[Federal Register Volume 65, Number 65 (Tuesday, April 4, 2000)]
[Notices]
[Pages 17688-17689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-8196]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42578; File No. SR-DTC-00-02]


Self-Regulatory Organizations; the Depository Trust Company; 
Notice of Filing of Proposed Rule Change Relating to Amendments to the 
Depository Trust Company's Organization Certificate and Rules in Order 
To Issue Preferred Stock

March 27, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 2, 2000, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') and on February 3, 2000, amended 
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

    The proposed rule change would allow DTC to issue $75 million of 
preferred stock to participants and to decrease the amount of required 
deposits in the participants fund by $75 million.

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

    In March 1999, DTC's organization certificate was amended to 
provide for up to $150 million of preferred stock as thereafter 
authorized by the Board of Directors.\3\ The board has now determined 
to increase the capital of DTC by using $75 million of series A 
preferred stock and to reduce the mandatory deposits to the 
participants fund by a like amount. \4\
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    \3\ This Amended Certificate of Organization was the subject of 
a DTC rule filing approved by the Commission (Securities Exchange 
Act Release No. 41529 (June 15, 1999), 64 FR 33333 (June 22, 1999) 
[File No. SR-DTC-99-08].
    \4\ In connection with this proposed rule change, DTC has 
requested that the Commission advise that it will take no action 
with respect to DTC broker-dealer participants treating investments 
in DTC series A preferred stock as allowable assets for purposes of 
Section 15c(3)(1) of the Act. Letter from Leopold S. Rassnick, 
Managing Director and Senior Special Counsel, DTC, to Michael 
Macchiaroli, Associate Director, Division of Market Regulation, 
Commission (February 2, 2000).
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    The issuance of the $75 million of series A preferred stock, the 
corresponding reduction of mandatory participants fund deposits, and 
the transition to the new arrangements will be governed by the 
following documents: \5\
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    \5\ A copy of DTC's proposed rule change and the attached 
exhibits, including the Certificate of Amendment of the Organization 
Certificate, the revised DTC Rules, and the Transition Procedures, 
are available at the Commission's Public Reference Section or 
through DTC.
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    (1) Certificate of Amendment of the Certificate of Incorporation. 
The certificate of amendment sets forth the relative rights (including 
a dividend which will provide an after-tax return comparable to the 
after-tax return on participant fund deposits), preferences, and 
limitations of the series A preferred stock.
    (2) Revised DTC Rules. The revised rules set forth:
    (a) The requirement that participants purchase and own shares of 
series A preferred stock; \6\
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    \6\ Rule 4, Section 2.
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    (b) The amount of series A preferred stock that participants are 
required to purchase and own, the manner in which that amount is to be 
periodically adjusted, the price at which shares of series A preferred 
stock are to be transferred among participants, the method and timing 
of payment for shares of series A preferred stock, and certain 
limitations on the transfer of shares of series A preferred stock; \7\
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    \7\ Id.
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    (c) The right of DTC, acting as agent and attorney-in-fact for its 
participants,

[[Page 17689]]

to pledge their shares of series A preferred stock to its end-of-day 
lenders; \8\
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    \8\ Rule 4, Section 2(f).
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    (d) The right of DTC, acting as agent and attorney-in-fact for its 
participants, to sell their shares of series A preferred stock to other 
participants (which have a corresponding obligation to purchase such 
shares) and to apply the proceeds to the participant's obligations to 
DTC; \9\
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    \9\ Rule 4, Section 2, and Rule (B).
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    (e) Various changes in defined terms to: (i) Describe the series A 
preferred stock and the required investment of participants in series A 
preferred stock, (ii) distinguish, when necessary, between the series A 
preferred stock and the required investment of participants in series A 
preferred stock (on the one hand) and the participants fund and the 
required deposit of participants to the participants fund (on the other 
hand) and (iii) refer collectively, when appropriate, to the series A 
preferred stock and the required investment of participants in series A 
preferred stock and the participants fund and the required deposit of 
participants to the participants fund; \10\
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    \10\ Rule 1.
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    (f) The structure under which DTC, acting as agent and attorney-in-
fact for a party that has ceased to be a participant, shall sell all of 
the shares of series A preferred stock of the former participant to 
current participants (who shall be required to purchase such shares pro 
rata to their required preferred stock investments at the time of such 
purchase) and shall add the proceeds thereof to the actual participants 
fund deposit of the former participant for disposition in accordance 
with Rule 4, Section 1(h) (which provides for the return of such actual 
participants fund deposit to a party ceasing to be a participant).\11\
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    \11\ Rule 4, Section 2(h).
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    (g) Certain other conforming and minor stylistic changes.
    (3) Transition Procedure. The transition procedure sets forth the 
time and manner in which, without any action required on the part of 
participants (other than the consent deemed to be given to DTC by 
virtue of their receipt of all necessary information and their 
continued use of the services and facilities of DTC), the required 
deposits of existing participants to the participants fund will be 
reduced in the aggregate amount of $75 million and such participants 
will purchase from DTC a corresponding amount of the series A preferred 
stock.
    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 rule change will not 
affect the safeguarding of securities and funds in DTC's custody or 
control for which it is responsible.

(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 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, NW, Washington, DC 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, NW, 
Washington, DC 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-00-02 and should be submitted by April 
25, 2000.

    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. 00-8196 Filed 4-3-00; 8:45 am]
BILLING CODE 8010-01-M