Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by The Depository Trust Company Relating to Eliminating the SRO Requirement as a Condition of DTC-Eligibility for Securities That Are Eligible for Resale Under Rule 144A Under the Securities Act of 1933, 76688-76689 [E8-29900]

Download as PDF 76688 Federal Register / Vol. 73, No. 243 / Wednesday, December 17, 2008 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Florence E. Harmon, Acting Secretary. [FR Doc. E8–29903 Filed 12–16–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59088; File No. SR–DTC– 2008–13] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by The Depository Trust Company Relating to Eliminating the SRO Requirement as a Condition of DTCEligibility for Securities That Are Eligible for Resale Under Rule 144A Under the Securities Act of 1933 December 11, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on October 9, 2008, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) 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 from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change DTC proposes to eliminate the SRO Requirement, as defined below, as a condition of DTC-eligibility for securities that are eligible for resale under Rule 144A (‘‘Rule 144A Securities’’) under the Securities Act of 1933 (‘‘Securities Act’’).2 pwalker on PROD1PC71 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 such statements. 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 230.144A. 1 15 VerDate Aug<31>2005 18:58 Dec 16, 2008 Jkt 217001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In April 1990, the Commission adopted Rule 144A under the Securities Act.3 This rule provides a safe-harbor from the registration requirements of the Securities Act for resales to qualified institutional buyers (‘‘QIBs’’) of certain restricted securities that when issued were not of the same class as securities listed on a national securities exchange registered under the Act. Rule 144A(d)(2) 4 requires that the seller or any person acting on its behalf take reasonable steps to ensure that the purchaser is aware that the seller may rely on the safe-harbor provided by Rule 144A. In 1993, the Commission approved a DTC rule filing whereby DTC would make Rule 144A securities eligible for deposit, book-entry delivery, and other depository services provided, in part, that DTC was required to ‘‘condition the eligibility of the Rule 144A Securities (other than Investment Grade Securities) on initial and continued inclusion of those securities in an SRO Rule 144A System, such as the NASD’s PORTAL Market System.’’ 5 This condition is referred to herein as the ‘‘SRO Requirement.’’ The SRO Requirement contemplated that an SRO Rule 144A System would include comprehensive safeguards to facilitate the SRO’s ability to detect violations of Rule 144A. However, the only SRO Rule 144A System that was developed was the NASD’s PORTAL Market System (‘‘PORTAL’’) and not only did PORTAL not develop as anticipated but also it did not include the safeguards contemplated by the DTC rule filing and Commission order of 1993.6 In light of the above, DTC believes that the SRO Requirement is no longer necessary or appropriate. DTC believes that eliminating the SRO Requirement will result in a uniform procedure for making Rule 144A Securities DTC-eligible whether or not they were classified as investment grade securities. Under the proposed rule change, issuers and participants would continue to be responsible for 3 Supra note 2. CFR 230.144A(d)(2). 5 Securities Exchange Release No. 33327 (Dec. 13, 1993), 58 FR 67878 (Dec. 22, 1993) [File No. SR– DTC–90–06]. ‘‘Investment Grade Securities’’ are defined in this release as nonconvertible debt securities and nonconvertible preferred stock which are in one of the top four categories by a nationally recognized statistical rating organization. 6 Securities Exchange Release No. 56172 (Jul. 31, 2007), 72 FR 44196 (Aug. 7, 2007) [File No. SR– NASDAQ–2006–65]. 4 17 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 determining that their deposit of Rule 144A Securities with DTC and their transactions in Rule 144A Securities through the facilities of DTC are in compliance with existing DTC rules and the federal securities laws, such as: (i) Rule 2, Section 8, of DTC’s rules: ‘‘In connection with their use of the Corporation’s [DTC’s] services, Participants and Pledgees must comply with all applicable laws, including all applicable laws relating to securities, taxation and money laundering.’’ (ii) DTC’s ‘‘Operational Arrangements (Necessary for an Issue to Become and Remain Eligible for DTC Services)’’ relating to BEO issues being made eligible for DTC services: ‘‘Issuer recognizes that DTC does not in any way undertake to, and shall not have any responsibility to, monitor or ascertain the compliance of any transactions in the Securities with the following, as amended from time to time: (1) Any exemptions from registration under the Securities Act of 1933; (2) the Investment Company Act of 1940; (3) the Employee Retirement Income Security Act of 1974; (4) the Internal Revenue Code of 1986; (5) any rules of any self-regulatory organizations (as defined under the Securities Exchange Act of 1934); or (6) any other local, state, federal, or foreign laws or regulations there under.’’ 7 This and other representations made by issuers to DTC pursuant to the DTC Operational Arrangements are mirrored in the Letter of Representations that DTC receives from issuers in connection with their deposits of BEO issues with DTC. (iii) When a Rule 144A Security is made DTC eligible, the issuer will continue to be required to execute a copy of the rider to the Letter of Representation in the form it appears today except that the reference to the SRO Requirement will be deleted. DTC believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations there under because eliminating the unnecessary SRO Requirement will remove an impediment to the perfection of the 7 In 1994, in an order clarifying certain language in the Rule 144A Approval Order, the Commission concurred in the position taken by DTC that ‘‘Rule 5 [of DTC’s rules] does not require DTC to determine whether securities, when deposited at DTC, may be transferred lawfully by book-entry in light of the Federal securities law.’’ Order Approving Proposed Rule Change Relating to a Clarification of Rule 5, Securities Exchange Act Release No. 33672, 56 SEC Docket 315 (Feb. 23, 1994) (‘‘Rule 5 Clarification Order’’). DTC Rule 5 was amended to delete any implication that DTC was under any statutory or contractual obligation to determine whether securities deposited with DTC could be legally transferred by book-entry. E:\FR\FM\17DEN1.SGM 17DEN1 Federal Register / Vol. 73, No. 243 / Wednesday, December 17, 2008 / Notices mechanism of a national system for the 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 yet been solicited or received. DTC will notify the Commission of any written comments received by DTC. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within thirty-five days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to ninety days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve such proposed rule change or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments 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. to 3 p.m. Copies of such filing also will be available for inspection and copying at DTC’s principal office and on DTC’s Web site at http://www.dtcc.com/legal/ rule_filings/dtc/2008.php. 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 No. SR–DTC–2008–13 and should be submitted on or before January 7, 2009. For the Commission by the Division of Trading and Markets, pursuant to delegated authority.8 Florence E. Harmon, Acting Secretary. [FR Doc. E8–29900 Filed 12–16–08; 8:45 am] 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: BILLING CODE 8011–01–P Electronic Comments Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change as Modified by Amendment No. 1 Thereto Relating to Cancellation Fees • 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 No. SR–DTC–2008–13 on the subject line. pwalker on PROD1PC71 with NOTICES 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 No. SR–DTC–2008–13. 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 VerDate Aug<31>2005 18:58 Dec 16, 2008 Jkt 217001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59072; File No. SR–ISE– 2008–92] December 10, 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 November 28, 2008, the International Securities Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the 8 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 76689 proposed rule change as described in Items I, II, and III below, which Items have been prepared by the ISE. On December 9, 2008, the ISE filed Amendment No. 1 to the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The ISE is proposing to amend its Schedule of Fees regarding its cancellation fee. The text of the proposed rule change is available on the Exchange’s Web site (http:// www.ise.com), at the principal office of the Exchange, 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 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. 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 The purpose of this proposed rule change is to amend the ISE’s cancellation fee. The Exchange currently has a cancellation fee of $2.00 that applies to Electronic Access Members (‘‘EAMs’’) that cancelled at least 500 orders in a month, for each order cancellation in excess of the total number of orders such member executed that month. Further, all orders from the same clearing EAM executed in the same underlying symbol at the same price within a 30 second period are aggregated and counted as one executed order for purposes of this fee. This fee is currently charged only to customer orders; broker-dealer orders, including non-member market maker (FARMM) orders, are excluded from this fee. Historically, some customers sought to avoid the cancellation fee by executing large quantities of small orders in inexpensive, out of the money options to offset their cancellation E:\FR\FM\17DEN1.SGM 17DEN1

Agencies

[Federal Register Volume 73, Number 243 (Wednesday, December 17, 2008)]
[Notices]
[Pages 76688-76689]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-29900]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59088; File No. SR-DTC-2008-13]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by The Depository Trust Company Relating to Eliminating the SRO 
Requirement as a Condition of DTC-Eligibility for Securities That Are 
Eligible for Resale Under Rule 144A Under the Securities Act of 1933

December 11, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 9, 2008, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') 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 from interested persons.
---------------------------------------------------------------------------

    \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 proposes to eliminate the SRO Requirement, as defined below, as 
a condition of DTC-eligibility for securities that are eligible for 
resale under Rule 144A (``Rule 144A Securities'') under the Securities 
Act of 1933 (``Securities Act'').\2\
---------------------------------------------------------------------------

    \2\ 17 CFR 230.144A.
---------------------------------------------------------------------------

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 such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In April 1990, the Commission adopted Rule 144A under the 
Securities Act.\3\ This rule provides a safe-harbor from the 
registration requirements of the Securities Act for resales to 
qualified institutional buyers (``QIBs'') of certain restricted 
securities that when issued were not of the same class as securities 
listed on a national securities exchange registered under the Act. Rule 
144A(d)(2) \4\ requires that the seller or any person acting on its 
behalf take reasonable steps to ensure that the purchaser is aware that 
the seller may rely on the safe-harbor provided by Rule 144A.
---------------------------------------------------------------------------

    \3\ Supra note 2.
    \4\ 17 CFR 230.144A(d)(2).
---------------------------------------------------------------------------

    In 1993, the Commission approved a DTC rule filing whereby DTC 
would make Rule 144A securities eligible for deposit, book-entry 
delivery, and other depository services provided, in part, that DTC was 
required to ``condition the eligibility of the Rule 144A Securities 
(other than Investment Grade Securities) on initial and continued 
inclusion of those securities in an SRO Rule 144A System, such as the 
NASD's PORTAL Market System.'' \5\ This condition is referred to herein 
as the ``SRO Requirement.'' The SRO Requirement contemplated that an 
SRO Rule 144A System would include comprehensive safeguards to 
facilitate the SRO's ability to detect violations of Rule 144A. 
However, the only SRO Rule 144A System that was developed was the 
NASD's PORTAL Market System (``PORTAL'') and not only did PORTAL not 
develop as anticipated but also it did not include the safeguards 
contemplated by the DTC rule filing and Commission order of 1993.\6\ In 
light of the above, DTC believes that the SRO Requirement is no longer 
necessary or appropriate.
---------------------------------------------------------------------------

    \5\ Securities Exchange Release No. 33327 (Dec. 13, 1993), 58 FR 
67878 (Dec. 22, 1993) [File No. SR-DTC-90-06]. ``Investment Grade 
Securities'' are defined in this release as nonconvertible debt 
securities and nonconvertible preferred stock which are in one of 
the top four categories by a nationally recognized statistical 
rating organization.
    \6\ Securities Exchange Release No. 56172 (Jul. 31, 2007), 72 FR 
44196 (Aug. 7, 2007) [File No. SR-NASDAQ-2006-65].
---------------------------------------------------------------------------

    DTC believes that eliminating the SRO Requirement will result in a 
uniform procedure for making Rule 144A Securities DTC-eligible whether 
or not they were classified as investment grade securities. Under the 
proposed rule change, issuers and participants would continue to be 
responsible for determining that their deposit of Rule 144A Securities 
with DTC and their transactions in Rule 144A Securities through the 
facilities of DTC are in compliance with existing DTC rules and the 
federal securities laws, such as:
    (i) Rule 2, Section 8, of DTC's rules: ``In connection with their 
use of the Corporation's [DTC's] services, Participants and Pledgees 
must comply with all applicable laws, including all applicable laws 
relating to securities, taxation and money laundering.''
    (ii) DTC's ``Operational Arrangements (Necessary for an Issue to 
Become and Remain Eligible for DTC Services)'' relating to BEO issues 
being made eligible for DTC services: ``Issuer recognizes that DTC does 
not in any way undertake to, and shall not have any responsibility to, 
monitor or ascertain the compliance of any transactions in the 
Securities with the following, as amended from time to time: (1) Any 
exemptions from registration under the Securities Act of 1933; (2) the 
Investment Company Act of 1940; (3) the Employee Retirement Income 
Security Act of 1974; (4) the Internal Revenue Code of 1986; (5) any 
rules of any self-regulatory organizations (as defined under the 
Securities Exchange Act of 1934); or (6) any other local, state, 
federal, or foreign laws or regulations there under.'' \7\ This and 
other representations made by issuers to DTC pursuant to the DTC 
Operational Arrangements are mirrored in the Letter of Representations 
that DTC receives from issuers in connection with their deposits of BEO 
issues with DTC.
---------------------------------------------------------------------------

    \7\ In 1994, in an order clarifying certain language in the Rule 
144A Approval Order, the Commission concurred in the position taken 
by DTC that ``Rule 5 [of DTC's rules] does not require DTC to 
determine whether securities, when deposited at DTC, may be 
transferred lawfully by book-entry in light of the Federal 
securities law.'' Order Approving Proposed Rule Change Relating to a 
Clarification of Rule 5, Securities Exchange Act Release No. 33672, 
56 SEC Docket 315 (Feb. 23, 1994) (``Rule 5 Clarification Order''). 
DTC Rule 5 was amended to delete any implication that DTC was under 
any statutory or contractual obligation to determine whether 
securities deposited with DTC could be legally transferred by book-
entry.
---------------------------------------------------------------------------

    (iii) When a Rule 144A Security is made DTC eligible, the issuer 
will continue to be required to execute a copy of the rider to the 
Letter of Representation in the form it appears today except that the 
reference to the SRO Requirement will be deleted.
    DTC believes that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations there under 
because eliminating the unnecessary SRO Requirement will remove an 
impediment to the perfection of the

[[Page 76689]]

mechanism of a national system for the 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 yet 
been solicited or received. DTC will notify the Commission of any 
written comments received by DTC.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (A) By order approve such proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml) or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-DTC-2008-13 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 No. SR-DTC-2008-13. 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 Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. to 3 p.m. Copies of such filing also will be available for 
inspection and copying at DTC's principal office and on DTC's Web site 
at http://www.dtcc.com/legal/rule_filings/dtc/2008.php. 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 No. SR-DTC-2008-13 and should be 
submitted on or before January 7, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-29900 Filed 12-16-08; 8:45 am]
BILLING CODE 8011-01-P