[Federal Register Volume 66, Number 127 (Monday, July 2, 2001)]
[Notices]
[Pages 34972-34973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16558]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44470; File No. SR-DTC-2001-10]


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

    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 1, 2001, 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, 2002.
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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 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 extend the 
Commission's temporary approval of DTC's admission criteria for non-
U.S. entities.\3\
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    \3\ DTC's admission criteria for non-U.S. entities were first 
temporarily approved on May 16, 1997. Securities Exchange Act 
Release No. 38600 (May 16, 1997), 62 FR 27086. Since then, the non-
U.S. admission criteria have been temporarily approved several 
times. Securities Exchange Act Release Nos. 40064 (June 3, 1998), 63 
FR 31818; 41466 (May 28, 1999), 64 FR 30077; and 42865 (May 30, 
2000), 65 FR 36188.
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    The proposed rule change seeks to extend approval of established 
admissions criteria that permit a well-qualified foreign entity to 
obtain direct access to DTC's services without requiring the foreign 
entity to obtain financial guarantees. The policy was established by 
DTC in response to requests received from certain participants to 
consider changes in DTC's admissions policy that would allow foreign 
affiliates to become direct participants without having to obtain 
financial guarantees.

[[Page 34973]]

    In November 1999, DTC admitted one non-U.S. entity as a direct 
participant under the standards for admission of foreign entities. DTC 
has received several inquiries from other non-U.S. entities and expects 
to admit several other foreign entities in 2001 under the standards for 
the admission of foreign entities. DTC is seeking an extension of the 
temporary approval so DTC can complete the admission of these foreign 
entities and gain additional experience with the new admission 
standards for foreign entities and the unique risks posed by the 
activities of foreign entities as direct DTC participants.
    The proposed rule change is consistent with the requirements of 
section 17A(b)(3)(F) of the Act \4\ and the rules and regulations 
thereunder applicable to DTC because the proposed policy does not 
unfairly discriminate against foreign entities seeking admission as 
participants because it appropriately takes into account the unique 
risks to the depository raised by their admission.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    While DTC acknowledges that the proposed additional admissions 
criteria applicable to foreign entities may impose some additional 
burden, for the reasons stated above, we believe that any such burden 
is 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 lessen 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 are designed in a manner that 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\ Id.
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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 filing. The Commission finds good cause for approving 
the proposed rule change prior to the thirtieth day 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, 2001.

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-2001-10 and should be submitted by July 
23, 2001.
    It is Therefore Ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-2001-10) be, and hereby 
is, approved on an accelerated basis through May 31, 2002.

    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. 01-16558 Filed 6-29-01; 8:45 am]
BILLING CODE 8010-01-M