[Federal Register Volume 73, Number 90 (Thursday, May 8, 2008)]
[Notices]
[Pages 26181-26182]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-10213]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57768; File No. SR-DTC-2007-10]
Self-Regulatory Organizations; The Depository Trust Company;
Order Granting Accelerated Approval of an Amended Proposed Rule Change
To Implement the New Issue Information Dissemination Service for
Municipal Securities
May 2, 2008.
I. Introduction
On August 16, 2007, The Depository Trust Company (``DTC'') filed
with the Securities and Exchange Commission (``Commission'') and on
September 12, 2007,\1\ March 3, 2008,\2\ and April 9, 2008 \3\ amended
proposed rule change SR-DTC-2007-10 pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'').\4\ Notice of the proposal
was published in the Federal Register on October 3, 2007,\5\ March 24,
2008,\6\ and April 16, 2008.\7\ The Commission received no comment
letters. For the reasons discussed below, the Commission is approving
the proposed rule change on an accelerated basis.
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\1\ The amendment changed a misplaced word in a footnote.
\2\ The amendment changed the implementation date of the service
and made other technical changes.
\3\ The amendment changed the implementation date of the
service.
\4\ 15 U.S.C. 78s(b)(1).
\5\ Securities Exchange Act Release No. 56552 (September 27,
2007), 72 FR 56407.
\6\ Securities Exchange Act Release No. 57513 (March 17, 2008),
73 FR 15548.
\7\ Securities Exchange Act Release No. 57647 (April 10, 2008),
73 FR 20727.
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II. Description
The New Issue Identification Dissemination Service (``NIIDS'') is
designed to improve the process by which municipal securities new issue
information is provided by underwriters to information vendors. NIIDS
will provide for the collection of information about new issues from
underwriters or their representatives in an electronic format and for
making that data available immediately to information vendors. NIIDS is
designed to enable the dissemination of new issue information as
quickly and efficiently as possible after the information is made
available by underwriters.
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.\8\ Inter-dealer trades eligible for comparison by a clearing
agency are required to be submitted to the MSRB through the National
Securities Clearing Corporation's (``NSCC'') Real Time Trade Matching
System (``RTTM'') within the 15 minute time frame in Rule G-14. NSCC
requires certain securities information in order to process and to
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 is required to be reported.
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\8\ 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 from underwriters. Each information vendor's
success in obtaining information about newly issued municipal
securities 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. Consequently, critical new issue information
may be missing, inaccurate, or both in the automated trade processing
systems used by dealers to report trades in new issues. This can result
in the late submission of trade reports or in trade reports that must
be canceled and resubmitted or amended because they contain inaccurate
data.
To address concerns that dealers often lack timely access to
electronically formatted accurate securities information necessary to
process and report municipal securities transactions in real-time, MSRB
Rule G-14 provides for reporting of trades within three-hours of the
time of trade for a dealer trading in ``when, as, and if issued''
municipal securities if the dealer is not a syndicate manager or
syndicate member for the issue, has not traded the issue in the
previous year, and does not have the CUSIP information or indicative
data for that issue in their securities master file (``Reporting
Exemption'').\9\ The Reporting Exemption will expire in 2008. In order
to prepare for the Reporting Exemption's expiration, the Securities
Industry and Financial Markets Association asked DTC to include a
centralized automated mechanism for the real-time collection and
dissemination of the required information as part of the planned
reengineering of DTC's underwriting system. In response to this
request, DTC built NIIDS to help make the collection and dissemination
of municipal securities new issue information more efficient for the
industry.
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\9\ MSRB Rule G-14, RTRS Procedures (a)(ii)(C).
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NIIDS Process
To commence the process, the Dissemination Agent for a new issue
municipal security must input the key data elements required for the
reporting, comparison, confirmation, and settlement of trades in
municipal securities (``NIIDS Data Elements'') into NIIDS. The
inputting will constitute a request that DTC make the information
available to the industry through NIIDS. DTC will not confirm the
accuracy of the NIIDS Data Elements and will act only as a conduit to
pass along such information to data vendors.\10\ DTC anticipates the
data vendors will then disseminate the information to the industry
thereby enabling dealers to make timely and accurate reporting of their
municipal trades. DTC will record the name of the Dissemination Agent
that inputs the NIIDS 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. In addition,
NIIDS will contain the contact information for the Dissemination Agent
that populated the NIIDS Data Elements for each issue to enable users
of the data to contact them with questions or comments.
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\10\ Data vendors or others that wish to receive NIIDS Data
Elements must register in advance with DTC.
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DTC is providing NIIDS to the industry in order to facilitate the
collection and dissemination of municipal securities new issue
information. As DTC is only a conduit of the information and does not
confirm the validity of any of the NIIDS Data Elements, use of NIIDS by
any party will constitute an agreement that DTC shall not be liable for
any loss or damages in relation to its collection and dissemination of
NIIDS Data Elements. Each NIIDS user will agree to indemnify
[[Page 26182]]
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.
Optional Use of NIIDS
The MSRB would like dealers to be able to use NIIDS before
requiring them to so by rule.\11\ The MSRB has filed with the
Commission a proposed rule change that ultimately would require
underwriters to use NIIDS in 2008.\12\ DTC intends to provide the
municipal securities industry the opportunity to start using NIIDS on
May 5, 2008. Mandated use of NIIDS for municipal securities is expected
to commence September 2, 2008. DTC believes that the municipal
securities industry will use NIIDS during the period NIIDS is optional
(``Optional Period'') in order to become accustomed to it. This may
result in Dissemination Agents inputting incomplete or inaccurate 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 also use existing
authorized sources of such information.
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\11\ The MSRB received comment on its proposed rules that would
require underwriters of municipal securities to participate in
NIIDS. See Comments on MSRB Notice 2007-10 (March 5, 2007) at http://www.msrb.org/msrb1/rules/RFC/2007/2007-10/2007-10CommentLetters.asp.
\12\ Securities Exchange Act Release No. 57131 (January 11,
2008), 73 FR 3295 (January 17, 2008) [SR-MSRB-2007-08].
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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 receive information through
NIIDS for further dissemination. DTC will charge a connectivity fee to
underwriters, service providers, and information vendors that use
NIIDS.
III. Discussion
Section 19(b) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\13\ Section 17A(b)(3)(F) of the Act requires that the
rules of a clearing agency be designed to promote the prompt and
accurate clearance and settlement of securities transactions.\14\ The
Commission finds that DTC's rule change implementing NIIDS is
consistent with this requirement because by automating, standardizing,
and centralizing the collection and dissemination of new issue
information for municipal securities NIIDS should make the reporting
and clearance and settlement of trades in municipal securities more
timely and accurate. As a result, DTC's proposed rule change should
promote the prompt and accurate clearance and settlement of securities
transactions.\15\
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\13\ 15 U.S.C. 78s(b).
\14\ 15 U.S.C. 78q-1(b)(3)(F).
\15\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
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The Commission believes there is good cause for approving the
proposed rule change prior to the thirtieth day after the date of
publication of notice of filing because by so approving the proposed
rule change DTC will be able to provide a longer Optional Period for
users to use and become accustom to NIIDS before its use is mandated
and will allow DTC to implement NIIDS according to its system
implementation schedule.
IV. 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,\16\ that the proposed rule change (File No. SR-DTC-2007-10) be and
hereby is approved on an accelerated basis.
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\16\ 15 U.S.C. 78s(b)(2).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-10213 Filed 5-7-08; 8:45 am]
BILLING CODE 8010-01-P