Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change To Adopt a New Service Guide To Establish the ClaimConnectTM, 67018-67022 [2020-23260]
Download as PDF
<![CDATA[
67018
Federal Register / Vol. 85, No. 204 / Wednesday, October 21, 2020 / Notices
Unit 4 combined license (ADAMS
Accession No. ML14100A135).
khammond on DSKJM1Z7X2PROD with NOTICES
II. Licensee ITAAC Post-Closure
Notifications (IPCNs)
Since the last Federal Register notice
of the NRC staff’s determinations of
successful completion of inspections,
tests, and analyses for VEGP Units 3 and
4, the NRC staff has not made additional
determinations of the successful
completion of inspections, tests, and
analyses based on licensee IPCNs
submitted under 10 CFR 52.99(c)(2).
III. NRC Staff Determination of
Completion of ITAAC
The NRC staff has determined that the
specified inspections, tests, and
analyses have been successfully
completed, and that the specified
acceptance criteria are met. The
documentation of the NRC staff’s
determination is in the ITAAC Closure
Verification Evaluation Form (VEF) for
each ITAAC. The VEF is a form that
represents the NRC staff’s structured
process for reviewing ICNs and IPCNs.
Each ICN presents a narrative
description of how the ITAAC was
completed. The NRC’s ICN review
process involves a determination on
whether, among other things: (1) Each
ICN provides sufficient information,
including a summary of the
methodology used to perform the
ITAAC, to demonstrate that the
inspections, tests, and analyses have
been successfully completed; (2) each
ICN provides sufficient information to
demonstrate that the acceptance criteria
of the ITAAC are met; and (3) any NRC
inspections for the ITAAC have been
completed and any ITAAC findings
associated with that ITAAC have been
closed. The NRC’s review process for
IPCNs is similar to that for ICNs but
focuses on how the licensee addressed
the new, material information giving
rise to the IPCN.
The NRC staff’s determination of the
successful completion of these ITAAC is
based on information available at this
time and is subject to the licensee’s
ability to maintain the condition that
the acceptance criteria are met. If the
NRC staff receives new information that
suggests the NRC staff’s determination
on any of these ITAAC is incorrect, then
the NRC staff will determine whether to
reopen that ITAAC (including
withdrawing the NRC staff’s
determination on that ITAAC). The NRC
staff’s determination will be used to
support a subsequent finding, pursuant
to 10 CFR 52.103(g), at the end of
construction that all acceptance criteria
in the combined license are met. The
ITAAC closure process is not finalized
VerDate Sep<11>2014
16:58 Oct 20, 2020
Jkt 253001
for these ITAAC until the NRC makes an
affirmative finding under 10 CFR
52.103(g). Any future updates to the
status of these ITAAC will be reflected
on the NRC’s website at https://
www.nrc.gov/reactors/new-reactors/
oversight/itaac.html.
This notice fulfills the NRC staff’s
obligations under 10 CFR 52.99(e)(1) to
publish a notice in the Federal Register
of the NRC staff’s determination of the
successful completion of inspections,
tests, and analyses.
Vogtle Electric Generating Plant Unit 3,
Docket No. 5200025
A complete list of the review status
for VEGP Unit 3 ITAAC, including the
submission date and ADAMS accession
number for each ICN received, the
ADAMS accession number for each
VEF, and the ADAMS accession
numbers for the inspection reports
associated with these specific ITAAC,
can be found on the NRC’s website at
https://www.nrc.gov/reactors/newreactors/new-licensing-files/vog3icnsr.pdf.
Vogtle Electric Generating Plant Unit 4,
Docket No. 5200026
A complete list of the review status
for VEGP Unit 4 ITAAC, including the
submission date and ADAMS accession
number for each ICN and IPCN received,
the ADAMS accession number for each
VEF, and the ADAMS accession
numbers for the inspection reports
associated with these specific ITAAC,
can be found on the NRC’s website at
https://www.nrc.gov/reactors/newreactors/new-licensing-files/vog4icnsr.pdf.
Dated: October 16, 2020.
For the Nuclear Regulatory Commission.
Omar R. Lopez-Santiago,
Chief, Vogtle Project Office, Office of Nuclear
Reactor Regulation.
[FR Doc. 2020–23316 Filed 10–20–20; 8:45 am]
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
8, 2020, 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 3 consists of
amendments to (i) adopt a new DTC
service guide to establish the
ClaimConnect service at DTC
(‘‘ClaimConnect Service Guide’’),4 and
(ii) update the existing DTC Settlement
Service Guide 5 (‘‘Settlement Guide’’) to
(A) account for a new ClaimConnect
process that would bypass DTC’s
existing Receiver Authorized Delivery
function (‘‘RAD’’), (B) make related
clarifying changes regarding RAD, and
(C) update certain address and contact
information in the Copyright section of
the Settlement Guide, as described in
greater detail 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.
BILLING CODE 7590–01–P
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Capitalized terms not defined herein are defined
in the Rules, By-Laws and Organization Certificate
of DTC (‘‘Rules’’) available at https://www.dtcc.com/
∼/media/Files/Downloads/legal/rules/dtc_rules.pdf,
or in the hereby proposed ClaimConnect Service
Guide, included as Exhibit 5 to this proposed rule
change filing.
4 The hereby proposed ClaimConnect Service
Guide sets forth Procedures for the proposed DTC
ClaimConnect service. 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
proposed ClaimConnect Service Guide would
constitute a Procedure of DTC, as defined in the
Rules.
5 Available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/service-guides/
Settlement.pdf.
2 17
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90203; File No. SR–DTC–
2020–012]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing of Proposed Rule Change To
Adopt a New Service Guide To
Establish the ClaimConnectTM Service
and Update the Settlement Service
Guide
October 15, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
E:\FR\FM\21OCN1.SGM
21OCN1
Federal Register / Vol. 85, No. 204 / Wednesday, October 21, 2020 / Notices
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The purpose of the proposed rule
change is to (i) adopt the ClaimConnect
Service Guide, and (ii) update the
Settlement Guide to (A) account for a
new ClaimConnect process that would
bypass RAD, (B) make related clarifying
changes regarding RAD, and (C) update
certain address and contact information
in the Copyright section of the
Settlement Guide.
khammond on DSKJM1Z7X2PROD with NOTICES
About ClaimConnect
The proposed ClaimConnect service
will be an optional service available to
all Participants.6 The service will enable
Participants to bilaterally match and
settle cash claim transactions at DTC.
With respect to ClaimConnect, a cash
claim or cash claim transaction is a cash
entitlement (i.e., a request for cash) from
one Participant to another Participant.
Typically, cash claims arise as a result
of trading exceptions from a Corporate
Action event,7 where a cash entitlement
needs to be delivered from one holder
to another. Today, such claims are
settled away from DTC, except for some
stock loan and repurchase (‘‘repo’’)
substitution payments, which can be
settled via Adjustment Payment Orders
(‘‘APOs’’).8 However, based on
discussions with Participants, DTC has
developed ClaimConnect so Participants
can settle cash claims in one centralized
location, using the DTC system.9
As described below, ClaimConnect
will be a validation and matching
engine that continually monitors claims
throughout their lifecycle in order to
settle and close claims through DTC’s
settlement process. This continuous
processing will allow for both the
manual matching of claims (i.e., to
Affirm or Affirmation) by ClaimConnect
users (‘‘Users’’) and systematic matching
6 A fee associated with Participants’ use of the
ClaimConnect service will be the subject of a
separate, subsequent rule filing with the
Commission.
7 Trading exceptions include, but are not limited
to, trades outside of the market’s agreed upon
settlement cycle, lack of due bill fail tracking, stock
loan or repo transaction discrepancy, or tax treaty
differences.
8 In light of the proposed ClaimConnect service,
DTC is considering retiring the APO process. If such
a decision is made, then any corresponding changes
would be the subject of a separate, subsequent rule
filing with the Commission, as applicable. Until
such time, Participants would have the option to
settle stock loan and repo substitution payments via
APOs or ClaimConnect.
9 Based on discussions with Participants, DTC
estimates that ClaimConnect may process
approximately 212,000 claims its first year,
increasing to approximately 425,000 claims by its
fifth year.
VerDate Sep<11>2014
16:58 Oct 20, 2020
Jkt 253001
of two like claims by ClaimConnect
based on the alignment of certain data
elements (i.e., Auto-matching).
ClaimConnect will offer various claim
processing functions, including end-ofday settlement of cash claims through
systematic Securities Payment Orders
(‘‘SPOs’’) generated and submitted by
ClaimConnect at set times intraday
(‘‘settlement time’’) on a settlement date.
Preparing To Use ClaimConnect
To use ClaimConnect, a Participant
need only request to be a ‘‘Claim
Participant’’ by contacting its
Relationship Manager. The Participant’s
account information at DTC will then be
updated to indicate that the Participant
is now a member of the service (i.e., a
User).
Once permissioned, a Participant
(now a User) will be able to engage
ClaimConnect in two ways: (i) The
ClaimConnect application via the
MyDTCC portal, and (ii) the
ClaimConnect Application
Programming Interfaces (‘‘APIs’’).10
If using ClaimConnect through the
web application on the MyDTCC portal,
Users will have access to all
ClaimConnect functionality, including:
• Submitting new claims;
• modifying claims submitted by the
User;
• attaching documents to claims;
• Canceling claims submitted by the
User;
• DKing and Un-DKing claims; 11
• Affirming claims;
• utilizing the ClaimConnect Automatch feature;
• establishing Approvals; and
• searching all claims submitted or
received by the User.
Additionally, the ClaimConnect
dashboard, which would be available
via the MyDTCC portal, will offer a
comprehensive overview of a User’s
claim activity, as well as provide daily
and weekly email alerts on the status of
claims, and the ability to pull reports
and export data for manipulation and
analysis.
Meanwhile, the ClaimConnect family
of APIs will enable Users to automate
the claim process. The APIs could be
used separately for machine-to-machine
processing of claims or in combination
with the ClaimConnect web application
through the MyDTCC portal. Although
10 ClaimConnect
APIs will provide Users with
callable endpoints for creating and deleting data
resources, as well as reading and updating data
resource values. Information including
specifications related to ClaimConnect APIs will be
available to Participants at https://
developer.dtcc.com or by navigating through the
Portals menu on www.dtcc.com.
11 DK is shorthand for ‘‘Don’t Know.’’
PO 00000
Frm 00094
Fmt 4703
Sfmt 4703
67019
ClaimConnect functionality is more
limited through the APIs (i.e., APIs
cannot Affirm claims, attach documents
to claims, access the ClaimConnect
dashboard or establish an Approval),
Users will still be able to:
• Submit new claims;
• modify their own claims;
• Cancel their own claims;
• utilize the ClaimConnect Automatch feature;
• DK and Un-DK claims; and
• search all claims submitted or
received by the User.
Each ClaimConnect function is
described in greater detail below. Unless
otherwise noted, the functions apply to
both the ClaimConnect service via the
web application and the APIs.
Submitting Claims
If overpaid or underpaid a cash
entitlement due to a trading exception,
a User will be able to create a claim
against a claim counterparty through
ClaimConnect. To create a claim, the
ClaimConnect system will require
certain data elements to be included,
while other data elements will be
optional.12 Optional data elements will
help Users differentiate similar claims.
To help expedite the claim process,
Users will be able to attach a document
to a claim, through the ClaimConnect
web application in the MyDTCC portal,
which can provide further details about
the claim. Similarly, to more easily
identify claims and expedite the
settlement process, claim submitters
should work with claim counterparties
during the claim submission process.
Once all required data elements are
entered and the claim is submitted, the
claim is assigned a Claim ID.13 If both
parties to a claim submit their
respective sides to the claim (i.e., a debit
claim and a credit claim), and the two
sides of the claim are Auto-matched,
then the claim will be identified by the
Claim ID associated with the debit side
of the claim. The Claim ID of the credit
side of the claim will be viewable in the
claim’s audit history.
Claim States
Once submitted, claims can exist in
several different ‘‘states’’ depending
upon the actions taken by the parties to
the claim. Claims will be able to exist
12 A sample list of required and optional data
elements will be available in the proposed
ClaimConnect Service Guide. A complete list of
data elements and whether the data elements are
required or optional will be available on the
ClaimConnect DTCC Learning Center page.
13 A Claim ID is a unique claim identification
number that is assigned to a claim after all required
data elements are entered and the claim is
submitted.
E:\FR\FM\21OCN1.SGM
21OCN1
67020
Federal Register / Vol. 85, No. 204 / Wednesday, October 21, 2020 / Notices
as Matched, Uncompared, DKuncompared, Cancelled, or Closed.
Matched. A claim will be in a
Matched state when it has been Automatched by the ClaimConnect system,
or it has been Affirmed by the
counterparty to the claim.
Uncompared. A claim will be in an
Uncompared state, and will remain in
such a state indefinitely, until an action
is taken on it. This will occur when (i)
a claim is initially submitted, without
any further action taken on the claim;
(ii) a claim is modified by the
submitting party before the counterparty
has acted on it; (iii) a claim is modified
by the submitting party after it has been
DK’d by the counterparty; or (iv) a claim
is Un-DK’d, without any further action
taken on the claim.
DK-uncompared. A claim will be in a
DK-uncompared state when it has been
DK’d by the receiving counterparty, and
the submitting party has not yet acted
on the counterparty’s DK.14
Cancelled. A claim will be in a
Cancelled state when the submitting
party determines that the claim is no
longer needed. This will occur when the
submitting party Cancels the claim
before it has been acted on by the
counterparty, or the submitting party
Cancels a claim that has been DK’d by
the counterparty.
Closed. A claim will be in a Closed
state when a Matched claim settles or
fails to settle, as part of DTC’s end-ofday settlement process, by the close of
the scheduled settlement day, as
described below. Once a claim is either
Matched or Closed, then it can no longer
be modified, DK’d, or moved into an
Uncompared state. If a correction needs
to be made to a Matched or Closed
claim, then a new claim will need to be
submitted.
khammond on DSKJM1Z7X2PROD with NOTICES
Validating Claims
Validation, the process of confirming
claim data elements, will happen in two
ways: (i) When a claim is Affirmed (i.e.,
by Affirming a claim, the receiving
counterparty is confirming the claim’s
data elements), or (ii) when
ClaimConnect Auto-matches two
claims.
Once Validated, a claim will switch
from an Uncompared to a Matched state.
However, if certain data elements of the
two sides of a claim do not agree, the
claims cannot be Validated and, thus,
cannot be Matched.15 Such claims will
14 The DK-uncompared state is synonymous with
an Uncompared status but will be distinguished in
the proposed ClaimConnect Service Guide to better
depict the workflow.
15 A complete list of data elements that require
matching will be available in the training materials
VerDate Sep<11>2014
16:58 Oct 20, 2020
Jkt 253001
remain in an Uncompared state until
action is taken upon one or both claims.
Modifying and Canceling Claims
Users will be able to modify or Cancel
claims. However, not all data elements
can be modified after submission,16 and
a claim can be modified if and only if:
• The modifying User is the User that
submitted the claim; and
• the claim is Uncompared;
• the claim has not been Cancelled;
• the claim has not been Matched; or
• the claim has not been Closed.
A claim can be Cancelled if and only
if:
• The Canceling User is the User that
submitted the claim; and
• the claim is Uncompared;
• the claim has not been Matched; or
• the claim has not been Closed.
Once a claim is Cancelled, no further
action can be made on the claim.
Affirming Claims
If a counterparty receives a claim and
agrees with its details (i.e., the data
elements), then the counterparty could
Affirm the claim. Affirming a claim will
be a confirmation of the claim’s data
elements and would move the claim
into a Matched state. Once Affirmed, the
claim will be settled on the Claim
Settlement Date 17 or Settle After
Match,18 whichever the parties agree to.
Affirmation will usually occur only
when one side of a claim is submitted
because it affords the counterparty
enough time to Affirm the claim. If both
sides of a claim are submitted, and the
applicable data elements align, then
Auto-match will likely Match the claims
before either party has time to make an
Affirmation.
Claims can be Affirmed only:
• ‘‘Manually’’ via the MyDTCC portal,
not through an API;
• by the counterparty that received
the claim; and
• when the claim is Uncompared; or
• when the claim is not Cancelled or
Closed.
Once Affirmed, the claim will move
to a Matched state and no further action
will be permitted on the claim.
DKing Claims
If a counterparty receives a claim that
it does not know or does not agree with,
found on the ClaimConnect DTCC Learning Center
page.
16 Users will be able to refer to the ClaimConnect
user guides and other training materials to
determine which fields can be modified.
17 The Claim Settlement Date is the date on which
a claim will settle, as agreed upon by the claim
parties.
18 Settle After Match is a settlement option where
a Matched claim will settle at the next scheduled
settlement time, as compared to a future settlement
date. Both parties to the claim would need to select
the Settle After Match option to be effective.
PO 00000
Frm 00095
Fmt 4703
Sfmt 4703
then it can DK the claim. Claims can be
DK’d only by the User that received the
claim and when the claim is
Uncompared or when the claim is not
Cancelled or Closed. Users that DK a
claim must provide a reason for the
DK.19 DKing a claim will return it to the
submitting party and change the state of
the claim to DK-uncompared. The
submitting party will then have the
option to modify the claim or Cancel it.
A claim DK’d in error can be Un-DK’d
(i.e., reversed) by the party, and only
that party, that DK’d the claim. Once
Un-DK’d, the claim will be in an
Uncompared state. Uncompared claims
can be modified or Cancelled by the
submitting party, or they can be
Affirmed or DK’d by the receiving party.
Searching and Reporting on Claims
ClaimConnect also will have both
search and report functions. There will
be two types of searches: (i) Quick
Search, to look up a specific claim using
either the unique Claim ID or Xref that
the User assigned to the claim, and (ii)
Advanced Search, to search for a range
of claim activity, including claims
submitted by the User or by a
counterparty.
From the search results, Users will be
able to select a claim to view more
detailed information. ClaimConnect also
will enable Users to view all of their
claims as of a given date (either on a
current or historic day), which can then
be downloaded into a CSV (CommaSeparated Value) file format report.
Approving Claims
To assist Users with the management
of their claims, ClaimConnect will offer
an Approval feature. The Approval
feature will require certain actions on a
claim to be approved by a separate User
employee, if the claim amount meets or
exceeds a predetermined dollar
threshold set by the User, before that
action can be completed. This feature is
designed to enable Users to better
monitor and manage certain cash debits
that are leaving their account to satisfy
claims.
Users will be able to activate the
Approval feature by updating their
ClaimConnect client profile. When
doing so, the User must then set the
dollar threshold that will trigger the
Approval process. For example, if a
User wants all debit claims equaling
$100.00 or greater to be Approved, the
User would set the Approval threshold
19 Reasons for a DK include, but are not limited
to, bad quantity, bad trade date, bad settlement
date, bad amount, bad counterparty, duplicate
record, invalid security identifier, need paperwork,
need medallion stamp, settlement date difference,
other bad data, or wrong event type.
E:\FR\FM\21OCN1.SGM
21OCN1
Federal Register / Vol. 85, No. 204 / Wednesday, October 21, 2020 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
to $100.00. Unfortunately, because of
the manual aspects of the Approval
feature, this feature will not be available
via APIs.20
Once the Approval process is
activated and a dollar threshold set,
Approval by another User employee is
required when the dollar threshold is
met for claims that are new, being
Affirmed, being modified, or being
Cancelled after being previously
Approved.
If a claim would be modified so that
the dollar amount of the claim would no
longer meet or exceed a previously
established approval threshold, then the
modification will not need to be
Approved. Conversely, if a claim would
be modified so that the dollar amount of
the claim would now meet or exceed a
previously established Approval
threshold, then the claim will need to be
Approved. If a previously Approved
claim is modified but the claim amount
remains unchanged (i.e., it still meets or
exceeds the Approval threshold), then
the claim will need to be re-Approved.
Approval is not required to DK or UnDK a claim.
New claims that are pending
Approval will not have a claim state,
and the counterparty to the claim will
not see the claim until it is Approved.
Once Approved, the claim will be
moved to an Uncompared state.
In order to modify a new claim that
is still pending Approval, the
submitting User should reject the claim,
make the modification, and resubmit it
for Approval. If the claim has already
been Approved, a modification may
require re-Approval, if the Approval
threshold is met.
Claim Approvers must be different
than the User employee that created the
claim. Approvers can view the details of
the claim prior to Approving. If an
Approver rejects a claim, the claim will
need to be resubmitted for Approval or
Cancelled.
Settling Claims
Matched claims will generate a
ClaimConnect SPO for settlement on
either the Claim Settlement Date, the
next applicable daily settlement time if
the Settle After Match indicator has
been agreed to by both parties,21 or the
first settlement time on the next
settlement day if the current day is a
holiday or non-settlement date. The
20 Because APIs are a form of machine-to-machine
or system-to-system communication, all necessary
actions, such as the manual process of Approving
a claim, must be completed prior to that
communication.
21 The intraday settlement times for processing
ClaimConnect SPOs will be available on the
ClaimConnect DTCC Learning Center page.
VerDate Sep<11>2014
16:58 Oct 20, 2020
Jkt 253001
SPO will credit the payee Participant
and debit the payor Participant the
claim amount and will then be
incorporated into DTC’s end-of-day
settlement process.
Although a ClaimConnect SPO will be
similar to other DTC SPOs, it will be
unique to ClaimConnect and its
settlement process in several ways:
• The reason code for ClaimConnect
SPOs will be used only for
ClaimConnect cash movements;
• ClaimConnect SPOs will not be able
to be instructed manually, as the
instructions will be an automated
process through the ClaimConnect
service; and
• ClaimConnect SPOs will bypass
RAD, meaning there will be no
additional approval or rejection process
for ClaimConnect SPOs.
ClaimConnect will Close the claim
once it settles or fails to settle by the
close of the settlement day. Closed
claims cannot be reopened, modified, or
processed again. If an adjustment is
needed, a new claim will need to be
submitted and processed.
ClaimConnect SPOs will be subject to
DTC’s Risk Controls (i.e., Collateral
Monitor and Net Debit Cap) and will
‘‘recycle’’ (i.e., pend) if the SPO cannot
satisfy those controls.22 If a
ClaimConnect SPO does not ‘‘make’’
(i.e., settle) by the end of the settlement
day, the SPO will be ‘‘dropped’’ (i.e.,
Closed). Details on failed claims will be
available using the Settlement Web
activity inquiry function.
Changes to the Rules
To effectuate the establishment of the
ClaimConnect service, DTC hereby
proposes to adopt a new service guide—
the ClaimConnect Service Guide—to
explain the ClaimConnect service as
described above. In addition, the
existing Settlement Guide will be
updated to (A) indicate that not all SPOs
are subject to RAD prior to settlement,
as ClaimConnect SPOs will not be
subject to RAD, (B) make related
clarifying changes regarding RAD, and
(C) update certain address and contact
information in the Copyright section of
the Settlement Guide.
Implementation Timeframe
The ClaimConnect service, and
associated guide, will become effective
and available to Participants within 10
business days following Commission
approval. DTC will announce the
22 Because ClaimConnect SPOs will not be
submitted for night cycle processing, they will not
be subject to DTC’s settlement optimization process.
See Securities Exchange Act Release No. 87022
(September 19, 2019), 84 FR 50541 (September 25,
2019) (SR–DTC–2019–005).
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
67021
effective date of the proposed changes
by Important Notice posted to its
website. A fee associated with
Participants’ use of ClaimConnect will
be the subject of a separate, subsequent
rule filing with the Commission. If that
fee filing has not been completed by the
time the ClaimConnect service becomes
effective and available to Participants,
then Participants will not be charged a
fee for their use of ClaimConnect until
that filing is completed. The proposed
changes the Settlement Service Guide
will become effective upon Commission
approval.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act
requires, in part, that the rules of a
clearing agency be designed to foster
cooperation and coordination with
persons engaged in the clearance and
settlement of securities transactions.23
DTC believes this proposed rule change
is consistent with that provision of the
Act, and the rules and regulations
thereunder applicable to a registered
clearing agency.
As described above, the ClaimConnect
service will be an optional service that
was developed based on discussions
with Participants. ClaimConnect would
enable Participants to bilaterally match
and settle cash claim transactions at
DTC. While settlement of cash claims
occurs today, it does so away from DTC,
in a dispersed fashion. ClaimConnect
would establish a centralized and
coordinated location for Participants to
settle such claims and, as described
above, include various functionality,
such as a web application, APIs, an
Auto-match feature, an Approval
function, and final settlement via SPOs.
Although a cash claim transaction
itself is not a securities transaction, it is
the biproduct of a securities transaction
and a Corporate Action event on the
securities. By offering a centralized and
coordinated location for Participants to
settle cash claims, with various
functionality, the ClaimConnect service
is designed to help Participants more
easily settle cash claim activity
associated with a securities transaction.
Similarly, by updating the existing
Settlement Service Guide to indicate
that not all SPOs will be subject to RAD
(since ClaimConnect SPOs will not be
subject to RAD, as explained above), the
guide will help Participants better
understand the clearance and settlement
processes.
Finally, by updating the Settlement
Guide with more current information
about where Participants and others
may direct inquiries about the DTC
23 15
E:\FR\FM\21OCN1.SGM
U.S.C. 78q–1(b)(3)(F).
21OCN1
67022
Federal Register / Vol. 85, No. 204 / Wednesday, October 21, 2020 / Notices
service guides, the Settlement Guide
will provide the most up-to-date
information to help Participants submit
questions or comments about the service
guides.
Therefore, for the above reasons, DTC
believes that the proposed rule change
will help foster cooperation and
coordination with persons engaged in
the clearance and settlement of
securities transactions, consistent with
Section 17A(b)(3)(F) of the Act.24
(B) Clearing Agency’s Statement on
Burden on Competition
DTC does not believe that the
adoption of the proposed service guide
to establish the ClaimConnect service or
the proposed modifications to the
existing Settlement Guide will have any
impact on competition.
As described above, the ClaimConnect
service will be an optional service (i.e.,
Participants will have the option to
either use ClaimConnect or continue to
settle cash claims away from DTC).
Although DTC believes settling a cash
claim via ClaimConnect will offer
benefits over settling such claims away
from DTC, those benefits would be
available to all Participants that choose
to use the service, including both the
credit and debit sides of any single
claim. Meanwhile, the proposed
changes to the Settlement Guide would
simply (A) account for the processing of
ClaimConnect SPOs, with respect to
RAD, (B) make related clarifying
changes regarding RAD, and (C) update
certain address and contact information
in the Copyright section of the
Settlement Guide.
For these reasons, DTC does not
believe that the proposed rule change
will have any impact on competition.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
DTC has not received or solicited any
written comments relating to this
proposal. DTC will notify the
Commission of any written comments
received by DTC.
khammond on DSKJM1Z7X2PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change, and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
24 Id.
VerDate Sep<11>2014
16:58 Oct 20, 2020
Jkt 253001
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–2020–012 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–2020–012. 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 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
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
should refer to File Number SR–DTC–
2020–012 and should be submitted on
or before November 12, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–23260 Filed 10–20–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90205; File No. SR–Phlx–
2020–47]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Extend the Current
Pilot Program Related to Phlx Rule
3312
October 15, 2020.
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 October
13, 2020, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to extend the
current pilot program related to Rule
3312, Clearly Erroneous Transactions, to
the close of business on April 20, 2021.
The text of the proposed rule change is
available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/phlx/rules, 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
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
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\21OCN1.SGM
21OCN1
]]>Agencies
[Federal Register Volume 85, Number 204 (Wednesday, October 21, 2020)]
[Notices]
[Pages 67018-67022]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23260]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90203; File No. SR-DTC-2020-012]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change To Adopt a New Service Guide
To Establish the ClaimConnectTM Service and Update the Settlement
Service Guide
October 15, 2020.
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 October 8, 2020, 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 \3\ consists of amendments to (i) adopt a
new DTC service guide to establish the ClaimConnect service at DTC
(``ClaimConnect Service Guide''),\4\ and (ii) update the existing DTC
Settlement Service Guide \5\ (``Settlement Guide'') to (A) account for
a new ClaimConnect process that would bypass DTC's existing Receiver
Authorized Delivery function (``RAD''), (B) make related clarifying
changes regarding RAD, and (C) update certain address and contact
information in the Copyright section of the Settlement Guide, as
described in greater detail below.
---------------------------------------------------------------------------
\3\ Capitalized terms not defined herein are defined in the
Rules, By-Laws and Organization Certificate of DTC (``Rules'')
available at https://www.dtcc.com/~/media/Files/Downloads/legal/
rules/dtc_rules.pdf, or in the hereby proposed ClaimConnect Service
Guide, included as Exhibit 5 to this proposed rule change filing.
\4\ The hereby proposed ClaimConnect Service Guide sets forth
Procedures for the proposed DTC ClaimConnect service. 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 proposed ClaimConnect Service Guide would
constitute a Procedure of DTC, as defined in the Rules.
\5\ Available at https://www.dtcc.com/~/media/Files/Downloads/
legal/service-guides/Settlement.pdf.
---------------------------------------------------------------------------
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.
[[Page 67019]]
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to (i) adopt the
ClaimConnect Service Guide, and (ii) update the Settlement Guide to (A)
account for a new ClaimConnect process that would bypass RAD, (B) make
related clarifying changes regarding RAD, and (C) update certain
address and contact information in the Copyright section of the
Settlement Guide.
About ClaimConnect
The proposed ClaimConnect service will be an optional service
available to all Participants.\6\ The service will enable Participants
to bilaterally match and settle cash claim transactions at DTC.
---------------------------------------------------------------------------
\6\ A fee associated with Participants' use of the ClaimConnect
service will be the subject of a separate, subsequent rule filing
with the Commission.
---------------------------------------------------------------------------
With respect to ClaimConnect, a cash claim or cash claim
transaction is a cash entitlement (i.e., a request for cash) from one
Participant to another Participant. Typically, cash claims arise as a
result of trading exceptions from a Corporate Action event,\7\ where a
cash entitlement needs to be delivered from one holder to another.
Today, such claims are settled away from DTC, except for some stock
loan and repurchase (``repo'') substitution payments, which can be
settled via Adjustment Payment Orders (``APOs'').\8\ However, based on
discussions with Participants, DTC has developed ClaimConnect so
Participants can settle cash claims in one centralized location, using
the DTC system.\9\
---------------------------------------------------------------------------
\7\ Trading exceptions include, but are not limited to, trades
outside of the market's agreed upon settlement cycle, lack of due
bill fail tracking, stock loan or repo transaction discrepancy, or
tax treaty differences.
\8\ In light of the proposed ClaimConnect service, DTC is
considering retiring the APO process. If such a decision is made,
then any corresponding changes would be the subject of a separate,
subsequent rule filing with the Commission, as applicable. Until
such time, Participants would have the option to settle stock loan
and repo substitution payments via APOs or ClaimConnect.
\9\ Based on discussions with Participants, DTC estimates that
ClaimConnect may process approximately 212,000 claims its first
year, increasing to approximately 425,000 claims by its fifth year.
---------------------------------------------------------------------------
As described below, ClaimConnect will be a validation and matching
engine that continually monitors claims throughout their lifecycle in
order to settle and close claims through DTC's settlement process. This
continuous processing will allow for both the manual matching of claims
(i.e., to Affirm or Affirmation) by ClaimConnect users (``Users'') and
systematic matching of two like claims by ClaimConnect based on the
alignment of certain data elements (i.e., Auto-matching).
ClaimConnect will offer various claim processing functions,
including end-of-day settlement of cash claims through systematic
Securities Payment Orders (``SPOs'') generated and submitted by
ClaimConnect at set times intraday (``settlement time'') on a
settlement date.
Preparing To Use ClaimConnect
To use ClaimConnect, a Participant need only request to be a
``Claim Participant'' by contacting its Relationship Manager. The
Participant's account information at DTC will then be updated to
indicate that the Participant is now a member of the service (i.e., a
User).
Once permissioned, a Participant (now a User) will be able to
engage ClaimConnect in two ways: (i) The ClaimConnect application via
the MyDTCC portal, and (ii) the ClaimConnect Application Programming
Interfaces (``APIs'').\10\
---------------------------------------------------------------------------
\10\ ClaimConnect APIs will provide Users with callable
endpoints for creating and deleting data resources, as well as
reading and updating data resource values. Information including
specifications related to ClaimConnect APIs will be available to
Participants at https://developer.dtcc.com or by navigating through
the Portals menu on www.dtcc.com.
---------------------------------------------------------------------------
If using ClaimConnect through the web application on the MyDTCC
portal, Users will have access to all ClaimConnect functionality,
including:
Submitting new claims;
modifying claims submitted by the User;
attaching documents to claims;
Canceling claims submitted by the User;
DKing and Un-DKing claims; \11\
---------------------------------------------------------------------------
\11\ DK is shorthand for ``Don't Know.''
---------------------------------------------------------------------------
Affirming claims;
utilizing the ClaimConnect Auto-match feature;
establishing Approvals; and
searching all claims submitted or received by the User.
Additionally, the ClaimConnect dashboard, which would be available
via the MyDTCC portal, will offer a comprehensive overview of a User's
claim activity, as well as provide daily and weekly email alerts on the
status of claims, and the ability to pull reports and export data for
manipulation and analysis.
Meanwhile, the ClaimConnect family of APIs will enable Users to
automate the claim process. The APIs could be used separately for
machine-to-machine processing of claims or in combination with the
ClaimConnect web application through the MyDTCC portal. Although
ClaimConnect functionality is more limited through the APIs (i.e., APIs
cannot Affirm claims, attach documents to claims, access the
ClaimConnect dashboard or establish an Approval), Users will still be
able to:
Submit new claims;
modify their own claims;
Cancel their own claims;
utilize the ClaimConnect Auto-match feature;
DK and Un-DK claims; and
search all claims submitted or received by the User.
Each ClaimConnect function is described in greater detail below.
Unless otherwise noted, the functions apply to both the ClaimConnect
service via the web application and the APIs.
Submitting Claims
If overpaid or underpaid a cash entitlement due to a trading
exception, a User will be able to create a claim against a claim
counterparty through ClaimConnect. To create a claim, the ClaimConnect
system will require certain data elements to be included, while other
data elements will be optional.\12\ Optional data elements will help
Users differentiate similar claims.
---------------------------------------------------------------------------
\12\ A sample list of required and optional data elements will
be available in the proposed ClaimConnect Service Guide. A complete
list of data elements and whether the data elements are required or
optional will be available on the ClaimConnect DTCC Learning Center
page.
---------------------------------------------------------------------------
To help expedite the claim process, Users will be able to attach a
document to a claim, through the ClaimConnect web application in the
MyDTCC portal, which can provide further details about the claim.
Similarly, to more easily identify claims and expedite the settlement
process, claim submitters should work with claim counterparties during
the claim submission process.
Once all required data elements are entered and the claim is
submitted, the claim is assigned a Claim ID.\13\ If both parties to a
claim submit their respective sides to the claim (i.e., a debit claim
and a credit claim), and the two sides of the claim are Auto-matched,
then the claim will be identified by the Claim ID associated with the
debit side of the claim. The Claim ID of the credit side of the claim
will be viewable in the claim's audit history.
---------------------------------------------------------------------------
\13\ A Claim ID is a unique claim identification number that is
assigned to a claim after all required data elements are entered and
the claim is submitted.
---------------------------------------------------------------------------
Claim States
Once submitted, claims can exist in several different ``states''
depending upon the actions taken by the parties to the claim. Claims
will be able to exist
[[Page 67020]]
as Matched, Uncompared, DK-uncompared, Cancelled, or Closed.
Matched. A claim will be in a Matched state when it has been Auto-
matched by the ClaimConnect system, or it has been Affirmed by the
counterparty to the claim.
Uncompared. A claim will be in an Uncompared state, and will remain
in such a state indefinitely, until an action is taken on it. This will
occur when (i) a claim is initially submitted, without any further
action taken on the claim; (ii) a claim is modified by the submitting
party before the counterparty has acted on it; (iii) a claim is
modified by the submitting party after it has been DK'd by the
counterparty; or (iv) a claim is Un-DK'd, without any further action
taken on the claim.
DK-uncompared. A claim will be in a DK-uncompared state when it has
been DK'd by the receiving counterparty, and the submitting party has
not yet acted on the counterparty's DK.\14\
---------------------------------------------------------------------------
\14\ The DK-uncompared state is synonymous with an Uncompared
status but will be distinguished in the proposed ClaimConnect
Service Guide to better depict the workflow.
---------------------------------------------------------------------------
Cancelled. A claim will be in a Cancelled state when the submitting
party determines that the claim is no longer needed. This will occur
when the submitting party Cancels the claim before it has been acted on
by the counterparty, or the submitting party Cancels a claim that has
been DK'd by the counterparty.
Closed. A claim will be in a Closed state when a Matched claim
settles or fails to settle, as part of DTC's end-of-day settlement
process, by the close of the scheduled settlement day, as described
below. Once a claim is either Matched or Closed, then it can no longer
be modified, DK'd, or moved into an Uncompared state. If a correction
needs to be made to a Matched or Closed claim, then a new claim will
need to be submitted.
Validating Claims
Validation, the process of confirming claim data elements, will
happen in two ways: (i) When a claim is Affirmed (i.e., by Affirming a
claim, the receiving counterparty is confirming the claim's data
elements), or (ii) when ClaimConnect Auto-matches two claims.
Once Validated, a claim will switch from an Uncompared to a Matched
state. However, if certain data elements of the two sides of a claim do
not agree, the claims cannot be Validated and, thus, cannot be
Matched.\15\ Such claims will remain in an Uncompared state until
action is taken upon one or both claims.
---------------------------------------------------------------------------
\15\ A complete list of data elements that require matching will
be available in the training materials found on the ClaimConnect
DTCC Learning Center page.
---------------------------------------------------------------------------
Modifying and Canceling Claims
Users will be able to modify or Cancel claims. However, not all
data elements can be modified after submission,\16\ and a claim can be
modified if and only if:
---------------------------------------------------------------------------
\16\ Users will be able to refer to the ClaimConnect user guides
and other training materials to determine which fields can be
modified.
---------------------------------------------------------------------------
The modifying User is the User that submitted the claim;
and
the claim is Uncompared;
the claim has not been Cancelled;
the claim has not been Matched; or
the claim has not been Closed.
A claim can be Cancelled if and only if:
The Canceling User is the User that submitted the claim;
and
the claim is Uncompared;
the claim has not been Matched; or
the claim has not been Closed.
Once a claim is Cancelled, no further action can be made on the
claim.
Affirming Claims
If a counterparty receives a claim and agrees with its details
(i.e., the data elements), then the counterparty could Affirm the
claim. Affirming a claim will be a confirmation of the claim's data
elements and would move the claim into a Matched state. Once Affirmed,
the claim will be settled on the Claim Settlement Date \17\ or Settle
After Match,\18\ whichever the parties agree to.
---------------------------------------------------------------------------
\17\ The Claim Settlement Date is the date on which a claim will
settle, as agreed upon by the claim parties.
\18\ Settle After Match is a settlement option where a Matched
claim will settle at the next scheduled settlement time, as compared
to a future settlement date. Both parties to the claim would need to
select the Settle After Match option to be effective.
---------------------------------------------------------------------------
Affirmation will usually occur only when one side of a claim is
submitted because it affords the counterparty enough time to Affirm the
claim. If both sides of a claim are submitted, and the applicable data
elements align, then Auto-match will likely Match the claims before
either party has time to make an Affirmation.
Claims can be Affirmed only:
``Manually'' via the MyDTCC portal, not through an API;
by the counterparty that received the claim; and
when the claim is Uncompared; or
when the claim is not Cancelled or Closed.
Once Affirmed, the claim will move to a Matched state and no
further action will be permitted on the claim.
DKing Claims
If a counterparty receives a claim that it does not know or does
not agree with, then it can DK the claim. Claims can be DK'd only by
the User that received the claim and when the claim is Uncompared or
when the claim is not Cancelled or Closed. Users that DK a claim must
provide a reason for the DK.\19\ DKing a claim will return it to the
submitting party and change the state of the claim to DK-uncompared.
The submitting party will then have the option to modify the claim or
Cancel it.
---------------------------------------------------------------------------
\19\ Reasons for a DK include, but are not limited to, bad
quantity, bad trade date, bad settlement date, bad amount, bad
counterparty, duplicate record, invalid security identifier, need
paperwork, need medallion stamp, settlement date difference, other
bad data, or wrong event type.
---------------------------------------------------------------------------
A claim DK'd in error can be Un-DK'd (i.e., reversed) by the party,
and only that party, that DK'd the claim. Once Un-DK'd, the claim will
be in an Uncompared state. Uncompared claims can be modified or
Cancelled by the submitting party, or they can be Affirmed or DK'd by
the receiving party.
Searching and Reporting on Claims
ClaimConnect also will have both search and report functions. There
will be two types of searches: (i) Quick Search, to look up a specific
claim using either the unique Claim ID or Xref that the User assigned
to the claim, and (ii) Advanced Search, to search for a range of claim
activity, including claims submitted by the User or by a counterparty.
From the search results, Users will be able to select a claim to
view more detailed information. ClaimConnect also will enable Users to
view all of their claims as of a given date (either on a current or
historic day), which can then be downloaded into a CSV (Comma-Separated
Value) file format report.
Approving Claims
To assist Users with the management of their claims, ClaimConnect
will offer an Approval feature. The Approval feature will require
certain actions on a claim to be approved by a separate User employee,
if the claim amount meets or exceeds a predetermined dollar threshold
set by the User, before that action can be completed. This feature is
designed to enable Users to better monitor and manage certain cash
debits that are leaving their account to satisfy claims.
Users will be able to activate the Approval feature by updating
their ClaimConnect client profile. When doing so, the User must then
set the dollar threshold that will trigger the Approval process. For
example, if a User wants all debit claims equaling $100.00 or greater
to be Approved, the User would set the Approval threshold
[[Page 67021]]
to $100.00. Unfortunately, because of the manual aspects of the
Approval feature, this feature will not be available via APIs.\20\
---------------------------------------------------------------------------
\20\ Because APIs are a form of machine-to-machine or system-to-
system communication, all necessary actions, such as the manual
process of Approving a claim, must be completed prior to that
communication.
---------------------------------------------------------------------------
Once the Approval process is activated and a dollar threshold set,
Approval by another User employee is required when the dollar threshold
is met for claims that are new, being Affirmed, being modified, or
being Cancelled after being previously Approved.
If a claim would be modified so that the dollar amount of the claim
would no longer meet or exceed a previously established approval
threshold, then the modification will not need to be Approved.
Conversely, if a claim would be modified so that the dollar amount of
the claim would now meet or exceed a previously established Approval
threshold, then the claim will need to be Approved. If a previously
Approved claim is modified but the claim amount remains unchanged
(i.e., it still meets or exceeds the Approval threshold), then the
claim will need to be re-Approved. Approval is not required to DK or
Un-DK a claim.
New claims that are pending Approval will not have a claim state,
and the counterparty to the claim will not see the claim until it is
Approved. Once Approved, the claim will be moved to an Uncompared
state.
In order to modify a new claim that is still pending Approval, the
submitting User should reject the claim, make the modification, and
resubmit it for Approval. If the claim has already been Approved, a
modification may require re-Approval, if the Approval threshold is met.
Claim Approvers must be different than the User employee that
created the claim. Approvers can view the details of the claim prior to
Approving. If an Approver rejects a claim, the claim will need to be
resubmitted for Approval or Cancelled.
Settling Claims
Matched claims will generate a ClaimConnect SPO for settlement on
either the Claim Settlement Date, the next applicable daily settlement
time if the Settle After Match indicator has been agreed to by both
parties,\21\ or the first settlement time on the next settlement day if
the current day is a holiday or non-settlement date. The SPO will
credit the payee Participant and debit the payor Participant the claim
amount and will then be incorporated into DTC's end-of-day settlement
process.
---------------------------------------------------------------------------
\21\ The intraday settlement times for processing ClaimConnect
SPOs will be available on the ClaimConnect DTCC Learning Center
page.
---------------------------------------------------------------------------
Although a ClaimConnect SPO will be similar to other DTC SPOs, it
will be unique to ClaimConnect and its settlement process in several
ways:
The reason code for ClaimConnect SPOs will be used only
for ClaimConnect cash movements;
ClaimConnect SPOs will not be able to be instructed
manually, as the instructions will be an automated process through the
ClaimConnect service; and
ClaimConnect SPOs will bypass RAD, meaning there will be
no additional approval or rejection process for ClaimConnect SPOs.
ClaimConnect will Close the claim once it settles or fails to
settle by the close of the settlement day. Closed claims cannot be
reopened, modified, or processed again. If an adjustment is needed, a
new claim will need to be submitted and processed.
ClaimConnect SPOs will be subject to DTC's Risk Controls (i.e.,
Collateral Monitor and Net Debit Cap) and will ``recycle'' (i.e., pend)
if the SPO cannot satisfy those controls.\22\ If a ClaimConnect SPO
does not ``make'' (i.e., settle) by the end of the settlement day, the
SPO will be ``dropped'' (i.e., Closed). Details on failed claims will
be available using the Settlement Web activity inquiry function.
---------------------------------------------------------------------------
\22\ Because ClaimConnect SPOs will not be submitted for night
cycle processing, they will not be subject to DTC's settlement
optimization process. See Securities Exchange Act Release No. 87022
(September 19, 2019), 84 FR 50541 (September 25, 2019) (SR-DTC-2019-
005).
---------------------------------------------------------------------------
Changes to the Rules
To effectuate the establishment of the ClaimConnect service, DTC
hereby proposes to adopt a new service guide--the ClaimConnect Service
Guide--to explain the ClaimConnect service as described above. In
addition, the existing Settlement Guide will be updated to (A) indicate
that not all SPOs are subject to RAD prior to settlement, as
ClaimConnect SPOs will not be subject to RAD, (B) make related
clarifying changes regarding RAD, and (C) update certain address and
contact information in the Copyright section of the Settlement Guide.
Implementation Timeframe
The ClaimConnect service, and associated guide, will become
effective and available to Participants within 10 business days
following Commission approval. DTC will announce the effective date of
the proposed changes by Important Notice posted to its website. A fee
associated with Participants' use of ClaimConnect will be the subject
of a separate, subsequent rule filing with the Commission. If that fee
filing has not been completed by the time the ClaimConnect service
becomes effective and available to Participants, then Participants will
not be charged a fee for their use of ClaimConnect until that filing is
completed. The proposed changes the Settlement Service Guide will
become effective upon Commission approval.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a clearing agency be designed to foster cooperation and coordination
with persons engaged in the clearance and settlement of securities
transactions.\23\ DTC believes this proposed rule change is consistent
with that provision of the Act, and the rules and regulations
thereunder applicable to a registered clearing agency.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
As described above, the ClaimConnect service will be an optional
service that was developed based on discussions with Participants.
ClaimConnect would enable Participants to bilaterally match and settle
cash claim transactions at DTC. While settlement of cash claims occurs
today, it does so away from DTC, in a dispersed fashion. ClaimConnect
would establish a centralized and coordinated location for Participants
to settle such claims and, as described above, include various
functionality, such as a web application, APIs, an Auto-match feature,
an Approval function, and final settlement via SPOs.
Although a cash claim transaction itself is not a securities
transaction, it is the biproduct of a securities transaction and a
Corporate Action event on the securities. By offering a centralized and
coordinated location for Participants to settle cash claims, with
various functionality, the ClaimConnect service is designed to help
Participants more easily settle cash claim activity associated with a
securities transaction. Similarly, by updating the existing Settlement
Service Guide to indicate that not all SPOs will be subject to RAD
(since ClaimConnect SPOs will not be subject to RAD, as explained
above), the guide will help Participants better understand the
clearance and settlement processes.
Finally, by updating the Settlement Guide with more current
information about where Participants and others may direct inquiries
about the DTC
[[Page 67022]]
service guides, the Settlement Guide will provide the most up-to-date
information to help Participants submit questions or comments about the
service guides.
Therefore, for the above reasons, DTC believes that the proposed
rule change will help foster cooperation and coordination with persons
engaged in the clearance and settlement of securities transactions,
consistent with Section 17A(b)(3)(F) of the Act.\24\
---------------------------------------------------------------------------
\24\ Id.
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
DTC does not believe that the adoption of the proposed service
guide to establish the ClaimConnect service or the proposed
modifications to the existing Settlement Guide will have any impact on
competition.
As described above, the ClaimConnect service will be an optional
service (i.e., Participants will have the option to either use
ClaimConnect or continue to settle cash claims away from DTC). Although
DTC believes settling a cash claim via ClaimConnect will offer benefits
over settling such claims away from DTC, those benefits would be
available to all Participants that choose to use the service, including
both the credit and debit sides of any single claim. Meanwhile, the
proposed changes to the Settlement Guide would simply (A) account for
the processing of ClaimConnect SPOs, with respect to RAD, (B) make
related clarifying changes regarding RAD, and (C) update certain
address and contact information in the Copyright section of the
Settlement Guide.
For these reasons, DTC does not believe that the proposed rule
change will have any impact on competition.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
DTC has not received or solicited any written comments relating to
this proposal. 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-2020-012 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-2020-012. 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 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-2020-012 and should be submitted on
or before November 12, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
---------------------------------------------------------------------------
\25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-23260 Filed 10-20-20; 8:45 am]
BILLING CODE 8011-01-P
