Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Amend Rules Relating to the Memo Segregation Function, 25389-25390 [2011-10806]
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Federal Register / Vol. 76, No. 86 / Wesnesday, May 4, 2011 / Notices
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–EDGX–2011–12 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64360; File No. SR–DTC–
2011–05]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing of Proposed Rule Change To
Amend Rules Relating to the Memo
Segregation Function
April 28, 2011.
All submissions should refer to File
Number SR–EDGX–2011–12. 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 Web site viewing and
printing 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.9 Copies of the filing
also will be available for inspection and
copying at the principal office of the
Exchange. 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–EDGX–
2011–12 and should be submitted on or
before May 25, 2011.
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 April 15,
2011, The Depository Trust Company
(‘‘DTC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared primarily by DTC.3
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Cathy H. Ahn,
Deputy Secretary.
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Rule 15c3–3 (‘‘Customer Protection
Rule’’), which was implemented by the
Commission under the Act, requires,
[FR Doc. 2011–10807 Filed 5–3–11; 8:45 am]
jlentini on DSKJ8SOYB1PROD with NOTICES
BILLING CODE 8011–01–P
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The purpose of this proposed rule
change is to amend DTC’s rules relating
to its Memo Segregation Service to no
longer permit stock loan or stock loan
return-related turnaround deliveries for
a security when there is a deficit in the
Memo Segregation account.
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.4
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The text of the proposed rule change is attached
as Exhibit 5 to DTC’s filing, which is available at
https://www.dtcc.com/downloads/legal/rule_filings/
2010/dtc/2011-05.pdf.
4 The Commission has modified the text of the
summaries prepared by DTC.
2 17
9 The text of the proposed rule change is available
on the Commission’s Web site at https://
www.sec.gov.
10 17 CFR 200.30–3(a)(12).
VerDate Mar<15>2010
17:45 May 03, 2011
Jkt 223001
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Fmt 4703
Sfmt 4703
25389
among other things, that broker-dealers
maintain possession or control of fullypaid or excess margin securities they
hold for the account of customers.5
DTC’s Memo Segregation Service
(‘‘MSEG’’) is an optional service which
offers a mechanism for broker-dealer
participants to protect fully-paid or
excess margin securities by allowing the
participant to shield from unintended
delivery a designated quantity of
securities that are in the participant’s
DTC free account or that may be
received during the daily processing
cycle. In this regard, the participant may
set a ‘‘counter’’ for a specified minimum
quantity of each security to be held in
its account as a threshold to any
redelivery intraday. When the counter
for a security is greater than the
inventory of the participant, MSEG will
prevent the delivery of any quantity of
the affected security out of the
participant’s account unless: (1) The
delivery is a permitted delivery (e.g., a
free of value ACATS delivery or a
‘‘turnaround’’ as described below) or
(2) the participant provides DTC with
new instructions to reduce the MSEG
counter.
The MSEG procedures currently
support two optional ‘‘turnaround’’
MSEG indicators which enable
participants to make deliveries for
certain transaction types (including, but
not limited to, stock loans and stock
loan returns) from certain positions
received intraday regardless of any
MSEG-related deficit. Recently, DTC
was advised by the Regulatory and
Clearance Committee of the Securities
Operations Section of SIFMA that
several broker-dealer participants had
expressed concern that their practices
for turnaround of stock loans and stock
loan returns (i.e., MSEG overrides) may
be deemed by FINRA to be contrary to
the Customer Protection Rule. DTC also
communicated directly with
participants affected through their use
of this functionality, and they expressed
similar concerns. In order to
accommodate its participants in this
regard, DTC is therefore proposing to
revise its procedures so that MSEG
would no longer permit stock loan or
stock loan return-related turnaround
deliveries for a security when there is an
MSEG deficit in the account.
In order to effect the proposed change
described above, DTC will amend its
Settlement Service Guide (‘‘Service
Guide’’), which is incorporated into
DTC’s procedures, to make existing
indicators that allow for the turnaround
of stock loans and stock loan returns
more restrictive. As a result, the
5 17
CFR 204.15c3–3.
E:\FR\FM\04MYN1.SGM
04MYN1
jlentini on DSKJ8SOYB1PROD with NOTICES
25390
Federal Register / Vol. 76, No. 86 / Wesnesday, May 4, 2011 / Notices
procedures will no longer permit
deliveries for stock loans (designated in
the Service Guide as Reason Code 10),
stock loan returns (Reason Code 20),
The Options Clearing Corporation
(‘‘OCC’’) stock loans (reason code 260),
OCC stock loan returns (reason code
270), American Depository Receipt
(‘‘ADR’’) stock loans (reason code 280),
and ADR stock loan returns (reason
code 290) to be completed from
turnaround shares when an MSEG
deficit exists.6
The proposed rule change is
consistent with the requirements of the
Securities Exchange Act of 1934, as
amended, (‘‘Act’’) and the rules and
regulations thereunder applicable to
DTC because it modifies a service of
DTC so that it enables participants to
better protect customer fully-paid and
excess margin securities which are held
at DTC and in general, protects investors
and the public interest.
In addition, the proposed rule change
is consistent with the CPSS–IOSCO
Recommendations for securities
settlement systems
(‘‘Recommendations’’). Recommendation
12, ‘‘Protection of Customers’
Securities,’’ states, in relevant part:
‘‘Entities holding securities in custody
should employ accounting practices and
safekeeping procedures that fully
protect customer’s securities.’’ Section
3.61 of this Recommendation includes
the statement that ‘‘one way that a
customer can be protected in the event
of a custodian’s insolvency is through
segregation (identification) of customer
securities on the books of the custodian
(and of all subcustodians, and
ultimately, the CSD [Central Securities
Depository]).’’ The term ‘‘custodian’’ in
this context would refer to the
participant and not to DTC as we, DTC,
understand the Recommendations. DTC
neither takes direct responsibility, as the
CSD, for the designation of assets as
customer assets nor is it required to do
so by law or regulation. However, DTC
accommodates the needs of its
participants to segregate (identify)
customer securities by identifying
mechanisms such as MSEG. The MSEG
proposal is, accordingly, consistent with
this Recommendation to the extent it
applies to DTC. The change will reduce
the risk of unintended delivery by
broker-dealer participants of customer
securities, which might otherwise be
deemed to be contrary to the Customer
Protection Rule.
6 The proposed change will also eliminate
references in the Settlement Service Guide that
MSEG-related functions are processed through the
Participant Terminal System (PTS), as participants
may currently use various platforms to
communicate with DTC.
VerDate Mar<15>2010
17:45 May 03, 2011
Jkt 223001
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
DTC does not believe that the
proposed rule change would 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.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within forty-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 or disapprove
the 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 (https://www.sec.gov/
rules/sro.shtml) or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–DTC–2011–05 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submission should refer to File
Number SR–DTC–2011–05. 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
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
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 Web site viewing and
printing in the Commission’s Public
Reference Section, 100 F Street, NE.,
Washington, DC 20549–1090, on official
business days between the hours of
10 a.m. and 3 p.m. Copies of such filings
will also 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/2011/dtc/2011-05.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–2011–05 and should
be submitted on or before May 25, 2011.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.7
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–10806 Filed 5–3–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64359; File No. SR–ISE–
2011–27]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Permit the Listing of Series
With $0.50 and $1 Strike Price
Increments on Certain Options Used
To Calculate Volatility Indexes
April 28, 2011.
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 April 26,
2011, the International Securities
Exchange, LLC (the ‘‘Exchange’’ or ‘‘ISE’’)
filed with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
7 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\04MYN1.SGM
04MYN1
]]>Agencies
[Federal Register Volume 76, Number 86 (Wednesday, May 4, 2011)]
[Notices]
[Pages 25389-25390]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-10806]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64360; File No. SR-DTC-2011-05]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change To Amend Rules Relating to the
Memo Segregation Function
April 28, 2011.
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 April 15, 2011, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I and II below, which Items have been
prepared primarily by DTC.\3\ 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).
\2\ 17 CFR 240.19b-4.
\3\ The text of the proposed rule change is attached as Exhibit
5 to DTC's filing, which is available at https://www.dtcc.com/downloads/legal/rule_filings/2010/dtc/2011-05.pdf.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The purpose of this proposed rule change is to amend DTC's rules
relating to its Memo Segregation Service to no longer permit stock loan
or stock loan return-related turnaround deliveries for a security when
there is a deficit in the Memo Segregation account.
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.\4\
---------------------------------------------------------------------------
\4\ 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
Rule 15c3-3 (``Customer Protection Rule''), which was implemented
by the Commission under the Act, requires, among other things, that
broker-dealers maintain possession or control of fully-paid or excess
margin securities they hold for the account of customers.\5\ DTC's Memo
Segregation Service (``MSEG'') is an optional service which offers a
mechanism for broker-dealer participants to protect fully-paid or
excess margin securities by allowing the participant to shield from
unintended delivery a designated quantity of securities that are in the
participant's DTC free account or that may be received during the daily
processing cycle. In this regard, the participant may set a ``counter''
for a specified minimum quantity of each security to be held in its
account as a threshold to any redelivery intraday. When the counter for
a security is greater than the inventory of the participant, MSEG will
prevent the delivery of any quantity of the affected security out of
the participant's account unless: (1) The delivery is a permitted
delivery (e.g., a free of value ACATS delivery or a ``turnaround'' as
described below) or (2) the participant provides DTC with new
instructions to reduce the MSEG counter.
---------------------------------------------------------------------------
\5\ 17 CFR 204.15c3-3.
---------------------------------------------------------------------------
The MSEG procedures currently support two optional ``turnaround''
MSEG indicators which enable participants to make deliveries for
certain transaction types (including, but not limited to, stock loans
and stock loan returns) from certain positions received intraday
regardless of any MSEG-related deficit. Recently, DTC was advised by
the Regulatory and Clearance Committee of the Securities Operations
Section of SIFMA that several broker-dealer participants had expressed
concern that their practices for turnaround of stock loans and stock
loan returns (i.e., MSEG overrides) may be deemed by FINRA to be
contrary to the Customer Protection Rule. DTC also communicated
directly with participants affected through their use of this
functionality, and they expressed similar concerns. In order to
accommodate its participants in this regard, DTC is therefore proposing
to revise its procedures so that MSEG would no longer permit stock loan
or stock loan return-related turnaround deliveries for a security when
there is an MSEG deficit in the account.
In order to effect the proposed change described above, DTC will
amend its Settlement Service Guide (``Service Guide''), which is
incorporated into DTC's procedures, to make existing indicators that
allow for the turnaround of stock loans and stock loan returns more
restrictive. As a result, the
[[Page 25390]]
procedures will no longer permit deliveries for stock loans (designated
in the Service Guide as Reason Code 10), stock loan returns (Reason
Code 20), The Options Clearing Corporation (``OCC'') stock loans
(reason code 260), OCC stock loan returns (reason code 270), American
Depository Receipt (``ADR'') stock loans (reason code 280), and ADR
stock loan returns (reason code 290) to be completed from turnaround
shares when an MSEG deficit exists.\6\
---------------------------------------------------------------------------
\6\ The proposed change will also eliminate references in the
Settlement Service Guide that MSEG-related functions are processed
through the Participant Terminal System (PTS), as participants may
currently use various platforms to communicate with DTC.
---------------------------------------------------------------------------
The proposed rule change is consistent with the requirements of the
Securities Exchange Act of 1934, as amended, (``Act'') and the rules
and regulations thereunder applicable to DTC because it modifies a
service of DTC so that it enables participants to better protect
customer fully-paid and excess margin securities which are held at DTC
and in general, protects investors and the public interest.
In addition, the proposed rule change is consistent with the CPSS-
IOSCO Recommendations for securities settlement systems
(``Recommendations''). Recommendation 12, ``Protection of Customers'
Securities,'' states, in relevant part: ``Entities holding securities
in custody should employ accounting practices and safekeeping
procedures that fully protect customer's securities.'' Section 3.61 of
this Recommendation includes the statement that ``one way that a
customer can be protected in the event of a custodian's insolvency is
through segregation (identification) of customer securities on the
books of the custodian (and of all subcustodians, and ultimately, the
CSD [Central Securities Depository]).'' The term ``custodian'' in this
context would refer to the participant and not to DTC as we, DTC,
understand the Recommendations. DTC neither takes direct
responsibility, as the CSD, for the designation of assets as customer
assets nor is it required to do so by law or regulation. However, DTC
accommodates the needs of its participants to segregate (identify)
customer securities by identifying mechanisms such as MSEG. The MSEG
proposal is, accordingly, consistent with this Recommendation to the
extent it applies to DTC. The change will reduce the risk of unintended
delivery by broker-dealer participants of customer securities, which
might otherwise be deemed to be contrary to the Customer Protection
Rule.
(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change would 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.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within forty-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 or disapprove the 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 (https://www.sec.gov/rules/sro.shtml) or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-DTC-2011-05 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submission should refer to File Number SR-DTC-2011-05. 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 Web site viewing and
printing in the Commission's Public Reference Section, 100 F Street,
NE., Washington, DC 20549-1090, on official business days between the
hours of 10 a.m. and 3 p.m. Copies of such filings will also 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/2011/dtc/2011-05.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-2011-05 and should be submitted on or before May 25, 2011.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\7\
---------------------------------------------------------------------------
\7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-10806 Filed 5-3-11; 8:45 am]
BILLING CODE 8011-01-P
