[Federal Register Volume 74, Number 32 (Thursday, February 19, 2009)]
[Notices]
[Pages 7715-7716]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-3428]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59386; File No. SR-DTC-2008-06]


Self-Regulatory Organizations; The Depository Trust Company; 
Order Approving Proposed Rule Change, As Amended, To Modify End of Day 
Settlement Procedures Relating to Settlement Acknowledgement Cut-Off 
Time Frames for Settling Banks

February 11, 2009.

I. Introduction

    On June 19, 2008, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') and on August 
7, 2008, amended proposed rule change SR-

[[Page 7716]]

DTC-2008-06 pursuant to Section 19(b)(1) of the Securities Exchange Act 
of 1934 (``Act'').\1\ Notice of the proposal was published in the 
Federal Register on August 18, 2008.\2\ The Commission received no 
comment letters. For the reasons discussed below, the Commission is 
approving the proposed rule change as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 58343 (August 12, 2008), 
73 FR 48259.
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II. Description

    DTC is modifying its end of day settlement procedures relating to 
settlement acknowledgement cut-off time frames for Settling Banks.\3\
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    \3\ The term ``Settling Bank'' means a Participant which is a 
bank or trust company, subject to supervision or regulation pursuant 
to Federal or State banking laws, which is a party to an effective 
Settling Bank Agreement.
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    DTC's End-of-Day Settlement Processing controls and coordinates the 
settling of Participant accounts and Settling Bank accounts on DTC's 
systems. Settlement occurs through the Fedwire system and is initiated 
when DTC posts final figures for Participants and Settling Banks. 
Although the actual settlement process begins with the posting of the 
final settlement figures at approximately 3:45 p.m. each day,\4\ DTC's 
settlement system provides Participants and Settling Banks with online 
reports throughout the processing day. These reports reflect gross 
debits, gross credits, and the net debit or credit for each Participant 
and a net-net figure for each Settling Bank.
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    \4\ All times are Eastern Standard Time.
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    Settling Banks, which settle for themselves, may also settle for 
other Participants. Currently, the cut-off time for Settling Banks to 
acknowledge their net-net settlement balance or to refuse to settle for 
a specific Participant is the later of 4:30 p.m. or 30 minutes after 
final net-net settlement balances are first made available by DTC.\5\ 
Any Participant for which a Settling Bank has refused to settle must 
make arrangements for payment of any amount due DTC.
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    \5\ The end-of-day net-net figure is the net of all 
participants' net balances after cross endorsement with the National 
Securities Clearing Corporation for which a Settling Bank settles, 
including its own accounts.
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    Once the Settling Bank acknowledgement process has been completed, 
DTC utilizes the Federal Reserve Bank of New York's National Settlement 
Service (``NSS'') to effect end-of-day cash settlement.
    DTC is proposing that the cut-off time for Settling Banks to 
acknowledge their settlement balance or refusal to settle for a 
Participant be the later of 4:15 p.m. or 30 minutes after DTC has 
posted final net-net settlement balances. DTC is proposing this change 
to enable DTC to be in a position to release the credit amount due 
Participants at an earlier time. Since DTC provides each Settling Bank 
with online reports throughout the processing day which reflect gross 
debits, gross credits, and the net debit or credit for each Participant 
and a net-net figure for the Settling Bank, DTC believes that this 
earlier cut-off time should not cause any undo burden. In the event 
that a Settling Bank is experiencing difficulty in identifying customer 
cash flows or has another extenuating circumstance and as a result 
needs more time to acknowledge settlement or refuses to settle, that 
Settling Bank would have to notify the Settlement department of its 
request for additional time prior to 4:15 p.m.

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. 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.\6\ The Commission 
believes that DTC's rule change is consistent with this Section because 
the rule change should facilitate the prompt and accurate clearance and 
settlement of securities by enabling DTC to send the NSS file to the 
Federal Reserve Bank of New York earlier in the day and thus complete 
settlement earlier.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change, as amended, is consistent with the requirements 
of the Act and in particular Section 17A of the Act and the rules and 
regulations thereunder.\7\
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    \7\ In approving the proposed rule change, as amended, the 
Commission considered the proposal's impact on efficiency, 
competition, and capital formation.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-2008-06) as amended be 
and hereby is approved.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Florence E. Harmon,
Deputy Secretary.
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    \8\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-3428 Filed 2-18-09; 8:45 am]
BILLING CODE 8011-01-P