Self-Regulatory Organizations; The Depository Trust Company; Order Granting Approval of a Proposed Rule Change Relating to the Canadian Link Service, 6797-6799 [E7-2419]

Download as PDF Federal Register / Vol. 72, No. 29 / Tuesday, February 13, 2007 / Notices jlentini on PROD1PC65 with NOTICES least: $0.125 for options trading under $2; $0.20 for options trading at or above $2 and up to $5; $0.25 for options trading above $5 and up to $10; $0.40 for options trading above $10 and up to $20; and $0.50 for options trading above $20. For series trading with bid-ask differentials that are a multiple of the widths established in Rule 8.7(b)(iv), the prescribed error amount would have the same multiple applied to the amounts prescribed above. Second, the proposal revises the obvious price error provision as it relates to the handling of transactions involving only CBOE Market-Makers. Under the current rule, such erroneous price transactions are nullified. Under the proposal, CBOE-Market-Maker-toCBOE-Market-Maker transactions would be subject to adjustment. In applying the proposed CBOE Market-Maker adjustment provision to index options and options on ETFs or HOLDRs, the adjustment price would be equal to the fair market value of the option minus the minimum error amount in the case of an erroneous sell transaction or the fair market value plus the minimum error amount in the case of an erroneous buy transaction. If the adjusted price is not in a multiple of the applicable minimum trading increment, the adjusted price would be rounded down (up) to the next price that is a multiple of the applicable minimum trading increment with respect to an erroneous sell (buy) transaction. Third, the proposal would eliminate obvious quantity errors as a type of transaction that is subject to obvious error review. The elimination of this provision is consistent with the Exchange’s current rule for equity options, which does not have an obvious error review for quantity errors.5 Lastly, the proposal would make various non-substantive changes to CBOE Rule 24.16, such as making crossreference updates to correspond to the above-described revisions, changing the title of the rule to reflect its application to options on ETFs and HOLDRS (currently the title only references index options), clarifying that fair market value is to be determined by Exchange Trading Officials in accordance with the offer for the series (across all exchanges trading the option). In multiply listed issues, if there are no quotes for comparison purposes, fair market value shall be determined by Trading Officials. For singly-listed issues and for transactions occurring as part of the Rapid Opening System (‘‘ROS trades’’) or Hybrid Opening System (‘‘HOSS’’), the Exchange clarified in the proposed rule change that the fair market value shall be the midpoint of the first quote after the transaction(s) in question that does not reflect the erroneous transaction(s). 5 See CBOE Rule 6.25(a). VerDate Aug<31>2005 16:55 Feb 12, 2007 Jkt 211001 provisions of the definition of fair market value, and making other technical changes. III. Discussion The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange 6 and, in particular, the requirements of Section 6(b) of the Act 7 and the rules and regulations thereunder. Specifically, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,8 in that the proposal promotes just and equitable principles of trade, prevents fraudulent and manipulative acts, removes impediments to and perfects the mechanism of a free and open market and a national market system, and, in general, protects investors and the public interest. The Commission considers that in most circumstances trades that are executed between parties should be honored. On rare occasions, the price of the executed trade indicates an ‘‘obvious error’’ may exist, suggesting that it is unrealistic to expect that the parties to the trade had come to a meeting of the minds regarding the terms of the transaction. In the Commission’s view, the determination of whether an ‘‘obvious error’’ has occurred should be based on specific and objective criteria and subject to specific and objective procedures. The revised scale for identifying the minimum error amount for an obvious price error and the elimination of obvious quantity errors set out a clear and objective methodology for determining when an obvious error has occurred. The proposed amendments with respect to obvious error transactions involving only CBOE Market Makers also establish specific and objective criteria governing the adjustment of such trades. In addition, the technical conforming and clarifying changes made by the proposed rule change, including the clarification with respect to the role of Trading Officials, should help facilitate understanding and application of CBOE Rule 24.16. Therefore, the Commission believes that the proposed rule change is consistent with the Act. 6 In approving this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 6797 IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,9 that the proposed rule change (SR–CBOE–2006– 62), as modified by Amendment No. 1, be, and it hereby is, approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.10 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–2405 Filed 2–12–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55239; File No. SR–DTC– 2006–15] Self-Regulatory Organizations; The Depository Trust Company; Order Granting Approval of a Proposed Rule Change Relating to the Canadian Link Service February 5, 2007. I. Introduction On October 10, 2006, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) proposed rule change SR–DTC–2006–15 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 December 8, 2006.2 No comment letters were received. For the reasons discussed below, the Commission is granting approval of the proposed rule change. II. Description The proposed rule change amends DTC’s Rule 30, Canadian-Link Service, to allow certain Canadian-Link transactions to settle in U.S. dollars. DTC’s Canadian-Link Service currently allows participants of DTC (‘‘DTC Participants’’) to clear and settle two categories of securities transactions in Canadian dollars: (1) transactions with participants of The Canadian Depository for Securities Limited CDS (‘‘CDS Participants’’) and (2) transactions with other DTC Participants. The CanadianLink Service also allows DTC Participants to transfer Canadian dollar funds to CDS Participants through the facilities of CDS and to other DTC Participants through Canadian settlement banks acting for DTC and 9 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 Securities Exchange Act Release No. 54855, (December 1, 2006), 71 FR 71206. 10 17 E:\FR\FM\13FEN1.SGM 13FEN1 6798 Federal Register / Vol. 72, No. 29 / Tuesday, February 13, 2007 / Notices are currently processed through the Canadian-Link Service. jlentini on PROD1PC65 with NOTICES such DTC Participants. The proposed rule change would add an additional functionality to the Canadian-Link Service to allow DTC Participants to settle certain securities transactions with CDS Participants in U.S. dollars (‘‘cross border U.S. dollar securities transactions’’). Set forth below is a description of the current CanadianLink Service and a description of the proposed change. Enhancement to the Canadian-Link Service Current Functionality of the CanadianLink Service The Canadian-Link Service currently allows DTC Participants to clear and settle valued securities transactions in Canadian dollars with CDS Participants through the link between DTC and CDS. The securities that may be the subject of these transactions are securities that are eligible for book-entry transfer through the facilities of CDS and DTC (‘‘FullService Canadian-Link Securities’’) and securities that are eligible for book-entry transfer through the facilities of CDS but not through DTC (‘‘Limited Service Canadian-Link Securities’’). The securities are delivered to and from CDS Participants through the facilities of CDS. Money settlement between DTC and CDS is included in Canadian dollar money settlement at CDS. Money settlement between DTC and DTC Participants takes place between Canadian settlement banks acting for DTC and such DTC Participants. The Canadian-Link Service allows DTC Participants to clear and settle valued transactions in Canadian dollars with other DTC Participants through the facilities of DTC. The securities that may be the subject of these transactions are Full-Service Canadian-Link Securities. The securities are delivered to and from DTC Participants through the facilities of DTC. Money settlement between DTC and DTC Participants takes place through Canadian settlement banks acting for DTC and such DTC Participants. The Canadian-Link Service allows DTC Participants to transfer Canadian dollar funds without any corresponding delivery or receipt of securities to CDS Participants or other DTC Participants. Transactions between DTC Participants and CDS Participants are processed through the facilities of CDS. Transactions between DTC Participants and other DTC Participants are processed through Canadian settlement banks acting for such DTC Participants. The proposed rule change would not change any of the existing components of the Canadian-Link Service and except for cross border U.S. dollar securities transactions, as set forth below, would not change how securities transactions VerDate Aug<31>2005 16:55 Feb 12, 2007 Jkt 211001 The proposed rule change enhances the Canadian-Link Service to allow DTC Participants to clear and settle certain valued securities transactions in U.S. dollars with CDS Participants through the link between DTC and CDS.3 The securities that will be the subject of U.S. dollar settlement are Limited-Service Canadian-Link Securities (i.e., securities that are eligible for book-entry transfer through the facilities of CDS but not DTC). The securities will be delivered to and from CDS Participants through the facilities of CDS. Money settlement between DTC and CDS will be included in U.S. dollar money settlement at DTC. Money settlement between DTC and DTC Participants will also be included in U.S. dollar money settlement at DTC together with the settlement of DTC Participants’ other transactions at DTC. As the foregoing indicates, these cross border U.S. dollar securities transactions will be processed in substantially the same way that transactions are now processed except that these transactions would settle in U.S. dollars rather than in Canadian dollars and the place of money settlement will be at DTC rather than at CDS or through Canadian settlement banks. The proposed rule change also adds new definitions to DTC Rule 30 to distinguish between transactions between DTC Participants and CDS Participants (‘‘Cross-Border Securities Transactions’’) and transactions between only DTC Participants (‘‘IntraDTC Securities Transactions’’). The proposed rule change also adds new definitions to distinguish between transactions that settle in U.S. dollars and transactions that settle in Canadian dollars (for example, ‘‘Cross-Border CAD Securities Transactions’’ and ‘‘Intra-DTC USD Securities Transactions’’). Risk Management Controls Set forth below is a description of DTC’s risk management controls with respect to the Canadian-Link Service and how these risk management controls will be affected as a result of the proposed rule change. 3 DTC has represented to the Commission that some transactions executed in Canadian markets, either on a stock exchange or over-the-counter, are settled in U.S. dollars. Transactions that settle in U.S. dollars are reported to DTC in U.S. dollar amounts. DTC does not convert settlement amounts from Canadian to U.S. dollars. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 1. Canadian-Link Required Participants Fund Deposit. A DTC Participant that uses the Canadian-Link Service is currently required to make an additional required deposit to the DTC participants fund that is determined in accordance with a formula that takes into account the volume of cross-border Canadian dollar securities transactions processed by DTC for such DTC Participant. Under the proposed rule change, such formula will also take into account the volume of cross-border U.S. dollar securities transactions processed by DTC for such DTC Participant. 2. Security for Canadian-Link Transactions. A DTC Participant that uses the Canadian-Link Service is currently required to pledge to DTC its interest in the securities subject to crossborder Canadian dollar securities transactions that are held by DTC for such DTC Participant at CDS. Under the proposed rule change, such DTC Participant will also be required to pledge to DTC its interest in the securities subject to cross-border U.S. dollar securities transactions that are held by DTC for such DTC Participant at CDS. 3. Canadian-Link Service Net Debit Caps of Canadian-Link Participants. A DTC Participant that uses the CanadianLink Service is currently subject to a net debit cap on the negative Canadian dollar balance that may, from time to time, be incurred by such DTC Participant with respect to its use of the Canadian-Link Service. Under the proposed rule change, a DTC Participant will also be subject to a net debit cap on the negative U.S. dollar balance that may from time to time be incurred by such DTC Participant with respect to its cross-border U.S. dollar securities transactions. The proposed rule change will add new definitions to DTC Rule 30 to take into account that there will be separate Net Debit Caps for U.S. and for Canadian dollar transactions. 4. Collateral Monitor of CanadianLink Participants. A DTC Participant that uses the Canadian-Link Service is currently subject to the DTC collateral monitor with respect to its use of the Canadian-Link Service. Under the proposed rule change, a DTC Participant will also be subject to the DTC collateral monitor with respect to its cross-border U.S. dollar securities transactions. As the foregoing indicates, crossborder U.S. dollar securities transactions will be subject to essentially the same risk management controls that are already applicable to the other securities transactions currently processed through the Canadian-Link Service. E:\FR\FM\13FEN1.SGM 13FEN1 Federal Register / Vol. 72, No. 29 / Tuesday, February 13, 2007 / Notices III. Discussion Section 17A(b)(3)(F) of the Act requires that the rules of a clearing agency be designed to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible. The Commission first approved Rule 30 to permit DTC to provide the Canadian-Link Service in 2005.4 In its order granting approval of Rule 30, the Commission found that rule satisfies the requirements of Section 17A of the Act because while streamlining the clearance and settlement of Canadian Dollar transactions at DTC, it includes sufficient procedures to assure the safeguarding of securities and funds which are in DTC’s custody or control or for which it is responsible. The proposed rule change, by adding to the transactions that are eligible to be cleared and settled through the Canadian-Link Service, is designed to encourage more CDS-Link Participants to use and to benefit from the operational and cost efficiencies of the Canadian-Link Service. We are satisfied with DTC’s description of the rule change as an enhancement that does not otherwise affect the operation of the Canadian-Link Service as it was previously approved by the Commission. In addition, the corresponding changes made to DTC’s risk management procedures and the clarifying amendments made to the terminology in Rule 30 should assure that DTC can offer U.S. Dollar settlement for the Canadian-Link Service without affecting DTC’s ability to safeguard securities and funds which are in its custody or control or for which it is responsible. IV. Conclusion jlentini on PROD1PC65 with NOTICES Jkt 211001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55244; File No. SR–NYSE– 2007–11] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Rule 122 (Orders With More Than One Broker) Until the Availability of Full dQuote Functions in a Particular Security or March 5, 2007, Whichever Comes First February 5, 2007. 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 February 5, 2007, the New York Stock Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the selfregulatory organization. NYSE filed the proposed rule change pursuant to Section 19(b)(3) of the Act 3 and Rule 19b–4(f)(6) thereunder,4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change 6 17 CFR 200.30–3(a)(12). 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)(6). 5 See Securities Exchange Act Release No. 54577 (October 5, 2006), 71 FR 60208 (October 12, 2006) (SR–NYSE–2006–36). 6 See Exchange Rules 13 and 123A.30(a). Exchange Rule 123A.30(a) describes a CAP–DI order as: ‘‘The elected or converted portion of a ‘percentage order that is convertible on a destabilizing tick and designated immediate execution or cancel election’ (‘‘CAP–DI order’’) may be automatically executed and may participate in a sweep.’’ 1 15 4 Securities Exchange Act Release No. 52784 (November 16, 2005), 71 FR 70902 (November 23, 2005) (File No. SR–DTC–2005–08). 5 In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 16:55 Feb 12, 2007 BILLING CODE 8010–01–P The Exchange proposes to continue the Floor brokers’ ability to maintain discretionary e-Quotes (‘‘d-Quotes’’) 5 and CAP–DI orders 6 in a security on the same side of the market for the same 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 Section 17A of the Act and the rules and regulations thereunder.5 It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (File No. SR– DTC–2006–15) be and hereby is approved. VerDate Aug<31>2005 For the Commission by the Division of Market Regulation, pursuant to delegated authority.6 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–2419 Filed 2–12–07; 8:45 am] PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 6799 order that are capable of trading at the same price until the completion of Phase IV implementation of the HYBRID MARKETSM (‘‘Hybrid Market’’) in the relevant security or until March 5, 2007, whichever comes first. The text of the proposed rule change is available on the Exchange’s Web site (www.nyse.com), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared 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 1. Purpose On October 25, 2006, the Exchange filed with the Commission an amendment to Rule 122 to permit Floor brokers to enter d-Quotes and CAP–DI orders in a security on the same side of the market for the same underlying order that are capable of trading at the same price until the implementation of full d-Quoting functionality in the relevant security or until February 5, 2007, whichever came first.7 On January 25, 2007, the Exchange commenced the implementation of Phase IV of the Hybrid Market, which includes the remaining d-Quote functions: (i) The ability to trade against non-marketable interest within a Floor broker’s discretionary range and (ii) routing control for Floor brokers with respect to d-Quotes.8 The Exchange anticipates that the implementation of Phase IV will not be completed as originally anticipated by February 5, 2007. Through this filing the Exchange therefore requests to extend Floor brokers’ ability to enter d-Quotes and CAP–DI orders in a security on the same side of the market for the same orders that are capable of trading at the same price until the implementation of 7 See Securities Exchange Act Release No. 54653 (October 26, 2006), 71 FR 64594 (November 2, 2006) (SR–NYSE–2006–94). 8 Other d-Quote functions were implemented in Phase III. E:\FR\FM\13FEN1.SGM 13FEN1

Agencies

[Federal Register Volume 72, Number 29 (Tuesday, February 13, 2007)]
[Notices]
[Pages 6797-6799]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-2419]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55239; File No. SR-DTC-2006-15]


Self-Regulatory Organizations; The Depository Trust Company; 
Order Granting Approval of a Proposed Rule Change Relating to the 
Canadian Link Service

February 5, 2007.

I. Introduction

    On October 10, 2006, The Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') proposed 
rule change SR-DTC-2006-15 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 December 8, 2006.\2\ No 
comment letters were received. For the reasons discussed below, the 
Commission is granting approval of the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 54855, (December 1, 
2006), 71 FR 71206.
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II. Description

    The proposed rule change amends DTC's Rule 30, Canadian-Link 
Service, to allow certain Canadian-Link transactions to settle in U.S. 
dollars. DTC's Canadian-Link Service currently allows participants of 
DTC (``DTC Participants'') to clear and settle two categories of 
securities transactions in Canadian dollars: (1) transactions with 
participants of The Canadian Depository for Securities Limited CDS 
(``CDS Participants'') and (2) transactions with other DTC 
Participants. The Canadian-Link Service also allows DTC Participants to 
transfer Canadian dollar funds to CDS Participants through the 
facilities of CDS and to other DTC Participants through Canadian 
settlement banks acting for DTC and

[[Page 6798]]

such DTC Participants. The proposed rule change would add an additional 
functionality to the Canadian-Link Service to allow DTC Participants to 
settle certain securities transactions with CDS Participants in U.S. 
dollars (``cross border U.S. dollar securities transactions''). Set 
forth below is a description of the current Canadian-Link Service and a 
description of the proposed change.

Current Functionality of the Canadian-Link Service

    The Canadian-Link Service currently allows DTC Participants to 
clear and settle valued securities transactions in Canadian dollars 
with CDS Participants through the link between DTC and CDS. The 
securities that may be the subject of these transactions are securities 
that are eligible for book-entry transfer through the facilities of CDS 
and DTC (``Full-Service Canadian-Link Securities'') and securities that 
are eligible for book-entry transfer through the facilities of CDS but 
not through DTC (``Limited Service Canadian-Link Securities''). The 
securities are delivered to and from CDS Participants through the 
facilities of CDS. Money settlement between DTC and CDS is included in 
Canadian dollar money settlement at CDS. Money settlement between DTC 
and DTC Participants takes place between Canadian settlement banks 
acting for DTC and such DTC Participants.
    The Canadian-Link Service allows DTC Participants to clear and 
settle valued transactions in Canadian dollars with other DTC 
Participants through the facilities of DTC. The securities that may be 
the subject of these transactions are Full-Service Canadian-Link 
Securities. The securities are delivered to and from DTC Participants 
through the facilities of DTC. Money settlement between DTC and DTC 
Participants takes place through Canadian settlement banks acting for 
DTC and such DTC Participants.
    The Canadian-Link Service allows DTC Participants to transfer 
Canadian dollar funds without any corresponding delivery or receipt of 
securities to CDS Participants or other DTC Participants. Transactions 
between DTC Participants and CDS Participants are processed through the 
facilities of CDS. Transactions between DTC Participants and other DTC 
Participants are processed through Canadian settlement banks acting for 
such DTC Participants.
    The proposed rule change would not change any of the existing 
components of the Canadian-Link Service and except for cross border 
U.S. dollar securities transactions, as set forth below, would not 
change how securities transactions are currently processed through the 
Canadian-Link Service.

Enhancement to the Canadian-Link Service

    The proposed rule change enhances the Canadian-Link Service to 
allow DTC Participants to clear and settle certain valued securities 
transactions in U.S. dollars with CDS Participants through the link 
between DTC and CDS.\3\ The securities that will be the subject of U.S. 
dollar settlement are Limited-Service Canadian-Link Securities (i.e., 
securities that are eligible for book-entry transfer through the 
facilities of CDS but not DTC). The securities will be delivered to and 
from CDS Participants through the facilities of CDS. Money settlement 
between DTC and CDS will be included in U.S. dollar money settlement at 
DTC. Money settlement between DTC and DTC Participants will also be 
included in U.S. dollar money settlement at DTC together with the 
settlement of DTC Participants' other transactions at DTC. As the 
foregoing indicates, these cross border U.S. dollar securities 
transactions will be processed in substantially the same way that 
transactions are now processed except that these transactions would 
settle in U.S. dollars rather than in Canadian dollars and the place of 
money settlement will be at DTC rather than at CDS or through Canadian 
settlement banks.
---------------------------------------------------------------------------

    \3\ DTC has represented to the Commission that some transactions 
executed in Canadian markets, either on a stock exchange or over-
the-counter, are settled in U.S. dollars. Transactions that settle 
in U.S. dollars are reported to DTC in U.S. dollar amounts. DTC does 
not convert settlement amounts from Canadian to U.S. dollars.
---------------------------------------------------------------------------

    The proposed rule change also adds new definitions to DTC Rule 30 
to distinguish between transactions between DTC Participants and CDS 
Participants (``Cross-Border Securities Transactions'') and 
transactions between only DTC Participants (``Intra-DTC Securities 
Transactions''). The proposed rule change also adds new definitions to 
distinguish between transactions that settle in U.S. dollars and 
transactions that settle in Canadian dollars (for example, ``Cross-
Border CAD Securities Transactions'' and ``Intra-DTC USD Securities 
Transactions'').

Risk Management Controls

    Set forth below is a description of DTC's risk management controls 
with respect to the Canadian-Link Service and how these risk management 
controls will be affected as a result of the proposed rule change.
    1. Canadian-Link Required Participants Fund Deposit. A DTC 
Participant that uses the Canadian-Link Service is currently required 
to make an additional required deposit to the DTC participants fund 
that is determined in accordance with a formula that takes into account 
the volume of cross-border Canadian dollar securities transactions 
processed by DTC for such DTC Participant. Under the proposed rule 
change, such formula will also take into account the volume of cross-
border U.S. dollar securities transactions processed by DTC for such 
DTC Participant.
    2. Security for Canadian-Link Transactions. A DTC Participant that 
uses the Canadian-Link Service is currently required to pledge to DTC 
its interest in the securities subject to cross-border Canadian dollar 
securities transactions that are held by DTC for such DTC Participant 
at CDS. Under the proposed rule change, such DTC Participant will also 
be required to pledge to DTC its interest in the securities subject to 
cross-border U.S. dollar securities transactions that are held by DTC 
for such DTC Participant at CDS.
    3. Canadian-Link Service Net Debit Caps of Canadian-Link 
Participants. A DTC Participant that uses the Canadian-Link Service is 
currently subject to a net debit cap on the negative Canadian dollar 
balance that may, from time to time, be incurred by such DTC 
Participant with respect to its use of the Canadian-Link Service. Under 
the proposed rule change, a DTC Participant will also be subject to a 
net debit cap on the negative U.S. dollar balance that may from time to 
time be incurred by such DTC Participant with respect to its cross-
border U.S. dollar securities transactions. The proposed rule change 
will add new definitions to DTC Rule 30 to take into account that there 
will be separate Net Debit Caps for U.S. and for Canadian dollar 
transactions.
    4. Collateral Monitor of Canadian-Link Participants. A DTC 
Participant that uses the Canadian-Link Service is currently subject to 
the DTC collateral monitor with respect to its use of the Canadian-Link 
Service. Under the proposed rule change, a DTC Participant will also be 
subject to the DTC collateral monitor with respect to its cross-border 
U.S. dollar securities transactions.
    As the foregoing indicates, cross-border U.S. dollar securities 
transactions will be subject to essentially the same risk management 
controls that are already applicable to the other securities 
transactions currently processed through the Canadian-Link Service.

[[Page 6799]]

III. Discussion

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in the custody or control of the clearing agency or 
for which it is responsible. The Commission first approved Rule 30 to 
permit DTC to provide the Canadian-Link Service in 2005.\4\ In its 
order granting approval of Rule 30, the Commission found that rule 
satisfies the requirements of Section 17A of the Act because while 
streamlining the clearance and settlement of Canadian Dollar 
transactions at DTC, it includes sufficient procedures to assure the 
safeguarding of securities and funds which are in DTC's custody or 
control or for which it is responsible.
---------------------------------------------------------------------------

    \4\ Securities Exchange Act Release No. 52784 (November 16, 
2005), 71 FR 70902 (November 23, 2005) (File No. SR-DTC-2005-08).
---------------------------------------------------------------------------

    The proposed rule change, by adding to the transactions that are 
eligible to be cleared and settled through the Canadian-Link Service, 
is designed to encourage more CDS-Link Participants to use and to 
benefit from the operational and cost efficiencies of the Canadian-Link 
Service. We are satisfied with DTC's description of the rule change as 
an enhancement that does not otherwise affect the operation of the 
Canadian-Link Service as it was previously approved by the Commission. 
In addition, the corresponding changes made to DTC's risk management 
procedures and the clarifying amendments made to the terminology in 
Rule 30 should assure that DTC can offer U.S. Dollar settlement for the 
Canadian-Link Service without affecting DTC's ability to safeguard 
securities and funds which are in its custody or control or for which 
it is responsible.

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 Section 17A of the Act and the rules and regulations 
thereunder.\5\
---------------------------------------------------------------------------

    \5\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-2006-15) be and hereby 
is approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-2419 Filed 2-12-07; 8:45 am]
BILLING CODE 8010-01-P