[Federal Register Volume 89, Number 152 (Wednesday, August 7, 2024)]
[Notices]
[Pages 64511-64516]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-17389]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100637; File No. SR-DTC-2024-007]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify the DTC Operational Arrangements (Necessary for Securities To 
Become and Remain Eligible for DTC Services)

August 1, 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 July 26, 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 
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)(6) 
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)(6).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of amendments to DTC Operational 
Arrangements (Necessary for Securities to Become and Remain Eligible 
for DTC Services) (the ``OA'') \5\ to (i) insert, consolidate and 
update the procedures for an Agent processing a reorganizations event, 
offer, or solicitation (each, an ``Offer'') through the DTC Automated 
Tender Offer Program (``ATOP'') \6\ system or Automated Subscription 
Offer Program (``ASOP'') \7\ system in order to better align with 
current processing, and (ii) make related technical and clarifying 
changes relating to Offers processed through ATOP (an ``ATOP-eligible 
Offer'') or ASOP (an ``ASOP-eligible Offer''), as described in greater 
detail below.
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    \5\ Available at www.dtcc.com/~/media/Files/Downloads/legal/
issue-eligibility/eligibility/operational-arrangements.pdf. Each 
term not otherwise defined herein has its respective meaning as set 
forth in the OA, the Rules, By-Laws and Organization Certificate of 
DTC (the ``Rules'') and the Reorganizations Service Guide (the 
``Reorganizations Guide''), available at www.dtcc.com/legal/rules-and-procedures.
    \6\ For the history of ATOP, see Securities Exchange Act Release 
Nos. 26538 (Feb. 13,1989), 54 FR 7316 (Feb. 17, 1989) (SR-DTC-88-
19); 27139 (Aug. 14, 1989), 54 FR 34841 (Aug. 22, 1989) (SR-DTC-88-
19); 29168 (May 7, 1991), 56 FR 22742 (May 16, 1991) (SR-DTC-91-04); 
30678 (May 7, 1992), 57 FR 20541 (May 13, 1992) (SR-DTC-91-11); and 
32645 (July 16, 1993), 58 FR 39585 (SR-DTC-92-12).
    \7\ For more information about ASOP, see Securities Exchange Act 
Release No. 35108 (Dec. 16, 1994), 59 FR 67356 (Dec. 29, 1994) (SR-
DTC-94-15).
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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 purpose of the proposed rule change is to amend the DTC 
Operational Arrangements (Necessary for Securities to Become and Remain 
Eligible for DTC Services) (the ``OA'') to (i) insert, consolidate and 
update the procedures for an Agent processing a reorganizations event, 
offer, or solicitation (each, an ``Offer'') through the DTC Automated 
Tender Offer Program (``ATOP'') system or Automated Subscription Offer 
Program (``ASOP'') system in order to better align with current 
processing, and (ii) make related technical and clarifying changes 
relating to Offers processed through ATOP (an ``ATOP-eligible Offer'') 
or ASOP (an ``ASOP-eligible Offer''), as described below.
(i) Background
    ATOP is an instruction processor initially developed by DTC in 1988 
to automate the manner in which tender and exchange offers are 
processed through DTC. When an Agent processes an Offer through ATOP, 
Participants are able to (i) submit instructions or elections for the 
Offer without needing to provide a letter of transmittal \8\ or a 
notice of guaranteed delivery \9\ to the Agent, which will instead 
receive an electronic message transmitted by DTC through the ATOP 
system with respect to each instruction and election, and (ii) tender 
the subject securities directly from the Participant's account into the 
Agent's account maintained by DTC for purposes of the ATOP-eligible 
Offer or ASOP-eligible Offer (``Agent ATOP/ASOP Account''). ATOP can be 
used in connection with any corporate action event that DTC deems 
appropriate, including, but not limited to, tenders and exchanges, cash 
conversions, and event processing of mergers with elections.\10\
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    \8\ The letter of transmittal is the basic instrument for 
effecting transfer of tendered securities. It is the document by 
which a security holder of the subject company's securities, as 
applicable, accepts the invitation to tender or offer to purchase; 
offers to sell the subject company's shares to the bidder; appoints 
the depositary as the agent to receive and hold tendered securities; 
and guarantees to deliver the subject company's securities to or 
actually deposits the subject company's securities with the 
depositary.
    \9\ A notice of guaranteed delivery, sometimes called a 
``protect,'' is a document submitted to the tender agent prior to 
the expiration of the tender offer whereby the holder submitting the 
notice guarantees delivery of securities (a ``cover'' of the 
protect) after the expiration of the tender offer but before the 
expiration of the protection period.
    \10\ See Securities Exchange Act Release Nos. 56538 (Sep. 26, 
2007), 72 FR 56409 (Oct. 3, 2007) (SR-DTC-2007-09); 62119 (May 18, 
2010), 75 FR 29374 (May 25, 2010) (SR-DTC-2010-08); 69597 (May 16, 
2013), 78 FR 30382 (May 22, 2013) (SR-DTC-2013-06); and 81096 (July 
7, 2017), 82 FR 32406 (July 13, 2017) (SR-DTC-2017-011).
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    ASOP is an instruction processing system similar to ATOP that was 
developed by DTC around 1994 to automate the manner in which rights 
subscription offers are processed

[[Page 64512]]

through DTC. When an Agent processes an Offer through ASOP, a 
Participant can (i) submit subscription instructions without providing 
a subscription form, letter of transmittal, or a notice of guaranteed 
delivery to the Agent, which instead receives an electronic message 
transmitted by DTC through the ASOP system with respect to each 
instruction and election from DTC, and (ii) tender the subject rights 
directly from the Participant's account into the Agent ATOP/ASOP 
Account and authorize DTC to debit the payment from Participant's 
account and credit the payment to the Agent's account. When the 
underlying securities are distributed by the Agent, DTC credits the 
securities to the account of the Participant.
    Currently, in order to make an Offer eligible for ATOP or ASOP, the 
agent for the Offer must have entered into a corresponding agreement 
(``Master Agreement'') with DTC and been approved by DTC to process 
Offers as an ATOP Agent or an ASOP Agent, as applicable. The ATOP Agent 
Master Agreement and ASOP Agent Master Agreement provide, in relevant 
part, that the Agent agrees that (i) the delivery by DTC of an 
electronic message transmitted through the ATOP or ASOP system, with 
respect to each instruction and election (an ``Agent Message''), will 
satisfy the terms of each Offer made eligible for ATOP or ASOP (as 
applicable) as to the execution and delivery of a subscription form, 
letter of transmittal or a notice of guaranteed delivery, as the case 
may be, in the form of the subscription form, letter of transmittal or 
notice of guaranteed delivery required by the Offer by the Participant 
identified in such Agent's Message, and (ii) the agreement set forth 
above will be enforceable against the offeror in each Offer made 
eligible for ATOP or ASOP (as applicable) by the Participant identified 
in such Agent's Message. For each ATOP-eligible Offer or ASOP-eligible 
Offer, the Agent is required to electronically agree to a Letter of 
Agreement (``LOA'') that relates specifically to that Offer and 
contains additional terms, conditions, and requirements with respect to 
the Offer. ATOP Agents and ASOP Agents are also provided with a copy of 
the ATOP Agent procedures and ASOP Agent procedures, respectively. The 
procedures, which were originally drafted around 1989 and revised from 
time to time, outline the procedures and the technical operations of 
ATOP and ASOP.\11\
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    \11\ See e.g., Securities Exchange Release Nos. 26757 (Apr. 21, 
1989); 54 FR 18619 (May 1, 1989) (SR-DTC-88-19); 33797 (Mar. 22, 
1994); 59 FR 14696 (Mar. 29, 1994) (SR-DTC-93-11).
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(ii) Proposed Rule Change
    DTC currently provides the ATOP Agent procedures and the ASOP Agent 
procedures to the ATOP Agent and ASOP Agent, as applicable, upon 
onboarding. However, DTC has come to understand that when the Agent 
later makes additional Offers ATOP-eligible or ASOP-eligible, as the 
case may be, the Agent might not have the applicable procedures readily 
accessible or might not be familiar with current processes. In 
addition, on the basis of its interactions with ATOP Agents and ASOP 
Agents, DTC has determined that the clarification and update of certain 
elements of the procedures would enhance Agents' understanding and 
facility with the process. Further, since there is considerable overlap 
between ATOP Agents and ASOP Agents, DTC determined that it is 
duplicative to continue to have two separate agreements and procedures 
for ATOP and ASOP processing.
    Therefore, in order to make the Agent's procedures for ATOP and 
ASOP more streamlined, transparent, and reflective of current 
processes, DTC would discontinue use of standalone procedures and 
proposes to amend the OA to (i) insert consolidated and updated 
procedures for Agents that are processing ATOP-eligible Offers or ASOP-
eligible Offers, and (ii) make related technical and clarifying changes 
relating to ATOP-eligible Offers or ASOP-eligible Offers.
A. Deletion of Current Language
    Pursuant to the proposed rule change, DTC would delete the 
following:
    1. Delete the second paragraph in Section VI.D because cut-off 
times would be addressed in the text of the proposed rule change.
    2. Delete Section VI.D.2 because rights offers would be addressed 
in the text of the proposed rule change.
    3. Delete Section VI.D.4.a and the text beginning ``With regard to 
tender/exchange offers'' through ``Agent is required to approve and 
adhere to all requirements represented in the LOA which includes, but 
is not limited to, the following:'' because processing of tender/
exchange offers would be more fully described in the text of the 
proposed rule change.
B. Heading
    Above the paragraph beginning with ``At least one business day 
prior to payment and allocation of entitlements by DTC,'' DTC is 
proposing to insert a new Section VI.D.3 with the title ``DTC's 
Automated Tender Offer Program (``ATOP'') and DTC's Automated 
Subscription Offer Program (``ASOP'').''
C. Becoming an ATOP/ASOP Agent
    DTC is proposing to add a new subsection VI.D.3.a with the heading 
``Becoming an ATOP/ASOP Agent.'' Currently, the requirements for an 
Agent to become an ATOP or ASOP Agent are reflected in the ATOP Agent 
procedures and the ASOP Agent procedures, respectively. The new 
subsection would reflect the new consolidated designation of an Agent 
as an ATOP/ASOP Agent, which would be permitted to make an Offer ATOP 
or ASOP eligible. Specifically, in order to make an Offer eligible to 
be processed through ATOP or ASOP, an Agent must be an agent approved 
as an ATOP/ASOP Agent.
    To become an ATOP/ASOP Agent, the Agent must (i) obtain the proper 
connectivity to access the ATOP and ASOP functions as may be required 
by DTC, and (ii) execute a DTC OA Agent Letter, if the Agent does not 
already have one on file with DTC; and (iii) execute an Automated 
Tender Offer (ATOP) and Automated Subscription Offer Program (ASOP) 
Agent Master Agreement (``ATOP/ASOP Master Agreement''), if the Agent 
does not already have one on file at DTC.\12\
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    \12\ As noted above, this would be a change from the current 
structure, where an Agent has to be approved as an ATOP Agent or an 
ASOP Agent under separate agreements.
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    Two footnotes will be inserted to clarify when an Agent will be 
required to sign a new OA Letter and/or a new ATOP/ASOP Master 
Agreement. The footnotes would state as follows: ``All Agents must have 
a signed OA Agent Letter on file at DTC prior to making any Offer 
eligible for either ATOP or ASOP. All Agents must have a signed ATOP/
ASOP Master Agreement on file at DTC prior to making any Offer eligible 
for either ATOP or ASOP. Any Agent that had previously signed an ATOP 
Master Agreement and/or ASOP Master Agreement prior to August 1, 2024, 
will be required to execute a new ATOP/ASOP Master Agreement. DTC may, 
in its sole discretion, decline to make an Offer eligible for ATOP or 
ASOP if the Agent does not have an ATOP/ASOP Master Agreement on file 
with DTC.
    Pursuant to the proposed rule change, OA would provide that the DTC 
Rules, including, without limitation, the OA, as may be amended from 
time to time, and the LOA for the particular Offer will govern the 
rights and obligations of the Agent in respect of each ATOP-eligible 
Offer or ASOP-eligible Offer, as the case may be. In addition, the OA 
would

[[Page 64513]]

provide that by executing the ATOP/ASOP Master Agreement, the Agent 
acknowledges and agrees that:
    1. The transmission by DTC of an Agent's Message shall satisfy the 
terms of: \13\
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    \13\ The following footnote reference would be added: ``The 
Agent's Message is the electronic message that is generated and 
transmitted to the Agent through ATOP or ASOP with respect to each 
Participant instruction and election.''
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    a. each ATOP-eligible Offer as to the execution and delivery of a 
letter of transmittal, a notice of guaranteed delivery, or other form 
of instruction, election, or acceptance, as the case may be, in the 
form of the letter of transmittal, notice of guaranteed delivery, or 
other form of instruction, election, or acceptance required by the 
Offer by the Participant identified in such Agent's Message;
    b. each ASOP-eligible Offer as to the execution and delivery of a 
subscription form, a notice of guaranteed delivery, other form of 
instruction, election, or acceptance, as the case may be, in the form 
of the subscription form, notice of guaranteed delivery, or other form 
of instruction, election or acceptance required by the Offer by the 
Participant identified in such Agent's Message.
    2. The delivery of securities from the account of the Participant 
identified in the Agent's Message to the Agent's account maintained by 
DTC for purposes of the Offer (``Agent ATOP/ASOP Account'') shall 
satisfy the terms of each Offer as to the surrender of securities 
required by the Offer by the Participant identified in the Agent's 
Message.
    3. Notwithstanding anything to the contrary, for purposes of making 
a determination of the timeliness of an instruction, election, or 
acceptance and, if applicable, the tender of securities, the date and 
time of a Participant's submission of any instruction, election, or 
acceptance to DTC through ATOP or ASOP (as reflected in the Transaction 
ID or Subscription ID), and not the date and time of the transmission 
of the Agent's Message by DTC to the Agent, shall govern. A footnote 
would be inserted to state that ``By way of example, but without 
limitation, for purposes of determining the timeliness of a 
Participant's instruction and/or tender in connection with an Offer, 
the Participant's instruction is deemed to have been timely received 
by, and, if applicable, the securities timely tendered to, the Agent 
when the date and time of the submission of a Participant's instruction 
to DTC (as reflected in the Transaction ID or Subscription ID of the 
completed transaction) is prior to the applicable cutoff/expiration 
date and time, even if the transaction does not complete and/or an 
Agent's Message is not transmitted until after the applicable cutoff/
expiration date and time for the Offer.''
    4. The agreements set forth in the preceding paragraphs 1-3 are 
enforceable against the offeror of an ATOP-eligible Offer or ASOP-
eligible Offer by the Participant(s) identified in the applicable 
Agent's Message.
    5. Prior to making an Offer eligible for ATOP or ASOP, the Agent 
shall have obtained authorization by the offeror of the Offer to make 
the acknowledgements and agreements in the preceding paragraphs 1-4.
    6. The Agent must inspect all Agent's Messages promptly upon 
receipt and to immediately escalate any questions to the appropriate 
DTC contacts identified in the OA and in the LOA for the specific 
Offer.
    7. If the Agent believes that the acceptance of an Offer (including 
acceptance by notice of guaranteed delivery and cover of protect 
instructions) and/or the tender of securities reflected in an Agent's 
Message is deficient for some reason, it is the sole responsibility of 
the Agent to promptly notify the affected Participant directly to 
resolve the issue and/or request that the Participant enter a 
withdrawal of its acceptance. The Agent must also promptly notify DTC 
about the deficiency by emailing the DTC contacts listed in the OA and 
in the LOA for the specific Offer.
    8. The Agent acknowledges and agrees that if there are any events 
or amendments that occur during the life of the Offer, the Agent must 
immediately notify DTC, and confirm DTC's receipt of the notice. DTC 
may revoke the eligibility of an Offer, including, without limitation, 
in the event that the terms of the Offer are amended, or if DTC becomes 
aware of a fact, factor, or circumstance and determines, in its sole 
discretion, that it is not practical or feasible for DTC to provide 
services in respect of the Offer.
    9. The Agent will ensure that DTC has, at all times, up-to-date 
contact information for the Agent, including, but not limited to, for 
senior management and operational personnel.
D. ATOP Eligibility or ASOP Eligibility of an Offer
    DTC is proposing to insert a new subsection VI.D.3.b. with the 
heading ``ATOP Eligibility or ASOP Eligibility of an Offer.'' Pursuant 
to the proposed rule change, this section would reflect the current 
procedure on how an Agent can make an Offer ATOP-eligible or ASOP-
eligible and would add transparency to DTC's discretion to decline to 
process any Offer and to the ATOP and ASOP cutoff times for 
instructions, after which the ATOP/ASOP Agent would need to process 
instructions outside of DTC.
    The proposed new subsection would first remind Agents and Issuers 
that DTC has discretion to decline to process any Offer, and DTC's 
acceptance of a particular Offer in one case does not set a precedent 
for future Offers. All Agents and Issuers with a proposed non-standard 
Offer that could require special processing must confirm with DTC 
whether the particular Offer can be processed on the ATOP or ASOP 
platform before including references to, or instructions or directions 
for, ATOP or ASOP processing in any documentation or filings. The new 
subsection would then explain that to make an Offer ATOP-eligible or 
ASOP-eligible, the Agent must send the offering announcement, including 
the source document, and a completed DTC questionnaire to DTC within 
the timeframes and in the manner described in the OA. DTC may require 
the Agent to provide additional documentation if needed. For an ASOP-
eligible Offer, the Agent will also be required to provide the ``Agent 
Wire Instructions Letter'' for which DTC is to send the subscription 
payments.
    Once DTC's receipt and review of the documentation and information 
is complete, DTC will post the terms of the Offer on ATOP or ASOP, as 
the case may be, viewable by the Agent only. Within one business day of 
posting, the Agent must review and approve the details of the Offer and 
to approve the terms of the LOA for the Offer by entering an 
acknowledgement in ATOP or ASOP, as applicable. Any delays by the Agent 
may impact the timeliness of opening the Offer to participants. If the 
Agent reviews the details of the Offer and the terms of the LOA and 
disagrees with one or more terms or details, the Agent must notify DTC 
of its disagreement by entering the LOA rejection and the reason for 
the rejection in ATOP or ASOP, as applicable, and by email to the DTC 
contacts listed in the LOA. DTC, at its option, may work with the Agent 
to modify the terms and details and resolve any differences with the 
Agent. DTC will not make an Offer available to Participants unless all 
approvals have been received from the Agent.
    The proposed subsection would also note that when making an Offer 
ATOP-eligible or ASOP-eligible, DTC will confirm with the Agent the 
actual expiration date/time for the Offer and the DTC cutoff date/time 
for the Offer. For Offers in which the offering

[[Page 64514]]

documentation (i) allows for holders to participate in the Offer (i.e., 
submit instructions) on the expiration date until a time later than the 
DTC cutoff time of 6:00 p.m. ET for equities or 5:00 p.m. ET for debt 
(e.g., Offers with an actual expiration time of 11:59 p.m. ET on 
expiration date), or (ii) reflects an Offer expiration time on 
expiration date that is earlier than 5:00 p.m. ET on expiration date 
(e.g., an Offer with an 11:00 a.m. ET expiration time on expiration 
date), in which case DTC's cutoff date and time for such Offer will 
typically be at 6:00 p.m. ET for equities or 5:00 p.m. ET for debt on 
the business day prior to the actual expiration date. DTC will neither 
accept nor facilitate any instructions through ATOP/ASOP after the 
stated DTC cutoff date/time, and DTC has no responsibility or 
obligation to do so. After DTC cutoff date/time, the Agent will be 
responsible for administering protects and cover of protects. The Agent 
must make itself available to Participants and have the capabilities to 
handle protect instructions, tenders of securities, and payments 
directly with Participants. Further, if the Agent is not the tendering 
security's transfer agent it is the responsibility of the Agent to 
coordinate with the transfer agent to receive the tendered securities 
from Participants and/or to deliver the security entitlement (if 
applicable) to Participants upon payment.
E. ATOP-Eligible Offers
    DTC is proposing to insert a new subsection VI.D.3.c. with the 
heading ``ATOP-eligible Offers.'' As previously noted, pursuant to the 
proposed rule change, DTC would discontinue its practice of providing 
standalone ATOP Agent procedures and would insert clarified and updated 
ATOP procedures in the OA. This new subsection would provide such 
updated procedures in order to provide enhanced transparency and to 
reflect current processes relating to ATOP-eligible Offers.
F. Use of ATOP
    DTC is proposing to insert a new subsection VI.D.3.c. (i) with the 
heading ``Use of ATOP.'' Pursuant to the proposed rule change, to 
enhance the transparency of possible uses of the ATOP platform, this 
subsection would briefly explain that ATOP can be used for processing 
any Offer as DTC may deem appropriate, and that the procedures and 
requirements may differ for ATOP-eligible Offers that are not standard 
tender and exchange Offers and/or require special or manual processing.
    The new proposed subsection would reflect the existing language 
that with regard to certain Offers, such as tenders and exchanges and 
mergers with elections, ATOP procedures and systems must be used for 
all elections (e.g., original acceptances, withdrawals of acceptances, 
notices of guaranteed deliveries, conditional acceptances). Use of ATOP 
for these purposes is an eligibility requirement for securities that 
are the subject of such Offers unless it is communicated by the Issuer 
or Agent to DTC and determined by DTC that certain conditions preclude 
the use of DTC's processors for a particular event, or preclude DTC 
from allocating entitlements for an Offer (e.g., restricted securities 
that cannot be made DTC eligible).
    The proposed subsection will also note that the subsequent 
description of ATOP processing is for standard processing of a tender 
or exchange Offer on ATOP, but that ATOP may be used for processing any 
Offer as DTC may deem appropriate. Accordingly, certain processes and 
requirements may differ and, when applicable, will be communicated to 
the Agent by DTC in writing and/or in a rider to the ATOP/ASOP Master 
Agreement and/or in the LOA for the specific Offer. For illustration, a 
footnote would be added as follows: ``By way of example, but without 
limitation, in order to make a voting solicitation Offer eligible for 
ATOP, the Agent must have a signed voting addendum to the ATOP/ASOP 
Master Agreement on file at DTC.''
    The text of the proposed subsection would continue to explain that, 
in addition, for such Offers, including, but not limited to, Offers 
that require special or manual processing, the Agent and Issuer may be 
required to provide additional written instructions and 
indemnifications from the Agent and Issuer and to pay additional 
processing fees. Unless otherwise agreed between the parties, payment 
of such fees is due upon receipt of an invoice from DTC, prior to DTC's 
announcement of the Offer.
G. Participant Acceptance and Surrender of Securities Through ATOP
    DTC is proposing to insert a new subsection VI.D.3.c.(ii) titled 
``Participant Acceptances and Surrender of Securities Through ATOP'' to 
provide transparency into how instructions are inputted and processed 
through ATOP.
    Pursuant to the proposed rule change, this subsection would briefly 
summarize how the ATOP system processes Participant instructions, 
stating that when a Participant submits an instruction to DTC for an 
ATOP-eligible Offer, such as an acceptance and surrender of securities, 
acceptance by submission of a notice of guaranteed delivery (a 
``protect''), or a surrender of securities to cover a notice of 
guaranteed delivery (a ``cover of a protect'') through ATOP, the ATOP 
system will typically (x) process the Participant submission, and, in 
the case of an acceptance with surrender of securities or a cover of a 
protect, effect a book-entry delivery of the Participant's subject 
position in the securities to the Agent ATOP/ASOP Account, (y) enter 
information about the submission (including the time of the 
Participant's submission into DTC) into ATOP and transmit an Agent's 
Message to the Agent that indicates the Participant's acceptance of the 
ATOP-eligible Offer or its instruction to cover a protect, as the case 
may be, and, to the extent applicable, reflects the book-entry delivery 
of the securities into the Agent ATOP/ASOP Account.
H. Withdrawal of Acceptances
    DTC proposes to insert a new subsection VI.D.3.c.(iii) titled 
``Withdrawal of Acceptances (including acceptances by notice of 
guaranteed delivery or instructions to cover the protect)'' to provide 
transparency into how withdrawals may be processed through ATOP. 
Pursuant to the proposed rule change, this subsection would briefly 
describe the process for a Participant to withdraw its acceptance or 
cover instruction.
    The proposed subsection would provide that if permitted under the 
terms of the ATOP-eligible Offer, Participants can submit an 
instruction for a partial or full withdrawal of their acceptance of an 
ATOP-eligible Offer. When a Participant submits a withdrawal request, 
the ATOP System will transmit a message (``Withdrawal Message'') to the 
Agent indicating the withdrawal instruction submitted by the 
Participant. The Agent is required to inspect all Withdrawal Messages 
upon receipt to verify the validity of the withdrawal request. No later 
than 30 minutes after the instruction cutoff time on the day of the 
withdrawal instruction, the Agent must take one of the following 
actions: (i) if the Agent determines to accept the withdrawal, the 
Agent must transmit an acceptance (``Withdrawal Acceptance'') to DTC 
through ATOP; or (ii) if the Agent determines to reject the request, 
the Agent must transmit a rejection (``Withdrawal Rejection'') to DTC 
through ATOP.
    The proposed subsection would also provide that the Agent's failure 
to timely accept or reject a pending

[[Page 64515]]

Withdrawal Message can prevent the ATOP-eligible Offer from being 
balanced with DTC and delay any payments due to Participants pursuant 
to the ATOP-eligible Offer and note that an Agent cannot partially 
accept or reject a withdrawal instruction.
    The proposed subsection would also clarify that if the withdrawal 
instruction relates to securities delivered to the Agent ATOP/ASOP 
Account in connection with the acceptance of the ATOP-eligible Offer, 
the Withdrawal Acceptance shall constitute an authorization from the 
Agent to DTC to deliver by book-entry from the Agent ATOP/ASOP Account 
to the account of the Participant submitting the withdrawal instruction 
the securities that are the subject of the Participant's withdrawal 
instruction. Upon receipt of such a Withdrawal Acceptance, DTC will 
affect a book-entry delivery returning the securities to the 
Participant from the Agent ATOP/ASOP Account. If the withdrawal request 
relates to an acceptance of the ATOP-eligible Offer by notice of 
guaranteed delivery, the Withdrawal Acceptance constitutes an 
authorization from the Agent to DTC to reduce the quantity of 
securities to which the Notice of Guaranteed Delivery relates by the 
quantity of securities that are subject to the withdrawal instruction.
I. After Expiration of an ATOP-Eligible Offer
    DTC is proposing to add a new subsection VI.D.3.c.(iv) titled 
``After Expiration of an ATOP-eligible Offer,'' which would include the 
existing enumerated list of requirements. DTC would also make 
grammatical changes, correct typos, and add the following sentence into 
No. 2 in the list: ``Agent must reconcile balances with DTC at least 
one business day prior to the allocation of entitlements, and must 
receive DTC confirmation prior to wiring funds to DTC.'' The purpose of 
this requirement is to prevent agents from overpaying or underpaying 
DTC, which would delay the allocation to Participants.
J. ASOP-Eligible Offers
    DTC is proposing to insert a new subsection VI.D.3.d. with the 
heading ``ASOP-eligible Offers.'' As previously noted, pursuant to the 
proposed rule change, DTC would discontinue its practice of providing 
standalone ASOP Agent procedures and would insert clarified and updated 
ASOP procedures in the OA. This new subsection would provide such 
updated procedures in order to provide enhanced transparency and to 
reflect current processes relating to ASOP-eligible Offers.
K. ASOP-Eligible Offer Processing
    DTC is proposing to insert subsection VI.D.3.d.(i). titled ``ASOP-
eligible Offer Processing,'' to enhance the transparency of possible 
uses of the ASOP platform. This subsection would generally describe the 
possible uses for ASOP, and what may be required from the Agent and 
Issuer for Offers that require special or manual processing.
    Pursuant to the proposed rule filing, this subsection would state 
that in the case of rights offerings, DTC's ASOP procedures and systems 
must be used to process subscription exercise activities, including the 
submission of instructions for basic subscriptions, the exercise of 
oversubscriptions, sales of rights, and notices of guaranteed 
deliveries, and all related activities. Use of ASOP for these purposes 
is an eligibility requirement for securities that are the subject of 
rights offers. However, ASOP can be used for processing any corporate 
action as DTC may deem appropriate. Accordingly, certain processes and 
requirements may differ and, when applicable, will be communicated to 
the Agent by DTC in writing and/or in a rider to the ATOP/ASOP Master 
Agreement and/or in the LOA. In addition, for such Offers, including, 
but not limited to, Offers that require special or manual processing, 
the Agent and Issuer may be required to provide additional written 
instructions and indemnifications from the Agent and Issuer and to pay 
additional processing fees. Unless otherwise agreed between the 
parties, payment of such fees is due upon receipt of an invoice from 
DTC, prior to DTC's announcement of the Offer.
L. Participant Acceptances of the ASOP-Eligible Offer and Surrender of 
Rights Through ASOP
    DTC is proposing to insert subsection VI.D.3.d.(ii) under the 
``ASOP-eligible Offers'' subsection with the heading ``Participant 
Acceptances of the ASOP-eligible Offer and Surrender of Rights through 
ASOP,'' to provide transparency into how instructions are inputted and 
processed through ATOP.
    Pursuant to the proposed rule change, this subsection would briefly 
summarize how the ASOP system processes Participant instructions, 
stating that when a Participant submits an instruction to DTC for an 
ASOP-eligible Offer, such as an acceptance and surrender of rights, 
acceptance by submission of a notice of guaranteed delivery (protect), 
or a surrender of securities to cover a notice of guaranteed delivery 
(cover of a protect), through ASOP, the ASOP system will typically (x) 
process the Participant submission, and in the case of an acceptance 
with surrender of rights or cover of a protect, effect a book-entry 
delivery of the Participant's subject position in the rights from 
Participant's account to the Agent ATOP/ASOP Account, (y) debit the 
required subscription payment from the Participant's account and credit 
the payment to the Agent ATOP/ASOP Account,\14\ (z) enter information 
about the submission (including the time of the Participant's 
submission into DTC) into ASOP and transmit an Agent's Message to the 
Agent that indicates the Participant's acceptance of the ASOP-eligible 
Offer and reflects the crediting of the required subscription payment 
to the Agent ATOP/ASOP Account, and, to the extent applicable, the 
book-entry delivery of the rights into the Agent ATOP/ASOP Account.
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    \14\ Depending on the terms of the Offer, the subscription 
payment may be debited at the end of the Offer.
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    The subscription payment indicated on the Agent's Message is 
typically credited to the Agent ATOP/ASOP Account on the same day, 
except where the Agent agrees to, or the Terms and Conditions of the 
Offer provides for, different procedures with respect to payment. Once 
the funds are credited to the Agent ATOP/ASOP Account, the funds are 
usually wired to the Agent on the following business day.
M. Instructions To Surrender and Sell Rights Through ASOP
    DTC is proposing to insert subsection VI.D.3.d. (iii) under the 
``ASOP-eligible Offers'' subsection with the heading ``Instructions to 
Surrender and Sell Rights Through ASOP,'' which would briefly describe 
the process through which a Participant could submit instructions to 
sell rights through ASOP.
    Pursuant to the proposed rule change, the subsection would state 
that for any ASOP-eligible Offer on which the Agent accepts 
instructions to sell rights, when a Participant submits instructions to 
sell rights through the Agent by means of ASOP, the ASOP system will 
typically (x) process the Participant submission, (y) effect a book-
entry delivery of the Participant's position in the subject rights from 
the Participant's account to the Agent ATOP/ASOP Account, (z) enter 
information about the submission (including the time of the 
Participant's submission into DTC) into ASOP, and transmit an Agent's 
Message to the Agent that indicates the Participant's instruction to 
sell rights and reflects the

[[Page 64516]]

book-entry delivery of the rights into the Agent ATOP/ASOP Account.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act) \15\ requires, in part, that the 
Rules be designed to promote the prompt and accurate clearance and 
settlement of securities transactions. As described above, the proposed 
rule change to amend the OA would (i) insert consolidate and updated 
procedures, including for an enhanced Master Agreement, for ATOP/ASOP 
Agents, and (ii) make related technical and clarifying changes relating 
to ATOP-eligible Offers or ASOP-eligible Offers. DTC believes that 
these proposed changes would make the Agent's procedures for ATOP and 
ASOP more streamlined, transparent, and reflective of current 
processes, thereby allowing Agents to more efficiently and effectively 
process corporate action events and associated securities transactions. 
Based on the foregoing, DTC believes that the proposed rule change is 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions, consistent with Section 17A(b)(3)(F) of the 
Act, cited above.
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    \15\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Clearing Agency's Statement on Burden on Competition

    DTC believes that the proposed rule change to amend the OA to (i) 
insert consolidated and updated procedures, including for an enhanced 
Master Agreement, for ATOP/ASOP Agents, and (ii) make related technical 
and clarifying changes relating to ATOP-eligible Offers or ASOP-
eligible Offers will not have any impact on competition.\16\ The 
proposed rule change would provide procedures that are more accessible, 
transparent, and reflective of current processes and would apply to all 
ATOP/ASOP Agents equally. Any additional efforts required on the part 
of Agents would be merely administrative, such as entering a new Master 
Agreement. In light of the foregoing, DTC does not believe that the 
proposed rule change would impose a burden on competition.\17\
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    \16\ 15 U.S.C. 78q-1(b)(3)(I).
    \17\ 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 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

    Because the foregoing proposed rule change does not:
    (i) significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 
19b-4(f)(6) 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-2024-007 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-2024-007. 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 
10:00 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 (https://dtcc.com/legal/sec-rule-filings.aspx). 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-2024-007 and should be submitted on 
or before August 28, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-17389 Filed 8-6-24; 8:45 am]
BILLING CODE 8011-01-P