[Federal Register Volume 63, Number 33 (Thursday, February 19, 1998)]
[Notices]
[Pages 8508-8509]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4095]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39647; File No. SR-DTC-97-12]
Self-Regulatory Organizations; the Depository Trust Company;
Notice of Filing of Proposed Rule Change to Establish a Voluntary
Redemption and Sales Service for Depository Eligible Units of Unit
Investment Trusts
February 11, 1998.
Pursuant to Section 19(b)(1) of the Securities and Exchange Act of
1934 (``Act''),\1\ notice is hereby given that on June 27, 1997, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') and on January 22, 1998, amended
the proposed rule change as 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 from interested persons on
the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The proposed rule change will allow DTC to establish procedures for
a redemption and sales service for depository eligible unit investment
trusts (``UITs'') to be called the investor's voluntary redemptions and
sales service (``IVORS'').
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.\2\
---------------------------------------------------------------------------
\2\ The Commission has modified the text of the summaries
prepared by DTC.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
DTC is establishing IVORS to provide its participants with a secure
and efficient redemption and sales service for DTC-eligible units in
UITs. IVORS will offer two basic UIT services: (1) Redemption of units
with the UIT transfer agent for cash payment and (2) sale of units to
the UIT sponsor for cash payment. IVORS initially will be available to
eligible DTC participants by way of DTC's participant terminal system
(``PTS'').
IVORS will be available only if (1) the UIT units are DTC-eligible
and are held in DTC's fast automated securities transfer (``FAST'')
system; \3\ (2) the FAST transfer agent currently is or agrees to
become a full service DTC participant; and (3) the UIT's lead sponsor
or its clearing agent agrees to participate in IVORS as a DTC
participant. When a specific UIT becomes eligible for IVORS, its FAST
transfer agent will submit initial standing instructions for the UIT to
an IVORS data base on PTS regarding participants' ability to redeem or
to sell units through IVORS. The UIT sponsor will be able to make daily
changes to those standing instructions by way of PTS. When a
participant holding units in its DTC account submits a request through
IVORS to surrender the units for their value, IVORS will determine
which of the two basic services (i.e., redemption or sale) is available
for the units based on the standing instructions for the particular UIT
CUSIP number in the IVORS database.
---------------------------------------------------------------------------
\3\ DTC has informed the Commission that DTC-eligible UIT units
usually are held in the FAST system.
---------------------------------------------------------------------------
After the determination of whether to surrender the units through a
redemption or sale has been made, IVORS will then process the
transaction. On the date of the participant's request to surrender the
units (i.e., trade date or ``T''), IVORS will move the surrendered
units from the participant's free position to its ``IVORs pending
surrender segregation account.'' Before the end of the day on T+2,
either the FAST transfer agent or the UIT sponsor will enter into IVORS
the redemption price (if the units are to be redeemed) or the purchase
price (if the units are to be sold) plus the accrued dividend per unit.
Both redemptions and sales of units through IVORS will be settled on
T+3.
IVORS automatically will calculate the settlement value of the
redemption or sale and will generate a deliver order (``DO'') to move
the units versus payment of the settlement value from the redeeming
participant's IVORS pending surrender segregation account either to the
FAST transfer agent's DTC participant account (in the case of a
redemption) or to the UIT sponsor's DTC participant account (in the
case of a sale). If the units are being redeemed, IVORS automatically
will generate a second DO to remove the units from the FAST transfer
agent's DTC participant account. If the units are being sold, the units
will remain in the UIT sponsor's DTC account until the UIT sponsor
later delivers them to a secondary-market purchaser or redeems them by
way of IVORS.
DTC believes that the proposed rule change is consistent with the
requirements of Section 17A(b)(3)(A) of the Act \4\ and the rules and
regulations thereunder because it will promote efficiencies in the
clearance and settlement of securities transactions.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78q-1(b)(3)(A).
---------------------------------------------------------------------------
[[Page 8509]]
(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, in the public interest, or for
the protection of investors.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
DTC has solicited participant comments on the proposed rule change.
It has taken into account participant input in the development of this
proposal.
DTC's planning department with several UIT sponsors and trustee/
transfer agents in the process of developing the IVORS service. The
proposal for IVORS was distributed to the executive committee of the
Reorganization Division Inc. of the Securities Industry Association
(``SIA''). Slides of the proposed service were also presented during
annual meetings of the SIA Reorganization Division.
In response to DTC newsletter articles regarding the IVORS proposal
and discussions with participant service representatives on their field
trips, over a dozen participants requested copies of the IVORS proposal
and offered to participate in a pilot of the new service.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which DTC consents, the Commission will:
(A) By order approve 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
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 inspection and copying in the
Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such filing also will be available
for inspection and copying at the principal office of DTC. All
submissions should refer to File No. SR-DTC-97-12 and should be
submitted by March 12, 1998.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
---------------------------------------------------------------------------
\5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-4095 Filed 2-18-98 8:45 am]
BILLING CODE 8010-01-M