[Federal Register Volume 86, Number 53 (Monday, March 22, 2021)]
[Notices]
[Pages 15281-15284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05823]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91336; File No. SR-DTC-2021-003]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Remove the Requirement for Participants To Submit Monthly Position 
Confirmations and Clarify Participant Obligation To Reconcile Activity 
on a Regular Basis

March 16, 2021.
    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 March 9, 2021, 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)(2) 
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)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change of The Depository Trust Company (``DTC'') 
would eliminate the requirement that a Participant must confirm its 
activity statements monthly through DTC's Participant Inquiry 
Notification System (``PINS'') system. Pursuant to the proposed rule 
change, this requirement would be removed from the DTC PTS/PBS 
Functions Guides \5\ (``PTS/PBS Guides''), as described below. In 
addition, the proposed rule change would revise and add text to clarify 
Participants' ongoing obligations to reconcile their respective 
transaction activity as set forth in the ClaimConnect\TM\ Service 
Guide, Custody Service Guide, Deposits Service Guide, Distributions 
Service Guide, Redemptions Service Guide, Reorganizations Service 
Guide, Settlement Service Guide and Underwriting Service Guide 
(``Service Guides'').\6\
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    \5\ Available at http://www.dtcc.com/settlement-and-asset-services/edl-ptspbs-function-guides.
    \6\ Available at https://www.dtcc.com/legal/rules-and-procedures. The service guides constitute Procedures of DTC. 
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, infra note 2. 
DTC's Procedures are filed with the Securities and Exchange 
Commission (``Commission''). They are binding on DTC and each 
Participant in the same manner as they are bound by the Rules. See 
Rule 27, infra note 2.
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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 of DTC would eliminate the requirement 
that a Participant must confirm its activity statements monthly through 
PINS. Pursuant to the proposed rule change, this requirement would be 
removed from the PTS/PBS Guides,\7\ as described below. In addition, 
the proposed rule change would revise and add text to clarify 
Participants' ongoing obligations to reconcile their respective 
transaction activity and other information as set forth in the Service 
Guides.
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    \7\ Available at http://www.dtcc.com/settlement-and-asset-services/edl-ptspbs-function-guides.
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Background
    DTC provides regular reports and statements to Participants showing 
their settlement activity; this includes activity, risk control 
monitoring and settlement reports. The Procedures of DTC require 
Participants to reconcile both their activity and positions with DTC 
upon receipt of applicable daily activity statements at the end of each 
day and to immediately report any discrepancies.\8\ Participants must 
also provide a month-end confirmation of their activity.\9\
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    \8\ See Settlement Service Guide, see supra at 6.
    \9\ See PTS/PBS Guides (PIAR-PUTS), available at http://www.dtcc.com/-/media/Files/Downloads/Settlement-Asset-Services/EDL/PTS_Functions_P2.pdf at 20-21.
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    With respect to the month-end confirmation, the PTS/PBS Guides 
require each Participant to reconcile and confirm with DTC its month-
end securities positions listed on its DTC monthly statement of 
positions

[[Page 15282]]

(``Monthly Position Statement'').\10\ No later than the 10th business 
day after the last Friday of the month, the Participant must confirm 
the accuracy of the position statement electronically via PINS.\11\
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    \10\ Id.
    \11\ Id.
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    If a Participant has more than one account, it must confirm the 
Monthly Position Statement for each account. Also, a partner or officer 
of the Participant must perform the end-of-month confirmation at least 
once in a 12-month period.\12\
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    \12\ Id.
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    Pursuant to the PTS/PBS Guides, failure by a Participant to confirm 
within the prescribed schedule will subject it to fines, pursuant to 
DTC's Rule 21. A first occurrence will cause the Participant to receive 
a warning letter of a failure to provide timely confirmation. For a 
second occurrence, a fine of $150 will be charged. Each subsequent 
occurrence will be subject to a $300 fine. Occurrences are determined 
on a moving 12-month period.
    DTC believes that the requirement for Participants to submit a 
month-end confirmation of positions is no longer necessary for DTC or 
its Participants to ensure prompt and accurate reconciliations by 
Participants of their activity. In the past, Participants frequently 
received hard copy reports relating to their DTC activity, which could 
take longer to process and reconcile than electronic reports. Today, 
reports and statements are offered exclusively in electronic form, 
which facilitates the daily reconciliation of activity by Participants 
in a prompt and accurate manner through automated means. In this 
regard, DTC proposes to eliminate the requirement set forth in the PTS/
PBS Guides for Participants to submit a month-end confirmation, as 
described below. In this regard, an affirmative confirmation of 
positions would no longer be required and the functionality for such an 
affirmative confirmation would be decommissioned.
    In addition, DTC proposes to further clarify, within the Service 
Guides, Participants obligations to regularly reconcile their activity 
daily; and also, as applicable, refine text contained in certain 
Service Guides relating to Participants obtaining and reconciling 
certain corporate actions-related information that they may use in 
connection with their use of DTC's services, as described below. The 
proposed rule change would add contact information to the text of the 
Service Guides for a Participant to report to DTC any discrepancies in 
information, reports and statements provided to it by DTC on the 
Participant's activity and positions, as described below.
Proposed Rule Change
PTS/PBS Guides
    As mentioned above, the requirement that DTC proposes to remove, as 
described above, for a Participant to perform a month-end confirmation 
of its activity is set forth in the PTS/PBS Guides. In this regard, the 
proposed rule change DTC would delete the following text from the 
applicable section \13\ of the PTS/PBS Guides:
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    \13\ See supra note 9.
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``About End of Month Confirmation Procedures

    DTC procedures require you to reconcile and confirm with DTC 
your month-end positions listed on the DTC Monthly Position 
Statement. No later than the 10th business day after the last Friday 
of the month, you must confirm the accuracy of the position 
statement electronically via PINS. DTC will send a reminder notice 
of the confirmation due date via an electronic message posted on the 
PINS Bulletin Board.
    If you have multiple accounts, you must confirm the end-of-month 
position statement for each account. Also, a partner or officer of 
the participant firm must perform the end-of-month confirmation at 
least once in a 12-month period.
    Note--You may need a new password or password reset, which can 
be obtained by contacting your relationship manager. This must be 
accomplished within the 10-day confirmation period.
    You must ensure adequate backup to fulfill this ongoing 
requirement. Failure to confirm within the prescribed schedule will 
subject you to fines, pursuant to DTC's Rule 21. (DTC's rules are 
available at https://login.dtcc.com/dtcorg) You will receive a 
warning letter for the first occurrence of a failure to provide 
timely confirmation. For a second occurrence, a fine of $150 will be 
charged. Each subsequent occurrence will be subject to a $300 fine. 
Occurrences are determined on a moving 12-month period.
    If you need help with obtaining passwords or have questions 
about this procedure, please contact your relationship manager. For 
help with using the PTS function PINS or the Web version (available 
at https://login.dtcc.com/dtcorg), please call 1-(888) 382-2721 and 
select option 6.
    To view the procedures and screens for processing end of month 
confirmations, click here.

 Associated Products

    PINS is used in association with all of DTC's services and 
products.

List of Procedures:

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Accessing the Bulletin Board

    Use the following procedure to access the Bulletin Board where 
you can view global notices as well as your own notices.
    1. Type PINS on the Enter Function screen and press ENTER.
    Result--The PINS Menu appears.
    2. Press PF3/15. Result--The Bulletin Board Notice List appears.
    3. Press PF6/18 or type X to the left of a selected notice and 
press ENTER to view details for a notice.
    Result--The Bulletin Board Inquiry screen appears.
    Note--If you pressed PF6/18 you will be able to go through all 
the notices on the list using the scrolling keys.

Inquiring About End of Month Confirmations

    Use the following procedure to view information about your End 
of Month confirmations.
    1. Type PINS on the Enter Function screen and press ENTER.
    Result--The PINS Menu appears.
    2. Type 6 in the Enter Option field and press ENTER.
    Result--The End of Month Confirmation Inquiry screen appears, 
displaying your notification confirmations for the past thirteen 
months and the status of each.

Processing an End of Month Confirmation

    Use the following procedure to confirm outstanding end of month 
confirmations or add new notifications.
    1. Type PINS on the Enter Function screen and press ENTER.
    Result-- The PINS Menu appears.
    2. Type 11 in the Enter Option field and press ENTER.
    Result--The End of Month Confirmation Initialization screen 
appears.
    Note-- If a partner or officer of your company has not executed 
the confirmation process within the last twelve months, a message 
indicating this is displayed and you will not be able to continue 
this process. In this case, contact your relationship manager.
    3. Refer to the Field Descriptions for the End of Month 
Confirmation Initialization screen and type the appropriate 
information in the entry fields provided, then press ENTER.
    Result-- The End of Month Confirmation Browse screen appears, 
displaying the open notifications for the specified month and year.
    4. Optional. To view detailed information about the 
notifications, press PF6/18.
    Result-- The Notification Inquiry screen appears. You can use 
the scrolling keys to display the information for all items for the 
specified month and year.
    Note-- You can also display the details for a specific item on 
the End of Month Confirmation Browse screen by typing any character 
to the left of the item and pressing ENTER. The Notification Inquiry 
screen appears.
    5. Optional. To add a notification, press PF4/16.
    Result-- The Activity Code List screen appears.

[[Page 15283]]

    6. Optional. Type the appropriate code in the Enter Activity 
Code field and press ENTER.
    Result-- The Notification Add screen appears.
    7. Optional. Refer to the Field Descriptions for the 
Notification Add screen and type the appropriate information in the 
entry field provided, then press PF1/13.
    Result-- The notification is added.
    8. Optional. Press PF6/18.
    Result-- The End of Month Confirmation Browse screen appears, 
displaying the notification you added.
    9. Optional. To view the details of one or more notifications, 
see Step 4. To add another notification, see Steps 5 to 7.
    10. Press PF1/13 to confirm the notifications for the specified 
month and year.
    Result-- The message 'End of month confirmation has been 
finalized' appears.''
Service Guides
    In addition, to provide added clarity regarding a Participant's 
obligation to reconcile its activity daily, DTC would add the following 
text to the ``Overview'' section of each of the Service Guides: \14\
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    \14\ These Service Guides, consistent with the term defined 
above, include the ClaimConnect\TM\ Service Guide, Custody Service 
Guide, Deposits Service Guide, Distributions Service Guide, 
Redemptions Service Guide, Reorganizations Service Guide, Settlement 
Service Guide and Underwriting Service Guide. See also, supra note 
6.
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    ``Note: It is the sole responsibility of Participants to perform 
a daily reconciliation of their activity and positions with the 
information, reports and statements provided by DTC. Participants 
must immediately report to DTC any discrepancy between their 
activity and positions with the information, reports and statements 
provided by DTC or other issues relating to the accuracy of the 
information, reports and statements provided by DTC. Such reports 
must be made to DTC by (i) calling the Client Support hotline at 1-
888-382-2721 (and selecting Option 1, Option 1) to speak with a DTC 
representative and (ii) providing a written detailed description of 
the discrepancy to the DTC representative, or as otherwise directed 
by DTC in writing. DTC shall not be liable for any loss resulting or 
arising directly or indirectly from mistakes, errors, or omissions 
related to the information, reports or statements provided by DTC, 
other than those caused directly by gross negligence or willful 
misconduct on the part of DTC.''

    In addition, to promote consistency among the Service Guides in 
this regard, DTC would delete the following text as it appears in the 
``Overview'' section of the Deposits Service Guide because it would be 
replaced by the above.

    ``Warning! Although DTC makes every effort to provide 
Participants with timely information with respect to deposit 
activity, Participants are primarily responsible for maintaining 
such information for purposes of their own bookkeeping. It is 
recommended that every Participant reconcile its records with 
information provided by DTC before and after making a deposit and 
before and after any critical dates.''

    Also, to promote consistency among the Service Guides in this 
regard, DTC would delete the following text as it appears in the 
``Overview'' section of the Settlement Service Guide because it would 
be replaced by the above.

    ``Note--Although DTC makes every effort to provide the 
Participant with timely information, the Participant is primarily 
responsible for obtaining such information without reliance on DTC. 
DTC recommends that Participants reconcile their records with DTC's 
records before any critical dates or cutoff times.''

    Furthermore, DTC would delete the following text as it appears in 
the ``Overview'' section of the Distributions Service Guide relating to 
obtaining and reconciling certain corporate actions-related information 
and replace it with text revised for further clarity in this regard, as 
more fully described below:

    ``Note: Although DTC makes every effort to provide you with 
timely information regarding income payments, you are primarily 
responsible for obtaining such information without reliance on DTC. 
We recommend that you reconcile your records with DTC's in advance 
of dividend or interest payable dates.''

    Also, DTC would delete the following text as it appears in the 
``Overview'' section of the Redemptions Service Guide relating to 
obtaining and reconciling certain corporate actions-related information 
and replace it with text revised for further clarity in this regard, as 
more fully described below:

    ``Note: Although DTC makes every effort to provide you with 
timely information regarding redemption and maturity payments, you 
are primarily responsible for obtaining such information without 
reliance on DTC. We recommend that you reconcile your records with 
DTC's in advance of redemption or maturity payable dates.''

    DTC would delete the following text as it appears in the 
``Overview'' section of the Reorganizations Service Guide relating to 
obtaining and reconciling certain corporate actions-related information 
and replace it with text revised for further clarity in this regard, as 
more fully described below:
    ``Note:
    This guide provides information regarding DTC's processing of 
reorganization events. DTC obtains this information from sources it 
believes to be reliable, but DTC does not represent the accuracy, 
adequacy, timeliness, completeness or fitness for any particular 
purpose of this information, which is provided as is. Furthermore, 
this information is subject to change. Participants should 
independently obtain, monitor and review any available documentation 
relating to the reorganization activity and verify information 
obtained from DTC. In addition, nothing contained in such 
information shall relieve participants of their responsibility under 
DTC's Rules and Procedures to check the accuracy of this 
information.''

    DTC would replace the text deleted from the Distributions, 
Redemptions and Reorganizations Service Guides, as proposed above, with 
the following:

    ``Subject to the terms of the ``Important Legal Information'' 
section, while DTC endeavors to provide Participants with timely and 
accurate information with respect to Distributions, Redemptions, and 
Reorganizations events, Participants are responsible for monitoring, 
obtaining and confirming such information without reliance on DTC, 
and for reconciling their records in advance of any critical dates, 
including, but not limited to, dividend, interest payable, 
redemption, maturity payable, and voluntary and mandatory 
reorganizations dates.''
Effective Date
    The proposed rule change would become effective upon filing.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Securities Exchange Act of 1934 
(``Act''),\15\ requires that the rules of the clearing agency be 
designed, inter alia, to promote the prompt and accurate clearance and 
settlement of securities transactions. DTC believes that the proposed 
rule change is consistent with this provision of the Act.
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    \15\ 15 U.S.C. 78q-1(b)(3)(F).
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    The proposal would eliminate an outdated requirement that 
Participants perform month-end confirmations, as described above. By 
removing this requirement, Participants would be able to allocate the 
time they spend on month-end confirmations to other DTC-related 
activities as they deem necessary, including performance of daily 
reconciliations. By removing an obligation that DTC believes in no 
longer necessary to facilitate the prompt and accurate reconciliation 
of Participant reports, and by facilitating Participants' ability to 
allocate the associated resources to other activities relevant to their 
DTC activity, including checking the accuracy of daily activity 
statements and reports relating to activity at DTC, DTC believes the 
proposed rule change would promote the prompt and accurate clearance 
and settlement of securities transactions.
    The proposed changes to revise and add text to clarify 
Participants' ongoing obligations to reconcile their respective 
transaction activity in the Service Guides will enhance the clarity and 
transparency of the Service Guides. By

[[Page 15284]]

enhancing the clarity and transparency of the Service Guides, the 
proposed changes would allow Participants to more efficiently and 
effectively conduct their business in accordance with the Service 
Guides, which DTC believes would promote the prompt and accurate 
clearance and settlement of securities transactions.
    Therefore, for the above reasons, DTC believes that the proposed 
rule change helps promote the prompt and accurate clearance and 
settlement of securities transactions, consistent with Section 
17(A)(b)(3)(F) of the Act.\16\
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    \16\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    DTC does not believe that the proposed rule change will have any 
impact on competition because the elimination of the requirement of a 
month-end confirmation by Participants, as described above, will merely 
change the ability of Participants to review and reconcile their 
activity with DTC in a prompt and accurate manner and not otherwise 
affect Participants' rights or obligations. The proposed changes to 
revise and add text to clarify Participants' ongoing obligations to 
reconcile their respective transaction activity in the Service Guides 
will merely enhance the clarity and transparency of the Services Guides 
and would not affect DTC's operations or the rights or obligations of 
the Participants.

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

    Written comments relating to this 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \17\ of the Act and paragraph (f) \18\ of Rule 19b-4 
thereunder. 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:

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-2021-003 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-2021-003. 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-2021-003 and should be submitted on 
or before April 12, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.


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    \19\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2021-05823 Filed 3-19-21; 8:45 am]
BILLING CODE 8011-01-P