[Federal Register Volume 78, Number 96 (Friday, May 17, 2013)]
[Notices]
[Pages 29186-29187]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-11758]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69562; File No. SR-DTC-2013-01]
Self-Regulatory Organizations; The Depository Trust Company;
Order Approving Proposed Rule Change To Modify Its Practice Regarding
the Collection of Participants' Required Participants Fund Deposits
May 13, 2013.
I. Introduction
On March 20, 2013, The Depository Trust Company (``DTC'') filed
with the Securities and Exchange Commission (``Commission'') proposed
rule change SR-DTC-2013-01 (``Proposed Rule Change'') pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder.\2\ The Proposed Rule Change was published in
the Federal Register on April 8, 2013.\3\ This order approves the
Proposed Rule Change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Release No. 34-69276 (Apr. 2, 2013), 78 FR 20999 (Apr. 8,
2013).
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II. Description
DTC filed the Proposed Rule Change to accelerate DTC's collection
of a Participant's required deposit to DTC's Participants Fund in
certain circumstances from two business days to the same day that the
Participant is notified of the requirement, as described below.
A. Participants Fund
Pursuant to Rule 4 of its Rules, By-laws, Organization Certificate
(``DTC Rules''), DTC maintains resources funded by its Participants
that is a liquidity resource and is available to satisfy any uninsured
loss incurred by DTC, including a loss resulting from a Participant's
failure to settle its transactions (``Participants Fund'').\4\ Each
Participant's required deposit to the Participants Fund (``Required
Participants Fund Deposit'') is calculated daily pursuant to an
established formula.\5\ While the minimum deposit is $10,000, each
Participant is required to make a deposit to the Participants Fund
based upon a formula that takes into account the Participant's six
largest intraday net debit peaks over a rolling 60 business-day
period.\6\ Typically DTC collects new Participants Fund deposits once
per month for each Participant.\7\ However, if the Participant's newly
calculated Required Participants Fund Deposit is greater than its prior
day's Required Participants Fund Deposit, and the difference thereof
(i) equals or exceeds $500,000 and (ii) represents 25 percent or more
of that Participant's newly calculated required fund deposit
(``Threshold Amount and Percentage''), the Participant currently must
deposit the difference, to the extent any excess amount of the
Participant's Actual Participants Fund Deposit \8\ does not already
satisfy the new requirement, in the Participants Fund within two
business days.\9\
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\4\ See DTC Rules (http://dtcc.com/legal/rules_proc/dtc_rules.pdf).
\5\ Id., Rule 4(a).
\6\ See DTC Settlement Service Guide (http://dtcc.com/downloads/products/learning/Settlement.pdf). DTC may also require an
additional deposit to the Participants Fund in the event that DTC
becomes concerned with a Participant's financial soundness. See DTC
Rules, supra note 4, Rule 9(A). Separately, a Participant may make a
voluntary deposit to the Participants Fund (``Voluntary Participants
Fund Deposit'') in excess of the amount required. See id., Rule
4(c). These two provisions are not impacted by the Proposed Rule
Change.
\7\ See DTC Rules, supra note 4, Rule 4(b).
\8\ See DTC Rules, supra note 4, Rule 4(b). ``Actual
Participants Fund Deposit'' means the actual amount the Participant
has deposited to the Participants Fund, including both its Required
Participants Fund Deposit and any Voluntary Participants Fund
Deposit. Id., Rule 1.
\9\ See DTC Settlement Service Guide, supra note 6.
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B. Proposed Rule Change
In order to enhance its liquidity and risk coverage, DTC is
accelerating the collection of Participants' Required Participants Fund
Deposits, in the circumstances where DTC currently collects it within
two business days, to the same day the Participant is notified of the
requirement. In other words, for both the daily and monthly
calculations that trigger collections, as described above, increased
deposit requirements will be collected by DTC on a same-day basis,
instead of within two business days.
To account for this rule change, DTC is revising the text of its
Settlement Services Guide to provide that where a Participant's
calculated Required Participants Fund Deposit meets the Threshold
Amount and Percentage, the increased amount must (to the extent any
excess amount of the Participant's Actual Participants Fund Deposit
does not already satisfy the new requirement) be deposited with DTC on
the same business day as (i) the calculation of the increase, and (ii)
a report or other notification of the change is made available to the
Participant.
As mentioned above, in order to harmonize the Participants Fund
collection processes, monthly increases
[[Page 29187]]
will also be collected on a same-day basis and DTC is adding language
to the Settlement Service Guide in this regard. In addition, DTC is
adding language to the Settlement Service Guide to clarify that the
relevant Guide provisions shall apply only to the calculation and
collection of DTC Participants Fund deposits, as described in the
Guide, and do not supersede or limit any provisions of the DTC Rules or
any rights of DTC in accordance with applicable law and DTC's Rules and
Procedures, including but not limited to transactions in securities and
money payments.
Finally, DTC is making certain clarifying and technical changes to
the language as set forth in the ``Participants Fund'' section of its
Settlement Service Guide, including (i) updating the description of the
purpose of the Participants Fund, (ii) updating the use of defined
terms, such as ``Participant,'' and (iii) updating and adding subject
headings.
III. Discussion
Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\10\ Section 17A(b)(3)(F) of the Act requires that, among
other things, ``[t]he rules of the clearing agency are designed to
promote the prompt and accurate clearance and settlement of securities
transactions and . . . to assure the safeguarding of securities and
funds which are in the custody or control of the clearing agency or for
which it is responsible.'' \11\ Furthermore, Commission Rule 17Ad-
22(d)(11) regarding default procedures, adopted as part of the Clearing
Agency Standards,\12\ requires that registered clearing agencies
``establish, implement, maintain and enforce written policies and
procedures reasonably designed to, as applicable: . . . establish
default procedures that ensure that the clearing agency can take timely
action to contain losses and liquidity pressures and to continue
meeting its obligations in the event of a participant default.''\13\
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\10\ 15 U.S.C. 78(s)(b)(2)(C).
\11\ 15 U.S.C. 78q-1(b)(3)(F).
\12\ Release No. 34-68080 (Oct. 22, 2012), 77 FR 66219 (Nov. 2,
2012).
\13\ 17 CFR 240.17Ad-22(d)(11).
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Here, as described above, DTC's proposed rule change to accelerate
collection of increases in Participants' Required Participants Fund
Deposits in certain circumstances from two business days to the same
day that the Participant is notified of the increase should, generally,
help further safeguard the securities and settlement process as a
whole, as required by Section 17A(b)(3)(F) of the Act,\14\ since DTC
will have access to the required funds, which are calculated by an
established formula, more quickly. More specifically, this rule change
should help improve DTC's ability to take timely action to contain
losses and liquidity pressures and to continue meeting its obligations
in the event of a Participant default, as required by Commission Rule
17Ad-22(d)(11),\15\ by providing DTC with funds likely necessary to
contain such losses and liquidity pressures in the event of a
defaulting Participant.
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\14\ 15 U.S.C. 78q-1(b)(3)(F).
\15\ 17 CFR 240.17Ad-22(d)(11).
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IV. Conclusion
On the basis of the foregoing, the Commission finds the Proposed
Rule Change is consistent with the requirements of the Act,
particularly with the requirements of Section 17A of the Act,\16\ and
the rules and regulations thereunder.
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\16\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\17\ that the proposed rule change SR-DTC-2013-01 be and hereby is
approved.\18\
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\17\ 15 U.S.C. 78s(b)(2).
\18\ In approving the Proposed Rule Change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-11758 Filed 5-16-13; 8:45 am]
BILLING CODE 8011-01-P