Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend DTC's Procedures and Make Clarifying Changes to the DTC Rules, 60721-60725 [2021-23918]
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Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / 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–
Phlx–2021–66 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.
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All submissions should refer to File
Number SR–Phlx–2021–66. 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–2021–66, and should
be submitted on or before November 24,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–23922 Filed 11–2–21; 8:45 am]
BILLING CODE 8011–01–P
11 17
CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93442; File No. SR–DTC–
2021–015]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
DTC’s Procedures and Make Clarifying
Changes to the DTC Rules
October 28, 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 October
18, 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)(6) 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 consists of
amendments to the DTC Rules, By-Laws
and Organization Certificate (‘‘Rules’’)
in order to (i) amend and clarify certain
notice provisions relating to proposed
rule changes and changes to DTC’s
Procedures, (ii) eliminate obsolete
Rules, and (iii) make technical and
clarifying changes to the Rules, as
discussed more fully below.5
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
5 Each term not otherwise defined herein has its
respective meaning as set forth in the Rules, which
includes, but is not limited to, the By-Laws of DTC
(‘‘By-Laws’’), available at https://www.dtcc.com/
legal/rules-and-procedures.aspx.
2 17
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(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The purpose of the proposed rule
change is to (i) amend and clarify
certain notice provisions relating to
proposed rule changes and changes to
DTC’s Procedures, (ii) eliminate
obsolete Rules, and (iii) make technical
and clarifying changes to the Rules, as
discussed more fully below.
(i) Amend and Clarify Certain Notice
Provisions
Pursuant to the proposed rule change,
DTC would amend and clarify certain
notice provisions relating to proposed
rule changes and changes to DTC’s
Procedures. Specifically, in Rule 19
(Notice of Proposed Rule Changes), DTC
is proposing to replace ‘‘immediately’’
with ‘‘promptly’’ in order to provide
that DTC will promptly—but might not
immediately—notify Participants,
Pledgees, and registered clearing
agencies of any proposed rule changes.
DTC is also proposing to delete the
requirement in Rule 27 (Procedures)
that DTC provide Participants and
Pledgees with ten Business Days’ notice
of any amendment to the Procedures.
DTC believes that the foregoing
requirements are not necessary or
practical because, as explained below,
Participants and Pledgees (and
registered clearing agencies, as
applicable) are already provided
adequate notice of any changes or
proposed changes to DTC’s Rules or
Procedures through the rule change
process.
As a clearing agency registered with
the Commission, DTC’s Rules and
Procedures are adopted and enforced
pursuant to a clear framework under the
Act. Under the rule change process,
generally, before a proposed rule change
may take effect, (i) the change and an
explanatory statement must be filed
with the Commission and posted by
DTC on its website, (ii) notice of the
filing and the substantive terms or
description of the change must be
published by the Commission in the
Federal Register for public review and
comment, and (iii) the Commission
must approve the change (or the change
must otherwise be permitted to take
effect). DTC’s Rules are filed with and
reviewed by the Commission. As a
clearing agency registered under Section
17A of the Act,6 a self-regulatory
organization subject to Section 19 of the
6 15
U.S.C. 78q–1.
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Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Notices
Act,7 and a systemically important
financial market utility under Title VIII
of Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010
(‘‘Dodd-Frank’’),8 DTC is required to
follow: (i) A specified process 9
whenever it proposes a new rule or a
change or amendment to its Rules and
(ii) a specified process 10 whenever it
proposes to make a change to its rules,
procedures or operations that could
materially affect the nature or level of
risks presented by DTC.
These rule change processes provide
notice to Participants, Pledgees, and
registered clearing agencies, among
others, and provide an opportunity for
those parties to comment on such
changes. Rule 19b–4 under the Act
requires that DTC post any rule change
proposals on its website within two
business days after the filing of a
proposed rule change,11 post any rule
changes that are approved by the
Commission within two business days
after it has been notified of the
Commission’s approval 12 and post any
rule change within two business days of
the Commissions notice of such
proposed change for rule changes that
are effective upon filing.13 DTC
complies—and will continue to
comply—with such notice requirements
which it believes are adequate.
In terms of technical changes that
relate to the notice provisions, DTC is
proposing to amend the language in
Rule 19 to (i) more closely align with
the SEC’s interpretation 14 of the
requirement for a clearing agency to
provide for the fair representation of its
members,15 and (ii) clarify that DTC will
notify Participants, Pledgees and
registered clearing agencies of any rule
change proposals by posting the
proposal on the DTC website.16 Further,
7 15
U.S.C. 78s.
U.S.C. 5465(e)(1).
9 This process is set forth in Section 19(b) of the
Exchange Act and Exchange Act Rule 19b–4. 15
U.S.C. 78s(b) and 17 CFR 240.19b–4.
10 This process is set forth in Section 806(e) of
Dodd-Frank and Exchange Act Rule 19b–4. 12
U.S.C. 5465(e) and 17 CFR 240.19b–4.
11 17 CFR 240.19b–4(l).
12 17 CFR 240.19b–4(m)(2).
13 Id.
14 See Securities Exchange Act Release No. 16900
(June 17, 1980), 20 FR 415 (July 1, 1980) (‘‘Clearing
agencies, however, should incorporate in their rules
a procedure pursuant to which participants and
registered clearing agencies will normally receive
the text or a brief description of the proposed rule
and its purpose and effect in sufficient time, in
view of the date by which the Commission may be
expected to act upon the filing, to permit the
participants and registered clearing agencies to
comment to the Commission’’) (emphasis added).
15 15 U.S.C. 78q–1(b)(3)(C).
16 Pursuant to the proposed rule change, DTC
would add the defined terms ‘‘DTC Website’’ and
‘‘DTCC’’ to Section 1 of Rule 1 (Definitions;
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in order to clarify that Pledgees are
bound by Procedures in the same
manner they are bound to the Rules,
DTC is proposing to add ‘‘Pledgee’’ to
the third sentence of Rule 27.17
(ii) Eliminate Obsolete Rules
DTC periodically reviews the Rules
for accuracy and applicability. In the
most recent review, DTC identified the
following two Rules for removal from
the Rules.
A. Rule 8 (Deliveries of Notifications
Among Participants and Pledgees)
DTC is proposing to remove Rule 8
from the Rules because the subject
delivery service is no longer utilized by
Participants and Pledgees. Rule 8
provides that DTC will accept deliveries
of hard copy confirmations, advices and
other records from a Participant or
Pledgee that are addressed to another
Participant or Pledgee at its offices.
DTC, in turn, will make the hard-copy
documents available to the addressee.
Rule 8 has appeared in the Rules, in
its current form, since at least 1980.18
Rule 8 relates back to a time when
physical securities processing and the
associated documentation were only in
hardcopy form. It is DTC’s
understanding that, as technology
started to advance, including, but not
limited to the automation and
availability of data files, Participants
and Pledgees began using other means,
including electronic or computergenerated messaging, to communicate
and exchange documentation relating to
a securities transaction.
No Participant or Pledgee has used
DTC facilities to deliver hardcopy
documents to other Participants and
Pledgees in several years. DTC is not
aware of any Participant or Pledgee that
has expressed interest in doing so.
Therefore, DTC is proposing to remove
Rule 8 from the Rules and reflect that
the Rule number is reserved for future
use.
B. Rule 34 (EB Collateral Positioning)
DTC is proposing to remove Rule 34
from the Rules because, as explained
below, the predicate service operated by
Euroclear Bank SA/NV (‘‘EB’’) is no
longer being offered. In 2016, DTC filed
Governing Law). ‘‘DTC Website’’ would be defined
as ‘‘any URL (Uniform Resource Locator) designated
by the Corporation from time to time which may
include DTCC’s website at https://www.dtcc.com.’’
‘‘DTCC’’ would be defined as ‘‘The Depository Trust
& Clearing Corporation.’’
17 As a ministerial correction to Rule 27, DTC is
also proposing to replace the term ‘‘DTC officer’’
with ‘‘officer of the Corporation.’’
18 See DTC CA–1 Application for Permanent
Registration as a Clearing Agency, dated December
15, 1980 (File 600–1) at page 594.
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a rule filing with the Commission to add
Rule 34 to the Rules.19 The purpose of
Rule 34 was to establish a free-ofpayment (‘‘FOP’’) Participant Account
for EB at DTC 20 and to provide
Participants with a framework for
positioning securities they held at DTC
for collateral transfers on the books of
EB in connection with EB’s collateral
management services (‘‘Collateral
Positioning’’).21 Rule 34 also reflects
that EB would only accept deliveries of
securities for Collateral Positioning from
Participants that were also (i)
participants of EB and (ii) users of DTCC
Euroclear Global Collateral Ltd.
(‘‘DEGCL’’) Inventory Management
Service (‘‘DEGCL IMS’’). DEGCL was a
United Kingdom joint venture of The
Depository Trust & Clearing Corporation
(‘‘DTCC’’) and Euroclear S.A./N.V.
(‘‘Euroclear’’), formed for the purpose of
offering global information, record
keeping, and processing services for
derivatives collateral transactions and
other types of financing transactions.
The DEGCL IMS service offered each
user an automated mechanism for using
the securities it held at DTC as collateral
on the books of EB. DEGCL IMS was
operated by EB and other entities in the
Euroclear group, as the service provider
to DEGCL, in accordance with the
appropriate agreements among them
and in compliance with applicable
regulatory requirements. There was no
direct relationship between DTC and
DEGCL IMS. However, DTC understood
that EB was acting as a service provider
to DEGCL, and accordingly, that Rule 34
supported the DEGCL IMS service.
On March 10, 2020, the DEGCL joint
venture was dissolved.22 As a result, the
DEGCL IMS service is no longer offered,
rendering Rule 34 obsolete.
Accordingly, DTC is proposing to
remove Rule 34 from the Rules and
reflect that the Rule number is reserved
for future use.
19 Securities Exchange Act Release No. 78358
(July 19, 2016), 81 FR 48482 (July 25, 2016) (SR–
DTC–2016–004).
20 In 2019, EB applied and was approved by DTC
for a delivery versus payment (‘‘DVP’’) Participant
Account at DTC. In 2019, DTC filed a rule filing to
make non-substantive changes to the Rule in order
to reflect the change to the account structure of EB.
See Securities Exchange Act Release No. 87474
(November 6, 2019), 84 FR 61670 (November 13,
2019) (SR–DTC–2019–010).
21 For a description of Collateral Positioning, see
Securities Exchange Act Release No. 78358 (July 19,
2016), 81 FR 48482 (July 25, 2016) (SR–DTC–2016–
004).
22 See Update on DTCC-Euroclear
GlobalCollateral Joint Venture, available at https://
www.dtcc.com/news/2020/january/14/update-ondtcc-euroclear-globalcollateral-joint-venture.
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(iii) Other Technical and Clarifying
Changes
A. Rule 22 (Right to Contest Decisions)
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a. Clarify the Time Period for an
Interested Person To Request a Hearing
Rule 22 provides that a Participant or
Pledgee, applicant to become a
Participant or Pledgee or issuer of a
Security, as the case may be (an
‘‘Interested Person’’), shall have an
opportunity to be heard on any decision
of DTC to take certain specified actions
against such Interested Person.23 The
Rule provides that the Interested Person
‘‘may request an opportunity to be heard
by filing with the Secretary of [DTC],
within the applicable time period
specified by these Rules, a written
request for a hearing . . . ’’ (emphasis
added).24 The time period, five Business
Days, is not expressly stated in Rule
22.25 Therefore, in order to enhance the
transparency of the hearing process,
DTC is proposing to amend Rule 22 to
expressly reflect the five Business Day
time period within which an Interested
Person must file its request for a hearing
under Rule 22.
Therefore, pursuant to the proposed
rule change, DTC would amend Rule 22
to provide that an Interested Person may
request an opportunity to be heard by
filing with the Secretary of DTC, within
five Business Days from the date on
which DTC informed the Interested
Person of an action or proposed action
of DTC with respect to the Interested
Person (or such other applicable time
period specified by the Rules).
In sum, DTC believes that by
clarifying the DTC time period for an
Interested Person to request a hearing,
the proposed rule change would provide
23 See Section 1 of Rule 22, supra note 5 (stating
that an Interested Person ‘‘shall have an
opportunity to be heard on any decision of the
Corporation: (a) Which proposes to deny the
applicant’s application to become a Participant or
Pledgee; (b) to cease to act for the Participant
pursuant to Rule 10, 11 or 12; (c) to summarily
suspend and close the Accounts of the Participant
or Pledgee pursuant to the Exchange Act; (d) to
terminate its agreement with the Pledgee, as
provided in Section 3 of Rule 2; (e) which proposes
to impose a disciplinary sanction pursuant to Rule
21; or (f) any determination of the Corporation that
an Eligible Security shall cease to be such.’’)
24 See Section 2 of Rule 22, supra note 5.
25 The five Business Day time period is specified
in Rule 21, supra note 5 (‘‘The sanction proposed
may be imposed by the Chairman of the Board, the
President or the Secretary unless, within five
Business Days after notification of such proposed
sanction, the Participant or Pledgee provides notice
of its desire to contest the sanction, as provided in
Rule 22.’’) (emphasis added). See also Securities
Exchange Act Release No. 57406 (February 29,
2008), 73 FR 12236 (March 6, 2008) (SR–DTC–
2007–06) (providing that ‘‘an Interested Person has
five business days from the date on which DTC first
informs it of a sanction or a denial of membership
in which to request a hearing.’’).
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transparency for Participants with
respect to their rights to a hearing under
the Rules.
b. Align the DTC Process of Appointing
a Hearing Panel With the NSCC Panel
Selection Process
Currently, Section 5 of Rule 22
provides that ‘‘[a] hearing requested in
connection with any matter which is not
deemed a ‘‘Minor Rule Violation’’ as
defined in Section 4 of this Rule, and
any hearing requested in connection
with an appeal of the decision of the
Minor Rule Violation Panel, shall be
before three members of a panel (a
‘‘Panel’’) selected by the Chairman of
the Board from a pool (a ‘‘Pool’’) of
Persons employed by or partners of
Participants. Persons shall be appointed
members of the Pool by the Board of
Directors or the Chairman of the Board.
Notwithstanding the above, the Panel
shall not include any Person who had
responsibility for the action or proposed
action of the Corporation as to which
the hearing relates.’’ 26
In contrast, Rule 37 of the National
Securities Clearing Corporation
(‘‘NSCC’’) Rules and Procedures (‘‘NSCC
Rules’’) provides that the hearing would
be before a panel of three individuals
drawn from members of the Board of
Directors or their designees, and that the
members of the Panel would be selected
by the Chairman of the Board. Further,
in addition to excluding from the panel
any individual who had responsibility
for the action or proposed action of
NSCC as to which the hearing relates,
NSCC Rule 37 also excludes any
individual representing the Interested
Person against which the proposed
action is to be taken.27
DTC believes that panel selection
process set forth in NSCC Rule 37
provides (i) a more straightforward and
streamlined process than the current
DTC process, which requires the
additional step of selecting a Pool of
potential panelists, a subset of which
would then be selected for the Panel,
and (ii) clearer guidance about avoiding
conflicts of interests on the Panel.
Further, DTC believes that aligning its
26 Supra
note 5.
Section 4 of NSCC Rule 37 (‘‘A hearing on
any matter not covered by Section 2 of this rule, or
a further hearing requested pursuant to Section 2
shall be before a panel (hereinafter the ‘‘Panel’’) of
three individuals drawn from members of the Board
of Directors or their designees. The members of the
Panel shall be selected by the Chairman of the
Board. Notwithstanding the above, the Panel shall
not include any individual representing the
Interested Person against which the proposed action
is to be taken, nor any person who had
responsibility for the action or proposed action of
the Corporation as to which the hearing relates.’’).
The NSCC Rules are available at https://
www.dtcc.com/legal/rules-and-procedures.aspx.
27 See
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60723
Panel selection process with that of
NSCC would provide enhanced
efficiency for the DTC hearing process,
as well as provide transparency and
consistent treatment for Participants,
particularly for a Participant that is a
common member of NSCC that may
have concurrent rights to a hearing
under the Rules and the NSCC Rules.
Accordingly, DTC is proposing to
replace the first two paragraphs of
Section 5 of Rule 22 with the following
two paragraphs:
A hearing requested in connection with
any matter which is not deemed a ‘‘Minor
Rule Violation’’ as defined in Section 4 of
this Rule, and any hearing requested in
connection with an appeal of the decision of
the Minor Rule Violation Panel, shall be
before three members of a panel (a ‘‘Panel’’)
drawn from members of the Board of
Directors or their designees. The members of
the Panel shall be selected by the Chairman
of the Board.
Notwithstanding the above, the Panel shall
not include any individual representing the
Interested Person against which the proposed
action will be taken, nor any Person who had
responsibility for the action or proposed
action of the Corporation as to which the
hearing relates.
B. Align Rule 23 (Bills Rendered) With
NSCC Rule 26 (Bills Rendered)
Rule 23 (Bills Rendered) currently
provides that ‘‘[t]he Corporation shall
render bills to Participants in the
manner specified in the Procedures for
charges on account of services provided
or fines imposed.’’ DTC is proposing to
amend this Rule to align with NSCC
Rule 26 (Bills Rendered), which
provides additional details about the
process that is applicable to both DTC
and NSCC.28 Specifically, DTC would
amend Rule 23 to state that ‘‘[t]he
Corporation shall render bills to
Participants for charges on account of
services provided or fines imposed and
shall charge their respective accounts
with the amounts thereof on or before
such date as determined by the
Corporation from time to time.’’ DTC
believes that aligning the language of
Rule 23 with the analogous NSCC Rule
26 would provide transparency and
consistent treatment of the rendering
and payment of bills for Participants, in
particular for Participants that are also
members of NSCC.
28 NSCC Rule 26 provides, in relevant part, that
‘‘[t]he Corporation will render bills to Members . . .
for charges on account of the business of any month
and will charge their respective accounts with the
amounts thereof on or before such date as
determined by the Corporation from time to time.’’
Supra note 27.
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C. Replace References to Vice President
With Executive Director
In 2018, DTC determined that the title
of ‘‘Vice President’’ should be replaced
by the title ‘‘Executive Director.’’ 29 DTC
is proposing to amend the Rules to
replace the term ‘‘Vice President,’’
which appears in Section 3 of Rule 1
and in Rule 28, with the term
‘‘Executive Director.’’
D. Amend the By-Laws
Pursuant to the proposed rule change,
DTC is proposing to amend Article V of
the By-Laws to expressly provide that
designees of the Board of Directors have
the power to interpret the Rules of DTC.
This amendment would provide
consistency across the overlapping
Boards of Directors of the three DTCC
registered clearing agencies, DTC,
NSCC,30 and the Fixed Income Clearing
Agency (‘‘FICC’’).31
Implementation Timeframe
DTC would implement the proposed
changes no earlier than thirty (30) days
after the date of filing, or such shorter
time as the Commission may designate.
As proposed, a legend would be added
to the Rules stating there are changes
that were effective upon filing but have
not yet been implemented. The legend
would also state that DTC would
implement the proposed changes no
earlier than thirty (30) days after the
date of filing, or such shorter time as the
Commission may designate. The
proposed legend would state that the
legend would automatically be removed
upon the implementation of the
proposed changes. DTC would
announce the implementation date of
the proposed changes by Important
Notice posted to its website.
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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.32
DTC believes that the proposed
changes to amend and clarify certain
notice provisions relating to proposed
29 Securities Exchange Act Release No. 82915
(March 20, 2018), 83 FR 12970 (March 26, 2018)
(SR–DTC–2018–001).
30 NSCC Rule 47 provides, in part, ‘‘The Board of
Directors of the Corporation or their designee(s)
shall have the authority to interpret the Rules of the
Corporation.’’ Supra note 27.
31 Rule 47 of the Government Securities Division
Rulebook of FICC (‘‘FICC GSD Rules’’) provides, in
part, ‘‘The Board of Directors of the Corporation or
their designee(s) shall have the authority to
interpret the Rules of the Corporation.’’ The FICC
GSD Rules are available at https://www.dtcc.com/
legal/rules-and-procedures.aspx.
32 15 U.S.C. 78q–1(b)(3)(F).
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rule changes and changes to the
Procedures would enhance the
efficiency of DTC’s process for notifying
its Participants and Pledgees about
changes to its Rules and Procedures. As
discussed above in detail, DTC believes
that Participants and Pledgees are
already provided adequate notice of any
rule changes, including changes to its
Procedures, through the rule change
process. As such, the requirements for
DTC to immediately provide notice of
any proposal it has made to change any
Rule to provide ten Business Days’
notice of changes to Procedures are
impractical and unnecessary and
therefore can negatively impact the
efficiency of the process. Specifically,
because DTC is already subject to—and
complies with—the time periods
required by the Act and Dodd Frank,33
DTC believes that self-imposed
requirements to provide notice more
quickly (in the case of proposed rule
changes) or farther in advance (in case
of changes to Procedures) than what is
required by statute is unnecessary. In
addition, DTC believes that the
requirements are impractical because
(i)(x) the requirement to immediately
give notice requires DTC to coordinate
an almost simultaneous submission of a
proposed rule filing and notification to
Participants, Pledgees, and registered
clearing agencies, and (y) Participants,
Pledgees, and registered clearing
agencies would not be prejudiced by the
delta between immediately and
promptly; and (ii) the requirement to
provide Participants and Pledgees
notice of changes to Procedures ten
Business Days in advance, especially
when such parties already receive
adequate notice of the changes, could
cause delays in the rule filing process
and/or the implementation of an
amended rule and procedure.
Accordingly, DTC believes that, by
removing unnecessary and impractical
timing requirements for notice, the
proposed rule change is designed to
enhance the efficiency of DTC’s notice
process and implementation of the
amended Rules and Procedures, thereby
promoting the prompt and accurate
clearance and settlement of securities
transactions, as provided under such
amended Rules and Procedures. As
such, DTC believes that the proposed
changes would be consistent with
Section 17A(b)(3)(F) of the Act, cited
above.
DTC believes that the proposed rule
change to make technical and clarifying
changes, in particular (i) removing
obsolete Rules 8 and 34, (ii) replacing
references to Vice President with
Executive Director in Rules 1 and 28,
(iii) amending the Bylaws to expressly
provide that designees of the Board of
Directors have the power to interpret the
Rules, (iv) amending Rule 22 to enhance
the transparency around, and efficiency
of, the hearing process for Interested
Persons, and (v) amend Rule 23 to align
the text with a parallel NSCC Rule
would enhance the clarity and
transparency of the Rules. By enhancing
the clarity and transparency of the
Rules, the proposed rule change would
allow Participants to more efficiently
and effectively conduct their business in
accordance with the Rules. Therefore,
DTC believes that the proposed rule
change is designed to promote the
prompt and accurate clearance and
settlement of securities transactions
consistent with Section 17A(b)(3)(F) of
the Act, cited above.
(B) Clearing Agency’s Statement on
Burden on Competition
DTC believes that the proposed rule
change to amend and clarify certain
notice provisions relating to proposed
rule changes and changes to Procedures
would not have any impact on
competition. While the proposed change
would impact the rights and obligations
of Participants and Pledgees to receive
notices more quickly (in the case of
proposed rule changes) or farther in
advance (in case of changes to
Procedures) than what is required by
statute, the impact of the proposed
changes on the Participants and
Pledgees would be minimal. As
discussed above, DTC believes that the
proposed changes to the notice
provisions are removing unnecessary
and impractical timing requirements for
notices, and Participants and Pledgees
would continue to receive adequate
notice under the rule change process
and continue to be treated equally with
respect to such notices. As such, DTC
believes the proposed rule change to
amend and clarify certain notice
provisions relating to proposed rule
changes and changes to Procedures
would not have any impact on
competition.34
DTC believes that the proposed rule
change to make technical and clarifying
changes described herein would not
have any impact on competition
because it would enhance the clarity
and transparency of the Rules and
therefore would not affect the rights or
obligations of any party. Accordingly,
DTC does not believe that the proposed
rule change would have any impact on
competition.35
34 15
33 See
PO 00000
supra notes 9 and 10.
Frm 00112
Fmt 4703
Sfmt 4703
U.S.C. 78q–1(b)(3)(I).
35 Id.
E:\FR\FM\03NON1.SGM
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Federal Register / Vol. 86, No. 210 / Wednesday, November 3, 2021 / Notices
IV. Solicitation of Comments
(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. If any written comments are
received, they will be publicly filed as
an Exhibit 2 to this filing, as required by
Form 19b–4 and the General
Instructions thereto.
Persons submitting comments are
cautioned that, according to Section IV
(Solicitation of Comments) of the
Exhibit 1A in the General Instructions to
Form 19b–4, the Commission does not
edit personal identifying information
from comment submissions.
Commenters should submit only
information that they wish to make
available publicly, including their
name, email address, and any other
identifying information.
All prospective commenters should
follow the Commission’s instructions on
how to submit comments, available at
https://www.sec.gov/regulatory-actions/
how-to-submit-comments. General
questions regarding the rule filing
process or logistical questions regarding
this filing should be directed to the
Main Office of the Commission’s
Division of Trading and Markets at
tradingandmarkets@sec.gov or 202–
551–5777.
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) 36 of the
Act and Rule 19b–4(f)(6)
thereunder; 37and
(iv) DTC would announce the
implementation date of the proposed
changes by Important Notice posted to
its website.
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.
36 15
U.S.C. 78s(b)(3)(A).
37 17 CFR 240.19b–4(f)(6).
VerDate Sep<11>2014
17:01 Nov 02, 2021
Jkt 256001
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:
• 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–2021–015 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–2021–015. 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–
2021–015 and should be submitted on
or before November 24, 2021.
Frm 00113
Fmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–23918 Filed 11–2–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
PO 00000
60725
Sfmt 4703
[Release No. 34–93462; File No. SR–
EMERALD–2021–37]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change by MIAX
Emerald, LLC To Amend Exchange
Rule 501, Days and Hours of Business,
To Make Juneteenth National
Independence Day a Holiday of the
Exchange
October 28, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
22, 2021, MIAX Emerald, LLC (‘‘MIAX
Emerald’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend
Exchange Rule 501, Days and Hours of
Business, Interpretation and Policy .02,
to make Juneteenth National
Independence Day a holiday of the
Exchange. Juneteenth National
Independence Day was designated a
legal public holiday in June 2021.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/emerald at MIAX Emerald’s
principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
38 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\03NON1.SGM
03NON1
]]>Agencies
[Federal Register Volume 86, Number 210 (Wednesday, November 3, 2021)]
[Notices]
[Pages 60721-60725]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-23918]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93442; File No. SR-DTC-2021-015]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend DTC's Procedures and Make Clarifying Changes to the DTC Rules
October 28, 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 October 18, 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)(6) 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)(6).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of amendments to the DTC Rules,
By-Laws and Organization Certificate (``Rules'') in order to (i) amend
and clarify certain notice provisions relating to proposed rule changes
and changes to DTC's Procedures, (ii) eliminate obsolete Rules, and
(iii) make technical and clarifying changes to the Rules, as discussed
more fully below.\5\
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\5\ Each term not otherwise defined herein has its respective
meaning as set forth in the Rules, which includes, but is not
limited to, the By-Laws of DTC (``By-Laws''), available at https://www.dtcc.com/legal/rules-and-procedures.aspx.
---------------------------------------------------------------------------
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 purpose of the proposed rule change is to (i) amend and clarify
certain notice provisions relating to proposed rule changes and changes
to DTC's Procedures, (ii) eliminate obsolete Rules, and (iii) make
technical and clarifying changes to the Rules, as discussed more fully
below.
(i) Amend and Clarify Certain Notice Provisions
Pursuant to the proposed rule change, DTC would amend and clarify
certain notice provisions relating to proposed rule changes and changes
to DTC's Procedures. Specifically, in Rule 19 (Notice of Proposed Rule
Changes), DTC is proposing to replace ``immediately'' with ``promptly''
in order to provide that DTC will promptly--but might not immediately--
notify Participants, Pledgees, and registered clearing agencies of any
proposed rule changes. DTC is also proposing to delete the requirement
in Rule 27 (Procedures) that DTC provide Participants and Pledgees with
ten Business Days' notice of any amendment to the Procedures. DTC
believes that the foregoing requirements are not necessary or practical
because, as explained below, Participants and Pledgees (and registered
clearing agencies, as applicable) are already provided adequate notice
of any changes or proposed changes to DTC's Rules or Procedures through
the rule change process.
As a clearing agency registered with the Commission, DTC's Rules
and Procedures are adopted and enforced pursuant to a clear framework
under the Act. Under the rule change process, generally, before a
proposed rule change may take effect, (i) the change and an explanatory
statement must be filed with the Commission and posted by DTC on its
website, (ii) notice of the filing and the substantive terms or
description of the change must be published by the Commission in the
Federal Register for public review and comment, and (iii) the
Commission must approve the change (or the change must otherwise be
permitted to take effect). DTC's Rules are filed with and reviewed by
the Commission. As a clearing agency registered under Section 17A of
the Act,\6\ a self-regulatory organization subject to Section 19 of the
[[Page 60722]]
Act,\7\ and a systemically important financial market utility under
Title VIII of Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010 (``Dodd-Frank''),\8\ DTC is required to follow: (i) A specified
process \9\ whenever it proposes a new rule or a change or amendment to
its Rules and (ii) a specified process \10\ whenever it proposes to
make a change to its rules, procedures or operations that could
materially affect the nature or level of risks presented by DTC.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q-1.
\7\ 15 U.S.C. 78s.
\8\ 12 U.S.C. 5465(e)(1).
\9\ This process is set forth in Section 19(b) of the Exchange
Act and Exchange Act Rule 19b-4. 15 U.S.C. 78s(b) and 17 CFR
240.19b-4.
\10\ This process is set forth in Section 806(e) of Dodd-Frank
and Exchange Act Rule 19b-4. 12 U.S.C. 5465(e) and 17 CFR 240.19b-4.
---------------------------------------------------------------------------
These rule change processes provide notice to Participants,
Pledgees, and registered clearing agencies, among others, and provide
an opportunity for those parties to comment on such changes. Rule 19b-4
under the Act requires that DTC post any rule change proposals on its
website within two business days after the filing of a proposed rule
change,\11\ post any rule changes that are approved by the Commission
within two business days after it has been notified of the Commission's
approval \12\ and post any rule change within two business days of the
Commissions notice of such proposed change for rule changes that are
effective upon filing.\13\ DTC complies--and will continue to comply--
with such notice requirements which it believes are adequate.
---------------------------------------------------------------------------
\11\ 17 CFR 240.19b-4(l).
\12\ 17 CFR 240.19b-4(m)(2).
\13\ Id.
---------------------------------------------------------------------------
In terms of technical changes that relate to the notice provisions,
DTC is proposing to amend the language in Rule 19 to (i) more closely
align with the SEC's interpretation \14\ of the requirement for a
clearing agency to provide for the fair representation of its
members,\15\ and (ii) clarify that DTC will notify Participants,
Pledgees and registered clearing agencies of any rule change proposals
by posting the proposal on the DTC website.\16\ Further, in order to
clarify that Pledgees are bound by Procedures in the same manner they
are bound to the Rules, DTC is proposing to add ``Pledgee'' to the
third sentence of Rule 27.\17\
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\14\ See Securities Exchange Act Release No. 16900 (June 17,
1980), 20 FR 415 (July 1, 1980) (``Clearing agencies, however,
should incorporate in their rules a procedure pursuant to which
participants and registered clearing agencies will normally receive
the text or a brief description of the proposed rule and its purpose
and effect in sufficient time, in view of the date by which the
Commission may be expected to act upon the filing, to permit the
participants and registered clearing agencies to comment to the
Commission'') (emphasis added).
\15\ 15 U.S.C. 78q-1(b)(3)(C).
\16\ Pursuant to the proposed rule change, DTC would add the
defined terms ``DTC Website'' and ``DTCC'' to Section 1 of Rule 1
(Definitions; Governing Law). ``DTC Website'' would be defined as
``any URL (Uniform Resource Locator) designated by the Corporation
from time to time which may include DTCC's website at https://www.dtcc.com.'' ``DTCC'' would be defined as ``The Depository Trust
& Clearing Corporation.''
\17\ As a ministerial correction to Rule 27, DTC is also
proposing to replace the term ``DTC officer'' with ``officer of the
Corporation.''
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(ii) Eliminate Obsolete Rules
DTC periodically reviews the Rules for accuracy and applicability.
In the most recent review, DTC identified the following two Rules for
removal from the Rules.
A. Rule 8 (Deliveries of Notifications Among Participants and Pledgees)
DTC is proposing to remove Rule 8 from the Rules because the
subject delivery service is no longer utilized by Participants and
Pledgees. Rule 8 provides that DTC will accept deliveries of hard copy
confirmations, advices and other records from a Participant or Pledgee
that are addressed to another Participant or Pledgee at its offices.
DTC, in turn, will make the hard-copy documents available to the
addressee.
Rule 8 has appeared in the Rules, in its current form, since at
least 1980.\18\ Rule 8 relates back to a time when physical securities
processing and the associated documentation were only in hardcopy form.
It is DTC's understanding that, as technology started to advance,
including, but not limited to the automation and availability of data
files, Participants and Pledgees began using other means, including
electronic or computer-generated messaging, to communicate and exchange
documentation relating to a securities transaction.
---------------------------------------------------------------------------
\18\ See DTC CA-1 Application for Permanent Registration as a
Clearing Agency, dated December 15, 1980 (File 600-1) at page 594.
---------------------------------------------------------------------------
No Participant or Pledgee has used DTC facilities to deliver
hardcopy documents to other Participants and Pledgees in several years.
DTC is not aware of any Participant or Pledgee that has expressed
interest in doing so. Therefore, DTC is proposing to remove Rule 8 from
the Rules and reflect that the Rule number is reserved for future use.
B. Rule 34 (EB Collateral Positioning)
DTC is proposing to remove Rule 34 from the Rules because, as
explained below, the predicate service operated by Euroclear Bank SA/NV
(``EB'') is no longer being offered. In 2016, DTC filed a rule filing
with the Commission to add Rule 34 to the Rules.\19\ The purpose of
Rule 34 was to establish a free-of-payment (``FOP'') Participant
Account for EB at DTC \20\ and to provide Participants with a framework
for positioning securities they held at DTC for collateral transfers on
the books of EB in connection with EB's collateral management services
(``Collateral Positioning'').\21\ Rule 34 also reflects that EB would
only accept deliveries of securities for Collateral Positioning from
Participants that were also (i) participants of EB and (ii) users of
DTCC Euroclear Global Collateral Ltd. (``DEGCL'') Inventory Management
Service (``DEGCL IMS''). DEGCL was a United Kingdom joint venture of
The Depository Trust & Clearing Corporation (``DTCC'') and Euroclear
S.A./N.V. (``Euroclear''), formed for the purpose of offering global
information, record keeping, and processing services for derivatives
collateral transactions and other types of financing transactions. The
DEGCL IMS service offered each user an automated mechanism for using
the securities it held at DTC as collateral on the books of EB. DEGCL
IMS was operated by EB and other entities in the Euroclear group, as
the service provider to DEGCL, in accordance with the appropriate
agreements among them and in compliance with applicable regulatory
requirements. There was no direct relationship between DTC and DEGCL
IMS. However, DTC understood that EB was acting as a service provider
to DEGCL, and accordingly, that Rule 34 supported the DEGCL IMS
service.
---------------------------------------------------------------------------
\19\ Securities Exchange Act Release No. 78358 (July 19, 2016),
81 FR 48482 (July 25, 2016) (SR-DTC-2016-004).
\20\ In 2019, EB applied and was approved by DTC for a delivery
versus payment (``DVP'') Participant Account at DTC. In 2019, DTC
filed a rule filing to make non-substantive changes to the Rule in
order to reflect the change to the account structure of EB. See
Securities Exchange Act Release No. 87474 (November 6, 2019), 84 FR
61670 (November 13, 2019) (SR-DTC-2019-010).
\21\ For a description of Collateral Positioning, see Securities
Exchange Act Release No. 78358 (July 19, 2016), 81 FR 48482 (July
25, 2016) (SR-DTC-2016-004).
---------------------------------------------------------------------------
On March 10, 2020, the DEGCL joint venture was dissolved.\22\ As a
result, the DEGCL IMS service is no longer offered, rendering Rule 34
obsolete. Accordingly, DTC is proposing to remove Rule 34 from the
Rules and reflect that the Rule number is reserved for future use.
---------------------------------------------------------------------------
\22\ See Update on DTCC-Euroclear GlobalCollateral Joint
Venture, available at https://www.dtcc.com/news/2020/january/14/update-on-dtcc-euroclear-globalcollateral-joint-venture.
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[[Page 60723]]
(iii) Other Technical and Clarifying Changes
A. Rule 22 (Right to Contest Decisions)
a. Clarify the Time Period for an Interested Person To Request a
Hearing
Rule 22 provides that a Participant or Pledgee, applicant to become
a Participant or Pledgee or issuer of a Security, as the case may be
(an ``Interested Person''), shall have an opportunity to be heard on
any decision of DTC to take certain specified actions against such
Interested Person.\23\ The Rule provides that the Interested Person
``may request an opportunity to be heard by filing with the Secretary
of [DTC], within the applicable time period specified by these Rules, a
written request for a hearing . . . '' (emphasis added).\24\ The time
period, five Business Days, is not expressly stated in Rule 22.\25\
Therefore, in order to enhance the transparency of the hearing process,
DTC is proposing to amend Rule 22 to expressly reflect the five
Business Day time period within which an Interested Person must file
its request for a hearing under Rule 22.
---------------------------------------------------------------------------
\23\ See Section 1 of Rule 22, supra note 5 (stating that an
Interested Person ``shall have an opportunity to be heard on any
decision of the Corporation: (a) Which proposes to deny the
applicant's application to become a Participant or Pledgee; (b) to
cease to act for the Participant pursuant to Rule 10, 11 or 12; (c)
to summarily suspend and close the Accounts of the Participant or
Pledgee pursuant to the Exchange Act; (d) to terminate its agreement
with the Pledgee, as provided in Section 3 of Rule 2; (e) which
proposes to impose a disciplinary sanction pursuant to Rule 21; or
(f) any determination of the Corporation that an Eligible Security
shall cease to be such.'')
\24\ See Section 2 of Rule 22, supra note 5.
\25\ The five Business Day time period is specified in Rule 21,
supra note 5 (``The sanction proposed may be imposed by the Chairman
of the Board, the President or the Secretary unless, within five
Business Days after notification of such proposed sanction, the
Participant or Pledgee provides notice of its desire to contest the
sanction, as provided in Rule 22.'') (emphasis added). See also
Securities Exchange Act Release No. 57406 (February 29, 2008), 73 FR
12236 (March 6, 2008) (SR-DTC-2007-06) (providing that ``an
Interested Person has five business days from the date on which DTC
first informs it of a sanction or a denial of membership in which to
request a hearing.'').
---------------------------------------------------------------------------
Therefore, pursuant to the proposed rule change, DTC would amend
Rule 22 to provide that an Interested Person may request an opportunity
to be heard by filing with the Secretary of DTC, within five Business
Days from the date on which DTC informed the Interested Person of an
action or proposed action of DTC with respect to the Interested Person
(or such other applicable time period specified by the Rules).
In sum, DTC believes that by clarifying the DTC time period for an
Interested Person to request a hearing, the proposed rule change would
provide transparency for Participants with respect to their rights to a
hearing under the Rules.
b. Align the DTC Process of Appointing a Hearing Panel With the NSCC
Panel Selection Process
Currently, Section 5 of Rule 22 provides that ``[a] hearing
requested in connection with any matter which is not deemed a ``Minor
Rule Violation'' as defined in Section 4 of this Rule, and any hearing
requested in connection with an appeal of the decision of the Minor
Rule Violation Panel, shall be before three members of a panel (a
``Panel'') selected by the Chairman of the Board from a pool (a
``Pool'') of Persons employed by or partners of Participants. Persons
shall be appointed members of the Pool by the Board of Directors or the
Chairman of the Board. Notwithstanding the above, the Panel shall not
include any Person who had responsibility for the action or proposed
action of the Corporation as to which the hearing relates.'' \26\
---------------------------------------------------------------------------
\26\ Supra note 5.
---------------------------------------------------------------------------
In contrast, Rule 37 of the National Securities Clearing
Corporation (``NSCC'') Rules and Procedures (``NSCC Rules'') provides
that the hearing would be before a panel of three individuals drawn
from members of the Board of Directors or their designees, and that the
members of the Panel would be selected by the Chairman of the Board.
Further, in addition to excluding from the panel any individual who had
responsibility for the action or proposed action of NSCC as to which
the hearing relates, NSCC Rule 37 also excludes any individual
representing the Interested Person against which the proposed action is
to be taken.\27\
---------------------------------------------------------------------------
\27\ See Section 4 of NSCC Rule 37 (``A hearing on any matter
not covered by Section 2 of this rule, or a further hearing
requested pursuant to Section 2 shall be before a panel (hereinafter
the ``Panel'') of three individuals drawn from members of the Board
of Directors or their designees. The members of the Panel shall be
selected by the Chairman of the Board. Notwithstanding the above,
the Panel shall not include any individual representing the
Interested Person against which the proposed action is to be taken,
nor any person who had responsibility for the action or proposed
action of the Corporation as to which the hearing relates.''). The
NSCC Rules are available at https://www.dtcc.com/legal/rules-and-procedures.aspx.
---------------------------------------------------------------------------
DTC believes that panel selection process set forth in NSCC Rule 37
provides (i) a more straightforward and streamlined process than the
current DTC process, which requires the additional step of selecting a
Pool of potential panelists, a subset of which would then be selected
for the Panel, and (ii) clearer guidance about avoiding conflicts of
interests on the Panel. Further, DTC believes that aligning its Panel
selection process with that of NSCC would provide enhanced efficiency
for the DTC hearing process, as well as provide transparency and
consistent treatment for Participants, particularly for a Participant
that is a common member of NSCC that may have concurrent rights to a
hearing under the Rules and the NSCC Rules.
Accordingly, DTC is proposing to replace the first two paragraphs
of Section 5 of Rule 22 with the following two paragraphs:
A hearing requested in connection with any matter which is not
deemed a ``Minor Rule Violation'' as defined in Section 4 of this
Rule, and any hearing requested in connection with an appeal of the
decision of the Minor Rule Violation Panel, shall be before three
members of a panel (a ``Panel'') drawn from members of the Board of
Directors or their designees. The members of the Panel shall be
selected by the Chairman of the Board.
Notwithstanding the above, the Panel shall not include any
individual representing the Interested Person against which the
proposed action will be taken, nor any Person who had responsibility
for the action or proposed action of the Corporation as to which the
hearing relates.
B. Align Rule 23 (Bills Rendered) With NSCC Rule 26 (Bills Rendered)
Rule 23 (Bills Rendered) currently provides that ``[t]he
Corporation shall render bills to Participants in the manner specified
in the Procedures for charges on account of services provided or fines
imposed.'' DTC is proposing to amend this Rule to align with NSCC Rule
26 (Bills Rendered), which provides additional details about the
process that is applicable to both DTC and NSCC.\28\ Specifically, DTC
would amend Rule 23 to state that ``[t]he Corporation shall render
bills to Participants for charges on account of services provided or
fines imposed and shall charge their respective accounts with the
amounts thereof on or before such date as determined by the Corporation
from time to time.'' DTC believes that aligning the language of Rule 23
with the analogous NSCC Rule 26 would provide transparency and
consistent treatment of the rendering and payment of bills for
Participants, in particular for Participants that are also members of
NSCC.
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\28\ NSCC Rule 26 provides, in relevant part, that ``[t]he
Corporation will render bills to Members . . . for charges on
account of the business of any month and will charge their
respective accounts with the amounts thereof on or before such date
as determined by the Corporation from time to time.'' Supra note 27.
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[[Page 60724]]
C. Replace References to Vice President With Executive Director
In 2018, DTC determined that the title of ``Vice President'' should
be replaced by the title ``Executive Director.'' \29\ DTC is proposing
to amend the Rules to replace the term ``Vice President,'' which
appears in Section 3 of Rule 1 and in Rule 28, with the term
``Executive Director.''
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\29\ Securities Exchange Act Release No. 82915 (March 20, 2018),
83 FR 12970 (March 26, 2018) (SR-DTC-2018-001).
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D. Amend the By-Laws
Pursuant to the proposed rule change, DTC is proposing to amend
Article V of the By-Laws to expressly provide that designees of the
Board of Directors have the power to interpret the Rules of DTC. This
amendment would provide consistency across the overlapping Boards of
Directors of the three DTCC registered clearing agencies, DTC,
NSCC,\30\ and the Fixed Income Clearing Agency (``FICC'').\31\
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\30\ NSCC Rule 47 provides, in part, ``The Board of Directors of
the Corporation or their designee(s) shall have the authority to
interpret the Rules of the Corporation.'' Supra note 27.
\31\ Rule 47 of the Government Securities Division Rulebook of
FICC (``FICC GSD Rules'') provides, in part, ``The Board of
Directors of the Corporation or their designee(s) shall have the
authority to interpret the Rules of the Corporation.'' The FICC GSD
Rules are available at https://www.dtcc.com/legal/rules-and-procedures.aspx.
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Implementation Timeframe
DTC would implement the proposed changes no earlier than thirty
(30) days after the date of filing, or such shorter time as the
Commission may designate. As proposed, a legend would be added to the
Rules stating there are changes that were effective upon filing but
have not yet been implemented. The legend would also state that DTC
would implement the proposed changes no earlier than thirty (30) days
after the date of filing, or such shorter time as the Commission may
designate. The proposed legend would state that the legend would
automatically be removed upon the implementation of the proposed
changes. DTC would announce the implementation date of the proposed
changes by Important Notice posted to its website.
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.\32\
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\32\ 15 U.S.C. 78q-1(b)(3)(F).
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DTC believes that the proposed changes to amend and clarify certain
notice provisions relating to proposed rule changes and changes to the
Procedures would enhance the efficiency of DTC's process for notifying
its Participants and Pledgees about changes to its Rules and
Procedures. As discussed above in detail, DTC believes that
Participants and Pledgees are already provided adequate notice of any
rule changes, including changes to its Procedures, through the rule
change process. As such, the requirements for DTC to immediately
provide notice of any proposal it has made to change any Rule to
provide ten Business Days' notice of changes to Procedures are
impractical and unnecessary and therefore can negatively impact the
efficiency of the process. Specifically, because DTC is already subject
to--and complies with--the time periods required by the Act and Dodd
Frank,\33\ DTC believes that self-imposed requirements to provide
notice more quickly (in the case of proposed rule changes) or farther
in advance (in case of changes to Procedures) than what is required by
statute is unnecessary. In addition, DTC believes that the requirements
are impractical because (i)(x) the requirement to immediately give
notice requires DTC to coordinate an almost simultaneous submission of
a proposed rule filing and notification to Participants, Pledgees, and
registered clearing agencies, and (y) Participants, Pledgees, and
registered clearing agencies would not be prejudiced by the delta
between immediately and promptly; and (ii) the requirement to provide
Participants and Pledgees notice of changes to Procedures ten Business
Days in advance, especially when such parties already receive adequate
notice of the changes, could cause delays in the rule filing process
and/or the implementation of an amended rule and procedure.
Accordingly, DTC believes that, by removing unnecessary and impractical
timing requirements for notice, the proposed rule change is designed to
enhance the efficiency of DTC's notice process and implementation of
the amended Rules and Procedures, thereby promoting the prompt and
accurate clearance and settlement of securities transactions, as
provided under such amended Rules and Procedures. As such, DTC believes
that the proposed changes would be consistent with Section 17A(b)(3)(F)
of the Act, cited above.
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\33\ See supra notes 9 and 10.
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DTC believes that the proposed rule change to make technical and
clarifying changes, in particular (i) removing obsolete Rules 8 and 34,
(ii) replacing references to Vice President with Executive Director in
Rules 1 and 28, (iii) amending the Bylaws to expressly provide that
designees of the Board of Directors have the power to interpret the
Rules, (iv) amending Rule 22 to enhance the transparency around, and
efficiency of, the hearing process for Interested Persons, and (v)
amend Rule 23 to align the text with a parallel NSCC Rule would enhance
the clarity and transparency of the Rules. By enhancing the clarity and
transparency of the Rules, the proposed rule change would allow
Participants to more efficiently and effectively conduct their business
in accordance with the Rules. Therefore, DTC believes that the proposed
rule change is designed to promote the prompt and accurate clearance
and settlement of securities transactions consistent with Section
17A(b)(3)(F) of the Act, cited above.
(B) Clearing Agency's Statement on Burden on Competition
DTC believes that the proposed rule change to amend and clarify
certain notice provisions relating to proposed rule changes and changes
to Procedures would not have any impact on competition. While the
proposed change would impact the rights and obligations of Participants
and Pledgees to receive notices more quickly (in the case of proposed
rule changes) or farther in advance (in case of changes to Procedures)
than what is required by statute, the impact of the proposed changes on
the Participants and Pledgees would be minimal. As discussed above, DTC
believes that the proposed changes to the notice provisions are
removing unnecessary and impractical timing requirements for notices,
and Participants and Pledgees would continue to receive adequate notice
under the rule change process and continue to be treated equally with
respect to such notices. As such, DTC believes the proposed rule change
to amend and clarify certain notice provisions relating to proposed
rule changes and changes to Procedures would not have any impact on
competition.\34\
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\34\ 15 U.S.C. 78q-1(b)(3)(I).
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DTC believes that the proposed rule change to make technical and
clarifying changes described herein would not have any impact on
competition because it would enhance the clarity and transparency of
the Rules and therefore would not affect the rights or obligations of
any party. Accordingly, DTC does not believe that the proposed rule
change would have any impact on competition.\35\
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\35\ Id.
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[[Page 60725]]
(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. If any written comments are received, they will be
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to
Section IV (Solicitation of Comments) of the Exhibit 1A in the General
Instructions to Form 19b-4, the Commission does not edit personal
identifying information from comment submissions. Commenters should
submit only information that they wish to make available publicly,
including their name, email address, and any other identifying
information.
All prospective commenters should follow the Commission's
instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/how-to-submit-comments. General
questions regarding the rule filing process or logistical questions
regarding this filing should be directed to the Main Office of the
Commission's Division of Trading and Markets at
[email protected] or 202-551-5777.
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) \36\ of the Act and
Rule 19b-4(f)(6) thereunder; \37\and
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\36\ 15 U.S.C. 78s(b)(3)(A).
\37\ 17 CFR 240.19b-4(f)(6).
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(iv) DTC would announce the implementation date of the proposed
changes by Important Notice posted to its website.
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-DTC-2021-015 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-2021-015. 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-2021-015 and should be submitted on
or before November 24, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
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\38\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-23918 Filed 11-2-21; 8:45 am]
BILLING CODE 8011-01-P
