[Federal Register Volume 75, Number 235 (Wednesday, December 8, 2010)]
[Notices]
[Pages 76506-76508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30721]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63415; File No. SR-DTC-2010-16]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating To Extending the End-of-Day Cutoff Time for Processing to The 
Federal Reserve and To Reflect Other Changes Requested by the Federal 
Reserve

December 2, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on November 18, 2010, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared 
primarily by DTC. DTC filed the proposed rule change pursuant to 
Section 19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-4(f)(4) \3\ 
thereunder so that the proposal was effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \3\ 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change will extend the end of day cutoff time for 
processing to the Federal Reserve and will reflect other changes 
requested by the Federal Reserve.

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

[[Page 76507]]

summaries, set forth in sections A, B, and C below, of the most 
significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    DTC's end-of-day settlement processing system controls and 
coordinates the settlement of Participant accounts and Settling Bank 
\4\ accounts on DTC's system. The settlement process occurs through the 
Fedwire system and is initiated when DTC posts final figures for 
Participants and Settling Banks. Recently, the Federal Reserve (``FR'') 
reviewed their current collateral processes and identified 
opportunities to improve the efficiency and timing of pledging 
collateral. To implement those changes, the FR has requested that DTC 
make revisions to its settlement schedule relating to the timing for 
Participants to pledge collateral to a Federal Reserve Bank 
(``FRB'').\5\ Additionally, the FR has requested that DTC consolidate 
the pledge reasons used for discount window and daylight overdraft 
payment system risk purposes.
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    \4\ The term ``Settling Bank'' means a DTC Participant that is a 
bank or trust company subject to supervision or regulation pursuant 
to Federal or State banking laws and is a party to an effective DTC 
Settling Bank Agreement.
    \5\ The Pledge service allows a pledgor Participant to pledge 
securities as collateral for a loan or for other purposes and also 
to request the release of pledged securities. Pledges and releases 
to a FRB are made free of value, which means that the securities are 
pledged on DTC books but the funds side of the related transaction 
is settled outside of DTC.
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    Specifically, the FR has requested that DTC remove the pledge code 
05-Daylight (Funds) Overdraft to prevent the future use of this 
code.\6\ Instead, Participants will use the pledge code 01- Discount 
Window to submit pledges relating to daylight overdraft and relating to 
the discount window.
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    \6\ DTC will modify the automated input file feed option with an 
error message when requests are submitted with the purpose pledge 
code 05-Daylight (Funds) Overdraft. The error message will let the 
user know to use pledge code 01 instead.
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    Effective December 2, 2010, DTC will extend the end-of-day cutoff 
time for processing pledges and releases to/from the FR from 3 \7\ p.m. 
to 5 p.m. to facilitate late-day processing for depository 
institutions.\8\ Effective December 10, 2010, DTC will consolidate the 
pledge codes used for discount window and daylight overdraft payment 
system risk purposes into one code. The extended period for pledge 
affords greater flexibility in determining and securing liquidity needs 
which may, among other matters, enhance DTC settlement and generally 
help to minimize systemic risk. These accommodations will not adversely 
affect DTC's settlement, including its processing schedule and other 
cutoffs. These changes will necessitate revisions to the existing DTC 
Settlement Service Guide and are attached to DTC's proposed rule change 
as Exhibit 5.
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    \7\ All times refer to Eastern Time.
    \8\ Depository institutions maintaining a deposit account at an 
FRB can make free pledges and release requests to the FRB. All DTC 
bank participants that are members of the FR are automatically 
eligible to pledge securities to FRBs that are DTC pledgees using 
the participant/non-participant pledge facility. DTC allows non-
participants to pledge collateral to FRBs through DTC bank 
participants.
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    Additionally, DTC is making unrelated technical changes to the 
Settlement Service Guide to conform to certain rule changes that have 
previously been filed with the Commission.\9\ These changes include 
modifications to the Settlement Processing schedule as well as removing 
certain input methods that no longer exist and are detailed in the 
attached Exhibit 5.
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    \9\ In 2004, the Commission approved a filing in which all 
reclaims of valued Money Market Instrument (``MMI'') issuance 
transactions received by DTC after 2:30 p.m. are treated as 
``unmatched'' and are subject to all original transaction-processing 
rules. Securities Exchange Act Release No. 50006 (July 19, 2004), 69 
FR 43042 (June 12, 2004) (File No. SR-DTC-04-03). In 2009, DTC 
enhanced its systems in order to provide Issuing Paying Agents 
(``IPAs'') with the ability to monitor their credit exposure to MMI 
issuers through an IPA Maturity Presentment ``Pend'' function. 
Securities Exchange Act Release No. 59695 (Apr. 2, 2009), 74 FR 7714 
(Feb. 19, 2009) (File No. SR-DTC-2009-02). In 2010, DTC implemented 
a new function that allows DTC Participants to set a profile in the 
Participant Browser System so that they can request that excess 
funds be wired to their settling bank account at approximately 3:20 
p.m. Securities Exchange Act Release No. 61922 (Apr. 15, 2010), 75 
FR 21072 (Apr. 22, 2010) (File No. SR-DTC-2010-07). DTC is updating 
its Service Guide to further reflect these changes. DTC is also 
updating the Settlement Service Guide to reflect proper contact 
information and provide definitions of certain terms.
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    DTC states that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \10\ and the rules and 
regulations thereunder applicable to DTC because the proposed rule 
change will promote the prompt and accurate clearance and settlement of 
securities transactions because it aligns its cutoff time for 
processing pledges and releases to and from an FRB with the timing for 
the processing of pledges in the market generally.
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    \10\ 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 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

    DTC has not solicited or received written comments relating to the 
proposed rule change. DTC will notify the Commission of any written 
comments it receives.

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

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(4) \12\ 
because the proposed rule change effects a change in an existing 
service of DTC that (i) does not adversely affect the safeguarding of 
securities or funds in DTC's custody or control or for which it is 
responsible and (ii) does not significantly affect the respective 
rights of DTC or persons using the service. At any time within 60 days 
of the filing of the proposed rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act.
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    \11\ Supra note 2.
    \12\ Supra note 3.
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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 No. SR-DTC-2010-16 on the subject line.

Paper Comments

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

All submissions should refer to File No. SR-DTC-2010-16. 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

[[Page 76508]]

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 Web site viewing and printing in the 
Commission's Public Reference Room, 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 DTC's principal office and DTC's Web site at http://www.dtc.org/impNtc/mor/index.html. 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 No. SR-DTC-2010-16 and should be submitted on or before December 
29, 2010.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-30721 Filed 12-7-10; 8:45 am]
BILLING CODE 8011-01-P