[Federal Register Volume 65, Number 24 (Friday, February 4, 2000)]
[Notices]
[Pages 5714-5715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-2487]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42366; File No. SR-DTC-00-01]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to an Interpretation of an Existing Rule Pertaining to the 
Direct Registration System

January 28, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 20, 2000, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') 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 on the proposed rule change from interest parties.
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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 provides an interpretation of DTC's rule 
relating to the Profile Modification System feature of the Direct 
Registration System facility.

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 these 
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 provide an 
interpretation with respect to the meaning of DTC's current rule 
relating to the administration of the Direct Registration System 
(``DRS'') facility and the Profile Modification System (``Profile''), a 
specific feature of the DRS facility.\3\ Under DTC's rule, only those 
DRS limited participants \4\ who ``implement Profile'' are allowed to 
make additional securities eligible for inclusion in DRS.\5\ With this 
filing, DTC is interpreting the phrase ``implements Profile'' to be 
satisfied when a DRS limited participant enters into a written 
agreement with DTC stating that the DRS limited participant will 
continue to use DRS, including Profile, when Profile becomes 
operational. DTC will make Profile operational using either an 
electronic medallion program \6\ or a screen-based indemnity.\7\
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    \3\ For a description of the DRS facility administered by DTC, 
see Securities Exchange Act Release No. 37931 (November 7, 1996), 61 
FR 58600 (November 15, 1996) [File No. SR-DTC-96-15] (order relating 
to the establishment of DRS); Securities Exchange Act Release No. 
41862 (September 10, 1999), 64 FR 51162 (September 21, 1999) [file 
No. SR-DTC-99-16] (order relating to implementation of the Profile 
Modification System).
    \4\ A DRS Limited Participant is a transfer agent who is 
permitted under DTC rules to facilitate DRS transactions. Securities 
Exchange Act Release No. 37931 (November 7, 1996), 61 FR 58600 
(November 15, 1996) [File No. SR-DTC-96-15].
    \5\ Id.
    \6\ Representatives of the New York Stock Exchange, which 
operates the Medallion Stamp Program (a signature guarantee 
program), the Securities Transfer Association, the Securities 
Industry Association, and issuers have been negotiating in order to 
implement an electronic medallion program. Such an electronic 
medallion program would operate under a mutually agreed-upon 
indemnification agreement that would address the risks undertaken by 
the respective parties participating in transferring customer 
positions in DRS.
    \7\ DTC will be to submitting to the Commission in the near 
future a proposed rule change to implement Profile.
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    In the case of a screen-based indemnity, before an instruction 
relating to a customer's DRS position is permitted to be sent via DRS 
to the DRS limited participant, a DTC participant would have to agree 
to a screen-based indemnity in substantially the following form:
    (1) Participant represents that it has customer authority for the 
request appearing on the following screen and that all information 
shown is accurate and complete, except that, with respect to the 
taxpayer identification number included in such information, to the 
best knowledge of participant, such information is accurate and 
complete; and
    (2) Participant indemnifies the issuer and its transfer agent 
against any breach of such representations in connection with the 
transaction that is the subject of such request.
    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \8\

[[Page 5715]]

and the rules and regulations thereunder applicable to DTC because it 
clarifies DTC's interpretation of its rule, thereby eliminating 
confusion in the industry relating to the implementation of the Profile 
feature and providing for more expeditious implementation of Profile. 
The proposed rule change will be implemented consistently with the 
safeguarding of securities and funds in DTC's custody or control or for 
which it is responsible.
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    \8\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC perceives no impact on competition by reason of the proposed 
rule change.

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

    The proposed rule change has been developed through discussions 
with several DTC participants and DRS limited participants. Written 
comments relating to the proposed rule change have not yet been 
solicited or received on the proposed rule change. DTC will notify the 
Commission of any written comments received by DTC.

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)(i) \9\ of the Act and Rule 19b-4(f)(1) \10\ promulgated 
thereunder because the proposal interprets the meaning of an existing 
rule. At any time within sixty days of the filing of such proposed 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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    \9\ 15 U.S.C. 78s(b)(3)(A)(i).
    \10\ 17 CFR 240.19b-4(f)(1).
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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-
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-00-01 and should be 
submitted by February 25, 2000.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-2487 Filed 2-23-00; 8:45 am]
BILLING CODE 8010-01-M