Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing Advance Notice To Reduce Liquidity Risk Relating to Its Processing of Maturity and Income Presentments and Issuances of Money Market Instruments, 5516-5518 [2013-01484]

Download as PDF 5516 Federal Register / Vol. 78, No. 17 / Friday, January 25, 2013 / Notices For the Nuclear Regulatory Commission. Andrew Persinko, Deputy Director, Decommissioning and Uranium Recovery Licensing Directorate, Division of Waste Management and Environmental Protection, Office of Federal and State Materials and Environmental Management Programs. [FR Doc. 2013–01581 Filed 1–24–13; 8:45 am] BILLING CODE 7590–01–P OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION Senior Executive Service Performance Review Board Membership Occupational Safety and Health Review Commission. ACTION: Annual notice. AGENCY: Notice is given under 5 U.S.C. 4314(c)(4) of the appointment of members to the Performance Review Board (PRB) of the Occupational Safety and Health Review Commission. DATES: Membership is effective on January 25, 2013. FOR FURTHER INFORMATION CONTACT: Linda M. Beard, Human Resources Specialist, U.S. Occupational Safety and Health Review Commission, 1120 20th Street NW., Washington, DC 20036, (202) 606–5393. SUPPLEMENTARY INFORMATION: The Review Commission, as required by 5 U.S.C. 4314(c)(1) through (5), has established a Senior Executive Service PRB. The PRB reviews and evaluates the initial appraisal of a senior executive’s performance by the supervisor, and makes recommendations to the Chairman of the Review Commission regarding performance ratings, performance awards, and pay-forperformance adjustments. Members of the PRB serve for a period of 24 months. In the case of an appraisal of a career appointee, more than half of the members shall consist of career appointees, pursuant to 5 U.S.C. 4314(c)(5). The names and titles of the PRB members are as follows: • Nicholas M. Inzeo, Director, Office of Field Programs, U.S. Equal Employment Opportunity Commission; • Jeffrey Risinger, Human Resources Director, Federal Housing Finance Agency; and • Joel R. Schapira, Deputy General Counsel, Defense Nuclear Facilities Safety Board. mstockstill on DSK4VPTVN1PROD with SUMMARY: Dated: January 16, 2013. Thomasina V. Rogers, Chairman. [FR Doc. 2013–01517 Filed 1–24–13; 8:45 am] BILLING CODE 7600–01–P VerDate Mar<15>2010 18:39 Jan 24, 2013 Jkt 229001 OVERSEAS PRIVATE INVESTMENT CORPORATION Sunshine Act: OPIC Annual Public Hearing 2 p.m., Wednesday, March 13, 2013. PLACE: Offices of the Corporation, Twelfth Floor Board Room, 1100 New York Avenue NW., Washington, DC. STATUS: Hearing open to the public at 2 p.m. PURPOSE: Annual Public Hearing to afford an opportunity for any person to present views regarding the activities of the Corporation. PROCEDURES: Individuals wishing to address the hearing orally must provide advance notice to OPIC’s Corporate Secretary no later than 5 p.m. Monday, February 25, 2013. The notice must include the individual’s name, title, organization, address, email, telephone number, and a concise summary of the subject matter to be presented. Oral presentations may not exceed ten (10) minutes. The time for individual presentations may be reduced proportionately, if necessary, to afford all participants who have submitted a timely request an opportunity to be heard. Participants wishing to submit a written statement for the record must submit a copy of such statement to OPIC’s Corporate Secretary no later than 5 p.m. Monday, February 25, 2013. Such statement must be typewritten, doublespaced, and may not exceed twenty-five (25) pages. Upon receipt of the required notice, OPIC will prepare an agenda for the hearing identifying speakers, setting forth the subject on which each participant will speak, and the time allotted for each presentation. The agenda will be available at the hearing. A written summary of the hearing will be compiled, and such summary will be made available, upon written request to OPIC’s Corporate Secretary, at the cost of reproduction. CONTACT PERSON FOR INFORMATION: Information on the hearing may be obtained from Connie M. Downs at (202) 336–8438, via email at connie.downs@opic.gov, or via facsimile at (202) 408–0297. SUPPLEMENTARY INFORMATION: OPIC is a U.S. Government agency that provides, on a commercial basis, political risk insurance and financing in friendly developing countries and emerging democracies for environmentally sound projects that confer positive developmental benefits upon the project TIME AND DATE: PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 country while creating employment in the U.S. OPIC is required by section 231A(c) of the Foreign Assistance Act of 1961, as amended (the ‘‘Act’’) to hold at least one public hearing each year. Dated: January 22, 2013. Connie M. Downs, OPIC Corporate Secretary. [FR Doc. 2013–01605 Filed 1–23–13; 11:15 am] BILLING CODE 3210–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68690; File No. SR–DTC– 2012–810] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing Advance Notice To Reduce Liquidity Risk Relating to Its Processing of Maturity and Income Presentments and Issuances of Money Market Instruments January 18, 2013. Pursuant to Section 806(e)(1) of the Payment, Clearing, and Settlement Supervision Act of 2010 (‘‘Clearing Supervision Act’’) 1 and Rule 19b– 4(n)(1)(i) 2 thereunder, notice is hereby given that on December 28, 2012, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the advance notice 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 advance notice from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Advance Notice DTC is proposing to change the current Largest Provisional Net Credit (‘‘LPNC’’) risk management control in order to increase withholding from one to two largest provisional credits (on an acronym 3 basis). DTC is also proposing to modify its Rules as they relate to the Issuing/Paying Agent’s (‘‘IPA’s’’) refusal to pay process. DTC is proposing not to process a reversal of a transaction initiated by an IPA when issuances of Money Market Instruments (‘‘MMIs’’) in an acronym exceed, in dollar value, the maturity or income presentments (‘‘Maturity Obligations’’) of MMIs in the 1 12 U.S.C. 5465(e)(1). CFR 240.19b–4(n)(i). 3 DTC employs a four-character acronym to designate an issuer’s Money Market Instrument program. An issuer can have multiple acronyms. The Issuing/Paying Agent’s bank uses the acronym(s) when submitting an instruction for a given issuer’s Money Market Instrument securities. 2 17 E:\FR\FM\25JAN1.SGM 25JAN1 Federal Register / Vol. 78, No. 17 / Friday, January 25, 2013 / Notices same acronym on the same day. As a result, at the point in time when issuances of MMIs in an acronym exceed, in dollar value, the Maturity Obligations of the MMIs in the same acronym on that day, DTC will remove the LPNC control with respect to the affected acronym. II. Clearing Agency’s Statement of Purpose of, and Statutory Basis for, the Advance Notice In its filing with the Commission, DTC included statements concerning the purpose of and basis for the advance notice and discussed any comments it received on the advance notice. 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) and (B) below, of the most significant aspects of such statements.4 mstockstill on DSK4VPTVN1PROD with (A) Advance Notices Filed Pursuant to Section 806(e) of the Payment, Clearing and Settlement Supervision Act Description of Change MMI presentment processing is initiated automatically by DTC each morning for MMIs maturing that day. The automatic process electronically sweeps all maturing positions of MMI CUSIPs from DTC Participant accounts and creates the Maturity Obligations. The matured MMIs are, subject to DTC Rules, delivered to the applicable IPA, a DTC Participant, and DTC debits the IPA’s account for the amount of the Maturity Obligations. In accordance with DTC Rules, payment will be due from the IPA for net settlement to the extent, if any, that the IPA has a net debit balance in its settlement account at end-of-day. Without regard to DTC net settlement, MMI issuers and IPAs commonly view the primary source of funding of payments for Maturity Obligations of MMIs as flowing from new issuances of MMIs in the same acronym by that issuer on that day. In a situation where those new issuances exceed the Maturity Obligations, the issuer would have no net funds payment due to the IPA on that day. However, because Maturity Obligations of MMIs are processed automatically at DTC, IPAs currently operationally have the ability to pay for all of an issuer’s maturities. An IPA that refuses payment on an MMI must communicate its intention to DTC using the DTC Participant Terminal/ Browser Service (‘‘PTS/PBS’’) MMRP function. This communication is referred to as an Issuer Failure/Refusal 4 The Commission has modified the text of the summaries prepared by DTC. VerDate Mar<15>2010 18:39 Jan 24, 2013 Jkt 229001 to Pay (‘‘RTP’’) and it allows the Paying Agent to enter a refusal to pay instruction for a particular issuer acronym up to 3:00 p.m. Eastern Time (‘‘ET’’) on the date of the affected maturity or income presentment. Such an instruction will cause DTC, pursuant to its Rules, to reverse all transactions related to that issuer’s acronym, including Maturity Obligations and any new issuances, posing a potential for systemic risk since the reversals may override DTC’s risk management controls (e.g., collateral monitor 5 and net debit cap 6). To mitigate the risks associated with an RTP, DTC employs the LPNC risk management control. On each processing day, DTC withholds intraday credit from each MMI Participant for the largest credit with respect to an issuer’s acronym, for purposes of calculating the Participant’s net settlement balance and collateral monitor. As such, this single largest credit is provisional and is not included in the calculation of the Participant’s collateral monitor or in the settlement balance measured against its net debit cap. DTC believes that the LPNC control will help protect DTC against either (i) the single largest issuer failure on a business day, or (ii) multiple failures on a business day that, taken together, do not exceed the largest provisional net credit. Maturity payment procedures were designed to limit credit, liquidity, and operational risk for DTC and Participants in the MMI program. In an effort to further mitigate these risks, DTC is proposing the following changes to current processing associated with (1) the LPNC control and (2) limiting intraday MMI reversals under specified conditions: 5 DTC tracks collateral in a Participant’s account through the Collateral Monitor (‘‘CM’’). At all times, the CM reflects the amount by which the collateral value in the account exceeds the net debit balance in the account. When processing a transaction, DTC verifies that the CM of each of the deliverer and receiver will not become negative when the transaction is processed. If the transaction would cause either party to have a negative CM, the transaction will recycle until the deficient account has sufficient collateral to proceed or until the applicable cutoff occurs. 6 The net debit cap control is designed so that DTC may complete settlement, even if a Participant fails to settle. Before completing a transaction in which a Participant is the receiver, DTC calculates the effect the transaction would have on such Participant’s account, and determines whether any resulting net debit balance would exceed the Participant’s net debit cap. Any transaction that would cause the net debit balance to exceed the net debit cap is placed on a pending (recycling) queue until the net debit cap will not be exceeded by processing the transaction. PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 5517 (1) Increase Withholding From One to Two LPNCs DTC is proposing to change the current LPNC risk management control in order to increase withholding from one to two largest provisional credits (on an acronym basis). DTC believes this will provide increased risk protection in the event of transaction reversals due to multiple issuer defaults or a single issuer default with two or more MMI programs. DTC has conducted a simulation analysis to measure the impact to IPAs and custodians/dealers of an increase in LPNC controls from one to two on settlement blockage 7 intraday during peak processing periods. DTC analyzed the blockage level for both the IPAs and custodians/dealers as separate segments since each react to the additional blockage in different ways. DTC believes the results of the simulation analysis indicated that there will be no material change in settlement blockage. (2) Eliminate Intraday Reversals When MMI Issuances Exceed Maturity Obligations DTC is also proposing to modify its Rules as they relate to the refusal to pay process. As planned, DTC will not process a reversal of a transaction initiated by an IPA when issuances of MMIs in an acronym exceed, in dollar value, the Maturity Obligations of MMIs in the same acronym on the same day. In such instances, DTC will not process a reversal of the transaction because the IPA would have no reason to exercise the refusal to pay for that acronym on that settlement day. As a result, because the LPNC control is designed to protect against transaction reversals, at the point in time when issuances of MMIs in an acronym exceed, in dollar value, the Maturity Obligations of the MMIs in the same acronym on that day, DTC proposes not to apply the LPNC control with respect to the affected acronym. Anticipated Effect on and Management of Risk DTC believes that the proposed changes will mitigate the systemic risk associated with MMI transaction reversals due to an IPA refusal to pay instruction by increasing withholding from one to two largest provisional credits (on an acronym basis). DTC believes that this will provide increased risk protection in the event of transaction reversals due to multiple issuer defaults or a single issuer default with two or more MMI programs. By 7 Settlement blockage refers to transactions that cannot be completed due to a receiver’s net debit cap or collateral monitor controls. E:\FR\FM\25JAN1.SGM 25JAN1 5518 Federal Register / Vol. 78, No. 17 / Friday, January 25, 2013 / Notices mitigating DTC’s and the financial systems exposure to this systemic risk, DTC believes that the proposed change will contribute to the goal of financial stability in the event of a default, and is consistent with the CPSS-IOSCO Recommendations for Securities Settlement Systems 8 applicable to DTC. DTC has discussed this proposal with various industry groups, including the Participants that transact in MMIs, none of whom objected, according to DTC. According to DTC, the Participants understand that the elimination of intraday reversals when issuances exceed Maturity Obligations will result in no material change in settlement blockage and will mitigate systemic risk as a whole. DTC believes the proposed changes should promote settlement finality by precluding reversals for those issuances. (B) Clearing Agency’s Statement on Comments on the Advance Notice Received From Members, Participants, or Others The subject proposal regarding MMIs was developed in consultation with various industry organizations. Written comments relating to the proposed changes contained in the advance notice have not yet been solicited or received. DTC will notify the Commission of any written comments received by DTC. mstockstill on DSK4VPTVN1PROD with III. Date of Effectiveness of the Advance Notice and Timing for Commission Action The clearing agency may implement the proposed change pursuant to Section 806(e)(1)(G) of the Clearing Supervision Act 9 if it has not received an objection to the proposed change within 60 days of the later of (i) the date that the Commission received the advance notice or (ii) the date the Commission receives any further information it requested for consideration of the notice. The clearing agency shall not implement the proposed change if the Commission has any objection to the proposed change. The Commission may extend the period for review by an additional 60 days if the proposed change raises novel or complex issues, subject to the Commission providing the clearing agency with prompt written notice of the extension. A proposed change may be implemented in less than 60 days from the date of receipt of the advance 8 Principles for Financial Market Infrastructures of the Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions (‘‘CPSS-IOSCO’’) (April 2012), available at http://www.bis.org/publ/cpss101a.pdf. 9 12 U.S.C. 5465(e)(1)(G). VerDate Mar<15>2010 18:39 Jan 24, 2013 Jkt 229001 notice, or the date the Commission receives any further information it requested, if the Commission notifies the clearing agency in writing that it does not object to the proposed change and authorizes the clearing agency to implement the proposed change on an earlier date, subject to any conditions imposed by the Commission. The clearing agency shall post notice on its Web site of proposed changes that are implemented. The proposal shall not take effect until all regulatory actions required with respect to the proposal are completed.10 IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the advance notice is consistent with the Clearing Supervision 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 email to rulecomments@sec.gov. Please include File Number SR–DTC–2012–810 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 submissions should refer to File Number SR–DTC–2012–810. This file number should be included on the subject line if email 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 advance notice that are filed with the Commission, and all 10 DTC also filed the proposals contained in this advance notice as a proposed rule change under Section 19(b)(1) of the Act and Rule 19b–4 thereunder. 15 U.S.C. 78s(b)(1); 17 CFR 240.19b–4. Pursuant to Section 19(b)(2) of the Act, within 45 days of the date of publication of the proposed rule change in the Federal Register or within such longer period up to 90 days if the Commission designates or the self-regulatory organization consents the Commission will either: (i) By order approve or disapprove the proposed rule change or (ii) institute proceedings to determine whether the proposed rule change should be disapproved. 15 U.S.C. 78s(b)(2)(A). See Release No. 34–68548 (December 28, 2012), 78 FR 795 (January 4, 2013). PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 written communications relating to the advance notice 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 10:00 a.m. and 3:00 p.m. 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://dtcc.com/downloads/legal/ rule_filings/2012/dtc/ Advance_Notice_SR_2012_810.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–2012–810 and should be submitted on or before February 15, 2013. By the Commission. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–01484 Filed 1–24–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68689; File No. SR–Phlx– 2013–03] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing of Proposed Rule Change To Amend Exchange Rules 507 and 1014 To Establish Remote Streaming Quote Trader Organizations January 18, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 2 thereunder, notice is hereby given that on January 4, 2013, NASDAQ OMX PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) 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 by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 2 17 E:\FR\FM\25JAN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 25JAN1

Agencies

[Federal Register Volume 78, Number 17 (Friday, January 25, 2013)]
[Notices]
[Pages 5516-5518]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-01484]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68690; File No. SR-DTC-2012-810]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing Advance Notice To Reduce Liquidity Risk Relating to 
Its Processing of Maturity and Income Presentments and Issuances of 
Money Market Instruments

January 18, 2013.
    Pursuant to Section 806(e)(1) of the Payment, Clearing, and 
Settlement Supervision Act of 2010 (``Clearing Supervision Act'') \1\ 
and Rule 19b-4(n)(1)(i) \2\ thereunder, notice is hereby given that on 
December 28, 2012, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') the advance 
notice 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 advance notice from interested persons.
---------------------------------------------------------------------------

    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(i).
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I. Clearing Agency's Statement of the Terms of Substance of the Advance 
Notice

    DTC is proposing to change the current Largest Provisional Net 
Credit (``LPNC'') risk management control in order to increase 
withholding from one to two largest provisional credits (on an acronym 
\3\ basis). DTC is also proposing to modify its Rules as they relate to 
the Issuing/Paying Agent's (``IPA's'') refusal to pay process. DTC is 
proposing not to process a reversal of a transaction initiated by an 
IPA when issuances of Money Market Instruments (``MMIs'') in an acronym 
exceed, in dollar value, the maturity or income presentments 
(``Maturity Obligations'') of MMIs in the

[[Page 5517]]

same acronym on the same day. As a result, at the point in time when 
issuances of MMIs in an acronym exceed, in dollar value, the Maturity 
Obligations of the MMIs in the same acronym on that day, DTC will 
remove the LPNC control with respect to the affected acronym.
---------------------------------------------------------------------------

    \3\ DTC employs a four-character acronym to designate an 
issuer's Money Market Instrument program. An issuer can have 
multiple acronyms. The Issuing/Paying Agent's bank uses the 
acronym(s) when submitting an instruction for a given issuer's Money 
Market Instrument securities.
---------------------------------------------------------------------------

II. Clearing Agency's Statement of Purpose of, and Statutory Basis for, 
the Advance Notice

    In its filing with the Commission, DTC included statements 
concerning the purpose of and basis for the advance notice and 
discussed any comments it received on the advance notice. 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) and (B) 
below, of the most significant aspects of such statements.\4\
---------------------------------------------------------------------------

    \4\ The Commission has modified the text of the summaries 
prepared by DTC.
---------------------------------------------------------------------------

(A) Advance Notices Filed Pursuant to Section 806(e) of the Payment, 
Clearing and Settlement Supervision Act

Description of Change
    MMI presentment processing is initiated automatically by DTC each 
morning for MMIs maturing that day. The automatic process 
electronically sweeps all maturing positions of MMI CUSIPs from DTC 
Participant accounts and creates the Maturity Obligations. The matured 
MMIs are, subject to DTC Rules, delivered to the applicable IPA, a DTC 
Participant, and DTC debits the IPA's account for the amount of the 
Maturity Obligations. In accordance with DTC Rules, payment will be due 
from the IPA for net settlement to the extent, if any, that the IPA has 
a net debit balance in its settlement account at end-of-day.
    Without regard to DTC net settlement, MMI issuers and IPAs commonly 
view the primary source of funding of payments for Maturity Obligations 
of MMIs as flowing from new issuances of MMIs in the same acronym by 
that issuer on that day. In a situation where those new issuances 
exceed the Maturity Obligations, the issuer would have no net funds 
payment due to the IPA on that day. However, because Maturity 
Obligations of MMIs are processed automatically at DTC, IPAs currently 
operationally have the ability to pay for all of an issuer's 
maturities. An IPA that refuses payment on an MMI must communicate its 
intention to DTC using the DTC Participant Terminal/Browser Service 
(``PTS/PBS'') MMRP function. This communication is referred to as an 
Issuer Failure/Refusal to Pay (``RTP'') and it allows the Paying Agent 
to enter a refusal to pay instruction for a particular issuer acronym 
up to 3:00 p.m. Eastern Time (``ET'') on the date of the affected 
maturity or income presentment. Such an instruction will cause DTC, 
pursuant to its Rules, to reverse all transactions related to that 
issuer's acronym, including Maturity Obligations and any new issuances, 
posing a potential for systemic risk since the reversals may override 
DTC's risk management controls (e.g., collateral monitor \5\ and net 
debit cap \6\).
---------------------------------------------------------------------------

    \5\ DTC tracks collateral in a Participant's account through the 
Collateral Monitor (``CM''). At all times, the CM reflects the 
amount by which the collateral value in the account exceeds the net 
debit balance in the account. When processing a transaction, DTC 
verifies that the CM of each of the deliverer and receiver will not 
become negative when the transaction is processed. If the 
transaction would cause either party to have a negative CM, the 
transaction will recycle until the deficient account has sufficient 
collateral to proceed or until the applicable cutoff occurs.
    \6\ The net debit cap control is designed so that DTC may 
complete settlement, even if a Participant fails to settle. Before 
completing a transaction in which a Participant is the receiver, DTC 
calculates the effect the transaction would have on such 
Participant's account, and determines whether any resulting net 
debit balance would exceed the Participant's net debit cap. Any 
transaction that would cause the net debit balance to exceed the net 
debit cap is placed on a pending (recycling) queue until the net 
debit cap will not be exceeded by processing the transaction.
---------------------------------------------------------------------------

    To mitigate the risks associated with an RTP, DTC employs the LPNC 
risk management control. On each processing day, DTC withholds intraday 
credit from each MMI Participant for the largest credit with respect to 
an issuer's acronym, for purposes of calculating the Participant's net 
settlement balance and collateral monitor. As such, this single largest 
credit is provisional and is not included in the calculation of the 
Participant's collateral monitor or in the settlement balance measured 
against its net debit cap. DTC believes that the LPNC control will help 
protect DTC against either (i) the single largest issuer failure on a 
business day, or (ii) multiple failures on a business day that, taken 
together, do not exceed the largest provisional net credit.
    Maturity payment procedures were designed to limit credit, 
liquidity, and operational risk for DTC and Participants in the MMI 
program. In an effort to further mitigate these risks, DTC is proposing 
the following changes to current processing associated with (1) the 
LPNC control and (2) limiting intraday MMI reversals under specified 
conditions:
(1) Increase Withholding From One to Two LPNCs
    DTC is proposing to change the current LPNC risk management control 
in order to increase withholding from one to two largest provisional 
credits (on an acronym basis). DTC believes this will provide increased 
risk protection in the event of transaction reversals due to multiple 
issuer defaults or a single issuer default with two or more MMI 
programs.
    DTC has conducted a simulation analysis to measure the impact to 
IPAs and custodians/dealers of an increase in LPNC controls from one to 
two on settlement blockage \7\ intraday during peak processing periods. 
DTC analyzed the blockage level for both the IPAs and custodians/
dealers as separate segments since each react to the additional 
blockage in different ways. DTC believes the results of the simulation 
analysis indicated that there will be no material change in settlement 
blockage.
---------------------------------------------------------------------------

    \7\ Settlement blockage refers to transactions that cannot be 
completed due to a receiver's net debit cap or collateral monitor 
controls.
---------------------------------------------------------------------------

(2) Eliminate Intraday Reversals When MMI Issuances Exceed Maturity 
Obligations

    DTC is also proposing to modify its Rules as they relate to the 
refusal to pay process. As planned, DTC will not process a reversal of 
a transaction initiated by an IPA when issuances of MMIs in an acronym 
exceed, in dollar value, the Maturity Obligations of MMIs in the same 
acronym on the same day. In such instances, DTC will not process a 
reversal of the transaction because the IPA would have no reason to 
exercise the refusal to pay for that acronym on that settlement day. As 
a result, because the LPNC control is designed to protect against 
transaction reversals, at the point in time when issuances of MMIs in 
an acronym exceed, in dollar value, the Maturity Obligations of the 
MMIs in the same acronym on that day, DTC proposes not to apply the 
LPNC control with respect to the affected acronym.
Anticipated Effect on and Management of Risk
    DTC believes that the proposed changes will mitigate the systemic 
risk associated with MMI transaction reversals due to an IPA refusal to 
pay instruction by increasing withholding from one to two largest 
provisional credits (on an acronym basis). DTC believes that this will 
provide increased risk protection in the event of transaction reversals 
due to multiple issuer defaults or a single issuer default with two or 
more MMI programs. By

[[Page 5518]]

mitigating DTC's and the financial systems exposure to this systemic 
risk, DTC believes that the proposed change will contribute to the goal 
of financial stability in the event of a default, and is consistent 
with the CPSS-IOSCO Recommendations for Securities Settlement Systems 
\8\ applicable to DTC.
---------------------------------------------------------------------------

    \8\ Principles for Financial Market Infrastructures of the 
Committee on Payment and Settlement Systems and the Technical 
Committee of the International Organization of Securities 
Commissions (``CPSS-IOSCO'') (April 2012), available at http://www.bis.org/publ/cpss101a.pdf.
---------------------------------------------------------------------------

    DTC has discussed this proposal with various industry groups, 
including the Participants that transact in MMIs, none of whom 
objected, according to DTC. According to DTC, the Participants 
understand that the elimination of intraday reversals when issuances 
exceed Maturity Obligations will result in no material change in 
settlement blockage and will mitigate systemic risk as a whole. DTC 
believes the proposed changes should promote settlement finality by 
precluding reversals for those issuances.

(B) Clearing Agency's Statement on Comments on the Advance Notice 
Received From Members, Participants, or Others

    The subject proposal regarding MMIs was developed in consultation 
with various industry organizations. Written comments relating to the 
proposed changes contained in the advance notice 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 Advance Notice and Timing for 
Commission Action

    The clearing agency may implement the proposed change pursuant to 
Section 806(e)(1)(G) of the Clearing Supervision Act \9\ if it has not 
received an objection to the proposed change within 60 days of the 
later of (i) the date that the Commission received the advance notice 
or (ii) the date the Commission receives any further information it 
requested for consideration of the notice. The clearing agency shall 
not implement the proposed change if the Commission has any objection 
to the proposed change.
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    \9\ 12 U.S.C. 5465(e)(1)(G).
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    The Commission may extend the period for review by an additional 60 
days if the proposed change raises novel or complex issues, subject to 
the Commission providing the clearing agency with prompt written notice 
of the extension. A proposed change may be implemented in less than 60 
days from the date of receipt of the advance notice, or the date the 
Commission receives any further information it requested, if the 
Commission notifies the clearing agency in writing that it does not 
object to the proposed change and authorizes the clearing agency to 
implement the proposed change on an earlier date, subject to any 
conditions imposed by the Commission. The clearing agency shall post 
notice on its Web site of proposed changes that are implemented.
    The proposal shall not take effect until all regulatory actions 
required with respect to the proposal are completed.\10\
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    \10\ DTC also filed the proposals contained in this advance 
notice as a proposed rule change under Section 19(b)(1) of the Act 
and Rule 19b-4 thereunder. 15 U.S.C. 78s(b)(1); 17 CFR 240.19b-4. 
Pursuant to Section 19(b)(2) of the Act, within 45 days of the date 
of publication of the proposed rule change in the Federal Register 
or within such longer period up to 90 days if the Commission 
designates or the self-regulatory organization consents the 
Commission will either: (i) By order approve or disapprove the 
proposed rule change or (ii) institute proceedings to determine 
whether the proposed rule change should be disapproved. 15 U.S.C. 
78s(b)(2)(A). See Release No. 34-68548 (December 28, 2012), 78 FR 
795 (January 4, 2013).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the advance 
notice is consistent with the Clearing Supervision 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 email to rule-comments@sec.gov. Please include 
File Number SR-DTC-2012-810 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 submissions should refer to File Number SR-DTC-2012-810. This file 
number should be included on the subject line if email 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 advance notice that are filed with the 
Commission, and all written communications relating to the advance 
notice 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 10:00 a.m. and 
3:00 p.m. 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://dtcc.com/downloads/legal/rule_filings/2012/dtc/Advance_Notice_SR_2012_810.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-2012-810 and should be submitted on or before February 15, 2013.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-01484 Filed 1-24-13; 8:45 am]
BILLING CODE 8011-01-P