Self-Regulatory Organizations; The Depository Trust Company; Order Granting Approval of a Proposed Rule Change Relating to DTC Opening an Omnibus Account at Euroclear Bank, 39064-39065 [E8-15354]
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Federal Register / Vol. 73, No. 131 / Tuesday, July 8, 2008 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58055; File No. SR–DTC–
2007–12]
Self-Regulatory Organizations; The
Depository Trust Company; Order
Granting Approval of a Proposed Rule
Change Relating to DTC Opening an
Omnibus Account at Euroclear Bank
June 27, 2008.
I. Introduction
On September 12, 2007, The
Depository Trust Company (‘‘DTC’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–DTC–2007–12 pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’).1 Notice
of the proposal was published in the
Federal Register on November 1, 2007.2
One comment letter was received. For
the reasons discussed below, the
Commission is granting approval of the
proposed rule change.
ebenthall on PRODPC60 with NOTICES
II. Description
The proposed rule change allows DTC
to open an omnibus account at
Euroclear Bank NA/SV (‘‘ECB’’) in order
to facilitate the repositioning of
inventory between European markets
and U.S. markets. This would enable
more efficient inventory positioning by
participants of DTC and ECB as needed
in order to settle securities at ECB and
at DTC.
The rule change is designed to
accommodate dual listing of certain
foreign and domestic securities on both
U.S. and European trading platforms.
One recent example of such a dual
listing is the common stock of NYSE
Euronext Group. This U.S.-issued
security, which resulted from the
merger of the NYSE Group and
Euronext, is currently registered, listed,
and traded in the U.S. on the New York
Stock Exchange (‘‘NYSE’’) and in
Europe on the Euronext platform. It is
eligible for settlement at both DTC and
ECB. When traded on the NYSE, the
security is cleared and settled in the
continuous net settlement (‘‘CNS’’)
system operated by National Securities
Clearing Corporation (‘‘NSCC’’) with the
associated security movements taking
place at DTC. When traded on Euronext,
the transaction is eligible for clearance
through the facilities of LCHClearnet SA
and settlement effected by ECB through
the local central securities depository
(‘‘CSD’’). ECB utilizes the services of a
1 15
U.S.C. 78s(b)(1).
2 Securities Exchange Act Release No. 56706
(October 26, 2007). 72 FR 61923.
VerDate Aug<31>2005
15:11 Jul 07, 2008
Jkt 214001
U.S. custodian bank as agent to access
DTC for position management as it
currently does for all other U.S. issues
eligible for settlement at ECB.
Participants of ECB and DTC have the
ability to reposition their inventory of
NYSE Euronext common stock between
ECB and DTC through this arrangement.
The proposed rule change allows a
similar arrangement with ECB for
custody and repositioning movements
of non-U.S. dually-listed securities held
on deposit with ECB to the extent such
securities are made eligible for listing
and trading on U.S. domestic markets.
Under the new rule, ECB would act as
DTC’s custodian for issues on deposit at
ECB-controlled CSDs as well as at other
CSDs in ECB’s subcustody network.
This arrangement would enable DTC
participants to settle trades in foreign
issues in U.S. dollars executed on a U.S.
domestic market through the normal
clearance and DTC book-entry
settlement processes. Further, DTC/ECB
common participants would be able to
reposition share balances between their
DTC account and their ECB account
either directly or through their
custodian agent to facilitate settlements
of trades in these dually-listed foreign
issues executed in either marketplace.
Specifically, the new account would
allow for European securities that are
listed in the U.S. to be custodied by ECB
for DTC. The securities would be
credited to an account that is
maintained by or on behalf of ECB at a
European CSD. The process for creating
a position at DTC would be initiated by
a participant of the European CSD
delivering the securities free to ECB’s
account or to the account of ECB’s agent
at the European CSD. ECB would credit
DTC’s account at ECB, and DTC would
then credit the securities to the DTC
participant account designated by the
delivering participant. The securities
would then be available for use at DTC
(e.g., to satisfy settlements at DTC). To
the extent participants need to move
position back to Europe to, for among
other reasons, facilitate settlements
there, the process would be reversed.
Under this arrangement, for a security
for which physical certificates have
been issued, there would be no need for
transporting the physical certificates to
or from DTC. Any reregistration of
securities from one holder to another
that is required due to the market
practices of any particular market would
be processed by the European registrar
for the issue. Any position at DTC
would be represented by securities that
are registered in the name of the
European CSD, ECB or ECB’s agent.
ECB would provide subcustody
services such as principal and income
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
collection and corporate action
processing on securities held in DTC’s
omnibus account at ECB in accordance
with ECB procedures. DTC in turn
would provide its participants with
principal and income payment and
corporate actions services without the
need for its participants to interact
directly with ECB.
The primary benefits of the rule
change are that it should facilitate the
expanded dual listing programs of
marketplaces operating in the U.S. and
Europe and that it should help to reduce
the number of transactions that fail on
settlement date because of inefficient
methods of inventory repositioning. The
realization of these benefits would be
consistent with DTC’s objectives of
providing efficient book-entry clearance
and settlement facilities and of reducing
risk to DTC participants by
immobilizing certificates.
III. Comments
The Commission received one
comment to the proposed rule change.3
The comment letter was written on
behalf of the Operations Committee of
the Securities Industry and Financial
Markets Association (‘‘SIFMA’’). The
comment letter strongly supported the
proposed rule change and stated that it
would facilitate the efficient processing
of cross-border securities transactions
and reduce the risk and cost of such
transactions.
IV. Discussion
Section 17A(b)(3)(F) of the Act
requires that the rules of a clearing
agency be designed to promote the
prompt and accurate clearance and
settlement of securities transactions and
to assure the safeguarding of securities
and funds in the custody or control of
the clearing agency or for which it is
responsible.4 The proposed rule change
would allow DTC to establish an
omnibus account with ECB so that DTC
participant can reposition securities that
are listed on both U.S. and European
securities markets for settlement
without physically moving certificates
outside of DTC’s system. This
arrangement should reduce much of the
time, expense, costs, and risks
associated with physically moving
certificates between ECB and DTC.
The Commission also believes that
DTC has established the omnibus
account with ECB in a manner that is
consistent with its safeguarding
obligations under the Act. In order to
3 Letter from Noland Cheng, Chairman,
Operations Committee, Securities Industry and
Financial Markets Association (July 17, 2007).
4 15 U.S.C. 78q–1(b)(3)(F).
E:\FR\FM\08JYN1.SGM
08JYN1
Federal Register / Vol. 73, No. 131 / Tuesday, July 8, 2008 / Notices
assure itself that the linking with ECB
is safe and prudent, DTC completed an
extensive review of such things as: (1)
ECB’s operational controls, financial
strength, technology capabilities, and
audit arrangements; (2) Belgian
regulation of ECB; and (3) application
and effect of Belgian laws as they
pertain to the account.
Accordingly, the Commission finds
that the proposed rule change is
designed to promote the prompt and
accurate clearance and settlement of
securities transactions and to assure the
safeguarding of securities and funds in
the custody or control of the DTC or for
which it is responsible.
V. 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
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change (File No. SR–
DTC–2007–12) be and hereby is
approved.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.6
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–15354 Filed 7–7–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58066; File No. SR–
NYSEArca–2008–32]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendment No. 2 to Proposed Rule
Change Relating to the Minor Rule
Plan and Order Granting Accelerated
Approval to the Proposed Rule Change
as Modified by Amendment No. 2
June 30, 2008.
ebenthall on PRODPC60 with NOTICES
I. Introduction
On March 18, 2008, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
5 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition and capital formations. 15
U.S.C. 78c(f).
6 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
VerDate Aug<31>2005
15:11 Jul 07, 2008
Jkt 214001
change to amend NYSE Arca Equities,
Inc. (‘‘NYSE Arca Equities’’) Rule 10.12
(Minor Rule Plan) (‘‘MRP’’) and related
rules that underlie the MRP. On April
17, 2008, the Exchange submitted
Amendment No. 1 to the proposed rule
change. The proposed rule change, as
amended, was published for comment
in the Federal Register on April 29,
2008.3 The Commission received no
comments on the proposal. On June 11,
2008, the Exchange filed Amendment
No. 2 to the proposed rule change.4 This
notice and order solicits comments from
interested persons on Amendment No. 2
and approves the proposal, as modified
by Amendment No. 2, on an accelerated
basis.
II. Description of the Amended
Proposal
The Exchange proposed to amend its
Minor Rule Plan and related rules that
underlie the MRP, including Rules
5.2(b)(1) (Notification Requirements for
Offering of Securities), 6.1 (Adherence
to Law), 6.18 (Supervision), 7.38(c)
(Odd and Mixed Lots—Prohibitions),
and 9.2(c) (Customer Records).
Rule 5.2(b)(1)—Notification
Requirements for Offering of Securities
The Exchange proposed to correct an
error that was inadvertently created
when the NYSE Arca Rules were
updated to replace the obsolete term
‘‘Member’’ with the term ‘‘ETP Holder.’’
The Exchange stated that the intended
reference in this rule is to all members
of a syndicate and proposed, therefore,
to reinsert the correct term ‘‘members.’’
Rule 6.1—Adherence to Law and Good
Business Practices
The Exchange designated existing
Rule 6.1 as Rule 6.1(a) and substituted
the word ‘‘fair’’ in the rule’s
requirement that certain actions of ‘‘any
ETP Holder shall at all times comply
with fair and equitable principles of
trade’’ with the word ‘‘just.’’ The
Exchange also proposed to adopt Rule
6.1(b), which would require all ETP
Holders, their associated persons, and
other participants to adhere to the
principles of good business practice in
the conduct of their business affairs.5
3 See Securities Exchange Act Release No. 56733
(April 22, 2008), 73 FR 23287 (‘‘Notice’’).
4 See partial Amendment dated June 11, 2008
(‘‘Amendment No. 2’’). The text of Amendment No.
2 is available on the Commission’s Web site
(https://www.sec.gov/rules/sro/nysearca.shtml ), at
the Commission’s Public Reference Room, at NYSE
Arca’s principal office, and on NYSE Arca’s Web
site (https://www.nyse.com).
5 This rule is based on the current NYSE Rule
401(a).
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
39065
Violations of Rule 6.1(b) would be
eligible for MRP disposition.
Rule 6.18—Supervision
The current language of Rule 6.18(b)
provides that only ETP Holders for
whom the Exchange is the Designated
Examining Authority (‘‘DEA’’) are
subject to its supervisory requirements.
The Exchange proposed to amend Rule
6.18 to provide that all ETP Holders,
regardless of DEA, are subject to
Exchange’s supervisory requirements.
The Exchange also proposed to make
violations of Rule 6.18 eligible for MRP
disposition.
Rule 7.38(c)—Odd and Mixed Lots—
Prohibitions
The Exchange proposed to replace the
language in the current paragraph (c) of
Rule 7.38 that presently states that all
odd-lot violations shall be considered
conduct inconsistent with just and
equitable principles of trade and to
provide instead that it shall be
prohibited for ETP Holders, any
associated persons thereof, and any
other participants to engage in these
violations. The Exchange stated that
many violations of Exchange odd-lot
rules do not necessarily involve the bad
faith or unethical conduct.
Rule 9.2(c)—Customer Records
The Exchange proposed to change
Rule 9.2(c) by adding the word
‘‘current,’’ to clarify and reiterate the
obligation that firms with customer
accounts must not only keep records of
their customer accounts, but also must
keep them current.
Rule 10.12—Minor Rule Plan
The Exchange proposed several
modifications to the MRP, including to:
• Make several trading rules and
record keeping rules eligible for MRP
disposition; 6
• Modify the Recommended Fine
Schedule in Rule 10.12(i) so that MRP
fines are escalated based not on the
number of violations but on the number
of times the Exchange has imposed one
or more MRP fines upon an ETP Holder
for the violation of a particular rule;
• Allow Exchange enforcement staff,
as part of an MRP disposition of certain
supervisory-related offenses, not only to
impose a monetary fine, but also to
require the violator to make specified
changes to its supervisory or other
compliance procedures;
• Enable the Exchange to require
violators of Rule 2.21 (Employees of
ETP Holders Registration) to remit all
6 See Notice, 73 FR at 23288, for a detailed
description of these additions.
E:\FR\FM\08JYN1.SGM
08JYN1
]]>Agencies
[Federal Register Volume 73, Number 131 (Tuesday, July 8, 2008)]
[Notices]
[Pages 39064-39065]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-15354]
[[Page 39064]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58055; File No. SR-DTC-2007-12]
Self-Regulatory Organizations; The Depository Trust Company;
Order Granting Approval of a Proposed Rule Change Relating to DTC
Opening an Omnibus Account at Euroclear Bank
June 27, 2008.
I. Introduction
On September 12, 2007, The Depository Trust Company (``DTC'') filed
with the Securities and Exchange Commission (``Commission'') proposed
rule change SR-DTC-2007-12 pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal
was published in the Federal Register on November 1, 2007.\2\ One
comment letter was 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. 56706 (October 26,
2007). 72 FR 61923.
---------------------------------------------------------------------------
II. Description
The proposed rule change allows DTC to open an omnibus account at
Euroclear Bank NA/SV (``ECB'') in order to facilitate the repositioning
of inventory between European markets and U.S. markets. This would
enable more efficient inventory positioning by participants of DTC and
ECB as needed in order to settle securities at ECB and at DTC.
The rule change is designed to accommodate dual listing of certain
foreign and domestic securities on both U.S. and European trading
platforms. One recent example of such a dual listing is the common
stock of NYSE Euronext Group. This U.S.-issued security, which resulted
from the merger of the NYSE Group and Euronext, is currently
registered, listed, and traded in the U.S. on the New York Stock
Exchange (``NYSE'') and in Europe on the Euronext platform. It is
eligible for settlement at both DTC and ECB. When traded on the NYSE,
the security is cleared and settled in the continuous net settlement
(``CNS'') system operated by National Securities Clearing Corporation
(``NSCC'') with the associated security movements taking place at DTC.
When traded on Euronext, the transaction is eligible for clearance
through the facilities of LCHClearnet SA and settlement effected by ECB
through the local central securities depository (``CSD''). ECB utilizes
the services of a U.S. custodian bank as agent to access DTC for
position management as it currently does for all other U.S. issues
eligible for settlement at ECB. Participants of ECB and DTC have the
ability to reposition their inventory of NYSE Euronext common stock
between ECB and DTC through this arrangement.
The proposed rule change allows a similar arrangement with ECB for
custody and repositioning movements of non-U.S. dually-listed
securities held on deposit with ECB to the extent such securities are
made eligible for listing and trading on U.S. domestic markets. Under
the new rule, ECB would act as DTC's custodian for issues on deposit at
ECB-controlled CSDs as well as at other CSDs in ECB's subcustody
network. This arrangement would enable DTC participants to settle
trades in foreign issues in U.S. dollars executed on a U.S. domestic
market through the normal clearance and DTC book-entry settlement
processes. Further, DTC/ECB common participants would be able to
reposition share balances between their DTC account and their ECB
account either directly or through their custodian agent to facilitate
settlements of trades in these dually-listed foreign issues executed in
either marketplace.
Specifically, the new account would allow for European securities
that are listed in the U.S. to be custodied by ECB for DTC. The
securities would be credited to an account that is maintained by or on
behalf of ECB at a European CSD. The process for creating a position at
DTC would be initiated by a participant of the European CSD delivering
the securities free to ECB's account or to the account of ECB's agent
at the European CSD. ECB would credit DTC's account at ECB, and DTC
would then credit the securities to the DTC participant account
designated by the delivering participant. The securities would then be
available for use at DTC (e.g., to satisfy settlements at DTC). To the
extent participants need to move position back to Europe to, for among
other reasons, facilitate settlements there, the process would be
reversed. Under this arrangement, for a security for which physical
certificates have been issued, there would be no need for transporting
the physical certificates to or from DTC. Any reregistration of
securities from one holder to another that is required due to the
market practices of any particular market would be processed by the
European registrar for the issue. Any position at DTC would be
represented by securities that are registered in the name of the
European CSD, ECB or ECB's agent.
ECB would provide subcustody services such as principal and income
collection and corporate action processing on securities held in DTC's
omnibus account at ECB in accordance with ECB procedures. DTC in turn
would provide its participants with principal and income payment and
corporate actions services without the need for its participants to
interact directly with ECB.
The primary benefits of the rule change are that it should
facilitate the expanded dual listing programs of marketplaces operating
in the U.S. and Europe and that it should help to reduce the number of
transactions that fail on settlement date because of inefficient
methods of inventory repositioning. The realization of these benefits
would be consistent with DTC's objectives of providing efficient book-
entry clearance and settlement facilities and of reducing risk to DTC
participants by immobilizing certificates.
III. Comments
The Commission received one comment to the proposed rule change.\3\
The comment letter was written on behalf of the Operations Committee of
the Securities Industry and Financial Markets Association (``SIFMA'').
The comment letter strongly supported the proposed rule change and
stated that it would facilitate the efficient processing of cross-
border securities transactions and reduce the risk and cost of such
transactions.
---------------------------------------------------------------------------
\3\ Letter from Noland Cheng, Chairman, Operations Committee,
Securities Industry and Financial Markets Association (July 17,
2007).
---------------------------------------------------------------------------
IV. Discussion
Section 17A(b)(3)(F) of the Act requires that the rules of a
clearing agency be designed to promote the prompt and accurate
clearance and settlement of securities transactions and to assure the
safeguarding of securities and funds in the custody or control of the
clearing agency or for which it is responsible.\4\ The proposed rule
change would allow DTC to establish an omnibus account with ECB so that
DTC participant can reposition securities that are listed on both U.S.
and European securities markets for settlement without physically
moving certificates outside of DTC's system. This arrangement should
reduce much of the time, expense, costs, and risks associated with
physically moving certificates between ECB and DTC.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The Commission also believes that DTC has established the omnibus
account with ECB in a manner that is consistent with its safeguarding
obligations under the Act. In order to
[[Page 39065]]
assure itself that the linking with ECB is safe and prudent, DTC
completed an extensive review of such things as: (1) ECB's operational
controls, financial strength, technology capabilities, and audit
arrangements; (2) Belgian regulation of ECB; and (3) application and
effect of Belgian laws as they pertain to the account.
Accordingly, the Commission finds that the proposed rule change is
designed to promote the prompt and accurate clearance and settlement of
securities transactions and to assure the safeguarding of securities
and funds in the custody or control of the DTC or for which it is
responsible.
V. 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 formations. 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-2007-12) be and hereby
is approved.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\6\
Florence E. Harmon,
Acting Secretary.
---------------------------------------------------------------------------
\6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. E8-15354 Filed 7-7-08; 8:45 am]
BILLING CODE 8010-01-P
