[Federal Register Volume 64, Number 145 (Thursday, July 29, 1999)]
[Notices]
[Pages 41171-41173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19416]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41643; SR-DTC-99-16]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Amendment to Proposed Rule Change Relating to 
Profile Modification Feature of the Direct Registration System

July 22, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 22, 1999, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') an amendment as described in 
Items, I, II, and III below, which items have been prepared primarily 
by DTC, to its proposed rule change SR-DTC-99-16.\2\ Notice of the 
proposed rule change as originally filed was published in the Federal 
Register on June 23, 1999.\3\ The Commission is publishing this notice 
of the amendment to solicit comments from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ DTC filed SR-DTC-99-16 on June 17, 1999.
    \3\ Securities Exchange Act Release No. 41535 (June 17, 1999), 
64 FR 33539 [File No. SR-DTC-99-16] (notice relating to the profile 
modification feature of the DRS).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The purpose of DTC's amendment is to add a fourth option on how to 
resolve the impasse in the implementation of the Profile Modification 
System (``Profile'') feature of the Direct Registration System 
(``DRS``) and to clarify DTC's description of the Profile.

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.\4\
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    \4\ The Commission has modified the text of the summaries 
prepared by DTC.

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[[Page 41172]]

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of this filing is to amend DTC's proposed rule change 
regarding the implementation of the Profile feature \5\ of DRS. \6\ The 
amendment adds a fourth option to the three options initially proposed 
as ways to resolve the impasse in implementing the Profile feature. The 
amendment also provides technical clarification of DTC's description of 
the Profile feature.
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    \5\ Profile is an electronic communication system through DTC 
which allows participants and DRS Limited Participants to send 
instructions to each other regarding the movement of DRS shares.
    \6\ Securities Exchange Act Release No. 35038 (December 1, 
1994), 59 FR 643652 (concept release relating to the direct 
registration system); Securities Exchange Act Release No. 37931 
(November 7, 1996), 61 FR 58600 (File No. SR-DTC-96-15) (order 
relating to the establishment of DRS).
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    In its proposed rule change, DTC has requested the guidance of the 
Commission staff in resolving the impasse between members of the 
Securities Transfer Association (``STA'') and the Securities Industry 
Association (``SIA'') relating to the implementation of the Profile 
feature of DRS. Because there is no industry consensus on whether DRS 
should continue to operate as it does today or whether use of DRS 
should be restricted in some manner until the Profile feature is 
implemented, DTC initially proposed three options on making additional 
securities issues eligible for inclusion in DRS.\7\
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    \7\ DTC's original three options included:
    (1) if all ``DRS limited participants'' are not able to 
implement Profile by August 31, 1999, no additional securities 
issues would be made eligible after August 31, 1999, for inclusion 
in DRS until sometime in the first quarter of 2000 when all ``DRS 
limited participants'' are able to implement Profile using either 
PTS or CCF;
    (2) securities issues would continue to be made eligible for 
inclusion in DRS in the manner in which they are currently made 
eligible for inclusion; or
    (3) securities would continue to be made eligible for inclusion 
in DRS provided that each ``DRS limited participant'' could be the 
``DRS limited participant'' for no more than two new issues per 
month. If all ``DRS limited participants'' are not able to implement 
Profile by using PTS or CCF by March 31, 2000, no additional 
securities issues would be made eligible for inclusion in DRS until 
such time as all ``DRS limited participants'' are ready to use 
Profile.
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    Since publication of the proposed rule change, several ``DRS 
limited participants'' have indicated that they may be operationally 
able to implement the Profile feature by the proposed deadline of 
August 31, 1999, or shortly thereafter. In addition, the SIA has 
submitted a comment letter supporting the concept of permitting any 
``DRS limited participant'' capable of using the Profile Feature by the 
August 31, 1999, deadline to be able to do so and to allow that ``DRS 
limited participant'' to make additional issues eligible.\8\
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    \8\ Letter from Jerome Clair, Chair, SIA Operations Committee, 
and John Cirrito, Chair, Subcommittee on DRS, to Jonathan Katz, 
Secretary, Commission (July 14, 1999).
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    As a result of these developments, DTC is adding the following 
additional option on making new issues eligible for DRS:
    (4) If a ``DRS limited participant'' is able to implement Profile 
by September 13, 1999, either through DTC's Participant Terminal System 
(``PTS'') or its Computer-to-Computer Facility (``CCF''), that ``DRS 
limited participant'' will be allowed to continue to make securities 
eligible for inclusion in DRS. Any ``DRS limited participant'' unable 
to implement Profile either through PTS or CCF by September 13, 1999, 
will not be allowed to make additional securities eligible for DRS 
until such time as it is able to implement Profile after January 15, 
2000.
    Due to the delay caused by the filing of this amendment, DTC is 
concerned about the shortened amount of time ``DRS limited 
participants'' will have to become operationally prepared to meet the 
August 31, 1999, deadline initially imposed in option (1) of the 
proposed rule change. Therefore, DTC is amending its proposed rule 
change so that the deadline in option (1) is September 13, 1999, and 
not August 31, 1999.\9\
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    \9\ DTC established a September 13, 1999, cutoff for all DTC 
systems changes due to Year 2000 concerns.
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    DTC is also amending the proposed rule change to clarify its 
description of Profile. DTC is adding the following sentence to 
footnote 4 of Exhibit 1 (``completed notice of the proposed rule change 
for publication in the Federal Register'') to its proposed rule change: 
``Profile was developed to incorporate the use of an electronic 
medallion guarantee.'' \10\
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    \10\ See footnote 4 of Securities Exchange Act Release No. 41535 
(June 7, 1999); 64 FR 33539 (File No. SR-DTC-99-16) (notice relating 
to the profile modification feature of the DRS).
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    DTC believes that the proposed rule change is consistent with 
Section 17A(b)(3)(F) \11\ the requirements of the Act and the rules and 
regulations thereunder applicable to DTC because the proposed rule 
change is designed to further the perfection of the mechanism for the 
national system for the prompt and accurate clearance and settlement of 
securities transactions.
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    \11\ 15 U.S.C. 78q-1(b)(3)(F).
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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.

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

    No comments on the amendment to the proposed rule change were 
solicited by DTC. DTC will notify the Commission of any written 
comments it receives.

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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (a) by order approve the proposed rule change, or
    (b) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-
0609. 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. SR-DTC-99-16 and should be 
submitted by August 19, 1999.


[[Page 41173]]


    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-19416 Filed 7-28-99; 8:45 am]
BILLING CODE 8070-01-M