[Federal Register Volume 79, Number 212 (Monday, November 3, 2014)]
[Notices]
[Pages 65268-65270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26004]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73443; File No. SR-DTC-2014-10]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change in Connection With the
Modifications To Require Receiver Authorized Delivery Approval for DTC
Processing of Institutional Delivery Transactions
October 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 October 16, 2014, The Depository Trust Company (``DTC'') filed with
the Securities Exchange Commission (``Commission'') the proposed rule
change as described in Item I, II and III below, which Items have been
prepared by DTC. The Commission is publishing this notice to solicit
comments on the proposed 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
The proposed rule change consists of changes to the DTC Settlement
Service Guide (the ``Guide'') \3\ to require Participants to use the
Receiver Authorized Delivery (``RAD'') function to accept (i.e.,
``match'') any affirmed institutional delivery transaction (``ID
Transaction'') prior to DTC processing of the related securities
delivery.\4\
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\3\ The Guide is available at http://www.dtcc.com/~/media/Files/
Downloads/legal/service-guides/Settlement.ashx.
\4\ Terms not otherwise defined herein have the meaning set
forth in the Rules.
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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, 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 proposes to modify the Guide to require Participants to use RAD
to accept any affirmed ID Transaction prior to DTC processing of the
respective delivery of securities.
RAD allows a receiver of valued deliveries of securities
(``Receiver'') to manage which deliveries to accept, or to reject,
prior to further processing by DTC. Prior to the proposed rule change,
pursuant to a recent rule change (the ``Prior RAD Change'') \5\ DTC has
instituted the requirement that all Deliver Orders and Payment Orders
be approved through RAD for further processing at DTC. The purpose of
the Prior RAD Change and this proposed rule change is to establish a
consistent internal ``matching'' system for book-entry deliveries at
DTC, by which the agreement of the Participant delivering securities
(``Deliverer'') and Receiver is
[[Page 65269]]
confirmed with respect to each delivery for purposes of DTC settlement.
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\5\ Securities Exchange Act Release No. 72576 (Jul. 9, 2014); 79
FR 41335 (Jul. 15, 2014) (SR-DTC-2014-06).
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ID Transactions generally have not required RAD approval, because
these transactions are externally pre-matched through Omgeo, LLC: the
Guide has permitted Participants, at their option, to apply RAD.\6\
Instead of RAD, a Participant may use the same-day reclaim process to
return securities to the original Deliverer without the acceptance of
the latter. This process creates uncertainty for Participants and DTC
with respect to ID Transactions as to whether securities would be
delivered or reclaimed on the same day without the prior acceptance of
the Receiver or original Deliverer, as applicable.
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\6\ Receivers may optionally set their DTC profile to route ID
Transactions to RAD.
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Pursuant to the proposed rule change, DTC would amend the Guide to
eliminate this uncertainty by providing that ID Transactions would only
be processed for delivery once the intended Receiver has approved the
transaction in RAD.\7\ Same day reclaims would also be subject to RAD
approval by the original Deliverer. As with any securities delivery,
these transactions would be subject to risk management controls.\8\
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\7\ For processing efficiency, the proposed change to the Guide
would offer Participants the option to set their system profile to
allow affirmed ID Transactions to be automatically accepted in RAD.
However, Participants would no longer have an option to allow ID
Transactions to bypass RAD.
\8\ DTC risk management controls, including Collateral Monitor
and Net Debit Cap (as defined in DTC Rule 1), are designed so that
DTC may complete system-wide settlement notwithstanding the failure
to settle of its largest Participant or affiliated family of
Participants. The Collateral Monitor tests that a Receiver has
adequate collateral to secure the amount of its net debit balance
and the Net Debit Cap limits the net debit balance of a Participant
so that it cannot exceed DTC liquidity resources for settlement. See
DTC Rules, http://dtcc.com/~/media/Files/Downloads/legal/rules/
dtc_rules.ashx.
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Additionally, the Guide would be updated for technical changes to:
(i) Update the text for consistency to reflect that all valued Deliver
Orders, Payment Orders, ID Transactions, MMI transactions, reclaims,
pledges and releases of pledged securities would be subject to RAD;
(ii) update the text for consistency to reflect that all reclaims would
be subject to risk management controls and remove references to system
functions related to reclaims that have become obsolete; (iii) add an
email address to which Settling Banks seeking to adjust Net Debit Caps
may send their requests, in addition to via mail or overnight delivery
to the existing mailing address; (iv) indicate where Participants may
access certain system functions via Settlement Web either in addition
to, or in lieu of, PBS/PTS; (v) eliminate references to fees, relating
to the ID Net service, which are redundant since those fees are also
listed in DTC's fee schedule; and (vi) delete reference to the
population of a ``third party'' field on DTC's system screens for the
ID Net service which is no longer applicable.
Implementation. The effective date of the proposed rule change
would be announced via a DTC Important Notice.
(2) Statutory Basis
The proposed rule change would reduce uncertainty relating to
settlement of securities deliveries for ID transactions through DTC by
requiring acceptance by the receiving party prior to delivery.
Therefore, the proposed rule change is consistent with the provisions
of Section 17A(b)(3)(F) \9\ of the Act which requires that the rules of
the clearing agency be designed, inter alia, to promote the prompt and
accurate clearance and settlement of securities transactions. In
addition, the proposed rule change is consistent with Rule 17Ad-
22(d)(12) of the Act \10\ which requires that a clearing agency
establish, implement, maintain and enforce written policies and
procedures reasonably designed to ensure that final settlement occurs
no later than the end of the settlement day and requires that intraday
or real-time finality be provided where necessary to reduce risks.
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\9\ 15 U.S.C. 78q-1(b)(3)(F).
\10\ 17 CFR 240.17Ad-22(d)(12).
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B. Self-Regulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change would 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 with respect to this filing.
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 No. SR-DTC-2014-10 on the subject line.
Paper Comments
Send paper comments 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-2014-10. 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 the filing 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/sec-rule-filings.aspx. 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-2014-10 and should be
submitted on or before November 24, 2014.
[[Page 65270]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26004 Filed 10-31-14; 8:45 am]
BILLING CODE 8011-01-P