[Federal Register Volume 64, Number 148 (Tuesday, August 3, 1999)]
[Notices]
[Pages 42157-42158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19877]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41663; File No. SR-DTC-99-11]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of a Proposed Rule Change Relating to Liability With 
Respect to Affiliated Entities

July 27, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ notice is hereby given that on May 12, 1999, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') a 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

    Under the proposed rule change, DTC will amend its rules to limit 
its liability with respect to affiliated entities and to provide for 
increased participants fund deposits in the event of a wind down of 
DTC's operations. Specifically, DTC will amend its rules to provide 
that notwithstanding any affiliation between DTC and any other entity, 
including any clearing agency, except as otherwise expressly provided 
by written

[[Page 42158]]

agreement DTC shall not be liable for any obligations of such other 
entity, the participants fund or other assets of DTC shall not be 
available to such other entity, such other entity shall not be liable 
for any obligations of DTC, and any assets of such other entity shall 
not be available to DTC. In addition, DTC will amend its rules to 
provide that it may increase required deposits to its participants fund 
to cover costs associated with a voluntary liquidation of DTC.

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 Boards of Directors of DTC and the National Securities Clearing 
Corporation (``NSCC'') have determined to proceed with a plan for the 
integration over time of DTC and NSCC. As an initial step in this plan, 
DTC and NSCC have elected uniform Boards of Directors. The next step 
proposed in the plan is to establish a holding company with DTC and 
NSCC as operating subsidiaries.
    A prime consideration in the DTC/NSCC integration plan is that DTC 
and NSCC each will continue to be insulated from the risks and 
obligations of the other. Under the proposed rule change, DTC will add 
new Section 7 to its Rule 2 to disclaim liability for any obligations 
of NSCC and to clarify that NSCC will not be liable for the obligations 
of DTC. NSCC has proposed similar revisions to its rules.\3\
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    \3\ File No. SR-NSCC-99-07.
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    As a separate matter, DTC's rules currently provide that in the 
unlikely event DTC were to cease providing some or all of its services, 
DTC's participants fund would be available to cover any DTC wind down 
costs not otherwise defrayed by service fees or other available 
resources. The proposed rule change will amend Section 1 of DTC's Rule 
4 to make clear that the required fund deposits of participants would 
be increased if necessary to cover such costs.
    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A(b)(2) of the Act \4\ and the rules and 
regulations thereunder applicable to DTC. The proposed rule change will 
not affect the safeguarding of securities and funds in DTC's custody or 
control or for which it is responsible.
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    \4\ 15 U.S.C. 78q-1(b)(2).
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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 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

    Written comments from DTC participants have not been solicited or 
received on the proposed rule change.

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 DTC consents, the Commission will:
    (A) By order approve such 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. 20549-609. 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-99-11 and should be 
submitted by August 24, 1999.
    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. 99-19877 Filed 8-2-99; 8:45 am]
BILLING CODE 8010-01-M