[Federal Register Volume 65, Number 68 (Friday, April 7, 2000)]
[Notices]
[Pages 18400-18401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-8648]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42584; File No. SR-DTC-99-22]


Self-Regulations Organizations; The Depository Trust Company; 
Order Approving a Proposed Rule Change Relating to Revisions to the 
Procedures for Running Call Lotteries for Book Entry Only Securities

March 28, 2000.
    On September 23, 1999, the Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change (File No. SR-DTC-99-22) pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal 
was published in the Federal Register on December 28, 1999.\2\ No 
comment letters were received. For the reasons discussed below, the 
Commission is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 42257 (Dec. 20, 1999), 
64 FR 72709 (Dec. 28, 1999).
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I. Description

    Currently, DTC's call lottery process allocates called book-entry 
only (``BEO'') securities among participants having positions in the 
called securities as of the close of business on the day DTC announces 
the call lottery (``DTC call announcement date''). DTC adopted these 
procedures in March 1998 with the approval of the Commission and the 
endorsement of the Corporate Actions Division of the Securities 
Industry Association (``Corporate Actions Division''). \3\ Prior to 
March 1998, DTC ran its lotteries based on participants' positions as 
of the close of business on the day prior to the publication date 
(``call publication date''). \4\
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    \3\ See Securities Exchange Act Release No. 39658 (Feb. 12, 
1998), 63 FR 8726 (Feb. 20, 1998) [File No. SR-DTC-97-14].
    \4\ For a history of DTC's call lottery process, refer to 
Securities Exchange Act Release Nos. 21523 (Nov. 27, 1984), 49 FR 
47352 [File No. SR-DTC-84-09] (notice of filing and immediate 
effectiveness of proposed rule change); 30552 (Apr. 2, 1992) 57 FR 
12352 [File No. SR-DTC-90-02] (order temporarily approving a 
proposed rule change by DTC relating to the establishment of a 
procedure to recall certain deliveries which have created short 
positions as a result of call lotteries); 35034 (Nov. 30, 1994) 59 
FR 63396 [File Nos. SR-DTC-94-08 and SR-DTC-94-09] (order granting 
temporary approval of proposed rule changes to establish procedures 
to recall certain deliveries which have created short positions as a 
result of call lotteries and rejected deposits); 36651 (Dec. 28, 
1995) 61 FR 429 [File No. SR-DTC-21] (order granting accelerated 
permanent approval of a proposed rule change concerning short 
position reclamation procedures); and 39658 (Feb. 20, 1998) 63 FR 
8726 [File No. SR-DTC-97-14] (order approving proposed rule change 
regarding call lottery procedures for BEO securities).
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    At times, DTC receives notice of a call of BEO securities after the 
redemption date. Under DTC's current BEO call lottery procedures, the 
DTC call announcement date in such a situation will necessarily be 
after the date as of which the called securities are deemed to have 
been redeemed by the issuer. Use of the DTC call announcement date in 
these instances can have an adverse impact on participants and their 
customers who have acquired a security position during the period 
between the redemption date and the DTC call announcement date because 
they have acquired the called security without notice that the security 
has been redeemed. Therefore, for call notices received after the 
redemption date, DTC is amending its BEO securities call lottery 
procedures so that the allocation lotteries will be run using 
participants' positions as of the close of business on the day prior to 
the call publication date. Use of the call publication date to 
determine lottery allocations for calls of BEO securities where DTC 
receives notice of the call after the redemption date is consistent 
with DTC's procedures for lotteries in certificated issues. Allocation 
lotteries for other calls of BEO securities, where notice is received 
on or before the redemption date, will continue to be run using 
participant's positions as of the DTC call announcement date.

II. Discussion

    Section 17A(b)(3)(F) \5\ of the Act requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. The Commission 
believes that DTC's rule change is consistent with DTC's obligations 
under the Act because the new procedures will mitigate the negative 
impact of calls of BEO securities that are processed through DTC's 
lottery process where DTC receives the notification of the call after 
the redemption date.
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    \5\ 15 U.S.C. 78-1(b)(3)(F).

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[[Page 18401]]

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act and the 
rules and regulations thereunder.
    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-99-22) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority. \6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-8648 Filed 4-6-00; 8:45 am]
BILLING CODE 8010-01-M