[Federal Register Volume 89, Number 71 (Thursday, April 11, 2024)]
[Notices]
[Pages 25684-25686]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07640]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99911; File No. SR-DTC-2024-004]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Update the Deposits Service Guide and the Operational Arrangements

April 5, 2024.
    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 April 2, 2024, 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 
primarily 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 would amend the Deposits Guide and the 
Operational Arrangements to reflect the upcoming migration of the 
Deposit/Withdrawal at Custodian (``DWAC'') functionality for securities 
in the DTC Fast Automated Securities Transfer (``FAST'') program 
(``FAST-eligible Securities'') \5\ from PTS/PBS \6\ to the new DTC 
Securities Processing Application (``SPA'') system. In addition, DTC is 
proposing to amend the Deposits Guide to make technical and ministerial 
changes, as described in greater detail below.\7\
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    \5\ A FAST-eligible Security is a DTC-eligible Security that has 
a transfer agent that is an approved FAST transfer agent.
    \6\ PTS (Participant Terminal System) and PBS (Participant 
Browser System) are user interfaces for DTC settlement and asset 
services functions. PTS is mainframe-based, and PBS is web-based 
with a mainframe back-end. Participants may use either PTS or PBS, 
as they are functionally equivalent.
    \7\ Each term not otherwise defined herein has its respective 
meaning as set forth in the Rules, By-Laws and Organization 
Certificate of DTC (``Rules''), the Deposits Service Guide 
(``Deposits Guide''), the Operational Arrangements (Necessary for 
Securities to Become and Remain Eligible for DTC Services) 
(``Operational Arrangements''), available at http://www.dtcc.com/legal/rules-and-procedures.aspx.
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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 Deposits Guide and the 
Operational Arrangements to reflect the upcoming migration of the 
Deposit/Withdrawal at Custodian (``DWAC'') functionality for securities 
in the DTC Fast Automated Securities Transfer (``FAST'') program 
(``FAST-eligible Securities'') \8\ from PTS/PBS \9\ to the new DTC 
Securities Processing Application (``SPA'') system. In addition, DTC is 
proposing to amend the Deposits Guide to make technical and ministerial 
changes, as more fully described below.
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    \8\ A FAST-eligible Security is a DTC-eligible Security that has 
a transfer agent that is an approved FAST transfer agent.
    \9\ PTS (Participant Terminal System) and PBS (Participant 
Browser System) are user interfaces for DTC settlement and asset 
services functions. PTS is mainframe-based, and PBS is web-based 
with a mainframe back-end. Participants may use either PTS or PBS, 
as they are functionally equivalent.
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(i) Background
Securities Processing Modernization Program
    DTC has undertaken a multiyear and multiphase initiative to enhance 
and modernize its securities processing systems. DTC's current security 
processing system (``SPS'') applications utilize legacy mainframe, 
terminal-based, centralized computing technology, which Participants 
and FAST Agents typically access through PTS/PBS. The SPS applications 
are, and have been for decades, robust and reliable. However, because 
the SPS is comprised of various distinct mainframe legacy applications, 
enhancements and maintenance of such are becoming more difficult and 
more costly. Accordingly, as part of its overall modernization efforts, 
DTC determined to create a more effective and efficient securities 
processing model with greater flexibility for new products, maintenance 
and future enhancements--the SPA system.
    With this proposed rule change, DTC would migrate the DWAC 
functionality currently used by Participants and FAST Agents through 
PTS/PBS to the SPA system, without any cost or investment needed by 
Participants or FAST Agents. SPA is built on distributed server-based 
computing and is designed to provide a system that is streamlined, 
resilient and in line with the needs and usability standards of 
Participants and FAST Agents.
About FAST and DWAC
    The FAST program reduces and streamlines certificate movements 
between DTC and transfer agents. For FAST-eligible Securities, the FAST 
Agent, as custodian for DTC, hold the securities registered in the name 
of DTC's nominee, Cede & Co., in the form of global balance 
certificates (``FAST Balance Certificate''). Each FAST Balance 
Certificate represents the amount (e.g., shares, units, obligations) of 
a specific security registered to Cede & Co., as nominee of DTC, on the 
books of the FAST Agent (i.e., the ``DTC FAST Balance'' of the 
security).
    A FAST Agent may custody the FAST Balance Certificates in the form 
of a certificate that either (i) evidences a fixed number of shares, 
units, or obligations and is cancelled and reissued daily, or (ii) 
reflects that the amount of the DTC FAST Balance shown on the books of 
the issuer is represented by such certificate, and the certificate is 
not cancelled as that number of share, units, or obligations 
fluctuates. FAST Agents are required to confirm daily to DTC the 
numbers of share, units or obligations, as the case

[[Page 25685]]

may be, reflected on each FAST Balance Certificate and registered in 
the same [sic] of Cede & Co.
    A Participant can deposit a physical certificate for a FAST-
eligible Security with DTC directly, and DTC will credit the 
Participant's account by the amount of the deposit, and send the 
certificate received from the Participant to the FAST Agent. The FAST 
Agent will cancel the certificate and increase the DTC FAST Balance for 
the security by the amount being deposited.\10\
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    \10\ For more information about FAST, see Securities Exchange 
Act Release Nos. 12353 (Apr. 20, 1976), 41 FR 17823 (Apr. 28, 1976) 
(SR-DTC-76-3); 13342 (Mar. 8, 1977) (SR-DTC-76-3); 14997 (Jul. 26, 
1978), 43 FR 33977 (Aug. 2, 1978) (SR-DTC-78-11); 21401 (Oct. 16, 
1984) (SR-DTC-84-8); 31941 (Mar. 3, 1993), 58 FR 13291 (Mar. 10, 
1993) (SR-DTC-92-15); 46956 (Dec. 6, 2002), 67 FR 77115 (Dec. 16, 
2002) (SR-DTC 2002-15); 64191 (Apr. 5, 2011), 76 FR 20061 (Apr. 11, 
2011) (SR-DTC-2010-15).
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    The deposit functionality of DWAC permits a Participant to make a 
deposit of a FAST-eligible Security directly with the FAST Agent for 
the security, which will then cancel the certificate (if a physical 
deposit) and increase the DTC FAST Balance for the security by the 
amount being deposited. The FAST Agent will confirm the deposit to DTC, 
which will credit the Participant's account with the amount of the 
deposit. Similarly, a Participant can make a DWAC withdrawal, in which 
the FAST Agent will reduce the DTC FAST Balance for the amount of the 
security being withdrawn and will re-register the amount of the 
security being withdrawn into the name of the Participant or to another 
party identified by the Participant.\11\
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    \11\ For more information about the DWAC service, see Securities 
Exchange Act Release No. 30283 (Jan. 23, 1992), 57 FR 3658 (Jan. 30, 
1992) (SR-DTC-91-16).
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(ii) Proposed Rule Change
DWAC Functionality
    FAST Agents currently use the Custodian Deposit/Withdrawal at 
Custodian (``CDWC'') function on PTS (or the TA Direct Deposit/
Withdrawal function on PBS), to view and approve the DWAC transactions 
of Participants. In addition, FAST Agents can also use the optional 
DWAC Centralized Billing through PTS/PBS to automate the billing and 
collection of pass-through DWAC fees charged to Participants by the 
FAST Agent. Participants currently use the Participant Deposit/
Withdrawal at Custodian (``PDWC'') function on PTS (or the Part Direct 
Deposit/Withdrawal functions on PBS) to view and to input deposit and 
withdrawal instructions for their DWAC transactions.
    Pursuant to the proposed rule change, the DWAC functionality 
currently used by Participants and FAST Agents through PTS/PBS will 
migrate to the SPA system. As of March 28, 2024, FAST Agents and 
Participants will be required to conduct these activities through the 
SPA system, which is accessible through the DTCC Portal at MyDTCC.com. 
In addition, pursuant to the proposed rule change, APIs for the SPA 
system would be available in connection with DWAC.
Deposits Guide and Operational Arrangements Amendments
    To effectuate the proposed rule change, DTC would make the 
following changes to the Deposits Guide and the Operational 
Arrangements:
    (a) The Deposits Guide
    (i) In the ``Depositing Securities at DTC'' section:
    (1) Add a reference to the Securities Processing Application (SPA) 
system and, in the list of methods for deposit, replace ``The Fast 
Automated Securities Transfer system (FAST) (via the PTS function PDWC 
and PBS function Participant Direct Deposit Withdrawal)'' with ``The 
SPA System (via Application Programming Interface (API) or via the DTCC 
Portal) to inquire, create and review transactions;'' and
    (2) Clarify that a Participant receives same-day credit for its 
DWAC deposit, as long as the DWAC deposit is ``entered by the 
Participant and created via SPA and approved by the custodian/agent'' 
prior to noon Eastern Time.\12\
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    \12\ Pursuant to the proposed rule change, DTC would also remove 
``Standard'' from the references to ``Eastern Standard Time'' in 
this subsection.
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    (ii) In the ``Deposit/Withdrawal at Custodian (DWAC)'' section:
    (1) In the ``About the Product'' subsection, add the following at 
the end of the paragraph, ``DWAC is available on the Securities 
Processing Application (SPA) system via the DTCC Portal or Application 
Programming Interface (API).''
    (2) In the ``How the Product Works'' subsection:
    (a) Replace references to DWACs being performed through PTS/PBS 
with references to the SPA system, and add language to reflect that 
when a Participant requests a DWAC, a unique Transaction ID is assigned 
(which allows for tracking by the Participant and the custodian/agent);
    (b) Replace references to the confirmation ticket and confirmation 
status types generated by PTS/PBS with a list of the SPA Transaction 
Status types available in the SPA DWAC transaction life cycle; and
    (c) Add a note that the information is available via API and that 
information on APIs is available on the DTCC API Marketplace via 
https://www.dtcc.com/api.
    (3) Replace the entirety of the ``Associated PTS/PBS File 
Functions'' subsection with the new ``Associated SPA Portal Navigation/
File Functions/Application Programming Interface (APIs)'' subsection. 
The new subsection would provide a table of the applicable SPA Function 
access path and a description of the function, as well as a row 
reflecting API and the continuing availability of the CCF Batch Files.
    (b) The Operational Arrangements
    (i) In Section II.B.2.c (DWAC), (i) add a reference to the SPA 
system for processing DWAC transactions; (ii) replace a reference to 
DWAC with ``SPA system;'' and (iii) replace a reference to PTS/PBS with 
``SPA system.''
2. Statutory Basis
    Section 17A(b)(3)(F) of the Securities Exchange Act of 1934 
(``Act'') requires, inter alia, that the Rules be designed to promote 
the prompt and accurate clearance and settlement of securities 
transactions.\13\ As described above, the proposed rule change would 
amend the Deposits Guide and the Operational Arrangements to reflect 
the upcoming migration of the DWAC functionality for Participants and 
FAST Agents from the legacy PTS/PBS system to the new SPA system. By 
migrating the DWAC functionality to a system with enhanced usability, 
flexibility, and resiliency, the proposed rule change is designed to 
support a more effective and efficient DTC securities processing model. 
Accordingly, DTC believes that the proposed rule change would promote 
the prompt and accurate clearance and settlement of securities 
transactions, consistent with the requirements of Section 17A(b)(3)(F) 
of the Act, cited above.
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    \13\ 15 U.S.C. 78q-1(b)(3)(F).
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    The proposed rule changes are also designed to be consistent with 
Rule 17ad-22(e)(21) which requires, in part, that each covered clearing 
agency establish, implement, maintain and enforce written policies and 
procedures reasonably designed to be efficient and effective in meeting 
the requirements of its participants and the markets it serves.\14\ As 
described above, by migrating the DWAC functionality to a system with 
enhanced usability, flexibility, and resiliency, the proposed rule 
change is designed to support a more effective and efficient DTC 
securities processing model which

[[Page 25686]]

would make DTC more effective and efficient in meeting the requirements 
of its participants and the markets it serves, in accordance with the 
requirements of Rule 17ad-22(e)(21).
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    \14\ 17 CFR 240.17ad-22(e)(21).
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(B) Clearing Agency's Statement on Burden on Competition

    DTC believes that the proposed rule change to amend the Deposits 
Guide and the Operational Arrangements to reflect the upcoming 
migration of the DWAC functionality for Participants and FAST Agents 
from the legacy PTS/PBS system to the new SPA system would not have any 
impact on competition.\15\ The proposed rule change would migrate the 
DWAC functionality to a system with enhanced usability and flexibility 
that will be available to all Participants and FAST Agents equally at 
no additional cost or effort to them. In light of the foregoing, DTC 
does not believe that the proposed rule change would impose a burden on 
competition.\16\
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    \15\ 15 U.S.C. 78q-1(b)(3)(I).
    \16\ Id.
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    DTC has not received or solicited any written comments relating to 
this proposal. If any written comments are received, they would be 
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
    Persons submitting comments are cautioned that, according to 
Section IV (Solicitation of Comments) of the Exhibit 1A in the General 
Instructions to Form 19b-4, the Commission does not edit personal 
identifying information from comment submissions. Commenters should 
submit only information that they wish to make available publicly, 
including their name, email address, and any other identifying 
information.
    All prospective commenters should follow the Commission's 
instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/how-to-submit-comments. General 
questions regarding the rule filing process or logistical questions 
regarding this filing should be directed to the Main Office of the 
Commission's Division of Trading and Markets at 
[email protected] or 202-551-5777.
    DTC reserves the right to not respond to any comments received.

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 and paragraph (f) 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.

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-DTC-2024-004 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-2024-004. 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 (https://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 
a.m. and 3 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 (dtcc.com/legal/sec-rule-filings). Do not include personal 
identifiable information in submissions; you should submit only 
information that you wish to make available publicly. We may redact in 
part or withhold entirely from publication submitted material that is 
obscene or subject to copyright protection. All submissions should 
refer to File Number SR-DTC-2024-004 and should be submitted on or 
before May 2, 2024.

    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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-07640 Filed 4-10-24; 8:45 am]
BILLING CODE 8011-01-P