Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Add New Fees for DTC's Money Market Instrument Program, 9968-9972 [2021-03090]
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Federal Register / Vol. 86, No. 30 / Wednesday, February 17, 2021 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 22 and Rule
19b–4(f)(2) 23 thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. 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–
MEMX–2021–02 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–MEMX–2021–02. 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
22 15
23 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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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 such
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–MEMX–2021–02, and
should be submitted on or before March
10, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–03087 Filed 2–16–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91098; File No. SR–DTC–
2021–001)]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Add New
Fees for DTC’s Money Market
Instrument Program
February 10, 2021.
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 February
1, 2021, The Depository Trust Company
(‘‘DTC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by DTC. DTC filed
the proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(2) thereunder.4 The
Commission is publishing this notice to
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(2).
1 15
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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 purpose of the proposed rule
change is to amend the Guide to the
DTC Fee Schedule 5 (‘‘Fee Guide’’) to
add new fees within the Corporate
Actions section,6 and specifically as that
section relates to the DTC’s Money
Market Instrument program (‘‘MMI
Program’’),7 as described in greater
detail below.8
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 Fee Guide to add new fees
within the Corporate Actions section,9
and specifically as that section relates to
the MMI Program, as described below.
5 Available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/fee-guides/dtcfeeguide.pdf.
6 See id at 6–8.
7 Pursuant to the Rules, the term ‘‘MMI Program’’
means the Program for transactions in MMI
Securities, as provided in Rule 9(C) and as specified
in the Procedures. See Rule 1, supra note 1.
Pursuant to the Rules, the term ‘‘MMI Securities’’
means an Eligible Security described in the second
paragraph of Section 1 of Rule 5, that would, upon
a determination of eligibility by the Corporation, be
assigned an Acronym by DTC. Id. Under the Rules,
MMI Securities are processed differently than other
Securities. See Rule 9(C), supra note 1; and DTC
Operational Arrangements (Necessary for Securities
to Become and Remain Eligible for DTC Services),
at 3, available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/issue-eligibility/eligibility/
operational-arrangements.pdf. The Procedures
applicable to settlement processing of MMI
Securities are set forth in the DTC Settlement
Service Guide (‘‘Settlement Guide’’), available at
https://www.dtcc.com/∼/media/Files/Downloads/
legal/service-guides/Settlement.pdf.
8 Each capitalized term not otherwise defined
herein has its respective meaning as set forth in the
Rules, By-Laws and Organization Certificate of DTC
(the ‘‘Rules’’), available at https://dtcc.com/∼/media/
Files/Downloads/legal/rules/dtc_rules.pdf.
9 See supra note 5.
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Background
The MMI Program operates using an
automated platform providing MMI
Issuing and Paying Agents 10 (each, an
‘‘IPA’’) with the ability to issue, service,
and settle Securities that are money
market instruments (‘‘MMI Securities’’)
that are processed in DTC’s MMI
Program 11 that they introduce into the
marketplace through DTC. The MMI
Program is designed to provide an IPA
with the capability to process all
corporate action activity associated with
MMI Securities without requiring
manual intervention by DTC. However,
from time to time, IPAs make requests
for adjustments relating to MMI
Securities that require manual
intervention by DTC, as described
below. While MMI Securities processing
is fully automated, the adjustments
require manual intervention by DTC,
introducing settlement and operational
risk to DTC and its Participants, as
described below. DTC does not
currently charge its Participants for
these adjustments.
DTC’s Rules relating to settlement
processing for the MMI Program are
designed, among other things, to limit
settlement risk for DTC and
Participants. In this regard, DTC
implemented rule changes (‘‘MMI Rule
Changes’’) to the MMI Program to
eliminate risks associated with intra-day
reversals of processed MMI obligations
to prevent the possibility that a reversal
could override risk controls and
heighten settlement risk.12
When an issue is made eligible at
DTC, DTC’s system for processing of
10 Pursuant to the Rules, the term (i) ‘‘MMI
Issuing Agent’’ means a Participant, acting as an
issuing agent for an issuer with respect to a
particular issue for MMI Securities of that issuer,
that has executed such agreements as the
Corporation shall require in connection with the
participation of such Participant in the MMI
Program in that capacity, and (ii) ‘‘MMI Paying
Agent’’ means a Participant, acting as a paying
agent for an issuer with respect to a particular issue
of MMI Securities of that issuer, that has executed
such agreements as the Corporation shall require in
connection with the participation of such
Participant in the MMI Program in that capacity.
See Rule 1, supra note 1.
11 Eligibility for inclusion in the MMI Program
covers Securities that are money market
instruments, which are short-term debt Securities
that generally mature 1 to 270 days from their
original issuance date. MMI Securities include, but
are not limited to, commercial paper, banker’s
acceptances and short-term bank notes and are
issued by financial institutions, large corporations,
or state and local governments. Most MMI
Securities trade in large denominations (typically,
$250,000 to $50 million) and are purchased by
institutional investors. Eligibility for inclusion in
the MMI Program also covers medium term notes
that mature over a longer term.
12 See Securities Exchange Act Release No. 79764
(January 9, 2017), 82 FR 4434 (January 13, 2017)
(SR–DTC–2016–008).
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MMI transactions (‘‘MMI System’’)
allows the IPA to create an instruction
to add a CUSIP number 13 (‘‘CUSIP’’)
and security-level details (e.g., interest
rate, maturity date, payment frequency)
to DTC’s masterfile.14 In this regard, the
MMI system provides an IPA with the
ability to issue, inquire about, withdraw
or cancel instructions for all MMI
Securities for which it is the IPA.15
When a maturity date, call date or
payable date (‘‘Event Date’’) for an MMI
Security that is on deposit at DTC
arrives, the event is automatically
processed by the MMI System. First, the
MMI System would require the IPA to
acknowledge its payment obligations
associated with the event.16 Second,
once the transaction is acknowledged by
the IPA, the MMI System would process
the related maturity, redemption or
interest payment, which includes
Deliveries of Securities between
Participants and IPAs, as applicable,
and inclusion of related funds payments
in DTC’s end-of-day settlement.17
If an IPA notifies DTC on or after an
Event Date that the IPA needs to modify
details that impact the processing of an
event, such as changing the Event Date
to a later date, modifying the event type
(e.g., from a principal payment to an
interest payment) or a changing the rate,
this presents DTC and its Participants
with increased settlement and
operational risk that the Rules
applicable to the MMI Program have
been designed to mitigate. In the case of
a change in Event Date once that date
has arrived, because the MMI System
would have begun processing the event,
effecting the change would require DTC
to manually back the event out of the
MMI System and change the Event Date.
In cases where the transaction has been
processed, this would require a reversal
of the transaction, involving movement
of Securities and reversals of funds
credits and debits to the IPA and
Participants holding the affected MMI
Security, that the MMI Rule Change was
intended to eliminate.18 Any resulting
13 A CUSIP number is the identification number
created by the American Banking Association’s
Committee on Uniform Security Identification
Procedures (CUSIP) to uniquely identify issuers and
issues of securities and financial instruments. See
Committee on Uniform Securities Identification
Procedures, available at https://www.aba.com/
about-us/our-story/cusip-securities-identification.
See DTC Underwriting Service Guide
(‘‘Underwriting Guide’’), available at https://
www.dtcc.com/∼/media/Files/Downloads/legal/
service-guides/Underwriting-Service-Guide.pdf at 6.
14 See Underwriting Guide, supra note 13 at 12.
15 See id at 13.
16 See Settlement Guide, supra note 7 at 46–47.
17 See id at 47.
18 Tasks involved for DTC to make an adjustment,
may include, but not be limited to, receiving the
request from the Participant, determining the
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reversals of funds credits to Participants
whose Securities are being redeemed
would create settlement risk for DTC
and Participants if it is in an amount
that places the Participant in a Net Debit
Balance, by potentially causing affected
Participants to be in a position to satisfy
a Net Debit Balance it might not
otherwise have incurred and that would
need to be funded in order to complete
settlement. Operational risk arises as
well since manual intervention is
required to make the reversals which
introduces the possibility of a manual
error by staff making the entries. Similar
risks arise in the case of a modification
of the event type or change in interest
rate, each of which requires manual
intervention by DTC to make the
adjustment requested by the IPA and
potential movement of Securities and/or
reversal of funds credits and debits. In
addition, incorrect information
previously provided by an IPA that
requires adjustment and related to a
transaction that has been acknowledged
by an IPA could present settlement risk
to DTC and Participants in the event
DTC was unable to make the requested
adjustment on that date and the IPA was
not able to meet its related obligation to
make payment for the affected MMI
Securities.
As a Participant, an IPA maintains a
responsibility to check the accuracy,
where applicable, of all statements and
reports received from DTC and to notify
DTC of any discrepancies.19 DTC relies,
among other things, upon the duty of
Participants and other authorized users
to exercise diligence in all aspects of
each transaction processed through
DTC.20 IPAs receive output and have
access to reports on DTC’s MMI System
regarding the status of their issues.
Failure of Participants to correct errors
and discrepancies, including those
relating to data that is provided by them
for MMI Securities they service, such as
Event Dates, types and rates, in a timely
manner may create undue settlement
and operational risk to DTC and its
Participants, such as those described
above.
In this regard, adjustments can
normally be made by an IPA during the
lifecycle of the MMI Security with
minimal intervention by DTC if the
adjustment is made prior to an Event
Date because the MMI System would
positions that would be impacted by the
adjustment, reviewing the positions and obligations
of the affected Participants, and effectuating the
adjustment. Most issues for which adjustments are
requested have many holders, and the processing of
the adjustments causes heightened operational risk
to DTC and its Participants.
19 See Settlement Guide, supra note 7 at 2.
20 Id.
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not yet have begun processing the event.
However, if an IPA does not act to
correct the information for its issue
prior to an Event Date, DTC would
process the event using the existing
information that was previously entered
by the IPA in the MMI System.21 Once
processing on the Event Date has begun,
adjustments require intervention by
DTC in the form of manual entry of
movements of MMI Securities and funds
to effectuate the adjustments. DTC staff
must perform a significant amount of
work to input the adjustment and
ensure it settles accurately in a timely
fashion. Depending on the amount, an
adjustment may have a significant effect
on the amount of a Participant’s net
settlement balance, presenting
settlement risk and settlement
uncertainty to DTC and the Participant.
In addition, the Participant that held an
MMI for which the transaction has been
processed must be contacted, and
agreement by the Participant to the
adjustment must be received, prior to
entering the adjustment, which can
extend the period of uncertainty relating
to settlement of the transaction.
Considering the risks presented by the
processing of adjustments relating to
MMI Securities as discussed above, DTC
is proposing to add new fees to the Fee
Guide to encourage an IPA to
implement practices that promote
efficient market behavior, including
meeting an IPA’s obligations to
reconcile its activity at DTC and ensure
its accuracy in accordance with the
Rules. The fees would be intended to (i)
deter behavior by an IPA, such as the
input of incorrect information and/or a
failure to timely reconcile its MMI
activity, that could result in the IPA
requesting an adjustment that presents
settlement and operational risk to DTC
and its Participants that the MMI Rule
Change was designed to eliminate, and
(ii) encourage IPAs, through
disincentives, to perform the necessary
levels of due diligence and operational
disciplines to fulfill their obligations.
The proposed fees would be set on a
sliding scale, categorized by three types
of adjustment requests, that considers
the level of settlement risk DTC believes
an adjustment type presents to DTC and
its Participants, as described below.
First, adjustments requiring position
reinstatement to reverse a processed
transaction either on Event Date or after
Event Date, would cause the IPA for the
affected MMI Security to incur a fee of
$10,000 per CUSIP. This type of
adjustment would incur the highest of
the three proposed adjustment fee
amounts because it involves the
movement of MMI Securities positions
between an IPA and Participants and
the debit of funds previously credited to
Participants for the redemption of the
MMI Securities. This type of adjustment
presents the highest level of risk as it
involves the reinstatement of the full
position and the debiting of the full
value of an issue that was previously
credited to Participants holding the
issue. This type of adjustment would
present a higher level of settlement risk
than an adjustment of an event type,
such as an interest payment, that would
typically be for a percentage amount
that is less than the full value of the
MMI Securities outstanding for the
CUSIP.
Second, events requiring the
modification of the event type would
cause the IPA for the affected MMI
Security to incur a fee of $7,500 per
CUSIP. This type of adjustment would
incur the second highest fee of the three
proposed adjustment fee categories
because it would typically involve the
movement of Securities and funds,
though not for the entire outstanding
amount of the issue, and therefore
presents potential settlement risk to
DTC and Participants, although
potentially less than if a reinstatement
to reverse a full redemption of a
Security was required to make the
requested adjustment.
Third, events requiring a rate change
and possibly a manual allocation of
funds relating to the corrected rate
would cause the IPA for the affected
issue to incur a charge of $2,000 per
CUSIP. This type of adjustment would
incur the lowest fee amount of the three
proposed adjustment fee categories
because it would involve the movement
of funds, either in the form of an
allocation to, or a debit from,
Participants holding an MMI Security,
and would not involve the movement of
MMI Securities.
Proposed Rule Change
Pursuant to the proposed rule change,
the following entries would be added to
the Fee Guide in the Corporate Actions
section 22 under the heading for ‘‘Agent
Fees’’:
Amount
($)
Fee name
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MMI Position Reinstatement (Maturity Date/Call Date/Payable Date Correction) ...................................................
Event Type Modification (Change of Principal to Interest) .......................................................................................
Rate Change (Post-Payable) And Manual Allocations .............................................................................................
Over the course of the previous two
years, DTC has discussed with impacted
Participants the (i) risks associated with
Participants’ practices with respect to
MMI processing that results in their
requests to make late adjustments and
(ii) proposed fees. While Participants
have been informed of these risks and
the potential for the fee proposal, and,
the requests from Participants for late
adjustments have continued to an extent
that DTC believes the implementation of
proposed fees is necessary to encourage
the Participants to adjust their practices
to avoid the need for the late
adjustments to their MMI activity.
21 The terms of an MMI Security, including
maturity date, redemption dates, and interest rates
are established at the time of the Securities
issuance, and are entered directly by the IPA into
the MMI System in connection with the issuance
of the MMI Security, as described above.
22 See Fee Guide, supra note 5 at 6–8.
23 15 U.S.C. 78q–1(b)(3)(D).
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Implementation Timeframe
The proposed rule change would
become effective upon filing with the
Commission such that the text of the
Fee Guide would be revised as set forth
above.
(2) Statutory Basis
DTC believes that this proposal is
consistent with the requirements of the
Act and the rules and regulations
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10,000
7,500
2,000
Conditions
per CUSIP.
per CUSIP.
per CUSIP.
thereunder applicable to a registered
clearing agency. Specifically, DTC
believes that this proposal is consistent
with Sections 17A(b)(3)(D) 23 and
17A(b)(3)(F) 24 of the Act and Rule
17Ad–22(e)(23)(ii),25 as promulgated
under the Act, for the reasons described
below.
(i) Section 17A(b)(3)(D) of the Act
requires, inter alia, that the Rules
provide for the equitable allocation of
reasonable dues, fees, and other charges
among participants.26 For the reasons
set forth below, DTC believes that the
24 15
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(e)(23)(ii).
26 15 U.S.C. 78q–1(b)(3)(D).
25 17
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proposed rule change described above
would provide for the equitable
allocation of reasonable dues, fees, and
other charges among participants.
DTC believes that the proposed rule
change to add new fees as described
above under a new heading ‘‘MMI
Exception Processing Fees’’ would
provide for the equitable allocation of
reasonable fees.27 Each proposed fee
under this heading would be charged to
a Participant in accordance with the
types and numbers of MMI-related
adjustments requested by a Participant.
In this regard, DTC believes the
proposed MMI exception processing
fees would be equitably allocated
because each Participant that requests
an adjustment relating to an MMI event
that has reached its Event Date would be
charged in accordance with the risk
DTC believes that the Participant’s
exception processing request presents to
DTC and its Participants, based on the
proposed three categories of
adjustments and respective fees, as
described above. Further, DTC believes
that the proposed fees would be
reasonable. As discussed above, the
proposed fees were designed
specifically to incentivize Participants
to accurately input information relating
to MMI Securities and timely address
any discrepancies so as to avoid the
risks to DTC and Participants associated
with exception processing in this
regard. DTC believes that charging fees
in the amounts as proposed would
provide the necessary encouragement to
Participants to adjust their own
practices with respect to MMI
processing so as to avoid (i) the risks
discussed above to DTC and its
Participants associated with late MMI
adjustment processing and (ii) incurring
the proposed fees.
(ii) Section 17A(b)(3)(F) 28 of the Act
requires, inter alia, that the Rules
provide for the prompt and accurate
clearance and settlement of securities
transactions by DTC. DTC believes that
the proposed MMI exception processing
fees, as described above, would provide
for the prompt and accurate clearance
and settlement of securities
transactions, because DTC believes it
would encourage IPAs to make timely
adjustments to MMI issues they are
responsible for, and avoid unexpected
transactions that reverse payments and
Securities movements associated with
MMI transactions that are subject to an
adjustment on or after the relevant
Event Date, Therefore, the proposed rule
change would enhance certainty for
Participants with respect to their
settlement obligations by allowing them
to (i) allocate funds and Securities
accordingly and (ii) promote their
ability to satisfy their settlement
obligations in a timely manner.
(iii) Rule 17Ad–22(e)(23)(ii) under the
Act requires DTC to establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to provide
sufficient information to enable
participants to identify and evaluate the
risks, fees, and other material costs they
incur by participating in DTC.29 DTC
believes that the proposed rule changes
with respect to implementing MMI
exception processing fees would help
ensure that the pricing structure of the
Fee Guide is well-defined and clear to
Participants. Having a well-defined and
clear Fee Guide would help Participants
to better understand the fees and help
provide Participants with increased
predictability and certainty regarding
the fees they incur in participating in
DTC. In this way, DTC believes the
proposed rule changes to the Fee Guide,
as described above, are consistent with
Rule 17Ad–22(e)(23)(ii) under the Act,
cited above.
(B) Clearing Agency’s Statement on
Burden on Competition
Impact on Competition. DTC believes
that the proposed rule change to add
new fees as described above may have
an impact on competition, because these
proposed adjustments could result in a
fee increase to Participants for the
relevant service.30 DTC believes that the
proposed fees for adjustments to MMI
processing requested by Participants
could create a burden on competition by
negatively affecting such Participants’
operating costs. However, DTC believes
that the burden on competition would
not be significant and would be
necessary and appropriate in
furtherance of the purposes of the Act,
as permitted by Section 17A(b)(3)(I) of
the Act.31
Burden on Competition Would Not Be
Significant. DTC believes that any
burden on competition that may be
imposed by the proposed fees for
adjustments would be insignificant
because a Participant can avoid the fee
by submitting adjustments before an
Event Date for a given Security.
Burden on Competition Would Be
Necessary and Appropriate. DTC
believes that any burden on competition
that is created by the proposed fees for
MMI adjustments would be necessary
and appropriate in furtherance of the
CFR 240.17Ad–22(e)(23)(ii).
30 15 U.S.C. 78q–1(b)(3)(I).
31 Id.
27 Id.
28 15
U.S.C. 78q–1(b)(3)(F).
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purposes of the Act, as permitted by
Section 17A(b)(3)(I) of the Act.32 The
proposal necessary to manage the
potential risks posed to the Participants
relating to adjustments, as described
above. The proposal is appropriate
because of the size of the proposed fees
are tied to the underlying risks
associated with adjustment requests, as
described above. Therefore, DTC
believes that any burden on competition
that may be imposed by the proposed
rule changes would be necessary and
appropriate, as permitted by Section
17A(b)(3)(I) of the Act.33
(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
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A) 34 of the Act and paragraph
(f) 35 of Rule 19b–4 thereunder. At any
time within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
DTC–2021–001 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Vanessa Countryman, Secretary,
Securities and Exchange Commission,
32 15
29 17
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9971
U.S.C. 78q–1(b)(3)(I).
33 Id.
34 15
35 17
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U.S.C 78s(b)(3)(A).
CFR 240.19b–4(f).
17FEN1
9972
Federal Register / Vol. 86, No. 30 / Wednesday, February 17, 2021 / Notices
100 F Street NE, Washington, DC
20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
the most significant aspects of such
statements.
All submissions should refer to File
Number SR–DTC–2021–001. 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 such
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–2021–001 and should
be submitted on or before March 10,
2021.
[Release No. 34–91096; File No. SR–
NASDAQ–2021–004]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–03090 Filed 2–16–21; 8:45 am]
jbell on DSKJLSW7X2PROD with NOTICES
BILLING CODE 8011–01–P
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Disseminate Abbreviated Order
Imbalance Information, Amend Certain
Cutoff Times for On-Open Orders
Entered gor Participation in the
Nasdaq Opening Cross and Extend the
Time Period for Accepting Certain
Limit On-Open Orders
February 10, 2021.
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 February
3, 2021, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘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 (i)
disseminate abbreviated order
imbalance information prior to the
dissemination of the Order Imbalance
Indicator, (ii) amend certain cutoff times
for on-open orders entered for
participation in the Nasdaq Opening
Cross and (iii) extend the time period
for accepting certain Limit On Open
Orders.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/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
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
1 15
36 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
20:43 Feb 16, 2021
2 17
Jkt 253001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00068
Fmt 4703
Sfmt 4703
1. Purpose
In July 2017 the Exchange enhanced
the Nasdaq Closing Cross (‘‘Closing
Cross’’) process by allowing customers
to enter Limit-On-Close (‘‘LOC’’) orders
after the first Net Order Imbalance
Indicator is disseminated.3 These
enhancements were designed to
encourage greater participation and
interaction opportunities within the
Nasdaq Closing Cross process and
support stability in the price discovery
process. In March 2019, the Exchange
continued to further improve price
discovery in the Nasdaq Closing Cross
process by creating an Early Order
Imbalance Indicator (‘‘EOII’’) comprised
of certain Net Order Imbalance Indicator
(‘‘NOII’’) information that would
disseminate ten minutes prior to the
market close.4 In conjunction with the
adoption of an EOII, in August 2019, the
Exchange also expanded the order entry
submission time for LOC orders to allow
entries after 3:55 p.m. Eastern Time (all
times noted hereafter are Eastern Time)
and established a second reference price
for late LOC orders.5 The Exchange did
not receive public comments regarding
any of its enhancements to the Closing
Cross process. Given the improvements
in stability and the price discovery
process of the Closing Cross, the
Exchange is proposing similar changes
to the Nasdaq Opening Cross (‘‘Opening
Cross’’).6
The Opening Cross is Nasdaq’s
process for matching orders at the
launch of regular trading hours and is
open to all System Securities.7 The
Opening Cross was designed to create a
robust open that allows for efficient
price discovery through a transparent
automated auction process. Currently,
beginning at 4:00 a.m. ET, Nasdaq
3 See Securities Exchange Act Release No. 81188
(July 21, 2017), 82 FR 35014 (July 27, 2017)
(NASDAQ–2017–061); see also Securities Exchange
Act Release No. 81556 (September 8, 2017), 82 FR
43264 (September 14, 2017) (NASDAQ–2017–061).
4 See Securities Exchange Act Release No. 85292
(March 12, 2019), 84 FR 9848 (March 18, 2019)
(NASDAQ–2019–010).
5 See Securities Exchange Act Release No. 86642
(August 13, 2019), 84 FR 42964 (August 19, 2019)
(NASDAQ–2019–064).
6 See Equity 4, Rule 4752.
7 The term ‘‘System Securities’’ shall mean (1) all
securities listed on Nasdaq and (2) all securities
subject to the Consolidated Tape Association Plan
and the Consolidated Quotation Plan except
securities specifically excluded from trading via a
list of excluded securities posted on
www.nasdaqtrader.com. Equity 1, Section 1.
E:\FR\FM\17FEN1.SGM
17FEN1
]]>Agencies
[Federal Register Volume 86, Number 30 (Wednesday, February 17, 2021)]
[Notices]
[Pages 9968-9972]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03090]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91098; File No. SR-DTC-2021-001)]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Add New Fees for DTC's Money Market Instrument Program
February 10, 2021.
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 February 1, 2021, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by DTC. DTC filed the proposed rule change pursuant
to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(2)
thereunder.\4\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The purpose of the proposed rule change is to amend the Guide to
the DTC Fee Schedule \5\ (``Fee Guide'') to add new fees within the
Corporate Actions section,\6\ and specifically as that section relates
to the DTC's Money Market Instrument program (``MMI Program''),\7\ as
described in greater detail below.\8\
---------------------------------------------------------------------------
\5\ Available at https://www.dtcc.com/~/media/Files/Downloads/
legal/fee-guides/dtcfeeguide.pdf.
\6\ See id at 6-8.
\7\ Pursuant to the Rules, the term ``MMI Program'' means the
Program for transactions in MMI Securities, as provided in Rule 9(C)
and as specified in the Procedures. See Rule 1, supra note 1.
Pursuant to the Rules, the term ``MMI Securities'' means an Eligible
Security described in the second paragraph of Section 1 of Rule 5,
that would, upon a determination of eligibility by the Corporation,
be assigned an Acronym by DTC. Id. Under the Rules, MMI Securities
are processed differently than other Securities. See Rule 9(C),
supra note 1; and DTC Operational Arrangements (Necessary for
Securities to Become and Remain Eligible for DTC Services), at 3,
available at https://www.dtcc.com/~/media/Files/Downloads/legal/
issue-eligibility/eligibility/operational-arrangements.pdf. The
Procedures applicable to settlement processing of MMI Securities are
set forth in the DTC Settlement Service Guide (``Settlement
Guide''), available at https://www.dtcc.com/~/media/Files/Downloads/
legal/service-guides/Settlement.pdf.
\8\ Each capitalized term not otherwise defined herein has its
respective meaning as set forth in the Rules, By-Laws and
Organization Certificate of DTC (the ``Rules''), available at http:/
/dtcc.com/~/media/Files/Downloads/legal/rules/dtc_rules.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.
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 Fee Guide to add new fees
within the Corporate Actions section,\9\ and specifically as that
section relates to the MMI Program, as described below.
---------------------------------------------------------------------------
\9\ See supra note 5.
---------------------------------------------------------------------------
[[Page 9969]]
Background
The MMI Program operates using an automated platform providing MMI
Issuing and Paying Agents \10\ (each, an ``IPA'') with the ability to
issue, service, and settle Securities that are money market instruments
(``MMI Securities'') that are processed in DTC's MMI Program \11\ that
they introduce into the marketplace through DTC. The MMI Program is
designed to provide an IPA with the capability to process all corporate
action activity associated with MMI Securities without requiring manual
intervention by DTC. However, from time to time, IPAs make requests for
adjustments relating to MMI Securities that require manual intervention
by DTC, as described below. While MMI Securities processing is fully
automated, the adjustments require manual intervention by DTC,
introducing settlement and operational risk to DTC and its
Participants, as described below. DTC does not currently charge its
Participants for these adjustments.
---------------------------------------------------------------------------
\10\ Pursuant to the Rules, the term (i) ``MMI Issuing Agent''
means a Participant, acting as an issuing agent for an issuer with
respect to a particular issue for MMI Securities of that issuer,
that has executed such agreements as the Corporation shall require
in connection with the participation of such Participant in the MMI
Program in that capacity, and (ii) ``MMI Paying Agent'' means a
Participant, acting as a paying agent for an issuer with respect to
a particular issue of MMI Securities of that issuer, that has
executed such agreements as the Corporation shall require in
connection with the participation of such Participant in the MMI
Program in that capacity. See Rule 1, supra note 1.
\11\ Eligibility for inclusion in the MMI Program covers
Securities that are money market instruments, which are short-term
debt Securities that generally mature 1 to 270 days from their
original issuance date. MMI Securities include, but are not limited
to, commercial paper, banker's acceptances and short-term bank notes
and are issued by financial institutions, large corporations, or
state and local governments. Most MMI Securities trade in large
denominations (typically, $250,000 to $50 million) and are purchased
by institutional investors. Eligibility for inclusion in the MMI
Program also covers medium term notes that mature over a longer
term.
---------------------------------------------------------------------------
DTC's Rules relating to settlement processing for the MMI Program
are designed, among other things, to limit settlement risk for DTC and
Participants. In this regard, DTC implemented rule changes (``MMI Rule
Changes'') to the MMI Program to eliminate risks associated with intra-
day reversals of processed MMI obligations to prevent the possibility
that a reversal could override risk controls and heighten settlement
risk.\12\
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release No. 79764 (January 9,
2017), 82 FR 4434 (January 13, 2017) (SR-DTC-2016-008).
---------------------------------------------------------------------------
When an issue is made eligible at DTC, DTC's system for processing
of MMI transactions (``MMI System'') allows the IPA to create an
instruction to add a CUSIP number \13\ (``CUSIP'') and security-level
details (e.g., interest rate, maturity date, payment frequency) to
DTC's masterfile.\14\ In this regard, the MMI system provides an IPA
with the ability to issue, inquire about, withdraw or cancel
instructions for all MMI Securities for which it is the IPA.\15\
---------------------------------------------------------------------------
\13\ A CUSIP number is the identification number created by the
American Banking Association's Committee on Uniform Security
Identification Procedures (CUSIP) to uniquely identify issuers and
issues of securities and financial instruments. See Committee on
Uniform Securities Identification Procedures, available at https://www.aba.com/about-us/our-story/cusip-securities-identification. See
DTC Underwriting Service Guide (``Underwriting Guide''), available
at https://www.dtcc.com/~/media/Files/Downloads/legal/service-guides/
Underwriting-Service-Guide.pdf at 6.
\14\ See Underwriting Guide, supra note 13 at 12.
\15\ See id at 13.
---------------------------------------------------------------------------
When a maturity date, call date or payable date (``Event Date'')
for an MMI Security that is on deposit at DTC arrives, the event is
automatically processed by the MMI System. First, the MMI System would
require the IPA to acknowledge its payment obligations associated with
the event.\16\ Second, once the transaction is acknowledged by the IPA,
the MMI System would process the related maturity, redemption or
interest payment, which includes Deliveries of Securities between
Participants and IPAs, as applicable, and inclusion of related funds
payments in DTC's end-of-day settlement.\17\
---------------------------------------------------------------------------
\16\ See Settlement Guide, supra note 7 at 46-47.
\17\ See id at 47.
---------------------------------------------------------------------------
If an IPA notifies DTC on or after an Event Date that the IPA needs
to modify details that impact the processing of an event, such as
changing the Event Date to a later date, modifying the event type
(e.g., from a principal payment to an interest payment) or a changing
the rate, this presents DTC and its Participants with increased
settlement and operational risk that the Rules applicable to the MMI
Program have been designed to mitigate. In the case of a change in
Event Date once that date has arrived, because the MMI System would
have begun processing the event, effecting the change would require DTC
to manually back the event out of the MMI System and change the Event
Date. In cases where the transaction has been processed, this would
require a reversal of the transaction, involving movement of Securities
and reversals of funds credits and debits to the IPA and Participants
holding the affected MMI Security, that the MMI Rule Change was
intended to eliminate.\18\ Any resulting reversals of funds credits to
Participants whose Securities are being redeemed would create
settlement risk for DTC and Participants if it is in an amount that
places the Participant in a Net Debit Balance, by potentially causing
affected Participants to be in a position to satisfy a Net Debit
Balance it might not otherwise have incurred and that would need to be
funded in order to complete settlement. Operational risk arises as well
since manual intervention is required to make the reversals which
introduces the possibility of a manual error by staff making the
entries. Similar risks arise in the case of a modification of the event
type or change in interest rate, each of which requires manual
intervention by DTC to make the adjustment requested by the IPA and
potential movement of Securities and/or reversal of funds credits and
debits. In addition, incorrect information previously provided by an
IPA that requires adjustment and related to a transaction that has been
acknowledged by an IPA could present settlement risk to DTC and
Participants in the event DTC was unable to make the requested
adjustment on that date and the IPA was not able to meet its related
obligation to make payment for the affected MMI Securities.
---------------------------------------------------------------------------
\18\ Tasks involved for DTC to make an adjustment, may include,
but not be limited to, receiving the request from the Participant,
determining the positions that would be impacted by the adjustment,
reviewing the positions and obligations of the affected
Participants, and effectuating the adjustment. Most issues for which
adjustments are requested have many holders, and the processing of
the adjustments causes heightened operational risk to DTC and its
Participants.
---------------------------------------------------------------------------
As a Participant, an IPA maintains a responsibility to check the
accuracy, where applicable, of all statements and reports received from
DTC and to notify DTC of any discrepancies.\19\ DTC relies, among other
things, upon the duty of Participants and other authorized users to
exercise diligence in all aspects of each transaction processed through
DTC.\20\ IPAs receive output and have access to reports on DTC's MMI
System regarding the status of their issues. Failure of Participants to
correct errors and discrepancies, including those relating to data that
is provided by them for MMI Securities they service, such as Event
Dates, types and rates, in a timely manner may create undue settlement
and operational risk to DTC and its Participants, such as those
described above.
---------------------------------------------------------------------------
\19\ See Settlement Guide, supra note 7 at 2.
\20\ Id.
---------------------------------------------------------------------------
In this regard, adjustments can normally be made by an IPA during
the lifecycle of the MMI Security with minimal intervention by DTC if
the adjustment is made prior to an Event Date because the MMI System
would
[[Page 9970]]
not yet have begun processing the event. However, if an IPA does not
act to correct the information for its issue prior to an Event Date,
DTC would process the event using the existing information that was
previously entered by the IPA in the MMI System.\21\ Once processing on
the Event Date has begun, adjustments require intervention by DTC in
the form of manual entry of movements of MMI Securities and funds to
effectuate the adjustments. DTC staff must perform a significant amount
of work to input the adjustment and ensure it settles accurately in a
timely fashion. Depending on the amount, an adjustment may have a
significant effect on the amount of a Participant's net settlement
balance, presenting settlement risk and settlement uncertainty to DTC
and the Participant. In addition, the Participant that held an MMI for
which the transaction has been processed must be contacted, and
agreement by the Participant to the adjustment must be received, prior
to entering the adjustment, which can extend the period of uncertainty
relating to settlement of the transaction.
---------------------------------------------------------------------------
\21\ The terms of an MMI Security, including maturity date,
redemption dates, and interest rates are established at the time of
the Securities issuance, and are entered directly by the IPA into
the MMI System in connection with the issuance of the MMI Security,
as described above.
---------------------------------------------------------------------------
Considering the risks presented by the processing of adjustments
relating to MMI Securities as discussed above, DTC is proposing to add
new fees to the Fee Guide to encourage an IPA to implement practices
that promote efficient market behavior, including meeting an IPA's
obligations to reconcile its activity at DTC and ensure its accuracy in
accordance with the Rules. The fees would be intended to (i) deter
behavior by an IPA, such as the input of incorrect information and/or a
failure to timely reconcile its MMI activity, that could result in the
IPA requesting an adjustment that presents settlement and operational
risk to DTC and its Participants that the MMI Rule Change was designed
to eliminate, and (ii) encourage IPAs, through disincentives, to
perform the necessary levels of due diligence and operational
disciplines to fulfill their obligations. The proposed fees would be
set on a sliding scale, categorized by three types of adjustment
requests, that considers the level of settlement risk DTC believes an
adjustment type presents to DTC and its Participants, as described
below.
First, adjustments requiring position reinstatement to reverse a
processed transaction either on Event Date or after Event Date, would
cause the IPA for the affected MMI Security to incur a fee of $10,000
per CUSIP. This type of adjustment would incur the highest of the three
proposed adjustment fee amounts because it involves the movement of MMI
Securities positions between an IPA and Participants and the debit of
funds previously credited to Participants for the redemption of the MMI
Securities. This type of adjustment presents the highest level of risk
as it involves the reinstatement of the full position and the debiting
of the full value of an issue that was previously credited to
Participants holding the issue. This type of adjustment would present a
higher level of settlement risk than an adjustment of an event type,
such as an interest payment, that would typically be for a percentage
amount that is less than the full value of the MMI Securities
outstanding for the CUSIP.
Second, events requiring the modification of the event type would
cause the IPA for the affected MMI Security to incur a fee of $7,500
per CUSIP. This type of adjustment would incur the second highest fee
of the three proposed adjustment fee categories because it would
typically involve the movement of Securities and funds, though not for
the entire outstanding amount of the issue, and therefore presents
potential settlement risk to DTC and Participants, although potentially
less than if a reinstatement to reverse a full redemption of a Security
was required to make the requested adjustment.
Third, events requiring a rate change and possibly a manual
allocation of funds relating to the corrected rate would cause the IPA
for the affected issue to incur a charge of $2,000 per CUSIP. This type
of adjustment would incur the lowest fee amount of the three proposed
adjustment fee categories because it would involve the movement of
funds, either in the form of an allocation to, or a debit from,
Participants holding an MMI Security, and would not involve the
movement of MMI Securities.
Proposed Rule Change
Pursuant to the proposed rule change, the following entries would
be added to the Fee Guide in the Corporate Actions section \22\ under
the heading for ``Agent Fees'':
---------------------------------------------------------------------------
\22\ See Fee Guide, supra note 5 at 6-8.
------------------------------------------------------------------------
Fee name Amount ($) Conditions
------------------------------------------------------------------------
MMI Position Reinstatement 10,000 per CUSIP.
(Maturity Date/Call Date/Payable
Date Correction).
Event Type Modification (Change 7,500 per CUSIP.
of Principal to Interest).
Rate Change (Post-Payable) And 2,000 per CUSIP.
Manual Allocations.
------------------------------------------------------------------------
Over the course of the previous two years, DTC has discussed with
impacted Participants the (i) risks associated with Participants'
practices with respect to MMI processing that results in their requests
to make late adjustments and (ii) proposed fees. While Participants
have been informed of these risks and the potential for the fee
proposal, and, the requests from Participants for late adjustments have
continued to an extent that DTC believes the implementation of proposed
fees is necessary to encourage the Participants to adjust their
practices to avoid the need for the late adjustments to their MMI
activity.
Implementation Timeframe
The proposed rule change would become effective upon filing with
the Commission such that the text of the Fee Guide would be revised as
set forth above.
(2) Statutory Basis
DTC believes that this proposal is consistent with the requirements
of the Act and the rules and regulations thereunder applicable to a
registered clearing agency. Specifically, DTC believes that this
proposal is consistent with Sections 17A(b)(3)(D) \23\ and 17A(b)(3)(F)
\24\ of the Act and Rule 17Ad-22(e)(23)(ii),\25\ as promulgated under
the Act, for the reasons described below.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78q-1(b)(3)(D).
\24\ 15 U.S.C. 78q-1(b)(3)(F).
\25\ 17 CFR 240.17Ad-22(e)(23)(ii).
---------------------------------------------------------------------------
(i) Section 17A(b)(3)(D) of the Act requires, inter alia, that the
Rules provide for the equitable allocation of reasonable dues, fees,
and other charges among participants.\26\ For the reasons set forth
below, DTC believes that the
[[Page 9971]]
proposed rule change described above would provide for the equitable
allocation of reasonable dues, fees, and other charges among
participants.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78q-1(b)(3)(D).
---------------------------------------------------------------------------
DTC believes that the proposed rule change to add new fees as
described above under a new heading ``MMI Exception Processing Fees''
would provide for the equitable allocation of reasonable fees.\27\ Each
proposed fee under this heading would be charged to a Participant in
accordance with the types and numbers of MMI-related adjustments
requested by a Participant. In this regard, DTC believes the proposed
MMI exception processing fees would be equitably allocated because each
Participant that requests an adjustment relating to an MMI event that
has reached its Event Date would be charged in accordance with the risk
DTC believes that the Participant's exception processing request
presents to DTC and its Participants, based on the proposed three
categories of adjustments and respective fees, as described above.
Further, DTC believes that the proposed fees would be reasonable. As
discussed above, the proposed fees were designed specifically to
incentivize Participants to accurately input information relating to
MMI Securities and timely address any discrepancies so as to avoid the
risks to DTC and Participants associated with exception processing in
this regard. DTC believes that charging fees in the amounts as proposed
would provide the necessary encouragement to Participants to adjust
their own practices with respect to MMI processing so as to avoid (i)
the risks discussed above to DTC and its Participants associated with
late MMI adjustment processing and (ii) incurring the proposed fees.
---------------------------------------------------------------------------
\27\ Id.
---------------------------------------------------------------------------
(ii) Section 17A(b)(3)(F) \28\ of the Act requires, inter alia,
that the Rules provide for the prompt and accurate clearance and
settlement of securities transactions by DTC. DTC believes that the
proposed MMI exception processing fees, as described above, would
provide for the prompt and accurate clearance and settlement of
securities transactions, because DTC believes it would encourage IPAs
to make timely adjustments to MMI issues they are responsible for, and
avoid unexpected transactions that reverse payments and Securities
movements associated with MMI transactions that are subject to an
adjustment on or after the relevant Event Date, Therefore, the proposed
rule change would enhance certainty for Participants with respect to
their settlement obligations by allowing them to (i) allocate funds and
Securities accordingly and (ii) promote their ability to satisfy their
settlement obligations in a timely manner.
---------------------------------------------------------------------------
\28\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
(iii) Rule 17Ad-22(e)(23)(ii) under the Act requires DTC to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide sufficient information to
enable participants to identify and evaluate the risks, fees, and other
material costs they incur by participating in DTC.\29\ DTC believes
that the proposed rule changes with respect to implementing MMI
exception processing fees would help ensure that the pricing structure
of the Fee Guide is well-defined and clear to Participants. Having a
well-defined and clear Fee Guide would help Participants to better
understand the fees and help provide Participants with increased
predictability and certainty regarding the fees they incur in
participating in DTC. In this way, DTC believes the proposed rule
changes to the Fee Guide, as described above, are consistent with Rule
17Ad-22(e)(23)(ii) under the Act, cited above.
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\29\ 17 CFR 240.17Ad-22(e)(23)(ii).
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(B) Clearing Agency's Statement on Burden on Competition
Impact on Competition. DTC believes that the proposed rule change
to add new fees as described above may have an impact on competition,
because these proposed adjustments could result in a fee increase to
Participants for the relevant service.\30\ DTC believes that the
proposed fees for adjustments to MMI processing requested by
Participants could create a burden on competition by negatively
affecting such Participants' operating costs. However, DTC believes
that the burden on competition would not be significant and would be
necessary and appropriate in furtherance of the purposes of the Act, as
permitted by Section 17A(b)(3)(I) of the Act.\31\
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\30\ 15 U.S.C. 78q-1(b)(3)(I).
\31\ Id.
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Burden on Competition Would Not Be Significant. DTC believes that
any burden on competition that may be imposed by the proposed fees for
adjustments would be insignificant because a Participant can avoid the
fee by submitting adjustments before an Event Date for a given
Security.
Burden on Competition Would Be Necessary and Appropriate. DTC
believes that any burden on competition that is created by the proposed
fees for MMI adjustments would be necessary and appropriate in
furtherance of the purposes of the Act, as permitted by Section
17A(b)(3)(I) of the Act.\32\ The proposal necessary to manage the
potential risks posed to the Participants relating to adjustments, as
described above. The proposal is appropriate because of the size of the
proposed fees are tied to the underlying risks associated with
adjustment requests, as described above. Therefore, DTC believes that
any burden on competition that may be imposed by the proposed rule
changes would be necessary and appropriate, as permitted by Section
17A(b)(3)(I) of the Act.\33\
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\32\ 15 U.S.C. 78q-1(b)(3)(I).
\33\ Id.
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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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) \34\ of the Act and paragraph (f) \35\ of Rule 19b-4
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\34\ 15 U.S.C 78s(b)(3)(A).
\35\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-DTC-2021-001 on the subject line.
Paper Comments
Send paper comments in triplicate to Vanessa Countryman,
Secretary, Securities and Exchange Commission,
[[Page 9972]]
100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-DTC-2021-001. 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 such 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-2021-001 and
should be submitted on or before March 10, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-03090 Filed 2-16-21; 8:45 am]
BILLING CODE 8011-01-P
