Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the DTC Rules in Order to Enhance Transparency With Regard to Application Criteria and Participation Requirements for Applicants and Participants, 18504-18507 [2017-07875]

Download as PDF 18504 Federal Register / Vol. 82, No. 74 / Wednesday, April 19, 2017 / Notices Section 6(b) of the Exchange Act,7 in general, and furthers the objectives of Sections 6(b)(4) 8 of the Exchange Act, in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges and is not designed to permit unfair discrimination among its members and issuers and other persons using its facilities. The Exchange also believes that the proposed rule change is consistent with Section 6(b)(5) of the Exchange Act, in particular in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change is consistent with Sections 6(b)(4) and 6(b)(5) of the Exchange Act in that it represents an equitable allocation of fees and does not unfairly discriminate among listed companies. In particular, the Exchange notes that the proposed amendment is not unfairly discriminatory as Acquisition Companies frequently have a much shorter period of listing on the Exchange than operating companies. It is not unfairly discriminatory to exempt Acquisition Companies from the Initial Application Fee because the Initial Application Fee would represent a significantly larger percentage of the initial listing fees payable by an Acquisition Company upon listing and Acquisition Companies are more likely than operating companies to successful complete their IPO so the Exchange is less likely to forego revenue if they do not pay the Initial Application Fee. jstallworth on DSK7TPTVN1PROD with NOTICES B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is designed to adopt reduced initial listing fees for Acquisition Companies and will therefore increase the competition for the listing of those companies by making the NYSE a more attractive listing venue for them. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) 9 of the Act and subparagraph (f)(2) of Rule 19b–4 10 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 11 of the Act to determine whether the proposed rule change should be approved or 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– NYSE–2017–14 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSE–2017–14. 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/ U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 11 15 U.S.C. 78s(b)(2)(B). 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–NYSE– 2017–14 and should be submitted on or before May 10, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Brent J. Fields, Secretary. [FR Doc. 2017–07876 Filed 4–18–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80454; File No. SR–DTC– 2017–006] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the DTC Rules in Order to Enhance Transparency With Regard to Application Criteria and Participation Requirements for Applicants and Participants April 13, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 7, 2017, 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 the clearing 9 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(4). VerDate Sep<11>2014 15:06 Apr 18, 2017 Jkt 241001 12 17 10 17 7 15 1 15 PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. E:\FR\FM\19APN1.SGM 19APN1 Federal Register / Vol. 82, No. 74 / Wednesday, April 19, 2017 / Notices agency. DTC filed the proposed rule change pursuant to Section 19(b)(3)(A) 3 of the Act and Rule 19b–4(f)(1) 4 thereunder. The proposed rule change was effective upon filing with the Commission. 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 would amend the Rules, By-Laws and Organization Certificate of DTC (‘‘Rules’’) 5 to expressly set forth in the Rules (i) the existing applicable minimum financial resource requirements that any applicant to become a Participant (‘‘Applicant’’) that is a U.S. bank, trust company or registered broker-dealer must respectively meet in order to qualify to become a Participant and, once admitted, continue as a Participant in good standing 6 and (ii) the existing requirement that each Applicant that is a U.S. entity must provide a legal opinion as part of its application to become a Participant, as discussed below. II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the clearing agency included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 3 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(1). 5 Available at https://www.dtcc.com/legal/rulesand-procedures. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to such terms in the Rules. 6 A U.S. bank or trust company that otherwise meets the application criteria and participation requirements established by DTC pursuant to the Rules is qualified to become a Participant pursuant to Section 1(d) of Rule 3. A U.S. broker dealer that otherwise meets the application criteria and participation requirements pursuant to the Rules is qualified to become a Participant pursuant to Section 1(h)(ii) of Rule 3. See Rule 3, supra note 5. jstallworth on DSK7TPTVN1PROD with NOTICES 4 17 VerDate Sep<11>2014 15:06 Apr 18, 2017 Jkt 241001 (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Pursuant to Rule 2,7 DTC has established application criteria and participation requirements for Applicants and Participants related to financial resources, creditworthiness and operational capability.8 These requirements are designed to manage the risks a Participant presents to DTC or to its membership, while facilitating fair and open access by market participants.9 The proposed rule change would amend the Rules to enhance transparency with respect to certain existing application criteria and participation requirements, specifically, (i) the minimum financial resource requirements for Applicants and Participants that are either U.S. banks, trust companies or registered brokerdealers and (ii) the requirement for Applicants that are U.S. entities to provide a legal opinion, as discussed below. Minimum Financial Requirements Rule 2 requires each Applicant or Participant to demonstrate that it has sufficient financial ability to meet its anticipated obligations to DTC.10 In this regard, DTC sets financial requirements for establishing and continuing participation that are based on the type of legal entity and the types of services that the entity will use at DTC. Currently, among other requirements, a registered broker dealer must have a minimum of $500,000 in excess net capital over its regulatory net capital 7 Rule 2, supra note 5. also Disclosure under the Principles for Financial Market Infrastructures (‘‘PFMI’’), available at https://www.dtcc.com/∼/media/Files/ Downloads/legal/policy-and-compliance/DTC_ Disclosure_Framework.pdf at 100–104 (Describing DTC access and participation requirements). 9 Rule 17 Ad–22(e)(18) under the Act, provides that each covered clearing agency shall establish, implement, maintain and enforce written policies and procedures reasonably designed to, as applicable, ‘‘establish objective, risk-based, and publicly disclosed criteria for participation, which permit fair and open access by direct and, where relevant, indirect participants and other financial market utilities, require participants to have sufficient financial resources and robust operational capacity to meet obligations arising from participation in the clearing agency, and monitor compliance with such participation requirements on an ongoing basis.’’ 17 CFR 240.17Ad–22(e)(18). (The Commission adopted amendments to Rule 17Ad–22, including the addition of new section 17Ad–22(e), on September 28, 2016. See Securities Exchange Act Release No. 78961 (September 28, 2016), 81 FR 70786 (October 13, 2016) (S7–03–14). DTC is a ‘‘covered clearing agency’’ as defined in Rule 17Ad–22(a)(5), and must comply with new section (e) (including subsection (e)(18) described above) of Rule 17Ad–22 by April 11, 2017.) 10 Rule 2, supra note 5. 8 See PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 18505 requirement,11 and a U.S. bank or trust company must have more than $2 million in equity capital 12 (collectively, ‘‘Minimum Financial Requirements’’), to become, and continue in good standing as, a Participant.13 The Minimum Financial Requirements are currently disclosed in the PFMI and in a list of DTC application requirements that is made available to all Applicants (‘‘Onboarding Requirements’’). In order to increase transparency with regard to its application and participation requirements, DTC proposes to amend the Rules by adding the Minimum Financial Requirements for Applicants and Participants that are (i) U.S. brokerdealers or (ii) U.S. banks or trust companies to Section 1 of the Policy Statement.14 Legal Opinion Requirement Each Applicant enters into a Participant’s Agreement (‘‘Agreement’’), pursuant which the Applicant agrees, inter alia, that the DTC Rules shall be a part of the terms and conditions of every contract or transaction that it may make or have with DTC. DTC requires that all Applicants provide an opinion of counsel that provides DTC with comfort as to the valid authorization, execution and delivery of the Agreement by an Applicant and, as applicable, the enforceability of the Agreement under applicable state and federal laws (‘‘Legal Opinion Requirement’’). Except with respect to 11 For this purpose, the broker dealer’s minimum regulatory net capital requirement is the greater of (i) the amount imposed on it pursuant to Rule 15c3–1 under the Act, 17 CFR 240.15c3–1, and (ii) such higher amount imposed by the broker-dealer’s designated examining authority, as named by the Commission pursuant to Rule 17d–1 under the Act, 17 CFR 240.17d–1. 12 For this purpose, equity capital has the meaning as defined on the form of Consolidated Report of Condition and Income and related instructions maintained by the Federal Financial Institutions Examination Council (FFIEC), available at https://www.ffiec.gov/pdf/FFIEC_forms/ FFIEC031_201612_f.pdf and https://www.ffiec.gov/ pdf/FFIEC_forms/FFIEC031_FFIEC041_201609_ i.pdf, respectively. 13 Not including non-U.S. Participants, whose minimum financial resource requirements are set forth in the Policy Statement on the Admission of Participants (‘‘Policy Statement’’), See Policy Statement, supra note 5 at 122, most Applicants and Participants are (i) U.S. broker dealers or (ii) U.S. banks or trust companies. Since U.S. broker dealers and U.S. banks and trust companies are subject to standard regulatory capital requirements, DTC has determined that setting the Minimum Financial Requirements based on applicable regulatory requirements is a practical method for determining whether such entities have sufficient financial ability to meet their obligations to DTC. For other Applicants and Participants, DTC reviews any appropriate financial information or reports available with respect to that entity to determine whether it maintains sufficient financial ability to meet its obligations under the Rules. 14 See Policy Statement, supra note 5 at 121. E:\FR\FM\19APN1.SGM 19APN1 18506 Federal Register / Vol. 82, No. 74 / Wednesday, April 19, 2017 / Notices non-U.S. Applicants,15 the Legal Opinion Requirement is not currently expressly set forth in the Rules.16 To enhance transparency with regard to the Legal Opinion Requirement, DTC proposes to amend the Rules to add the Legal Opinion Requirement for U.S. Applicants to the Policy Statement. Proposed Changes to Rules Text Pursuant to the proposed rule change, DTC would (i) amend the text of Section 1 of the Policy Statement to add the existing (A) Minimum Financial Requirements and (B) Legal Opinion Requirement that pertains to U.S. Applicants, as discussed above, and (ii) add a cross-reference within Rule 2 to the requirements that would be added to the Policy Statement. Effective Date of Proposed Rule Change The proposed rule change would become effective immediately upon filing with the Commission. jstallworth on DSK7TPTVN1PROD with NOTICES 2. Statutory Basis Section 17A(b)(3)(F) of the Act, requires, inter alia, that the Rules promote the prompt and accurate clearance and settlement of securities transactions.17 The proposed rule change would provide transparency in the Rules regarding existing participation requirements that Applicants and Participants must meet for access to DTC’s services, including but not limited to participation in its settlement service, by (i) adding the Minimum Financial Requirements and the Legal Opinion Requirement to the Policy Statement and (ii) adding a crossreference within Rule 2 to the Policy Statement, as discussed above. Collectively, the proposed changes would enhance the transparency and clarity of the Rules, which would enable stakeholders to readily understand DTC’s access requirements. Therefore, by providing stakeholders with enhanced transparency and clarity with regard to existing participation requirements that Applicants and Participants must meet for access to DTC’s services, including but not limited to participation in its settlement service, DTC believes that the proposed rule changes would promote the prompt and accurate clearance and settlement of securities transactions consistent with Section 17A(b)(3)(F) of the Act. Rule 17Ad–22(d)(2) under the Act requires a clearing agency to establish, implement, maintain and enforce 15 Id at 122. Legal Opinion Requirement is set forth in the Onboarding Requirements. 17 15 U.S.C. 78q–1(b)(3)(F). 16 The VerDate Sep<11>2014 15:06 Apr 18, 2017 Jkt 241001 written policies and procedures reasonably designed to, as applicable, require participants to have sufficient financial resources and robust operational capacity to meet obligations arising from participation in the clearing agency; have procedures in place to monitor that participation requirements are met on an ongoing basis; and have participation requirements that are objective and publicly disclosed, and permit fair and open access.18 As mentioned above, the proposed rule change would provide transparency in the Rules regarding existing DTC participation requirements by (i) adding the Minimum Financial Requirements and the Legal Opinion Requirement to the Policy Statement and (ii) adding a cross-reference within Rule 2 to the Policy Statement, as discussed above. Therefore, by providing stakeholders with greater transparency with regard to existing participation requirements by providing an additional source of public disclosure in this regard through the Policy Statement, DTC believes that the proposed rule change is consistent with Rule 17Ad–22(d)(2) promulgated under the Act cited above. The proposed rule change is also designed to be consistent with Rule 17Ad–22(e)(18) of the Act, which was recently adopted by the Commission.19 Rule 17Ad–22(e)(18) will require DTC, inter alia, to establish, implement, maintain and enforce written policies and procedures reasonably designed to, as applicable, establish objective, riskbased, and publicly disclosed criteria for participation, which permit fair and open access by direct and, where relevant, indirect participants and other financial market utilities, require participants to have sufficient financial resources and robust operational capacity to meet obligations arising from participation in the clearing agency, and monitor compliance with such participation requirements on an ongoing basis. As mentioned above, the proposed rule change would provide transparency in the Rules regarding existing DTC participation requirements by (i) adding the Minimum Financial Requirements and the Legal Opinion Requirement to the Policy Statement and (ii) adding a cross-reference within Rule 2 to the Policy Statement, as 18 17 CFR 240.17Ad–22(d)(2). CFR 240.17Ad–22(e)(18). As mentioned above, the Commission adopted amendments to Rule 17Ad–22, including the addition of new subsection 17Ad–22(e), on September 28, 2016. See Securities Exchange Act Release No. 78961 (September 28, 2016), 81 FR 70786 (October 13, 2016) (S7–03–14). DTC is a ‘‘covered clearing agency’’ as defined by new Rule 17Ad–22(a)(5) and must comply with new subsection (e) of Rule 17Ad–22 by April 11, 2017. Id. 19 17 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 discussed above. Therefore, by providing stakeholders with greater transparency with regard to existing participation requirements by providing an additional source of public disclosure in this regard through the Policy Statement, DTC believes that the proposed rule change is consistent with Rule 17Ad–22(e)(18) promulgated under the Act cited above. (B) Clearing Agency’s Statement on Burden on Competition DTC does not believe that the proposed rule change would have any impact on competition because the proposed change expressly reflects existing application criteria and participation requirements applicable to all Applicants and Participants. (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others DTC has not solicited and does not intend to solicit comments regarding the proposed rule change. DTC has not received any unsolicited written comments from interested parties. To the extent DTC receives written comments on the proposed rule change, DTC will forward such comments to the Commission. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 20 of the Act and paragraph (f) of Rule 19b–4 21 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 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 20 15 21 17 E:\FR\FM\19APN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). 19APN1 Federal Register / Vol. 82, No. 74 / Wednesday, April 19, 2017 / Notices • Send an email to rule-comments@ sec.gov. Please include File Number SR– DTC–2017–006 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR-DTC–2017–006. 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–2017–006 and should be submitted on or before May 10, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Brent J. Fields, Secretary. jstallworth on DSK7TPTVN1PROD with NOTICES [FR Doc. 2017–07875 Filed 4–18–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80453; File No. SR–IEX– 2017–09] Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Specify the Required Forms of Listing Application, Agreement and Other Documentation April 13, 2017. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on April 3, 2017, the Investors Exchange LLC (‘‘IEX’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. 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 Pursuant to the provisions of Section 19(b)(1) under the Securities Exchange Act of 1934 (‘‘Act’’),4 and Rule 19b–4 thereunder,5 Investors Exchange LLC (‘‘IEX’’ or ‘‘Exchange’’) is filing with the Commission a proposed rule change to specify the required forms of listing application, listing agreement and other documentation that listed companies must execute or complete (as applicable) as a prerequisite for listing on the Exchange. The Exchange has designated this proposal as noncontroversial and provided the Commission with the notice required by Rule 19b–4(f)(6)(iii) under the Act.6 The text of the proposed rule change is available at the Exchange’s Web site at www.iextrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 4 15 U.S.C. 78s(b)(1). 5 17 CRF 240.19b–4. 6 17 CFR 240.19b–4(f)(6)(iii). 2 15 22 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 15:06 Apr 18, 2017 Jkt 241001 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 18507 on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose On June 17, 2016 the Commission granted IEX’s application for registration as a national securities exchange under Section 6 of the Act including approval of rules applicable to the qualification, listing and delisting of companies on the Exchange.7 The Exchange plans to begin a listing program in 2017 and is proposing to adopt listing applications and forms applicable to companies applying for listing or listed on the Exchange in this proposed rule change. As proposed, the listing forms are substantially similar to those currently in use by the Nasdaq Stock Exchange LLC (‘‘Nasdaq’’), with certain differences as described herein.8 The Exchange proposes to specify the required forms of listing application, listing agreement and other documentation that listing applicants and listed companies must execute or complete (as applicable) as a prerequisite for initial and ongoing listing on the Exchange, as applicable (collectively, ‘‘listing documentation’’). All listing documentation will be available on the Exchange’s Web site (www.iextrading.com). In the event that in the future the Exchange makes any substantive changes (including changes to the rights, duties, or obligations of a listed company or listing applicant or the Exchange, or that would otherwise require a rule filing) to such documents, it will submit a rule filing in accordance with Rule 19b–4.9 7 See Securities Exchange Act Release No. 34– 78101 (June 17, 2016), 81 FR 41141 (June 23, 2016) (File No. 10–222). 8 Nasdaq’s listing applications and forms are available at: https://listingcenter.nasdaq.com/ Forms_Preview.aspx. In connection with IEX’s Form 1 application for registration as a national securities exchange, the Commission approved rules applicable to the qualification, listing and delisting of companies on IEX. See Securities Exchange Act Release No. 78101 (June 17, 2016), 81 FR 41141 (June 23, 2016) (File No. 10–222). These rules are modelled on Nasdaq’s rules applicable to the qualification, listing and delisting of companies on Nasdaq. 9 The Exchange will not submit a rule filing if the changes made to a document are solely typographical or stylistic in nature. E:\FR\FM\19APN1.SGM 19APN1

Agencies

[Federal Register Volume 82, Number 74 (Wednesday, April 19, 2017)]
[Notices]
[Pages 18504-18507]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07875]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80454; File No. SR-DTC-2017-006]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Modify the DTC Rules in Order to Enhance Transparency With Regard to 
Application Criteria and Participation Requirements for Applicants and 
Participants

April 13, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 7, 2017, 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 the clearing

[[Page 18505]]

agency. DTC filed the proposed rule change pursuant to Section 
19(b)(3)(A) \3\ of the Act and Rule 19b-4(f)(1) \4\ thereunder. The 
proposed rule change was effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------

I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change would amend the Rules, By-Laws and 
Organization Certificate of DTC (``Rules'') \5\ to expressly set forth 
in the Rules (i) the existing applicable minimum financial resource 
requirements that any applicant to become a Participant (``Applicant'') 
that is a U.S. bank, trust company or registered broker-dealer must 
respectively meet in order to qualify to become a Participant and, once 
admitted, continue as a Participant in good standing \6\ and (ii) the 
existing requirement that each Applicant that is a U.S. entity must 
provide a legal opinion as part of its application to become a 
Participant, as discussed below.
---------------------------------------------------------------------------

    \5\ Available at https://www.dtcc.com/legal/rules-and-procedures. 
Capitalized terms used herein and not otherwise defined shall have 
the meaning assigned to such terms in the Rules.
    \6\ A U.S. bank or trust company that otherwise meets the 
application criteria and participation requirements established by 
DTC pursuant to the Rules is qualified to become a Participant 
pursuant to Section 1(d) of Rule 3. A U.S. broker dealer that 
otherwise meets the application criteria and participation 
requirements pursuant to the Rules is qualified to become a 
Participant pursuant to Section 1(h)(ii) of Rule 3. See Rule 3, 
supra note 5.
---------------------------------------------------------------------------

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. The clearing agency 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
    Pursuant to Rule 2,\7\ DTC has established application criteria and 
participation requirements for Applicants and Participants related to 
financial resources, creditworthiness and operational capability.\8\ 
These requirements are designed to manage the risks a Participant 
presents to DTC or to its membership, while facilitating fair and open 
access by market participants.\9\ The proposed rule change would amend 
the Rules to enhance transparency with respect to certain existing 
application criteria and participation requirements, specifically, (i) 
the minimum financial resource requirements for Applicants and 
Participants that are either U.S. banks, trust companies or registered 
broker-dealers and (ii) the requirement for Applicants that are U.S. 
entities to provide a legal opinion, as discussed below.
---------------------------------------------------------------------------

    \7\ Rule 2, supra note 5.
    \8\ See also Disclosure under the Principles for Financial 
Market Infrastructures (``PFMI''), available at https://www.dtcc.com/
~/media/Files/Downloads/legal/policy-and-compliance/
DTC_Disclosure_Framework.pdf at 100-104 (Describing DTC access and 
participation requirements).
    \9\ Rule 17 Ad-22(e)(18) under the Act, provides that each 
covered clearing agency shall establish, implement, maintain and 
enforce written policies and procedures reasonably designed to, as 
applicable, ``establish objective, risk-based, and publicly 
disclosed criteria for participation, which permit fair and open 
access by direct and, where relevant, indirect participants and 
other financial market utilities, require participants to have 
sufficient financial resources and robust operational capacity to 
meet obligations arising from participation in the clearing agency, 
and monitor compliance with such participation requirements on an 
ongoing basis.'' 17 CFR 240.17Ad-22(e)(18). (The Commission adopted 
amendments to Rule 17Ad-22, including the addition of new section 
17Ad-22(e), on September 28, 2016. See Securities Exchange Act 
Release No. 78961 (September 28, 2016), 81 FR 70786 (October 13, 
2016) (S7-03-14). DTC is a ``covered clearing agency'' as defined in 
Rule 17Ad-22(a)(5), and must comply with new section (e) (including 
subsection (e)(18) described above) of Rule 17Ad-22 by April 11, 
2017.)
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Minimum Financial Requirements
    Rule 2 requires each Applicant or Participant to demonstrate that 
it has sufficient financial ability to meet its anticipated obligations 
to DTC.\10\ In this regard, DTC sets financial requirements for 
establishing and continuing participation that are based on the type of 
legal entity and the types of services that the entity will use at DTC. 
Currently, among other requirements, a registered broker dealer must 
have a minimum of $500,000 in excess net capital over its regulatory 
net capital requirement,\11\ and a U.S. bank or trust company must have 
more than $2 million in equity capital \12\ (collectively, ``Minimum 
Financial Requirements''), to become, and continue in good standing as, 
a Participant.\13\ The Minimum Financial Requirements are currently 
disclosed in the PFMI and in a list of DTC application requirements 
that is made available to all Applicants (``Onboarding Requirements''). 
In order to increase transparency with regard to its application and 
participation requirements, DTC proposes to amend the Rules by adding 
the Minimum Financial Requirements for Applicants and Participants that 
are (i) U.S. broker-dealers or (ii) U.S. banks or trust companies to 
Section 1 of the Policy Statement.\14\
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    \10\ Rule 2, supra note 5.
    \11\ For this purpose, the broker dealer's minimum regulatory 
net capital requirement is the greater of (i) the amount imposed on 
it pursuant to Rule 15c3-1 under the Act, 17 CFR 240.15c3-1, and 
(ii) such higher amount imposed by the broker-dealer's designated 
examining authority, as named by the Commission pursuant to Rule 
17d-1 under the Act, 17 CFR 240.17d-1.
    \12\ For this purpose, equity capital has the meaning as defined 
on the form of Consolidated Report of Condition and Income and 
related instructions maintained by the Federal Financial 
Institutions Examination Council (FFIEC), available at https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_201612_f.pdf and https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_FFIEC041_201609_i.pdf, 
respectively.
    \13\ Not including non-U.S. Participants, whose minimum 
financial resource requirements are set forth in the Policy 
Statement on the Admission of Participants (``Policy Statement''), 
See Policy Statement, supra note 5 at 122, most Applicants and 
Participants are (i) U.S. broker dealers or (ii) U.S. banks or trust 
companies. Since U.S. broker dealers and U.S. banks and trust 
companies are subject to standard regulatory capital requirements, 
DTC has determined that setting the Minimum Financial Requirements 
based on applicable regulatory requirements is a practical method 
for determining whether such entities have sufficient financial 
ability to meet their obligations to DTC. For other Applicants and 
Participants, DTC reviews any appropriate financial information or 
reports available with respect to that entity to determine whether 
it maintains sufficient financial ability to meet its obligations 
under the Rules.
    \14\ See Policy Statement, supra note 5 at 121.
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Legal Opinion Requirement
    Each Applicant enters into a Participant's Agreement 
(``Agreement''), pursuant which the Applicant agrees, inter alia, that 
the DTC Rules shall be a part of the terms and conditions of every 
contract or transaction that it may make or have with DTC. DTC requires 
that all Applicants provide an opinion of counsel that provides DTC 
with comfort as to the valid authorization, execution and delivery of 
the Agreement by an Applicant and, as applicable, the enforceability of 
the Agreement under applicable state and federal laws (``Legal Opinion 
Requirement''). Except with respect to

[[Page 18506]]

non-U.S. Applicants,\15\ the Legal Opinion Requirement is not currently 
expressly set forth in the Rules.\16\ To enhance transparency with 
regard to the Legal Opinion Requirement, DTC proposes to amend the 
Rules to add the Legal Opinion Requirement for U.S. Applicants to the 
Policy Statement.
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    \15\ Id at 122.
    \16\ The Legal Opinion Requirement is set forth in the 
Onboarding Requirements.
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Proposed Changes to Rules Text
    Pursuant to the proposed rule change, DTC would (i) amend the text 
of Section 1 of the Policy Statement to add the existing (A) Minimum 
Financial Requirements and (B) Legal Opinion Requirement that pertains 
to U.S. Applicants, as discussed above, and (ii) add a cross-reference 
within Rule 2 to the requirements that would be added to the Policy 
Statement.
Effective Date of Proposed Rule Change
    The proposed rule change would become effective immediately upon 
filing with the Commission.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act, requires, inter alia, that the 
Rules promote the prompt and accurate clearance and settlement of 
securities transactions.\17\ The proposed rule change would provide 
transparency in the Rules regarding existing participation requirements 
that Applicants and Participants must meet for access to DTC's 
services, including but not limited to participation in its settlement 
service, by (i) adding the Minimum Financial Requirements and the Legal 
Opinion Requirement to the Policy Statement and (ii) adding a cross-
reference within Rule 2 to the Policy Statement, as discussed above. 
Collectively, the proposed changes would enhance the transparency and 
clarity of the Rules, which would enable stakeholders to readily 
understand DTC's access requirements. Therefore, by providing 
stakeholders with enhanced transparency and clarity with regard to 
existing participation requirements that Applicants and Participants 
must meet for access to DTC's services, including but not limited to 
participation in its settlement service, DTC believes that the proposed 
rule changes would promote the prompt and accurate clearance and 
settlement of securities transactions consistent with Section 
17A(b)(3)(F) of the Act.
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    \17\ 15 U.S.C. 78q-1(b)(3)(F).
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    Rule 17Ad-22(d)(2) under the Act requires a clearing agency to 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to, as applicable, require participants 
to have sufficient financial resources and robust operational capacity 
to meet obligations arising from participation in the clearing agency; 
have procedures in place to monitor that participation requirements are 
met on an ongoing basis; and have participation requirements that are 
objective and publicly disclosed, and permit fair and open access.\18\ 
As mentioned above, the proposed rule change would provide transparency 
in the Rules regarding existing DTC participation requirements by (i) 
adding the Minimum Financial Requirements and the Legal Opinion 
Requirement to the Policy Statement and (ii) adding a cross-reference 
within Rule 2 to the Policy Statement, as discussed above. Therefore, 
by providing stakeholders with greater transparency with regard to 
existing participation requirements by providing an additional source 
of public disclosure in this regard through the Policy Statement, DTC 
believes that the proposed rule change is consistent with Rule 17Ad-
22(d)(2) promulgated under the Act cited above.
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    \18\ 17 CFR 240.17Ad-22(d)(2).
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    The proposed rule change is also designed to be consistent with 
Rule 17Ad-22(e)(18) of the Act, which was recently adopted by the 
Commission.\19\ Rule 17Ad-22(e)(18) will require DTC, inter alia, to 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to, as applicable, establish objective, 
risk-based, and publicly disclosed criteria for participation, which 
permit fair and open access by direct and, where relevant, indirect 
participants and other financial market utilities, require participants 
to have sufficient financial resources and robust operational capacity 
to meet obligations arising from participation in the clearing agency, 
and monitor compliance with such participation requirements on an 
ongoing basis. As mentioned above, the proposed rule change would 
provide transparency in the Rules regarding existing DTC participation 
requirements by (i) adding the Minimum Financial Requirements and the 
Legal Opinion Requirement to the Policy Statement and (ii) adding a 
cross-reference within Rule 2 to the Policy Statement, as discussed 
above. Therefore, by providing stakeholders with greater transparency 
with regard to existing participation requirements by providing an 
additional source of public disclosure in this regard through the 
Policy Statement, DTC believes that the proposed rule change is 
consistent with Rule 17Ad-22(e)(18) promulgated under the Act cited 
above.
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    \19\ 17 CFR 240.17Ad-22(e)(18). As mentioned above, the 
Commission adopted amendments to Rule 17Ad-22, including the 
addition of new subsection 17Ad-22(e), on September 28, 2016. See 
Securities Exchange Act Release No. 78961 (September 28, 2016), 81 
FR 70786 (October 13, 2016) (S7-03-14). DTC is a ``covered clearing 
agency'' as defined by new Rule 17Ad-22(a)(5) and must comply with 
new subsection (e) of Rule 17Ad-22 by April 11, 2017. Id.
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(B) Clearing Agency's Statement on Burden on Competition

    DTC does not believe that the proposed rule change would have any 
impact on competition because the proposed change expressly reflects 
existing application criteria and participation requirements applicable 
to all Applicants and Participants.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    DTC has not solicited and does not intend to solicit comments 
regarding the proposed rule change. DTC has not received any 
unsolicited written comments from interested parties. To the extent DTC 
receives written comments on the proposed rule change, DTC will forward 
such comments to the Commission.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \20\ of the Act and paragraph (f) of Rule 19b-4 \21\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the 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

[[Page 18507]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-DTC-2017-006 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-DTC-2017-006. 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-2017-006 and 
should be submitted on or before May 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2017-07875 Filed 4-18-17; 8:45 am]
 BILLING CODE 8011-01-P
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