmed 
confirmation.
    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \4\ and the rules and 
regulations thereunder because it promotes efficiencies in the 
clearance and settlement of transactions in securities by facilitating 
the cancellation of

[[Page 69128]]

affirmed confirmations which should not be settled and allows the 
records of trades to reflect the transactions more accurately.
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    \4\ 15 U.S.C. 78q-1
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(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.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received from Members, Participants or Others

    No comments on the proposed rule change were solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) \5\ of the Act and pursuant to Rule 19b-4(e)(4) \6\ 
promulgated thereunder because the proposal effects a change in an 
existing service of a registered clearing agency that does not 
adversely affect the safeguarding of securities or funds in the custody 
or control of the clearing agency or for which it is responsible and 
does not significantly affect the respective rights or obligations of 
DTC or persons using the service. At any time within sixty days of the 
filing of such rule change, the Commission may summarily abrogate such 
rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \5\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \6\ 17 CFR 240.19b-4(e)(4).
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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-98-20 and should be submitted by 
January 3, 1999.

    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. 98-33133 Filed 12-14-98; 8:45 am]
BILLING CODE 8010-01-M