Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Consisting of Modifications to the Text of the Rules and the Procedures, of the Service Guide for the DTC Canadian-Link Service and the DTC Operational Arrangements Relating to the Elimination of the Canadian Dollar Settlement Feature of the Canadian-Link Service, 38381-38389 [2021-15345]
Download as PDF
<![CDATA[
Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
burden on competition. The term
‘‘electronic order book’’ makes clear that
specific order book being described.
The Exchange’s proposal to amend
Options 8, Section 28(g) to provide that
Floor Brokers may enter limit, market,
stop-limit or stop orders into the
electronic order book does not impose
an undue burden on competition.
Currently, Options 8, Section 28(g) only
refers to limit orders when it should
have also noted market, stop-limit and
stop orders. The Exchange notes that
Floor Brokers may also utilize market,
stop-limit and stop orders to clear
resting Customers orders from the
electronic order book. Today, placing
market, stop-limit and stop orders on
the electronic order book does not
require exposure in open outcry.
Options 10, Section 20
The Exchange proposes to update a
reference to Phx Rule 1049 within
Options 10, Section 20, Options
Communications, and replace ‘‘Nasdaq
PHLX’’ throughout this rule with ‘‘Phlx’’
are non-substantive amendments that
will clarify the Rulebook.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
khammond on DSKJM1Z7X2PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 22 and
subparagraph (f)(6) of Rule 19b–4
thereunder.23
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
22 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
23 17
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Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
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–
Phlx–2021–41 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–Phlx–2021–41. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–Phlx–2021–41 and should
be submitted on or before August 10,
2021.
Frm 00118
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–15339 Filed 7–19–21; 8:45 am]
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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38381
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92410; File No. SR–DTC–
2021–012]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Consisting of
Modifications to the Text of the Rules
and the Procedures, of the Service
Guide for the DTC Canadian-Link
Service and the DTC Operational
Arrangements Relating to the
Elimination of the Canadian Dollar
Settlement Feature of the CanadianLink Service
July 14, 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 July 12,
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 the clearing
agency. DTC filed the proposed rule
change pursuant to Section 19(b)(3)(A)
of the Act 3 and Rule 19b–4(f)(4)
thereunder.4 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 of DTC 5
consists of modifications to the text of
the Rules and the Procedures,6
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)(4).
5 Capitalized terms not defined herein are defined
in the Rules, By-Laws, and Organization Certificate
of DTC (‘‘Rules’’), available at www.dtcc.com/∼/
media/Files/Downloads/legal/rules/dtc_rules.pdf
and the Guide.
6 Pursuant to the Rules, the term ‘‘Procedures’’
means the Procedures, service guides, and
regulations of DTC adopted pursuant to Rule 27, as
amended from time to time. See Rule 1, Section 1,
supra note 5. Pursuant to Rule 27, each Participant
and DTC is bound by the Procedures and any
amendment thereto in the same manner as it is
1 15
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Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
including Rule 30, of the service guide
(‘‘Guide’’) 7 for the DTC Canadian-Link
Service (‘‘Canadian-Link Service’’) and
the DTC Operational Arrangements
(Necessary for Securities to Become and
Remain Eligible for DTC Services)
(‘‘OA’’) 8 relating to the elimination of
the Canadian dollar (‘‘CAD’’) settlement
feature of the Canadian-Link Service, as
described below.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The proposed rule change consists of
modifications to the text of the Rules
and the Procedures, including Rule 30,9
the Guide and the OA relating to the
elimination of the CAD settlement
feature of the Canadian-Link Service, as
described below.
Background
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In 2006, DTC established a
‘‘northbound’’ Canadian-Link Service
that supports transactions settled in
CAD.10 Rule 30 11 describes the
operation of the Canadian-Link Service,
that permits DTC Participants using the
Canadian Link Service (‘‘Canadian-Link
Participants’’) to (A) settle Delivery
Versus Payment (‘‘DVP’’) Securities
transactions with participants (‘‘CDS
Participants’’) of The Canadian
Depository for Securities Limited
(‘‘CDS’’) and other Canadian-Link
Participants in CAD and (B) transfer
CAD to or receive CAD from CDS
Participants and other Canadian-Link
bound by the Rules. See Rule 27 at 97, supra note
5.
7 Available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/service-guides/Canadian_
Dollar_Settlement.pdf.
8 Available at https://www.dtcc.com/∼/media/
Files/Downloads/legal/issue-eligibility/eligibility/
operational-arrangements.pdf.
9 Supra note 5.
10 See Securities Exchange Act Release No. 52784
(November 16, 2005), 70 FR 70902 (November 23,
2005) (SR–DTC–2005–08).
11 Supra note 5.
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17:00 Jul 19, 2021
Jkt 253001
Participants without any corresponding
delivery or receipt of Securities.12
The Canadian-Link Service provides
Participants with a single depository
interface for CAD transactions. The link
facilitates Participants’ ability to
maintain U.S. and Canadian Security
positions in their DTC accounts for
Securities listed in both Canada and the
United States (i.e., dually listed). This
eliminates the need for Participants to
maintain separate positions in an
eligible 13 Security in CDS for CAD
settlements and in DTC for USD
settlements. It also eliminates the need
for Participants to reposition Securities
inventory between DTC and CDS in
preparation for corporate action events
and or transaction processing for dually
listed issues.
Transactions between Canadian-Link
Participants and CDS Participants are
processed through an omnibus account
maintained by DTC at CDS (‘‘DTC
Omnibus Account’’) in accordance with
the rules and procedures of CDS.
Canadian-Link Participants are able (i)
to deliver Securities to or receive
Securities from CDS Participants against
payment (i.e., DVP) in CAD and (ii) to
transfer funds to or receive funds from
CDS Participants in CAD without any
corresponding delivery or receipt of
Securities. Transactions between
Canadian-Link Participants and other
Canadian-Link Participants are
processed through accounts at DTC in
accordance with the Rules.
For both transactions (i) between
Canadian-Link Participants and CDS
Participants processed through the DTC
Omnibus Account and (ii) between
Canadian-Link Participants and other
Canadian-Link Participants processed
through accounts at DTC, there is a
single end-of-day CAD money
settlement between DTC and its
Canadian-Link Participants.14 For the
12 The Canadian-Link Service also provides for
Cross-Border USD Securities Transactions between
Participants and CDS Participants. See Rule 30,
Section 1(a)(2), supra note 5. See also Securities
Exchange Act Release No. 55239 (February 5, 2007),
72 FR 6797 (February 13, 2007) (SR–DTC–2006–15).
13 DTC may determine the Securities that are
eligible for the Canadian-Link Service. Some
Securities may be eligible for all purposes of the
Canadian-Link Service, and some Securities may be
eligible only for limited purposes (e.g., clearance
and settlement through the facilities of CDS but
only custody and asset servicing through the
facilities of DTC). See Rule 30, Section 4, supra note
5.
14 Pursuant to Section 1(h)(15) of Rule 30, the
term ‘‘Canadian-Link CAD Money Settlement’’ is
defined as the money settlement of Canadian-Link
Transactions in CAD Funds between the DTC and
Canadian-Link Participants. Rule 30, supra note 5.
DTC notes that in a list of defined terms at the
beginning of Rule 30, the definition of CanadianLink CAD Money Settlement is specified to appear
in Section 1(a)(15); however, the definition actually
PO 00000
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Sfmt 4703
transactions between Canadian-Link
Participants and CDS Participants
processed through the DTC Omnibus
Account, there is a separate end-of-day
CAD money settlement between CDS
and DTC.
As with all transactions processed at
DTC, DTC maintains risk controls with
respect to transactions processed by
Canadian-Link Participants, including
the Net Debit Cap and Collateral
Monitor.15 With respect to Collateral
Monitor, each Canadian-Link
Participant has a single Collateral
Monitor with respect to transactions
processed for such Participant through
the Canadian-Link Service and other
transactions processed by DTC for such
Participant.
Proposed Rule Change
In recent years, activity at DTC in
CAD has accounted for less than 0.20
percent of DTC’s average daily valued
settlement volume. Most of this activity
relates to distributions such as
principal, interest and dividend
payments in Securities held at CDS by
DTC on behalf of Participants. While
Participants continue to use the
Canadian-Link Service for custody
purposes to position Securities
inventory at CDS through DTC’s CDS
account and receive related distribution
payments, no Participants have
effectuated a DVP of Securities through
the Canadian-Link Service since 2018.
DTC attributes this lack of DVP activity
to a lack of demand among its
Participants for the DVP aspect of the
Canadian-Link Service.
CDS recently communicated to CDS’s
participants, including DTC, that it will
be modernizing its settlement system
through an initiative referred to as the
Post Trade Modernization (‘‘CDS PTM’’)
Project.16 For DTC to continue to
maintain access to CDS’s CAD
settlement services, it would have been
necessary for DTC to perform systems
development in order to be able to
continue to use this aspect of the
Canadian-Link service. However, the
CDS modernization does not adversely
impact DTC’s ability to hold Securities
appears in Section 1(h)(15) of Rule 30 and not
Section 1(a)(15) of Rule 30. Id.
15 The term ‘‘Collateral Monitor’’ of a Participant,
as used with respect to its obligations to the
Corporation, means, on any Business Day, the
record maintained by the Corporation for the
Participant which records, in the manner specified
in Procedures, the algebraic sum of (i) the Net
Credit or Debit Balance of the Participant and (ii)
the aggregate Collateral Value of the Collateral of
the Participant. Rule 1, Section 1 at 3, supra note
5.
16 See CDS’s website at https://www.cds.ca/
about/post-trade-modernization for information
published by CDS regarding CDS PTM.
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Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
at CDS on behalf of Participants, receive
distributions on behalf of Participants
and facilitate Free Deliveries 17 through
the link.
Rule 30, Section 2 provides:
The Corporation has entered into various
agreements with CDS, and as a participant of
CDS has undertaken to abide by the rules,
procedures and user guides of CDS (the
‘‘Rules and Procedures of CDS’’). Such
agreements and the Rules and Procedures of
CDS, as the same may be amended or
supplemented from time to time, are
collectively referred to as the ‘‘CDS
Documents’’. Notwithstanding anything else
contained in this Rule 30 or otherwise in the
Rules and Procedures of the Corporation, the
Corporation shall offer the Canadian-Link
Service only for so long as the Corporation
continues to be a participant of CDS and
there have been no changes in the CDS
Documents, or actions taken by CDS, which
would, in the judgment of the Corporation,
prevent or impair the ability of the
Corporation to offer the Canadian-Link
Service or make it impractical or onerous for
the Corporation to do so.
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DTC has determined that it would no
longer be able to access CDS’s CAD
settlement service without making
necessary system changes consistent
with CDS PTM. In DTC’s judgement, it
would be impractical for DTC to incur
the costs to undertake such changes,
including incurring development costs,
due to the lack of demand by its
Participants to use the valued aspect of
the Canadian Link Service.
In this regard, because there is no
Participant demand for valued CAD
Securities transaction and CAD Funds
transfer aspect of the Canadian-Link
Service, it is DTC’s judgement that it
would be impractical for DTC to
continue to process valued CAD
Securities and CAD Funds transfer
transactions and, in accordance with its
discretion set forth in Rule 30 as
described above, DTC has discontinued
processing of CAD Securities and CAD
Funds transactions through the
Canadian-Link Service.18 DTC proposes
to amend the Rules to clarify its Rules
in this regard and reflect the elimination
of the function of processing of CAD
Securities and CAD Funds transactions
pursuant to the provisions of Rule 30,
Section 2.19 However, because the CDS
PTM changes are not expected to
materially impact DTC’s ability to
perform custody and process Free
Deliveries at CDS, DTC would continue
17 Pursuant to Rule 1, the term ‘‘Free Delivery’’
means a Delivery free of any payment by the
Receiver through the facilities of the Corporation,
as provided in Rule 9(B) and as specified in the
Procedures. See supra note 5.
18 See DTC Important Notice 13639–20 (July 10,
2020). Available at https://www.dtcc.com/-/media/
Files/pdf/2020/7/10/13639-20.pdf.
19 Supra note 5.
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17:00 Jul 19, 2021
Jkt 253001
to maintain its membership, including
its Securities account, at CDS, to hold
Securities on behalf of DTC Participants
at CDS and offer the functionality
allowing Participants the ability to
process Free Deliveries through the
Canadian-Link Service. In addition,
DTC would continue to pass
distributions paid on Securities held in
its DTC account to the applicable
Participants in CAD or USD.20
In this regard, DTC proposes to
update the text of its Rules to reflect the
discontinuance of processing valued
CAD Securities transactions and CAD
Funds transfers through the CanadianLink Service.
Proposed Rule Changes
Proposed Changes to Rulebook
Pursuant to the proposed rule change,
DTC will delete text in Rule 30 relating
to the processing of CAD transactions in
the Canadian-Link Service, including as
follows.
Defined Terms
Defined terms relating to the
description of the processing of CAD
transactions in Rule 30 would be
deleted, including CAD Funds,21
Canadian-Link CAD Money
Settlement,22 Canadian-Link CAD Net
Debit Cap,23 Canadian-Link CAD Net
Settlement Credit,24 Canadian-Link
CAD Settlement Debit,25 Canadian-Link
Funds Transactions,26 Canadian-Link
Net Debit Cap,27 Canadian-Link Net
OA at 23–27, supra note 8.
to Section 1(h)(3) of Rule 30, the term
‘‘CAD Funds’’ are defined as funds denominated in
Canadian dollars. See Rule 30, supra note 5.
22 See supra note 14.
23 Pursuant to Section 8(a) of Rule 30, the term
‘‘Canadian-Link CAD Net Debit Cap’’ is defined as
a limit established by DTC (i) on the negative CAD
Funds balance that may, from time to time, be
incurred by a Canadian-Link Participant in respect
of Canadian-Link Transactions processed for such
Participant through the Canadian-Link Service in
CAD Funds. See Rule 30, supra note 5.
24 Pursuant to Rule 30, Section 12(b), the term
‘‘Canadian-Link CAD Net Settlement Credit’’ is
defined as the net amount of CAD Funds, calculated
by DTC by a time on a CDS Business Day set forth
in the Procedures, payable by DTC to a CanadianLink Participant. Id.
25 Pursuant to Rule 30, Section 12(b), the term
‘‘Canadian-Link CAD Net Settlement Debit’’ is
defined as the net amount of CAD Funds, calculated
by DTC by a time on a CDS Business Day set forth
in the Procedures, payable to DTC by a CanadianLink Participant. Id.
26 Pursuant to Rule 30, Section 1(h)(8), the term
‘‘Canadian-Link Funds Transactions’’ is defined as
Cross-Border CAD Funds Transactions and IntraDTC CAD Funds Transactions, referred to
individually or collectively as the context may
require. Id.
27 Pursuant to Rule 30, Section 8(a), the term
‘‘Canadian-Link Net Debit Cap’’ is defined as the
Canadian-Link CAD Net Debit Cap and CanadianLink USD Net Debit Cap referred to, individually
or collectively as the context may require. This
PO 00000
20 See
21 Pursuant
Frm 00120
Fmt 4703
Sfmt 4703
38383
Settlement Credit,28 Canadian-Link Net
Settlement Debit,29 Canadian-Link
Participants Fund Cash,30 CanadianLink Required Participants Fund
Deposit,31 Canadian-Link USD Net Debit
Cap,32 Canadian-Link USD Net
Settlement Credit,33 Canadian-Link USD
Net Settlement Debit,34 CDS Payment
Exchange,35 Canadian-Link Securities
section provides that the Canadian-Link Net Debit
Cap of each Canadian-Link Participant shall be
determined by a formula (taking into account the
volume of Canadian-Link Transactions of each
Canadian-Link Participant) that shall be fixed by
DTC and set forth in the Procedures. Id.
28 Pursuant to Rule 30, Section 12(b), the term
‘‘Canadian-Link Net Settlement Credit’’ is defined
as the Canadian-Link CAD Net Settlement Credit
and Canadian-Link USD Net Settlement Credit
referred to, individually or collectively as the
context may require. Id.
29 Pursuant to Rule 30, Section 12(b), the term
‘‘Canadian-Link Net Settlement Debit’’ is defined as
the Canadian-Link CAD Net Settlement Debit and
Canadian-Link USD Net Settlement Debit referred
to, individually or collectively as the context may
require. Id.
30 Pursuant to Rule 30, Section 6(c), the term
‘‘Canadian-Link Participants Fund Cash’’ is defined
as that portion of the cash in the Participants Fund
equal to the aggregate amount of the Canadian-Link
Required Participants Fund Deposits of all
Canadian-Link Participants. Id.
31 Pursuant to Rule 30, Section 6(a), the term
‘‘Canadian-Link Required Participant Fund
Deposit’’ is defined as an amount each CanadianLink Participant shall be required to deposit to the
Participants Fund (as described in Section 1 of Rule
4) an amount of USD Funds in addition to the
amount of USD Funds specified in Section 1(a)(i)
of Rule 4. The Canadian-Link Required Participants
Fund Deposit shall be in cash. The Canadian-Link
Required Participants Fund Deposit of each
Canadian-Link Participant shall be determined by a
formula (considering the volume of transactions of
each Canadian-Link Participant) that shall be fixed
by the DTC and set forth in the Procedures. DTC
may, from time to time, change the formula for
determining the Canadian-Link Required
Participants Fund Deposits of Canadian-Link
Participants; provided, however, that notice of such
change shall be given to each Canadian-Link
Participant at least ten Business Days in advance of
the effective date thereof. Id.
32 Pursuant to Rule 30, Section 8(a), a ‘‘CanadianLink USD Net Debit Cap’’ is to be established by
DTC on the negative USD Funds balance that may,
from time to time, be incurred by a Canadian-Link
Participant in respect to Canadian-Link
Transactions processed for such Participant through
the Canadian-Link Service in USD Funds. Id.
33 Pursuant to Rule 30, Section 12(b), the term
‘‘Canadian-Link USD Net Settlement Credit’’ is
defined as the net amount of USD Funds calculated
by DTC by a time on a CDS Business Day set forth
in the Procedures and payable by DTC to a
Canadian-Link Participant. Id.
34 Pursuant to Rule 30, Section 12(b), the term
‘‘Canadian-Link USD Net Settlement Debit’’ is
defined as the net amount of USD Funds calculated
by DTC by a time on a CDS Business Day set forth
in the Procedures and payable to DTC by a
Canadian-Link Participant. Id.
35 Pursuant to Rule 30, Section 13(a), ‘‘CDS
Payment Exchange’’ is defined as on each CDS
Business Day, during a period of time set forth in
the Rules and Procedures of CDS, when CDS is
required to pay to DTC the amount of its DTC
Omnibus Account CAD Net Settlement Credit, id,
or DTC is required to pay to CDS the amount of its
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Transactions,36 CDS Settlement
Recap,37 CDS Settlement Recap Time,38
Collateral Monitor Conversion Rate,39
Cross-Border CAD Funds
Transactions,40 Cross-Border CAD
Securities Transactions,41 Cross-Border
Net Additions,42 Cross-Border USD
Securities Transactions,43 DTC
DTC Omnibus Account CAD Net Settlement Debit,
as specified in the CDS Settlement Recap. All such
payments to or by DTC are made to or by a
Canadian bank acting on behalf of DTC. Id.
36 Pursuant to Rule 30, Section 1(h)(7),
‘‘Canadian-Link Securities Transactions’’ is defined,
individually or collectively as the context may
require, Cross-Border CAD Securities Transactions,
Cross-Border USD Securities Transactions and
Intra-DTC CAD Securities Transactions. Id.
37 Pursuant to Rule 30, Section 12(a), provides the
definition of ‘‘CDS Settlement Recap’’ as follows:
‘‘On each CDS Business Day, by a time set forth in
the Rules and Procedures of CDS, CDS calculates
and provides to the Corporation a settlement recap
(the ‘‘CDS Settlement Recap’’) with (i) the net
amount of CAD Funds payable by CDS to the
Corporation (a ‘‘DTC Omnibus Account CAD Net
Settlement Credit’’) or by the Corporation to CDS
(a ‘‘DTC Omnibus Account CAD Net Settlement
Debit’’), (ii) the net amount of USD Funds payable
by CDS to the Corporation (a ‘‘DTC Omnibus
Account USD Net Settlement Credit’’) or by the
Corporation to CDS (a ‘‘DTC Omnibus Account USD
Net Settlement Debit’’) and (iii) other information
in respect of the Cross-Border Transactions
processed by CDS for the Corporation on such CDS
Business Day.’’ Id.
38 Pursuant to Rule 30, Section 12(a), ‘‘CDS
Settlement Recap Time’’ is defined as time when
CDS provides the CDS Settlement Recap to DTC. Id.
39 Pursuant to Rule 30, Section 16(b), provides the
definition of ‘‘Collateral Monitor Conversion Rate’’
as follows: ‘‘If any computation has to be made
requiring the conversion of an amount of CAD
Funds into an amount of USD Funds for the
purpose of calculating the Collateral Monitor of a
Canadian-Link Participant pursuant to Section 9 of
this Rule 30, the conversion rate for such purpose
shall be a rate determined by a formula (taking into
account exchange rate fluctuations) that shall be
fixed by the Corporation and set forth in the
Procedures (the ‘‘Collateral Monitor Conversion
Rate’’).’’ Id.
40 Pursuant to Rule 30, Section 1(a)(4), the term
‘‘Cross-Border CAD Funds Transactions’’ is defined
as the transfer of Canadian dollars between
Participants of DTC and participants of CDS. Id.
41 Pursuant to Rule 30, Section 1(a)(1), the term
‘‘Cross-Border CAD Securities Transactions’’ is
defined as the settlement of valued transactions (A)
in Securities that are Eligible Securities (as
described in Section 1 of Rule 5) and in Securities
that are not Eligible Securities (B) in Canadian
dollars (C) between Participants of the Corporation
and participants of CDS (‘‘Cross-Border CAD
Securities Transactions’’). Id.
42 Pursuant to Rule 30, Section 7(b), the term
‘‘Cross-Border Net Additions’’ is defined as any
Cross-Border Securities credited to the DTC
Omnibus Account. Id.
43 Pursuant to Rule 30, Section 1(a)(2), the term
‘‘Cross-Border USD Securities Transactions’’ is
defined as the settlement of valued transactions in
(A) Securities that are not Eligible Securities (B) in
US dollars (C) between Participants of DTC and
participants of CDS. Id.
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Omnibus Account CAD Net Debit Cap,44
DTC Omnibus Account CAD Net
Settlement Credit,45 DTC Omnibus
Account CAD Net Settlement Debit,46
DTC Omnibus Account Net Debit Cap,47
DTC Omnibus Account Net Settlement
Credit,48 DTC Omnibus Account Net
Settlement Debit,49 DTC Omnibus
Account USD Net Debit Cap,50 DTC
Omnibus Account USD Net Settlement
Credit,51 DTC Omnibus Account USD
Net Settlement Debit,52 DTC Canadian
Settlement Bank,53 DTC Settlement
Payment Deadline,54 DTC Settlement
44 Pursuant to Rule 30, Section 8(a), the term
‘‘DTC Omnibus Account CAD Net Debit Cap’’ is
defined as a limit established by CDS on the
negative CAD Funds balance that may, from time
to time, be incurred in the DTC Omnibus Account
in respect of Cross-Border Transactions processed
for DTC through the facilities of CDS in CAD Funds.
Id.
45 See supra note 37.
46 Id.
47 Pursuant to Rule 30, Section 8(a), the terms
‘‘DTC Omnibus Account CAD Net Debit Cap’’ and
‘‘DTC Omnibus Account USD Net Debit Cap’’ are
referred to, individually or collectively as the
context may require, as the ‘‘DTC Omnibus Account
Net Debit Cap.’’ See Rule 30, supra note 5.
48 Pursuant to Rule 30, Section 12(a), the term
‘‘DTC Omnibus Account Net Settlement Credit’’
means the DTC Omnibus Account CAD Net
Settlement Credit and DTC Omnibus Account USD
Net Settlement Credit, individually or collectively
as the context may require. Id.
49 Pursuant to Rule 30, Section 12(a), the term
‘‘DTC Omnibus Account Net Settlement Debit’’
means the DTC Omnibus Account CAD Net
Settlement Debit and DTC Omnibus Account USD
Net Settlement Debit, individually or collectively as
the context may require. Id.
50 Pursuant to Rule 30, Section 8(a), the term
‘‘DTC Omnibus Account USD Net Debit Cap’’ is
defined pursuant to the Rules and Procedures of
CDS, as a limit established by CDS (i) on the
negative USD Funds balance that may, from time
to time, be incurred in the DTC Omnibus Account
in respect of Cross-Border Transactions processed
for the Corporation through the facilities of CDS in
USD Funds. Id.
51 See supra note 37.
52 Id.
53 Pursuant to Rule 30, Section 13(a), the term
‘‘DTC Canadian Settlement Bank’’ is defined as a
Canadian bank acting on behalf of DTC for
payments relating to CDS paying to DTC the
amount of the DTC Omnibus Account CAD Net
Settlement Credit, or DTC paying to CDS the
amount of its DTC Omnibus Account CAD Net
Settlement Debit, as specified in the CDS
Settlement Recap. See Rule 30, supra note 5.
54 Pursuant to Rule 30, Section 13(b), the term
‘‘DTC Settlement Payment Deadline’’ is defined as
on each CDS Business Day, by a time set forth in
the Procedures of the Corporation, each CanadianLink Participant with a Canadian-Link CAD Net
Settlement Debit shall pay to the Corporation the
amount of its Canadian-Link CAD Net Settlement
Debit, as specified in the DTC Settlement Recap.
See Rule 30, supra note 5. The time when such
payment must be made is referred to as the ‘‘DTC
Settlement Payment Deadline.’’ Id.
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Recap,55 DTC Settlement Recap Time,56
Funds,57 Intra-DTC CAD Funds
Transactions,58 Intra-DTC CAD
Securities Transactions,59 Participant
Canadian Settlement Bank,60 Payment
Default Conversion Rate,61 Payment
55 Pursuant to Rule 30, Section 12(b), the term
‘‘DTC Settlement Recap’’ is defined as described in
the following: ‘‘On each CDS Business Day, by a
time set forth in the Procedures of the Corporation,
the Corporation shall calculate and provide to each
Canadian-Link Participant a settlement recap (a
‘‘DTC Settlement Recap’’) with (i) the net amount
of CAD Funds payable by the Corporation to such
Canadian-Link Participant (a ‘‘Canadian-Link CAD
Net Settlement Credit’’) or by such Canadian-Link
Participant to the Corporation (a ‘‘Canadian-Link
CAD Net Settlement Debit’’), (ii) the net amount of
USD Funds payable by the Corporation to such
Canadian-Link Participant (a ‘‘Canadian-Link USD
Net Settlement Credit’’) or by such Canadian-Link
Participant to the Corporation (a ‘‘Canadian-Link
USD Net Settlement Debit’’) and (iii) other
information in respect of the Canadian-Link
Transactions of such Canadian-Link Participant
processed through the Canadian-Link Service on
such CDS Business Day, including both CrossBorder Transactions with CDS Participants
processed for such Participant through the DTC
Omnibus Account and Intra-DTC Transactions with
other Canadian-Link Participants processed for
such Participant through Accounts with the
Corporation.’’ Id.
56 Pursuant to Rule 30, Section 12(b), the term
‘‘DTC Settlement Recap Time’’ means the time
when DTC provides the DTC Settlement Recap to
Canadian-Link Participants. Id.
57 Pursuant to Rule 30, Section 1(h)(5), the term
‘‘Funds’’ is defined as CAD Funds and USD Funds,
individually or collectively as the context may
require. Id.
58 Pursuant to Rule 30, Section 1(a)(5), the term
‘‘Intra-DTC CAD Funds Transactions’’ is defined as
the transfer of Canadian dollars between
Participants of DTC and other Participants of DTC.
Id.
59 Pursuant to Rule 30, Section 1(a)(3), the term
‘‘Intra-DTC CAD Securities Transactions’’ is defined
as the settlement of valued transactions (A) in
Securities that are Eligible Securities (B) in
Canadian dollars (C) between Participants of DTC
and other Participants of DTC. Id.
60 Pursuant to Rule 30, Section 13(d), the term
‘‘Participant Canadian Settlement Bank’’ is defined
as a Canadian Bank acting on behalf of a Canadian
bank to which all payments of CAD Funds to or by
a Canadian-Link Participant shall be made. Id.
61 Pursuant to Rule 30, Section 16 (c), ‘‘Payment
Default Conversion Rate’’ is defined as follows: ‘‘If
any computation has to be made requiring the
conversion of an amount of CAD Funds into an
amount of USD Funds for the purpose of calculating
the Gross Settlement Debit of a Canadian-Link
Participant pursuant to Section 15 of this Rule 30,
the conversion rate for such purpose shall be a rate
determined by a formula (taking into account all
factors incident to the default of such Participant
in the payment of its Canadian-Link CAD Net
Settlement Debit) that shall be fixed by the
Corporation and set forth in the Procedures (the
‘‘Payment Default Conversion Rate’’).’’ Id.
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Default Exchange Rate 62 and USD
Funds.63
Cross references to sections of Rule 30
for certain defined terms would be
revised to reflect renumbering of the
respective referenced sections, as more
fully described below. The referenced
section for the term (A) ‘‘Canadian-Link
Participants’’ would be revised from
Section 1(h)(1) to Section 1(e)(1), (B)
‘‘Canadian-Link Securities’’ from
Section 1(h)(14) to Section 1(e)(8), (C)
‘‘Canadian-Link Transactions’’ from
Section 1(h)(11) to Section 1(e)(5), ‘‘CDS
Business Day’’ from Section 11(a) to
Section 7(a), (D) ‘‘CDS Participants’’
from Section 1(h)(2) to Section 1(e)(2),
(E) ‘‘Cross-Border Securities’’ from
Section 1(h)(12) to Section 1(e)(6), (F)
‘‘Cross-Border Transactions’’ from
Section 1(h)(9) to Section 1(e)(3), (G)
‘‘DTC Business Day’’ from Section 11(a)
to Section 7(a), (I) ‘‘Intra-DTC
Securities’’ from Section 1(h)(13) to
Section 1(e)(7), and ‘‘Intra-DTC
Transactions’’ from Section 1(h)(10) to
Section 1(e)(4).
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Section 1—Overview of Canadian Link
Service
Section 1 of Rule 30 describes the
scope of services offered by DTC
relating to the Canadian-Link Service.
Pursuant to the proposed rule change,
Section 1 of Rule 30 would be revised
to remove references to the processing
of CAD Securities and CAD Funds
transactions through the Canadian-Link
service and provide only for processing
of Free Deliveries through the link.
These changes include:
(i) Consolidate subsection (a) of
Section 1 by eliminating references to
DTC processing of (1) Cross-Border CAD
Securities Transactions, (2) CrossBorder USD Securities Transactions, (3)
Intra-DTC CAD Securities Transactions,
(4) Cross-Border CAD Funds
Transactions and (5) Intra-DTC CAD
Funds Transactions, and instead refer to
processing of Free Deliveries only.
(ii) Subsection (b) of Section 1 which
currently states, among other things,
that DTC provides the Canadian-Link
62 Pursuant to Rule 30, Section 16(a), the term
‘‘Payment Default Exchange Rate’’ is defined as the
exchange rate determined by a formula (taking into
account all factors incident to the default of such
Participant in the payment of its Canadian-Link
CAD Net Settlement Debit) that shall be fixed by
DTC and set forth in the Procedures. The exchange
rate relates to any amount of USD Funds has to be
exchanged for an amount of CAD Funds to pay (or
re-fund) a DTC Omnibus Account CAD Net
Settlement Debit to CDS in accordance with Section
13 of this Rule 30 because a Canadian-Link
Participant failed to pay DTC the amount of its
Canadian-Link CAD Net Settlement Debit. Id.
63 Pursuant to Rule 30, Section 1(h)(4), the term
‘‘USD Funds’’ is defined as funds denominated in
US dollars. Id.
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Service as a Securities Intermediary for
its Participants, and all transactions in
Securities and transfers of funds are
subject to the Rules and Procedures of
the Corporation, including this Rule 30
and the Procedures adopted pursuant to
Rule 30, would be amended to delete
the reference to ‘‘and transfers of
funds.’’ This reference would be deleted
as DTC would no longer offer the ability
to process CAD Funds Transactions
through the Canadian-Link Service. As
indicated above, DTC notes that
distributions such as principal, interest
and dividend payments relating
Securities held at CDS by DTC on behalf
of Participants would continue to be
processed through DTC’s CAD Settling
Bank to DTC Participants, pursuant to
the applicable provisions of the OA.
Processing of such distributions are
conducted through DTC’s asset
servicing functions and are not part of
the DVP functionality that DTC
proposes to eliminate from its Rules and
Procedures.
(iii) DTC would amend Subsection (c)
of Section 1 to change references to
‘‘seller’’ and ‘‘purchaser’’ of Securities
to ‘‘Deliverer’’ 64 and ‘‘Receiver,’’ 65
respectively, to harmonize the use of
terms with DTC’s rules related to
settlement of Securities Deliveries and
receives generally. DTC would also
amend the text of this subsection to
reflect the proposal that DVP
transactions would no longer be
processed through the Canadian-Link
Service. In this regard, references to
settlement in CAD would be deleted,
and the text would refer to the crediting
and debiting of Securities from a
‘‘Deliverer’’ to a ‘‘Receiver.’’ Also,
Subsection (d) directly below
Subsection (c), which refers to crossborder settlement of transactions in USD
would be deleted in its entirety to
reflect the elimination of DVP
settlement through the service. Since
Subsection (c), as described above,
would be written to address the
Deliveries and Receives of Securities,
generally, Securities transactions
previously covered under Subsection (d)
would be covered under the proposed
revisions to Subsection (c).
(iv) Subsection (e) of Section 1
describes the processing of CAD
Securities Transactions between DTC
Participants. DTC proposes to amend
Subsection (e) of Section 1 to reflect the
elimination of money settlement
64 Pursuant to Rule 1, the term ‘‘Deliverer,’’ as
used with respect to a Delivery of a Security, means
the Person which Delivers the Security. See Rule 1,
supra note 5.
65 Pursuant to Rule 1, the term ‘‘Receiver,’’ as
used with respect to a Delivery of a Security, means
the Person which receives the Security. Id.
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38385
relating to transactions conducted
through the Canadian-Link Service. In
this regard, a sentence that describes the
debiting and crediting of Securities
between Participants and references the
term ‘‘Intra-DTC CAD Securities
Transaction’’ would be revised to refer
to ‘‘intra-DTC Securities transaction’’
instead, to reflect that movements of
Securities between Participants would
continue to be permitted through the
Canadian-Link Service, even though the
ability to settle a Securities transaction
in CAD would be eliminated. In
addition, DTC would change references
to ‘‘seller’’ and ‘‘purchaser’’ of
Securities to ‘‘Deliverer’’ and
‘‘Receiver,’’ respectively, to harmonize
the use of terms with DTC’s rules
related to settlement of Securities
deliveries and receives generally. DTC
would also revise Subsection (e) so that
it would be renumbered as Subsection
(d) to reflect the deletion of the current
Subsection (d), described above.
(v) DTC would delete Subsection (f) of
Section 1 which states: ‘‘A Cross-Border
CAD Funds Transaction between a
Participant of the Corporation and a
participant of CDS is processed through
the facilities of CDS.’’ In addition, DTC
would delete Subsection (g) of Section
1 which states: ‘‘An Intra-DTC CAD
Funds Transaction between a
Participant of the Corporation and
another Participant of Corporation is
processed though Canadian settlement
banks acting for the Corporation and
such Participants.’’ Both subsections
would be obsolete because of the
elimination of CAD processing through
the Canadian-Link Service.
(vi) Subsection (h) of Section 1 would
be amended to delete explanations of
certain definitions described above,
including CAD Funds, USD Funds,
Funds, Cross-Border Securities
Transactions, Canadian-Link Securities
Transactions, Canadian-Link Funds
Transactions, and Canadian-Link CAD
Money Settlement. Also the definitions
of Intra-DTC Transactions, Cross-Border
Securities, Cross-Border Transactions
and Intra-DTC Securities would be
amended to reflect the above-described
elimination of money settlement in the
Canadian-Link Service so that
transactions are not referred to as
involving DVP settlement or payment of
funds. In this regard, references to the
terms ‘‘Cross-Border USD Securities
Transactions’’ and ‘‘Cross-Border CAD
Securities Transactions’’ as elements of
the definition of ‘‘Cross-Border
Transactions’’ would be replaced with
an undefined term ‘‘Cross-border
securities transactions’’ to reflect that
movements of Securities between
Canadian-Link Participants and CDS
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Participants would continue to be
permitted through the Canadian-Link
Service, even though the ability to settle
a Securities transaction versus payment
would be eliminated. Further, ‘‘IntraDTC CAD Securities Transactions’’ and
‘‘Intra-DTC CAD Funds Transactions’’ as
elements of the definition of ‘‘Intra-DTC
Transactions’’ would be replaced with a
reference ‘‘Intra-DTC securities
transactions,’’ for the same reason as an
identical change to current Subsection
(e) of Section 1 (proposed to be
renumbered as Subsection (d)), as
described above. Also, ‘‘Cross-Border
CAD Securities Transactions’’ and
‘‘Cross-Border USD Securities
Transactions’’ used as elements of the
description of ‘‘Cross-Border Securities’’
would be deleted and replaced with
Cross-Border Transactions. Also, ‘‘IntraDTC CAD Securities Transactions,’’
used as a descriptor relating to
Securities underlying an element of the
definition of ‘‘Intra-DTC Securities,’’
would be replaced with ‘‘Intra-DTC
Transactions,’’ because (i) even though
Intra-DTC CAD Securities Transactions
would no longer be provided for under
Rule 30, intra-DTC Securities
transactions could still occur through
the Canadian-Link Service, as described
above and (ii) such transactions would
defined as ‘‘Intra-DTC Transactions,’’ as
described above. In addition, Subsection
(h) would be renumbered as Subsection
(e) to conform the numbering of this
section with the elimination and
renumbering of other subsections as
described above. In this regard, the
explanations of definitions in
subsection (h) are currently set forth in
an itemized list numbered from (1) to
(15), with each item followed by a
semicolon. As a result of the proposed
revisions described above, in addition to
changes to the text to reflect the
substantive changes described above,
item numbers (3), (4), (5), (6) (7), (8) and
(15) would be deleted and items (9),
(10), (11), (12), (13) and (14) would be
renumbered respectively as (3), (4), (5),
(6), (7) and (8). A semicolon and the
word ‘‘and’’ would be deleted from the
end of current (14) (to be renumbered as
(8)) and replaced with a period because
the deletion of (15) would make the
newly renumbered (8) the last item of
this list. The word ‘‘and’’ would be
added to the end of current (13) (to be
renumbered as 7) directly after an
existing semicolon.
Section 2—CDS Documents
Section 2 of Rule 30 provides, among
other things, that ‘‘[E]ach Canadian-Link
Participant shall observe and comply
with the CDS Documents applicable to
the Canadian-Link Service as if such
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Canadian-Link Participant were a CDS
Participant and a direct party to the CDS
Documents. Each Canadian-Link
Participant acknowledges that the CDS
Documents may include grants of
security interests in and liens on CrossBorder Securities and CAD Funds in
which such Canadian-Link Participant
may have an interest. . . .’’
Pursuant to the proposed rule change,
DTC proposes to change ‘‘CAD Funds’’
in the preceding sentence to ‘‘funds.’’
As described herein, the term ‘‘CAD
Funds’’ would be eliminated pursuant
to the proposed rule change. However,
CDS may continue to have a security
interest in funds owed to DTC for
dividends and interest paid on
Securities held by DTC at CDS on behalf
of Canadian-Link Participants.66
Section 4—Participants Eligible for
Canadian-Link Service
Section 4 of Rule 30 provides, among
other things that ‘‘A Security that is an
Eligible Security may or may not be a
Canadian-Link Security and may or may
not be the subject of Cross-Border CAD
Securities Transactions, Cross-Border
USD Securities Transactions and/or
Intra-DTC Securities Transactions. A
Security that is not an Eligible Security
may be a Limited-Service CanadianLink Security, but it may not be a FullService Canadian-Link Security and
may not be the subject of Intra-DTC
CAD Securities Transactions.’’
Consistent with the proposed changes
described above, DTC proposes to
amend this section to eliminate
references to CAD and USD-related
transactions and refer to transactions
without reference to Canadian or U.S.
currency. In this regard, a reference to
‘‘Intra-DTC CAD Securities
Transactions’’ would be revised to
‘‘Intra-DTC Transactions’’ in a sentence
describing to the effect, among other
things, that a Limited-Service CanadianLink Security cannot be included in an
intra-DTC Securities transaction.
Section 5—Canadian-Link Interface and
DTC Omnibus Account
Section 5(a) of Rule 10 includes a
description of ledgers and accounts that
CDS maintains for DTC at CDS that
relate to Securities and funds. The funds
accounts are denominated in Canadian
dollars and US dollars. While the DVP
function of the Canadian-Link Service
would be discontinued pursuant to the
proposed rule change, DTC would
continue to receive dividends and
interest on Securities held by it at CDS
and DTC may owe fees for services to
66 See Section 5.2.2 of CDS’s rules, available at
https://www.cds.ca/resource/en/311.
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CDS. As a result, DTC would continue
to maintain funds accounts for these
purposes. While the terms ‘‘CAD
Funds’’ and ‘‘USD Funds’’ would be
removed from Rule 30 as described
herein, DTC proposes to replace these
terms as used in Section 5(a) of Rule 30
with ‘‘Canadian Dollar funds’’ and ‘‘US
dollar funds,’’ respectively.
Section 5(b) provides that DTC will
make the DTC Omnibus Account
available for the purpose of processing
Cross-Border Transactions between
Canadian-Link Participants and CDS
Participants. This section states that
DTC will act on behalf of Canadian-Link
Participants and in accordance with
their instructions, but DTC maintains, at
all times, control over the Cross-Border
Securities and Funds in the DTC
Omnibus Account. As described herein,
DTC would remove the defined term for
‘‘Funds’’. However, as described above,
DTC would continue to receive funds
into its account at CDS in the form of
dividends and interest. Therefore, DTC
would replace ‘‘Funds’’ as used in
Section 5(b) with ‘‘funds.’’
Section 6—Canadian-Link Required
Participants Fund Deposit
Section 6 of Rule 30 provides that a
Participant must make a deposit that is
deemed to be included in the
Participants Fund with respect to DVP
volume conducted by the Participant
through the Canadian-Link Service. The
section also provides for the investment
of such deposits by DTC and the
payment of interest for those
investments to the applicable
Participants. The Participants Fund
provides liquidity for DTC to complete
settlement in the event a Participant
fails to meet its settlement obligation.
Section 6 would be deleted in its
entirety pursuant to the proposed rule
change, because Participants would no
longer have a settlement obligation in
the Canadian-Link Service due to the
elimination of money settlement for
Securities transactions conducted
through the service. In this regard, DTC
would no longer have a settlement
obligation with respect to CDS. As a
result, there would no longer be a need
to maintain such deposits with respect
to Canadian-Link activity.
Section 7—Security for Canadian-Link
Transactions
Section 7 of Rule 30 provides DTC
with a security interest in Securities
settled DVP through the Canadian-Link
Service and allows DTC to use such
Securities to secure loans for purposes
of completing settlement in the event a
Participant fails to satisfy its settlement
obligation. This Section would be
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deleted in its entirety pursuant to the
proposal, because since Participants
would no longer be able to incur a
settlement obligation with respect to
activity within the Canadian-Link
Service, it would no longer necessary
for DTC to maintain a security interest
in Securities that are the subject of
Canadian-Link Transactions.
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Section 8—Canadian-Link Net Debit
Caps of Canadian-Link Participants
Section 8 of Rule 30 provides for a
limit to be established by DTC (i) on the
negative CAD Funds balance that may,
from time to time, be incurred by a
Canadian-Link Participant in respect of
Canadian-Link Transactions processed
for such Participant through the
Canadian-Link Service in CAD Funds
(each a ‘‘Canadian-Link CAD Net Debit
Cap’’) and (ii) on the negative USD
Funds balance that may, from time to
time, be incurred by a Canadian-Link
Participant in respect to Canadian-Link
Transactions processed for such
Participant through the Canadian-Link
Service in USD Funds (each, a
‘‘Canadian-Link USD Net Debit Cap’’).
The Canadian-Link CAD Net Debit Cap
and Canadian-Link USD Net Debit Cap
are referred to, individually or
collectively as the context may require,
as the ‘‘Canadian-Link Net Debit Cap.’’
This Section subjects all transactions
processed though the Canadian-Link
Service to be subject to the CanadianLink Net Debit Cap. The section further
provides that DTC shall not comply
with any instruction from a CanadianLink Participant in respect of any
Canadian-Link Transaction that would
cause DTC to exceed its DTC Omnibus
Account Net Debit Cap or cause such
Canadian-Link Participant to exceed its
Canadian-Link Net Debit Cap but rather
shall pend such Canadian-Link
Transaction (subject to the Rules) until
such Canadian-Link Transaction may be
processed without causing DTC to
exceed its DTC Omnibus Account Net
Debit Cap or causing such CanadianLink Participant to exceed its CanadianLink Net Debit Cap.
Pursuant to the proposed rule change,
DTC would delete Section 8 of Rule 30
in its entirety. The maintenance of a
Canadian-Link Net Debit Cap would no
longer be necessary as this limit applies
to DVP transactions, and DVP
transactions would no longer be
processed through the Canadian-Link
Service.
Section 9—Collateral Monitor of
Canadian-Link Participants
In addition to the Net Debit Cap,67
another tool DTC uses in managing
credit risk is the Collateral Monitor.68
These two controls work together to
protect the DTC settlement system in
the event of Participant default. The
Collateral Monitor requires net debit
settlement obligations, as they accrue
intraday, to be fully collateralized.
Meanwhile, the Net Debit Cap limits the
amount of any Participant’s net debit
settlement obligation to the amount that
can be satisfied with DTC liquidity
resources. Section 9 of Rule 30 provides
for activity conducted by a Participant
through the Canadian-Link Service to be
included in the Participant’s Collateral
Monitor. For the same reason as
described above with respect to the
elimination of Section 8, DTC would
delete Section 9 in its entirety, because
the elimination of DVP activity would
eliminate any credit risk associated with
transactions conducted through the
Canadian-Link Service, and therefore
DTC would no longer require the
inclusion of Canadian-Link activity in
the Collateral Monitor in managing its
credit risk.
Section 10—Processing Canadian-Link
Transactions
Section 10 of Rule 30 provides for the
process by which Securities and funds
are credited and debited to and from
Canadian-Link Participants’ accounts
for activity instructed by Participants to
be processed through the Canadian-Link
Service. As described above, DTC would
continue to process transfers of
Securities through the Canadian-Link
Service, but it would no longer process
DVP and/or CAD Funds activity for
transactions conducted through the
service. Therefore, pursuant to the
proposed rule change, DTC would
amend Section 10 to reflect the
elimination of processing of funds
debits and credits as part of the
processing of Canadian-Link
Transactions. In this regard, DTC would
also revise references in the text of this
section to (a) ‘‘Canadian-Link Securities
Transaction’’ to ‘‘Canadian-Link
Transaction,’’ (b) ‘‘Intra-DTC CAD
Securities Transaction’’ to ‘‘Intra-DTC
Transaction,’’ and (c) ‘‘Cross-Border
Securities Transaction’’ to ‘‘CrossBorder Transaction,’’ because the
currently used terms would be deleted
from Rule 30, as described above, and
the elimination of the processing of
funds debits and credits, as described
67 Id.
68 Id.
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38387
above, would eliminate the need for the
use of defined terms relating to
transactions processed through the
Canadian-Link that distinguish between
Securities transactions from funds
transactions. Further subsections (C)
and (D) of Section 10(a)(1) and Item (iii)
of Sections 10(a)(2)(A) and 10(a)(2)(B)
would be deleted from Rule 30. Finally,
this section would also be renumbered
as Section 6 due to the deletion of the
original Sections 6, 7, 8 and 9, as
described above.
Section 11—CDS Business Days
Pursuant to the proposed rule change,
Section 11 would be renumbered as
Section 7.
Section 12—Settlement Recaps
Section 12 provides the process for
the issuance of Settlement Recaps by
DTC. Because the money settlement
aspect of the Canadian-Link Service
would be eliminated, there would no
longer be a need for DTC to issue
Settlement Recaps with respect to CAD
activity. Therefore, DTC would
eliminate Section 12 in its entirety
because Settlement Recaps would no
longer be issued by DTC, and this
Section would become obsolete.
Section 13—Settlement Payments
Section 13 provides for the processing
of settlement payments relating to DVP
activity through the Canadian-Link
Service. As described above, money
settlement would be eliminated
pursuant to the proposed rule change.
Therefore, DTC would no longer
provide for money settlement relating to
transactions processed through the
Canadian-Link. In this regard, DTC
proposes to eliminate Section 13 in its
entirety as it would become obsolete.
Section 14—End of Day Sweep
Section 14 provides for the timing of
the movement of Securities between
accounts used for the Canadian-Link
Service. This section provides that such
movements occur at the end of each
CDS Business Day after the completion
of money settlement. DTC would delete
the provision requiring for the
completion of money settlement prior to
the ‘‘sweeping’’ of Securities in this
regard as DTC would no longer be
conducting money settlement for the
Canadian-Link Service. Also, DTC
would renumber this section as Section
8 to reflect the renumbering and
deletion of previous sections as
described above.
E:\FR\FM\20JYN1.SGM
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Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
Section 15—Failure To Make Settlement
Payments
Section 15 provides the process to be
followed if a Participant fails to make
payment with regards to Canadian-Link
activity. As described above, DTC
proposes to eliminate money settlement
with respect to Canadian-Link activity.
In this regard, DTC would delete
Section 15 in its entirety as it would
become obsolete due to the elimination
of settlement payments through this
service.
Section 16—Currency Conversion and
Exchange
Section 16 provides the process for
the conversion of USD Funds to CAD
Funds as necessary for a Participant to
complete settlement or satisfy its risk
controls relating to the Canadian-Link
Service. Since money settlement would
no longer occur through this service,
such conversions of currency would no
longer occur, and this section would
become obsolete. Therefore, pursuant to
the proposed rule change, DTC would
delete Section 16 in its entirety.
Section 17—Choice of Law and
Submission to Jurisdiction
To conform the numbering of sections
to reflect the deletion and renumbering
of previous sections as described above,
Section 17 would be renumbered as
Section 9.
khammond on DSKJM1Z7X2PROD with NOTICES
Section 18—Canadian Link Charges
Section 18 provides that Participants
must pay to DTC any fees and charges
relating to their use of the CanadianLink Service. These charges include
charges relating to the cost to DTC for
maintaining liquidity resources to settle
Canadian-Link Transactions. As
mentioned above, money settlement
under this service would be eliminated
and therefore it would no longer
necessary for DTC to maintain such
liquidity resources with respect to
activity processed through the
Canadian-Link Service. Therefore, text
referring to charges relating to the cost
of maintaining liquidity resources with
respect to the Canadian-Link Service
would be obsolete and would be
deleted. As a result of these proposed
changes, to conform the numbering of
the subsections to reflect the deletion of
subsection (ii), the subsections
following would be renumbered, (ii),
(iii), (iv) and (v). Also, to conform the
numbering of sections to reflect the
deletion and renumbering of previous
sections as described above, Section 18
would be renumbered as Section 10.
VerDate Sep<11>2014
17:00 Jul 19, 2021
Jkt 253001
Elimination of the Canadian-Link
Service Guide
DTC proposes to eliminate the full
text of the Guide. The Guide relates to
Procedures necessary for the DVP
settlement of Canadian-Link
Transactions. These Procedures cover
all operational aspects of the service as
it relates to DVP activity, including DVP
transaction processing, risk controls and
tracking established to control for failed
DVP transactions in the processing of
end-of-day sweeps. Due to the
elimination of money settlement
through the Canadian-Link Service, this
Guide would become obsolete.
Proposed Changes to the OA
The OA sets forth requirements that a
Security must meet to become and
remain eligible for DTC services and
provides for the orderly processing of
such Securities and timely payments to
Participants.
Proposed Changes to Text of the OA
Relating to Eligibility Requirements/
Non-U.S. Denominated Securities
Section I.C.5. of the OA contains
provisions relating to the eligibility of
Securities denominated in a non-U.S.
currencies and processing of
distribution payments in non-U.S.
currencies. This section currently
contains references to CAD settlement
through the Canadian-Link Service. To
reflect the proposed elimination of
money settlement in the Canadian-Link
Service, DTC proposes to amend this
section to remove references to the
availability of Canadian dollar
settlement. Since, as described above,
DTC would continue to process
distributions in CAD, this section would
continue to provide for such
distributions in CAD. The proposed rule
change would make a grammatical
change that does not affect the
substance of the section.
Proposed Changes to Dividend and
Income Payment Notification
Procedures
Section IV of the OA sets forth
Dividend and Income Payment
Notification Procedures. Subsection B of
this section describes currency
provisions relating to dividend and
income payments, and specifically
refers to such payments made in CAD.
The text includes mentions of CAD
settlement performed through the
Canadian-Link Service. It also refers to
the service generally as ‘‘Canadian
dollar settlement.’’ In order to reflect the
proposed elimination of CAD settlement
through the Canadian-Link Service, DTC
would (i) revise this section to delete
provisions referring to or describing
PO 00000
Frm 00125
Fmt 4703
Sfmt 4703
CAD settlement and (ii) modify a
statement relating to Securities eligible
to receive payments in CAD from
referencing Securities eligible for
Canadian dollar settlement to Securities
eligible for the Canadian-Link Service.
Also, the proposed rule change in this
regard would cause a defined term for
CDS to be deleted as it falls within a
paragraph that describes CAD
settlement. The proposed rule change
moves the defining term for CDS to a
sentence that would not be eliminated
by the proposal.
Effective Date
The proposed rule change would
become effective upon filing with the
Commission.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act
requires, in part, that the Rules be
designed to promote the prompt and
accurate clearance and settlement of
Securities transactions.69 DTC believes
that the proposed rule change is
consistent with this provision because it
would provide enhanced clarity and
transparency for participants with
respect to services offered by DTC by
updating the Rules to remove the ability
to access services that Canadian-Link
Participants have not recently utilized
and are unlikely to utilize in the future.
Therefore, by providing enhanced
clarity and transparency in the Rules
regarding the services provided by DTC,
DTC believes the proposed rule change
would promote the prompt and accurate
clearance and settlement of Securities
transactions, consistent with the
requirements of the Act, in particular
Section 17A(b)(3)(F), cited above.
(B) Clearing Agency’s Statement on
Burden on Competition
DTC does not believe that the
proposed rule change would have any
impact on competition. Participants
have not used the Canadian-Link
Service for DVP Securities and/or CAD
Funds transactions in several years.
Also, based on discussions DTC has had
with Participants regarding their use of
the Canadian-Link Service, DTC
believes Participants are unlikely to use
the service for this purpose in the
future. Therefore, DTC believes that the
proposed rule change should have no
effect on Participants, other than to
remove references to the ability for
Participants to conduct DVP
transactions through the Canadian-Link
Service from the Rules and Procedures,
which transactions are unlikely to be
conducted by Participants.
69 15
E:\FR\FM\20JYN1.SGM
U.S.C. 78q–1(b)(3)(F).
20JYN1
Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
(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
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A) 70 of the Act and paragraph
(f) 71 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:
khammond on DSKJM1Z7X2PROD with NOTICES
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–2021–012 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–2021–012. 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
should refer to File Number SR–DTC–
2021–012 and should be submitted on
or before August 10, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.72
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–15345 Filed 7–19–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
71 17
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the NYSE Arca
Equities Listing Fee Schedule
July 14, 2021.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on June 30,
2021, NYSE Arca, Inc. (‘‘NYSE Arca’’ or
the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
VerDate Sep<11>2014
17:00 Jul 19, 2021
Jkt 253001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
NYSE Arca Equities listing fee schedule
to modify the initial listing fees for
equity securities and warrants and
adopt fee provisions specific to groups
of three or more listed REITs under
common control. The proposed rule
change is available on the Exchange’s
website at www.nyse.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
[Release No. 34–92405; File No. SR–
NYSEArca–2021–56]
72 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
70 15
38389
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
Initial Listing Fees
NYSE Arca charges initial listing fees
for the listing of common stock,
preferred stock and warrants of
operating companies based on the
number of shares of the issuer
outstanding at the time of initial listing
(or, in the case of listed foreign private
issuers, the number of shares
outstanding in the United States), based
on the following current schedule:
Up to and including 30 million shares
outstanding—$100,000
More than 30 million shares outstanding
up to and including 50 million shares
outstanding—$125,000
More than 50 million shares
outstanding—$150,000
The Exchange proposes to reduce the
initial fee levels to the following:
Up to and including 30 million shares
outstanding—$55,000
More than 30 million shares outstanding
up to and including 50 million shares
outstanding—$60,000
More than 50 million shares
outstanding—$75,000
The Exchange believes that these
proposed fee levels are more consistent
E:\FR\FM\20JYN1.SGM
20JYN1
]]>Agencies
[Federal Register Volume 86, Number 136 (Tuesday, July 20, 2021)]
[Notices]
[Pages 38381-38389]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15345]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92410; File No. SR-DTC-2021-012]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Consisting of Modifications to the Text of the Rules and the
Procedures, of the Service Guide for the DTC Canadian-Link Service and
the DTC Operational Arrangements Relating to the Elimination of the
Canadian Dollar Settlement Feature of the Canadian-Link Service
July 14, 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 July 12, 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 the clearing agency. DTC filed the proposed rule change
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(4)
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)(4).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change of DTC \5\ consists of modifications to
the text of the Rules and the Procedures,\6\
[[Page 38382]]
including Rule 30, of the service guide (``Guide'') \7\ for the DTC
Canadian-Link Service (``Canadian-Link Service'') and the DTC
Operational Arrangements (Necessary for Securities to Become and Remain
Eligible for DTC Services) (``OA'') \8\ relating to the elimination of
the Canadian dollar (``CAD'') settlement feature of the Canadian-Link
Service, as described below.
---------------------------------------------------------------------------
\5\ Capitalized terms not defined herein are defined in the
Rules, By-Laws, and Organization Certificate of DTC (``Rules''),
available at www.dtcc.com/~/media/Files/Downloads/legal/rules/
dtc_rules.pdf and the Guide.
\6\ Pursuant to the Rules, the term ``Procedures'' means the
Procedures, service guides, and regulations of DTC adopted pursuant
to Rule 27, as amended from time to time. See Rule 1, Section 1,
supra note 5. Pursuant to Rule 27, each Participant and DTC is bound
by the Procedures and any amendment thereto in the same manner as it
is bound by the Rules. See Rule 27 at 97, supra note 5.
\7\ Available at https://www.dtcc.com/~/media/Files/Downloads/
legal/service-guides/Canadian_Dollar_Settlement.pdf.
\8\ Available at https://www.dtcc.com/~/media/Files/Downloads/
legal/issue-eligibility/eligibility/operational-arrangements.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 consists of modifications to the text of
the Rules and the Procedures, including Rule 30,\9\ the Guide and the
OA relating to the elimination of the CAD settlement feature of the
Canadian-Link Service, as described below.
---------------------------------------------------------------------------
\9\ Supra note 5.
---------------------------------------------------------------------------
Background
In 2006, DTC established a ``northbound'' Canadian-Link Service
that supports transactions settled in CAD.\10\ Rule 30 \11\ describes
the operation of the Canadian-Link Service, that permits DTC
Participants using the Canadian Link Service (``Canadian-Link
Participants'') to (A) settle Delivery Versus Payment (``DVP'')
Securities transactions with participants (``CDS Participants'') of The
Canadian Depository for Securities Limited (``CDS'') and other
Canadian-Link Participants in CAD and (B) transfer CAD to or receive
CAD from CDS Participants and other Canadian-Link Participants without
any corresponding delivery or receipt of Securities.\12\
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\10\ See Securities Exchange Act Release No. 52784 (November 16,
2005), 70 FR 70902 (November 23, 2005) (SR-DTC-2005-08).
\11\ Supra note 5.
\12\ The Canadian-Link Service also provides for Cross-Border
USD Securities Transactions between Participants and CDS
Participants. See Rule 30, Section 1(a)(2), supra note 5. See also
Securities Exchange Act Release No. 55239 (February 5, 2007), 72 FR
6797 (February 13, 2007) (SR-DTC-2006-15).
---------------------------------------------------------------------------
The Canadian-Link Service provides Participants with a single
depository interface for CAD transactions. The link facilitates
Participants' ability to maintain U.S. and Canadian Security positions
in their DTC accounts for Securities listed in both Canada and the
United States (i.e., dually listed). This eliminates the need for
Participants to maintain separate positions in an eligible \13\
Security in CDS for CAD settlements and in DTC for USD settlements. It
also eliminates the need for Participants to reposition Securities
inventory between DTC and CDS in preparation for corporate action
events and or transaction processing for dually listed issues.
---------------------------------------------------------------------------
\13\ DTC may determine the Securities that are eligible for the
Canadian-Link Service. Some Securities may be eligible for all
purposes of the Canadian-Link Service, and some Securities may be
eligible only for limited purposes (e.g., clearance and settlement
through the facilities of CDS but only custody and asset servicing
through the facilities of DTC). See Rule 30, Section 4, supra note
5.
---------------------------------------------------------------------------
Transactions between Canadian-Link Participants and CDS
Participants are processed through an omnibus account maintained by DTC
at CDS (``DTC Omnibus Account'') in accordance with the rules and
procedures of CDS. Canadian-Link Participants are able (i) to deliver
Securities to or receive Securities from CDS Participants against
payment (i.e., DVP) in CAD and (ii) to transfer funds to or receive
funds from CDS Participants in CAD without any corresponding delivery
or receipt of Securities. Transactions between Canadian-Link
Participants and other Canadian-Link Participants are processed through
accounts at DTC in accordance with the Rules.
For both transactions (i) between Canadian-Link Participants and
CDS Participants processed through the DTC Omnibus Account and (ii)
between Canadian-Link Participants and other Canadian-Link Participants
processed through accounts at DTC, there is a single end-of-day CAD
money settlement between DTC and its Canadian-Link Participants.\14\
For the transactions between Canadian-Link Participants and CDS
Participants processed through the DTC Omnibus Account, there is a
separate end-of-day CAD money settlement between CDS and DTC.
---------------------------------------------------------------------------
\14\ Pursuant to Section 1(h)(15) of Rule 30, the term
``Canadian-Link CAD Money Settlement'' is defined as the money
settlement of Canadian-Link Transactions in CAD Funds between the
DTC and Canadian-Link Participants. Rule 30, supra note 5. DTC notes
that in a list of defined terms at the beginning of Rule 30, the
definition of Canadian-Link CAD Money Settlement is specified to
appear in Section 1(a)(15); however, the definition actually appears
in Section 1(h)(15) of Rule 30 and not Section 1(a)(15) of Rule 30.
Id.
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As with all transactions processed at DTC, DTC maintains risk
controls with respect to transactions processed by Canadian-Link
Participants, including the Net Debit Cap and Collateral Monitor.\15\
With respect to Collateral Monitor, each Canadian-Link Participant has
a single Collateral Monitor with respect to transactions processed for
such Participant through the Canadian-Link Service and other
transactions processed by DTC for such Participant.
---------------------------------------------------------------------------
\15\ The term ``Collateral Monitor'' of a Participant, as used
with respect to its obligations to the Corporation, means, on any
Business Day, the record maintained by the Corporation for the
Participant which records, in the manner specified in Procedures,
the algebraic sum of (i) the Net Credit or Debit Balance of the
Participant and (ii) the aggregate Collateral Value of the
Collateral of the Participant. Rule 1, Section 1 at 3, supra note 5.
---------------------------------------------------------------------------
Proposed Rule Change
In recent years, activity at DTC in CAD has accounted for less than
0.20 percent of DTC's average daily valued settlement volume. Most of
this activity relates to distributions such as principal, interest and
dividend payments in Securities held at CDS by DTC on behalf of
Participants. While Participants continue to use the Canadian-Link
Service for custody purposes to position Securities inventory at CDS
through DTC's CDS account and receive related distribution payments, no
Participants have effectuated a DVP of Securities through the Canadian-
Link Service since 2018. DTC attributes this lack of DVP activity to a
lack of demand among its Participants for the DVP aspect of the
Canadian-Link Service.
CDS recently communicated to CDS's participants, including DTC,
that it will be modernizing its settlement system through an initiative
referred to as the Post Trade Modernization (``CDS PTM'') Project.\16\
For DTC to continue to maintain access to CDS's CAD settlement
services, it would have been necessary for DTC to perform systems
development in order to be able to continue to use this aspect of the
Canadian-Link service. However, the CDS modernization does not
adversely impact DTC's ability to hold Securities
[[Page 38383]]
at CDS on behalf of Participants, receive distributions on behalf of
Participants and facilitate Free Deliveries \17\ through the link.
---------------------------------------------------------------------------
\16\ See CDS's website at https://www.cds.ca/about/post-trade-modernization for information published by CDS regarding CDS PTM.
\17\ Pursuant to Rule 1, the term ``Free Delivery'' means a
Delivery free of any payment by the Receiver through the facilities
of the Corporation, as provided in Rule 9(B) and as specified in the
Procedures. See supra note 5.
---------------------------------------------------------------------------
Rule 30, Section 2 provides:
The Corporation has entered into various agreements with CDS,
and as a participant of CDS has undertaken to abide by the rules,
procedures and user guides of CDS (the ``Rules and Procedures of
CDS''). Such agreements and the Rules and Procedures of CDS, as the
same may be amended or supplemented from time to time, are
collectively referred to as the ``CDS Documents''. Notwithstanding
anything else contained in this Rule 30 or otherwise in the Rules
and Procedures of the Corporation, the Corporation shall offer the
Canadian-Link Service only for so long as the Corporation continues
to be a participant of CDS and there have been no changes in the CDS
Documents, or actions taken by CDS, which would, in the judgment of
the Corporation, prevent or impair the ability of the Corporation to
offer the Canadian-Link Service or make it impractical or onerous
for the Corporation to do so.
DTC has determined that it would no longer be able to access CDS's
CAD settlement service without making necessary system changes
consistent with CDS PTM. In DTC's judgement, it would be impractical
for DTC to incur the costs to undertake such changes, including
incurring development costs, due to the lack of demand by its
Participants to use the valued aspect of the Canadian Link Service.
In this regard, because there is no Participant demand for valued
CAD Securities transaction and CAD Funds transfer aspect of the
Canadian-Link Service, it is DTC's judgement that it would be
impractical for DTC to continue to process valued CAD Securities and
CAD Funds transfer transactions and, in accordance with its discretion
set forth in Rule 30 as described above, DTC has discontinued
processing of CAD Securities and CAD Funds transactions through the
Canadian-Link Service.\18\ DTC proposes to amend the Rules to clarify
its Rules in this regard and reflect the elimination of the function of
processing of CAD Securities and CAD Funds transactions pursuant to the
provisions of Rule 30, Section 2.\19\ However, because the CDS PTM
changes are not expected to materially impact DTC's ability to perform
custody and process Free Deliveries at CDS, DTC would continue to
maintain its membership, including its Securities account, at CDS, to
hold Securities on behalf of DTC Participants at CDS and offer the
functionality allowing Participants the ability to process Free
Deliveries through the Canadian-Link Service. In addition, DTC would
continue to pass distributions paid on Securities held in its DTC
account to the applicable Participants in CAD or USD.\20\
---------------------------------------------------------------------------
\18\ See DTC Important Notice 13639-20 (July 10, 2020).
Available at https://www.dtcc.com/-/media/Files/pdf/2020/7/10/13639-20.pdf.
\19\ Supra note 5.
\20\ See OA at 23-27, supra note 8.
---------------------------------------------------------------------------
In this regard, DTC proposes to update the text of its Rules to
reflect the discontinuance of processing valued CAD Securities
transactions and CAD Funds transfers through the Canadian-Link Service.
Proposed Rule Changes
Proposed Changes to Rulebook
Pursuant to the proposed rule change, DTC will delete text in Rule
30 relating to the processing of CAD transactions in the Canadian-Link
Service, including as follows.
Defined Terms
Defined terms relating to the description of the processing of CAD
transactions in Rule 30 would be deleted, including CAD Funds,\21\
Canadian-Link CAD Money Settlement,\22\ Canadian-Link CAD Net Debit
Cap,\23\ Canadian-Link CAD Net Settlement Credit,\24\ Canadian-Link CAD
Settlement Debit,\25\ Canadian-Link Funds Transactions,\26\ Canadian-
Link Net Debit Cap,\27\ Canadian-Link Net Settlement Credit,\28\
Canadian-Link Net Settlement Debit,\29\ Canadian-Link Participants Fund
Cash,\30\ Canadian-Link Required Participants Fund Deposit,\31\
Canadian-Link USD Net Debit Cap,\32\ Canadian-Link USD Net Settlement
Credit,\33\ Canadian-Link USD Net Settlement Debit,\34\ CDS Payment
Exchange,\35\ Canadian-Link Securities
[[Page 38384]]
Transactions,\36\ CDS Settlement Recap,\37\ CDS Settlement Recap
Time,\38\ Collateral Monitor Conversion Rate,\39\ Cross-Border CAD
Funds Transactions,\40\ Cross-Border CAD Securities Transactions,\41\
Cross-Border Net Additions,\42\ Cross-Border USD Securities
Transactions,\43\ DTC Omnibus Account CAD Net Debit Cap,\44\ DTC
Omnibus Account CAD Net Settlement Credit,\45\ DTC Omnibus Account CAD
Net Settlement Debit,\46\ DTC Omnibus Account Net Debit Cap,\47\ DTC
Omnibus Account Net Settlement Credit,\48\ DTC Omnibus Account Net
Settlement Debit,\49\ DTC Omnibus Account USD Net Debit Cap,\50\ DTC
Omnibus Account USD Net Settlement Credit,\51\ DTC Omnibus Account USD
Net Settlement Debit,\52\ DTC Canadian Settlement Bank,\53\ DTC
Settlement Payment Deadline,\54\ DTC Settlement Recap,\55\ DTC
Settlement Recap Time,\56\ Funds,\57\ Intra-DTC CAD Funds
Transactions,\58\ Intra-DTC CAD Securities Transactions,\59\
Participant Canadian Settlement Bank,\60\ Payment Default Conversion
Rate,\61\ Payment
[[Page 38385]]
Default Exchange Rate \62\ and USD Funds.\63\
---------------------------------------------------------------------------
\21\ Pursuant to Section 1(h)(3) of Rule 30, the term ``CAD
Funds'' are defined as funds denominated in Canadian dollars. See
Rule 30, supra note 5.
\22\ See supra note 14.
\23\ Pursuant to Section 8(a) of Rule 30, the term ``Canadian-
Link CAD Net Debit Cap'' is defined as a limit established by DTC
(i) on the negative CAD Funds balance that may, from time to time,
be incurred by a Canadian-Link Participant in respect of Canadian-
Link Transactions processed for such Participant through the
Canadian-Link Service in CAD Funds. See Rule 30, supra note 5.
\24\ Pursuant to Rule 30, Section 12(b), the term ``Canadian-
Link CAD Net Settlement Credit'' is defined as the net amount of CAD
Funds, calculated by DTC by a time on a CDS Business Day set forth
in the Procedures, payable by DTC to a Canadian-Link Participant.
Id.
\25\ Pursuant to Rule 30, Section 12(b), the term ``Canadian-
Link CAD Net Settlement Debit'' is defined as the net amount of CAD
Funds, calculated by DTC by a time on a CDS Business Day set forth
in the Procedures, payable to DTC by a Canadian-Link Participant.
Id.
\26\ Pursuant to Rule 30, Section 1(h)(8), the term ``Canadian-
Link Funds Transactions'' is defined as Cross-Border CAD Funds
Transactions and Intra-DTC CAD Funds Transactions, referred to
individually or collectively as the context may require. Id.
\27\ Pursuant to Rule 30, Section 8(a), the term ``Canadian-Link
Net Debit Cap'' is defined as the Canadian-Link CAD Net Debit Cap
and Canadian-Link USD Net Debit Cap referred to, individually or
collectively as the context may require. This section provides that
the Canadian-Link Net Debit Cap of each Canadian-Link Participant
shall be determined by a formula (taking into account the volume of
Canadian-Link Transactions of each Canadian-Link Participant) that
shall be fixed by DTC and set forth in the Procedures. Id.
\28\ Pursuant to Rule 30, Section 12(b), the term ``Canadian-
Link Net Settlement Credit'' is defined as the Canadian-Link CAD Net
Settlement Credit and Canadian-Link USD Net Settlement Credit
referred to, individually or collectively as the context may
require. Id.
\29\ Pursuant to Rule 30, Section 12(b), the term ``Canadian-
Link Net Settlement Debit'' is defined as the Canadian-Link CAD Net
Settlement Debit and Canadian-Link USD Net Settlement Debit referred
to, individually or collectively as the context may require. Id.
\30\ Pursuant to Rule 30, Section 6(c), the term ``Canadian-Link
Participants Fund Cash'' is defined as that portion of the cash in
the Participants Fund equal to the aggregate amount of the Canadian-
Link Required Participants Fund Deposits of all Canadian-Link
Participants. Id.
\31\ Pursuant to Rule 30, Section 6(a), the term ``Canadian-Link
Required Participant Fund Deposit'' is defined as an amount each
Canadian-Link Participant shall be required to deposit to the
Participants Fund (as described in Section 1 of Rule 4) an amount of
USD Funds in addition to the amount of USD Funds specified in
Section 1(a)(i) of Rule 4. The Canadian-Link Required Participants
Fund Deposit shall be in cash. The Canadian-Link Required
Participants Fund Deposit of each Canadian-Link Participant shall be
determined by a formula (considering the volume of transactions of
each Canadian-Link Participant) that shall be fixed by the DTC and
set forth in the Procedures. DTC may, from time to time, change the
formula for determining the Canadian-Link Required Participants Fund
Deposits of Canadian-Link Participants; provided, however, that
notice of such change shall be given to each Canadian-Link
Participant at least ten Business Days in advance of the effective
date thereof. Id.
\32\ Pursuant to Rule 30, Section 8(a), a ``Canadian-Link USD
Net Debit Cap'' is to be established by DTC on the negative USD
Funds balance that may, from time to time, be incurred by a
Canadian-Link Participant in respect to Canadian-Link Transactions
processed for such Participant through the Canadian-Link Service in
USD Funds. Id.
\33\ Pursuant to Rule 30, Section 12(b), the term ``Canadian-
Link USD Net Settlement Credit'' is defined as the net amount of USD
Funds calculated by DTC by a time on a CDS Business Day set forth in
the Procedures and payable by DTC to a Canadian-Link Participant.
Id.
\34\ Pursuant to Rule 30, Section 12(b), the term ``Canadian-
Link USD Net Settlement Debit'' is defined as the net amount of USD
Funds calculated by DTC by a time on a CDS Business Day set forth in
the Procedures and payable to DTC by a Canadian-Link Participant.
Id.
\35\ Pursuant to Rule 30, Section 13(a), ``CDS Payment
Exchange'' is defined as on each CDS Business Day, during a period
of time set forth in the Rules and Procedures of CDS, when CDS is
required to pay to DTC the amount of its DTC Omnibus Account CAD Net
Settlement Credit, id, or DTC is required to pay to CDS the amount
of its DTC Omnibus Account CAD Net Settlement Debit, as specified in
the CDS Settlement Recap. All such payments to or by DTC are made to
or by a Canadian bank acting on behalf of DTC. Id.
\36\ Pursuant to Rule 30, Section 1(h)(7), ``Canadian-Link
Securities Transactions'' is defined, individually or collectively
as the context may require, Cross-Border CAD Securities
Transactions, Cross-Border USD Securities Transactions and Intra-DTC
CAD Securities Transactions. Id.
\37\ Pursuant to Rule 30, Section 12(a), provides the definition
of ``CDS Settlement Recap'' as follows: ``On each CDS Business Day,
by a time set forth in the Rules and Procedures of CDS, CDS
calculates and provides to the Corporation a settlement recap (the
``CDS Settlement Recap'') with (i) the net amount of CAD Funds
payable by CDS to the Corporation (a ``DTC Omnibus Account CAD Net
Settlement Credit'') or by the Corporation to CDS (a ``DTC Omnibus
Account CAD Net Settlement Debit''), (ii) the net amount of USD
Funds payable by CDS to the Corporation (a ``DTC Omnibus Account USD
Net Settlement Credit'') or by the Corporation to CDS (a ``DTC
Omnibus Account USD Net Settlement Debit'') and (iii) other
information in respect of the Cross-Border Transactions processed by
CDS for the Corporation on such CDS Business Day.'' Id.
\38\ Pursuant to Rule 30, Section 12(a), ``CDS Settlement Recap
Time'' is defined as time when CDS provides the CDS Settlement Recap
to DTC. Id.
\39\ Pursuant to Rule 30, Section 16(b), provides the definition
of ``Collateral Monitor Conversion Rate'' as follows: ``If any
computation has to be made requiring the conversion of an amount of
CAD Funds into an amount of USD Funds for the purpose of calculating
the Collateral Monitor of a Canadian-Link Participant pursuant to
Section 9 of this Rule 30, the conversion rate for such purpose
shall be a rate determined by a formula (taking into account
exchange rate fluctuations) that shall be fixed by the Corporation
and set forth in the Procedures (the ``Collateral Monitor Conversion
Rate'').'' Id.
\40\ Pursuant to Rule 30, Section 1(a)(4), the term ``Cross-
Border CAD Funds Transactions'' is defined as the transfer of
Canadian dollars between Participants of DTC and participants of
CDS. Id.
\41\ Pursuant to Rule 30, Section 1(a)(1), the term ``Cross-
Border CAD Securities Transactions'' is defined as the settlement of
valued transactions (A) in Securities that are Eligible Securities
(as described in Section 1 of Rule 5) and in Securities that are not
Eligible Securities (B) in Canadian dollars (C) between Participants
of the Corporation and participants of CDS (``Cross-Border CAD
Securities Transactions''). Id.
\42\ Pursuant to Rule 30, Section 7(b), the term ``Cross-Border
Net Additions'' is defined as any Cross-Border Securities credited
to the DTC Omnibus Account. Id.
\43\ Pursuant to Rule 30, Section 1(a)(2), the term ``Cross-
Border USD Securities Transactions'' is defined as the settlement of
valued transactions in (A) Securities that are not Eligible
Securities (B) in US dollars (C) between Participants of DTC and
participants of CDS. Id.
\44\ Pursuant to Rule 30, Section 8(a), the term ``DTC Omnibus
Account CAD Net Debit Cap'' is defined as a limit established by CDS
on the negative CAD Funds balance that may, from time to time, be
incurred in the DTC Omnibus Account in respect of Cross-Border
Transactions processed for DTC through the facilities of CDS in CAD
Funds. Id.
\45\ See supra note 37.
\46\ Id.
\47\ Pursuant to Rule 30, Section 8(a), the terms ``DTC Omnibus
Account CAD Net Debit Cap'' and ``DTC Omnibus Account USD Net Debit
Cap'' are referred to, individually or collectively as the context
may require, as the ``DTC Omnibus Account Net Debit Cap.'' See Rule
30, supra note 5.
\48\ Pursuant to Rule 30, Section 12(a), the term ``DTC Omnibus
Account Net Settlement Credit'' means the DTC Omnibus Account CAD
Net Settlement Credit and DTC Omnibus Account USD Net Settlement
Credit, individually or collectively as the context may require. Id.
\49\ Pursuant to Rule 30, Section 12(a), the term ``DTC Omnibus
Account Net Settlement Debit'' means the DTC Omnibus Account CAD Net
Settlement Debit and DTC Omnibus Account USD Net Settlement Debit,
individually or collectively as the context may require. Id.
\50\ Pursuant to Rule 30, Section 8(a), the term ``DTC Omnibus
Account USD Net Debit Cap'' is defined pursuant to the Rules and
Procedures of CDS, as a limit established by CDS (i) on the negative
USD Funds balance that may, from time to time, be incurred in the
DTC Omnibus Account in respect of Cross-Border Transactions
processed for the Corporation through the facilities of CDS in USD
Funds. Id.
\51\ See supra note 37.
\52\ Id.
\53\ Pursuant to Rule 30, Section 13(a), the term ``DTC Canadian
Settlement Bank'' is defined as a Canadian bank acting on behalf of
DTC for payments relating to CDS paying to DTC the amount of the DTC
Omnibus Account CAD Net Settlement Credit, or DTC paying to CDS the
amount of its DTC Omnibus Account CAD Net Settlement Debit, as
specified in the CDS Settlement Recap. See Rule 30, supra note 5.
\54\ Pursuant to Rule 30, Section 13(b), the term ``DTC
Settlement Payment Deadline'' is defined as on each CDS Business
Day, by a time set forth in the Procedures of the Corporation, each
Canadian-Link Participant with a Canadian-Link CAD Net Settlement
Debit shall pay to the Corporation the amount of its Canadian-Link
CAD Net Settlement Debit, as specified in the DTC Settlement Recap.
See Rule 30, supra note 5. The time when such payment must be made
is referred to as the ``DTC Settlement Payment Deadline.'' Id.
\55\ Pursuant to Rule 30, Section 12(b), the term ``DTC
Settlement Recap'' is defined as described in the following: ``On
each CDS Business Day, by a time set forth in the Procedures of the
Corporation, the Corporation shall calculate and provide to each
Canadian-Link Participant a settlement recap (a ``DTC Settlement
Recap'') with (i) the net amount of CAD Funds payable by the
Corporation to such Canadian-Link Participant (a ``Canadian-Link CAD
Net Settlement Credit'') or by such Canadian-Link Participant to the
Corporation (a ``Canadian-Link CAD Net Settlement Debit''), (ii) the
net amount of USD Funds payable by the Corporation to such Canadian-
Link Participant (a ``Canadian-Link USD Net Settlement Credit'') or
by such Canadian-Link Participant to the Corporation (a ``Canadian-
Link USD Net Settlement Debit'') and (iii) other information in
respect of the Canadian-Link Transactions of such Canadian-Link
Participant processed through the Canadian-Link Service on such CDS
Business Day, including both Cross-Border Transactions with CDS
Participants processed for such Participant through the DTC Omnibus
Account and Intra-DTC Transactions with other Canadian-Link
Participants processed for such Participant through Accounts with
the Corporation.'' Id.
\56\ Pursuant to Rule 30, Section 12(b), the term ``DTC
Settlement Recap Time'' means the time when DTC provides the DTC
Settlement Recap to Canadian-Link Participants. Id.
\57\ Pursuant to Rule 30, Section 1(h)(5), the term ``Funds'' is
defined as CAD Funds and USD Funds, individually or collectively as
the context may require. Id.
\58\ Pursuant to Rule 30, Section 1(a)(5), the term ``Intra-DTC
CAD Funds Transactions'' is defined as the transfer of Canadian
dollars between Participants of DTC and other Participants of DTC.
Id.
\59\ Pursuant to Rule 30, Section 1(a)(3), the term ``Intra-DTC
CAD Securities Transactions'' is defined as the settlement of valued
transactions (A) in Securities that are Eligible Securities (B) in
Canadian dollars (C) between Participants of DTC and other
Participants of DTC. Id.
\60\ Pursuant to Rule 30, Section 13(d), the term ``Participant
Canadian Settlement Bank'' is defined as a Canadian Bank acting on
behalf of a Canadian bank to which all payments of CAD Funds to or
by a Canadian-Link Participant shall be made. Id.
\61\ Pursuant to Rule 30, Section 16 (c), ``Payment Default
Conversion Rate'' is defined as follows: ``If any computation has to
be made requiring the conversion of an amount of CAD Funds into an
amount of USD Funds for the purpose of calculating the Gross
Settlement Debit of a Canadian-Link Participant pursuant to Section
15 of this Rule 30, the conversion rate for such purpose shall be a
rate determined by a formula (taking into account all factors
incident to the default of such Participant in the payment of its
Canadian-Link CAD Net Settlement Debit) that shall be fixed by the
Corporation and set forth in the Procedures (the ``Payment Default
Conversion Rate'').'' Id.
\62\ Pursuant to Rule 30, Section 16(a), the term ``Payment
Default Exchange Rate'' is defined as the exchange rate determined
by a formula (taking into account all factors incident to the
default of such Participant in the payment of its Canadian-Link CAD
Net Settlement Debit) that shall be fixed by DTC and set forth in
the Procedures. The exchange rate relates to any amount of USD Funds
has to be exchanged for an amount of CAD Funds to pay (or re-fund) a
DTC Omnibus Account CAD Net Settlement Debit to CDS in accordance
with Section 13 of this Rule 30 because a Canadian-Link Participant
failed to pay DTC the amount of its Canadian-Link CAD Net Settlement
Debit. Id.
\63\ Pursuant to Rule 30, Section 1(h)(4), the term ``USD
Funds'' is defined as funds denominated in US dollars. Id.
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Cross references to sections of Rule 30 for certain defined terms
would be revised to reflect renumbering of the respective referenced
sections, as more fully described below. The referenced section for the
term (A) ``Canadian-Link Participants'' would be revised from Section
1(h)(1) to Section 1(e)(1), (B) ``Canadian-Link Securities'' from
Section 1(h)(14) to Section 1(e)(8), (C) ``Canadian-Link Transactions''
from Section 1(h)(11) to Section 1(e)(5), ``CDS Business Day'' from
Section 11(a) to Section 7(a), (D) ``CDS Participants'' from Section
1(h)(2) to Section 1(e)(2), (E) ``Cross-Border Securities'' from
Section 1(h)(12) to Section 1(e)(6), (F) ``Cross-Border Transactions''
from Section 1(h)(9) to Section 1(e)(3), (G) ``DTC Business Day'' from
Section 11(a) to Section 7(a), (I) ``Intra-DTC Securities'' from
Section 1(h)(13) to Section 1(e)(7), and ``Intra-DTC Transactions''
from Section 1(h)(10) to Section 1(e)(4).
Section 1--Overview of Canadian Link Service
Section 1 of Rule 30 describes the scope of services offered by DTC
relating to the Canadian-Link Service. Pursuant to the proposed rule
change, Section 1 of Rule 30 would be revised to remove references to
the processing of CAD Securities and CAD Funds transactions through the
Canadian-Link service and provide only for processing of Free
Deliveries through the link. These changes include:
(i) Consolidate subsection (a) of Section 1 by eliminating
references to DTC processing of (1) Cross-Border CAD Securities
Transactions, (2) Cross-Border USD Securities Transactions, (3) Intra-
DTC CAD Securities Transactions, (4) Cross-Border CAD Funds
Transactions and (5) Intra-DTC CAD Funds Transactions, and instead
refer to processing of Free Deliveries only.
(ii) Subsection (b) of Section 1 which currently states, among
other things, that DTC provides the Canadian-Link Service as a
Securities Intermediary for its Participants, and all transactions in
Securities and transfers of funds are subject to the Rules and
Procedures of the Corporation, including this Rule 30 and the
Procedures adopted pursuant to Rule 30, would be amended to delete the
reference to ``and transfers of funds.'' This reference would be
deleted as DTC would no longer offer the ability to process CAD Funds
Transactions through the Canadian-Link Service. As indicated above, DTC
notes that distributions such as principal, interest and dividend
payments relating Securities held at CDS by DTC on behalf of
Participants would continue to be processed through DTC's CAD Settling
Bank to DTC Participants, pursuant to the applicable provisions of the
OA. Processing of such distributions are conducted through DTC's asset
servicing functions and are not part of the DVP functionality that DTC
proposes to eliminate from its Rules and Procedures.
(iii) DTC would amend Subsection (c) of Section 1 to change
references to ``seller'' and ``purchaser'' of Securities to
``Deliverer'' \64\ and ``Receiver,'' \65\ respectively, to harmonize
the use of terms with DTC's rules related to settlement of Securities
Deliveries and receives generally. DTC would also amend the text of
this subsection to reflect the proposal that DVP transactions would no
longer be processed through the Canadian-Link Service. In this regard,
references to settlement in CAD would be deleted, and the text would
refer to the crediting and debiting of Securities from a ``Deliverer''
to a ``Receiver.'' Also, Subsection (d) directly below Subsection (c),
which refers to cross-border settlement of transactions in USD would be
deleted in its entirety to reflect the elimination of DVP settlement
through the service. Since Subsection (c), as described above, would be
written to address the Deliveries and Receives of Securities,
generally, Securities transactions previously covered under Subsection
(d) would be covered under the proposed revisions to Subsection (c).
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\64\ Pursuant to Rule 1, the term ``Deliverer,'' as used with
respect to a Delivery of a Security, means the Person which Delivers
the Security. See Rule 1, supra note 5.
\65\ Pursuant to Rule 1, the term ``Receiver,'' as used with
respect to a Delivery of a Security, means the Person which receives
the Security. Id.
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(iv) Subsection (e) of Section 1 describes the processing of CAD
Securities Transactions between DTC Participants. DTC proposes to amend
Subsection (e) of Section 1 to reflect the elimination of money
settlement relating to transactions conducted through the Canadian-Link
Service. In this regard, a sentence that describes the debiting and
crediting of Securities between Participants and references the term
``Intra-DTC CAD Securities Transaction'' would be revised to refer to
``intra-DTC Securities transaction'' instead, to reflect that movements
of Securities between Participants would continue to be permitted
through the Canadian-Link Service, even though the ability to settle a
Securities transaction in CAD would be eliminated. In addition, DTC
would change references to ``seller'' and ``purchaser'' of Securities
to ``Deliverer'' and ``Receiver,'' respectively, to harmonize the use
of terms with DTC's rules related to settlement of Securities
deliveries and receives generally. DTC would also revise Subsection (e)
so that it would be renumbered as Subsection (d) to reflect the
deletion of the current Subsection (d), described above.
(v) DTC would delete Subsection (f) of Section 1 which states: ``A
Cross-Border CAD Funds Transaction between a Participant of the
Corporation and a participant of CDS is processed through the
facilities of CDS.'' In addition, DTC would delete Subsection (g) of
Section 1 which states: ``An Intra-DTC CAD Funds Transaction between a
Participant of the Corporation and another Participant of Corporation
is processed though Canadian settlement banks acting for the
Corporation and such Participants.'' Both subsections would be obsolete
because of the elimination of CAD processing through the Canadian-Link
Service.
(vi) Subsection (h) of Section 1 would be amended to delete
explanations of certain definitions described above, including CAD
Funds, USD Funds, Funds, Cross-Border Securities Transactions,
Canadian-Link Securities Transactions, Canadian-Link Funds
Transactions, and Canadian-Link CAD Money Settlement. Also the
definitions of Intra-DTC Transactions, Cross-Border Securities, Cross-
Border Transactions and Intra-DTC Securities would be amended to
reflect the above-described elimination of money settlement in the
Canadian-Link Service so that transactions are not referred to as
involving DVP settlement or payment of funds. In this regard,
references to the terms ``Cross-Border USD Securities Transactions''
and ``Cross-Border CAD Securities Transactions'' as elements of the
definition of ``Cross-Border Transactions'' would be replaced with an
undefined term ``Cross-border securities transactions'' to reflect that
movements of Securities between Canadian-Link Participants and CDS
[[Page 38386]]
Participants would continue to be permitted through the Canadian-Link
Service, even though the ability to settle a Securities transaction
versus payment would be eliminated. Further, ``Intra-DTC CAD Securities
Transactions'' and ``Intra-DTC CAD Funds Transactions'' as elements of
the definition of ``Intra-DTC Transactions'' would be replaced with a
reference ``Intra-DTC securities transactions,'' for the same reason as
an identical change to current Subsection (e) of Section 1 (proposed to
be renumbered as Subsection (d)), as described above. Also, ``Cross-
Border CAD Securities Transactions'' and ``Cross-Border USD Securities
Transactions'' used as elements of the description of ``Cross-Border
Securities'' would be deleted and replaced with Cross-Border
Transactions. Also, ``Intra-DTC CAD Securities Transactions,'' used as
a descriptor relating to Securities underlying an element of the
definition of ``Intra-DTC Securities,'' would be replaced with ``Intra-
DTC Transactions,'' because (i) even though Intra-DTC CAD Securities
Transactions would no longer be provided for under Rule 30, intra-DTC
Securities transactions could still occur through the Canadian-Link
Service, as described above and (ii) such transactions would defined as
``Intra-DTC Transactions,'' as described above. In addition, Subsection
(h) would be renumbered as Subsection (e) to conform the numbering of
this section with the elimination and renumbering of other subsections
as described above. In this regard, the explanations of definitions in
subsection (h) are currently set forth in an itemized list numbered
from (1) to (15), with each item followed by a semicolon. As a result
of the proposed revisions described above, in addition to changes to
the text to reflect the substantive changes described above, item
numbers (3), (4), (5), (6) (7), (8) and (15) would be deleted and items
(9), (10), (11), (12), (13) and (14) would be renumbered respectively
as (3), (4), (5), (6), (7) and (8). A semicolon and the word ``and''
would be deleted from the end of current (14) (to be renumbered as (8))
and replaced with a period because the deletion of (15) would make the
newly renumbered (8) the last item of this list. The word ``and'' would
be added to the end of current (13) (to be renumbered as 7) directly
after an existing semicolon.
Section 2--CDS Documents
Section 2 of Rule 30 provides, among other things, that ``[E]ach
Canadian-Link Participant shall observe and comply with the CDS
Documents applicable to the Canadian-Link Service as if such Canadian-
Link Participant were a CDS Participant and a direct party to the CDS
Documents. Each Canadian-Link Participant acknowledges that the CDS
Documents may include grants of security interests in and liens on
Cross-Border Securities and CAD Funds in which such Canadian-Link
Participant may have an interest. . . .''
Pursuant to the proposed rule change, DTC proposes to change ``CAD
Funds'' in the preceding sentence to ``funds.'' As described herein,
the term ``CAD Funds'' would be eliminated pursuant to the proposed
rule change. However, CDS may continue to have a security interest in
funds owed to DTC for dividends and interest paid on Securities held by
DTC at CDS on behalf of Canadian-Link Participants.\66\
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\66\ See Section 5.2.2 of CDS's rules, available at https://www.cds.ca/resource/en/311.
---------------------------------------------------------------------------
Section 4--Participants Eligible for Canadian-Link Service
Section 4 of Rule 30 provides, among other things that ``A Security
that is an Eligible Security may or may not be a Canadian-Link Security
and may or may not be the subject of Cross-Border CAD Securities
Transactions, Cross-Border USD Securities Transactions and/or Intra-DTC
Securities Transactions. A Security that is not an Eligible Security
may be a Limited-Service Canadian-Link Security, but it may not be a
Full-Service Canadian-Link Security and may not be the subject of
Intra-DTC CAD Securities Transactions.'' Consistent with the proposed
changes described above, DTC proposes to amend this section to
eliminate references to CAD and USD-related transactions and refer to
transactions without reference to Canadian or U.S. currency. In this
regard, a reference to ``Intra-DTC CAD Securities Transactions'' would
be revised to ``Intra-DTC Transactions'' in a sentence describing to
the effect, among other things, that a Limited-Service Canadian-Link
Security cannot be included in an intra-DTC Securities transaction.
Section 5--Canadian-Link Interface and DTC Omnibus Account
Section 5(a) of Rule 10 includes a description of ledgers and
accounts that CDS maintains for DTC at CDS that relate to Securities
and funds. The funds accounts are denominated in Canadian dollars and
US dollars. While the DVP function of the Canadian-Link Service would
be discontinued pursuant to the proposed rule change, DTC would
continue to receive dividends and interest on Securities held by it at
CDS and DTC may owe fees for services to CDS. As a result, DTC would
continue to maintain funds accounts for these purposes. While the terms
``CAD Funds'' and ``USD Funds'' would be removed from Rule 30 as
described herein, DTC proposes to replace these terms as used in
Section 5(a) of Rule 30 with ``Canadian Dollar funds'' and ``US dollar
funds,'' respectively.
Section 5(b) provides that DTC will make the DTC Omnibus Account
available for the purpose of processing Cross-Border Transactions
between Canadian-Link Participants and CDS Participants. This section
states that DTC will act on behalf of Canadian-Link Participants and in
accordance with their instructions, but DTC maintains, at all times,
control over the Cross-Border Securities and Funds in the DTC Omnibus
Account. As described herein, DTC would remove the defined term for
``Funds''. However, as described above, DTC would continue to receive
funds into its account at CDS in the form of dividends and interest.
Therefore, DTC would replace ``Funds'' as used in Section 5(b) with
``funds.''
Section 6--Canadian-Link Required Participants Fund Deposit
Section 6 of Rule 30 provides that a Participant must make a
deposit that is deemed to be included in the Participants Fund with
respect to DVP volume conducted by the Participant through the
Canadian-Link Service. The section also provides for the investment of
such deposits by DTC and the payment of interest for those investments
to the applicable Participants. The Participants Fund provides
liquidity for DTC to complete settlement in the event a Participant
fails to meet its settlement obligation. Section 6 would be deleted in
its entirety pursuant to the proposed rule change, because Participants
would no longer have a settlement obligation in the Canadian-Link
Service due to the elimination of money settlement for Securities
transactions conducted through the service. In this regard, DTC would
no longer have a settlement obligation with respect to CDS. As a
result, there would no longer be a need to maintain such deposits with
respect to Canadian-Link activity.
Section 7--Security for Canadian-Link Transactions
Section 7 of Rule 30 provides DTC with a security interest in
Securities settled DVP through the Canadian-Link Service and allows DTC
to use such Securities to secure loans for purposes of completing
settlement in the event a Participant fails to satisfy its settlement
obligation. This Section would be
[[Page 38387]]
deleted in its entirety pursuant to the proposal, because since
Participants would no longer be able to incur a settlement obligation
with respect to activity within the Canadian-Link Service, it would no
longer necessary for DTC to maintain a security interest in Securities
that are the subject of Canadian-Link Transactions.
Section 8--Canadian-Link Net Debit Caps of Canadian-Link Participants
Section 8 of Rule 30 provides for a limit to be established by DTC
(i) on the negative CAD Funds balance that may, from time to time, be
incurred by a Canadian-Link Participant in respect of Canadian-Link
Transactions processed for such Participant through the Canadian-Link
Service in CAD Funds (each a ``Canadian-Link CAD Net Debit Cap'') and
(ii) on the negative USD Funds balance that may, from time to time, be
incurred by a Canadian-Link Participant in respect to Canadian-Link
Transactions processed for such Participant through the Canadian-Link
Service in USD Funds (each, a ``Canadian-Link USD Net Debit Cap''). The
Canadian-Link CAD Net Debit Cap and Canadian-Link USD Net Debit Cap are
referred to, individually or collectively as the context may require,
as the ``Canadian-Link Net Debit Cap.'' This Section subjects all
transactions processed though the Canadian-Link Service to be subject
to the Canadian-Link Net Debit Cap. The section further provides that
DTC shall not comply with any instruction from a Canadian-Link
Participant in respect of any Canadian-Link Transaction that would
cause DTC to exceed its DTC Omnibus Account Net Debit Cap or cause such
Canadian-Link Participant to exceed its Canadian-Link Net Debit Cap but
rather shall pend such Canadian-Link Transaction (subject to the Rules)
until such Canadian-Link Transaction may be processed without causing
DTC to exceed its DTC Omnibus Account Net Debit Cap or causing such
Canadian-Link Participant to exceed its Canadian-Link Net Debit Cap.
Pursuant to the proposed rule change, DTC would delete Section 8 of
Rule 30 in its entirety. The maintenance of a Canadian-Link Net Debit
Cap would no longer be necessary as this limit applies to DVP
transactions, and DVP transactions would no longer be processed through
the Canadian-Link Service.
Section 9--Collateral Monitor of Canadian-Link Participants
In addition to the Net Debit Cap,\67\ another tool DTC uses in
managing credit risk is the Collateral Monitor.\68\ These two controls
work together to protect the DTC settlement system in the event of
Participant default. The Collateral Monitor requires net debit
settlement obligations, as they accrue intraday, to be fully
collateralized. Meanwhile, the Net Debit Cap limits the amount of any
Participant's net debit settlement obligation to the amount that can be
satisfied with DTC liquidity resources. Section 9 of Rule 30 provides
for activity conducted by a Participant through the Canadian-Link
Service to be included in the Participant's Collateral Monitor. For the
same reason as described above with respect to the elimination of
Section 8, DTC would delete Section 9 in its entirety, because the
elimination of DVP activity would eliminate any credit risk associated
with transactions conducted through the Canadian-Link Service, and
therefore DTC would no longer require the inclusion of Canadian-Link
activity in the Collateral Monitor in managing its credit risk.
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\67\ Id.
\68\ Id.
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Section 10--Processing Canadian-Link Transactions
Section 10 of Rule 30 provides for the process by which Securities
and funds are credited and debited to and from Canadian-Link
Participants' accounts for activity instructed by Participants to be
processed through the Canadian-Link Service. As described above, DTC
would continue to process transfers of Securities through the Canadian-
Link Service, but it would no longer process DVP and/or CAD Funds
activity for transactions conducted through the service. Therefore,
pursuant to the proposed rule change, DTC would amend Section 10 to
reflect the elimination of processing of funds debits and credits as
part of the processing of Canadian-Link Transactions. In this regard,
DTC would also revise references in the text of this section to (a)
``Canadian-Link Securities Transaction'' to ``Canadian-Link
Transaction,'' (b) ``Intra-DTC CAD Securities Transaction'' to ``Intra-
DTC Transaction,'' and (c) ``Cross-Border Securities Transaction'' to
``Cross-Border Transaction,'' because the currently used terms would be
deleted from Rule 30, as described above, and the elimination of the
processing of funds debits and credits, as described above, would
eliminate the need for the use of defined terms relating to
transactions processed through the Canadian-Link that distinguish
between Securities transactions from funds transactions. Further
subsections (C) and (D) of Section 10(a)(1) and Item (iii) of Sections
10(a)(2)(A) and 10(a)(2)(B) would be deleted from Rule 30. Finally,
this section would also be renumbered as Section 6 due to the deletion
of the original Sections 6, 7, 8 and 9, as described above.
Section 11--CDS Business Days
Pursuant to the proposed rule change, Section 11 would be
renumbered as Section 7.
Section 12--Settlement Recaps
Section 12 provides the process for the issuance of Settlement
Recaps by DTC. Because the money settlement aspect of the Canadian-Link
Service would be eliminated, there would no longer be a need for DTC to
issue Settlement Recaps with respect to CAD activity. Therefore, DTC
would eliminate Section 12 in its entirety because Settlement Recaps
would no longer be issued by DTC, and this Section would become
obsolete.
Section 13--Settlement Payments
Section 13 provides for the processing of settlement payments
relating to DVP activity through the Canadian-Link Service. As
described above, money settlement would be eliminated pursuant to the
proposed rule change. Therefore, DTC would no longer provide for money
settlement relating to transactions processed through the Canadian-
Link. In this regard, DTC proposes to eliminate Section 13 in its
entirety as it would become obsolete.
Section 14--End of Day Sweep
Section 14 provides for the timing of the movement of Securities
between accounts used for the Canadian-Link Service. This section
provides that such movements occur at the end of each CDS Business Day
after the completion of money settlement. DTC would delete the
provision requiring for the completion of money settlement prior to the
``sweeping'' of Securities in this regard as DTC would no longer be
conducting money settlement for the Canadian-Link Service. Also, DTC
would renumber this section as Section 8 to reflect the renumbering and
deletion of previous sections as described above.
[[Page 38388]]
Section 15--Failure To Make Settlement Payments
Section 15 provides the process to be followed if a Participant
fails to make payment with regards to Canadian-Link activity. As
described above, DTC proposes to eliminate money settlement with
respect to Canadian-Link activity. In this regard, DTC would delete
Section 15 in its entirety as it would become obsolete due to the
elimination of settlement payments through this service.
Section 16--Currency Conversion and Exchange
Section 16 provides the process for the conversion of USD Funds to
CAD Funds as necessary for a Participant to complete settlement or
satisfy its risk controls relating to the Canadian-Link Service. Since
money settlement would no longer occur through this service, such
conversions of currency would no longer occur, and this section would
become obsolete. Therefore, pursuant to the proposed rule change, DTC
would delete Section 16 in its entirety.
Section 17--Choice of Law and Submission to Jurisdiction
To conform the numbering of sections to reflect the deletion and
renumbering of previous sections as described above, Section 17 would
be renumbered as Section 9.
Section 18--Canadian Link Charges
Section 18 provides that Participants must pay to DTC any fees and
charges relating to their use of the Canadian-Link Service. These
charges include charges relating to the cost to DTC for maintaining
liquidity resources to settle Canadian-Link Transactions. As mentioned
above, money settlement under this service would be eliminated and
therefore it would no longer necessary for DTC to maintain such
liquidity resources with respect to activity processed through the
Canadian-Link Service. Therefore, text referring to charges relating to
the cost of maintaining liquidity resources with respect to the
Canadian-Link Service would be obsolete and would be deleted. As a
result of these proposed changes, to conform the numbering of the
subsections to reflect the deletion of subsection (ii), the subsections
following would be renumbered, (ii), (iii), (iv) and (v). Also, to
conform the numbering of sections to reflect the deletion and
renumbering of previous sections as described above, Section 18 would
be renumbered as Section 10.
Elimination of the Canadian-Link Service Guide
DTC proposes to eliminate the full text of the Guide. The Guide
relates to Procedures necessary for the DVP settlement of Canadian-Link
Transactions. These Procedures cover all operational aspects of the
service as it relates to DVP activity, including DVP transaction
processing, risk controls and tracking established to control for
failed DVP transactions in the processing of end-of-day sweeps. Due to
the elimination of money settlement through the Canadian-Link Service,
this Guide would become obsolete.
Proposed Changes to the OA
The OA sets forth requirements that a Security must meet to become
and remain eligible for DTC services and provides for the orderly
processing of such Securities and timely payments to Participants.
Proposed Changes to Text of the OA Relating to Eligibility
Requirements/Non-U.S. Denominated Securities
Section I.C.5. of the OA contains provisions relating to the
eligibility of Securities denominated in a non-U.S. currencies and
processing of distribution payments in non-U.S. currencies. This
section currently contains references to CAD settlement through the
Canadian-Link Service. To reflect the proposed elimination of money
settlement in the Canadian-Link Service, DTC proposes to amend this
section to remove references to the availability of Canadian dollar
settlement. Since, as described above, DTC would continue to process
distributions in CAD, this section would continue to provide for such
distributions in CAD. The proposed rule change would make a grammatical
change that does not affect the substance of the section.
Proposed Changes to Dividend and Income Payment Notification Procedures
Section IV of the OA sets forth Dividend and Income Payment
Notification Procedures. Subsection B of this section describes
currency provisions relating to dividend and income payments, and
specifically refers to such payments made in CAD. The text includes
mentions of CAD settlement performed through the Canadian-Link Service.
It also refers to the service generally as ``Canadian dollar
settlement.'' In order to reflect the proposed elimination of CAD
settlement through the Canadian-Link Service, DTC would (i) revise this
section to delete provisions referring to or describing CAD settlement
and (ii) modify a statement relating to Securities eligible to receive
payments in CAD from referencing Securities eligible for Canadian
dollar settlement to Securities eligible for the Canadian-Link Service.
Also, the proposed rule change in this regard would cause a defined
term for CDS to be deleted as it falls within a paragraph that
describes CAD settlement. The proposed rule change moves the defining
term for CDS to a sentence that would not be eliminated by the
proposal.
Effective Date
The proposed rule change would become effective upon filing with
the Commission.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act requires, in part, that the Rules
be designed to promote the prompt and accurate clearance and settlement
of Securities transactions.\69\ DTC believes that the proposed rule
change is consistent with this provision because it would provide
enhanced clarity and transparency for participants with respect to
services offered by DTC by updating the Rules to remove the ability to
access services that Canadian-Link Participants have not recently
utilized and are unlikely to utilize in the future.
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\69\ 15 U.S.C. 78q-1(b)(3)(F).
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Therefore, by providing enhanced clarity and transparency in the
Rules regarding the services provided by DTC, DTC believes the proposed
rule change would promote the prompt and accurate clearance and
settlement of Securities transactions, consistent with the requirements
of the Act, in particular Section 17A(b)(3)(F), cited above.
(B) Clearing Agency's Statement on Burden on Competition
DTC does not believe that the proposed rule change would have any
impact on competition. Participants have not used the Canadian-Link
Service for DVP Securities and/or CAD Funds transactions in several
years. Also, based on discussions DTC has had with Participants
regarding their use of the Canadian-Link Service, DTC believes
Participants are unlikely to use the service for this purpose in the
future. Therefore, DTC believes that the proposed rule change should
have no effect on Participants, other than to remove references to the
ability for Participants to conduct DVP transactions through the
Canadian-Link Service from the Rules and Procedures, which transactions
are unlikely to be conducted by Participants.
[[Page 38389]]
(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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) \70\ of the Act and paragraph (f) \71\ 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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\70\ 15 U.S.C. 78s(b)(3)(A).
\71\ 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-2021-012 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-2021-012. 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-2021-012 and should be submitted on
or before August 10, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\72\
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\72\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15345 Filed 7-19-21; 8:45 am]
BILLING CODE 8011-01-P
