[Federal Register Volume 69, Number 105 (Tuesday, June 1, 2004)]
[Notices]
[Pages 30969-30970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-12199]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49764; File No. SR-DTC-2003-10]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change Relating to a New Messaging 
Service for Stock Loan Recalls

May 25, 2004.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 8, 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 prepared 
primarily by DTC. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested parties.
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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 allow DTC to activate its Universal 
Hub for Stock Loan Recalls (``Universal Hub''), a new messaging service 
providing participants an efficient means to facilitate the 
notification, acknowledgement, and maintenance of stock loan recall 
information.

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

    Currently, industry participants utilize faxes and phone calls to 
recall securities on loan. Processing stock loan recalls is generally 
paper intensive, increasing the risk of transmission errors and 
delaying response time. The lack of formal, automated mechanisms to 
notify borrowers of a loan recall has proven inefficient for the 
industry.
    To remedy these issues and to support the Securities Industry 
Association's Straight Through Processing Securities Lending 
Subcommittee's goals, DTC has developed a universal messaging hub 
which, among other things, will automate the labor-intensive stock loan 
recall process. The goal of the Universal Hub is to provide a central 
point of access for DTC participants engaging in stock loan recall 
transactions to send and receive recall notices, acknowledgements, 
cancellations, buy-in execution details, and corporate action notices. 
DTC participants utilizing either vendor-supplied Automated Stock Loan 
Recall Messaging Systems (ARMS) or their own stock loan recall 
capability will be able to connect directly to the Universal Hub. By 
providing a central point of access to all parties, the Universal Hub 
provides interoperability between various ARMS users and DTC 
participants and permits ARMS vendors and DTC participants to avoid the 
costs and inefficiencies of building bilateral links.
    The Universal Hub's message formats will be based on ISO 15022 
standards and will be supported on MQ Series and DTC's standard file 
transfer capabilities. The Universal Hub will create an 
acknowledgement/receipt record for each message processed to notify the 
sender that the Universal Hub has received the message and that the 
message was forwarded to the receiver. In addition, the Universal Hub 
will create a receipt record for the sender indicating that the 
counterparty to the stock loan recall retrieved the message from the 
Universal Hub. Each message will be assigned an internal control number 
for audit trail purposes. If the Universal Hub cannot deliver a 
message, it will reject the message back to the sender for resolution. 
The Universal Hub will only edit the header of the message to ensure 
successful delivery of the message. The Universal Hub will not edit the 
data in the actual stock loan recall message. Participants remain 
responsible for the details provided in their recall messages.
    The proposed rule change is consistent with the requirements of 
section 17A(b)(3)(A) of the Act \3\ and the rules and regulations 
thereunder applicable to DTC because it will further automate the 
processing of stock loan recalls while furthering the industry's 
efforts to achieve straight-through processing thus facilitating the 
prompt and accurate processing of securities transactions.
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    \3\ 15 U.S.C. 78q-1(b)(3)(A).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, in the public interest, and for 
the protection of investors.

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

    DTC has discussed this rule change proposal in its current form 
with various DTC participants and industry groups, a number of whom 
have worked closely in developing the proposed Universal Hub.

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

[[Page 30970]]

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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-DTC-2003-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-DTC-2003-10. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 and 
on DTC's Web site at www.dtc.org. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-DTC-2003-10 and should be submitted on or before June 
22, 2004.

    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-12199 Filed 5-28-04; 8:45 am]
BILLING CODE 8010-01-P