[Federal Register Volume 73, Number 74 (Wednesday, April 16, 2008)]
[Notices]
[Pages 20727-20729]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-8130]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57647; File No. SR-DTC-2007-10]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Amended Proposed Rule Change to Implement the New 
Issue Information Dissemination Service for Municipal Securities

April 10, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given that 
on August 16, 2007, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') and on 
September 12, 2007, March 3, 2008, and April 9, 2008, amended the 
proposed rule change described in Items I, II, and III below, which 
items have been prepared primarily by DTC. The Commission previously 
published notice of the proposed rule change on October 3, 2007 and 
March 24, 2008.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 56552 (September 27, 
2007), 72 FR 56407 (October 3, 2006); Securities Exchange Act 
Release No. 57513 (March 17, 2008), 73 FR 15548 (March 24, 2008).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change seeks approval to implement the New Issue 
Information Dissemination System (``NIIDS'') for municipal securities. 
NIIDS is an automated system developed by DTC at the request of the 
Securities Industry and Financial Markets Association (``SIFMA'') \4\ 
in order to improve the mechanism for disseminating new issue 
information regarding municipal securities.
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    \4\ The request originated from The Bond Market Association 
(``BMA''), which has since merged with the Securities Industry 
Association to form SIFMA.
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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 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.\5\
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    \5\ 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, Municipal Securities Rulemaking Board (``MSRB'') Rule G-
14 generally requires municipal securities dealers to report municipal 
securities transactions to the MSRB within 15 minutes of the time of 
the trade.\6\ Inter-dealer trades eligible for comparison by a clearing 
agency are required to be submitted through NSCC's Real Time Trade 
Matching System (``RTTM'') within the time frame in Rule G-14. These 
trades are subsequently reported to the MSRB by NSCC. NSCC requires 
certain securities information in order to process and report 
transactions involving those securities. Therefore, it is necessary 
that dealers trading newly issued municipal securities have the 
securities information needed for trade submission by the time the 
trade reporting is required.
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    \6\ MSRB Rule G-14 RTRS Procedures (a)(ii).
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    Pursuant to current practice in the municipal securities market, 
each information vendor works separately to obtain information from 
offering documents and underwriters. Each information vendor's success 
depends in large part upon the voluntary cooperation of the 
underwriters. It is not unusual for information vendors to have 
inconsistent information or for some information vendors to receive 
information before others.

[[Page 20728]]

Consequently, critical new issue information may be missing or 
inaccurate in the automated trade processing systems used by dealers to 
report the initial trades in new issues. This can result in late trade 
reports or trade reports that must be canceled and resubmitted or 
amended because they contain inaccurate data.
    NIIDS is designed to improve the process by which new issue 
information is provided by underwriters to information vendors by 
collecting information about a new issue from underwriters in an 
electronic format and making that data available immediately to 
information vendors. NIIDS is designed to ensure that information is 
disseminated as quickly and efficiently as possible after the 
information is made available by the underwriters.\7\
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    \7\ NIIDS is being incorporated into the update of DTC's 
underwriting system (``UW Source''). All applicable NIIDS Data 
Elements must be input into UW Source for a municipal issue to close 
at DTC.
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    To address concerns that dealers often lack timely access to 
electronically formatted securities information necessary to process 
and to report municipal securities transactions in real-time, MSRB Rule 
G-14 includes a three-hour exemption available to a dealer transacting 
``when, as, and if issued'' municipal securities if the dealer is not a 
syndicate manager or member for this issue, has not traded the issue in 
the previous year, and the CUSIP number and indicative data of the 
issue are not in the dealer's securities master file (``Reporting 
Exemption'').\8\ The Reporting Exemption will expire in 2008. In order 
to prepare for the Reporting Exemption's expiration, SIFMA asked DTC to 
incorporate a centralized automated mechanism for the collection and 
dissemination on a real-time basis of the required information as part 
of the planned reengineering of DTC's underwriting system. DTC built 
NIIDS to help make the collection and dissemination of new issue 
information with respect to municipal securities more efficient for the 
industry.
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    \8\ MSRB Rule G-14 RTRS Procedures (a)(ii)(C).
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    An industry working group of municipal securities dealers, SIFMA 
members, the MSRB, and DTC have identified key data elements required 
for the reporting, comparison, confirmation, and settlement of trades 
in municipal securities (``NIIDS Data Elements''). Initially, DTC is 
proposing to make NIIDS available to the municipal securities industry 
on an optional basis to allow dealers to have some experience with 
NIIDS before the MSRB mandates its use. DTC proposes to make NIIDS for 
municipal securities available to participants on an optional basis in 
May 2008. DTC will mandate the use of NIIDS for municipal securities in 
September 2008, prior to the expiration of the MSRB Reporting 
Exemption. DTC periodically has been informing participants of the 
upcoming implementation of NIIDS and the NIIDS Data Elements through 
periodically issued Important Notices. Only DTC participants or those 
entities specifically authorized by a participant (``Correspondent'') 
will be able to input information into NIIDS.\9\
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    \9\ Participants will be required to identify an authorized 
party at the Correspondent with whom DTC may interact.
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    To commence the process, the dissemination agent (``Dissemination 
Agent'') for a new issue must input the NIIDS Data Elements thereby 
requesting that DTC make the information available to the industry 
through NIIDS. DTC will not confirm the NIIDS Data Elements but rather 
will act as a conduit to pass along such information to data vendors. 
DTC anticipates the data vendors will then disseminate the information 
to the industry thereby allowing dealers to make timely reporting of 
their municipal trades. DTC will record the name of the Dissemination 
Agent that inputs the Data Elements and the time such information is 
submitted. DTC will begin disseminating the data when it has received 
authorization from the Dissemination Agent through NIIDS. The 
Dissemination Agent, by triggering the dissemination decision flag in 
the NIIDS Data Elements, indicates the information is being sent by it 
and is in compliance with the terms and conditions of NIIDS. In 
addition, NIIDS will contain the contact information for the 
Dissemination Agent that populated the NIIDS Data Elements for a 
particular issue to enable users of the data to contact it with 
questions or comments.
    DTC is proposing to provide NIIDS to the industry in order to 
facilitate the collection and dissemination of new issue information in 
relation to municipal securities. Because DTC does not confirm the 
accuracy of NIIDS Data Elements and only acts as a conduit of the 
information, use of NIIDS \10\ by any party, including but not limited 
to participants, correspondents, and vendors (``NIIDS Users'') \11\ 
will constitute a waiver of any and all claims direct or indirect 
against DTC and its affiliates and an agreement that DTC and its 
affiliates shall not be liable for any loss in relation to the 
dissemination or use of NIIDS Data Elements, which are provided ``as 
is.'' Each NIIDS User will agree to indemnify and hold harmless DTC and 
its affiliates from and against any and all losses, damages, 
liabilities, costs, judgments, charges, and expenses arising out of or 
relating to the use of NIIDS.
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    \10\ Use of NIIDS shall include but not be limited to the 
population, dissemination, or processing of NIIDS Data Elements.
    \11\ Data vendors or others that wish to receive NIIDS Data 
Elements must register in advance with DTC.
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    The MSRB would like dealers to be able to use NIIDS before 
requiring them to do so by rule.\12\ The MSRB has filed with the 
Commission a rule change that ultimately would require underwriters to 
use NIIDS in 2008 to coincide with the expiration of the Reporting 
Exemption.\13\ DTC intends to provide the municipal securities industry 
the opportunity to use NIIDS commencing May 5, 2008. DTC intends to 
mandate the use of NIIDS for municipal securities commencing Tuesday, 
September 2, 2008. DTC believes that members of the municipal 
securities industry will be using NIIDS during the period NIIDS is 
optional (``Optional Period'') to become accustomed to using it. This 
may result in Dissemination Agents inputting incomplete NIIDS Data 
Elements while getting acquainted with NIIDS. Therefore, no one should 
rely on the accuracy of the NIIDS Data Elements during the Optional 
Period but rather should continue to use existing authorized sources of 
such information.
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    \12\ The MSRB received comment on proposed rules that would 
require underwriters of municipal securities to participate in 
NIIDS. See MSRB Notice 2007-10 (March 5, 2007) at http://www.msrb.org.
    \13\ Securities Exchange Act Release No. 57002 (December 20, 
2007), 72 FR 73939 (December 28, 2007) [File No. SR-MSRB-2007-07].
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    DTC will not charge a service fee to underwriters that input or 
receive information through NIIDS. Additionally, DTC will not charge a 
service fee to information vendors that will receive information for 
further dissemination through NIIDS. DTC will charge a connectivity fee 
to underwriters, service providers, and information vendors that use 
NIIDS.
    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \14\ and the rules and 
regulations thereunder because the proposed changes promote the prompt 
and accurate clearance and settlement of securities transactions by 
streamlining the collection and dissemination of new issue information 
for municipal securities throughout the industry.
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    \14\ 15 U.S.C. 78q-1.

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[[Page 20729]]

(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC does not believe that the proposed rule change will have any 
impact or impose any burden on competition.

(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 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 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. 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-2007-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-DTC-2007-10. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filings also will be available for 
inspection and copying at the principal office of DTC and on DTC's Web 
site at http://www.dtcc.com/downloads/legal/rule_filings/2007/dtc/2007-10.pdf, http://www.dtcc.com/downloads/legal/rule_filings/2007/dtc/2007-10-amendment.pdf, http://dtcc.com/downloads/legal/rule_filings/2007/dtc/2007-10-amendment2.pdf, and http://www.dtcc.com/downloads/legal/rule_filings/2007/dtc/2007-10-amendment3.pdf. 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-2007-10 and should be 
submitted on or before May 1, 2008.

For the Commission by the Division of Trading and Markets, pursuant 
to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-8130 Filed 4-15-08; 8:45 am]
BILLING CODE 8010-01-P