[Federal Register Volume 65, Number 47 (Thursday, March 9, 2000)]
[Notices]
[Pages 12602-12603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-5758]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42482; File No. SR-DTC-00-03]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change Relating to Establishing a 
Depository Link With SIS SegaInterSettle AG

March 1, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 22, 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 interested 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

    DTC proposes to open a free-of-payment omnibus account at SIS 
SegaInterSettle AG (``SIS''), a Swiss depository.

II. Self-Regulatory Organization's 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

    (1) DTC is proposing to establish a depository link with SIS 
through use of a free-of-payment omnibus account at SIS. The central 
purpose of the proposed link between SIS and DTC will be to facilitate 
the efficient processing of cross-border securities transactions 
between DTC participants and SIS participants.
    DTC proposes to open a free-of-payment omnibus account at SIS, 
creating a one-way DTC-SIS interface. The link would permit, but would 
not require, DTC positions in issues that are eligible at both DTC and 
SIS to be held in DTC's account at SIS. The proposed interface will 
enable DTC participants to effect book-entry transactions with SIS 
participants. In addition, it is noteworthy that there are a number of 
major banks and broker-dealers that are participants of both DTC and 
SIS. The link will enable these dual participants to engage in 
efficient inventory positioning by moving their security positions from 
one depository's books to the other in order to meet the dual 
participants' internal needs.\3\
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    \3\ Today, the ``Swiss'' issues that are DTC-eligible consist of 
over five dozen issues of depository receipts, debt, and warrants. 
DTC understands, however, that UBS AG (``UBS'') plans to list UBS 
registered shares on the New York Stock Exchange at the end of March 
2000 and to concurrently have them made eligible in the DTC system.
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    Establishment of the link will allow DTC (and through it, DTC's 
participants) to use SIS's custody, book-entry delivery, and other 
depository services for securities that are eligible in both 
depositories. The link will enable a DTC participant to settle, on a 
free-of-payment basis, a cross-border transaction with an SIS 
counterparty by making a book-entry delivery from DTC's omnibus account 
at SIS to the SIS participant's account at SIS. Conversely, an SIS 
participant would be able to settle, on a free-of-payment basis, a 
cross-border transaction with a DTC participant by making a book-entry 
delivery from the SIS participant's account at SIS to the DTC omnibus 
account at SIS (while identifying the DTC participant to which the 
delivered securities should be credited). The receiving DTC participant 
could then redeliver the securities on either a free-of-payment or 
versus-payment basis to any other DTC participant within DTC.
    By opening a DTC account at SIS, DTC would enable its participants 
to substitute efficient book-entry movements for cumbersome physicial 
movements of securities certificates between SIS and DTC. The link will 
markedly reduce the significant costs and risks associated with 
withdrawing physical certificates from one depository and then 
physically transporting the certificates and ultimately reregistering 
and redepositing them at the other depository.
    SIS will make SIS's depository services (such as income collection, 
maturity presentments, and reorganization processing) available to DTC 
in accordance with SIS procedures on securities held in DTC's account 
at SIS. Whether DTC holds its underlying inventory in Switzerland or in 
the U.S., DTC services to DTC participants will be the same as are 
currently provided.
    (2) The principal benefits that will attend DTC's opening an 
omnibus account at SIS are: (i) the accelerated speed of settlement of 
cross-border transactions in the subject securities; (ii) the 
elimination of most physical movements of the subject securities 
between SIS, transfer agents in the U.S. and Switzerland, and DTC; and 
(iii) a reduction of costs and risks to DTC participants and SIS 
participants as a result of the above advances. DTC's providing these 
benefits to participants is in keeping with DTC's objective of 
providing efficient book-entry clearance and settlement facilities 
while at the same time reducing risk to DTC participants.
    The proposed rule change is consistent with the requirements of 
Section 17A(b)(3)(A) of the Act and the rules and regulations 
thereunder applicable to DTC because the proposed link will reduce 
risks and associated costs to DTC participants and SIS participants.\4\
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    \4\ In establishing an account at a foreign depository such as 
SIS, DTC performs risk analysis of the foreign depository to assess 
whether, in the aggregate, the foreign depository has what DTC 
determines to be an acceptable risk profile. DTC's risk analysis 
includes, among other things, an evaluation of the foreign 
depository in the areas of operational control, financial strength, 
technological capabilities, market reputation and standing, contract 
and legal protection, regulation, audit arrangements, and subcustody 
usage. Once an account is established, DTC conducts ongoing 
monitoring of material events and periodic risk assessments 
evaluating the same areas as when the account was being established.
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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 that is not necessary or appropriate in 
furtherance of the purposes of the Act, in the public interest, and for 
the protection of investors.

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

    Written comments relating to the proposed rule change have not yet 
been solicited or received. 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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i)

[[Page 12603]]

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 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-
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-00-03 and should be 
submitted by March 30, 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. 00-5758 Filed 3-8-00; 8:45 am]
BILLING CODE 8010-01-M