[Federal Register Volume 65, Number 68 (Friday, April 7, 2000)]
[Notices]
[Pages 18399-18400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-8492]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42597; File No. SR-DTC-99-26]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to an Enhancement of Custody Reorganization and Redemption 
Services

March 30, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 27, 1999, 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

    The proposed rule change would implement the short-term redemption 
service as an ancillary service of the custody reorganization and 
redemption service.

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 implement the short-
term redemption service. The short-term redemption service will enhance 
the custody reorganization and redemption services, which are a part of 
DTC's custody service. DTC believes that the proposed rule change will 
provide its participants with additional flexibility in their use of 
the custody reorganization and redemption services.\3\
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    \3\ Securities Exchange Act Release No. 37314 (June 21, 1996), 
61 FR 31989.
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    The short-term redemption service will be available for the 
following instruments as they are handled within the custody 
reorganization and redemption services: certificated bankers 
acceptances, municipal variable-rate demand obligations issued in 
commercial paper mode, institutional certificates of deposit, and other 
instruments held in custody which must be presented to the paying agent 
on, but not before, the scheduled payable date with the agent making 
payment of principal or income proceeds later that same afternoon, 
which is too late for processing through DTC's settlement system. Some 
instruments may also have certificates with different payable dates 
identified by the same CUSIP number.
    Under the short-term redemption service, the payable date and other 
relevant payment details are captured at the certificate level by DTC 
when the eligible instruments are deposited into custody. A short-term 
redemption payment projection report detailing instruments with payable 
dates within the next five business days is produced daily and 
forwarded to the participant. It is the participant's responsibility to 
verify the completeness and accuracy of this report and to immediately 
notify DTC of any discrepancies (e.g., a security payable within the 
next five days is not shown on the report or an incorrect paying agent 
name or address is shown on the report). Securities shown on the 
projection report are automatically routed by DTC to the short-term 
redemption prep box. DTC then arranges for the securities to be 
delivered to the paying agent on the payable date. The securities are 
accompanied by a letter of transmittal instructing the agent to wire 
the proceeds directly to the bank account designated by the participant 
for this purpose. It is the participant's responsibility to follow-up 
with the agent to ensure timely payment and reconcile any payment 
discrepancies.
    The fee per item for this enhanced service is $32.25, which fee is 
an aggregate of several custody service fees previously filed with 
DTC's 1999 fee schedule.\4\
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    \4\ Securities Exchange Act Release No. 41508 (June 17, 1999), 
64 FR 32574.
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    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \5\ and the rules and 
regulations thereunder because the proposal will give participants 
greater flexibility in use of the custody reorganization and redemption 
services. 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 since the operation of the 
custody reorganization and redemption services, as modified by the 
proposed rule charge, will be similar to the current operation of the 
function.
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    \5\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC perceives no adverse 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 participants. Written comments

[[Page 18400]]

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

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)(iii) \6\ of the Act and Rule 19b-4(f)(4) \7\ promulgated 
thereunder because the proposal effects a change in an existing service 
of DTC that does not adversely affect the safeguarding of securities or 
funds in the custody or control of DTC and that does not significantly 
affect the respective rights or obligations of DTC or persons using the 
service. 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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    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 240.19b-4(f)(4).
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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, 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-99-26 and should be submitted by April 
28, 2000.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-8492 Filed 4-6-00; 8:45 am]
BILLING CODE 8010-01-M