Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change Regarding the Implementation of Functionality To Submit a Cover of Protect on Behalf of Another Participant and the Removal of the Option To Cover of Protect Directly With Agent, 54170-54173 [2016-19322]
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54170
Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices
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 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–IEX–
2016–11 and should be submitted on or
before September 6, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–19315 Filed 8–12–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78520; File No. SR–DTC–
2016–005]
sradovich on DSK3GMQ082PROD with NOTICES
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing of Proposed Rule Change
Regarding the Implementation of
Functionality To Submit a Cover of
Protect on Behalf of Another
Participant and the Removal of the
Option To Cover of Protect Directly
With Agent
August 9, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’)1 and Rule 19b–4 thereunder,2
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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notice is hereby given that on July 29,
2016, The Depository Trust Company
(‘‘DTC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II and III below, which Items
have been prepared by DTC. DTC filed
the proposed rule change pursuant to
Section 19(b)(2) of the Act.3 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change by DTC
would update its Procedures4 set forth
in the Guide to make changes to certain
options within its Participant
Subscription Offer Program (‘‘PSOP’’)5
and Participant Tender Offer Program
(‘‘PTOP’’) functions.6 Specifically, DTC
proposes to add an option called ‘‘Cover
of Protect on Behalf of Another
Participant’’ (‘‘CPAP’’) to both PSOP
and PTOP (‘‘PSOP/PTOP’’) that would
allow a Participant to tender
subscription rights (‘‘Rights’’) or
Securities through DTC to an agent
(‘‘Offer Agent’’),7 on behalf of another
Participant that needs to tender such
Rights or Securities in order to receive
the shares and/or consideration from (i)
a subscription rights offering (a ‘‘Rights
Offer’’); or (ii) a cash tender offer or
exchange offer (collectively, a ‘‘Tender/
Exchange Offer’’) (together with Rights
3 15
U.S.C. 78s(b)(2).
terms not otherwise defined herein
have the meaning set forth in the Rules, By-Laws
and Organization Certificate of DTC (the ‘‘Rules’’),
available at https://www.dtcc.com/legal/rules-andprocedures.aspx and the Reorganizations Service
Guide (the ‘‘Guide’’), available at https://
www.dtcc.com/∼/media/Files/Downloads/legal/
service-guides/Reorganizations.pdf.
5 References in this rule filing to ‘‘PSOP’’ refer to
both the PSOP function within the DTC Participant
Terminal System (‘‘PTS’’) interface and the
equivalent ‘‘Rights Subscription’’ function within
the Participant Browser System (‘‘PBS’’) interface.
PSOP is a function that is used by Participants to
submit instructions including oversubscriptions,
submit protects, submit cover of protects, submit
cover of protects on behalf of another Participant,
and submit Rights sell instructions on Rights
Subscription events. PTS and PBS are user
interfaces for DTC’s Settlement and Asset Services
functions. PTS is mainframe-based and PBS is webbased with a mainframe back-end. Participants may
use either PTS or PBS, as they are functionally
equivalent.
6 References in this rule filing to ‘‘PTOP’’ refer to
both the PTOP function within the PTS interface
and the equivalent ‘‘Voluntary Tenders and
Exchanges’’ function within the PBS interface.
PTOP is a function that is used by Participants to
submit instructions, submit protects, submit cover
of protects, submit cover of protects on behalf of
another Participant, and submit withdrawals on
various Voluntary Reorganization events.
7 The Offer Agent is the fiscal agent of the offeror,
typically a bank or trust company that is designated
to coordinate the process of the Offer.
4 Capitalized
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Offer, ‘‘Offer’’). DTC would also
eliminate an option called ‘‘Cover of
Protect Submitted Directly to Agent’’
(‘‘CPDA’’) from PSOP/PTOP that has
allowed a Participant to tender Rights or
Securities through DTC to be eligible to
receive the shares and/or consideration
from an Offer, when such Participant
submitted its initial acceptance directly
to the Offer Agent outside of DTC. In
addition, DTC proposes to make
ministerial changes to the text of the
Guide, as more fully described below.
II. Clearing Agency’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) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The proposed rule change by DTC
would update its Procedures set forth in
the Guide to make changes to certain
options within its PSOP and PTOP
functions. Specifically, DTC proposes to
add an option called CPAP to PSOP/
PTOP that would allow a Participant to
tender Rights or Securities through DTC
to an Offer Agent, on behalf of another
Participant that needs to tender such
Rights or Securities in order to receive
the shares and/or consideration from (i)
a Rights Offer; or (ii) a Tender/Exchange
Offer. DTC would also eliminate an
option called CPDA from PSOP/PTOP
that has allowed a Participant to tender
Rights or Securities through DTC to be
eligible to receive the shares and/or
consideration from an Offer, when such
Participant submitted its initial
acceptance directly to the Offer Agent
outside of DTC. In addition, DTC
proposes to make ministerial changes to
the text of the Guide, as more fully
described below.
(i) Protects and Covers
(a) Protects and Covers Outside of DTC
Subscription Rights Offering
A Rights Offer is the issuance of
Rights to each shareholder as of a record
date set by the issuer. Rights are issued
to each shareholder in proportion to the
number of shares it holds, and entitles
the shareholder to purchase additional
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Federal Register / Vol. 81, No. 157 / Monday, August 15, 2016 / Notices
shares at a discount. Rights may be
either non-transferable or transferable.
Holders are able to trade transferable
Rights in the secondary market.
In order to subscribe to a Rights Offer,
an investor or its broker (‘‘Investor’’)
must, prior to the expiration of the
Rights Offer, deliver to the Offer Agent:
(i) The Rights, (ii) an executed
subscription form for such Rights Offer
(‘‘Subscription Form’’) in which it
subscribes to the new shares of the
Rights Offer, and (iii) the payment due
for the purchase of the shares.
Tender Offers and Exchange Offers
A tender offer is a solicitation by an
issuer or a third party to purchase a
substantial percentage of the issuer’s
shares for a specified period of time.
The tender offer is at a fixed price,
usually higher than the current market
price, and is usually conditioned on a
sufficient number of the issuer’s
shareholders tendering a fixed number
of their shares. An exchange offer is an
offer by an issuer to exchange its
Securities for other Securities (of that
issuer or another).
If an Investor wants to accept a
Tender/Exchange Offer, it submits to the
Offer Agent: (i) The letter of transmittal
for such Tender/Exchange Offer (‘‘Letter
of Transmittal’’) setting forth the terms
of the tender or exchange, including
information about the quantity of
Securities being tendered as well as
where and to whom the payment should
be made, and (ii) the Securities it is
tendering.
sradovich on DSK3GMQ082PROD with NOTICES
Cover of Protect
An Investor may want to accept an
Offer but will not have the necessary
Rights or Securities, as the case may be,
before the expiration date of the Offer.
If permitted by the terms of the Offer,
the Investor may submit to the Offer
Agent the notice of guaranteed delivery
for such Offer (‘‘Notice of Guaranteed
Delivery’’) which serves as (i) protection
of the Investor’s acceptance of the Offer
(the ‘‘Protect’’), and sets forth the
number of shares being subscribed to or
the amount of Securities being tendered,
and (ii) a guarantee that the Rights or
Securities (the ‘‘Cover’’) will be
delivered to the Offer Agent within the
period prescribed by the Offer (the
‘‘Protect Period’’).8
Covering Another Investor’s Protect
In some cases, an Investor may find
that it will not have the necessary Rights
or Securities, as the case may be, in time
to tender to the Offer Agent before the
8 A Protect Period is usually three business days
after the expiration of the Offer.
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expiration of the Protect Period. This
may occur due to a failed trade or late
delivery of such Rights or Securities. If
the Investor is unable to deliver the
Rights or Securities within the Protect
Period, it will have failed to validly
tender and will not be eligible to
purchase shares under the Rights Offer
or to receive the consideration of the
Tender/Exchange Offer, respectively.
However, another Investor who does
hold the Rights or Securities, and
typically owes such Rights or Securities
to the Investor who submitted the
Protect because of a failed trade or late
delivery, may submit the Cover to the
Offer Agent on behalf of such Investor.
(b) Protects and Covers Through DTC
PSOP and PTOP
DTC distributes information to
Participants regarding the
reorganization activity that it handles.
Generally, this information is
distributed through PSOP/PTOP, or the
Reorganization Inquiry for Participants
(‘‘RIPS’’) function of PTS/PBS. Upon
receiving notice of such reorganization
activity, Participants may use the PSOP
(for Rights Offers) or PTOP (for Tender/
Exchange Offers) functions to elect
participation in the reorganization event
and to place related instructions for
DTC to process.
DTC’s Automated Subscription Offer
Program
As part of its corporate action 9
services, DTC offers the Automated
Subscription Offer Program (‘‘ASOP’’),10
through which DTC, as a conduit
between Participants and the Offer
Agents, processes Rights Offers for
Eligible Securities. Each Offer Agent for
a Rights Offer that is eligible for
processing through ASOP enters into an
agreement with DTC specifying, among
other things, that the relay of electronic
messages by DTC will qualify as the
execution and delivery of Subscription
Forms or Notices of Guaranteed
Delivery by Participants.
ASOP enables Participants to submit
subscription instructions using PSOP.
Through PSOP, a Participant that wants
to subscribe to a Rights Offer transmits
its acceptance and acknowledgment of
the terms of the Subscription Form, and
9 Corporate actions processed by DTC include,
but are not limited to, the reorganization of Eligible
Securities resulting from mergers, acquisitions, and
reverse splits. DTC performs corporate actions
processing through its Mandatory and Voluntary
Reorganization Services. See DTC Operational
Arrangements, available at https://www.dtcc.com/∼/
media/Files/Downloads/legal/issue-eligibility/
eligibility/operational-arrangements.pdf.
10 See Securities Exchange Act Release No. 35108
(December 16, 1994), 59 FR 67356 (December 29,
1994) (SR–DTC–94–15) (instituting ASOP).
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54171
instructs and authorizes DTC to
surrender the Rights and process the
corresponding payment to the Offer
Agent. In accordance with these
electronic instructions, DTC effects
book-entry deliveries of the Rights by
transferring the Rights from the
Participant’s Account to a DTC
operational account maintained by DTC
on behalf of the Offer Agent (‘‘Agent
Account’’) and sending an electronic
confirmation to the Offer Agent. DTC
debits the Participant’s Settlement
Account for the amount of the
subscription payments and wires the
payment to the Offer Agent. When the
additional shares are distributed by the
Offer Agent, DTC credits the Securities
to the Account of the Participant.
If permitted by the terms of the Rights
Offer, if a Participant will not have the
Rights before the expiration date of the
Rights Offer, it may submit a Protect to
the Offer Agent by transmitting through
PSOP its acceptance and
acknowledgment of the terms of the
Notice of Guaranteed Delivery. If the
Participant receives the Rights before
the day designated by DTC as the Cover
end date (the ‘‘DTC Cover Protect
Expiration Date’’),11 the Participant may
submit a Cover of Protect by
transmitting its acceptance of the terms
in the Letter of Transmittal via a Cover
of Protect option in PSOP, and
instructing DTC to deliver the Rights
and process the payment to the Offer
Agent.
DTC’s Automated Tender Offer Program
DTC offers the Automated Tender
Offer Program (‘‘ATOP’’),12 through
which DTC processes Tender/Exchange
Offers for Eligible Securities. Offer
Agents for Tender/Exchange Offers
eligible for processing through ATOP
must enter into a master agreement with
DTC.
A Participant uses PTOP to transmit
its acceptance and acknowledgement of
the Letter of Transmittal of the
applicable Tender/Exchange Offer and
to instruct DTC to deliver the Securities
to the Offer Agent. In accordance with
permitted instructions, DTC effects
book-entry delivery of Securities from
the Participant’s Account to the Agent
Account. When the payment (for a
tender offer) and/or Securities (for an
exchange offer) are distributed by the
Offer Agent, DTC credits the amount of
11 The DTC Cover Protect Expiration Date is
usually one business day earlier than the Protect
Period expiration date established by the terms of
the Offer.
12 For a description of ATOP, refer to Securities
Exchange Act Release No. 33797 (March 22, 1994),
59 FR 14696 (March 29, 1994) (SR–DTC–93–11)
(approving enhancements to ATOP).
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sradovich on DSK3GMQ082PROD with NOTICES
the payment and/or Securities to the
Settlement Account or Account of the
Participant, respectively.
A Participant’s Securities may not be
available to tender to the Offer Agent
prior to the expiration of the Tender/
Exchange Offer. If the Participant
anticipates receiving the Securities and
wants to participate in the Tender/
Exchange Offer, it may, if permitted by
the terms of the Tender/Exchange Offer,
submit a Protect by transmitting through
PTOP its acknowledgement and
acceptance of the terms of the Notice of
Guaranteed Delivery. Before the DTC
Cover Protect Expiration Date, the
Participant must acknowledge and agree
to the terms of the Letter of Transmittal
through PTOP and instruct DTC to
deliver the Securities to the Offer Agent
to Cover such Participant’s Protect. If
the Participant is unable to deliver the
Securities before the DTC Cover Protect
Expiration Date, it will have failed to
validly tender and will not be eligible
for the consideration of the Tender/
Exchange Offer.
(c) Proposal
As explained above, there are times
when a Participant that submitted a
Protect (the ‘‘Protecting Participant’’)
may need to have another Participant
(the ‘‘Covering Participant’’) Cover the
Protect. Currently, neither PSOP nor
PTOP has the specific functionality for
a Covering Participant to submit a Cover
on behalf of a Protecting Participant.
However, DTC is aware that Covering
Participants frequently utilize the
PSOP/PTOP CPDA option in order to
submit a Cover on behalf of another
Participant, which is not the intended
purpose of the CPDA function. The
intended purpose of the CPDA function
is to enable a Participant that submitted
a Protect directly to an Offer Agent
outside of DTC to later submit the
corresponding Cover through DTC.
In order to address directly a
Participant’s need to submit a Cover of
another Participant’s Protect, DTC
proposes to add the CPAP option to
PSOP/PTOP. With this enhancement,
the Protecting Participant would submit
a Protect through PSOP/PTOP, and the
Covering Participant would be able to
submit a Cover through PSOP/PTOP by
providing the Protecting Participant’s
Protect ID, Protect Sequence Number,
and Protect Participant ID. This
enhanced functionality would automate
the matching of Covers to corresponding
Protects, as well as automatically
allocate the applicable credits for
Securities and/or payments directly to
the Protecting Participant, rather than to
the Covering Participant. The CPAP
option would eliminate the need for
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Participants to utilize CPDA for the
unintended purpose of Covering another
Participant’s Protect.
In addition, to further reduce the
risks, burden, and costs to DTC
associated with the manual processing
of the CPDA option in PSOP/PTOP,
DTC is proposing to eliminate that
option. When a Participant uses CPDA
to submit a Cover for another
Participant’s Protect, DTC must
manually process the Cover and use
manual exception processing to match
the Cover to the corresponding Protect.
In addition, DTC must allocate the
credits for Securities and/or payment
from the Offer to the Covering
Participant. Even when a Participant
uses CPDA for its intended purpose,
which is infrequent, it is a labor
intensive process for DTC, as it must
manually process the Cover and return
the allocation to the Offer Agent within
a narrow timeframe. Therefore, DTC
proposes that when a Participant
submits a Protect directly to the Offer
Agent, such Participant would need to
submit the Cover directly to the Offer
Agent, and not through PSOP/PTOP.
(ii) Technical Changes
The proposed rule change would
revise the Guide to make ministerial
updates to reflect current terminology
and practices, as set forth below. The
Guide would be updated to:
• Correct the text of the Guide to
accurately reflect names of functions
accessible through PTS, and to
accurately reflect the names of the
corresponding functions that are
accessible through PBS. Presently, the
Guide assigns PTS functions to PBS,
and does not provide the names of the
corresponding PBS functions.
• Correct the timeframes within
which a Participant can submit a Notice
of Guaranteed Delivery on the
expiration date of a Rights Offer.
Generally, a Participant may submit a
Notice of Guaranteed Delivery through
PSOP/PTOP from 8:00 a.m. to 2:15 p.m.,
at which time the window closes to
allow for settlement of cash activities.
However, DTC will re-open the window
from 3:30 p.m. to 5:00 p.m. on the
expiration date of the Offer to allow
Participants extra time to submit a
Notice of Guaranteed Delivery before
the Offer expires, provided that the
Offer Agent agrees to accept deferred
subscription payments. The text of the
Guide incorrectly reflects an open
window from 8:00 a.m. to 5:00 p.m.,
which is not the practice. With this rule
filing, the text would be corrected to
reflect the correct 8:00 a.m. to 2:15 p.m.
and 3:30 p.m. to 5:00 p.m. windows.
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• Pursuant to Participant requests,
expand the availability of PTOP for a
Participant to submit a Cover of Protect,
on the dates specified in the notice of
an Offer. The current availability is until
4:15 p.m. or 12:00 p.m., depending on
the type of Offer, and the proposed rule
change would revise the text to reflect
availability until 5:00 p.m. or 1:00 p.m.,
as applicable.
• Remove references to the UNIT
Swingovers service. Several years ago,
the UNIT Swingovers service was
discontinued, and instead, voluntary
unit separations and recombinations 13
began to be processed under the FAST
program.14
• Clarify information regarding
available reports and methods of
submission and receipt.
• Replace reference to ‘NASDAQ’
with ‘FINRA’.
• Replace reference to ‘AMEX’ with
‘NASDAQ’.
• Add the title of the Guide, delete
‘Copyright,’ and update the ‘Important
Legal Information’ to align with other
DTC service guides.
• Correct spelling, grammatical,
capitalization, numbering, and
typographical errors throughout.
• Update other text, including
address, phone numbers, Web site
information, and methods of
communication.
Implementation Date
DTC will announce the effective date
via Important Notice upon the
Commission’s approval of the proposed
rule change.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act 15
requires that the rules of the clearing
agency be designed, inter alia, to
promote the prompt and accurate
clearance and settlement of securities
transactions. DTC believes that the
proposed rule change is consistent with
this provision because (i) by adding the
CPAP option by which a Participant can
submit a Cover through PSOP/PTOP on
behalf of another Participant instead of
improperly using the CPDA option that
then requires DTC to resort to manual
processing and allocate the
consideration to the Covering
13 A unit is a Security comprised of more than
one class of Securities, e.g., common stock and
warrants (the components). In a voluntary unit
separation, the separation and recombination
between the security component and the security is
done by the Participant and transfer agent using
DTC’s Deposit and Withdrawal at Custodian
system.
14 Securities Exchange Act Release No. 59199
(January 6, 2009), 74 FR 1266 (January 12, 2009)
(SR–DTC–2008–14).
15 15 U.S.C. 78q–1(b)(3)(F).
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Participant rather than the Protecting
Participant, and (ii) by removing the
CPDA option and requiring that
Participants that Protect outside of DTC
to also Cover outside DTC, the proposed
rule change would establish a process
that would streamline Cover of Protect
transactions, allocations and
recordkeeping for Participants, and
reduce manual processing and the risks,
burdens, and costs associated with such
processing for DTC, thereby promoting
the prompt and accurate clearance and
settlement of securities, consistent with
the requirements of the Act, in
particular Section 17A(b)(3)(F), cited
above.
Additionally, the proposed
ministerial changes to the Procedures,
which update the Guide as set forth
above, would provide additional clarity
to Participants and would ensure the
accuracy of the Procedures by reflecting
the present state of DTC’s reorganization
services and practices, thereby
promoting the prompt and accurate
clearance and settlement of securities,
consistent with the requirements of the
Act, in particular Section 17A(b)(3)(F),
cited above.
(B) Clearing Agency’s Statement on
Burden on Competition
DTC does not believe that the
proposed rule change would have any
impact, or impose any burden, on
competition because it would remove a
function that is infrequently used for its
intended purpose, and would establish
a new function, available to all
Participants, without the addition of a
new fee.
(C) Clearing Agency’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.
sradovich on DSK3GMQ082PROD with 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
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(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 Number SR–
DTC–2016–005 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–DTC–2016–005. 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 the
filing also will be available for
inspection and copying at the principal
office of DTC and on DTCC’s Web site
(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 Number SR–DTC–
2016–005 and should be submitted on
or before September 6, 2016.
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54173
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–19322 Filed 8–12–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78511; File No. SR–CBOE–
2016–049]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Designation of
Longer Period for Commission Action
on Proposed Rule Change To List
Options That Overlie the FTSE
Developed Europe Index and the FTSE
Emerging Index, To Raise the
Comprehensive Surveillance
Agreement Percentage Applicable to
Certain Index Options, and To Amend
the Maintenance Listing Criteria
Applicable to Certain Index Options
August 9, 2016.
On June 15, 2016, Chicago Board
Options Exchange, Incorporated
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
list and trade options that overlie the
FTSE Developed Europe Index and the
FTSE Emerging Index, raise the
comprehensive surveillance agreement
percentage applicable to options that
overlie the MSCI EAFE Index and the
MSCI Emerging Markets Index (‘‘EAFE
options’’ and ‘‘EM options’’), and amend
the maintenance listing criteria
applicable to EAFE options, EM options,
FTSE 100 Index options, and FTSE
China 50 Index options. The proposed
rule change was published for comment
in the Federal Register on July 1, 2016.3
The Commission has received no
comment letters on the proposal.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 78177
(June 28, 2016), 81 FR 43308.
4 15 U.S.C. 78s(b)(2).
1 15
E:\FR\FM\15AUN1.SGM
15AUN1
Agencies
[Federal Register Volume 81, Number 157 (Monday, August 15, 2016)]
[Notices]
[Pages 54170-54173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19322]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78520; File No. SR-DTC-2016-005]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change Regarding the Implementation
of Functionality To Submit a Cover of Protect on Behalf of Another
Participant and the Removal of the Option To Cover of Protect Directly
With Agent
August 9, 2016.
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 July 29, 2016, The Depository Trust Company (``DTC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II and III below, which Items have been
prepared by DTC. DTC filed the proposed rule change pursuant to Section
19(b)(2) of the Act.\3\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change by DTC would update its Procedures\4\ set
forth in the Guide to make changes to certain options within its
Participant Subscription Offer Program (``PSOP'')\5\ and Participant
Tender Offer Program (``PTOP'') functions.\6\ Specifically, DTC
proposes to add an option called ``Cover of Protect on Behalf of
Another Participant'' (``CPAP'') to both PSOP and PTOP (``PSOP/PTOP'')
that would allow a Participant to tender subscription rights
(``Rights'') or Securities through DTC to an agent (``Offer
Agent''),\7\ on behalf of another Participant that needs to tender such
Rights or Securities in order to receive the shares and/or
consideration from (i) a subscription rights offering (a ``Rights
Offer''); or (ii) a cash tender offer or exchange offer (collectively,
a ``Tender/Exchange Offer'') (together with Rights Offer, ``Offer'').
DTC would also eliminate an option called ``Cover of Protect Submitted
Directly to Agent'' (``CPDA'') from PSOP/PTOP that has allowed a
Participant to tender Rights or Securities through DTC to be eligible
to receive the shares and/or consideration from an Offer, when such
Participant submitted its initial acceptance directly to the Offer
Agent outside of DTC. In addition, DTC proposes to make ministerial
changes to the text of the Guide, as more fully described below.
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\4\ Capitalized terms not otherwise defined herein have the
meaning set forth in the Rules, By-Laws and Organization Certificate
of DTC (the ``Rules''), available at https://www.dtcc.com/legal/rules-and-procedures.aspx and the Reorganizations Service Guide (the
``Guide''), available at https://www.dtcc.com/~/media/Files/
Downloads/legal/service-guides/Reorganizations.pdf.
\5\ References in this rule filing to ``PSOP'' refer to both the
PSOP function within the DTC Participant Terminal System (``PTS'')
interface and the equivalent ``Rights Subscription'' function within
the Participant Browser System (``PBS'') interface. PSOP is a
function that is used by Participants to submit instructions
including oversubscriptions, submit protects, submit cover of
protects, submit cover of protects on behalf of another Participant,
and submit Rights sell instructions on Rights Subscription events.
PTS and PBS are user interfaces for DTC's Settlement and Asset
Services functions. PTS is mainframe-based and PBS is web-based with
a mainframe back-end. Participants may use either PTS or PBS, as
they are functionally equivalent.
\6\ References in this rule filing to ``PTOP'' refer to both the
PTOP function within the PTS interface and the equivalent
``Voluntary Tenders and Exchanges'' function within the PBS
interface. PTOP is a function that is used by Participants to submit
instructions, submit protects, submit cover of protects, submit
cover of protects on behalf of another Participant, and submit
withdrawals on various Voluntary Reorganization events.
\7\ The Offer Agent is the fiscal agent of the offeror,
typically a bank or trust company that is designated to coordinate
the process of the Offer.
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II. Clearing Agency'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) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
The proposed rule change by DTC would update its Procedures set
forth in the Guide to make changes to certain options within its PSOP
and PTOP functions. Specifically, DTC proposes to add an option called
CPAP to PSOP/PTOP that would allow a Participant to tender Rights or
Securities through DTC to an Offer Agent, on behalf of another
Participant that needs to tender such Rights or Securities in order to
receive the shares and/or consideration from (i) a Rights Offer; or
(ii) a Tender/Exchange Offer. DTC would also eliminate an option called
CPDA from PSOP/PTOP that has allowed a Participant to tender Rights or
Securities through DTC to be eligible to receive the shares and/or
consideration from an Offer, when such Participant submitted its
initial acceptance directly to the Offer Agent outside of DTC. In
addition, DTC proposes to make ministerial changes to the text of the
Guide, as more fully described below.
(i) Protects and Covers
(a) Protects and Covers Outside of DTC
Subscription Rights Offering
A Rights Offer is the issuance of Rights to each shareholder as of
a record date set by the issuer. Rights are issued to each shareholder
in proportion to the number of shares it holds, and entitles the
shareholder to purchase additional
[[Page 54171]]
shares at a discount. Rights may be either non-transferable or
transferable. Holders are able to trade transferable Rights in the
secondary market.
In order to subscribe to a Rights Offer, an investor or its broker
(``Investor'') must, prior to the expiration of the Rights Offer,
deliver to the Offer Agent: (i) The Rights, (ii) an executed
subscription form for such Rights Offer (``Subscription Form'') in
which it subscribes to the new shares of the Rights Offer, and (iii)
the payment due for the purchase of the shares.
Tender Offers and Exchange Offers
A tender offer is a solicitation by an issuer or a third party to
purchase a substantial percentage of the issuer's shares for a
specified period of time. The tender offer is at a fixed price, usually
higher than the current market price, and is usually conditioned on a
sufficient number of the issuer's shareholders tendering a fixed number
of their shares. An exchange offer is an offer by an issuer to exchange
its Securities for other Securities (of that issuer or another).
If an Investor wants to accept a Tender/Exchange Offer, it submits
to the Offer Agent: (i) The letter of transmittal for such Tender/
Exchange Offer (``Letter of Transmittal'') setting forth the terms of
the tender or exchange, including information about the quantity of
Securities being tendered as well as where and to whom the payment
should be made, and (ii) the Securities it is tendering.
Cover of Protect
An Investor may want to accept an Offer but will not have the
necessary Rights or Securities, as the case may be, before the
expiration date of the Offer. If permitted by the terms of the Offer,
the Investor may submit to the Offer Agent the notice of guaranteed
delivery for such Offer (``Notice of Guaranteed Delivery'') which
serves as (i) protection of the Investor's acceptance of the Offer (the
``Protect''), and sets forth the number of shares being subscribed to
or the amount of Securities being tendered, and (ii) a guarantee that
the Rights or Securities (the ``Cover'') will be delivered to the Offer
Agent within the period prescribed by the Offer (the ``Protect
Period'').\8\
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\8\ A Protect Period is usually three business days after the
expiration of the Offer.
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Covering Another Investor's Protect
In some cases, an Investor may find that it will not have the
necessary Rights or Securities, as the case may be, in time to tender
to the Offer Agent before the expiration of the Protect Period. This
may occur due to a failed trade or late delivery of such Rights or
Securities. If the Investor is unable to deliver the Rights or
Securities within the Protect Period, it will have failed to validly
tender and will not be eligible to purchase shares under the Rights
Offer or to receive the consideration of the Tender/Exchange Offer,
respectively. However, another Investor who does hold the Rights or
Securities, and typically owes such Rights or Securities to the
Investor who submitted the Protect because of a failed trade or late
delivery, may submit the Cover to the Offer Agent on behalf of such
Investor.
(b) Protects and Covers Through DTC
PSOP and PTOP
DTC distributes information to Participants regarding the
reorganization activity that it handles. Generally, this information is
distributed through PSOP/PTOP, or the Reorganization Inquiry for
Participants (``RIPS'') function of PTS/PBS. Upon receiving notice of
such reorganization activity, Participants may use the PSOP (for Rights
Offers) or PTOP (for Tender/Exchange Offers) functions to elect
participation in the reorganization event and to place related
instructions for DTC to process.
DTC's Automated Subscription Offer Program
As part of its corporate action \9\ services, DTC offers the
Automated Subscription Offer Program (``ASOP''),\10\ through which DTC,
as a conduit between Participants and the Offer Agents, processes
Rights Offers for Eligible Securities. Each Offer Agent for a Rights
Offer that is eligible for processing through ASOP enters into an
agreement with DTC specifying, among other things, that the relay of
electronic messages by DTC will qualify as the execution and delivery
of Subscription Forms or Notices of Guaranteed Delivery by
Participants.
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\9\ Corporate actions processed by DTC include, but are not
limited to, the reorganization of Eligible Securities resulting from
mergers, acquisitions, and reverse splits. DTC performs corporate
actions processing through its Mandatory and Voluntary
Reorganization Services. See DTC Operational Arrangements, available
at https://www.dtcc.com/~/media/Files/Downloads/legal/issue-
eligibility/eligibility/operational-arrangements.pdf.
\10\ See Securities Exchange Act Release No. 35108 (December 16,
1994), 59 FR 67356 (December 29, 1994) (SR-DTC-94-15) (instituting
ASOP).
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ASOP enables Participants to submit subscription instructions using
PSOP. Through PSOP, a Participant that wants to subscribe to a Rights
Offer transmits its acceptance and acknowledgment of the terms of the
Subscription Form, and instructs and authorizes DTC to surrender the
Rights and process the corresponding payment to the Offer Agent. In
accordance with these electronic instructions, DTC effects book-entry
deliveries of the Rights by transferring the Rights from the
Participant's Account to a DTC operational account maintained by DTC on
behalf of the Offer Agent (``Agent Account'') and sending an electronic
confirmation to the Offer Agent. DTC debits the Participant's
Settlement Account for the amount of the subscription payments and
wires the payment to the Offer Agent. When the additional shares are
distributed by the Offer Agent, DTC credits the Securities to the
Account of the Participant.
If permitted by the terms of the Rights Offer, if a Participant
will not have the Rights before the expiration date of the Rights
Offer, it may submit a Protect to the Offer Agent by transmitting
through PSOP its acceptance and acknowledgment of the terms of the
Notice of Guaranteed Delivery. If the Participant receives the Rights
before the day designated by DTC as the Cover end date (the ``DTC Cover
Protect Expiration Date''),\11\ the Participant may submit a Cover of
Protect by transmitting its acceptance of the terms in the Letter of
Transmittal via a Cover of Protect option in PSOP, and instructing DTC
to deliver the Rights and process the payment to the Offer Agent.
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\11\ The DTC Cover Protect Expiration Date is usually one
business day earlier than the Protect Period expiration date
established by the terms of the Offer.
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DTC's Automated Tender Offer Program
DTC offers the Automated Tender Offer Program (``ATOP''),\12\
through which DTC processes Tender/Exchange Offers for Eligible
Securities. Offer Agents for Tender/Exchange Offers eligible for
processing through ATOP must enter into a master agreement with DTC.
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\12\ For a description of ATOP, refer to Securities Exchange Act
Release No. 33797 (March 22, 1994), 59 FR 14696 (March 29, 1994)
(SR-DTC-93-11) (approving enhancements to ATOP).
---------------------------------------------------------------------------
A Participant uses PTOP to transmit its acceptance and
acknowledgement of the Letter of Transmittal of the applicable Tender/
Exchange Offer and to instruct DTC to deliver the Securities to the
Offer Agent. In accordance with permitted instructions, DTC effects
book-entry delivery of Securities from the Participant's Account to the
Agent Account. When the payment (for a tender offer) and/or Securities
(for an exchange offer) are distributed by the Offer Agent, DTC credits
the amount of
[[Page 54172]]
the payment and/or Securities to the Settlement Account or Account of
the Participant, respectively.
A Participant's Securities may not be available to tender to the
Offer Agent prior to the expiration of the Tender/Exchange Offer. If
the Participant anticipates receiving the Securities and wants to
participate in the Tender/Exchange Offer, it may, if permitted by the
terms of the Tender/Exchange Offer, submit a Protect by transmitting
through PTOP its acknowledgement and acceptance of the terms of the
Notice of Guaranteed Delivery. Before the DTC Cover Protect Expiration
Date, the Participant must acknowledge and agree to the terms of the
Letter of Transmittal through PTOP and instruct DTC to deliver the
Securities to the Offer Agent to Cover such Participant's Protect. If
the Participant is unable to deliver the Securities before the DTC
Cover Protect Expiration Date, it will have failed to validly tender
and will not be eligible for the consideration of the Tender/Exchange
Offer.
(c) Proposal
As explained above, there are times when a Participant that
submitted a Protect (the ``Protecting Participant'') may need to have
another Participant (the ``Covering Participant'') Cover the Protect.
Currently, neither PSOP nor PTOP has the specific functionality for a
Covering Participant to submit a Cover on behalf of a Protecting
Participant.
However, DTC is aware that Covering Participants frequently utilize
the PSOP/PTOP CPDA option in order to submit a Cover on behalf of
another Participant, which is not the intended purpose of the CPDA
function. The intended purpose of the CPDA function is to enable a
Participant that submitted a Protect directly to an Offer Agent outside
of DTC to later submit the corresponding Cover through DTC.
In order to address directly a Participant's need to submit a Cover
of another Participant's Protect, DTC proposes to add the CPAP option
to PSOP/PTOP. With this enhancement, the Protecting Participant would
submit a Protect through PSOP/PTOP, and the Covering Participant would
be able to submit a Cover through PSOP/PTOP by providing the Protecting
Participant's Protect ID, Protect Sequence Number, and Protect
Participant ID. This enhanced functionality would automate the matching
of Covers to corresponding Protects, as well as automatically allocate
the applicable credits for Securities and/or payments directly to the
Protecting Participant, rather than to the Covering Participant. The
CPAP option would eliminate the need for Participants to utilize CPDA
for the unintended purpose of Covering another Participant's Protect.
In addition, to further reduce the risks, burden, and costs to DTC
associated with the manual processing of the CPDA option in PSOP/PTOP,
DTC is proposing to eliminate that option. When a Participant uses CPDA
to submit a Cover for another Participant's Protect, DTC must manually
process the Cover and use manual exception processing to match the
Cover to the corresponding Protect. In addition, DTC must allocate the
credits for Securities and/or payment from the Offer to the Covering
Participant. Even when a Participant uses CPDA for its intended
purpose, which is infrequent, it is a labor intensive process for DTC,
as it must manually process the Cover and return the allocation to the
Offer Agent within a narrow timeframe. Therefore, DTC proposes that
when a Participant submits a Protect directly to the Offer Agent, such
Participant would need to submit the Cover directly to the Offer Agent,
and not through PSOP/PTOP.
(ii) Technical Changes
The proposed rule change would revise the Guide to make ministerial
updates to reflect current terminology and practices, as set forth
below. The Guide would be updated to:
Correct the text of the Guide to accurately reflect names
of functions accessible through PTS, and to accurately reflect the
names of the corresponding functions that are accessible through PBS.
Presently, the Guide assigns PTS functions to PBS, and does not provide
the names of the corresponding PBS functions.
Correct the timeframes within which a Participant can
submit a Notice of Guaranteed Delivery on the expiration date of a
Rights Offer. Generally, a Participant may submit a Notice of
Guaranteed Delivery through PSOP/PTOP from 8:00 a.m. to 2:15 p.m., at
which time the window closes to allow for settlement of cash
activities. However, DTC will re-open the window from 3:30 p.m. to 5:00
p.m. on the expiration date of the Offer to allow Participants extra
time to submit a Notice of Guaranteed Delivery before the Offer
expires, provided that the Offer Agent agrees to accept deferred
subscription payments. The text of the Guide incorrectly reflects an
open window from 8:00 a.m. to 5:00 p.m., which is not the practice.
With this rule filing, the text would be corrected to reflect the
correct 8:00 a.m. to 2:15 p.m. and 3:30 p.m. to 5:00 p.m. windows.
Pursuant to Participant requests, expand the availability
of PTOP for a Participant to submit a Cover of Protect, on the dates
specified in the notice of an Offer. The current availability is until
4:15 p.m. or 12:00 p.m., depending on the type of Offer, and the
proposed rule change would revise the text to reflect availability
until 5:00 p.m. or 1:00 p.m., as applicable.
Remove references to the UNIT Swingovers service. Several
years ago, the UNIT Swingovers service was discontinued, and instead,
voluntary unit separations and recombinations \13\ began to be
processed under the FAST program.\14\
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\13\ A unit is a Security comprised of more than one class of
Securities, e.g., common stock and warrants (the components). In a
voluntary unit separation, the separation and recombination between
the security component and the security is done by the Participant
and transfer agent using DTC's Deposit and Withdrawal at Custodian
system.
\14\ Securities Exchange Act Release No. 59199 (January 6,
2009), 74 FR 1266 (January 12, 2009) (SR-DTC-2008-14).
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Clarify information regarding available reports and
methods of submission and receipt.
Replace reference to `NASDAQ' with `FINRA'.
Replace reference to `AMEX' with `NASDAQ'.
Add the title of the Guide, delete `Copyright,' and update
the `Important Legal Information' to align with other DTC service
guides.
Correct spelling, grammatical, capitalization, numbering,
and typographical errors throughout.
Update other text, including address, phone numbers, Web
site information, and methods of communication.
Implementation Date
DTC will announce the effective date via Important Notice upon the
Commission's approval of the proposed rule change.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act \15\ requires that the rules of the
clearing agency be designed, inter alia, to promote the prompt and
accurate clearance and settlement of securities transactions. DTC
believes that the proposed rule change is consistent with this
provision because (i) by adding the CPAP option by which a Participant
can submit a Cover through PSOP/PTOP on behalf of another Participant
instead of improperly using the CPDA option that then requires DTC to
resort to manual processing and allocate the consideration to the
Covering
[[Page 54173]]
Participant rather than the Protecting Participant, and (ii) by
removing the CPDA option and requiring that Participants that Protect
outside of DTC to also Cover outside DTC, the proposed rule change
would establish a process that would streamline Cover of Protect
transactions, allocations and recordkeeping for Participants, and
reduce manual processing and the risks, burdens, and costs associated
with such processing for DTC, thereby promoting the prompt and accurate
clearance and settlement of securities, consistent with the
requirements of the Act, in particular Section 17A(b)(3)(F), cited
above.
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\15\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Additionally, the proposed ministerial changes to the Procedures,
which update the Guide as set forth above, would provide additional
clarity to Participants and would ensure the accuracy of the Procedures
by reflecting the present state of DTC's reorganization services and
practices, thereby promoting the prompt and accurate clearance and
settlement of securities, consistent with the requirements of the Act,
in particular Section 17A(b)(3)(F), cited above.
(B) Clearing Agency's Statement on Burden on Competition
DTC does not believe that the proposed rule change would have any
impact, or impose any burden, on competition because it would remove a
function that is infrequently used for its intended purpose, and would
establish a new function, available to all Participants, without the
addition of a new fee.
(C) Clearing Agency'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 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 Number SR-DTC-2016-005 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-DTC-2016-005. 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 the filing also will be available
for inspection and copying at the principal office of DTC and on DTCC's
Web site (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 Number SR-DTC-2016-005 and should be
submitted on or before September 6, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Robert W. Errett,
Deputy Secretary.
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\16\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-19322 Filed 8-12-16; 8:45 am]
BILLING CODE 8011-01-P