[Federal Register Volume 68, Number 146 (Wednesday, July 30, 2003)]
[Notices]
[Pages 44824-44825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-19330]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48221; File No. SR-DTC-2001-13]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of a Proposed Rule Change Amending The Depository 
Trust Company's Policy Statement on the Admission of Non-U.S. Entities 
as Direct Depository Participants

July 23, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 23, 2001, 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 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

    DTC is proposing to amend its Policy Statement on the Admission of 
Non-U.S. Entities as Direct Depository Participants (``Policy 
Statement'') to eliminate the requirement that the foreign entity 
deposit with or pledge to DTC special collateral having a value (after 
the imposition of specified haircuts) equal to 50% of the entity's net 
debit cap (``special collateral requirement'').\2\
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    \2\ A copy of the text of DTC's proposed rule change and 
attachment is available at the Commission's Public Reference Room or 
through DTC.
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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 place 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.\3\
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    \3\ 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

    The Policy Statement was adopted by DTC to establish admissions 
criteria that would permit a well-qualified foreign entity to obtain 
direct access to DTC's services without requiring the foreign entity to 
obtain financial guarantees.\4\ The Policy Statement contains a number 
of requirements that are designed to address the unique risks posed by 
the admission of foreign entities. Under the proposed rule change, all 
of these requirements, except for the special collateral requirement, 
would be retained.
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    \4\ DTC's Policy Statement on its admission criteria for non-
U.S. entities was first temporarily approved on May 9, 1997. 
Securities Exchange Act Release No. 38600 (May 9, 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; 42865 (May 30, 2000), 65 FR 36188; and 44470 (June 22, 2001), 
66 FR 34972.
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    The special collateral requirement provides that except for U.S. 
Treasury

[[Page 44825]]

securities, securities posted as special collateral receives a haircut 
of 50% of their market value. Most importantly, the foreign entity does 
not receive credit for this special collateral in DTC's collateral 
monitor; that is, any net debit or collateral needs have to be 
supported by the value of other, non-special collateral (including 
securities received by the participant reflecting DTC's customary 
haircuts).
    DTC's collateral monitor systematically prevents a participant from 
accruing a net debit that exceeds the value of the collateral in its 
account by blocking any transaction that would have that effect. For 
this purpose, collateral includes: (1) The participant's deposit to the 
participants fund, (2) the value of securities in the participant's 
account that it has designated as collateral, and (3) the value of 
securities that are the subject of deliveries from other participants. 
The collateral value attributed to securities is equal to their market 
value minus a ``haircut'' determined by DTC. DTC believes that the 
collateral monitor and its other risk management controls and 
procedures applicable to all participants, together with the other 
requirements of the Policy Statement, adequately limit DTC's exposure 
in the event of the failure to settle and insolvency of a foreign 
participant, without the need for the special collateral requirement.
    DTC believes that 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 eliminate an 
unnecessary barrier to admission as participants by well-qualified 
foreign entities.

(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

    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

    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 such 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-2001-13. 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-2001-13 and should be submitted by August 20 2003.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-19330 Filed 7-29-03; 8:45 am]
BILLING CODE 8010-01-P