[Federal Register Volume 75, Number 127 (Friday, July 2, 2010)]
[Notices]
[Pages 38581-38583]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-16107]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62384; File No. SR-DTC-2010-09]
Self-Regulatory Organizations; the Depository Trust Company;
Notice of Filing of Proposed Rule Change To Revise Its Procedures
Regarding Securities Delivered To or From Participant Accounts Through
the Automated Customer Account Transfer Service of National Securities
Clearing Corporation
June 25, 2010.
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 June 4, 2010, 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 substantially prepared 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. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The purpose of this proposed rule change is to revise DTC's
Procedures regarding securities delivered to or from Participant
accounts through the Automated Customer Account Transfer Service
(``ACATS'') of National Securities Clearing Corporation (``NSCC'').
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 these
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
DTC proposes modifying certain provisions of its Settlement
Services Guide (``Guide'') in connection with
[[Page 38582]]
concurrent rule changes proposed by NSCC concerning ACATS transfers
through NSCC's Continuous Net Settlement (``CNS'') system.\3\
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\3\ NSCC is proposing these concurrent changes in filing SR-
NSCC-2010-05 with the Commission.
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NSCC's ACATS enables members to effect automated transfers of
customer accounts among themselves.\4\ For ACATS transfers processed
through NSCC's Continuous Net Settlement (``CNS'') system,\5\ long and
short positions are passed against Members' positions at The Depository
Trust Company (``DTC''). Available securities are delivered from short
Members' accounts at DTC and allocated to long Members' accounts by
book-entry.
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\4\ ACATS complements a Financial Industry Regulatory Authority
(``FINRA'') rule requiring FINRA members to use automated clearing
agency customer account transfer services and to effect customer
account transfers within specified time frames.
\5\ CNS is an ongoing accounting system which nets today's
Settling Trades with yesterday's Closing Positions to produce a net
short or long position for a particular security for a particular
Member. NSCC is the contra party for all positions. The positions
are then passed against the Member's Designated Depository positions
and available securities are allocated by book-entry. This
allocation of securities is accomplished through an evening cycle
followed by a day cycle. Positions which remain open after the
evening cycle may be changed as a result of trades accepted for
settlement that day. CNS allocates deliveries in both the night and
day cycles using an algorithm based on priority groups in descending
order, age of position within a priority group, and random numbers
within age groups.
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An NSCC Member to which a customer's securities account is to be
transferred through ACATS (``Receiving Member'') may initiate the
transfer process by submitting a Transfer Initiation Request (``TIF'')
to NSCC. For the transfer to be processed, the TIF must be accepted by
the NSCC Member from which the customer's securities account is being
transferred (``Delivering Member''). After a Delivering Member accepts
a customer account transfer and all other preconditions of NSCC's rules
for processing ACATS transfer are met, all CNS-eligible items in the
account will be entered into NSCC's CNS accounting operation on the day
before settlement date unless the Receiving Member notifies NSCC that
certain items should be withheld.\6\
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\6\ NSCC Rule 50 (Automated Customer Account Transfer Service).
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DTC proposes modifying the Guide in several ways to clarify that
securities moving through NSCC's ACATS system are not subject to a lien
by DTC when they are debited from a delivering Participant's DTC
account or when they are credited to a receiving Participant's DTC
account.\7\ DTC believes its proposed clarifications would help NSCC
Members and DTC Participants meet their legal obligations to maintain
securities possession or control of certain customer securities \8\ and
would concurrently protect the interests of NSCC and DTC.
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\7\ As part of NSCC's companion rule filing, NSCC proposes
amending its Rules to provide that any deliveries and receives in a
particular security processed through CNS would be designated by
NSCC to satisfy a Member's ACATS receive or deliver obligation prior
to satisfaction of other CNS-related obligations for that Member in
the same security. This would allow NSCC to track the completion
status of CNS ACATS deliveries and would facilitate NSCC's ability
to notify DTC of which CNS deliveries are ACATS transfers.
\8\ Commission Rule 15c3-3 provides that a broker dealer shall
promptly obtain and shall thereafter maintain the physical
possession or control of all fully-paid securities and excess margin
securities, in each case, carried by a broker or dealer for the
account of customers.
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DTC proposes modifying the CNS section of the Guide to clarify that
when a Participant holds securities in its DTC account in a no-lien
location \9\ and those securities are part of an ACATS transfer through
CNS, then DTC would not have any lien on such securities to satisfy the
Participant's CNS ACATS delivery obligation. DTC also proposes
clarifying within the Guide that ACAT deliveries from CNS would be
deemed to be designated by the receiving Participant as ``Minimum
Amount Securities'' when they are credited to the receiving
Participant's account.\10\ Minimum Amount Securities are not considered
collateral under DTC's rules.\11\ Additional clarification would be
included to explain that an ACATS transfer would be deemed null and
void and the underlying securities could be used to satisfy settlement
obligations to NSCC if NSCC determines that a Delivering Member and a
Receiving Member defaulted on their settlement obligations to NSCC and
the Delivering Member also fails to meet its ACATS delivery obligation.
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\9\ For example, when the securities are designated as ``Minimum
Amount Securities'' and not as Net Additions.
\10\ As ``Minimum Amount Securities'', DTC would not have any
lien on such securities transferred through ACATS and received from
CNS. Such securities would not constitute collateral to which DTC
could assert a claim, and accordingly they would not be counted as
part of the Participant's Collateral Monitor unless the receiving
Participant designates such securities as ``Net Additions'' in
accordance with DTC Rules and Procedures.
\11\ DTC Rule 1 and DTC Rule 4(A) respectively for the
definition of Minimum Amount Securities and for the implications of
this designation in protecting such securities from any lien or
other claim of DTC.
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DTC proposes implementing the proposed changes in this filing
during the third quarter of 2010 and advising Members of the specific
implementation date through issuance of DTC Important Notices.
DTC believes the proposed rule changes are consistent with the
requirements of Section 17A of the Act \12\ and the rules and
regulations thereunder because the proposed changes would facilitate
DTC's prompt and accurate clearance and settlement of securities
transactions by clarifying when securities involved in ACATS transfers
through CNS are subject to a lien by DTC.
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\12\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change would 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 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 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 the self-regulatory organization consents,
the Commission will:
(A) By order approve the 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 Commissions Internet comment form (http://www.sec.gov/rules/sro.shtml) or
Send an e-mail to [email protected]. Please include
File Number SR-DTC-2010-09 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission,
[[Page 38583]]
100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-DTC-2010-09. This file
number should be included on the subject line if e-mail 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 Section, 100 F Street,
NE., Washington, DC 20549-1090, on official business days between the
hours of 10 a.m. and 3 p.m. Copies of such filings will also be
available for inspection and copying at the principal office of the DTC
and on DTC's Web site at http://www.dtcc.com/downloads/legal/rule_filings/2010/dtc/2010-09.pdf. 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-2010-09 and should be submitted on or before July
23, 2010.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16107 Filed 7-1-10; 8:45 am]
BILLING CODE 8010-01-P