[Federal Register Volume 78, Number 172 (Thursday, September 5, 2013)]
[Notices]
[Pages 54696-54697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-21561]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70291; File No. SR-DTC-2013-10]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change in Order To Terminate the
Sealed Envelope Service, Which Is Part of The Depository Trust
Company's Custody Service
August 30, 2013.
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 August 22, 2013, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change described in Items I, II and III below, which Items have
been prepared primarily by DTC. 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.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
As more fully discussed below, the proposed rule change is to
terminate the Sealed Envelope Service, which is part of DTC's Custody
Service.
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, DTC 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. DTC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
Purpose
In 2002, DTC launched the Sealed Envelope Service (the ``Service'')
as a service extension to DTC's Custody Service.\3\ The Service was
designed to provide physical custody to Participants for documents or
instruments that are not securities, such as loan agreements, wills,
deeds, mortgages, contracts and option agreements. The Service strictly
prohibits the deposit of securities certificates as well as tangible
assets such as currency, gold coins or jewelry. DTC initially launched
the Service in response to a request from Participants to assist in
fully outsourcing their vaults to DTC. Subsequently, there has not been
much use of the Service by Participants, and it is, accordingly, not
economically efficient to maintain the Service.
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\3\ Securities Exchange Act Release No. 46018 (Jun. 3, 2002), 67
FR 39454 (Jun. 7, 2002) (SR-DTC-2002-03).
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Currently, DTC allows for these non-security items to be held in
custody in a sealed envelope in one of DTC's vaults. The envelopes are
such that the contents cannot be viewed when sealed. DTC does not open
any sealed envelopes, but x-rays all packages and envelopes received to
assure [sic] no dangerous contents. DTC also assigns a user-CUSIP
number for tracking and record keeping purposes. The depositing
Participant is required to list the contents of the envelope on the
outside of the envelope. Participants balance their sealed envelopes
daily with DTC in the same manner as they presently do for securities
held in the Custody Service. DTC does not verify the contents of the
envelope and this has presented a concern since DTC has no way of
knowing whether the contents qualify for the Service.
[[Page 54697]]
As part of the Hurricane Sandy storm recovery, DTC has determined
that it is not recovering its costs from usage of the Service by only a
few Participants. Only fifteen Participants currently use the Service,
with one of those Participants representing approximately 85% of the
total volume. All fifteen of these Participants have been notified of
DTC's intention to discontinue the Service and none of the Participants
have objected. Accordingly, upon approval by the SEC, DTC will
terminate the Service. DTC will work with the Participants that
currently use the Service to develop a timeline that is not unduly
burdensome to return the existing sealed envelope inventory.
Statutory Basis
DTC believes the proposed rule change, as described above, is
consistent with the requirements of the Act, specifically Section
17A(b)(3)(F),\4\ and the rules and regulations thereunder applicable to
DTC, because the change, which terminates the Service, eliminates risk
to the depository associated with the safeguarding of items in DTC's
physical custody and therefore enhances DTC's ability to safeguard
securities or funds in its custody or control or for which it is
responsible.
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\4\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change will have any
impact, or impose any burden, on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments relating to the proposed rule change have not yet
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
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-2013-10 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-DTC-2013-10. 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 Web site (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 Web site 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 such filings also will be available for inspection
and copying at the principal office of DTC and on DTC's Web site at
http://dtcc.com/legal/rule_filings/dtc/2013.php. All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-DTC-2013-10 and should be submitted on
or before September 26, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-21561 Filed 9-4-13; 8:45 am]
BILLING CODE 8011-01-P