[Federal Register Volume 68, Number 226 (Monday, November 24, 2003)]
[Notices]
[Pages 65977-65978]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-29297]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48773; File No. SR-DTC-2003-13]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to the Termination of the DALI Tax Service

November 12, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 2, 2003, The 
Depository Trust Company filed a proposed rule change with the 
Securities and Exchange Commission and on October 30, 2003, amended its 
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

    The proposed rule change will terminate DTC's Data Link for 
Intermediaries (``DALI'') tax service.

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 the 
Statutory Basis for, the Proposed Rule Change

    The proposed rule change will terminate DTC's DALI tax service 
effective December 31, 2003. DALI is a communications hub that allows 
financial institutions (typically, a U.S. paying institution acting as 
a U.S. withholding agent and its foreign customer payee) to exchange 
the data necessary to determine correct withholding and reporting of 
U.S. tax on

[[Page 65978]]

payments such as dividends and interest to a foreign payee.\3\
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    \3\ See Sections 1441 et seq. of the Internal Revenue Code and 
regulations promulgated thereunder.
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    DTC introduced DALI in January 2001 at the request of four DTC 
participants (``Consortium''). DALI's principal features are 
communicating payment events and withholding instructions relating to 
such events, managing payee tax documentation (such as IRS Forms W-8 
and W-9), and aggregating information for tax reporting and 
recordkeeping.
    At the Consortium's request, DTC agreed to act as project manager 
for developing the DALI software system and for operating and 
maintaining the system as a DTC service that would be available to all 
DTC participants and their customers at standard DTC fees. The 
Consortium members agreed to finance the product development costs and 
expected to be reimbursed for such costs over time from the proceeds of 
user service fees in excess of these costs. The Consortium also agreed 
to fund DALI's operating losses during the initial phase of operations. 
The Consortium expected that the DALI system would be widely used by 
DTC participants, which would therefore obviate the need for the 
Consortium to continue to fund operating losses and would enable the 
Consortium to recoup any amounts previously funded.
    Only Consortium members have used DALI, and by mid-2003, only one 
out of those four members continued using DALI. Given the costs of 
maintaining DALI, DTC has determined that it will no longer offer this 
service. Consistent with the agreements between DTC and the Consortium, 
DTC will transfer the DALI system to the Consortium member that is 
still using and funding DALI. DTC will operate the system as a 
facilities manager on behalf of that member for a limited period of 
time (less than one year) during the transition. This member intends to 
operate the DALI system in-house for its own customers.
    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A(b)(3)(A) of the Act \4\ and the rules and 
regulations thereunder applicable to DTC because it will enhance DTC's 
ability to safeguard securities and funds in its custody or control or 
for which it is responsible by promoting the efficient allocation of 
DTC resources. This will be done by terminating the operation of a 
service that is not being utilized by a sufficient number of DTC 
participants to support its costs or justify its use of DTC's 
operational resources.
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    \4\ 15 U.S.C. 78q-1(b)(3)(A).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    DTC perceives no impact on competition by reason of the proposed 
rule change. Each of the three Consortium members that used DALI 
informed DTC that it has developed its own internal system to perform 
withholding and reporting with respect to DALI's functions and that 
DTC's discontinuance of DALI will not adversely affect it. DTC will 
assist the remaining Consortium member in transitioning the DALI system 
for its own use.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    DTC has not solicited nor received written comments on the proposed 
rule change. DTC will inform the Commission of any written comments it 
receives.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \5\ and Rule 19b-4(f)(6) thereunder \6\ because 
it effects a change that does not significantly affect the protection 
of investors or the public interest, does not impose any significant 
burden on competition, and does not become operative for 30 days after 
the date of the filing. At any time within 60 days of the filing of 
such proposed rule change, the Commission may summarily abrogate such 
rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 270.19b-4(f)(6).
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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 5th Street NW., Washington, DC 20549-0069. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-DTC-2003-13. 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 rule filing that 
are filed with the Commission, and all written communications relating 
to the rule filing between the Commission and any person, other than 
those that may be withheld from the public in accordance with 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room in Washington, DC. 
Copies of such filing will also be available for inspection and copying 
at DTC's principal office and on DTC's Web site at http://www.dtc.org/impNtc/mor/index.html. All submissions should refer to File No. SR-DTC-
2003-13 and should be submitted by December 15, 2003.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-29297 Filed 11-21-03; 8:45 am]
BILLING CODE 8010-01-P