Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Establish a Fee Relating to DTC's Settlement Procedures for the Maturity of Money Market Instruments With Unknown Rates, 42645-42646 [E8-16717]

Download as PDF Federal Register / Vol. 73, No. 141 / Tuesday, July 22, 2008 / Notices comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://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 Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Phlx. 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–Phlx–2008–53 and should be submitted on or before August 12, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.34 Florence E. Harmon, Acting Secretary. [FR Doc. E8–16685 Filed 7–21–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58165; File No. SR–DTC– 2008–03] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Establish a Fee Relating to DTC’s Settlement Procedures for the Maturity of Money Market Instruments With Unknown Rates sroberts on PROD1PC70 with NOTICES July 15, 2008. 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 May 30, 2008, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change described in CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change seeks to establish a fee that relates to DTC’s settlement procedures for the maturity of Money Market Instruments (‘‘MMI’’) with unknown rates (‘‘Unknown Rate Maturities’’). 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.3 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change DTC initiates MMI maturity processing automatically each morning by electronically sweeping all maturing positions of MMI CUSIPs from investors’ custodian accounts and generating the appropriate maturity payments. The MMI then is delivered to the account of the appropriate Issuing Agent or Paying Agent (collectively, ‘‘IPA’’). On the day of delivery, DTC debits the IPA’s account in the amount of the maturity proceeds for settlement and credits the same amount of the maturity proceeds to the investor’s custodian account for payment to the investor. In order for DTC to process settlement for Unknown Rate Maturities the IPA currently is required to send notice to DTC by 6 p.m. (ET) on the day the amount of variable income or principal becomes known to the IPA, but in no event later than 3 p.m. (ET) on the day prior to maturity or periodic payment date. In certain circumstances, DTC may accept an IPA’s notice after the applicable deadlines until 2:30 p.m. (ET) on the date of maturity. If no maturity rate is provided by 2:30 p.m. 34 17 1 15 VerDate Aug<31>2005 19:47 Jul 21, 2008 3 The Commission has modified the text of the summaries prepared by DTC. Jkt 214001 PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 42645 (ET) on the date of maturity, then the maturity will roll-over to the next processing day. This rollover continues until a rate is provided. The process to monitor the resolution of payments on Unknown Rate Maturities is timeconsuming because it involves, among other things, DTC verifying the IPA of the Unknown Rate Maturity, calling the IPA at minimum on a daily basis, and coordinating within DTC to get the issue resolved as quickly as possible. Accordingly, DTC is proposing to implement a disincentive fee to encourage timely receipt of the appropriate maturity rates. DTC submits that this is an appropriate fee to assess in order to compensate for the operational expenses associated with monitoring the resolution of payments on Unknown Rate Maturities and expects such fee to serve as a disincentive to IPAs’ delayed notice of the maturity rate. Under the proposed rule change, if the maturity rate is not populated in DTC’s system by 2:30 p.m. (ET) on the date of maturity, DTC will charge a fee of $5,000 on the maturity date and for each subsequent MMI business day, or part thereof, until the rate is submitted.4 DTC has met with various industry organizations, all of whom support the implementation of this fee. DTC believes that the proposed rule change is consistent with the requirements of Section 17A of the Act 5 and the rules and regulations thereunder because the proposed change will deter late submission of maturity rates, thereby promoting prompt and accurate clearance and settlement of securities transactions. 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 been solicited or received. DTC will notify the Commission of any written comments received by DTC. 4 DTC also will report any pattern of late submission of maturity rates to the Commission. 5 15 U.S.C. 78q–1. E:\FR\FM\22JYN1.SGM 22JYN1 42646 Federal Register / Vol. 73, No. 141 / Tuesday, July 22, 2008 / Notices 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 (http://www.sec.gov/ rules/sro.shtml) or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–DTC–2008–03 on the subject line. sroberts on PROD1PC70 with NOTICES • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–DTC–2008–03. 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 (http://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, on official business days between the hours of 10 am and 3 pm. 19:47 Jul 21, 2008 For the Commission by the Division of Trading and Markets, pursuant to delegated authority.6 Florence E. Harmon, Acting Secretary. [FR Doc. E8–16717 Filed 7–21–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58158; File No. SR–OCC– 2007–20] Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Approval of a Proposed Rule Change Relating to the System for Theoretical Analysis and Numerical Simulations July 15, 2008. Paper Comments VerDate Aug<31>2005 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 http://www.dtcc.com/ downloads/legal/rule_filings/2008/dtc/ 2008–03.pdf. 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– 2008–03 and should be submitted on or before August 12, 2008. Jkt 214001 I. Introduction On December 14, 2007, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) proposed rule change SR–OCC–2007–20 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 February 12, 2008.2 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 permits the incorporation of certain forms of securities deposited as margin collateral into OCC’s System for Theoretical Analysis and Numerical Simulations (‘‘STANS’’) risk management methodology. The purpose of the proposed rule change is to more accurately measure the risk in clearing members’ accounts and thereby permit CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 Securities Exchange Act Release No. 57270 (February 5, 2008), 73 FR 8098. PO 00000 6 17 1 15 Frm 00105 Fmt 4703 Sfmt 4703 OCC to set margin requirements that more precisely reflect that risk. In connection with this rule change, it is also necessary to include additional flexibility in determining the amount of replacement collateral required when securities deposited as margin are withdrawn. In addition, because OCC believes that certain existing concentration limits and requirements regarding minimum share prices are no longer appropriately applied to securities that are underlying securities or to fund shares that track an index that is an underlying index for covered contracts, OCC is eliminating such requirements with respect to such securities. Overview of Rule Changes. OCC will incorporate certain common stocks and ETFs (defined as ‘‘fund shares’’ in Article I of OCC’s By-Laws) into the STANS margin calculation process.3 STANS is a large-scale Monte Carlobased risk management methodology used to measure risk associated with portfolios of cleared contracts. Currently, these forms of securities when deposited as collateral to satisfy margin requirements are priced on a nightly basis and are assigned a value equal to their end-of-day market price minus the haircut applicable to that form of collateral, an amount that varies according to asset type. While this method of valuing collateral has generally served OCC well in the past, it does not take into account the potential risk-reducing impact that the deposited collateral might have on a clearing member’s portfolio. Under the rule change, cleared options positions and underlying securities in the forms indicated above will be analyzed as a single portfolio using STANS, thus providing a more accurate valuation of securities deposited as collateral in relation to the other positions in the account. The rule change will align risk management techniques utilized to manage market risk of options portfolios with those used to value margin deposits. There are two primary benefits expected from the rule change. First, margin requirements will be based on the risk of the combined portfolio that includes both cleared contracts and deposited collateral, thereby allowing the relevant intercorrelations of cleared contracts and deposited collateral to be taken into consideration rather than treating securities deposited as collateral as having fixed values. Second, the coverage provided by a 3 For a description of STANS, refer to Securities Exchange Act Release No. 53322 (February 15, 2006) 71 FR 9403 (February 23, 2006) (File No. SR– OCC–2004–20). E:\FR\FM\22JYN1.SGM 22JYN1

Agencies

[Federal Register Volume 73, Number 141 (Tuesday, July 22, 2008)]
[Notices]
[Pages 42645-42646]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-16717]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58165; File No. SR-DTC-2008-03]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change To Establish a Fee Relating to 
DTC's Settlement Procedures for the Maturity of Money Market 
Instruments With Unknown Rates

July 15, 2008.
    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 May 30, 2008, 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).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change seeks to establish a fee that relates to 
DTC's settlement procedures for the maturity of Money Market 
Instruments (``MMI'') with unknown rates (``Unknown Rate Maturities'').

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.\3\
---------------------------------------------------------------------------

    \3\ 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

    DTC initiates MMI maturity processing automatically each morning by 
electronically sweeping all maturing positions of MMI CUSIPs from 
investors' custodian accounts and generating the appropriate maturity 
payments. The MMI then is delivered to the account of the appropriate 
Issuing Agent or Paying Agent (collectively, ``IPA''). On the day of 
delivery, DTC debits the IPA's account in the amount of the maturity 
proceeds for settlement and credits the same amount of the maturity 
proceeds to the investor's custodian account for payment to the 
investor.
    In order for DTC to process settlement for Unknown Rate Maturities 
the IPA currently is required to send notice to DTC by 6 p.m. (ET) on 
the day the amount of variable income or principal becomes known to the 
IPA, but in no event later than 3 p.m. (ET) on the day prior to 
maturity or periodic payment date. In certain circumstances, DTC may 
accept an IPA's notice after the applicable deadlines until 2:30 p.m. 
(ET) on the date of maturity. If no maturity rate is provided by 2:30 
p.m. (ET) on the date of maturity, then the maturity will roll-over to 
the next processing day. This rollover continues until a rate is 
provided. The process to monitor the resolution of payments on Unknown 
Rate Maturities is time-consuming because it involves, among other 
things, DTC verifying the IPA of the Unknown Rate Maturity, calling the 
IPA at minimum on a daily basis, and coordinating within DTC to get the 
issue resolved as quickly as possible.
    Accordingly, DTC is proposing to implement a disincentive fee to 
encourage timely receipt of the appropriate maturity rates. DTC submits 
that this is an appropriate fee to assess in order to compensate for 
the operational expenses associated with monitoring the resolution of 
payments on Unknown Rate Maturities and expects such fee to serve as a 
disincentive to IPAs' delayed notice of the maturity rate. Under the 
proposed rule change, if the maturity rate is not populated in DTC's 
system by 2:30 p.m. (ET) on the date of maturity, DTC will charge a fee 
of $5,000 on the maturity date and for each subsequent MMI business 
day, or part thereof, until the rate is submitted.\4\ DTC has met with 
various industry organizations, all of whom support the implementation 
of this fee.
---------------------------------------------------------------------------

    \4\ DTC also will report any pattern of late submission of 
maturity rates to the Commission.
---------------------------------------------------------------------------

    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \5\ and the rules and 
regulations thereunder because the proposed change will deter late 
submission of maturity rates, thereby promoting prompt and accurate 
clearance and settlement of securities transactions.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

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 been 
solicited or received. DTC will notify the Commission of any written 
comments received by DTC.

[[Page 42646]]

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 (http://
www.sec.gov/rules/sro.shtml) or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-DTC-2008-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-DTC-2008-03. 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 (http://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, on official business days between the hours 
of 10 am and 3 pm. 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 http://www.dtcc.com/downloads/legal/rule_filings/2008/dtc/
2008-03.pdf. 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-
2008-03 and should be submitted on or before August 12, 2008.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

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

Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16717 Filed 7-21-08; 8:45 am]
BILLING CODE 8010-01-P