[Federal Register Volume 69, Number 106 (Wednesday, June 2, 2004)]
[Notices]
[Pages 31149-31150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-12430]



[[Page 31149]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49777; File No. SR-DTC-2004-04]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of a Proposed Rule Change To Establish a Valued 
Delivery Order Interface With the National Securities Clearing 
Corporation

May 26, 2004.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, notice is hereby given that on May 3, 2004, the 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change 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

    DTC is seeking to amend its rules to establish a Valued Delivery 
Order Interface (``VDO Interface'') with the National Securities 
Clearing Corporation (``NSCC''). The VDO Interface will allow NSCC at 
the request of a common DTC/NSCC member to create delivery versus 
payment delivery orders for the member's NSCC balance orders and 
special trades to be transmitted automatically to DTC for processing.

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

    NSCC currently creates receive and deliver instructions for Balance 
Order Securities ``Balance Orders'' and for ``Special Trades'' (trade-
for-trade transactions) which NSCC Members then have to manually enter 
into DTC as ``Valued Delivery Orders'' (``VDOs'').\3\ In connection 
with NSCC's update of its Continuous Net Settlement System (``CNS 
Rewrite''),\4\ NSCC requested DTC to establish an interface to automate 
and facilitate the processing and book-entry settlement of Balance 
Orders and Special Trades.
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    \3\ The terms Balance Order Securities and Special Trades are 
defined in Rule 1 of NSCC's Rules. The term Valued Delivery Order is 
a delivery versus payment as opposed to a Free Delivery where 
delivery is made free of any payment by the receiver.
    \4\ The Commission has published notice seeking comment on 
NSCC's CNS Rewrite. Securities Exchange Act Release No. 49717 (May 
17, 2004), 69 FR 29605 (File No. SR-NSCC-2004-01).
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    DTC and NSCC currently have an automated VDO municipal bond 
interface known as the PDQ Automated Municipal Bond Settlement Facility 
(``PDQ Facility''). Pursuant to the PDQ Facility, NSCC Members and NSCC 
Municipal Comparison Only Members (``MCOMs'') that are also DTC 
Participants (``common participants'') or that clear through DTC 
Participants may authorize NSCC to send to DTC their compared municipal 
bond transaction data in an automated file, and may authorize DTC to 
accept and input such data as VDOs.
    As a result of requests from common participants and based upon 
DTC's and NSCC's positive experience with the PDQ Facility, DTC and 
NSCC are seeking to expand the PDQ Facility to include all NSCC Balance 
Orders and Special Trades for automatic processing at DTC as VDOs using 
the VDO Interface. The VDO Interface would convey VDO instructions for 
each common participant's Balance Orders and Special Trades pursuant to 
standing instructions from the common participant to NSCC. These 
standing instructions would be automatically transmitted to DTC for 
processing. For NSCC MCOMs that are not common participants, NSCC will 
create delivery versus payment VDO instructions for a MCOM's Special 
Trades if both the MCOM and its DTC clearing brokers each provide 
standing instructions to DTC to process such trades through the VDO 
Interface. The VDO Interface will incorporate the PDQ Facility's 
functionality and will replace the PDQ Facility.\5\ Subject to 
Commission approval, DTC intends to implement the proposed rule change 
in conjunction with the implementation of NSCC's CNS Rewrite on or 
about July 9, 2004.
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    \5\ Telephone conversation between Diane L. Brennan, Director of 
Risk Management, DTC, and staff of the Division of Market 
Regulation, Commission (May 21, 2004).
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    DTC believes that the proposed rule change is consistent with the 
requirements of section 17A of the Act \6\ and the rules and 
regulations thereunder applicable to DTC because it will promote the 
prompt and accurate clearance and settlement of securities transactions 
by increasing efficiency in processing member transactions.
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    \6\ 15 U.S.C. 78q-1.
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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 not necessary or 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

    Written comments relating to the proposed rule change have not yet 
been solicited or received. DTC will notify the Commission of any 
written comments received by DTC.

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

    Within 35 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 90 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. 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-2004-04 on the subject line.
    Paper comments:
     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary,

[[Page 31150]]

Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
DC 20549-0609.
    All submissions should refer to File Number SR-DTC-2004-04. 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 http://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-2004-04 and should be submitted on 
or before June 23, 2004.

    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).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-12430 Filed 6-1-04; 8:45 am]
BILLING CODE 8010-01-P