[Federal Register Volume 79, Number 64 (Thursday, April 3, 2014)]
[Notices]
[Pages 18748-18749]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-07470]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71828; File No. SR-DTC-2014-03]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Update Existing Procedures as They Relate to Processing Mandatory
Corporate Actions
March 28, 2014.
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 27, 2014, 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 DTC. DTC filed the proposed rule change pursuant to
Section 19(b)(3)(A)(ii) \3\ of the Act and Rule 19b-4(f)(4) \4\
thereunder; the proposed rule change was effective upon filing with the
Commission. 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)(ii).
\4\ 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
As discussed below, this rule change will mitigate risk associated
with mandatory corporate actions processing by eliminating inaccurate
allocations caused by Participants' adjusting their positions after the
position capture. The change will also bring operational efficiencies
to DTC by reducing the number of post allocation adjustments.
II. Self-Regulatory Organization'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
1. Purpose
DTC processes mandatory corporate actions through its
Reorganization, Dividends, Proxy (``RDP'') system. Currently, when
processing a mandatory corporate action in which new securities are
exchanged for existing securities held at DTC, one day prior to
processing allocation of the new securities to Participant Accounts,
the RDP system will automatically identify the positions of the
existing securities in the Participant's Account (including the
Segregated Account) to allocate the new securities in accordance with
the Participant's holdings of the existing securities on the day
preceding the effective date of the corporate action, referred to as
``position capture.'' However, in certain instances, between its
segregated position and free position, a Participant may have adjusted
its position between its segregated position and free position,\5\ or
may have delivered out the securities from its accounts.
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\5\ The Sub-Accounting Service allows Participants to protect
securities on deposit at DTC by moving them from their free position
to their segregated position. The securities remain segregated and
unavailable for any transactions until the Participant authorizes
DTC to release them and return them to their free position.
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To eliminate discrepancies due to these changes between the time of
position capture and allocation, DTC is updating its systems to add a
second position capture immediately prior to allocation (referred to as
``real-time position capture''). This real time position capture will
recognize any adjustments a Participant made between the time of
position capture and the time of allocation. This change will mitigate
risk associated with mandatory corporate actions processing by self-
correcting allocations for changes made between position capture and
real-time position capture. The change will also improve efficiency by
reducing the number of post allocation adjustments.
Implementation Timeframe
DTC expects to implement these changes by end of the first quarter
of 2014. DTC will announce the
[[Page 18749]]
implementation date by Important Notice.
2. Statutory Basis
By adding real time position capture immediately prior to
allocation, the proposed rule change streamlines processes associated
with corporate action events and mitigates risk associated with such
processing; it allows for more prompt and accurate crediting of
corporate action securities to the Accounts of Participants. Therefore,
DTC believes the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to DTC, in particular Section 17A(b)(3)(F) \6\ of the Act
which requires that DTC's Rules be designed to promote the prompt and
accurate clearance and settlement of securities transactions.
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\6\ 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. As stated above, the
proposed change adds a real-time position capture to facilitate
accurate corporate actions processing which will benefit all
Participants' equally and should have no effect on competition within
or without DTC.
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
The foregoing rule change became effective on March 27, 2014,
pursuant to Section 19(b)(3)(A) \7\ of the Act and paragraph (f)(4) of
Rule 19b-4 \8\ thereunder. At any time within 60 days of the filing of
the proposed rule change, the Commission 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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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(2)
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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 No. SR-DTC-2014-03 on the subject line.
Paper Comments
Send in triplicate to Secretary, Securities and Exchange
Commission, 100 F Street NE., Washington, DC, 20549-1090.
All submissions should refer to File No. SR-DTC-2014-03. 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 will also be available
for inspection and copying at the principal office of DTC.
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 No. SR-DTC-2014-03 and
should be submitted on or before April 24, 2014.
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\9\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-07470 Filed 4-2-14; 8:45 am]
BILLING CODE 8011-01-P