Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Clarify That Federal Reserve Banks, Central Counterparties, and Central Securities Depositories Shall Not Be Considered Either “Mandatory Purchaser Participants” or “Voluntary Purchaser Participants”, 70260-70261 [2014-27841]
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<![CDATA[
70260
Federal Register / Vol. 79, No. 227 / Tuesday, November 25, 2014 / Notices
SECURITIES AND EXCHANGE
COMMISSION
and C below, of the most significant
aspects of such statements.
[Release No. 34–73643; File No. SR–DTC–
2014–11]
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Clarify That
Federal Reserve Banks, Central
Counterparties, and Central Securities
Depositories Shall Not Be Considered
Either ‘‘Mandatory Purchaser
Participants’’ or ‘‘Voluntary Purchaser
Participants’’
November 19, 2014.
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
12, 2014, 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 prepared
by DTC. DTC filed the proposed rule
change pursuant to Section 19(b)(3)(A)
of the Act3 and Rule 19b–4(f)(1)
thereunder.4 The proposed rule change
was effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
amendments to Rule 31 of the Rules and
Procedures (‘‘Rules’’) of DTC in order to
clarify that Federal Reserve Banks,
central counterparties, and central
securities depositories shall not be
considered either ‘‘Mandatory Purchaser
Participants’’ or ‘‘Voluntary Purchaser
Participants,’’ as such terms are defined
therein, as more fully described below.
wreier-aviles on DSK4TPTVN1PROD with NOTICES
II. Clearing Agency’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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(1).
1. Purpose
Pursuant to the Third Amended and
Restated Shareholders Agreement, dated
as of December 7, 2005 (‘‘Shareholders
Agreement’’), by and among The
Depository Trust & Clearing Corporation
(‘‘DTCC’’), DTC, National Securities
Clearing Corporation (‘‘NSCC’’), Fixed
Income Clearing Corporation (‘‘FICC’’)
and the other parties thereto, and DTC
Rule 31, Participants (as such term is
defined in the Rules 5) other than (i)
non-U.S. based central securities
depositories, or (ii) Limited Participants
(as such term is defined in the Rules)
are required to be ‘‘Mandatory
Purchaser Participants’’ (as such term is
defined in Rule 31) and be parties to the
Shareholders Agreement. Limited
Participants are not permitted to
purchase and own shares of DTCC
common stock (‘‘Common Shares’’) or
be parties to the Shareholders
Agreement.
DTC is proposing to amend Rule 31,
as marked on Exhibit 5 hereto, in order
to make clear Federal Reserve Banks,
central counterparties, and central
securities depositories shall not be
considered either Mandatory Purchaser
Participants or Voluntary Purchaser
Participants (as such term is defined in
Rule 31). DTC has interpreted Rule 31
to exclude from its provisions: (1)
Federal Reserve Banks, because it was
never intended that such governmental
authorities should be required to own
shares in DTCC, notwithstanding that
they may use certain services of DTC;
and (2) central counterparties and
central securities depositories, because
link arrangements between DTC and
these entities are for the purpose of
extending clearing agency services
across borders or among closely related
activities and products, but not for
ownership purposes.
2. Statutory Basis
The proposed rule change is
consistent with the Act, and the rules
and regulations thereunder, in
particular Section 17A(b)(3)(C) which
requires that the rules of DTC ‘‘assure a
fair representation of its shareholders
(or members) and participants in the
selection of its directors and
administration of its affairs . . . [and
the Commission] may determine that
the representation of participants is fair
2 17
VerDate Sep<11>2014
14:41 Nov 24, 2014
5 DTC’s Rules are available at https://dtcc.com/
legal/rules-and-procedures.aspx.
Jkt 235001
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if they are afforded a reasonable
opportunity to acquire voting stock of
the clearing agency, directly or
indirectly, in reasonable proportion to
their use of such clearing agency.’’ 6
DTC implements and meets this
requirement through DTC Rule 31,
which afford DTC’s participants a
reasonable opportunity to acquire voting
stock indirectly in the clearing agency
in reasonable proportion to their use of
the clearing agency.7 The proposed rule
change constitutes a stated policy,
practice, or interpretation with respect
to the meaning, administration, or
enforcement of this existing rule.
(B) Clearing Agency’s Statement on
Burden on Competition
The proposed rule change will not
have any impact, or impose any burden,
on competition.
(C) Clearing Agency’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 yet 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
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A) 8 of the Act and paragraph (f)
of Rule 19b–4 9 thereunder. 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.
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:
6 15
U.S.C. 78q–1(b)(3)(C).
Commission orders approving NSCC and
DTC’s rule filings which implemented the current
stock ownership structure that satisfies the fair
representation requirements. Securities Exchange
Act Release No. 41800 (August 27, 1999), 64 FR
48694 (September 7, 1999) (SR–NSCC–1999–10);
and Securities Exchange Act Release No. 41786
(August 24, 1999), 64 FR 47882 (September 1, 1999)
(SR–DTC–1999–17).
8 15 U.S.C. 78s(b)(3)(A).
9 17 CFR 240.19b–4(f).
7 See
E:\FR\FM\25NON1.SGM
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Federal Register / Vol. 79, No. 227 / Tuesday, November 25, 2014 / Notices
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
DTC–2014–11 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
wreier-aviles on DSK4TPTVN1PROD with NOTICES
All submissions should refer to File
Number SR–DTC–2014–11. This file
number should be included on the
subject line if email 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 (https://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
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of DTC and on DTC’s Web site at
https://dtcc.com/legal/sec-rulefilings.aspx. 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–
2014–11 and should be submitted on or
before December 16, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–27841 Filed 11–24–14; 8:45 am]
BILLING CODE 8011–01–P
10 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
14:41 Nov 24, 2014
Jkt 235001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73649; File No. S7–04–09]
Order Extending Temporary
Conditional Exemption for Nationally
Recognized Statistical Rating
Organizations From Requirements of
Rule 17g–5 Under the Securities
Exchange Act of 1934 and Request for
Comment
November 19, 2014.
I. Introduction
On May 19, 2010, the Securities and
Exchange Commission (‘‘Commission’’)
conditionally exempted, with respect to
certain credit ratings and until
December 2, 2010, nationally recognized
statistical rating organizations
(‘‘NRSROs’’) from certain requirements
in Rule 17g–5(a)(3) 1 under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’), which had a
compliance date of June 2, 2010.2
Pursuant to the Order, an NRSRO is not
required to comply with Rule 17g–
5(a)(3) until December 2, 2010 with
respect to credit ratings where: (1) The
issuer of the structured finance product
is a non-U.S. person; and (2) the NRSRO
has a reasonable basis to conclude that
the structured finance product will be
offered and sold upon issuance, and that
any arranger linked to the structured
finance product will effect transactions
of the structured finance product after
issuance, only in transactions that occur
outside the U.S. (‘‘covered
transactions’’).3 On November 23, 2010,
the Commission extended the
conditional temporary exemption until
December 2, 2011.4 On November 16,
2011, the Commission extended the
conditional temporary exemption until
December 2, 2012.5 On November 26,
2012, the Commission extended the
conditional temporary exemption until
December 2, 2013.6 On November 22,
2013, the Commission extended the
conditional temporary exemption until
December 2, 2014.7 The Commission is
1 See
17 CFR 240.17g–5(a)(3).
Exchange Act Release No. 62120 (May 19,
2010), 75 FR 28825 (May 24, 2010) (‘‘Order’’).
3 See id. at 28827–28 (setting forth conditions of
relief).
4 See Exchange Act Release No. 63363 (Nov. 23,
2010), 75 FR 73137 (Nov. 29, 2010) (‘‘First
Extension Order’’).
5 See Exchange Act Release No. 65765 (Nov. 16,
2011), 76 FR 72227 (Nov. 22, 2011) (‘‘Second
Extension Order’’).
6 See Exchange Act Release No. 34–68286 (Nov.
26, 2012), 77 FR 71201 (Nov. 29, 2012) (‘‘Third
Extension Order’’).
7 See Exchange Act Release No. 34–70919 (Nov.
22, 2013), 78 FR 70984 (Nov. 27, 2013) (‘‘Fourth
Extension Order’’).
2 See
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
70261
extending the temporary conditional
exemption exempting NRSROs from
complying with Rule 17g–5(a)(3) with
respect to rating covered transactions
until December 2, 2015.
II. Background
Rule 17g–5 identifies, in paragraphs
(b) and (c) of the rule, a series of
conflicts of interest arising from the
business of determining credit ratings.8
Paragraph (a) of Rule 17g–5 9 prohibits
an NRSRO from issuing or maintaining
a credit rating if it is subject to the
conflicts of interest identified in
paragraph (b) of Rule 17g–5 unless the
NRSRO has taken the steps prescribed
in paragraph (a)(1) (i.e., disclosed the
type of conflict of interest in Exhibit 6
to Form NRSRO in accordance with
Section 15E(a)(1)(B)(vi) of the Exchange
Act 10 and Rule 17g–1) 11 and paragraph
(a)(2) (i.e., established and is
maintaining and enforcing written
policies and procedures to address and
manage conflicts of interest in
accordance with Section 15E(h) of the
Exchange Act).12 Paragraph (c) of Rule
17g–5 specifically prohibits seven types
of conflicts of interest. Consequently, an
NRSRO is prohibited from issuing or
maintaining a credit rating when it is
subject to these conflicts regardless of
whether it had disclosed them and
established procedures reasonably
designed to address them.
In December 2009, the Commission
adopted subparagraph (a)(3) to Rule
17g–5. This provision requires an
NRSRO that is hired by an arranger to
determine an initial credit rating for a
structured finance product to take
certain steps designed to allow an
NRSRO that is not hired by the arranger
to nonetheless determine an initial
credit rating—and subsequently monitor
that credit rating—for the structured
finance product.13 In particular, under
Rule 17g–5(a)(3), an NRSRO is
prohibited from issuing or maintaining
a credit rating when it is subject to the
conflict of interest identified in
paragraph (b)(9) of Rule 17g–5 (i.e.,
being hired by an arranger to determine
a credit rating for a structured finance
product) 14 unless it has taken the steps
8 17
CFR 240.17g–5(b) and (c).
CFR 240.17g–5(a).
10 15 U.S.C. 78o–7(a)(1)(B)(vi).
11 17 CFR 240.17g–1.
12 15 U.S.C. 78o–7(h).
13 See 17 CFR 240.17g–5(a)(3); see also Exchange
Act Release No. 61050 (Nov. 23, 2009), 74 FR 63832
(Dec. 4, 2009) (‘‘Adopting Release’’) at 63844–45.
14 Paragraph (b)(9) of Rule 17g–5 identifies the
following conflict of interest: issuing or maintaining
a credit rating for a security or money market
instrument issued by an asset pool or as part of any
asset-backed or mortgage-backed securities
9 17
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]]>Agencies
[Federal Register Volume 79, Number 227 (Tuesday, November 25, 2014)]
[Notices]
[Pages 70260-70261]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-27841]
[[Page 70260]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73643; File No. SR-DTC-2014-11]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Clarify That Federal Reserve Banks, Central Counterparties, and Central
Securities Depositories Shall Not Be Considered Either ``Mandatory
Purchaser Participants'' or ``Voluntary Purchaser Participants''
November 19, 2014.
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 12, 2014, 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 prepared by DTC. DTC filed the proposed rule change pursuant to
Section 19(b)(3)(A) of the Act\3\ and Rule 19b-4(f)(1) thereunder.\4\
The proposed rule change was effective upon filing with the Commission.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of amendments to Rule 31 of the
Rules and Procedures (``Rules'') of DTC in order to clarify that
Federal Reserve Banks, central counterparties, and central securities
depositories shall not be considered either ``Mandatory Purchaser
Participants'' or ``Voluntary Purchaser Participants,'' as such terms
are defined therein, as more fully described below.
II. Clearing Agency'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.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
Pursuant to the Third Amended and Restated Shareholders Agreement,
dated as of December 7, 2005 (``Shareholders Agreement''), by and among
The Depository Trust & Clearing Corporation (``DTCC''), DTC, National
Securities Clearing Corporation (``NSCC''), Fixed Income Clearing
Corporation (``FICC'') and the other parties thereto, and DTC Rule 31,
Participants (as such term is defined in the Rules \5\) other than (i)
non-U.S. based central securities depositories, or (ii) Limited
Participants (as such term is defined in the Rules) are required to be
``Mandatory Purchaser Participants'' (as such term is defined in Rule
31) and be parties to the Shareholders Agreement. Limited Participants
are not permitted to purchase and own shares of DTCC common stock
(``Common Shares'') or be parties to the Shareholders Agreement.
---------------------------------------------------------------------------
\5\ DTC's Rules are available at https://dtcc.com/legal/rules-and-procedures.aspx.
---------------------------------------------------------------------------
DTC is proposing to amend Rule 31, as marked on Exhibit 5 hereto,
in order to make clear Federal Reserve Banks, central counterparties,
and central securities depositories shall not be considered either
Mandatory Purchaser Participants or Voluntary Purchaser Participants
(as such term is defined in Rule 31). DTC has interpreted Rule 31 to
exclude from its provisions: (1) Federal Reserve Banks, because it was
never intended that such governmental authorities should be required to
own shares in DTCC, notwithstanding that they may use certain services
of DTC; and (2) central counterparties and central securities
depositories, because link arrangements between DTC and these entities
are for the purpose of extending clearing agency services across
borders or among closely related activities and products, but not for
ownership purposes.
2. Statutory Basis
The proposed rule change is consistent with the Act, and the rules
and regulations thereunder, in particular Section 17A(b)(3)(C) which
requires that the rules of DTC ``assure a fair representation of its
shareholders (or members) and participants in the selection of its
directors and administration of its affairs . . . [and the Commission]
may determine that the representation of participants is fair if they
are afforded a reasonable opportunity to acquire voting stock of the
clearing agency, directly or indirectly, in reasonable proportion to
their use of such clearing agency.'' \6\ DTC implements and meets this
requirement through DTC Rule 31, which afford DTC's participants a
reasonable opportunity to acquire voting stock indirectly in the
clearing agency in reasonable proportion to their use of the clearing
agency.\7\ The proposed rule change constitutes a stated policy,
practice, or interpretation with respect to the meaning,
administration, or enforcement of this existing rule.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q-1(b)(3)(C).
\7\ See Commission orders approving NSCC and DTC's rule filings
which implemented the current stock ownership structure that
satisfies the fair representation requirements. Securities Exchange
Act Release No. 41800 (August 27, 1999), 64 FR 48694 (September 7,
1999) (SR-NSCC-1999-10); and Securities Exchange Act Release No.
41786 (August 24, 1999), 64 FR 47882 (September 1, 1999) (SR-DTC-
1999-17).
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
The proposed rule change will not have any impact, or impose any
burden, on competition.
(C) Clearing Agency'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 yet
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) \8\ of the Act and paragraph (f) of Rule 19b-4 \9\
thereunder. 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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
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:
[[Page 70261]]
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-DTC-2014-11 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-DTC-2014-11. This file
number should be included on the subject line if email 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 (https://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
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of DTC and on DTC's
Web site at https://dtcc.com/legal/sec-rule-filings.aspx. 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-2014-11 and should be
submitted on or before December 16, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-27841 Filed 11-24-14; 8:45 am]
BILLING CODE 8011-01-P
