[Federal Register Volume 84, Number 245 (Friday, December 20, 2019)]
[Notices]
[Pages 70256-70258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27452]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87756; File No. SR-DTC-2019-012]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Extend the Implementation Timeframe for a Rule Change To Implement a 
New Algorithm for Transactions Processed in the Night Cycle

December 16, 2019.
    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 December 13, 2019, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I, II and III below, which Items have 
been prepared by the clearing agency. DTC filed the proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(4) thereunder.\4\ 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change \5\ would amend the Procedures \6\ set 
forth in the DTC Settlement Service Guide (``Settlement Guide'')\7\ to 
extend the implementation timeframe for a rule change (``Approved Rule 
Change''), that became effective pursuant to rule filing SR-DTC-2019-
005, as amended (``Original Rule Filing'') \8\ upon approval by the 
Commission.\9\ In this regard, pursuant to the proposed rule change, 
the Settlement Guide would be amended to state that the Approved Rule 
Change will be implemented by March 6, 2020, rather than being 
implemented by December 6, 2019, as stated in the Settlement Guide, as 
discussed below.
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    \5\ Capitalized terms not defined herein are defined in the 
Rules, By-Laws and Organization Certificate of DTC (``Rules''), 
available at http://www.dtcc.com/~/media/Files/Downloads/legal/
rules/dtc_rules.pdf.
    \6\ Pursuant to the Rules, the term ``Procedures'' means the 
Procedures, service guides, and regulations of DTC adopted pursuant 
to Rule 27, as amended from time to time. See Rule 1, Section 1, 
supra note 5. Pursuant to Rule 27, each Participant and DTC is bound 
by the Procedures and any amendment thereto in the same manner as it 
is bound by the Rules. See Rule 27, supra note 5.
    \7\ Available at http://www.dtcc.com/~/media/Files/Downloads/
legal/service-guides/Settlement.pdf.
    \8\ Available at http://www.dtcc.com/legal/sec-rule-filings?subsidiary=DTC&pgs=1.
    \9\ See Securities Exchange Act Release No. 87022 (September 19, 
2019), 84 FR 50541 (September 25, 2019) (SR-DTC-2019-005).
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency 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. The clearing agency has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    The proposed rule change would amend the Procedures set forth in 
the Settlement Guide \10\ to extend the implementation timeframe for 
the Approved Rule Change. In this regard, pursuant to the proposed rule 
change, the Settlement Guide would be

[[Page 70257]]

amended to state that the Approved Rule Change will be implemented by 
March 6, 2020, rather than being implemented by December 6, 2019, as 
stated in the Settlement Guide, as discussed below.
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    \10\ Supra note 7.
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Background
    Pursuant to the Approved Rule Change, DTC will implement changes 
(``Night Cycle Reengineering'') related to its processing of book-entry 
Deliveries \11\ and Payment Orders \12\ in the DTC night cycle (``Night 
Cycle''). As more fully described in the Original Rule Filing, Night 
Cycle Reengineering is designed to maximize transaction throughput by 
optimizing available positions and controlling the order in which 
transactions are attempted for settlement within existing Night Cycle 
timeframes. Upon implementation, the reengineered Night Cycle will 
introduce a new, advanced settlement processing algorithm capable of 
evaluating each Participant's transaction obligations, available 
positions, transaction priorities and risk management controls, 
including Net Debit Cap and Collateral Monitor,\13\ to identify the 
transaction processing order that maximizes Night Cycle settlement 
rates.
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    \11\ Pursuant to Rule 1, the term ``Delivery'' as used with 
respect to a Security held in the form of a Security Entitlement on 
the books of DTC, means debiting the Security from an Account of the 
Deliverer and crediting the Security to an Account of the Receiver. 
Supra note 1.
    \12\ Pursuant to the Settlement Guide, ``Payment Order'' means a 
transaction in which a Participant charges another Participant for 
changes in value for outstanding stock loans or option contract 
premiums. See Settlement Guide, supra note 7, at 5.
    \13\ In managing its credit risk, DTC uses the Collateral 
Monitor and Net Debit Cap. These two controls work together to 
protect the DTC settlement system in the event of Participant 
default. The Collateral Monitor requires net debit settlement 
obligations, as they accrue intraday, to be fully collateralized; 
the Net Debit Cap limits the amount of any Participant's net debit 
settlement obligation to an amount that can be satisfied with DTC 
liquidity resources (the Participants Fund and the committed line of 
credit from a consortium of lenders). See Settlement Guide, supra 
note 7, at 64-67.
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    Pursuant to the Settlement Guide, the changes set forth in the 
Approved Rule Change are to take effect by December 6, 2019. DTC 
proposes to extend the implementation timeframe for the Approved Rule 
Change to allow additional time to facilitate finalization of 
operational testing of DTC systems changes related to the 
implementation of the Approved Rule Change.
    In this regard, pursuant to the proposed rule change, DTC proposes 
to amend the Settlement Guide with respect to the implementation 
timeframe setting forth the date by which the Approved Rule Change will 
become effective, as described below.
Proposed Rule Change
    The Settlement Guide contains the following legend (``Original 
Legend'') \14\ regarding the implementation timeframe for the Approved 
Rule Change.
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    \14\ See Settlement Guide, supra note 7 at 1.

    [Changes to these Procedures, as amended by File No. SR-DTC-
2019-005, are available at dtcc.com/legal/sec-rule-filings?subsidiary=DTC. These changes have been approved by the 
Securities and Exchange Commission but have not yet been 
implemented. By December 6, 2019, these changes will be implemented, 
and this legend will automatically be removed from these 
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Procedures.]

    Pursuant to the proposed rule change, this legend would be deleted 
and replaced with the following revised legend (``Revised Legend'').

    [Changes to these Procedures, as amended by File No. SR-DTC-
2019-005, are available at dtcc.com/legal/sec-rule-filings?subsidiary=DTC. These changes have been approved by the 
Securities and Exchange Commission but have not yet been 
implemented. By March 6, 2020, these changes will be implemented, 
and this legend will automatically be removed from these 
Procedures.]
Implementation Timeframe
    The proposed rule change would become effective upon filing with 
the Commission such that the text of the Settlement Guide would be 
revised to delete the Original Legend and replace it with the Revised 
Legend, as discussed above.
2. Statutory Basis
    DTC believes this proposal is consistent with the requirements of 
the Act and the rules and regulations thereunder applicable to a 
registered clearing agency. Specifically, DTC believes this proposal is 
consistent with Section 17A(b)(3)(F) of the Act \15\ for the reason 
described below.
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    \15\ 15 U.S.C. 78q-1(b)(3)(F).
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    Section 17A(b)(3)(F) of the Act requires, in part, that the Rules 
be designed to promote the prompt and accurate clearance and settlement 
of securities transactions.\16\ DTC believes that by allowing 
additional time to finalize operational testing of DTC system changes 
related to the implementation of the Approved Rule Change, the proposed 
rule change would facilitate the ability of DTC to implement the 
Approved Rule Change in a manner that minimizes the possibility of 
disruptions relating to implementation of Night Cycle Reengineering, 
which is designed to maximize transaction throughput in the Night 
Cycle, as discussed above. Therefore, DTC believes that the proposed 
rule change to extend the implementation timeframe, which would allow 
additional time for DTC to complete operational testing relating to the 
Approved Rule Change, would promote the prompt and accurate clearance 
and settlement of securities transactions, consistent with Section 
17A(b)(3)(F) of the Act.
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    \16\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    DTC does not believe the proposed rule change would have any impact 
on competition. The proposed rule change would extend the 
implementation timeframe for the Approved Rule Change and not affect 
existing processing of securities transactions at DTC.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    DTC has not solicited and does not intend to solicit written 
comments regarding the proposed rule change. DTC has not received any 
unsolicited written comments from interested parties. To the extent DTC 
receives written comments on the proposed rule change, DTC will forward 
such comments to the Commission.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \17\ and paragraph (f) of Rule 19b-4 
thereunder.\18\ 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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f).
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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:

[[Page 70258]]

Electronic Comments

     Use the Commission's internet comment form
    (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-DTC-2019-012 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-DTC-2019-012. This file 
number should be included on the subject line if email 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 website (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 website 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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of DTC and on DTCC's website 
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-DTC-2019-012 and should be submitted on 
or before January 10, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27452 Filed 12-19-19; 8:45 am]
 BILLING CODE 8011-01-P