[Federal Register Volume 69, Number 140 (Thursday, July 22, 2004)]
[Notices]
[Pages 43870-43871]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-16747]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50029; File No. SR-DTC-2003-10]


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

July 15, 2004.
    On July 8, 2003, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') proposed rule 
change File No. SR-DTC-2003-10 pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ On July 21, 2003, DTC 
filed an amendment to the proposed rule change.\2\ Notice of the 
proposed rule change was published in the Federal Register on June 1, 
2004.\3\ No comment letters were received. For the reasons discussed 
below, the Commission is now granting approval of the proposed rule 
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ The amendment changed the proposed rule change from being 
filed under Section19(b)(3)(A) for immediate effectiveness to being 
filed under Section 19(b)(2) for noticeand comment.
    \3\ Securities Exchange Act Release No. 49764 (May 25, 2004), 69 
FR 30969.
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I. Description

    The purpose of the rule change is to allow DTC to activate its 
Universal Hub for Stock Loan Recalls (``Universal Hub''). Universal Hub 
is a new messaging service that will provide participants with an 
efficient means for transmitting the notification and acknowledgement 
and maintaining such information related to stock loan recalls.
    Currently, industry participants utilize faxes and phone calls to 
recall securities on loan. Processing stock loan recalls is generally 
paper intensive, which increases the risk of transmission errors and 
delayed responses. The lack of formal, automated mechanisms for lenders 
and borrowers to communicate notifications and acknowledgements of loan 
recalls is extremely inefficient.
    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 that, 
among other things, will automate the labor-intensive stock loan recall 
process. The Universal Hub will provide a central point of access for 
DTC participants engaging in stock loan recall transactions where 
participants can 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 
will provide interoperability between various ARMS users and DTC 
participants and will permit ARMS vendors and DTC participants to avoid 
the costs and inefficiencies of building multiple 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.

II. Discussion

    Section 17A(b)(3)(F) \4\ of the Act requires that the rules of a 
clearing agency be designed to remove impediments to and perfect the 
mechanism of a national system for prompt and accurate clearance and 
settlement of securities transactions. Implementing the Universal Hub 
will enable DTC to further automate the processing of stock loan 
recalls and will further the industry's efforts to achieve straight-
through processing. As a result, DTC will be able to facilitate the 
prompt and accurate processing of securities transactions. As such, the 
proposed rule change is consistent with DTC's statutory obligation to 
remove impediments to and perfect the mechanism of a national system 
for prompt and accurate clearance and settlement of securities 
transactions.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).

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[[Page 43871]]

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A of the Act and the rules and regulations 
thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\5\ that the proposed rule change (File No. SR-DTC-2003-10) be and 
hereby is approved.
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    \5\ 15 U.S.C. 78s(b)(2).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-16747 Filed 7-21-04; 8:45 am]
BILLING CODE 8010-01-P