[Federal Register Volume 64, Number 107 (Friday, June 4, 1999)]
[Notices]
[Pages 30077-30078]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14211]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41466; File No. SR-DTC-99-12]


Self-Regulatory Organizations; The Depository Trust Company; 
Filing and Order Granting Accelerated, Temporary Approval of a Proposed 
Rule Change Relating to the Admission of Non-U.S. Entities as Direct 
Depository Participants

May 28, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 19, 1999, 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, 
temporary approval of the proposed rule change through May 31, 2000.
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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 purpose of the proposed rule change is to extend the 
Commission's temporary approval of DTC's admission criteria for 
entities that are organized in a country other than the United States 
(``non-U.S. entities'').

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

    The purpose of the proposed rule change is to extend the 
Commission's temporary approval of DTC's admission criteria for non-
U.S. entities as direct DTC participants. The Commission originally 
granted temporary approval on May 9, 1997.\3\ The admission criteria 
permit well-qualified, non-U.S. entities to obtain direct access to 
DTC's services without requiring the non-U.S. entities to obtain 
financial guarantees from another DTC participant. According to DTC, 
DTC established the program for admission of non-U.S. entities in 
response to requests it received from certain participants. These 
participants requested that DTC consider changes in its admissions 
policy that would allow non-U.S. affiliates to become direct 
participants without having to obtain financial guarantees from a DTC 
participant that was a U.S. entity.
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    \3\ For a complete discussion of the admission criteria, refer 
to Securities Exchange Act Release No, 38600, International Release 
No. 1078 (May 9, 1997), 62 FR 27086-01 [File No. SR-DTC-96-13] 
(order temporarily approving a proposed rule change relating to the 
admission of non-U.S. entities as direct depository participants).
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    As of May 10, 1999, one non-U.S. entity has been approved for DTC 
membership under the standards for admission of non-U.S. entities. DTC 
is currently reviewing an application from another non-U.S. entity and 
has received numerous inquiries from other non-U.S. entities. In 1999, 
DTC expects

[[Page 30078]]

to admit, several non-U.S. entities. DTC is seeking an extension of the 
temporary approval so it can complete the admission of these non-U.S. 
entities and gain further experience with the admission standards of 
non-U.S. entities and the unique risks posed by the activities of non-
U.S. entities as direct DTC participants.
    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A(b)(3)(F) of the Act and the rules and 
regulations promulgated because the admission criteria takes into 
account the unique risks to DTC raised by the admission of non-U.S. 
entities while not unfairly discriminating against non-U.S. entities 
seeking admission as participants.

(b) Self-Regulatory Organization's Statement on Burden on Competition

    While DTC acknowledges that the proposed additional admissions 
criteria applicable to non-U.S. entities may impose some additional 
burden, for the reasons stated above, we believe that any such burden 
is necessary and 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

    DTC has not sought or received comments on the proposed rule 
change.

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

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed 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.\4\ The Commission finds that the rule 
change is consistent with this obligation because DTC's admission 
criteria has been designed in a manner which takes into account 
jurisdiction differences in regulatory structure and in business 
operations of non-U.S. entities with respect to risk control and 
management. Furthermore, DTC admission criteria should bind non-U.S. 
entities to DTC's rules and procedures in a manner similar to domestic 
participants and should lesson or eliminate the negative effects that 
jurisdictional issues could have on DTC's exercise of its rights 
against non-U.S. entities. Therefore, the Commission finds that the 
admissions criteria will assist DTC in assuring the safeguarding of 
securities and funds which are in its custody, control, or for which it 
is responsible.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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    DTC has requested that the Commission find good cause for approving 
the proposed rule change prior to the thirtieth day after publication 
of the notice of the filing. The Commission finds good cause for 
approving the proposed rule change prior to the thirtieth day after 
publication of the notice of the filing because accelerated approval 
will permit DTC to continue to use and study the effectiveness of its 
admission criteria without interruption.

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 submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Copies of the submissions, 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 Room, 450 Fifth Street, N.W., Washington, 
D.C. 20549. Copies of such filings will also be available for 
inspection and copying at the principal office of DTC. All submissions 
should refer to the file number SR-DTC-99-12 and should be submitted by 
June 25, 1999.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-99-12), be, and hereby 
is, temporarily approved on an accelerated basis through May 31, 2000.
    For the Commission by the Division of Market Regulation pursuant to 
delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-14211 Filed 6-3-99; 8:45 am]
BILLING CODE 8010-01-M