Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Require Members To Purchase Shares of the Common Stock of The Depository Trust & Clearing Corporation, 62357-62359 [E5-5999]
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Federal Register / Vol. 70, No. 209 / Monday, October 31, 2005 / Notices
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
The use of contra CUSIP numbers for
VRDO partial calls was designed to
facilitate the settlement of trades in
called securities. The practice enables
participants to process book-entry
deliveries versus payment by the
submission of Deliver Order (‘‘DO’’)
transactions, with the ultimate receiving
participants of the deliveries being
credited with the call proceeds on
redemption date. In practice, the use of
contra CUSIPs for this purpose is
inefficient for participants and for DTC.
For example, DTC must maintain
security master file linkages of the
related CUSIP numbers and separately
announce and process the interest
payments due participants and their
customers based on contra CUSIP
positions. Furthermore, thousands of
partially-called positions in contra
CUSIP numbers are created each month,
and DTC has determined that very few
DOs are processed.
In place of the use of contra CUSIP’s,
DTC will now process partially-called
positions in VRDO issues in the same
manner as all other issue types, with the
partially-called positions being
segregated in the Call Account under
the issue’s regularly assigned CUSIP
number. DTC believes the rule change is
consistent with Section 17A of the Act,3
as amended, because it will promote
efficiency in processing partial calls of
VRDO issues. The rule change will be
implemented consistently with the
safeguarding of securities and funds in
the custody or control of DTC because
DTC will be processing partial calls of
VRDO issues in a similar manner to the
way DTC processes partial calls of other
issue types.
Regional Municipal Operations
Association, which supported the rule
change. DTC will notify the Commission
of any additional written comments
received by DTC.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change
has become effective upon filing
pursuant to Section 19(b)(3)(A)(iii) of
the Act 4 and Rule 19b–4(f)(4) 5
thereunder because it does not
adversely affect the safeguarding of
securities or funds in the custody or
control of DTC or for which it is
responsible and does not significantly
affect the respective rights or obligations
of the clearing agency or persons using
the service. At any time within sixty
days of the filing of the proposed rule
change, the Commission may summarily
abrogate 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:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml) or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–DTC–2005–15 on the
subject line.
Paper Comments
(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 discussed this proposed rule
change with various participants. DTC
circulated an Important Notice on
August 4, 2005, describing the proposal
and inviting participants to direct
comments and questions to DTC
(Important Notice B# 8359). DTC
received one comment letter from the
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
Number SR–DTC–2005–15. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
4 15
3 15
U.S.C. 78q–1.
VerDate Aug<31>2005
15:29 Oct 28, 2005
5 17
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PO 00000
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(4).
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62357
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 inspection and copying in
the Commission’s Public Reference
Section, 100 F Street, NE., Washington,
DC 20549. Copies of such filings also
will be available for inspection and
copying at the principal office of DTC
and on DTC’s Web site at https://
login.dtcc.com/dtcorg/. 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–
2005–15 and should be submitted on or
before November 21, 2005.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.6
Jonathan G. Katz,
Secretary.
[FR Doc. E5–5997 Filed 10–28–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52665; File No. SR–DTC–
2005–16]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing of Proposed Rule Change To
Require Members To Purchase Shares
of the Common Stock of The
Depository Trust & Clearing
Corporation
October 25, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
October 4, 2005, The Depository Trust
Company (‘‘DTC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change described in Items I, II, and III
below, which items have been prepared
primarily by DTC. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested parties.
6 17
1 15
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CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
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62358
Federal Register / Vol. 70, No. 209 / Monday, October 31, 2005 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The purpose of this proposed rule
change is to amend the rules of DTC to
require that participants of DTC other
than Limited Participants purchase
shares of common stock of The
Depository Trust & Clearing Corporation
(‘‘DTCC’’).
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.2
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
(a) DTCC is a holding company for
three registered clearing agencies: DTC,
the National Securities Clearing
Corporation (‘‘NSCC’’), and the Fixed
Income Clearing Corporation (‘‘FICC’’).
Pursuant to DTCC’s current
Shareholders Agreement (‘‘Current
Shareholders Agreement’’), substantially
all members and participants of DTC,
NSCC, and FICC (‘‘Participants’’) are
entitled but are not required to purchase
DTCC common shares. Participants are
allocated an entitlement to purchase
DTCC common shares on the basis of
their relative use of the services of DTC,
NSCC, and FICC. As of the last periodic
allocation of share entitlements in 2003,
approximately 1,100 Participants had a
right to purchase DTCC common shares;
however, only 190 Participants
currently own any DTCC common
shares and of these only 86 own DTCC
common shares up to the full amounts
of their share entitlements.
DTCC is currently soliciting the
consent of its common shareholders to
amend the Current Shareholders
Agreement pursuant to which
Participants of DTC, NSCC, and FICC
that make full use of the services of one
or more of these clearing agency
subsidiaries of DTCC would be required
to purchase DTCC common shares
2 The Commission has modified the text of the
summaries prepared by DTC.
VerDate Aug<31>2005
15:29 Oct 28, 2005
Jkt 208001
(‘‘Mandatory Purchaser Participants’’) 3
in accordance with the terms of the
Current Shareholders Agreement while
preserving the right but not the
obligation of other Participants that
make only limited use of their services
to purchase DTCC common shares
(‘‘Voluntary Purchaser Participants’’).4
Holders of DTCC common shares are
entitled to elect all of the directors of
DTCC other than two directors that
DTCC preferred shareholders are
entitled to elect.5 DTCC common
shareholders are entitled to vote on all
other matters submitted to a vote of
DTCC shareholders, and each DTCC
common shareholder is entitled to one
vote per DTCC common share. DTCC
common shareholders are entitled to
cumulate their votes for the election of
directors. In addition, DTCC common
shareholders are entitled to receive,
when and if declared by the Board of
Directors of DTCC, out of assets of DTCC
dividends payable in cash or stock or
otherwise. However, since DTC, NSCC,
and FICC provide their services to their
Participants on a cost-basis with
revenues in excess of expenses and
necessary reserves rebated or on a
discounted basis, as a matter of policy
and practice DTCC does not pay any
dividends on DTCC common shares.
The proposed amendments to the
Current Shareholders Agreement will
have no effect on these rights of DTCC
common shareholders and preferred
shareholders.
Pursuant to certain covenants in the
Current Shareholders Agreement, a
3 Under the Proposed Shareholders Agreement, a
Mandatory Purchaser Participant that is a
Participant in more than one clearing agency will
be required to purchase DTCC common shares
based upon its relative use of the services of all
clearing agencies of which it is a Participant.
4 The proposed DTCC Shareholders Agreement
(‘‘Proposed Shareholders Agreement’’) marked to
show the proposed amendments is attached to the
proposed rule change as Exhibit 3 and is available
on DTC’s Web site at https://www.dtc.org/impNtc/
mor/. The effective date of the Proposed
Shareholders Agreement would be the later of (i)
approval by DTCC common shareholders owning
two-thirds of the outstanding DTCC common shares
and (ii) approval by the Commission of the
proposed rule change and similar proposed rule
changes being submitted by NSCC and FICC.
5 In connection with the 1999 integration of DTC
and NSCC and formation of DTCC, the New York
Stock Exchange (‘‘NYSE’’) and the National
Association of Securities Dealers (‘‘NASD’’), the
then coowners of NSCC, each received 10,000
DTCC preferred shares in exchange for their NSCC
common stock. DTCC preferred shareholders have
no right to vote on any matters submitted to a vote
of DTC shareholders except that each of the two
DTCC preferred shareholders are entitled to elect
one director. DTCC preferred shareholders have no
right to receive any dividends. In the event of any
liquidation, dissolution or winding up of the affairs
of DTCC, DTCC preferred shareholders are entitled
to a liquidation preference of $300 per share of
DTCC preferred stock.
PO 00000
Frm 00066
Fmt 4703
Sfmt 4703
person elected a director of DTCC also
serves as a director of each of DTC,
NSCC, and FICC. The proposed changes
in the Current Shareholders Agreement
will have no effect on these covenants.
The system for allocating entitlements
to purchase shares, which was
incorporated into the Current
Shareholders Agreement, was first
implemented by DTC with respect to
DTC common shares in 1973. At that
time, the banks that were users of DTC’s
services purchased their DTC common
shares directly but for logistical and
other reasons the NYSE, the NASD and
the American Stock Exchange
(‘‘AMEX’’) (collectively, the ‘‘SelfRegulatory Organizations’’) purchased
the DTC common shares allocated to the
broker-dealers that were members of the
Self-Regulatory Organizations and users
of the services of DTC. It was
anticipated that over time as brokerdealers exercised their right to purchase
DTC common shares, the number of
DTC common shares held by brokerdealers directly would increase and the
number of DTC common shares held by
the Self-Regulatory Organizations would
correspondingly decrease, potentially to
zero, since the share entitlements of the
Self-Regulatory Organizations were a
function of the unexercised share
entitlements of their members.
The Self-Regulatory Organizations,
notwithstanding the passage of time and
the opportunity afforded their members
to purchase DTCC common shares,
continue to hold a significant block of
DTCC common shares. NYSE holds
approximately 29% of the outstanding
DTCC common shares, and the NASD
and the AMEX each holds
approximately 3.7%. Accordingly, a
total of approximately 36.4% of the
outstanding DTCC common shares are
not held by Participants but rather are
held in a representative capacity by the
Self-Regulatory Organizations for
broker-dealer Participants which have
not purchased any DTCC common
shares or have not purchased DTCC
common shares commensurate with
their share entitlements. It is also the
case that a significant number of
Participants other than broker-dealers
have not purchased any DTCC common
shares or have not purchased DTCC
common shares commensurate with
their share entitlements. Ownership of
DTCC common shares (and previously
ownership of DTC common shares) is
not a financial investment but instead is
a vehicle for supporting each registered
clearing agency and influencing its
policies and operations through the
election of directors.
By providing that all DTCC common
shares are owned by Participants, DTC
E:\FR\FM\31OCN1.SGM
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Federal Register / Vol. 70, No. 209 / Monday, October 31, 2005 / Notices
believes that these proposed rule
changes and the proposed amendments
to the Current Shareholders Agreement
will guarantee that Participants
continue to govern and control the
activities of DTC, NSCC, and FICC,
including the kinds and quality of
services provided and the service fees
charged. In particular, Participants will
be in a position to assure that DTC,
NSCC, and FICC continue the practices
of establishing fees that are cost-based
and use-based and of returning to
Participants in the form of cash rebates
or discounts revenues in excess of
expenses and necessary reserves.
Finally, because they introduce the
greatest risks to the clearing agencies
and obtain the greatest benefits from
clearing agency services, it is
appropriate to require those Participants
making full use of the services of DTC,
NSCC, or FICC to contribute to DTCC’s
capital through the purchase of its
common shares.
DTC believes that the proposed rule
change is consistent with the
requirements of Section 17A of the Act 6
and the rules and regulations
thereunder applicable to DTC because
DTC believes the proposed changes to
the Current Shareholders Agreement
will assure fair representation of DTC’s
participants in the selection of DTC’s
directors and the administration of its
affairs.
(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
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
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:
6 15
U.S.C. 78q–1.
VerDate Aug<31>2005
15:29 Oct 28, 2005
Jkt 208001
(A) By order approve such 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 (https://www.sec.gov/
rules/sro.shtml) or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–DTC–2005–16 in the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
Number SR-DTC–2005–16. 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
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 inspection and copying in
the Commission’s Public Reference
Section, 100 F Street, NE., Washington,
DC 20549. Copies of such filings also
will be available for inspection and
copying at the principal office of DTC
and on DTC’s Web site, https://
www.dtc.org/impNtc/mor/.
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–2005–16 and should
be submitted on or before November 21,
2005.
PO 00000
Frm 00067
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62359
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.7
Jonathan G. Katz,
Secretary.
[FR Doc. E5–5999 Filed 10–28–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52663; File No. SR–FICC–
2005–19]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing of Proposed Rule Change To
Require Members To Purchase Shares
of the Common Stock of The
Depository Trust & Clearing
Corporation
October 25, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 notice is hereby given that on
October 4, 2005, the Fixed Income
Clearing Corporation (‘‘FICC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change described in Items
I, II, and III below, which items have
been prepared primarily by FICC. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The purpose of this proposed rule
change is to amend the rules of FICC to
require that certain members of FICC
purchase shares of common stock of The
Depository Trust & Clearing Corporation
(‘‘DTCC’’).
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FICC 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. FICC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.2
7 17
CFR 200.30–(a)(12).
U.S.C. 78s(b)(1).
2 The Commission has modified the text of the
summaries prepared by FICC.
1 15
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]]>Agencies
[Federal Register Volume 70, Number 209 (Monday, October 31, 2005)]
[Notices]
[Pages 62357-62359]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-5999]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52665; File No. SR-DTC-2005-16]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change To Require Members To Purchase
Shares of the Common Stock of The Depository Trust & Clearing
Corporation
October 25, 2005.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on October 4, 2005, The
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change described
in Items I, II, and III below, which items have been prepared primarily
by DTC. The Commission is publishing this notice to solicit comments on
the proposed rule change from interested parties.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
[[Page 62358]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of this proposed rule change is to amend the rules of
DTC to require that participants of DTC other than Limited Participants
purchase shares of common stock of The Depository Trust & Clearing
Corporation (``DTCC'').
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.\2\
---------------------------------------------------------------------------
\2\ The Commission has modified the text of the summaries
prepared by DTC.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
(a) DTCC is a holding company for three registered clearing
agencies: DTC, the National Securities Clearing Corporation (``NSCC''),
and the Fixed Income Clearing Corporation (``FICC''). Pursuant to
DTCC's current Shareholders Agreement (``Current Shareholders
Agreement''), substantially all members and participants of DTC, NSCC,
and FICC (``Participants'') are entitled but are not required to
purchase DTCC common shares. Participants are allocated an entitlement
to purchase DTCC common shares on the basis of their relative use of
the services of DTC, NSCC, and FICC. As of the last periodic allocation
of share entitlements in 2003, approximately 1,100 Participants had a
right to purchase DTCC common shares; however, only 190 Participants
currently own any DTCC common shares and of these only 86 own DTCC
common shares up to the full amounts of their share entitlements.
DTCC is currently soliciting the consent of its common shareholders
to amend the Current Shareholders Agreement pursuant to which
Participants of DTC, NSCC, and FICC that make full use of the services
of one or more of these clearing agency subsidiaries of DTCC would be
required to purchase DTCC common shares (``Mandatory Purchaser
Participants'') \3\ in accordance with the terms of the Current
Shareholders Agreement while preserving the right but not the
obligation of other Participants that make only limited use of their
services to purchase DTCC common shares (``Voluntary Purchaser
Participants'').\4\
---------------------------------------------------------------------------
\3\ Under the Proposed Shareholders Agreement, a Mandatory
Purchaser Participant that is a Participant in more than one
clearing agency will be required to purchase DTCC common shares
based upon its relative use of the services of all clearing agencies
of which it is a Participant.
\4\ The proposed DTCC Shareholders Agreement (``Proposed
Shareholders Agreement'') marked to show the proposed amendments is
attached to the proposed rule change as Exhibit 3 and is available
on DTC's Web site at https://www.dtc.org/impNtc/mor/. The
effective date of the Proposed Shareholders Agreement would be the
later of (i) approval by DTCC common shareholders owning two-thirds
of the outstanding DTCC common shares and (ii) approval by the
Commission of the proposed rule change and similar proposed rule
changes being submitted by NSCC and FICC.
---------------------------------------------------------------------------
Holders of DTCC common shares are entitled to elect all of the
directors of DTCC other than two directors that DTCC preferred
shareholders are entitled to elect.\5\ DTCC common shareholders are
entitled to vote on all other matters submitted to a vote of DTCC
shareholders, and each DTCC common shareholder is entitled to one vote
per DTCC common share. DTCC common shareholders are entitled to
cumulate their votes for the election of directors. In addition, DTCC
common shareholders are entitled to receive, when and if declared by
the Board of Directors of DTCC, out of assets of DTCC dividends payable
in cash or stock or otherwise. However, since DTC, NSCC, and FICC
provide their services to their Participants on a cost-basis with
revenues in excess of expenses and necessary reserves rebated or on a
discounted basis, as a matter of policy and practice DTCC does not pay
any dividends on DTCC common shares. The proposed amendments to the
Current Shareholders Agreement will have no effect on these rights of
DTCC common shareholders and preferred shareholders.
---------------------------------------------------------------------------
\5\ In connection with the 1999 integration of DTC and NSCC and
formation of DTCC, the New York Stock Exchange (``NYSE'') and the
National Association of Securities Dealers (``NASD''), the then
coowners of NSCC, each received 10,000 DTCC preferred shares in
exchange for their NSCC common stock. DTCC preferred shareholders
have no right to vote on any matters submitted to a vote of DTC
shareholders except that each of the two DTCC preferred shareholders
are entitled to elect one director. DTCC preferred shareholders have
no right to receive any dividends. In the event of any liquidation,
dissolution or winding up of the affairs of DTCC, DTCC preferred
shareholders are entitled to a liquidation preference of $300 per
share of DTCC preferred stock.
---------------------------------------------------------------------------
Pursuant to certain covenants in the Current Shareholders
Agreement, a person elected a director of DTCC also serves as a
director of each of DTC, NSCC, and FICC. The proposed changes in the
Current Shareholders Agreement will have no effect on these covenants.
The system for allocating entitlements to purchase shares, which
was incorporated into the Current Shareholders Agreement, was first
implemented by DTC with respect to DTC common shares in 1973. At that
time, the banks that were users of DTC's services purchased their DTC
common shares directly but for logistical and other reasons the NYSE,
the NASD and the American Stock Exchange (``AMEX'') (collectively, the
``Self-Regulatory Organizations'') purchased the DTC common shares
allocated to the broker-dealers that were members of the Self-
Regulatory Organizations and users of the services of DTC. It was
anticipated that over time as broker-dealers exercised their right to
purchase DTC common shares, the number of DTC common shares held by
broker-dealers directly would increase and the number of DTC common
shares held by the Self-Regulatory Organizations would correspondingly
decrease, potentially to zero, since the share entitlements of the
Self-Regulatory Organizations were a function of the unexercised share
entitlements of their members.
The Self-Regulatory Organizations, notwithstanding the passage of
time and the opportunity afforded their members to purchase DTCC common
shares, continue to hold a significant block of DTCC common shares.
NYSE holds approximately 29% of the outstanding DTCC common shares, and
the NASD and the AMEX each holds approximately 3.7%. Accordingly, a
total of approximately 36.4% of the outstanding DTCC common shares are
not held by Participants but rather are held in a representative
capacity by the Self-Regulatory Organizations for broker-dealer
Participants which have not purchased any DTCC common shares or have
not purchased DTCC common shares commensurate with their share
entitlements. It is also the case that a significant number of
Participants other than broker-dealers have not purchased any DTCC
common shares or have not purchased DTCC common shares commensurate
with their share entitlements. Ownership of DTCC common shares (and
previously ownership of DTC common shares) is not a financial
investment but instead is a vehicle for supporting each registered
clearing agency and influencing its policies and operations through the
election of directors.
By providing that all DTCC common shares are owned by Participants,
DTC
[[Page 62359]]
believes that these proposed rule changes and the proposed amendments
to the Current Shareholders Agreement will guarantee that Participants
continue to govern and control the activities of DTC, NSCC, and FICC,
including the kinds and quality of services provided and the service
fees charged. In particular, Participants will be in a position to
assure that DTC, NSCC, and FICC continue the practices of establishing
fees that are cost-based and use-based and of returning to Participants
in the form of cash rebates or discounts revenues in excess of expenses
and necessary reserves. Finally, because they introduce the greatest
risks to the clearing agencies and obtain the greatest benefits from
clearing agency services, it is appropriate to require those
Participants making full use of the services of DTC, NSCC, or FICC to
contribute to DTCC's capital through the purchase of its common shares.
DTC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \6\ and the rules and
regulations thereunder applicable to DTC because DTC believes the
proposed changes to the Current Shareholders Agreement will assure fair
representation of DTC's participants in the selection of DTC's
directors and the administration of its affairs.
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\6\ 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
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
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 such 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 (https://
www.sec.gov/rules/sro.shtml) or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-DTC-2005-16 in the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File Number SR-DTC-2005-16. 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 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 inspection and
copying in the Commission's Public Reference Section, 100 F Street,
NE., Washington, DC 20549. Copies of such filings also will be
available for inspection and copying at the principal office of DTC and
on DTC's Web site, https://www.dtc.org/impNtc/mor/. 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-2005-16 and should be
submitted on or before November 21, 2005.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-5999 Filed 10-28-05; 8:45 am]
BILLING CODE 8010-01-P
