[Federal Register Volume 75, Number 225 (Tuesday, November 23, 2010)]
[Notices]
[Pages 71473-71475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29401]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63320; File No. SR-DTC-2010-15]
Self-Regulatory Organizations; the Depository Trust Company;
Notice of Filing of Proposed Rule Change To Amend Rules Relating to the
Requirement To Maintain a Balance Certificate in the Fast Automated
Securities Transfer Program
November 16, 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 November 5, 2010, 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
[[Page 71474]]
have been prepared primarily by DTC.\3\ 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\ The text of the proposed rule change is attached as Exhibit
5 to DTC's filing, which is available at http://www.dtcc.com/downloads/legal/rule_filings/2010/dtc/2010-15.pdf.
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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 amend DTC's rules
relating to its Fast Automated Securities Transfer (``FAST'') program
to eliminate the requirement for certain transfer agents to custody a
balance certificate.
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.\4\
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\4\ The Commission has modified the text of the summaries
prepared by NSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
Under DTC's FAST program, DTC leaves securities in the form of
balance certificates in the custody of the transfer agent participating
in FAST (``FAST transfer agents'').\5\ The balance certificates are
registered in the name of DTC's nominee, Cede & Co. and evidence the
record ownership by Cede & Co. of each issue for which the FAST
transfer agent acts as transfer agent. The balance certificate
agreement is executed by each FAST transfer agent and DTC and sets
forth the rights and obligations of FAST transfer agents and DTC. As
additional securities are deposited or withdrawn from DTC, the FAST
transfer agent adjusts the denomination of the balance certificate as
appropriate and electronically confirms theses changes with DTC.
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\5\ FAST reduces the movement of certificates between DTC and
the transfer agent, thereby reducing the costs and risks associated
with the creation, movement, and storing of certificates. For a
description of DTC's current rules relating to FAST, see Securities
Exchange Act Release Nos. 34-13342 (March 8, 1977) (File No. SR-DTC-
76-3); 34-14997 (July 26, 1978) (File No. SR-DTC-78-11); 34-21401
(October 16, 1984) (File No. SR-DTC-84-8); 34-31941 (March 3, 1993)
(SR-DTC-92-15); and 34-46956 (December 2, 2002) (File No. SR-DTC-
2002-15). In addition, DTC has filed a proposed rule change with the
SEC to update the requirements relating to its FAST and DRS programs
(See Securities Exchange Act Release No. 34-57362 (February 20,
2008) (File No. SR-DTC-2006-16).
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Recently, FAST transfer agents have requested that DTC remove the
requirement for FAST transfer agents to custody a balance certificate
because the transfer agent electronically confirms the balance with DTC
on a daily basis. As a result, DTC is proposing to remove the
requirement that FAST transfer agents maintain a balance certificate
for certain issuers that are participating in the direct registration
system (``DRS'').\6\
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\6\ DRS allows registered owners to hold their assets on the
records of the transfer agent in book-entry form rather than in
certificated form. Securities on deposit at DTC are considered ``DRS
eligible'' if the issuer's by-laws permit the issuance of book entry
shares and the CUSIP number has been designated as FAST eligible by
DTC. ``Participating in DRS'' means that the issuer and its transfer
agent have complied with DTC's requirements to participate in the
DRS program and actually allow investors to hold shares in DRS.
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An issuer that participates in DRS has agreed to allow investors to
hold their securities position in book-entry form on the records of the
issuer's transfer agent instead of in certificated form. With DRS,
shares can be electronically transferred between a DRS Limited
Participant (i.e., a transfer agent participating in DRS) and DTC
participants (i.e., broker-dealers or banks). DRS provides investors
with an alternate approach to holding their securities either in
certificated form or in ``street'' name.\7\ As additional securities
are deposited or withdrawn from DTC, the DRS Limited Participant
adjusts the denomination of the balance certificate as appropriate and
electronically confirms these changes with DTC.
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\7\ Street name generally describes securities held in the name
of a broker-dealer or another nominee, such as a clearing agency,
instead of the broker-dealer's customer.
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Since issuers that participate in DRS have acknowledged that the
use of electronic registration of securities is a valid method to
evidence ownership of their issued securities and since electronic
registration should reduce the costs and risks associated with the
creation, storage, and replacement of balance certificates, DTC
proposes to remove the requirement that FAST transfer agents maintain a
balance certificate for those exchange listed issues that are DRS
eligible and participating in DRS. However, DTC also proposes to
continue to reserve its rights to draw down from the FAST balance and
to receive in lieu of a DRS or electronic position a certificate to be
registered in DTC's nominee name of Cede & Co. and to reflect any
number of shares up to and including the total amount of shares
outstanding due DTC from those FAST transfer agents.
The proposed rule change is consistent with the requirements of the
Securities Exchange Act of 1934, as amended, (``Act'') and the rules
and regulations thereunder applicable to DTC because it should allow
DTC to better safeguard the securities which are in DTC's custody or
control or for which it is responsible by reducing the inherent risks
associated with the transfer and maintenance of physical certificates.
(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 forty-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 or disapprove 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 Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
Send an e-mail to [email protected]. Please include
File
[[Page 71475]]
Number SR-DTC-2010-15 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submission should refer to File Number SR-DTC-2010-15. 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 DTC and
on DTC's Web site at http://www.dtcc.com/downloads/legal/rule_filings/2010/nscc/2010-11.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-2010-15 and should be submitted on or before December 14, 2010.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-29401 Filed 11-22-10; 8:45 am]
BILLING CODE 8011-01-P