[Federal Register Volume 64, Number 57 (Thursday, March 25, 1999)]
[Notices]
[Pages 14478-14479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7281]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41191; File No. SR-DTC-98-26]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change Relating to the Establishment of an Interface With National 
Securities Clearing Corporation Regarding the Automated Customer 
Account Transfer Service

March 19, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 18, 1998, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I and II below, which items have been prepared 
primarily by DTC. The Commission is publishing this notice and order to 
solicit comments from interested persons and to grant accelerated 
approval of 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

    Under the proposed rule change, DTC will establish an interface 
with National Securities Clearing Corporation (``NSCC'') to allow 
certain DTC participants that are not NSCC members to participate in 
NSCC's Automated Customer Account Transfer Service (``ACATS'')

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

    Under the proposed rule change, DTC will give its participants that 
are not direct members of NSCC access to NSCC's ACATS via DTC's 
Participant Terminal System, NSCC's PC Web Direct service, or both and 
later through DTC's computer to computer facility. Through ACATS, DTC 
participants will be able to transfer customer accounts in an automated 
manner with standardized input and output.\3\
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    \3\ The program will begin as a pilot involving approximately 16 
DTC participants that are not NSCC members. Thereafter, if the 
program is successful, it will be made generally available to all 
DTC participants.
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    Currently, ACATS enables NSCC members to effect automated transfers 
of customer accounts among themselves.\4\ On November 10, 1998, the 
Commission approved a proposed rule change by NSCC to expand the types 
of eligible ACATS participants and kinds of accounts that may be 
transferred.\5\ NSCC's rule change permits a qualified securities 
depository (``QSD'') such as DTC to effect customer account transfers 
in ACATS on behalf of its participants.\6\
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    \4\ ACATS complements New York Stock Exchange (``NYSE'') and 
National Association of Securities Dealers (``NASD'') rules which 
require NYSE and NASD members to use automated, clearing agency 
customer account transfer services and to effect customer account 
transfers within specified time frames.
    \5\ Securities Exchange Act Release No. 40657 (November 10, 
1998), 63 FR 63952 [File No. SR-NSCC-98-06].
    \6\ QSD is defined in NSCC Rule 1 as a registered clearing 
agency which has entered into an agreement with NSCC pursuant to 
which it will act as a securities depository for NSCC and effect 
book-entry transfers of securities to and by NSCC with respect to 
NSCC's CNS system.
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    As recently revised, ACATS will allow ACATS participants to 
transfer an account from one institution to another in a standardized, 
book-entry environment utilizing NSCC's links to DTC, The Option 
Clearing Corporation, Government Securities Clearing Corporation, the 
MBS Division of DTC, and approximately 120 mutual fund families through 
the ACATS-Fund/SERV link.
    DTC will enter into an agreement with NSCC which will permit ACATS 
to be sued for the transfer of accounts between two DTC participants or 
between a DTC participant and an NSCC member. DTC will also enter into 
an agreement with each DTC participant that wants to use the ACATS 
interface.\7\
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    \7\ A draft agreement between NSCC and DTC and a draft agreement 
for DTC participants that want to use the ACATS interface are 
attached as exhibits to DTC's filing, which is available for 
inspection and copying at the Commission's Public Reference Room and 
through DTC.
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    Transactions under the arrangement will be effected under DTC's 
present rules. Transfers between DTC participants (e.g., bank-to-bank 
transfers) will be free. Transfers between a DTC participant and an 
NSCC member (e.g., bank-to-broker transfers) and vice versa will also 
be free. Transfers of account cash balances associated with account 
transfers will be part of end of day net settlement.
    DTC believes that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to DTC since the proposed rule change will increase 
efficiency in processing participant transactions.

(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.

[[Page 14479]]

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

    The ``ACATS for Banks'' proposal appeared in the March 1996 program 
agenda advisory committee agenda, which is a DTC communication 
mechanism to present new programs and other issues to DTC customers. 
The results of comments by DTC participants appeared in the August 1996 
program agenda proposals report. Ninety-eight participants responded to 
the proposal, and more than 70% of those that approved of the proposal 
through that, of the several possible means of facilitating these 
account transfers, a link to the NSCC ACATS system was the most 
desirable approach. Since NSCC had already committed to a wholesale 
redesign of ACATs, bringing banks into the system was made an integral 
part of the redesign.
    As part of the ACATS redesign, NSCC set up several focus groups, 
including a group of banks and representatives of bank industry groups, 
to discuss improvements to ACATS and DTC's role in account transfers. 
This led to a bank advisory group and, thereafter, to joint NSCC/DTC 
educational awareness seminars held in various cities around the 
country during February and March of 1998. All DTC participants were 
invited, and 16 DTC participants signed up to participate in a pilot. 
To date, 62 DTC participants have expressed an interest in ACATS.

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

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder and particularly with the requirements of Section 17A(b) (3) 
(F).\8\ Section 17A(b)(3)(1)(F) requires that the rules of a clearing 
agency be designed to promote the 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) of the Act. ACATS provides a more efficient method for the 
transfer of customer assets. The rule change will make the benefits of 
ACATS available to a number of DTC participants that presently do not 
have access to ACATS.
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    \8\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
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    DTC has requested that the Commission approve the proposed rule 
change subsequent to the thirtieth day after publication of the notice 
of the filing. The Commission finds good cause for approving the 
proposed rule change rule change prior to the thirtieth day after the 
publication of notice because such approval will allow DTC's interface 
the ACATS to become operative with NSCC's implementation of the newly 
designed ACATS system. The Commission points out that this proposed 
rule change was discussed in NSCC's rule filing regarding the new ACATs 
system to which no written comments were received.\9\
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    \9\ Securities Exchange Act Release Nos. 40487 (September 28, 
1998), 63 FR 53479 and 40657 (November 10, 1998), 63 FR 63952.
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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, N.W., Washington, D.C. 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. 552, will be available for inspection and copying in the 
Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 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. SSR-DTC-98-26 and should be 
submitted by April 15, 1999.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-98-26) be and hereby is 
approved on an accelerated basis.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-7281 Filed 3-24-99; 8:45 am]
BILLING CODE 8010-01-M