Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Effect Changes to the DTC Settlement Service Guide Relating to the Automated Customer Account Transfer Service of National Securities Clearing Corporation, 20260-20262 [2014-08121]

Download as PDF tkelley on DSK3SPTVN1PROD with NOTICES 20260 Federal Register / Vol. 79, No. 70 / Friday, April 11, 2014 / Notices securities purchased by the Fund, or its respective Master Fund, in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The Board of the Fund will take any appropriate actions based on its review, including, if appropriate, the institution of procedures designed to ensure that purchases of securities in Affiliated Underwritings are in the best interest of shareholders of the Fund. 13. Each Fund, or its respective Master Fund, will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase in an Affiliated Underwriting occurred, the first two years in an easily accessible place, a written record of each purchase of securities in Affiliated Underwritings, once an investment by an Acquiring Fund in the securities of the Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth from whom the securities were acquired, the identity of the underwriting syndicate’s members, the terms of the purchase, and the information or materials upon which the determinations of the Board of the Fund were made. 14. Before investing in Shares of a Fund in excess of the limits in section 12(d)(1)(A), each Acquiring Fund and the Fund will execute an Acquiring Fund Agreement stating, without limitation, that their Boards and their investment adviser(s), or their Sponsors or trustees (‘‘Trustee’’), as applicable, understand the terms and conditions of the requested order, and agree to fulfill their responsibilities under the requested order. At the time of its investment in Shares of a Fund in excess of the limit in section 12(d)(1)(A)(i), an Acquiring Fund will notify the Fund of the investment. At such time, the Acquiring Fund will also transmit to the Fund a list of the names of each Acquiring Fund Affiliate and Underwriting Affiliate. The Acquiring Fund will notify the Fund of any changes to the list of the names as soon as reasonably practicable after a change occurs. The Fund and the Acquiring Fund will maintain and preserve a copy of the requested order, the Acquiring Fund Agreement, and the list with any updated information for the duration of the investment and for a period of not less than six years thereafter, the first two years in an easily accessible place. VerDate Mar<15>2010 18:55 Apr 10, 2014 Jkt 232001 15. The Acquiring Fund Advisor, Trustee or Sponsor, as applicable, will waive fees otherwise payable to it by the Acquiring Fund in an amount at least equal to any compensation (including fees received pursuant to any plan adopted under rule 12b-l under the Act) received from the Fund, or its respective Master Fund, by the Acquiring Fund Advisor, Trustee or Sponsor, or an affiliated person of the Acquiring Fund Advisor, Trustee or Sponsor, other than any advisory fees paid to the Acquiring Fund Advisor, Trustee or Sponsor, or its affiliated person by the Fund, or its respective Master Fund, in connection with the investment by the Acquiring Fund in the Fund. Any Acquiring Fund Sub-Advisor will waive fees otherwise payable to the Acquiring Fund SubAdvisor, directly or indirectly, by the Acquiring Management Company in an amount at least equal to any compensation received from a Fund, or its respective Master Fund, by the Acquiring Fund Sub-Advisor, or an affiliated person of the Acquiring Fund Sub-Advisor, other than any advisory fees paid to the Acquiring Fund SubAdvisor or its affiliated person by the Fund, or its respective Master Fund, in connection with any investment by the Acquiring Management Company in the Fund made at the direction of the Acquiring Fund Sub-Advisor. In the event that the Acquiring Fund SubAdvisor waives fees, the benefit of the waiver will be passed through to the Acquiring Management Company. 16. Any sales charges and/or service fees charged with respect to shares of an Acquiring Fund will not exceed the limits applicable to a fund of funds as set forth in NASD Conduct Rule 2830. 17. No Fund, or its respective Master Fund, will acquire securities of any other investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent (i) the Fund, or its respective Master Fund, acquires securities of another investment company pursuant to exemptive relief from the Commission permitting the Fund, or its respective Master Fund, to acquire securities of one or more investment companies for short-term cash management purposes or (ii) the Fund acquires securities of the Master Fund pursuant to the Master–Feeder Relief. 18. Before approving any advisory contract under section 15 of the Act, the Board of of each Acquiring Management Company, including a majority of the Independent Trustees, will find that the advisory fees charged under such advisory contract are based on services PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 provided that will be in addition to, rather than duplicative of, the services provided under the advisory contract(s) of any Fund, or its respective Master Fund, in which the Acquiring Management Company may invest. These findings and their basis will be recorded fully in the minute books of the appropriate Acquiring Management Company. For the Commission, by the Division of Investment Management, under delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–08131 Filed 4–10–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71886; File No. SR–DTC– 2014–04] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Effect Changes to the DTC Settlement Service Guide Relating to the Automated Customer Account Transfer Service of National Securities Clearing Corporation April 7, 2014. 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 March 28, 2014, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change described in Items I, II and III below, which Items have been prepared primarily by DTC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change consists of conforming changes to the DTC Settlement Service Guide (the ‘‘Guide’’) 3 with respect to proposed changes in the Automated Customer Account Transfer Service (‘‘ACATS’’) of its affiliate, National Securities Clearing Corporation (‘‘NSCC’’).4 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 The Guide is available at https://www.dtcc.com/ ∼/media/Files/Downloads/legal/service-guides/ Settlement.ashx. 4 Terms not defined herein have the meaning set forth in DTC’s Rules & Procedures (the ‘‘Rules’’) available at https://www.dtcc.com/en/legal/rulesand-procedures.aspx. 2 17 E:\FR\FM\11APN1.SGM 11APN1 Federal Register / Vol. 79, No. 70 / Friday, April 11, 2014 / 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. (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose i. Background ACATS is an NSCC service that interfaces with DTC for the delivery of customer 5 securities from the account of one DTC Participant (that is also an NSCC Member) to another DTC Participant (that is also an NSCC Member). NSCC has proposed a redesign of ACATS (under NSCC rule filing SR–NSCC–2014–04, the ‘‘NSCC Proposal’’) which, if approved, will require conforming changes to DTC’s Procedures. Under the NSCC Proposal, customer account transfers with respect to two types of DTC-eligible securities will be processed through a new NSCC accounting operation (to be known as the ‘‘ACATS Settlement Accounting Operation’’) on an ACATS Settlement Date (as defined therein). The key provision of the NSCC Proposal impacting DTC is that ACATS transactions will no longer have an associated incentive charge in NSCC’s system so that such an ACATS transfer will have no related funds settlement risk to either NSCC or DTC. In this regard, ACATS transfers will be entirely free of payment on the books of DTC. Accordingly, DTC proposes to change its procedures set forth in the Guide as described below. The proposal also includes clarifications in the Guide with respect to the protection of customer securities processed through ACATS. tkelley on DSK3SPTVN1PROD with NOTICES ii. Proposed DTC Rule Changes Elimination of Short Cover Charge An ‘‘ACATS short cover charge’’ is a dollar amount guaranteed by NSCC to DTC for the value of securities delivered 5 For purposes of this rule filing, ‘‘customer’’ refers to an accountholder of a DTC Participant whose account is transferred to another DTC Participant by an ACATS transaction. VerDate Mar<15>2010 18:55 Apr 10, 2014 Jkt 232001 from a Participant’s DTC account to NSCC for processing by NSCC through its Continuous Net Settlement system (‘‘CNS’’). Because ACATS transfers will be entirely free of payment under the NSCC proposal as described above, a provision in the Guide relating to the processing of ‘‘ACATS short cover charges’’ will be deleted, with related adjustments to references to the DTC Collateral Monitor.6 Long Allocations At NSCC, under current rules, long allocations of securities made via CNS may be reversed if the NSCC Member receiving the securities fails to meet its NSCC money settlement obligation. Because ACATS transactions will not generate any funds settlement obligations, this reversal is eliminated. The provision in the Guide describing the NSCC reversal will be deleted. Memo Seg Optionality Memo Seg is a systemic mechanism that allows Participants to prevent inventory that is not subject to a lien or claim of DTC (‘‘Minimum Amount’’ or ‘‘MA’’) from falling below a certain number of units.7 In order to extend the Memo Seg option to securities received in ACATS transfers, the Guide would be revised to provide that a Participant may increase its number of units designated for protection under Memo Seg to reflect ACATS receipts.8 Clarification With Respect to MA Securities ACATS transfers are not subject to any lien or claims by DTC because they are transferred free of payment on the books of DTC. Upon receipt into a Participant account, the securities constitute MA securities pursuant to the Rules.9 The Guide uses the term ‘‘Deemed MA’’ to reflect this condition. This terminology is no longer necessary because, under the NSCC Proposal, no funds obligations attach to the ACATS transaction. Accordingly, the term 6 These adjustments reduce a Participant’s Collateral Monitor with respect to its net ACATS short positions on at the start of ACATS settlement date. The Participant then receives credit in its Collateral Monitor for ACATS deliveries as they occur throughout the day. 7 Memo Seg is offered by DTC to its Participants to support their control of fully-paid customer securities, although its effectiveness for that purpose depends entirely on the Participant’s management of its accounts. 8 Please see the Guide for additional information regarding Memo Seg under the ‘‘Memo Segregation’’ section available at www.dtcc.com. 9 Securities received through the ACATS Settlement Accounting Operation are not counted as part of the Participant’s Collateral Monitor, unless and until the receiving Participant, in accordance with the Rules, designates those securities as Net Additions (NA). PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 20261 ‘‘Deemed MA’’ will be deleted from the Guide; a new section of the Guide will confirm that ACATS securities received by a Participant will, by virtue of this transfer, be credited to the receiving account as MA.10 Other Clarifications The Guide will be revised to clarify the descriptions of CNS Short Covers and Long Allocations and their effect on Participant collateral and the Collateral Monitor. iii. Implementation Timeframe The effective date of the proposed Rule change will be announced via a DTC Important Notice and will be implemented concurrently with the implementation by NSCC of the ACATS enhancements, if approved. 2. Statutory Basis The proposed rule change provides for enhancements relating to the processing of customer securities which would support finality of transfers of customer securities. Therefore, DTC believes the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to DTC, in particular Section 17A(b)(3)(F) 11 of the Act which requires that the Rules be designed to promote the prompt and accurate clearance and settlement of securities transactions and, in general, to protect investors and the public interest. (B) Self-Regulatory Organization’s Statement on Burden on Competition DTC believes that the proposed rule change would not impose any burden on competition as it applies to all Participants that utilize the ACATS service and the new process has been developed in close coordination with the industry. (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 with respect to this filing. 10 In this regard, a Participant accepting an ACATS free delivery automatically designates the subject securities as MA securities, not subject to any lien or claim of DTC. Therefore, such securities are not counted in the Collateral Monitor of the Participant. It should be noted that the Participant may re-designate the securities as NA or deliver them versus payment in which case these securities would be counted in the Collateral Monitor. 11 15 U.S.C. 78q–1(b)(3)(F). E:\FR\FM\11APN1.SGM 11APN1 20262 Federal Register / Vol. 79, No. 70 / Friday, April 11, 2014 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate 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 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: inspection and copying at the principal office of DTC and on DTC’s Web site at https://dtcc.com/legal/sec-rulefilings.aspx. 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–2014– 04 and should be submitted on or before May 2, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–08121 Filed 4–10–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71892; File No. SR– NASDAQ–2014–027] Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File No. SR– DTC–2014–04 on the subject line. tkelley on DSK3SPTVN1PROD 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–2014–04. 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 (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 10:00 a.m. and 3:00 p.m. Copies of such filings also will be available for VerDate Mar<15>2010 18:55 Apr 10, 2014 Jkt 232001 Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of the Shares of the PowerShares MultiStrategy Alternative Portfolio, a series of PowerShares Actively Managed Exchange-Traded Fund Trust April 7, 2014. 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 March 24, 2014, The NASDAQ Stock Market LLC (‘‘Nasdaq’’ or the ‘‘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 Nasdaq. 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 the Substance of the Proposed Rule Change Nasdaq proposes to list and trade the shares of the PowerShares MultiStrategy Alternative Portfolio (the ‘‘Fund’’), a series of PowerShares Actively Managed Exchange-Traded Fund Trust (the ‘‘Trust’’), under Nasdaq Rule 5735 (‘‘Managed Fund Shares’’). The shares of the Fund are collectively referred to herein as the ‘‘Shares.’’ 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 The text of the proposed rule change is available at https:// nasdaq.cchwallstreet.com/, at Nasdaq’s principal office, 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, Nasdaq included statements concerning the purpose of, and basis for, the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq 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 Exchange proposes to list and trade the Shares of the Fund under Nasdaq Rule 5735, which governs the listing and trading of Managed Fund Shares 3 on the Exchange.4 The Fund will be an actively managed exchangetraded fund (‘‘ETF’’) that will use proprietary portfolio management techniques in an effort to exceed a 3 A Managed Fund Share is a security that represents an interest in an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1) (the ‘‘1940 Act’’) organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. In contrast, an open-end investment company that issues Index Fund Shares, listed and traded on the Exchange under Nasdaq Rule 5705, seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock index, fixed income securities index or combination thereof. 4 The Commission approved Nasdaq Rule 5735 (formerly Nasdaq Rule 4420(o)) in Securities Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 20, 2008) (SR–NASDAQ–2008–039). There are already multiple actively-managed funds listed on the Exchange; see, e.g., Securities Exchange Act Release Nos. 69464 (April 26, 2013), 78 FR 25774 (May 2, 2013) (SR–NASDAQ–2013– 036) (order approving listing and trading of First Trust Senior Loan Fund); 66489 (February 29, 2012), 77 FR 13379 (March 6, 2012) (SR–NASDAQ– 2012–004) (order approving listing and trading of WisdomTree Emerging Markets Corporate Bond Fund). Additionally, the Commission has previously approved the listing and trading of a number of actively-managed funds on NYSE Arca, Inc. pursuant to Rule 8.600 of that exchange. See, e.g., Securities Exchange Act Release No. 68870 (February 8, 2013), 78 FR 11245 (February 15, 2013) (SR–NYSEArca–2012–139) (order approving listing and trading of First Trust Preferred Securities and Income ETF). The Exchange believes the proposed rule change raises no significant issues not previously addressed in those prior Commission orders. E:\FR\FM\11APN1.SGM 11APN1

Agencies

[Federal Register Volume 79, Number 70 (Friday, April 11, 2014)]
[Notices]
[Pages 20260-20262]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08121]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71886; File No. SR-DTC-2014-04]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change To Effect Changes to the DTC 
Settlement Service Guide Relating to the Automated Customer Account 
Transfer Service of National Securities Clearing Corporation

April 7, 2014.
    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 March 28, 2014, The Depository Trust Company (``DTC'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change described in Items I, II and III below, which Items have 
been prepared primarily by DTC. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The proposed rule change consists of conforming changes to the DTC 
Settlement Service Guide (the ``Guide'') \3\ with respect to proposed 
changes in the Automated Customer Account Transfer Service (``ACATS'') 
of its affiliate, National Securities Clearing Corporation 
(``NSCC'').\4\
---------------------------------------------------------------------------

    \3\ The Guide is available at https://www.dtcc.com/~/media/Files/
Downloads/legal/service-guides/Settlement.ashx.
    \4\ Terms not defined herein have the meaning set forth in DTC's 
Rules & Procedures (the ``Rules'') available at https://www.dtcc.com/en/legal/rules-and-procedures.aspx.

---------------------------------------------------------------------------

[[Page 20261]]

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

1. Purpose
i. Background
    ACATS is an NSCC service that interfaces with DTC for the delivery 
of customer \5\ securities from the account of one DTC Participant 
(that is also an NSCC Member) to another DTC Participant (that is also 
an NSCC Member). NSCC has proposed a redesign of ACATS (under NSCC rule 
filing SR-NSCC-2014-04, the ``NSCC Proposal'') which, if approved, will 
require conforming changes to DTC's Procedures. Under the NSCC 
Proposal, customer account transfers with respect to two types of DTC-
eligible securities will be processed through a new NSCC accounting 
operation (to be known as the ``ACATS Settlement Accounting 
Operation'') on an ACATS Settlement Date (as defined therein).
---------------------------------------------------------------------------

    \5\ For purposes of this rule filing, ``customer'' refers to an 
accountholder of a DTC Participant whose account is transferred to 
another DTC Participant by an ACATS transaction.
---------------------------------------------------------------------------

    The key provision of the NSCC Proposal impacting DTC is that ACATS 
transactions will no longer have an associated incentive charge in 
NSCC's system so that such an ACATS transfer will have no related funds 
settlement risk to either NSCC or DTC. In this regard, ACATS transfers 
will be entirely free of payment on the books of DTC. Accordingly, DTC 
proposes to change its procedures set forth in the Guide as described 
below. The proposal also includes clarifications in the Guide with 
respect to the protection of customer securities processed through 
ACATS.
ii. Proposed DTC Rule Changes
Elimination of Short Cover Charge
    An ``ACATS short cover charge'' is a dollar amount guaranteed by 
NSCC to DTC for the value of securities delivered from a Participant's 
DTC account to NSCC for processing by NSCC through its Continuous Net 
Settlement system (``CNS''). Because ACATS transfers will be entirely 
free of payment under the NSCC proposal as described above, a provision 
in the Guide relating to the processing of ``ACATS short cover 
charges'' will be deleted, with related adjustments to references to 
the DTC Collateral Monitor.\6\
---------------------------------------------------------------------------

    \6\ These adjustments reduce a Participant's Collateral Monitor 
with respect to its net ACATS short positions on at the start of 
ACATS settlement date. The Participant then receives credit in its 
Collateral Monitor for ACATS deliveries as they occur throughout the 
day.
---------------------------------------------------------------------------

Long Allocations
    At NSCC, under current rules, long allocations of securities made 
via CNS may be reversed if the NSCC Member receiving the securities 
fails to meet its NSCC money settlement obligation. Because ACATS 
transactions will not generate any funds settlement obligations, this 
reversal is eliminated. The provision in the Guide describing the NSCC 
reversal will be deleted.
Memo Seg Optionality
    Memo Seg is a systemic mechanism that allows Participants to 
prevent inventory that is not subject to a lien or claim of DTC 
(``Minimum Amount'' or ``MA'') from falling below a certain number of 
units.\7\ In order to extend the Memo Seg option to securities received 
in ACATS transfers, the Guide would be revised to provide that a 
Participant may increase its number of units designated for protection 
under Memo Seg to reflect ACATS receipts.\8\
---------------------------------------------------------------------------

    \7\ Memo Seg is offered by DTC to its Participants to support 
their control of fully-paid customer securities, although its 
effectiveness for that purpose depends entirely on the Participant's 
management of its accounts.
    \8\ Please see the Guide for additional information regarding 
Memo Seg under the ``Memo Segregation'' section available at 
www.dtcc.com.
---------------------------------------------------------------------------

Clarification With Respect to MA Securities
    ACATS transfers are not subject to any lien or claims by DTC 
because they are transferred free of payment on the books of DTC. Upon 
receipt into a Participant account, the securities constitute MA 
securities pursuant to the Rules.\9\ The Guide uses the term ``Deemed 
MA'' to reflect this condition. This terminology is no longer necessary 
because, under the NSCC Proposal, no funds obligations attach to the 
ACATS transaction. Accordingly, the term ``Deemed MA'' will be deleted 
from the Guide; a new section of the Guide will confirm that ACATS 
securities received by a Participant will, by virtue of this transfer, 
be credited to the receiving account as MA.\10\
---------------------------------------------------------------------------

    \9\ Securities received through the ACATS Settlement Accounting 
Operation are not counted as part of the Participant's Collateral 
Monitor, unless and until the receiving Participant, in accordance 
with the Rules, designates those securities as Net Additions (NA).
    \10\ In this regard, a Participant accepting an ACATS free 
delivery automatically designates the subject securities as MA 
securities, not subject to any lien or claim of DTC. Therefore, such 
securities are not counted in the Collateral Monitor of the 
Participant. It should be noted that the Participant may re-
designate the securities as NA or deliver them versus payment in 
which case these securities would be counted in the Collateral 
Monitor.
---------------------------------------------------------------------------

Other Clarifications
    The Guide will be revised to clarify the descriptions of CNS Short 
Covers and Long Allocations and their effect on Participant collateral 
and the Collateral Monitor.
iii. Implementation Timeframe
    The effective date of the proposed Rule change will be announced 
via a DTC Important Notice and will be implemented concurrently with 
the implementation by NSCC of the ACATS enhancements, if approved.
2. Statutory Basis
    The proposed rule change provides for enhancements relating to the 
processing of customer securities which would support finality of 
transfers of customer securities. Therefore, DTC believes the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to DTC, in particular 
Section 17A(b)(3)(F) \11\ of the Act which requires that the Rules be 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions and, in general, to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

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

    DTC believes that the proposed rule change would not impose any 
burden on competition as it applies to all Participants that utilize 
the ACATS service and the new process has been developed in close 
coordination with the industry.

(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 with respect to this filing.

[[Page 20262]]

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-DTC-2014-04 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-2014-04. 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 (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 
10:00 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 https://dtcc.com/legal/sec-rule-filings.aspx. 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-2014-04 and should be 
submitted on or before May 2, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08121 Filed 4-10-14; 8:45 am]
BILLING CODE 8011-01-P
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