Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change as Amended To Increase Liquidity Resources, 62578-62579 [E8-24972]

Download as PDF 62578 Federal Register / Vol. 73, No. 204 / Tuesday, October 21, 2008 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Florence E. Harmon, Acting Secretary. [FR Doc. E8–24971 Filed 10–20–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58757A; File No. SR–DTC– 2008–12] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change as Amended To Increase Liquidity Resources October 14, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on August 26, 2008, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) and on September 9, 2008 and on September 30, 2008, amended the proposed rule change as 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 as amended from interested parties. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change DTC is seeking to increase its liquidity resources to ensure that it has sufficient liquidity to cover the failure of a family of financially affiliated DTC participants. mstockstill on PROD1PC66 with NOTICES 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 9 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 The Commission has modified the text of the summaries prepared by DTC. 1 15 VerDate Aug<31>2005 17:06 Oct 20, 2008 Jkt 217001 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The proposed rule change seeks to increase the liquidity resources of DTC to ensure it has sufficient liquidity to cover the failure of a financial family of affiliated DTC Participants (‘‘Affiliated Family’’).3 An Affiliated Family means a Participant that controls another Participant or other Participants and each Participant that is under the control of the controlling Participant. For purposes of this definition, ‘‘control’’ means the direct or indirect ownership of more than 50% of the voting securities or other voting interests of any entity.4 To ensure that DTC is able to complete its settlement obligations each day in the event of a Participant’s inability to settle with DTC, DTC currently maintains liquidity resources of $2.5 billion composed of a $600 million all-cash Participants Fund and a committed line of credit in the amount of $1.9 billion with a consortium of banks. DTC’s committed line of credit was recently increased from $1.4 billion. Given that financial firms have become increasingly interdependent, DTC recognizes that there is a possibility of ‘‘contagion’’ among several related Participants. Financial problems at one Participant may impact the stability of another related Participant, potentially causing both to fail simultaneously. Because of concerns about this potential, DTC and its regulators have agreed that DTC should increase its available liquidity resources so that DTC would be able to withstand the failure of a financial family of affiliated DTC Participants.5 In order to address these concerns, DTC is proposing to (i) increase by $700 million the total cash deposits to DTC’s all-cash Participants Fund, so that the aggregate amount of the required cash deposits to DTC’s Participant Fund and the required preferred stock investments of Participants would be increased to $1.3 billion from $600 million and (ii) limit 3 DTC currently has 332 Participants, most of which are broker-dealers or banks with one Participant account. Large integrated organizations, however, typically have several ‘‘legal entities’’ that each are DTC Participants (e.g., a bank custodian entity and a separate securities firm entity). 4 Under this definition, DTC currently has 47 Affiliated Families. 5 The Commission is the primary federal regulator of DTC as a clearing agency. DTC is also a limited purpose trust company established under New York Banking Law and a state member bank of the Federal Reserve System. As such, the The Federal Reserve Bank of New York (FRBNY) and the New York State Department of Banking have regulatory authority over DTC. PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 the aggregate maximum net debit cap 6 for any Affiliated Family to $3 billion. The following variables are currently used in the determination of each Participant’s required Fund deposit: (1) The six largest intra-day net debit peaks for a Participant over a rolling 60business day period. (2) Minimum Fund Deposit: $10,000. (3) Fund Size: $600 Million. DTC will continue to employ these variables to calculate the first $600 million of the required $1.3 billion Fund. The remaining $700 million will be allocated proportionately among the Affiliated Families whose aggregate net debit caps per family exceed $2.3 billion.7 An Affiliated Family whose net debit cap exceeds $2.3 billion would be required to contribute a portion of the remaining $700 million calculated by dividing the amount by which the Affiliated Family’s net debit cap exceeds $2.3 billion by the sum of the amount by which each Affiliated Family’s net debit cap exceeds $2.3 billion.8 Once an Affiliated Family’s additional Participant’s Fund requirement has been established, DTC will allocate this sum among the Participants comprising the Affiliated Family in proportion to each Participant’s adjusted net debit cap.9 This algorithm will be systematically used to calculate the allocations for the Participants of Affiliated Families, unless each of the Participants that comprise an Affiliated Family provides DTC with written instructions to allocate the aggregate net debit cap differently. While the Participants of an 6 DTC ensures that timely settlement can be completed in the event of an inability to settle by a Participant with the largest settlement obligation, by setting limits (called net debit caps) for each Participant. A Participant’s net debit is limited throughout the processing day to a net debit cap that is the lesser of four amounts: (1) An amount based on the average of the three largest net debits that the Participant incurred over a rolling 70 business day period, (2) an amount, if any, determined by the Participant’s settling bank, (3) an amount, if any, determined by DTC, or (4) $1.8 billion. 7 In accordance with its current practice, DTC would continue to maintain a liquidity cushion of $200 million between its largest net debit cap and its liquidity resources (i.e., DTC’s current liquidity of $2.5 billion minus the $200 liquidity cushion it maintains). 8 DTC will adjust the net debit caps of the Participants that comprise the Affiliated Families so that the aggregate affiliated net debit cap does not exceed $3 billion. Currently 18 Affiliate Families consisting of 57 DTC Participants would be subject to these Affiliated Family provisions. Thirteen Affiliated Families would be required to reduce their overall Net debit cap. 9 The proposed DTC Affiliated Family Algorithm can be viewed on the Commission’s Web site at https://www.sec.gov/rules/sro/dtc/2008/3458757.pdf and at DTC’s Web site at https:// www.dtcc.com/downloads/legal/rule_filings/2008/ dtc/2008-12.pdf. E:\FR\FM\21OCN1.SGM 21OCN1 Federal Register / Vol. 73, No. 204 / Tuesday, October 21, 2008 / Notices Affiliated Family may give instructions to reapportion their net debit caps among themselves, they cannot reallocate to any one Participant a debit cap that is greater than the DTC system calculated net debit cap for that Participant. DTC believes that the proposed rule change is consistent with the requirements of Section 17A of the Act 10 and the rules and regulations thereunder applicable to DTC because it should assure the safeguarding of securities and funds in DTC’s custody or control or for which it is responsible by increasing DTC’s liquidity resources to enable it to complete settlement in the event of a failure of a financial family of affiliated Participants. IV. Solicitation of Comments (B) Self-Regulatory Organization’s Statement on Burden on Competition Paper Comments DTC believes that the proposed rule change will not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The risk mitigation effects of the proposed change do not impose any unreasonable or inappropriate burden on competition. The revised net debit cap limits and increased Participant Fund are allocated among those entities whose interdependencies have raised concern. (C) Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The proposed rule change has been discussed with several Participants. Written comments relating to the proposed rule change have been received by DTC and are addressed by the proposed rule change. DTC will notify the Commission if it receives additional comments. mstockstill on PROD1PC66 with 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. 10 15 U.S.C. 78q–1. VerDate Aug<31>2005 17:06 Oct 20, 2008 Jkt 217001 Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: 62579 For the Commission by the Division of Trading and Markets, pursuant to delegated authority.11 Florence E. Harmon, Acting Secretary. [FR Doc. E8–24972 Filed 10–20–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 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–2008–12 on the subject line. • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. [Release No. 34–58770; File No. SR– NYSEArca–2008–103] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Its Schedule of Fees and Charges for Exchange Services That Apply to the Primary Only Plus Order October 10, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 All submissions should refer to File notice is hereby given that on Number SR–DTC–2008–12. This file September 29, 2008, NYSE Arca, Inc. number should be included on the (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed subject line if e-mail is used. To help the with the Securities and Exchange Commission (‘‘Commission’’) the Commission process and review your proposed rule change as described in comments more efficiently, please use only one method. The Commission will Items I, II, and III below, which Items post all comments on the Commission’s have been substantially prepared by the Exchange. The Exchange filed the Internet Web site (https://www.sec.gov/ proposed rule change pursuant to rules/sro.shtml). Copies of the Section 19(b)(3)(A) of the Act 3 and Rule submission, all subsequent 19b–4(f)(2) thereunder,4 which renders amendments, all written statements the proposal effective upon filing with with respect to the proposed rule the Commission. The Commission is change that are filed with the publishing this notice to solicit Commission, and all written comments on the proposed rule change communications relating to the from interested persons. proposed rule change between the Commission and any person, other than I. Self-Regulatory Organization’s those that may be withheld from the Statement of the Terms of Substance of the Proposed Rule Change public in accordance with the provisions of 5 U.S.C. 552, will be NYSE Arca proposes to add new fees available for inspection and copying in to the Schedule of Fees and Charges for the Commission’s Public Reference Exchange Services (the ‘‘Schedule’’) that Section, 100 F Street, NE., Washington, apply to the new Primary Only Plus DC 20549, on official business days (‘‘PO+’’) Order type. The text of the between the hours of 10 a.m and 3 p.m. proposed rule change is available at Copies of such filing also will be NYSE Arca, the Commission’s Public available for inspection and copying at Reference Room, and https:// the principal office of DTC and on www.nyse.com. DTC’s Web site at https://www.dtcc.com/ II. Self-Regulatory Organization’s downloads/legal/rule_filings/2008/dtc/ Statement of the Purpose of, and 2008–12.pdf. All comments received Statutory Basis for, the Proposed Rule will be posted without change; the Change Commission does not edit personal In its filing with the Commission, the identifying information from Exchange included statements submissions. You should submit only information that you wish to make 11 17 CFR 200.30–3(a)(12). available publicly. All submissions 1 15 U.S.C. 78s(b)(1). should refer to File Number SR–DTC– 2 17 CFR 240.19b–4. 2008–12 and should be submitted on or 3 15 U.S.C. 78s(b)(3)(A). before November 12, 2008. 4 17 CFR 240.19b–4(f)(2). PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 E:\FR\FM\21OCN1.SGM 21OCN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 73, Number 204 (Tuesday, October 21, 2008)]
[Notices]
[Pages 62578-62579]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-24972]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58757A; File No. SR-DTC-2008-12]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change as Amended To Increase 
Liquidity Resources

October 14, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 26, 2008, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') and on September 9, 2008 and on 
September 30, 2008, amended the proposed rule change as 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 as amended from interested parties.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

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

    DTC is seeking to increase its liquidity resources to ensure that 
it has sufficient liquidity to cover the failure of a family of 
financially affiliated DTC participants.

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

    The proposed rule change seeks to increase the liquidity resources 
of DTC to ensure it has sufficient liquidity to cover the failure of a 
financial family of affiliated DTC Participants (``Affiliated 
Family'').\3\ An Affiliated Family means a Participant that controls 
another Participant or other Participants and each Participant that is 
under the control of the controlling Participant. For purposes of this 
definition, ``control'' means the direct or indirect ownership of more 
than 50% of the voting securities or other voting interests of any 
entity.\4\
---------------------------------------------------------------------------

    \3\ DTC currently has 332 Participants, most of which are 
broker-dealers or banks with one Participant account. Large 
integrated organizations, however, typically have several ``legal 
entities'' that each are DTC Participants (e.g., a bank custodian 
entity and a separate securities firm entity).
    \4\ Under this definition, DTC currently has 47 Affiliated 
Families.
---------------------------------------------------------------------------

    To ensure that DTC is able to complete its settlement obligations 
each day in the event of a Participant's inability to settle with DTC, 
DTC currently maintains liquidity resources of $2.5 billion composed of 
a $600 million all-cash Participants Fund and a committed line of 
credit in the amount of $1.9 billion with a consortium of banks. DTC's 
committed line of credit was recently increased from $1.4 billion. 
Given that financial firms have become increasingly interdependent, DTC 
recognizes that there is a possibility of ``contagion'' among several 
related Participants. Financial problems at one Participant may impact 
the stability of another related Participant, potentially causing both 
to fail simultaneously. Because of concerns about this potential, DTC 
and its regulators have agreed that DTC should increase its available 
liquidity resources so that DTC would be able to withstand the failure 
of a financial family of affiliated DTC Participants.\5\ In order to 
address these concerns, DTC is proposing to (i) increase by $700 
million the total cash deposits to DTC's all-cash Participants Fund, so 
that the aggregate amount of the required cash deposits to DTC's 
Participant Fund and the required preferred stock investments of 
Participants would be increased to $1.3 billion from $600 million and 
(ii) limit the aggregate maximum net debit cap \6\ for any Affiliated 
Family to $3 billion.
---------------------------------------------------------------------------

    \5\ The Commission is the primary federal regulator of DTC as a 
clearing agency. DTC is also a limited purpose trust company 
established under New York Banking Law and a state member bank of 
the Federal Reserve System. As such, the The Federal Reserve Bank of 
New York (FRBNY) and the New York State Department of Banking have 
regulatory authority over DTC.
    \6\ DTC ensures that timely settlement can be completed in the 
event of an inability to settle by a Participant with the largest 
settlement obligation, by setting limits (called net debit caps) for 
each Participant. A Participant's net debit is limited throughout 
the processing day to a net debit cap that is the lesser of four 
amounts: (1) An amount based on the average of the three largest net 
debits that the Participant incurred over a rolling 70 business day 
period, (2) an amount, if any, determined by the Participant's 
settling bank, (3) an amount, if any, determined by DTC, or (4) $1.8 
billion.
---------------------------------------------------------------------------

    The following variables are currently used in the determination of 
each Participant's required Fund deposit:
    (1) The six largest intra-day net debit peaks for a Participant 
over a rolling 60-business day period.
    (2) Minimum Fund Deposit: $10,000.
    (3) Fund Size: $600 Million.
    DTC will continue to employ these variables to calculate the first 
$600 million of the required $1.3 billion Fund. The remaining $700 
million will be allocated proportionately among the Affiliated Families 
whose aggregate net debit caps per family exceed $2.3 billion.\7\ An 
Affiliated Family whose net debit cap exceeds $2.3 billion would be 
required to contribute a portion of the remaining $700 million 
calculated by dividing the amount by which the Affiliated Family's net 
debit cap exceeds $2.3 billion by the sum of the amount by which each 
Affiliated Family's net debit cap exceeds $2.3 billion.\8\ Once an 
Affiliated Family's additional Participant's Fund requirement has been 
established, DTC will allocate this sum among the Participants 
comprising the Affiliated Family in proportion to each Participant's 
adjusted net debit cap.\9\ This algorithm will be systematically used 
to calculate the allocations for the Participants of Affiliated 
Families, unless each of the Participants that comprise an Affiliated 
Family provides DTC with written instructions to allocate the aggregate 
net debit cap differently. While the Participants of an

[[Page 62579]]

Affiliated Family may give instructions to reapportion their net debit 
caps among themselves, they cannot reallocate to any one Participant a 
debit cap that is greater than the DTC system calculated net debit cap 
for that Participant.
---------------------------------------------------------------------------

    \7\ In accordance with its current practice, DTC would continue 
to maintain a liquidity cushion of $200 million between its largest 
net debit cap and its liquidity resources (i.e., DTC's current 
liquidity of $2.5 billion minus the $200 liquidity cushion it 
maintains).
    \8\ DTC will adjust the net debit caps of the Participants that 
comprise the Affiliated Families so that the aggregate affiliated 
net debit cap does not exceed $3 billion. Currently 18 Affiliate 
Families consisting of 57 DTC Participants would be subject to these 
Affiliated Family provisions. Thirteen Affiliated Families would be 
required to reduce their overall Net debit cap.
    \9\ The proposed DTC Affiliated Family Algorithm can be viewed 
on the Commission's Web site at https://www.sec.gov/rules/sro/dtc/
2008/34-58757.pdf and at DTC's Web site at https://www.dtcc.com/
downloads/legal/rule_filings/2008/dtc/2008-12.pdf.
---------------------------------------------------------------------------

    DTC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \10\ and the rules and 
regulations thereunder applicable to DTC because it should assure the 
safeguarding of securities and funds in DTC's custody or control or for 
which it is responsible by increasing DTC's liquidity resources to 
enable it to complete settlement in the event of a failure of a 
financial family of affiliated Participants.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC believes that the proposed rule change will not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act. The risk mitigation effects of the proposed 
change do not impose any unreasonable or inappropriate burden on 
competition. The revised net debit cap limits and increased Participant 
Fund are allocated among those entities whose interdependencies have 
raised concern.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    The proposed rule change has been discussed with several 
Participants. Written comments relating to the proposed rule change 
have been received by DTC and are addressed by the proposed rule 
change. DTC will notify the Commission if it receives additional 
comments.

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, as amended, 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-2008-12 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-2008-12. 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, 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 DTC and on DTC's Web 
site at https://www.dtcc.com/downloads/legal/rule_filings/2008/dtc/
2008-12.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-
2008-12 and should be submitted on or before November 12, 2008.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-24972 Filed 10-20-08; 8:45 am]
BILLING CODE 8011-01-P

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