[Federal Register Volume 65, Number 110 (Wednesday, June 7, 2000)]
[Notices]
[Pages 36188-36189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14254]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42865; International Series Release No. 1225; File No. 
SR-DTC-00-07]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Order Granting Accelerated, Temporary Approval of 
a Proposed Rule Change Relating to the Admission of Non-U.S. Entities 
as Direct Depository Participants

May 30, 2000.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 18, 2000, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared 
primarily by DTC. The Commission is publishing this notice and order to 
solicit comments from interested persons and to grant accelerated, 
temporary approval of the proposed rule change through May 31, 2001.
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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 purpose of the proposed rule change is to extend the 
Commission's temporary approval of DTC's admission criteria for 
entities that are organized in a country other than the United States 
(``non-U.S. entities'').

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 such 
statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by DTC.

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[[Page 36189]]

(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 extend the 
Commission's temporary approval of DTC's admission criteria for non-
U.S. entities as direct DTC participants. On May 9, 1997, the 
Commission originally granted temporary approval through May 31, 
1998.\3\ The admission criteria are designed to permit well-qualified, 
non-U.S. entities to obtain direct access to DTC's services without 
requiring the non-U.S. entities to obtain financial guarantees from 
another DTC participant. According to DTC, DTC established the program 
for admission of non-U.S. entities in response to requests it received 
from certain participants. These participants requested that DTC 
consider changes in its admissions policy that would allow non-U.S. 
affiliates of U.S. participants to become direct participants without 
having to obtain financial guarantees from their U.S. affiliates that 
are DTC participants. The Commission has subsequently extended its 
original temporary approval through May 31, 2000.\4\
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    \3\ For a complete discussion of the admission criteria, refer 
to Securities Exchange Act Release No. 38600 (May 9, 1997), 62 FR 
27086 [File No. SR-DTC-96-13].
    \4\ See Securities Exchange Act Release Nos. 40064 (June 3, 
1998), 63 FR 31818 [File No. SR-DTC-98-11] and 41466 (May 28, 1999), 
64 FR 30077 [File No. SR-DTC-99-12].
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    In November 1999, DTC admitted one non-U.S. entity as a direct 
participant under the standards for admission of non-U.S. entities. DTC 
has received several inquiries from other non-U.S. entities and expects 
to admit several non-U.S. entities under its standards for the 
admission of non-U.S. entities. DTC is seeking an extension of the 
temporary approval so it can complete the admission of these non-U.S. 
entities and gain further experience with the admission standards for 
non-U.S. entities and with the unique risks posed by the activities of 
non-U.S. entities as direct DTC participants.
    DTC believes that the proposed rule change is consistent with the 
requirements of section 17A(b)(3)(F) of the Act and the rules and 
regulations promulgated because the admission criteria takes into 
account the unique risks to DTC raised by the admission of non-U.S. 
entities while not unfairly discriminating against non-U.S. entities 
seeking admission as participants.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    While DTC acknowledges that the proposed additional admissions 
criteria applicable to non-U.S. entities may impose some additional 
burden, for the reasons stated above, DTC believes that any such burden 
necessary and 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

    DTC has not sought or received comments on the proposed rule 
change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in the custody or control of the clearing agency or 
for which it is responsible.\5\ The Commission finds that the rule 
change is consistent with this obligation because DTC's admission 
criteria for non-U.S. entities has been designed in a manner that takes 
into account jurisdiction differences in regulatory structure and in 
business operations of non-U.S. entities with respect to DTC's risk 
control and management. Furthermore, DTC admission criteria should bind 
non-U.S. entities to DTC's rules and procedures in a manner similar to 
domestic participants and should lesson or eliminate the negative 
effects that jurisdictional issues could have on DTC's exercise of its 
rights against non-U.S. entities. Therefore, the Commission finds that 
the admissions criteria will assist DTC in assuring the safeguarding of 
securities and funds which are in its custody, control, or for which it 
is responsible.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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    DTC has requested that the Commission find good cause for approving 
the proposed rule change prior to the thirtieth day after publication 
of the notice of the filing. The Commission finds good cause for 
approving the proposed rule change prior to the thirtieth day after 
publication of the notice of the filing because accelerated approval 
will permit DTC to continue to use and study the effectiveness of its 
admission criteria for non-U.S. entities without interruption when the 
current temporary approval of these criteria expires on May 31, 2000.

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 Room, 450 Fifth Street, NW., Washington, 
DC 20549. Copies of such filing will also be available for inspection 
and copying at the principal office of the DTC. All submissions should 
refer to file number SR-DTC-00-07 and should be submitted by June 28, 
2000.
    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-00-07) be, and hereby 
is, temporarily approved on an accelerated basis through May 31, 2001.

    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. 00-14254 Filed 6-6-00; 8:45 am]
BILLING CODE 8010-01-M