[Federal Register Volume 65, Number 233 (Monday, December 4, 2000)]
[Notices]
[Pages 75749-75750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30718]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43624; File No. SR-DTC-00-13]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change Related to the Processing of Low Volume Tender Offers

November 27, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 29, 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 
approval of the proposal.
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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 clarify the policy of 
DTC regarding low volume tender offers. A low volume tender offer is an 
offer in which the offeror is seeking to purchase for cash up to 5% of 
the outstanding shares of an equity issue or any amount of a debt 
issue. Low volume tender offers do not include an exchange offer or an 
offer by the issuer of the target security. The proposed rule change 
clarifies that it is DTC's policy (i) not to make an offeror's 
information about a low volume tender offer available to participants 
through DTC's Reorganization Inquiry for Participants System (``RIPS'') 
unless the offeror uses DTC's Automated Tender Offer Program (``ATOP'') 
to process the offer and (ii) not to make securities available to the 
offeror at the conclusion of a low volume tender offer processed 
through ATOP until DTC has received payment for the securities from the 
offeror.

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

    As DTC has gained experience in processing low volume tender offers 
during recent years, DTC has sought to improve the manner in which it 
handles such offers. In a small number of cases, the offeror making a 
low volume tender offer sent DTC information to be entered into RIPS 
and paid DTC's low volume tender offer fee \3\ but did not use ATOP to 
process acceptances of the offer. In such cases the offeror included in 
the offering documents an instruction that participants who wished to 
accept the offer should do so by a free book-entry delivery at DTC to 
the account of a participant represented to be acting on behalf of the 
offeror. Participants accepting such an offer did not have all the 
benefits of ATOP. Those benefits include more detailed information in 
the RIPS announcement, such as information about the existence of any 
withdrawal rights in the offer and information about the offeror's 
payment arrangements, and an indication on their daily participant 
statements while the offer is open that a tendered position is 
outstanding. In order to assure that its participants receive the 
benefits of ATOP, as a matter of policy DTC does not announce a low 
volume tender offer in RIPS unless the offer is processed through ATOP.
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    \3\ DTC charges a fee of $2,700 in connection with low volume 
tender offers processed through its facilities. Securities Exchange 
Act Release No. 41032, (February 9, 1999) 64 FR 7931 (February 17, 
1999) [File No. SR-DTC-99-01]. DTC will continue to charge that fee, 
which is not affected by the proposed rule change.
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    When a low volume tender offer is not processed through ATOP, 
payment for any securities purchased in the offer usually, if not 
always, are made to participants outside of DTC's facilities. It can be 
difficult for participants to assure themselves that securities 
delivered to the offeror by a free book-entry delivery at DTC are 
promptly paid for at the end of the offer. To give its participants the 
efficiency and safeguards of payment through DTC's facilities, DTC 
requires the offeror in a low volume tender offer processed through 
ATOP to send payment to DTC for any securities purchased in the offer 
before DTC makes the securities available to the offeror.
    The proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to DTC since 
the proposed rule change will facilitate the processing of low volume 
tender offers at DTC. 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 low volume 
tender offers will be processed with the safeguards of the ATOP 
procedures.

(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

    Written comments from DTC participants or others have not been 
solicited or received on the proposed rule change. DTC will notify the 
Commission of any written comments received by DTC.

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

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder and particularly with the requirements of

[[Page 75750]]

Section 17A(b)(3)(F).\4\ Section 17A(b)(3)(A)(F) requires that the 
rules of a clearing agency be designed, among other things, to protect 
investors and the public interest. DTC's policy of requiring low volume 
tender offers to be processed through ATOP and of not making securities 
available to an offeror until payment for the shares tendered is 
received should help to ensure that those tendering shares will be paid 
for their tendered shares. This should help DTC and its participants to 
protect investors and is in the public interest.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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    DTC has requested that the Commission approve 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 the publication of notice 
because such approval will allow DTC to immediately apply the 
safeguards discussed above to the processing of low volume tender 
offers.

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 DTC. All submissions should 
refer to the File No. SR-DTC-00-13 and should be submitted by December 
26, 2000.
    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\5\ that the proposed rule change (File No. SR-DTC-00-13) be and 
hereby is approved.
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    \5\ 15 U.S.C. 78s(b)(2).
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    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).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-30718 Filed 12-1-00; 8:45 am]
BILLING CODE 8010-01-M