[Federal Register Volume 60, Number 206 (Wednesday, October 25, 1995)]
[Notices]
[Pages 54739-54740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26430]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36384; File No. SR-DTC-95-19]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Order Granting Accelerated Approval of a Proposed
Rule Change Relating to Compliance With Confirmation Disclosure
Requirements Through the Use of the Institutional Delivery System
October 17, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on October 4, 1995, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I and II below, which Items have been prepared
primarily by DTC. The Commission is publishing this notice and order to
solicit comments from interested persons and to grant accelerated
approval of the proposed rule change.
\1\15 U.S.C. Sec. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
DTC proposes to make additions to its Participant Operating
Procedures\2\ to enable broker-dealers that use DTC's Institutional
Delivery (``ID'') system for generating confirmations for their
customer transactions to comply with certain disclosure requirements of
Rule 10b-10 under the Act.\3\
\2\The additions to DTC's Participant Operating Procedures,
Section M--ID System, are attached as exhibit 2 to DTC's filing
(File No. SR-DTC-95-19) and are available for review in the
Commission's Public Reference Section.
\3\17 CFR 240.10b-10 (1994).
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II. Self-Regulatory Organizations'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 section (A),
(B),
[[Page 54740]]
and (C) below, of the most significant aspects of such statements.\4\
\4\The Commission has modified the text of the summaries
prepared by DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In 1994, the Commission adopted amendments to rule 10b-10.\5\
Subsequently, the Division of Market Regulation issued a no-action
letter to the Public Securities Association (``PSA'') on behalf of its
members and all other brokers and dealers temporarily exempting them
from certain disclosure requirements of paragraphs (a)(7), (a)(8), and
(a)(9) of Rule 10b-10 until November 1, 1995.\6\
\5\For a complete discussion of the amendments, refer to
Securities Exchange Act Release No. 34962 (November 10, 1994), 59 FR
59612.
\6\Letter from Catherine McGuire, Chief Counsel, Division of
Market Regulation, Commission, to George P. Miller, Esq., Vice
President and Associate General Counsel, PSA (September 29, 1995).
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The purpose of this proposed rule change is to enable broker-
dealers that use DTC's ID system for generating confirmations for their
customer transactions to comply with the following three disclosure
requirements upon the expiration of the temporary exemption.
(1) Amended Rule 10b-10 requires broker-dealers that are not
members of the Securities Investor Protection Corporation (``SIPC'') to
disclose that fact in trade confirmations. A broker-dealer using the ID
system to send confirmations can disclose that fact by including a
statement such as ``[Name of broker-dealer] is not a member of SIPC''
in the Special Instructions field of trade data submitted to the ID
System. A broker-dealer can enter up to 256 characters of free-form
text in the Special Instructions field to be included in the
confirmation.
(2) Amended Rule 10b-10 requires broker-dealers to disclose in the
case of a debt security other than a government security that the
security is not rated by a nationally recognized statistical rating
organization if that is the case. A broker-dealer using the ID system
can disclose that fact by entering ``Not Rated'' or ``N/R'' in the
Special Instructions field. The proposed rule change adds a statement
that defines the codes ``Not Rated'' or ``N/R'' in DTC's Procedures for
the ID system in the material describing the Special Instructions
field.
(3) Amended Rule 10b-10 requires broker-dealers to disclose in
confirmations for asset-backed securities that are continuously subject
to prepayment that the yield of the security depends on the rate of
prepayments and that certain information concerning the factors that
affect yield will be furnished upon written request. By using one of
several acronyms, a broker-dealer using the ID system can enter data in
the Security Type field to identify the security as one of several
types of securities that meet the Rule 10b-10 definition of asset-
backed securities. The proposed rule change adds a provision to DTC's
Procedures for the ID System in the material setting forth the
provisions deemed to be part of a confirmation stating that when one of
several designated acronyms appears in the Security Type field of the
ID confirmation, the required disclosure is deemed to be a part of the
ID confirmation for that transaction.
DTC believes the proposed rule change is consistent with the
requirements of Section 17A(b)(3)(F)\7\ of the Act and the rules and
regulations thereunder applicable to DTC because the proposed rule
change will facilitate the confirmation of transactions through the use
of DTC's ID system. DTC states that the proposed rule change will be
implemented consistently with the safeguarding of securities and funds
in DTC's custody or control or for which it is responsible because the
proposed rule change relates to DTC's existing ID system.
\7\15 U.S.C. 78q-1(b)(3)(F) (1988).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC perceives no impact on competition by reason of the proposed
rule change.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
The proposed rule change was developed through discussions with the
PSA, acting on behalf of its members, and several participants. Written
comments from DTC participants or others have not been solicited or
received on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Section 17A(b)(3)(F) of the Act requires the rules of a clearing
agency be designed to promote the prompt and accurate clearance and
settlement of securities transactions and to foster cooperation and
coordination with persons engaged in the clearance and settlement of
securities transactions. The Commission believes the proposed rule
change is consistent with these requirements because it should
facilitate the prompt and accurate clearance and settlement of
securities transactions by enabling DTC participants to continue to
confirm and affirm institutional transactions through the ID system in
compliance with the additional disclosure requirements of amended Rule
10b-10.
DTC has requested that the Commission find good cause for approving
the proposed rule change prior to the thirtieth day after publication
of the notice of filing. The Commission finds good cause for so
approving because accelerated approval will allow DTC participants to
begin utilizing the ID system to comply with the disclosure
requirements of Rule 10b-10 before the expiration of the temporary
exemption on November 1, 1995.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submission
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
Copies of the submissions, 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 inspection and copying at the
Commission's Public Reference Section, 450 5th Street NW., Washington,
DC 20549. Copies of such filings will also be available at the
principal office DTC. All submissions should refer to File No. SR-DTC-
95-19 and should be submitted by November 15, 1995.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-DTC-95-19) be, and hereby
is, approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
\8\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-26430 Filed 10-24-95; 8:45 am]
BILLING CODE 8010-01-M