[Federal Register Volume 75, Number 235 (Wednesday, December 8, 2010)]
[Notices]
[Pages 76506-76508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30721]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63415; File No. SR-DTC-2010-16]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating To Extending the End-of-Day Cutoff Time for Processing to The
Federal Reserve and To Reflect Other Changes Requested by the Federal
Reserve
December 2, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on November 18, 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 have been prepared
primarily by DTC. DTC filed the proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-4(f)(4) \3\
thereunder so that the proposal was effective upon filing with the
Commission. 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\ 15 U.S.C. 78s(b)(3)(A)(iii).
\3\ 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change will extend the end of day cutoff time for
processing to the Federal Reserve and will reflect other changes
requested by the Federal Reserve.
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
[[Page 76507]]
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
DTC's end-of-day settlement processing system controls and
coordinates the settlement of Participant accounts and Settling Bank
\4\ accounts on DTC's system. The settlement process occurs through the
Fedwire system and is initiated when DTC posts final figures for
Participants and Settling Banks. Recently, the Federal Reserve (``FR'')
reviewed their current collateral processes and identified
opportunities to improve the efficiency and timing of pledging
collateral. To implement those changes, the FR has requested that DTC
make revisions to its settlement schedule relating to the timing for
Participants to pledge collateral to a Federal Reserve Bank
(``FRB'').\5\ Additionally, the FR has requested that DTC consolidate
the pledge reasons used for discount window and daylight overdraft
payment system risk purposes.
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\4\ The term ``Settling Bank'' means a DTC Participant that is a
bank or trust company subject to supervision or regulation pursuant
to Federal or State banking laws and is a party to an effective DTC
Settling Bank Agreement.
\5\ The Pledge service allows a pledgor Participant to pledge
securities as collateral for a loan or for other purposes and also
to request the release of pledged securities. Pledges and releases
to a FRB are made free of value, which means that the securities are
pledged on DTC books but the funds side of the related transaction
is settled outside of DTC.
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Specifically, the FR has requested that DTC remove the pledge code
05-Daylight (Funds) Overdraft to prevent the future use of this
code.\6\ Instead, Participants will use the pledge code 01- Discount
Window to submit pledges relating to daylight overdraft and relating to
the discount window.
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\6\ DTC will modify the automated input file feed option with an
error message when requests are submitted with the purpose pledge
code 05-Daylight (Funds) Overdraft. The error message will let the
user know to use pledge code 01 instead.
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Effective December 2, 2010, DTC will extend the end-of-day cutoff
time for processing pledges and releases to/from the FR from 3 \7\ p.m.
to 5 p.m. to facilitate late-day processing for depository
institutions.\8\ Effective December 10, 2010, DTC will consolidate the
pledge codes used for discount window and daylight overdraft payment
system risk purposes into one code. The extended period for pledge
affords greater flexibility in determining and securing liquidity needs
which may, among other matters, enhance DTC settlement and generally
help to minimize systemic risk. These accommodations will not adversely
affect DTC's settlement, including its processing schedule and other
cutoffs. These changes will necessitate revisions to the existing DTC
Settlement Service Guide and are attached to DTC's proposed rule change
as Exhibit 5.
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\7\ All times refer to Eastern Time.
\8\ Depository institutions maintaining a deposit account at an
FRB can make free pledges and release requests to the FRB. All DTC
bank participants that are members of the FR are automatically
eligible to pledge securities to FRBs that are DTC pledgees using
the participant/non-participant pledge facility. DTC allows non-
participants to pledge collateral to FRBs through DTC bank
participants.
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Additionally, DTC is making unrelated technical changes to the
Settlement Service Guide to conform to certain rule changes that have
previously been filed with the Commission.\9\ These changes include
modifications to the Settlement Processing schedule as well as removing
certain input methods that no longer exist and are detailed in the
attached Exhibit 5.
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\9\ In 2004, the Commission approved a filing in which all
reclaims of valued Money Market Instrument (``MMI'') issuance
transactions received by DTC after 2:30 p.m. are treated as
``unmatched'' and are subject to all original transaction-processing
rules. Securities Exchange Act Release No. 50006 (July 19, 2004), 69
FR 43042 (June 12, 2004) (File No. SR-DTC-04-03). In 2009, DTC
enhanced its systems in order to provide Issuing Paying Agents
(``IPAs'') with the ability to monitor their credit exposure to MMI
issuers through an IPA Maturity Presentment ``Pend'' function.
Securities Exchange Act Release No. 59695 (Apr. 2, 2009), 74 FR 7714
(Feb. 19, 2009) (File No. SR-DTC-2009-02). In 2010, DTC implemented
a new function that allows DTC Participants to set a profile in the
Participant Browser System so that they can request that excess
funds be wired to their settling bank account at approximately 3:20
p.m. Securities Exchange Act Release No. 61922 (Apr. 15, 2010), 75
FR 21072 (Apr. 22, 2010) (File No. SR-DTC-2010-07). DTC is updating
its Service Guide to further reflect these changes. DTC is also
updating the Settlement Service Guide to reflect proper contact
information and provide definitions of certain terms.
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DTC states that the proposed rule change is consistent with the
requirements of Section 17A of the Act \10\ and the rules and
regulations thereunder applicable to DTC because the proposed rule
change will promote the prompt and accurate clearance and settlement of
securities transactions because it aligns its cutoff time for
processing pledges and releases to and from an FRB with the timing for
the processing of pledges in the market generally.
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\10\ 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 will 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
DTC has not solicited or received written comments relating to the
proposed rule change. DTC will notify the Commission of any written
comments it receives.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(4) \12\
because the proposed rule change effects a change in an existing
service of DTC that (i) does not adversely affect the safeguarding of
securities or funds in DTC's custody or control or for which it is
responsible and (ii) does not significantly affect the respective
rights of DTC or persons using the service. At any time within 60 days
of the filing of the proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act.
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\11\ Supra note 2.
\12\ Supra note 3.
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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 No. SR-DTC-2010-16 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 submissions should refer to File No. SR-DTC-2010-16. 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
[[Page 76508]]
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 a.m. and 3
p.m. Copies of such filings also will be available for inspection and
copying at DTC's principal office and DTC's Web site at http://www.dtc.org/impNtc/mor/index.html. 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-2010-16 and should be submitted on or before December
29, 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. 2010-30721 Filed 12-7-10; 8:45 am]
BILLING CODE 8011-01-P