[Federal Register Volume 75, Number 246 (Thursday, December 23, 2010)]
[Notices]
[Page 80878]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-32225]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63567; File No. SR-DTC-2010-14]
Self-Regulatory Organizations; The Depository Trust Company;
Order Granting Approval of a Proposed Rule Change To Authorize
Additional Shares of Preferred Stock and Designate Shares as Series A
Preferred Stock
December 16, 2010.
I. Introduction
On October 22, 2010, The Depository Trust Company (``DTC'') filed
with the Securities and Exchange Commission (``Commission'') proposed
rule change SR-DTC-2010-11 pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal
was published in the Federal Register on November 12, 2010.\2\ The
Commission received no comment letters. For the reasons discussed
below, the Commission is granting approval of the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 63254 (November 5,
2010), 75 FR 69514 (November 12, 2010).
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II. Description
In 1999, DTC's Certificate of Organization was amended (``1999
Amendment'') to provide for the authorization and issuance of 1,500,000
shares of preferred stock, par value $100 per share.\3\ The 1999
Amendment also provided that the preferred stock could be issued in one
or more classes having such designations, relative rights, preferences,
or limitation as fixed by the Board of Directors of DTC at the time of
issuance of any such preferred stock. DTC's Certificate of Organization
has been amended three times since the 1999 Amendment to provide for
the issuance of variable rate, noncumulative, nonvoting shares of
Series A preferred stock, par value $100 per shares, which are
preferred over DTC's common stock as to dividends and in the event of
liquidation (``Series A Preferred Stock''). The first such amendment
(filed in 2000) provided for the issuance of 750,000 shares of the
Series A Preferred Stock.\4\ The second amendment (filed in 2006)
provided for the issuance of an additional 500,000 shares of Series A
Preferred Stock.\5\ The third amendment (filed in 2009) provided for
the issuance of an additional 250,000 shares of Series A Preferred
Stock.\6\
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\3\ The amendment was the subject of a DTC proposed rule change
approved by the Commission. Securities Exchange Act No. 34-41529
(June 15, 1999), 64 FR 33333 (June 22, 1999) [File No. SR-DTC-1999-
08]. The amendment was also approved by the New York State
Superintendent of Banks.
\4\ Securities Exchange Release No. 43197 (August 23, 2000), 65
FR 52459 (August 29, 2000) [File No. SR-DTC-2000-02].
\5\ Securities Exchange Act Release No. 54775 (November 17,
2006), 71 FR 68662 (November 27, 2006) [SR-DTC-2006-14].
\6\ Securities Exchange Act Release No. 59612 (March 20, 2009),
74 FR 13488 (March 27, 2009) [File No. SR-DTC-2009-06].
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DTC participants are required to purchase and own shares of the
Series A Preferred Stock in proportion to their use of DTC services.
DTC treats the Series A Preferred Stock held by participants
substantially the same as it treats the mandatory cash deposits made by
participants to the Participants Fund for purposes of collateralizing
securities transactions, limiting net debit positions, implementing
default procedures, and allocating unrecovered losses.
In order to further increase its capital, DTC is amending its
Certificate of Organization \7\ to authorize an additional 1,750,000
shares of Series A Preferred stock with such rights, preferences, and
limitations as currently provided in its Certificate of
Organization.\8\
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\7\ On October 20, 2010, DTC's sole stockholder, The Depository
Trust & Clearing Corporation, authorized DTC to amend its
Certificate of Organization to increase the number of shares of
authorized preferred stock, as required by Section 8003 of the
Banking Law of the State of New York. DTC is also required to seek
approval from the New York State Banking Department, which
concurrent with the filing of this proposed rule change, it has
done.
\8\ DTC, as a member institution of the Federal Reserve System,
is subject to capital guidelines issued by the Board of Governors of
the Federal Reserve System. To be considered ``well-capitalized''
under these guidelines, DTC must, among other things, maintain a
Total Risk-Based Capital Ratio of at least 10%, a Leverage Ratio of
at least 5%, and a Tier 1 Risk-Based Capital Ratio of at least 6%.
The authorization and issuance of this additional 1,750,000
shares will increase the number of shares of Series A Preferred
Stock to a total of 3,250,000 shares with a total par value of $325
million. This will enable DTC to continue to be ``well capitalized''
under the capital guidelines issued by the Board of Governors of the
Federal Reserve System.
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III. Discussion
Section 17A(b)(3)(F) of the Act requires that the rules of a
clearing agency be designed to, among other things, assure the
safeguarding of securities and funds which are in the custody or
control of the clearing agency or for which it is responsible and to
protect investors and the public interest.\9\ The Commission believes
that the rule change is consistent with DTC's obligations under the
Exchange Act because the rule change will enable DTC to be ``well
capitalized'' while not adversely affecting its ability to adequately
safeguard the securities and funds in its custody or control or for
which it is responsible.
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\9\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular with the requirements of Section 17A of the Act and the
rules and regulations thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-DTC-2010-14) be and hereby
is approved.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-32225 Filed 12-22-10; 8:45 am]
BILLING CODE 8011-01-P