[Federal Register Volume 68, Number 98 (Wednesday, May 21, 2003)]
[Notices]
[Pages 27877-27879]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-12732]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47875; File No. SR-DTC-2003-08]


Self-Regulatory Organizations; the Depository Trust Company; 
Notice of Filing of a Proposed Rule Change Relating to Rule 4A, Pledge 
of Property to the Corporation and Its Lenders

May 15, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 6, 2003, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I, II, and III below, which items have been

[[Page 27878]]

prepared primarily by DTC. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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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 proposed rule change would modify DTC's Rule 4A, Section 1, and 
would make a technical correction to the definition of the term pledge 
in DTC's Rule 1.

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

    Each DTC participant pays or receives the net debit or net credit 
balance in its DTC money settlement account at the end of each day. 
DTC's principal risk is the possible failure of one or more 
participants to settle their net debit obligations. To assure that it 
is able to complete its settlement obligations each day, DTC maintains 
liquidity resources, including a committed line of credit in the 
maximum amount of $1.75 billion with a consortium of banks that is part 
of a combined syndicated facility with National Securities Clearing 
Corporation (``End of Day Facility'').
    The End of Day Facility matures annually. As part of the 
negotiations to extend the facility for the year beginning May 27, 
2003, DTC's lenders have requested that Section 1 of DTC's Rule 4A, 
``Pledge of Property to the Corporation and its Lenders,'' be 
clarified. This provision currently provides that for the purpose of 
securing loans to DTC, DTC may pledge and repledge and grant its 
lenders a security interest in (i) cash deposits in the participants 
fund and all securities, repurchase agreements, or deposits in which 
such cash is invested, (ii) net additions, including any security 
entitlements of participants in net additions, and (iii) preferred 
stock. This section provides that any such loan to DTC may be on such 
terms as DTC, in its discretion, may deem necessary or advisable and 
may be in amounts greater and extend for time periods longer than the 
obligations of any participant in DTC. It further provides that no 
lender shall be obligated to return any pledged collateral prior to the 
full repayment of any loan secured thereby.
    DTC is proposing to add language to Section 1 of Rule 4A to make 
clear what is implicit in the current rule that while there remain any 
outstanding obligations under any such loan, no participant may assert 
a claim against the lender for the return of any collateral pledged by 
DTC as security therefore.\3\ Subject to the foregoing and the terms of 
any such loan, the obligation of DTC to return any items of pledged 
collateral to its participants or to permit substitutions and 
withdrawals thereof remains unaffected.
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    \3\ The proposed language would state, ``No Participant shall 
have any right, claim or action against any secured Lender (or any 
collateral agent of such secured Lender) for the return, or 
otherwise in respect, of any such collateral Pledged by the 
Corporation to such secured Lender (or its collateral agent), so 
long as any loans made by such Lender to the Corporation or other 
obligations, secured by such collateral, are unpaid and 
outstanding.''
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    In addition, the proposed rule change would make a technical 
correction to the definition of the term ``pledge'' in Rule 1 
necessitated by the recent revisions to Article 9 of the New York 
Uniform Commercial Code (``NYUCC''). Currently, the definition of 
``pledge'' refers to section 9-115 of the NYUCC. As proposed, the 
references to that specific section would be deleted so the definition 
would refer to the NYUCC in general.
    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act and the rules and regulations 
thereunder applicable to DTC because it will assist DTC in maintaining 
a committed end-of-day line of credit to facilitate completion of daily 
money settlement and as such will assist DTC to assure the safeguarding 
of securities and funds which are in its custody or control or for 
which it is responsible.

(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

    Comments from DTC participants or others have not been solicited or 
received on the proposed rule change.

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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (a) By order approve the proposed rule change or
    (b) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-DTC-2003-08. This file number should be included on the 
subject line if e-mail is used. To help us process and review comments 
more efficiently, comments should be sent in hardcopy or by e-mail but 
not by both methods. 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 will also be available for inspection and copying at the 
principal office of DTC. All submissions should refer to the File No. 
SR-DTC-2003-08 and should be submitted by June 11, 2003.


[[Page 27879]]


    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-12732 Filed 5-20-03; 8:45 am]
BILLING CODE 8010-01-P