Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of a Proposed Rule Change To Amend the Settlement Guide Procedures To Provide Status Information for Institutional Transactions To a Matching Utility, 63948-63952 [2018-26913]
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Federal Register / Vol. 83, No. 238 / Wednesday, December 12, 2018 / 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 not
necessary or appropriate in furtherance
of the purposes of the Act. All of the
proposed changes are intended to bring
greater transparency to the Exchange’s
Rulebook, and therefore does not
unduly burden competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 13 and
subparagraph (f)(6) of Rule 19b–4
thereunder.14
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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
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:
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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–
MRX–2018–37 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–MRX–2018–37. 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 website (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 website 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–MRX–2018–37 and should
be submitted on or before January 2,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–26908 Filed 12–11–18; 8:45 am]
BILLING CODE 8011–01–P
13 15
U.S.C. 78s(b)(3)(A)(iii).
14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. At the Exchange’s request, the
Commission has waived this requirement.
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84751; File No. SR–DTC–
2018–010]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing of a Proposed Rule Change To
Amend the Settlement Guide
Procedures To Provide Status
Information for Institutional
Transactions To a Matching Utility
December 7, 2018.
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 November
29, 2018, 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 agency. 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 Procedures, set forth in the
DTC Settlement Guide,3 4 to allow DTC
to provide status information (‘‘Status
Information’’) for institutional
transactions in Eligible Securities
(‘‘Institutional Transactions’’) 5 to an
entity providing a matching service 6
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Each capitalized term not otherwise defined
herein has its respective meaning as set forth in the
Rules, By-Laws and Organization Certificate of The
Depository Trust Company (‘‘Rules’’), available at
https://www.dtcc.com/legal/rules-andprocedures.aspx and the DTC Settlement Service
Guide (‘‘Settlement Guide’’), available at https://
www.dtcc.com/∼/media/Files/Downloads/legal/
service-guides/Settlement.pdf.
4 The Settlement Guide, which is proposed to be
amended hereby, sets forth Procedures for the
DTC’s Settlement Service. See Settlement Guide,
supra note 3. Procedures, in this context, pursuant
to Section 1 of Rule 1, means ‘‘the Procedures,
service guides, and regulations of DTC adopted
pursuant to Rule 27, as amended from time to
time.’’ Rule 1, Section 1, supra note 3. The
Settlement Guide constitutes Procedures of DTC, as
defined in the Rules. See Settlement Guide, supra
note 3 at 1.
5 An Institutional Transaction is a securities
transaction between a broker-dealer and its
institutional customer (e.g., sell-side firms, buy-side
institutions, and custodians).
6 A ‘‘matching service’’ is an electronic service to
match trade information, centrally, between a
broker-dealer and its institutional customer. The
matching service intermediary matches (i.e.,
reconciles) trade information from the
counterparties to an Institutional Transaction, to
generate an affirmed transaction (‘‘Affirmed
Transaction’’) which is then used to provide
2 17
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(‘‘Matching Utility’’), as 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, 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
The proposed rule change would
amend the Settlement Guide to allow
DTC to provide Status Information for
Institutional Transactions to a Matching
Utility, as described below.
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Background
DTC may accept Institutional
Transactions from a Matching Utility
that is (i) a clearing agency registered
pursuant to Section 17A of the Act 7 (ii)
an entity that has obtained an
exemption from such registration from
the Commission, or (iii) a ‘‘qualified
vendor’’ for trade confirmation/
affirmation services as defined by the
rules of a self-regulatory organization.8
In accordance with the Settlement
Guide, for a Matching Utility to
establish and maintain a connection
with DTC, the Matching Utility must be
able to balance with DTC in an
automated way 9 and communicate
transactions to and from DTC with
information required though mandated
settlement instructions for the Affirmed
Transactions to the central securities depository,
such as DTC, at which the Affirmed Transaction
settles. See Securities Exchange Act Release No.
39829 (April 6, 1998), 63 FR 17943 (April 13, 1998)
at 17946 (providing interpretive guidance on types
of entities that may provide a matching service).
7 15 U.S.C. 78q–1.
8 See Settlement Guide, supra note 3 at 35.
9 For each Matching Utility interfacing with DTC,
DTC requires the Matching Utility to deliver a daily
message on each business day shortly after noon
from the Matching Utility with their accepted item
counts of institutional delivery and ID Net
transaction totals for Settlement Date minus one
transactions. DTC’s system will compare the totals
from the Matching Utility to its accepted item
counts. If the totals match, an ‘‘acknowledged
balance’’ balance file will be sent to the Matching
Utility. If the totals do not match, DTC will respond
with the list of Settlement Date minus one control
numbers received from the Matching Utility, along
with their respective transaction types for the
originating Matching Utility to compare. Id.
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fields in order to provide DTC with data
necessary for it to be able to process a
transaction.10
The submission of an Affirmed
Transaction by the Matching Utility to
DTC, on behalf of a Participant,
constitutes the duly authorized
instruction of the Participant to DTC to
process the Affirmed Transaction in
accordance with the Rules and
Procedures.11
As more fully described below, a
transaction submitted to DTC for
processing may be subject to a
processing exception (‘‘Exception’’),
causing it to pend in the DTC system or
not be processed because the transaction
does not satisfy certain requirements
and/or controls set forth in the Rules
and Service Guide. A Matching Utility
that has submitted an Institutional
Transaction to DTC, or is otherwise
involved with the matching of a
transaction, does not receive Status
Information regarding the transaction
and is therefore unable to provide
services to facilitate resolution of
processing Exceptions occurring at DTC.
Therefore, in order to resolve an
Exception, the Participants to an
Institutional Transaction must (i) access
Status Information directly through the
DTC Settlement User Interface and (ii),
as necessary, supply the information to
their customers that are counterparties
to the transaction on their books, in
order to facilitate the coordination of the
resolution of the Exception among the
counterparties. Pursuant to the
proposed rule change, DTC would
amend the Settlement Guide to allow
DTC to provide Status Information for
an Institutional Transaction to a
Matching Utility. The proposal would
allow the Matching Utility to further
provide the Status Information to the
counterparties to the Institutional
Transaction to facilitate coordination of
the resolution of Exceptions among
counterparties.12
10 The mandated fields for this purpose are the
transaction control number (‘‘Control Number’’),
DTC receiver and deliverer account numbers,
CUSIP, message type, share quantity, market type,
buy-sell indicator, broker ID, ID agent internal
account number, broker internal account number,
agent bank ID, settlement amount, origination
entity, recipient of message, institution, and
settlement date. Id. Institutional Transactions that
are not Affirmed Transactions, but which include
a Control Number, may be submitted directly by
Participants.
11 Id.
12 The proposed rule change would not change or
have any effect on Participants’ ability to continue
to access Status Information directly through the
DTC Settlement User Interface.
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63949
DTC Transaction Processing Exceptions
Exceptions may arise at various points
during the processing of an Institutional
Transaction submitted to DTC.
After an Affirmed Transaction, or
other transaction that has been
submitted directly by a Participant, has
been accepted by DTC, the transaction
must be approved by the Receiver
through the Receiver Authorized
Delivery function (‘‘RAD’’), before it
will be staged for DTC settlement
processing in accordance with the Rules
and the Settlement Guide.13 In this
regard, a Receiving Participant may
reject a transaction for any reason using
RAD. If a transaction is not processed
because of a rejection, then the
transaction will drop from the DTC
system, resulting in an Exception that
could only be resolved through
resubmission of the transaction and
approval by the Receiving Participant.14
When processing a transaction for
settlement, DTC checks risk controls,
including the Net Debit Cap and
Collateral Monitor, and inventory
controls of the Participants to the
transaction.15 If a transaction satisfies
DTC risk and inventory controls, as
described below, the transaction will be
processed by DTC and will become
complete if the Receiving Participant
satisfies its end-of-day funds settlement
obligation.16 If a transaction is not
processed, i.e., because DTC risk
controls are not met, or if the Deliverer
has insufficient inventory in the
applicable Securities, this would result
in an Exception such that the
transaction will pend in DTC’s system
and recycle until the condition causing
the pend is satisfied.17
An incomplete transaction recycles in
DTC’s system until the end of the day,
and if it remains incomplete at the end
of the day it will be dropped.18
Addressing Exceptions
An Exception creates inefficiencies
for parties to the applicable Institutional
Transaction. If an Institutional
Transaction results in an Exception,
information regarding the status of the
Institutional Transaction may need to be
exchanged by Participants and others
involved in the trade life cycle,
including buy-side firms, broker/
13 RAD allows Participants to review and either
approve or reject incoming Deliveries before they
are processed. See Settlement Guide, supra note 3
at 53. RAD limits a Participant’s exposure from
misdirected or erroneously entered transactions.
See Settlement Guide, supra note 3 at 5.
14 See Settlement Guide, supra note 3 at 54–55.
15 See Settlement Guide, supra note 3 at 64–68.
16 See Rules 9(A) and 9(B), supra note 3.
17 See Settlement Guide, supra note 3 at 55.
18 See Settlement Guide, supra note 3 at 55.
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dealers, custodians, prime brokers,
clearing brokers and other settlement
agents, to resolve the issue underlying
the Exception and successfully process
the transaction. Communications among
Participants that have direct access to
Status Information through DTC and
other counterparties regarding
Exceptions are often processed in a
decentralized manner via email,
creating a time consuming process that
is subject to error.
Any potential delays and/or errors in
communicating the existence of an
Exception and related Status
Information among counterparties may
impede the prompt and accurate
clearance and settlement of affected
Institutional Transactions. A
Participant’s timely receipt of
information relating to an Exception
would facilitate its ability to take an
action to facilitate the processing of the
related transaction. Examples of some of
the actions the Participant may take
include, as applicable, (i) making a
settlement progress payment
(‘‘Settlement Progress Payment’’) 19 to
lower its net settlement debit and
increase its Collateral Monitor in order
to meet the DTC Net Debit Cap and
Collateral Monitor risk controls, (ii)
managing the Securities in its Account
to increase its available Collateral, and/
or (iii) communication with
counterparties to the transaction with
respect to a rejection so that the
Deliverer and Receiver may agree on the
details for any related transaction to be
submitted and approved via RAD.
Proposed Rule Change
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DTC has received a request from its
Matching Utility affiliate, ITP Matching
(US) LLC (‘‘ITP’’), to receive Status
Information so that ITP may transmit
the Status Information to counterparties
in a centralized format. DTC believes
that distribution of Status Information to
relevant counterparties in a centralized
format would facilitate Participants’
ability to monitor Exceptions and
coordinate with their institutional
customers in order to resolve
Exceptions.
Pursuant to the proposed rule change,
in order to facilitate more seamless
transmission of the Status Information
for (i) Affirmed Transactions and (ii)
other Institutional Transactions that
19 A Settlement Progress Payment is a payment
wired intraday by a Participant to DTC’s account at
the Federal Reserve Bank of New York. The amount
of a Settlement Progress Payment is (i) credited to
the Participant’s intraday net settlement balance
and (ii) is Collateral that supports the Participant’s
Collateral Monitor. See also Rule 1, supra note 3
(definition of Collateral) and Settlement Guide,
supra note 3 at 62–63.
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may have been confirmed at a Matching
Utility and received a Control Number,
and are submitted directly to DTC by a
Participant in an instruction containing
the Control Number, (collectively,
‘‘Eligible Transactions’’) to Participants
and facilitate their ability to manage
Exceptions, DTC proposes to amend the
Settlement Guide to provide that DTC
may provide Status Information on
Eligible Transactions to the applicable
Matching Utility that submitted the
transaction to DTC, or with respect to
which its Control Number is included in
transaction details provided by a
Participant,20 if so requested by the
Matching Utility. In this regard, DTC
would send to a Matching Utility Status
Information for Eligible Transactions
that DTC has received from the
Matching Utility or have been entered
by the Participant, that have a Control
Number associated with that Matching
Utility. The Status Information provided
to the Matching Utility would include
the status of the transaction (e.g., the
Delivery of Securities has been made
within DTC, the transaction is pending
Delivery within DTC, or the transaction
was reclaimed (i.e., sent back to the
Deliverer)) and a reason for any pending
status (e.g., the Deliverer has
insufficient inventory in the applicable
Securities, the Deliverer has insufficient
Collateral, the Receiver to the
transaction has insufficient Net Debit
Cap, etc.). The Status Information would
also include information (‘‘Identifying
Information’’) to facilitate the Matching
Utility’s ability to identify the
applicable Eligible Transaction and
reconcile the Status Information to the
Eligible Transaction in its records.
Identifying Information would include,
but not be limited to, (i) the applicable
Control Number (ii) identification
numbers of the Participants to the
transaction, (iii) quantity of Securities,
(iv) dollar amount of the transaction,
and (v) an indicator of whether the
transaction was submitted to DTC by the
Matching Utility or directly by a
Participant.
DTC believes that sharing Status
Information with a Matching Utility, on
behalf of a Participant, would foster
coordination among persons engaged in
the clearance and settlement of
Institutional Transactions by facilitating
20 It is DTC’s understanding that a transaction that
has been confirmed within a Matching Utility’s
system, but has not been affirmed, may be assigned
a Control Number by the Matching Utility. Any
transaction not affirmed by a Matching Utility
would not be submitted by it to DTC as an Affirmed
Transaction. In that case, the Participant may
submit the transaction directly through DTC as a
Deliver Order, and include the applicable Control
Number as assigned by the Matching Utility on its
submission to DTC.
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enhanced access to information for
relevant parties that may promote their
ability to manage Exceptions.
Proposed Changes to the Settlement
Guide
Pursuant to the proposed rule change,
DTC proposes to revise the Settlement
Guide to allow DTC to provide Status
Information of (i) Affirmed Transactions
and (ii) other institutional transactions
to a Matching Utility that requests such
information, but only for those
transactions that are associated with a
Control Number relating to the
Matching Utility. The proposed text to
the Settlement Guide would also (x)
describe the types of Status Information
and related Identifying Information that
would be shared with a Matching Utility
in this regard, as described above and
(y) provide that DTC may charge a fee
(‘‘Status Information Fee’’) to a
Matching Utility that receives Status
Information as set forth in the DTC Fee
Guide.21 The proposed rule change
would also add a defined term for
‘‘Control Number’’ to the Settlement
Guide in existing text where the term is
referred to but not defined.
The proposed rule change would
require that prior to providing Status
Information to a Matching Utility, DTC
would obtain the written agreement, in
such form as determined by DTC from
time to time (‘‘Status Information
Agreement’’), from the Matching Utility
that includes (i) a request from the
Matching Utility to receive Status
Information from DTC, (ii) an agreement
by the Matching Utility that the
Matching Utility will not distribute
Status Information to any third party
other than (a) the Participants indicated
on the Status Information and (b) the
institutional customers that are
counterparties to the transaction for
which the Participants indicated on the
Status Information are acting with
respect to the transaction, (iii) the
agreement of the Matching Utility that
the Matching Utility will indemnify,
hold harmless and agree, on demand, to
reimburse DTC, its stockholders,
officers, directors and employees from
and against and for any and all claims,
liabilities, obligations, damages, actions,
penalties, losses, costs, expenses and
disbursements, including, without
limitation, attorneys’ fees and
disbursements (‘‘Claims’’), which they
may sustain by reason of DTC’s
providing Status Information to the
Matching Utility, except for any Claims
21 Available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/fee-guides/dtcfeeguide.pdf.
Any such fee would be the subject of a subsequent
proposed rule change that DTC would file with the
Commission.
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which result from the gross negligence
or willful misconduct of the person
asserting a right to indemnification, (iv)
the agreement of the Matching Utility to
pay the Status Information Fee, (v) the
agreement of the Matching Utility to
notify DTC immediately if the Matching
Utility becomes aware of Status
Information provided to it by DTC being
distributed to a third party other than as
authorized pursuant to (ii) above, and
(vi) the acknowledgement of the
Matching Utility that DTC may
terminate the Status Information
Agreement in the event that (a) DTC
becomes aware that the Matching Utility
has used or distributed the Status
Information in a manner that violates
the terms of the Status Information
Agreement, (b) the Matching Utility
does not pay the Status Information Fee
in accordance with the terms of the Fee
Schedule, or (c) DTC submits a rule
filing to the SEC, which is approved by
the SEC or otherwise becomes effective
pursuant to the Act to discontinue
DTC’s distribution of Status Information
to Matching Utilities.
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Implementation Timeframe
The proposed rule change would be
effective upon approval of the proposed
rule change by the Commission.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act 22
requires, inter alia, that the Rules
promote the prompt and accurate
clearance and settlement of securities
transactions. DTC believes that the
proposed rule changes are consistent
with this provision because by allowing
DTC to provide Status Information to
Matching Utilities in accordance with
the proposal as described above, the
proposed rule change would facilitate
the distribution of information on
Exceptions to the parties of Eligible
Transactions. This distribution of Status
Information would allow for enhanced
communication among the parties to an
Eligible Transaction to address an
Exception so that the Eligible
Transaction may meet DTC controls and
be processed for end-of-day settlement.
Therefore, by facilitating the
distribution of Status Information to a
Matching Utility, and thereby
facilitating the ability of a Matching
Utility to provide this information to the
applicable parties to an Eligible
Transaction that may address related
Exceptions and resolve related issues so
that a transaction may be processed for
settlement, DTC believes that the
proposed rule change would promote
the prompt and accurate clearance and
settlement of securities transactions
consistent with Section 17A(b)(3)(F) of
the Act.23
Rule 17Ad–22(e)(20) 24 promulgated
under the Act requires DTC to establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to, as applicable,
identify, monitor, and manage risks
related to any link the covered clearing
agency establishes with one or more
other clearing agencies, financial market
utilities, or trading markets. DTC
believes that the proposed rule change
is consistent with this Rule because the
proposed Status Information Agreement,
which would include the terms as set
forth above, that would be required to
be provided by a Matching Utility prior
to DTC distributing Status Information
to it, would limit DTC’s exposure to
legal risks and expenses that may
otherwise arise in connection with such
distribution by including an indemnity
from the Matching Utility with respect
to its receipt of Status Information and
manage privacy risk by requiring
Matching Utilities to not distribute
Status Information to unauthorized
third parties, as described above.
(B) Clearing Agency’s Statement on
Burden on Competition
DTC believes the proposed rule
change could impact competition.25
DTC does not believe that the proposed
rule change to allow DTC to provide
Status Information to a Matching Utility
that is a party to a transaction (i.e., the
party originating the confirm or
processing the affirm) would impose a
burden on competition for Matching
Utilities and Participants, because by
adding text to the Settlement Guide to
allow DTC to provide Status
Information to a Matching Utility, as
applicable, the proposal is merely
facilitating the transmission of Status
Information that would enable the
counterparties to an Eligible Transaction
to address Exceptions in order to
facilitate processing of the transaction
by DTC. In addition, Status Information
would be available to any Matching
Utility that requests it and satisfies the
applicable requirements that would be
set forth in the Settlement Guide. DTC
does not believe the proposed rule
change that would add text referencing
that DTC may charge a fee to a Matching
Utility that receives Status Information
would impose a burden on competition,
because any such fee would not take
effect until after such a fee is filed as
part of a subsequent rule filing that
23 Id.
24 17
22 15
U.S.C. 78q–1(b)(3)(F).
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U.S.C. 78q–1(b)(3)(I).
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63951
would be submitted by DTC to the
Commission. DTC believes that the
provision of Status Information to a
Matching Utility could promote
competition, to the extent Status
Information is further transmitted by the
Matching Utility to the counterparties to
an applicable Eligible Transaction, by
facilitating Participants’ ability to
address an Exception that may affect the
processing of the Eligible Transaction at
DTC.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
Written comments relating to this
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–2018–010 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–2018–010. 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
E:\FR\FM\12DEN1.SGM
12DEN1
63952
Federal Register / Vol. 83, No. 238 / Wednesday, December 12, 2018 / Notices
post all comments on the Commission’s
internet website (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 website 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 website
(https://dtcc.com/legal/sec-rulefilings.aspx). All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–DTC–
2018–010 and should be submitted on
or before January 2, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–26913 Filed 12–11–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84739; File No. SR–CBOE–
2018–074]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating To Adopt a Shell
Structure for the Cboe Options
Rulebook in Connection With the
Migration of the Exchange to Bats
Technology
amozie on DSK3GDR082PROD with NOTICES1
December 6, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
26, 2018, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Exchange filed the proposal as a
‘‘non-controversial’’ proposed rule
change pursuant to Section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b–4(f)(6) thereunder.4 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
Cboe Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to adopt a
shell structure for the Cboe Options
rulebook (‘‘Rulebook’’) in connection
with the migration of the Exchange to
Bats technology.
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegal
RegulatoryHome.aspx), at the
Exchange’s Office of the Secretary, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange 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
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
In 2016, the Exchange’s parent
company, Cboe Global Markets, Inc.
(formerly named CBOE Holdings, Inc.)
(‘‘Cboe Global’’), which is also the
parent company of Cboe C2 Exchange,
Inc. (‘‘C2’’), acquired Cboe EDGA
Exchange, Inc. (‘‘EDGA’’), Cboe EDGX
Exchange, Inc. (‘‘EDGX’’ or ‘‘EDGX
Options’’), Cboe BZX Exchange, Inc.
(‘‘BZX’’ or ‘‘BZX Options’’), and Cboe
BYX Exchange, Inc. (‘‘BYX’’ and,
together with Cboe Options, C2, EDGX,
26 17
18:39 Dec 11, 2018
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.5 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 6 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, 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.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 7 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange believes the proposed
rule change will remove impediments to
5 15
1 15
VerDate Sep<11>2014
EDGA, and BZX, the ‘‘Cboe Affiliated
Exchanges’’). The Cboe Affiliated
Exchanges are working to align certain
system functionality, retaining only
intended differences between the Cboe
Affiliated Exchanges, in the context of a
technology migration. Cboe Options
intends to migrate its technology onto
the same trading platform as the other
Cboe Affiliated Exchanges, which the
Exchange expects to complete on
October 7, 2019. Cboe Options believes
offering similar functionality to the
extent practicable will reduce potential
confusion for market participants.
In connection with this technology
migration, the Exchange proposes to add
a shell structure that would reside
alongside its current Rulebook. The
proposed shell outlines the various
chapters, and sections within certain
chapters, of the future Rulebook, as well
as contains new chapter numbering. In
subsequent rule changes, Cboe Options
will amend its Rules to reflect proposed
changes to its system in connection with
the system migration. Cboe Options will
also submit subsequent rule changes to
move rule text that will not change as
part of the technology migration from
the current Rulebook to the future
Rulebook.
3 15
U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
Jkt 247001
PO 00000
Frm 00128
Fmt 4703
Sfmt 4703
6 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
7 Id.
E:\FR\FM\12DEN1.SGM
12DEN1
]]>Agencies
[Federal Register Volume 83, Number 238 (Wednesday, December 12, 2018)]
[Notices]
[Pages 63948-63952]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26913]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84751; File No. SR-DTC-2018-010]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of a Proposed Rule Change To Amend the Settlement
Guide Procedures To Provide Status Information for Institutional
Transactions To a Matching Utility
December 7, 2018.
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 November 29, 2018, 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 agency. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change would amend the Procedures, set forth in
the DTC Settlement Guide,\3\ \4\ to allow DTC to provide status
information (``Status Information'') for institutional transactions in
Eligible Securities (``Institutional Transactions'') \5\ to an entity
providing a matching service \6\
[[Page 63949]]
(``Matching Utility''), as described below.
---------------------------------------------------------------------------
\3\ Each capitalized term not otherwise defined herein has its
respective meaning as set forth in the Rules, By-Laws and
Organization Certificate of The Depository Trust Company
(``Rules''), available at https://www.dtcc.com/legal/rules-and-procedures.aspx and the DTC Settlement Service Guide (``Settlement
Guide''), available at https://www.dtcc.com/~/media/Files/Downloads/
legal/service-guides/Settlement.pdf.
\4\ The Settlement Guide, which is proposed to be amended
hereby, sets forth Procedures for the DTC's Settlement Service. See
Settlement Guide, supra note 3. Procedures, in this context,
pursuant to Section 1 of Rule 1, means ``the Procedures, service
guides, and regulations of DTC adopted pursuant to Rule 27, as
amended from time to time.'' Rule 1, Section 1, supra note 3. The
Settlement Guide constitutes Procedures of DTC, as defined in the
Rules. See Settlement Guide, supra note 3 at 1.
\5\ An Institutional Transaction is a securities transaction
between a broker-dealer and its institutional customer (e.g., sell-
side firms, buy-side institutions, and custodians).
\6\ A ``matching service'' is an electronic service to match
trade information, centrally, between a broker-dealer and its
institutional customer. The matching service intermediary matches
(i.e., reconciles) trade information from the counterparties to an
Institutional Transaction, to generate an affirmed transaction
(``Affirmed Transaction'') which is then used to provide settlement
instructions for the Affirmed Transactions to the central securities
depository, such as DTC, at which the Affirmed Transaction settles.
See Securities Exchange Act Release No. 39829 (April 6, 1998), 63 FR
17943 (April 13, 1998) at 17946 (providing interpretive guidance on
types of entities that may provide a matching service).
---------------------------------------------------------------------------
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
The proposed rule change would amend the Settlement Guide to allow
DTC to provide Status Information for Institutional Transactions to a
Matching Utility, as described below.
Background
DTC may accept Institutional Transactions from a Matching Utility
that is (i) a clearing agency registered pursuant to Section 17A of the
Act \7\ (ii) an entity that has obtained an exemption from such
registration from the Commission, or (iii) a ``qualified vendor'' for
trade confirmation/affirmation services as defined by the rules of a
self-regulatory organization.\8\
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78q-1.
\8\ See Settlement Guide, supra note 3 at 35.
---------------------------------------------------------------------------
In accordance with the Settlement Guide, for a Matching Utility to
establish and maintain a connection with DTC, the Matching Utility must
be able to balance with DTC in an automated way \9\ and communicate
transactions to and from DTC with information required though mandated
fields in order to provide DTC with data necessary for it to be able to
process a transaction.\10\
---------------------------------------------------------------------------
\9\ For each Matching Utility interfacing with DTC, DTC requires
the Matching Utility to deliver a daily message on each business day
shortly after noon from the Matching Utility with their accepted
item counts of institutional delivery and ID Net transaction totals
for Settlement Date minus one transactions. DTC's system will
compare the totals from the Matching Utility to its accepted item
counts. If the totals match, an ``acknowledged balance'' balance
file will be sent to the Matching Utility. If the totals do not
match, DTC will respond with the list of Settlement Date minus one
control numbers received from the Matching Utility, along with their
respective transaction types for the originating Matching Utility to
compare. Id.
\10\ The mandated fields for this purpose are the transaction
control number (``Control Number''), DTC receiver and deliverer
account numbers, CUSIP, message type, share quantity, market type,
buy-sell indicator, broker ID, ID agent internal account number,
broker internal account number, agent bank ID, settlement amount,
origination entity, recipient of message, institution, and
settlement date. Id. Institutional Transactions that are not
Affirmed Transactions, but which include a Control Number, may be
submitted directly by Participants.
---------------------------------------------------------------------------
The submission of an Affirmed Transaction by the Matching Utility
to DTC, on behalf of a Participant, constitutes the duly authorized
instruction of the Participant to DTC to process the Affirmed
Transaction in accordance with the Rules and Procedures.\11\
---------------------------------------------------------------------------
\11\ Id.
---------------------------------------------------------------------------
As more fully described below, a transaction submitted to DTC for
processing may be subject to a processing exception (``Exception''),
causing it to pend in the DTC system or not be processed because the
transaction does not satisfy certain requirements and/or controls set
forth in the Rules and Service Guide. A Matching Utility that has
submitted an Institutional Transaction to DTC, or is otherwise involved
with the matching of a transaction, does not receive Status Information
regarding the transaction and is therefore unable to provide services
to facilitate resolution of processing Exceptions occurring at DTC.
Therefore, in order to resolve an Exception, the Participants to an
Institutional Transaction must (i) access Status Information directly
through the DTC Settlement User Interface and (ii), as necessary,
supply the information to their customers that are counterparties to
the transaction on their books, in order to facilitate the coordination
of the resolution of the Exception among the counterparties. Pursuant
to the proposed rule change, DTC would amend the Settlement Guide to
allow DTC to provide Status Information for an Institutional
Transaction to a Matching Utility. The proposal would allow the
Matching Utility to further provide the Status Information to the
counterparties to the Institutional Transaction to facilitate
coordination of the resolution of Exceptions among counterparties.\12\
---------------------------------------------------------------------------
\12\ The proposed rule change would not change or have any
effect on Participants' ability to continue to access Status
Information directly through the DTC Settlement User Interface.
---------------------------------------------------------------------------
DTC Transaction Processing Exceptions
Exceptions may arise at various points during the processing of an
Institutional Transaction submitted to DTC.
After an Affirmed Transaction, or other transaction that has been
submitted directly by a Participant, has been accepted by DTC, the
transaction must be approved by the Receiver through the Receiver
Authorized Delivery function (``RAD''), before it will be staged for
DTC settlement processing in accordance with the Rules and the
Settlement Guide.\13\ In this regard, a Receiving Participant may
reject a transaction for any reason using RAD. If a transaction is not
processed because of a rejection, then the transaction will drop from
the DTC system, resulting in an Exception that could only be resolved
through resubmission of the transaction and approval by the Receiving
Participant.\14\
---------------------------------------------------------------------------
\13\ RAD allows Participants to review and either approve or
reject incoming Deliveries before they are processed. See Settlement
Guide, supra note 3 at 53. RAD limits a Participant's exposure from
misdirected or erroneously entered transactions. See Settlement
Guide, supra note 3 at 5.
\14\ See Settlement Guide, supra note 3 at 54-55.
---------------------------------------------------------------------------
When processing a transaction for settlement, DTC checks risk
controls, including the Net Debit Cap and Collateral Monitor, and
inventory controls of the Participants to the transaction.\15\ If a
transaction satisfies DTC risk and inventory controls, as described
below, the transaction will be processed by DTC and will become
complete if the Receiving Participant satisfies its end-of-day funds
settlement obligation.\16\ If a transaction is not processed, i.e.,
because DTC risk controls are not met, or if the Deliverer has
insufficient inventory in the applicable Securities, this would result
in an Exception such that the transaction will pend in DTC's system and
recycle until the condition causing the pend is satisfied.\17\
---------------------------------------------------------------------------
\15\ See Settlement Guide, supra note 3 at 64-68.
\16\ See Rules 9(A) and 9(B), supra note 3.
\17\ See Settlement Guide, supra note 3 at 55.
---------------------------------------------------------------------------
An incomplete transaction recycles in DTC's system until the end of
the day, and if it remains incomplete at the end of the day it will be
dropped.\18\
---------------------------------------------------------------------------
\18\ See Settlement Guide, supra note 3 at 55.
---------------------------------------------------------------------------
Addressing Exceptions
An Exception creates inefficiencies for parties to the applicable
Institutional Transaction. If an Institutional Transaction results in
an Exception, information regarding the status of the Institutional
Transaction may need to be exchanged by Participants and others
involved in the trade life cycle, including buy-side firms, broker/
[[Page 63950]]
dealers, custodians, prime brokers, clearing brokers and other
settlement agents, to resolve the issue underlying the Exception and
successfully process the transaction. Communications among Participants
that have direct access to Status Information through DTC and other
counterparties regarding Exceptions are often processed in a
decentralized manner via email, creating a time consuming process that
is subject to error.
Any potential delays and/or errors in communicating the existence
of an Exception and related Status Information among counterparties may
impede the prompt and accurate clearance and settlement of affected
Institutional Transactions. A Participant's timely receipt of
information relating to an Exception would facilitate its ability to
take an action to facilitate the processing of the related transaction.
Examples of some of the actions the Participant may take include, as
applicable, (i) making a settlement progress payment (``Settlement
Progress Payment'') \19\ to lower its net settlement debit and increase
its Collateral Monitor in order to meet the DTC Net Debit Cap and
Collateral Monitor risk controls, (ii) managing the Securities in its
Account to increase its available Collateral, and/or (iii)
communication with counterparties to the transaction with respect to a
rejection so that the Deliverer and Receiver may agree on the details
for any related transaction to be submitted and approved via RAD.
---------------------------------------------------------------------------
\19\ A Settlement Progress Payment is a payment wired intraday
by a Participant to DTC's account at the Federal Reserve Bank of New
York. The amount of a Settlement Progress Payment is (i) credited to
the Participant's intraday net settlement balance and (ii) is
Collateral that supports the Participant's Collateral Monitor. See
also Rule 1, supra note 3 (definition of Collateral) and Settlement
Guide, supra note 3 at 62-63.
---------------------------------------------------------------------------
Proposed Rule Change
DTC has received a request from its Matching Utility affiliate, ITP
Matching (US) LLC (``ITP''), to receive Status Information so that ITP
may transmit the Status Information to counterparties in a centralized
format. DTC believes that distribution of Status Information to
relevant counterparties in a centralized format would facilitate
Participants' ability to monitor Exceptions and coordinate with their
institutional customers in order to resolve Exceptions.
Pursuant to the proposed rule change, in order to facilitate more
seamless transmission of the Status Information for (i) Affirmed
Transactions and (ii) other Institutional Transactions that may have
been confirmed at a Matching Utility and received a Control Number, and
are submitted directly to DTC by a Participant in an instruction
containing the Control Number, (collectively, ``Eligible
Transactions'') to Participants and facilitate their ability to manage
Exceptions, DTC proposes to amend the Settlement Guide to provide that
DTC may provide Status Information on Eligible Transactions to the
applicable Matching Utility that submitted the transaction to DTC, or
with respect to which its Control Number is included in transaction
details provided by a Participant,\20\ if so requested by the Matching
Utility. In this regard, DTC would send to a Matching Utility Status
Information for Eligible Transactions that DTC has received from the
Matching Utility or have been entered by the Participant, that have a
Control Number associated with that Matching Utility. The Status
Information provided to the Matching Utility would include the status
of the transaction (e.g., the Delivery of Securities has been made
within DTC, the transaction is pending Delivery within DTC, or the
transaction was reclaimed (i.e., sent back to the Deliverer)) and a
reason for any pending status (e.g., the Deliverer has insufficient
inventory in the applicable Securities, the Deliverer has insufficient
Collateral, the Receiver to the transaction has insufficient Net Debit
Cap, etc.). The Status Information would also include information
(``Identifying Information'') to facilitate the Matching Utility's
ability to identify the applicable Eligible Transaction and reconcile
the Status Information to the Eligible Transaction in its records.
Identifying Information would include, but not be limited to, (i) the
applicable Control Number (ii) identification numbers of the
Participants to the transaction, (iii) quantity of Securities, (iv)
dollar amount of the transaction, and (v) an indicator of whether the
transaction was submitted to DTC by the Matching Utility or directly by
a Participant.
---------------------------------------------------------------------------
\20\ It is DTC's understanding that a transaction that has been
confirmed within a Matching Utility's system, but has not been
affirmed, may be assigned a Control Number by the Matching Utility.
Any transaction not affirmed by a Matching Utility would not be
submitted by it to DTC as an Affirmed Transaction. In that case, the
Participant may submit the transaction directly through DTC as a
Deliver Order, and include the applicable Control Number as assigned
by the Matching Utility on its submission to DTC.
---------------------------------------------------------------------------
DTC believes that sharing Status Information with a Matching
Utility, on behalf of a Participant, would foster coordination among
persons engaged in the clearance and settlement of Institutional
Transactions by facilitating enhanced access to information for
relevant parties that may promote their ability to manage Exceptions.
Proposed Changes to the Settlement Guide
Pursuant to the proposed rule change, DTC proposes to revise the
Settlement Guide to allow DTC to provide Status Information of (i)
Affirmed Transactions and (ii) other institutional transactions to a
Matching Utility that requests such information, but only for those
transactions that are associated with a Control Number relating to the
Matching Utility. The proposed text to the Settlement Guide would also
(x) describe the types of Status Information and related Identifying
Information that would be shared with a Matching Utility in this
regard, as described above and (y) provide that DTC may charge a fee
(``Status Information Fee'') to a Matching Utility that receives Status
Information as set forth in the DTC Fee Guide.\21\ The proposed rule
change would also add a defined term for ``Control Number'' to the
Settlement Guide in existing text where the term is referred to but not
defined.
---------------------------------------------------------------------------
\21\ Available at https://www.dtcc.com/~/media/Files/Downloads/
legal/fee-guides/dtcfeeguide.pdf. Any such fee would be the subject
of a subsequent proposed rule change that DTC would file with the
Commission.
---------------------------------------------------------------------------
The proposed rule change would require that prior to providing
Status Information to a Matching Utility, DTC would obtain the written
agreement, in such form as determined by DTC from time to time
(``Status Information Agreement''), from the Matching Utility that
includes (i) a request from the Matching Utility to receive Status
Information from DTC, (ii) an agreement by the Matching Utility that
the Matching Utility will not distribute Status Information to any
third party other than (a) the Participants indicated on the Status
Information and (b) the institutional customers that are counterparties
to the transaction for which the Participants indicated on the Status
Information are acting with respect to the transaction, (iii) the
agreement of the Matching Utility that the Matching Utility will
indemnify, hold harmless and agree, on demand, to reimburse DTC, its
stockholders, officers, directors and employees from and against and
for any and all claims, liabilities, obligations, damages, actions,
penalties, losses, costs, expenses and disbursements, including,
without limitation, attorneys' fees and disbursements (``Claims''),
which they may sustain by reason of DTC's providing Status Information
to the Matching Utility, except for any Claims
[[Page 63951]]
which result from the gross negligence or willful misconduct of the
person asserting a right to indemnification, (iv) the agreement of the
Matching Utility to pay the Status Information Fee, (v) the agreement
of the Matching Utility to notify DTC immediately if the Matching
Utility becomes aware of Status Information provided to it by DTC being
distributed to a third party other than as authorized pursuant to (ii)
above, and (vi) the acknowledgement of the Matching Utility that DTC
may terminate the Status Information Agreement in the event that (a)
DTC becomes aware that the Matching Utility has used or distributed the
Status Information in a manner that violates the terms of the Status
Information Agreement, (b) the Matching Utility does not pay the Status
Information Fee in accordance with the terms of the Fee Schedule, or
(c) DTC submits a rule filing to the SEC, which is approved by the SEC
or otherwise becomes effective pursuant to the Act to discontinue DTC's
distribution of Status Information to Matching Utilities.
Implementation Timeframe
The proposed rule change would be effective upon approval of the
proposed rule change by the Commission.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act \22\ requires, inter alia, that the
Rules promote the prompt and accurate clearance and settlement of
securities transactions. DTC believes that the proposed rule changes
are consistent with this provision because by allowing DTC to provide
Status Information to Matching Utilities in accordance with the
proposal as described above, the proposed rule change would facilitate
the distribution of information on Exceptions to the parties of
Eligible Transactions. This distribution of Status Information would
allow for enhanced communication among the parties to an Eligible
Transaction to address an Exception so that the Eligible Transaction
may meet DTC controls and be processed for end-of-day settlement.
Therefore, by facilitating the distribution of Status Information to a
Matching Utility, and thereby facilitating the ability of a Matching
Utility to provide this information to the applicable parties to an
Eligible Transaction that may address related Exceptions and resolve
related issues so that a transaction may be processed for settlement,
DTC believes that the proposed rule change would promote the prompt and
accurate clearance and settlement of securities transactions consistent
with Section 17A(b)(3)(F) of the Act.\23\
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78q-1(b)(3)(F).
\23\ Id.
---------------------------------------------------------------------------
Rule 17Ad-22(e)(20) \24\ promulgated under the Act requires DTC to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to, as applicable, identify, monitor,
and manage risks related to any link the covered clearing agency
establishes with one or more other clearing agencies, financial market
utilities, or trading markets. DTC believes that the proposed rule
change is consistent with this Rule because the proposed Status
Information Agreement, which would include the terms as set forth
above, that would be required to be provided by a Matching Utility
prior to DTC distributing Status Information to it, would limit DTC's
exposure to legal risks and expenses that may otherwise arise in
connection with such distribution by including an indemnity from the
Matching Utility with respect to its receipt of Status Information and
manage privacy risk by requiring Matching Utilities to not distribute
Status Information to unauthorized third parties, as described above.
---------------------------------------------------------------------------
\24\ 17 CFR 240.17Ad-22(e)(20).
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
DTC believes the proposed rule change could impact competition.\25\
DTC does not believe that the proposed rule change to allow DTC to
provide Status Information to a Matching Utility that is a party to a
transaction (i.e., the party originating the confirm or processing the
affirm) would impose a burden on competition for Matching Utilities and
Participants, because by adding text to the Settlement Guide to allow
DTC to provide Status Information to a Matching Utility, as applicable,
the proposal is merely facilitating the transmission of Status
Information that would enable the counterparties to an Eligible
Transaction to address Exceptions in order to facilitate processing of
the transaction by DTC. In addition, Status Information would be
available to any Matching Utility that requests it and satisfies the
applicable requirements that would be set forth in the Settlement
Guide. DTC does not believe the proposed rule change that would add
text referencing that DTC may charge a fee to a Matching Utility that
receives Status Information would impose a burden on competition,
because any such fee would not take effect until after such a fee is
filed as part of a subsequent rule filing that would be submitted by
DTC to the Commission. DTC believes that the provision of Status
Information to a Matching Utility could promote competition, to the
extent Status Information is further transmitted by the Matching
Utility to the counterparties to an applicable Eligible Transaction, by
facilitating Participants' ability to address an Exception that may
affect the processing of the Eligible Transaction at DTC.
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\25\ 15 U.S.C. 78q-1(b)(3)(I).
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(C) Clearing Agency's Statement on Comments on the Proposed Rule
Change Received From Members, Participants, or Others
Written comments relating to this 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 [email protected]. Please include
File Number SR-DTC-2018-010 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-2018-010. 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
[[Page 63952]]
post all comments on the Commission's internet website (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 website 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 website (https://dtcc.com/legal/sec-rule-filings.aspx). All comments received will be posted without
change. Persons submitting comments are cautioned that we do not redact
or edit personal identifying information from comment submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-DTC-2018-010
and should be submitted on or before January 2, 2019.
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\26\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-26913 Filed 12-11-18; 8:45 am]
BILLING CODE 8011-01-P
