[Federal Register Volume 65, Number 98 (Friday, May 19, 2000)]
[Notices]
[Page 31952]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-12628]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42782; File No. SR-DTC-00-03]


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

May 15, 2000.
    On February 22, 2000, The Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change (File No. SR-DTC-00-03) 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 March 9, 2000.\2\ No comment 
letters were received. For the reasons discussed below, the Commission 
is granting approval of the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 42482, (March 1, 2000), 
65 FR 12602.
---------------------------------------------------------------------------

I. Description

    Under the rule change, DTC will establish a free-of-payment omnibus 
account at SIS SegaInterSettle AG (``SIS'') in order to create a one-
way DTC-SIS link. The link will permit, but will not require, DTC to 
hold in its account at SIS positions in issues that are eligible at 
both DTC and SIS. The interface will enable DTC participants to more 
efficiently move and position their inventory through book-entry 
movements from one depository's books to the other's.\3\
---------------------------------------------------------------------------

    \3\ With respect to global share issues of issuers such as UBS, 
DTC expects to hold the bulk of its positions at DTC so that DTC's 
position will be reflected on the books of U.S. transfer agents.
---------------------------------------------------------------------------

    Establishment of the link will enable a DTC participant to settle a 
cross-border transaction with an SIS counterparty by making a free-of-
payment book-entry delivery from DTC's omnibus account at SIS to the 
SIS participant's account at SIS. Conversely, an SIS participant will 
be able to settle a cross-border transaction with a DTC participant by 
making a free-of-payment 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 then will be able to redeliver the 
securities on either a free-of-payment or versus-payment basis to any 
other DTC participant within DTC.
    SIS will make SIS's custody and depository services (such as income 
collection, maturity presentments, and reorganization processing) 
available to DTC for securities held in DTC's account at SIS in 
accordance with SIS procedures. 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.

II. Discussion

    Section 17A(b)(3)(F) \4\ 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 and to assure the 
safeguarding of securities and funds that are in its custody or control 
or for which it is responsible. For the reasons set forth below, the 
Commission believes that DTC's proposed rule change is consistent with 
DTC's obligations under the Act.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The Commission believes that the link between DTC and SIS should 
promote the prompt and accurate clearance and settlement of securities 
transactions. The central purpose of the link is to facilitate the 
efficient processing of cross-border securities transactions between 
DTC participants and SIS participants. By opening an omnibus account at 
SIS, DTC will enable its participants to substitute efficient book-
entry movements for inefficient physical movements of securities 
certificates from SIS to DTC. The link should reduce much of the time, 
expense, costs, and risks associated with physically moving 
certificates from SIS and redepositing them at DTC.
    The Commission also believes that DTC has established the link with 
SIS in a manner that is consistent with its safeguarding obligations 
under the Act. In order to assure itself that the linking with SIS is 
safe and prudent, DTC completed an extensive review of such things as: 
(1) SIS's operational controls, financial strength, technology 
capabilities, and audit arrangements; (2) Swiss regulation of SIS; and 
(3) application and effect of Swiss and U.S. laws as they pertain to 
the link.
    Accordingly, the Commission finds that the link satisfies DTC's 
obligations to promote the prompt and accurate clearance and settlement 
of securities transactions and to foster cooperation and coordination 
with persons engaged in the clearance and settlement of securities 
transactions.

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular 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-00-03) be and hereby is 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
---------------------------------------------------------------------------

    \5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-12628 Filed 5-18-00; 8:45 am]
BILLING CODE 8010-01-M