Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Distributions Guide, 75079-75083 [2022-26536]
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Federal Register / Vol. 87, No. 234 / Wednesday, December 7, 2022 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96427; File No. SR–DTC–
2022–012]
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Distributions Guide
December 1, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
22, 2022, 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 would
amend the Distributions Guide to
accommodate Participants’ tax reporting
and withholding obligations by
enhancing DTC’s Procedure for the Tax
Event Announcements feature (‘‘Tax
Event Announcements’’) of DTC’s
Distributions Service as set forth in the
Distributions Guide to (i) add two new
‘‘Sub-Event Types’’ and one ‘‘Event
Type’’ under Tax Event
Announcements, (ii) eliminate a ‘‘CUSIP
Limit’’ for an existing Sub-Event Type
known as ‘‘1042–S Classifications’’ and
(iii) make clarifying changes to the Tax
Event Announcements section of the
Distributions Guide, as described in
greater detail below.5
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)(_).
5 Each capitalized term not otherwise defined
herein has its respective meaning as set forth in the
Rules, By-Laws and Organization Certificate of The
Depository Trust Company (‘‘DTC Rules’’), available
at https://www.dtcc.com/legal/rules-andprocedures.aspx, or the DTC Corporate Actions
Distributions Service Guide (‘‘Distributions
Guide’’), available at https://www.dtcc.com/∼/
media/Files/Downloads/legal/service-guides/
Service-Guide-Distributions.pdf.
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II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, the
clearing agency included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The proposed rule change would
amend the Distributions Guide 6 to
accommodate Participants’ tax reporting
and withholding obligations by
enhancing DTC’s Procedure for the Tax
Event Announcements feature (‘‘Tax
Event Announcements’’) of DTC’s
Distributions Service 7 as set forth in the
Distributions Guide to (i) add two new
‘‘Sub-Event Types’’ and one ‘‘Event
Type’’ under Tax Event
Announcements, (ii) eliminate a ‘‘CUSIP
Limit’’ for an existing Sub-Event Type
known as ‘‘1042–S Classifications’’ and
(iii) make clarifying changes to the Tax
Event Announcements section of the
Distributions Guide, as described below.
(a) Announcements
The Distributions Service includes the
announcement (‘‘Announcements’’),
collection, allocation, and reporting by
DTC, on behalf of its Participants, of
dividend, interest and principal
payments for Eligible Securities held by
Participants at DTC. This centralized
processing provides efficiency for
Participants for their receipt of (i)
payment information and (ii) payments
on distributions covered by
Announcements (‘‘Distribution Event’’) 8
from multiple issuers and agents.
6 The Distributions Guide is a Procedure of DTC.
Pursuant to the DTC 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. They are binding on DTC and each
Participant in the same manner that they are bound
by the DTC Rules. See Rule 27, supra note 5.
7 Tax Event Announcements provide Participants
with information-only announcements regarding
taxable events that may give rise to information
and/or withholding obligations that occur even in
the absence of an actual distribution of dividend
and interest payments (‘‘Tax Events’’). See
Distributions Guide, supra note 5, at 14.
8 Distribution Events covered by Announcements
include cash dividends, interest, principal, capital
gains, sale of rights on American depositary
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DTC also provides a Participant
holding a Security in its DTC account
with Tax Event Announcements (‘‘Tax
Event Announcements Feature’’) for
distributions subject to Sections 305(c)
(‘‘305(c) Deemed Distributions’’) and
871(m) (‘‘871 Dividend Equivalent
Amount’’) of the Internal Revenue Code
of 1986, as amended 9 (‘‘Code’’),10 as
well as classification information for
Form 1042–S reporting purposes
(‘‘1042–S Classifications’’).11
The proposed rule change would
enhance Tax Event Announcements by
adding two new Tax Event
Announcements as ‘‘Sub-Event
Types’’:12 (i) ‘‘1446(f) Excess of
Cumulative Net Income’’ 13 and (ii) ‘‘92Day Exemption Qualified Notice,’’ as
more fully described below.
Although all existing Tax Event
Announcements are classified as a ‘‘Tax
Event’’ Event Type, the ‘‘General
Information’’ Event Type would be
added to the Tax Event Announcements
Feature in the Distributions Guide and
used for the 92-Day Exemption
Qualified Notice Sub-Event Type.
However, the Event Type for the 1446(f)
Excess of Cumulative Net Income SubEvent Type would be a Tax Event.
Internal Revenue Code Section 1446(f)
Section 1446(f) of the Internal
Revenue Code was enacted on
December 22, 2017, as part of the Tax
Cuts and Jobs Act of 2017 (‘‘Jobs
Act’’).14 The U.S. Treasury Department
(‘‘Treasury Department’’) finalized
corresponding regulations on October 7,
2020,15 including the tax withholding
required pursuant to Treasury
Regulation Section 1.1446(f)–4(a) 16
receipts, return of capital, dividend with option,
stock splits, stock dividends, automatic dividend
reinvestments, spinoffs, rights distributions, pay in
kind, and liquidation. See Distributions Guide,
supra note 5, at 12.
9 26 U.S.C 305(c) and 26 U.S.C. 871(m).
10 See Distributions Guide, supra note 5, at 14–
15. See also Securities Exchange Act Release No.
81871 (October 13, 2017), 82 FR 48734 (October 19,
2017) (SR–DTC–2017–018) and Securities Exchange
Act Release No. 87729 (December 12, 2019), 84 FR
69424 (December 18, 2019) (SR–DTC–2019–011).
11 See Distributions Guide, supra note 5, at 14–
15. See also Securities Exchange Act Release No.
95231 (July 8, 2022), 87 FR 42243 (July 14, 2022)
(SR–DTC–2022–008).
12 Tax Event Announcements are classified by
‘‘Event Type’’ and Sub-Event Type. See
Distributions Guide, supra note 5, at 14.
13 The cumulative net income is the net income
earned by the partnership since the formation of the
partnership that has not been previously distributed
by the partnership 1.1446(f)–4(c)(2)(iii)
14 Public Law 115–97 (2017), Section 864(c)(8).
15 Withholding of Tax and Information Reporting
With Respect to Interests in Partnerships Engaged
in a U.S. Trade or Business, 85 FR 76910
(November 30, 2020).
16 26 CFR 1.1446(f)–4(a).
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upon the transfer of an interest in a
publicly traded partnership by a foreign
partner, or pursuant to 1.1446(f)–
4(c)(2)(iii) with respect to an amount
realized on a distribution from a
publicly traded partnership to a foreign
partner (a ‘‘Section 1446(f)
Withholding’’).
It is DTC’s understanding that a
Section 1446(f) Withholding is designed
to ensure foreign partners file U.S.
federal income tax returns to report
their effectively connected income.
The Final Regulations require a
Section 1446(f) Withholding on
partnerships that are publicly traded on
exchanges (‘‘PTPs’’) in respect of
transfers that occur on or after January
1, 2022. The Treasury Department and
the IRS published Notice 2021–51 to
defer the applicability date to transfers
and distributions that occur on or after
January 1, 2023.17
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Proposed 1446(f) Excess of Cumulative
Net Income Sub-Event Type
The proposed 1446(f) Excess of
Cumulative Net Income Event Sub-Type
is intended to facilitate Participants’ and
their customers’ compliance with tax
withholding obligations in connection
with the implementation of section
1446(f) of the Code that was enacted as
part of the Jobs Act,18 and the Treasury
Regulations or other official
interpretations thereunder, as in effect
from time to time (collectively, ‘‘Section
1446(f)’’).
Section 1446(f) requires tax
withholding in accordance with
Treasury Regulation Section 1.1446(f)–
4(c)(2)(iii) with respect to an amount
realized on a distribution from a PTP (a
‘‘Section 1446(f) Withholding’’). The
amount realized on a distribution from
a PTP is the amount of the distribution
reduced by the portion of the
distribution that is attributable to the
cumulative net income. The cumulative
net income is the net income earned by
the PTP since its formation that has not
been previously distributed by the
partnership. If a portion of a distribution
made by a PTP is attributable to an
amount in excess of cumulative net
income, a broker is required to withhold
only on this portion for purposes of
Section 1446(f)
The Final Regulations include a
requirement for a PTP to identify such
excess portion of the distribution as an
amount in excess of cumulative net
income on a qualified notice and to
deliver the notice to any registered
17 IRS Notice 2021–15 (August 24, 2021),
available at https://www.irs.gov/pub/irs-drop/n-2151.pdf.
18 Public Law 115–97 (2017), section 864(c)(8).
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holder that is a nominee.19 It was noted
in the release for the Final Regulations
that PTP interests are generally
immobilized at a central depository and
registered in the name of the
depository’s nominee and that
furnishing the qualified notice to the
PTP’s registered holders that are
nominees would facilitate the
dissemination of information provided
on the qualified notice to relevant
market participants.20
To facilitate the distribution of the
qualified notices that DTC, as holder of
record through its nominee, Cede & Co.,
would receive from PTPs in this regard,
DTC proposes to add the new 1446(f)
Excess of Cumulative Net Income SubEvent Type to the Distributions Guide,
as more fully described below. Subject
to requirements described below, DTC
would (i) receive the qualified notices
that PTPs provide to DTC for this
purpose and (ii) distribute the
information to Participants that hold the
applicable securities through the Tax
Event Announcements Feature.
Proposed 92-Day Exemption Qualified
Notice Sub-Event Type
The proposed 92-Day Exemption
Qualified Notice Sub-Event Type is
intended to facilitate Participants’
ability to receive general information
relating to an exception from the
Section 1446(f) Withholding
requirement. The Final Regulations
provide exceptions to the withholding
requirement. One exception provides
that under certain circumstances as
specified in the Final Regulations,
brokers may rely on a qualified notice
from the PTP providing for an exception
from Section 1446(f) Withholding
requirement for a transfer of an interest
in a PTP, if the PTP posts the qualified
notice within 92 days ending on the
date of the transfer.21
To facilitate the distribution of the
qualified notices that DTC, may receive
from PTPs in this regard, DTC proposes
to add the new 92-Day Exemption
Qualified Notice Sub-Event Type to the
Distributions Guide, as more fully
described below. Subject to
requirements described below, DTC
would (i) receive the qualified notices
that PTPs provide to DTC for this
purpose and (ii) distribute the
information to Participants that hold the
applicable securities through the Tax
Event Announcements Feature.
19 See
supra note 15, at 76928.
20 Id.
21 See
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Proposed Rule Change
New Event Sub-Types
Pursuant to the proposed rule change,
the Distributions Guide would be
revised to reflect the addition of the
1446(f) Excess of Cumulative Net
Income and 92-Day Exemption
Qualified Notice Event Sub-Types under
The Tax Event Announcement Feature
subsection.
As stated above, while existing Event
Sub-Types are classified under the
Event Type ‘‘Tax Event,’’ the proposed
rule change would add a Tax Event to
the Tax Event Announcement Feature
referred to as ‘‘General Information’’
that would include the 92-Day
Exemption Qualified Notice Event SubType. The 1446(f) Excess of Cumulative
Net Income Event Sub-Type would be
categorized under the ‘‘Tax Event’’
Event Type.
The proposed text to be added to the
Distributions Guide relating to the
1446(f) Excess of Cumulative Net
Income Event Sub-Type would include
that these announcements are ‘‘linked’’
to distribution announcements from a
PTP and provide the amount of the
distribution that is in excess of
cumulative net income. The text would
also note that the announcement for this
Event Sub-Type would include a ‘‘Cash
Rate’’ field that is used to provide the
amount of a distribution that is in
excess of cumulative net income, or if
the Qualified Notice states that none of
the distribution is in excess of
cumulative net income, then the Cash
Rate field would reflect zero.
The proposed text to be added to the
Distributions Guide relating to the 92Day Exemption Qualified Notice Event
Sub-Type would indicate that the
announcement for this Event Sub-Type
would include a ‘‘Declared Publication
Date’’ field used to provide the posting
date of a qualified notice issued by a
PTP.
Similarly, text in the Distributions
Guide that describes Tax Event
Announcements generally as
‘‘information only announcements
regarding taxable events that may give
rise to information and/or withholding
obligations which occur even in the
absence of an actual distribution of
dividend and interest payments’’ would
be expanded to state that these
announcements also include
‘‘information only announcements
regarding the taxability of a
corresponding distribution’’ and/or
‘‘other relevant tax data that DTC
receives from an issuer.’’
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Other Changes
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1042–S Classifications
In July 2022, DTC amended the
Distributions Guide to add a new Tax
Event ‘‘Sub Event Type’’ (i.e., the
‘‘1042–S Classification’’) to facilitate the
distribution of certain tax classification
information in a centralized format to
Participants holding certain Securities
at DTC.22 For 1042–S Classifications,
DTC accepts templates from issuers that
delineate various tax components that
make up a distribution. Subject to
requirements in the Distributions Guide,
DTC (i) receives 1042–S Classification
information that issuers voluntarily
provide to DTC for this purpose and (ii)
distributes the information to
Participants that hold the applicable
securities. Information that Issuers are
required to provide to DTC pursuant to
Rule 1.1446–4(b)(4) may also be
included in the 1042–S Classification
Sub Event Type.
The Distributions Guide states that
each issuer and its affiliates, in the
aggregate, may provide templates for up
to, but no more than, 12 CUSIP numbers
per month (‘‘CUSIP Limit’’).23 The rule
change that implemented the 1042–S
Classification Event Sub-Type and the
CUSIP Limit 24 stated that depending on
demand for the transmittal of 1042–S
Classifications through the facilities of
DTC, and general availability of
processing resources at DTC, DTC may
submit a future proposed rule change to
amend the Distributions Guide to
increase the CUSIP Limit.
Since the implementation of the
1042–S Classification Event Sub-Type,
DTC has observed increased demand
from issuers to submit templates for
greater than the CUSIP Limit and DTC
has determined, based on its
administration of this process, that it
maintains the processing resources
necessary to accommodate such
demand. In this regard, pursuant to the
proposed rule change issuers and their
affiliates would no longer be subject to
the CUSIP Limit and the text that
imposes the CUSIP Limit would be
removed from the Distributions Guide.
Clarifying Changes
The subsection titled ‘‘The Tax Event
Announcement Feature’’ under the ‘‘Tax
Event Announcements’’ section of the
Distributions Guide would be
reformatted for readability and ease of
reference. This subsection contains
details on the Event Sub-Types and
related fields that are reported through
22 Supra
note 11.
Guide, supra note 5, at 15.
24 Supra note 11.
23 Distributions
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the Tax Event Announcements feature.
Currently, the Tax Events and fields
described in this subsection are the
305(c) Deemed Distributions, 871(m)
Dividend Equivalent Amount and 1042–
S Classifications. The revised text
would include the newly proposed
Event Sub-Types and related
information, including fields and
respective Event Type classifications to
this subsection, as described above.
Pursuant to the proposed rule change,
this subsection would be reformatted to
consolidate all information relating to
the respective Event Sub-Types into a
table that includes the corresponding
Event Type and Fields next to each of
the five Event Sub-Types mentioned
above. An introductory paragraph
would be added to the beginning of the
section to summarize the types of Tax
Event Announcements that DTC
processes. Certain existing ‘‘Important
Notes’’ would continue to be included
in the text. These Important Notes relate
to 1042–S Classifications, including the
use of templates and submission of
qualified notices, and a disclaimer
relating to Participants’ responsibility to
ensure the accuracy and completeness
of Tax Event Announcement
information. As mentioned above, a
note relating to the CUSIP Limit would
be deleted.
Applicability of Tax Event Fee
As with DTC’s distribution of other
Tax Event information to Participants,
the distribution of information for the
1446(f) Excess of Cumulative Net
Income and 92-Day Exemption
Qualified Notice Event Sub-Types
would be subject to the existing ‘‘Tax
Event Announcement Fee’’ of $12 per
Announcement, as set forth in the Fee
Guide.25
2. Statutory Basis
DTC believes that the proposed rule
change is consistent with the
requirements of the Securities Exchange
Act of 1934 (‘‘Act’’), and the rules and
regulations thereunder applicable to
DTC, in particular Section
17A(b)(3)(F) 26 of the Act.
Section 17A(b)(3)(F) of the Act
requires, inter alia, that the rules of the
clearing agency be designed to promote
the prompt and accurate clearance and
settlement of securities transactions.27
As described above, the proposed rule
change would update the Distributions
Guide to (i) include the distribution of
Announcements for two new Event Sub25 See DTC Fee Guide, available at https://
www.dtcc.com/∼/media/Files/Downloads/legal/feeguides/2022-DTC-Fee-Schedule-FINAL, at 15.
26 15 U.S.C. 78q–1(b)(3)(F).
27 Id.
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Types, (ii) eliminate the CUSIP Limit for
the1042–S [sic] Classification Event
Sub-Type, and (iii) make certain related
clarifying changes, as described above.
By enhancing the Tax Event
Announcement Feature in this regard,
the proposed rule change would
enhance the Tax Events to help facilitate
Participants’ compliance with U.S.
federal tax withholding obligations for
Eligible Securities subject to Tax Events
categorized within Event Sub-Types that
are on Deposit at DTC and making use
of DTC’s book-entry transfer and
settlement services. This would further
facilitate Participants’ ability to
continue to maintain Eligible Securities
on Deposit at DTC and make use of
DTC’s book-entry transfer and
settlement services with respect to those
Securities, in accordance with DTC
Rules requirements relating to the use of
DTC services by Participants.28
Therefore, by facilitating Participant’s
ability to continue to use DTC’s bookentry transfer and settlement services at
DTC with respect to Eligible Securities
that are subject to such Event SubTypes, the proposed rule change would
help 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) of the Act, cited
above.
(B) Clearing Agency’s Statement on
Burden on Competition
DTC believes that the proposed rule
change to amend the Distributions
Guide to (i) include the distribution of
Announcements for two new Event SubTypes, (ii) eliminate the CUSIP Limit for
the 1042–S Classification Event SubType, and (iii) make certain related
clarifying changes, as described above,
could impose a burden on competition
by subjecting Participants to additional
costs. More specifically, Participants
that hold Eligible Securities that may be
subject to categorization under the
proposed 1446(f) Excess of Cumulative
Net Income or 92-Day Exemption
Qualified Notice Event Sub-Types, as
well as the 1042–S Classification (to the
extent an issuer or its affiliates submit
1042–S Classification information that
exceeds the current CUSIP Limit), to
additional fees, which may negatively
affect such Participant’s operating costs.
DTC believes any burden on
competition imposed by the proposed
rule changes would not be significant,
and to the extent the proposed rule
28 In connection with their use of DTC’s services,
Participants must comply with all applicable laws,
including, but not limited to, all applicable laws
relating to taxation. See DTC Rule 2, Section 8,
supra note 5.
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change may impose a burden on
competition, DTC believes it would be
necessary and appropriate in
furtherance of the purposes of the Act.29
DTC has discussed the proposal with
Participants that hold Eligible Securities
that may be subject to categorization
under the 1446(f) Excess of Cumulative
Net Income, 92-Day Exemption
Qualified Notice Event and 1042–S
Classification Sub-Types, and issuers of
those Securities, and DTC understands
that Participants and their customers
would otherwise need to obtain the
necessary information directly from the
respective individual issuers or from
third-party vendors. DTC understands
that having to obtain this information on
an individual CUSIP-by-CUSIP basis
from issuers or getting this information
after the distribution from a vendor,
creates inefficiencies and timing issues
for Participants and their customers
relating to the piecemeal nature of the
retrieval of such information, that
would be mitigated if such information
were made available in a more
centralized format through DTC.
DTC believes that any burden on
competition imposed by the proposal
would be necessary because the
proposed rule change would provide
Participants with a centralized means to
receive announcement information
needed to facilitate their compliance
with tax withholding and reporting
obligations relating to payments on
Eligible Securities for which issuers
provide information to DTC relating to
Eligible Securities categorized under the
various Event Sub-Types, as described
above.
DTC believes that any burden on
competition imposed by the proposal
would be appropriate because the fees
are intended to provide revenue that is
close to the costs to DTC of building and
providing the services described above.
DTC believes the Tax Event
Announcements feature has a positive
effect on competition among
Participants because the service allows
Participants to receive applicable tax
information in a more efficient manner,
thereby reducing the resources they
would need to allocate to obtain the
applicable tax-related information on a
CUSIP-by-CUSIP basis through issuers
and third-party vendors. The service
also provides issuers with a more
efficient method of providing Tax Event
information to parties that need to see
such information in order to facilitate
timely tax withholding and reporting.
DTC believes this enhances competition
among Participants by allowing parties
to receive such information more
29 15
U.S.C. 78q–1(b)(3)(I).
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quickly and in a more streamlined
manner.
Based on experiences with existing
services provided through the Tax Event
Announcements feature and discussions
with Participants, DTC believes that
despite the Tax Event Fee that would be
charged to Participants holding affected
Securities for the distribution of 1446(f)
Excess of Cumulative Net Income and
92-Day Exemption Qualified Noticerelated information, the distribution of
such information through the facilities
of DTC would provide benefits to
Participants in terms of processing and
timing efficiencies that should mitigate
the impact of any such fees charged. As
such, DTC believes these proposed rule
changes would be appropriate in
furtherance of the purposes of the Act,
as permitted by Section 17A(b)(3)(I) of
the Act.30
DTC does not believe that the aspect
of the proposed rule change to make
certain clarifying changes to the
Distributions Guide, as described above,
would have an impact on competition.31
Having a clearer Distributions Guide
facilitates Participants’ understanding of
the Distributions Guide and provide
Participants with increased
predictability and certainty regarding
their obligations about DTC Tax Event
Announcement feature. Therefore, DTC
believes that the proposed rule change
to make clarifying changes to the Rules
and the Settlement Guide would not
have an impact on competition.32
DTC believes that the aspect of the
proposed rule change to eliminate the
CUSIP Limit for an issuer and its
affiliates to be able to submit up to 12
templates per month, as described
above, could promote competition for
issuers and their affiliates, because
issuers and their affiliates would no
longer be subject to the CUSIP Limit for
submission of templates per month, and
all Participants holding the applicable
issues would be able to receive the
aggregate amount of notices for any
issuer and its affiliates as all other
Participants holding the same issues.
(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 would 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 Securities and
Exchange Commission (‘‘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.
DTC reserves the right to not respond
to any comments received.
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) 33 of the Act and paragraph
(f) 34 of Rule 19b–4 thereunder. At any
time within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
DTC–2022–012 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
30 Id.
31 Id.
33 15
32 Id.
34 17
PO 00000
Frm 00061
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U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
07DEN1
Federal Register / Vol. 87, No. 234 / Wednesday, December 7, 2022 / Notices
All submissions should refer to File
Number SR–DTC–2022–012. 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–
2022–012 and should be submitted on
or before December 28, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022–26536 Filed 12–6–22; 8:45 am]
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
18, 2022, MEMX LLC (‘‘MEMX’’ 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 Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Commission a proposed rule change to
amend the Exchange’s fee schedule
applicable to Members 3 and nonMembers (the ‘‘Fee Schedule’’) pursuant
to Exchange Rules 15.1(a) and (c). The
Exchange proposes to implement the
changes to the Fee Schedule pursuant to
this proposal immediately.
The text of the proposed rule change
is provided in Exhibit 5.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
BILLING CODE 8011–01–P
Background
SECURITIES AND EXCHANGE
COMMISSION
ddrumheller on DSK6VXHR33PROD with NOTICES
[Release No. 34–96430; File No. SR–MEMX–
2022–32]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Fee
Schedule To Adopt Market Data Fees
December 1, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
The purpose of the proposed rule
change is to amend the Fee Schedule to
adopt fees the Exchange will charge to
Members and non-Members for each of
its three proprietary market data feeds,
namely MEMOIR Depth, MEMOIR Top,
and MEMOIR Last Sale (collectively, the
‘‘Exchange Data Feeds’’). The Exchange
is proposing to implement the proposed
fees immediately.
The Exchange previously filed the
proposal on March 24, 2022 (SR–
MEMX–2022–03) (the ‘‘Initial
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Exchange Rule 1.5(p).
2 17
35 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
19:54 Dec 06, 2022
Jkt 259001
PO 00000
Frm 00062
Fmt 4703
Sfmt 4703
75083
Proposal’’). The Exchange withdrew the
Initial Proposal and replaced the
proposal with SR–MEMX–2022–14 (the
‘‘Second Proposal’’). The Exchange
withdrew the Second Proposal and
replaced the proposal with SR–MEMX–
2022–19 (the ‘‘Third Proposal’’). The
Exchange withdrew the Third Proposal
and replaced the proposal with SR–
MEMX–2022–28 (the ‘‘Fourth
Proposal’’). The Exchange recently
withdrew the Fourth Proposal and is
replacing it with the current proposal
(SR–MEMX–2022–32).
The Exchange notes that it has
previously included a cost analysis in
connection with the proposed fees for
the Exchange Data Feeds, however, the
prior cost analysis coupled costs related
to operating its trading system, or
transaction services, with costs of
producing market data. As described
more fully below, this filing provides an
updated cost analysis that focuses solely
on costs related to the provision of the
Exchange Data Feeds (the ‘‘Cost
Analysis’’). Although the baseline Cost
Analysis used to justify the fees has
been updated, the fees themselves have
not changed since the Initial Proposal
and the Exchange still proposes fees that
are intended to cover the Exchange’s
cost of producing the Exchange Data
Feeds with a reasonable mark-up over
those costs. Before setting forth the
additional details regarding the proposal
as well as the updated Cost Analysis
conducted by the Exchange,
immediately below is a description of
the proposed fees.
Proposed Market Data Pricing
The Exchange offers three separate
data feeds to subscribers—MEMOIR
Depth, MEMOIR Top and MEMOIR Last
Sale. The Exchange notes that there is
no requirement that any Firm subscribe
to a particular Exchange Data Feed or
any Exchange Data Feed whatsoever,
but instead, a Firm may choose to
maintain subscriptions to those
Exchange Data Feeds they deem
appropriate based on their business
model. The proposed fee will not apply
differently based upon the size or type
of Firm, but rather based upon the
subscriptions a Firm has to Exchange
Data Feeds and their use thereof, which
are in turn based upon factors deemed
relevant by each Firm. The proposed
pricing for each of the Exchange Data
Feeds is set forth below.
MEMOIR Depth
The MEMOIR Depth feed is a MEMXonly market data feed that contains all
displayed orders for securities trading
on the Exchange (i.e., top and depth-ofbook order data), order executions (i.e.,
E:\FR\FM\07DEN1.SGM
07DEN1
]]>Agencies
[Federal Register Volume 87, Number 234 (Wednesday, December 7, 2022)]
[Notices]
[Pages 75079-75083]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-26536]
[[Page 75079]]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96427; File No. SR-DTC-2022-012]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Distributions Guide
December 1, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 22, 2022, 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)(_).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change would amend the Distributions Guide to
accommodate Participants' tax reporting and withholding obligations by
enhancing DTC's Procedure for the Tax Event Announcements feature
(``Tax Event Announcements'') of DTC's Distributions Service as set
forth in the Distributions Guide to (i) add two new ``Sub-Event Types''
and one ``Event Type'' under Tax Event Announcements, (ii) eliminate a
``CUSIP Limit'' for an existing Sub-Event Type known as ``1042-S
Classifications'' and (iii) make clarifying changes to the Tax Event
Announcements section of the Distributions Guide, as described in
greater detail below.\5\
---------------------------------------------------------------------------
\5\ Each capitalized term not otherwise defined herein has its
respective meaning as set forth in the Rules, By-Laws and
Organization Certificate of The Depository Trust Company (``DTC
Rules''), available at https://www.dtcc.com/legal/rules-and-procedures.aspx, or the DTC Corporate Actions Distributions Service
Guide (``Distributions Guide''), available at https://www.dtcc.com/
~/media/Files/Downloads/legal/service-guides/Service-Guide-
Distributions.pdf.
---------------------------------------------------------------------------
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the clearing agency included
statements concerning the purpose of and basis for the proposed rule
change and discussed any comments it received on the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. The clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
The proposed rule change would amend the Distributions Guide \6\ to
accommodate Participants' tax reporting and withholding obligations by
enhancing DTC's Procedure for the Tax Event Announcements feature
(``Tax Event Announcements'') of DTC's Distributions Service \7\ as set
forth in the Distributions Guide to (i) add two new ``Sub-Event Types''
and one ``Event Type'' under Tax Event Announcements, (ii) eliminate a
``CUSIP Limit'' for an existing Sub-Event Type known as ``1042-S
Classifications'' and (iii) make clarifying changes to the Tax Event
Announcements section of the Distributions Guide, as described below.
---------------------------------------------------------------------------
\6\ The Distributions Guide is a Procedure of DTC. Pursuant to
the DTC 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. They
are binding on DTC and each Participant in the same manner that they
are bound by the DTC Rules. See Rule 27, supra note 5.
\7\ Tax Event Announcements provide Participants with
information-only announcements regarding taxable events that may
give rise to information and/or withholding obligations that occur
even in the absence of an actual distribution of dividend and
interest payments (``Tax Events''). See Distributions Guide, supra
note 5, at 14.
---------------------------------------------------------------------------
(a) Announcements
The Distributions Service includes the announcement
(``Announcements''), collection, allocation, and reporting by DTC, on
behalf of its Participants, of dividend, interest and principal
payments for Eligible Securities held by Participants at DTC. This
centralized processing provides efficiency for Participants for their
receipt of (i) payment information and (ii) payments on distributions
covered by Announcements (``Distribution Event'') \8\ from multiple
issuers and agents.
---------------------------------------------------------------------------
\8\ Distribution Events covered by Announcements include cash
dividends, interest, principal, capital gains, sale of rights on
American depositary receipts, return of capital, dividend with
option, stock splits, stock dividends, automatic dividend
reinvestments, spinoffs, rights distributions, pay in kind, and
liquidation. See Distributions Guide, supra note 5, at 12.
---------------------------------------------------------------------------
DTC also provides a Participant holding a Security in its DTC
account with Tax Event Announcements (``Tax Event Announcements
Feature'') for distributions subject to Sections 305(c) (``305(c)
Deemed Distributions'') and 871(m) (``871 Dividend Equivalent Amount'')
of the Internal Revenue Code of 1986, as amended \9\ (``Code''),\10\ as
well as classification information for Form 1042-S reporting purposes
(``1042-S Classifications'').\11\
---------------------------------------------------------------------------
\9\ 26 U.S.C 305(c) and 26 U.S.C. 871(m).
\10\ See Distributions Guide, supra note 5, at 14-15. See also
Securities Exchange Act Release No. 81871 (October 13, 2017), 82 FR
48734 (October 19, 2017) (SR-DTC-2017-018) and Securities Exchange
Act Release No. 87729 (December 12, 2019), 84 FR 69424 (December 18,
2019) (SR-DTC-2019-011).
\11\ See Distributions Guide, supra note 5, at 14-15. See also
Securities Exchange Act Release No. 95231 (July 8, 2022), 87 FR
42243 (July 14, 2022) (SR-DTC-2022-008).
---------------------------------------------------------------------------
The proposed rule change would enhance Tax Event Announcements by
adding two new Tax Event Announcements as ``Sub-Event Types'':\12\ (i)
``1446(f) Excess of Cumulative Net Income'' \13\ and (ii) ``92-Day
Exemption Qualified Notice,'' as more fully described below.
---------------------------------------------------------------------------
\12\ Tax Event Announcements are classified by ``Event Type''
and Sub-Event Type. See Distributions Guide, supra note 5, at 14.
\13\ The cumulative net income is the net income earned by the
partnership since the formation of the partnership that has not been
previously distributed by the partnership 1.1446(f)-4(c)(2)(iii)
---------------------------------------------------------------------------
Although all existing Tax Event Announcements are classified as a
``Tax Event'' Event Type, the ``General Information'' Event Type would
be added to the Tax Event Announcements Feature in the Distributions
Guide and used for the 92-Day Exemption Qualified Notice Sub-Event
Type. However, the Event Type for the 1446(f) Excess of Cumulative Net
Income Sub-Event Type would be a Tax Event.
Internal Revenue Code Section 1446(f)
Section 1446(f) of the Internal Revenue Code was enacted on
December 22, 2017, as part of the Tax Cuts and Jobs Act of 2017 (``Jobs
Act'').\14\ The U.S. Treasury Department (``Treasury Department'')
finalized corresponding regulations on October 7, 2020,\15\ including
the tax withholding required pursuant to Treasury Regulation Section
1.1446(f)-4(a) \16\
[[Page 75080]]
upon the transfer of an interest in a publicly traded partnership by a
foreign partner, or pursuant to 1.1446(f)-4(c)(2)(iii) with respect to
an amount realized on a distribution from a publicly traded partnership
to a foreign partner (a ``Section 1446(f) Withholding'').
---------------------------------------------------------------------------
\14\ Public Law 115-97 (2017), Section 864(c)(8).
\15\ Withholding of Tax and Information Reporting With Respect
to Interests in Partnerships Engaged in a U.S. Trade or Business, 85
FR 76910 (November 30, 2020).
\16\ 26 CFR 1.1446(f)-4(a).
---------------------------------------------------------------------------
It is DTC's understanding that a Section 1446(f) Withholding is
designed to ensure foreign partners file U.S. federal income tax
returns to report their effectively connected income.
The Final Regulations require a Section 1446(f) Withholding on
partnerships that are publicly traded on exchanges (``PTPs'') in
respect of transfers that occur on or after January 1, 2022. The
Treasury Department and the IRS published Notice 2021-51 to defer the
applicability date to transfers and distributions that occur on or
after January 1, 2023.\17\
---------------------------------------------------------------------------
\17\ IRS Notice 2021-15 (August 24, 2021), available at https://www.irs.gov/pub/irs-drop/n-21-51.pdf.
---------------------------------------------------------------------------
Proposed 1446(f) Excess of Cumulative Net Income Sub-Event Type
The proposed 1446(f) Excess of Cumulative Net Income Event Sub-Type
is intended to facilitate Participants' and their customers' compliance
with tax withholding obligations in connection with the implementation
of section 1446(f) of the Code that was enacted as part of the Jobs
Act,\18\ and the Treasury Regulations or other official interpretations
thereunder, as in effect from time to time (collectively, ``Section
1446(f)'').
---------------------------------------------------------------------------
\18\ Public Law 115-97 (2017), section 864(c)(8).
---------------------------------------------------------------------------
Section 1446(f) requires tax withholding in accordance with
Treasury Regulation Section 1.1446(f)-4(c)(2)(iii) with respect to an
amount realized on a distribution from a PTP (a ``Section 1446(f)
Withholding''). The amount realized on a distribution from a PTP is the
amount of the distribution reduced by the portion of the distribution
that is attributable to the cumulative net income. The cumulative net
income is the net income earned by the PTP since its formation that has
not been previously distributed by the partnership. If a portion of a
distribution made by a PTP is attributable to an amount in excess of
cumulative net income, a broker is required to withhold only on this
portion for purposes of Section 1446(f)
The Final Regulations include a requirement for a PTP to identify
such excess portion of the distribution as an amount in excess of
cumulative net income on a qualified notice and to deliver the notice
to any registered holder that is a nominee.\19\ It was noted in the
release for the Final Regulations that PTP interests are generally
immobilized at a central depository and registered in the name of the
depository's nominee and that furnishing the qualified notice to the
PTP's registered holders that are nominees would facilitate the
dissemination of information provided on the qualified notice to
relevant market participants.\20\
---------------------------------------------------------------------------
\19\ See supra note 15, at 76928.
\20\ Id.
---------------------------------------------------------------------------
To facilitate the distribution of the qualified notices that DTC,
as holder of record through its nominee, Cede & Co., would receive from
PTPs in this regard, DTC proposes to add the new 1446(f) Excess of
Cumulative Net Income Sub-Event Type to the Distributions Guide, as
more fully described below. Subject to requirements described below,
DTC would (i) receive the qualified notices that PTPs provide to DTC
for this purpose and (ii) distribute the information to Participants
that hold the applicable securities through the Tax Event Announcements
Feature.
Proposed 92-Day Exemption Qualified Notice Sub-Event Type
The proposed 92-Day Exemption Qualified Notice Sub-Event Type is
intended to facilitate Participants' ability to receive general
information relating to an exception from the Section 1446(f)
Withholding requirement. The Final Regulations provide exceptions to
the withholding requirement. One exception provides that under certain
circumstances as specified in the Final Regulations, brokers may rely
on a qualified notice from the PTP providing for an exception from
Section 1446(f) Withholding requirement for a transfer of an interest
in a PTP, if the PTP posts the qualified notice within 92 days ending
on the date of the transfer.\21\
---------------------------------------------------------------------------
\21\ See supra note 15, at 76925.
---------------------------------------------------------------------------
To facilitate the distribution of the qualified notices that DTC,
may receive from PTPs in this regard, DTC proposes to add the new 92-
Day Exemption Qualified Notice Sub-Event Type to the Distributions
Guide, as more fully described below. Subject to requirements described
below, DTC would (i) receive the qualified notices that PTPs provide to
DTC for this purpose and (ii) distribute the information to
Participants that hold the applicable securities through the Tax Event
Announcements Feature.
Proposed Rule Change
New Event Sub-Types
Pursuant to the proposed rule change, the Distributions Guide would
be revised to reflect the addition of the 1446(f) Excess of Cumulative
Net Income and 92-Day Exemption Qualified Notice Event Sub-Types under
The Tax Event Announcement Feature subsection.
As stated above, while existing Event Sub-Types are classified
under the Event Type ``Tax Event,'' the proposed rule change would add
a Tax Event to the Tax Event Announcement Feature referred to as
``General Information'' that would include the 92-Day Exemption
Qualified Notice Event Sub-Type. The 1446(f) Excess of Cumulative Net
Income Event Sub-Type would be categorized under the ``Tax Event''
Event Type.
The proposed text to be added to the Distributions Guide relating
to the 1446(f) Excess of Cumulative Net Income Event Sub-Type would
include that these announcements are ``linked'' to distribution
announcements from a PTP and provide the amount of the distribution
that is in excess of cumulative net income. The text would also note
that the announcement for this Event Sub-Type would include a ``Cash
Rate'' field that is used to provide the amount of a distribution that
is in excess of cumulative net income, or if the Qualified Notice
states that none of the distribution is in excess of cumulative net
income, then the Cash Rate field would reflect zero.
The proposed text to be added to the Distributions Guide relating
to the 92-Day Exemption Qualified Notice Event Sub-Type would indicate
that the announcement for this Event Sub-Type would include a
``Declared Publication Date'' field used to provide the posting date of
a qualified notice issued by a PTP.
Similarly, text in the Distributions Guide that describes Tax Event
Announcements generally as ``information only announcements regarding
taxable events that may give rise to information and/or withholding
obligations which occur even in the absence of an actual distribution
of dividend and interest payments'' would be expanded to state that
these announcements also include ``information only announcements
regarding the taxability of a corresponding distribution'' and/or
``other relevant tax data that DTC receives from an issuer.''
[[Page 75081]]
Other Changes
1042-S Classifications
In July 2022, DTC amended the Distributions Guide to add a new Tax
Event ``Sub Event Type'' (i.e., the ``1042-S Classification'') to
facilitate the distribution of certain tax classification information
in a centralized format to Participants holding certain Securities at
DTC.\22\ For 1042-S Classifications, DTC accepts templates from issuers
that delineate various tax components that make up a distribution.
Subject to requirements in the Distributions Guide, DTC (i) receives
1042-S Classification information that issuers voluntarily provide to
DTC for this purpose and (ii) distributes the information to
Participants that hold the applicable securities. Information that
Issuers are required to provide to DTC pursuant to Rule 1.1446-4(b)(4)
may also be included in the 1042-S Classification Sub Event Type.
---------------------------------------------------------------------------
\22\ Supra note 11.
---------------------------------------------------------------------------
The Distributions Guide states that each issuer and its affiliates,
in the aggregate, may provide templates for up to, but no more than, 12
CUSIP numbers per month (``CUSIP Limit'').\23\ The rule change that
implemented the 1042-S Classification Event Sub-Type and the CUSIP
Limit \24\ stated that depending on demand for the transmittal of 1042-
S Classifications through the facilities of DTC, and general
availability of processing resources at DTC, DTC may submit a future
proposed rule change to amend the Distributions Guide to increase the
CUSIP Limit.
---------------------------------------------------------------------------
\23\ Distributions Guide, supra note 5, at 15.
\24\ Supra note 11.
---------------------------------------------------------------------------
Since the implementation of the 1042-S Classification Event Sub-
Type, DTC has observed increased demand from issuers to submit
templates for greater than the CUSIP Limit and DTC has determined,
based on its administration of this process, that it maintains the
processing resources necessary to accommodate such demand. In this
regard, pursuant to the proposed rule change issuers and their
affiliates would no longer be subject to the CUSIP Limit and the text
that imposes the CUSIP Limit would be removed from the Distributions
Guide.
Clarifying Changes
The subsection titled ``The Tax Event Announcement Feature'' under
the ``Tax Event Announcements'' section of the Distributions Guide
would be reformatted for readability and ease of reference. This
subsection contains details on the Event Sub-Types and related fields
that are reported through the Tax Event Announcements feature.
Currently, the Tax Events and fields described in this subsection are
the 305(c) Deemed Distributions, 871(m) Dividend Equivalent Amount and
1042-S Classifications. The revised text would include the newly
proposed Event Sub-Types and related information, including fields and
respective Event Type classifications to this subsection, as described
above.
Pursuant to the proposed rule change, this subsection would be
reformatted to consolidate all information relating to the respective
Event Sub-Types into a table that includes the corresponding Event Type
and Fields next to each of the five Event Sub-Types mentioned above. An
introductory paragraph would be added to the beginning of the section
to summarize the types of Tax Event Announcements that DTC processes.
Certain existing ``Important Notes'' would continue to be included in
the text. These Important Notes relate to 1042-S Classifications,
including the use of templates and submission of qualified notices, and
a disclaimer relating to Participants' responsibility to ensure the
accuracy and completeness of Tax Event Announcement information. As
mentioned above, a note relating to the CUSIP Limit would be deleted.
Applicability of Tax Event Fee
As with DTC's distribution of other Tax Event information to
Participants, the distribution of information for the 1446(f) Excess of
Cumulative Net Income and 92-Day Exemption Qualified Notice Event Sub-
Types would be subject to the existing ``Tax Event Announcement Fee''
of $12 per Announcement, as set forth in the Fee Guide.\25\
---------------------------------------------------------------------------
\25\ See DTC Fee Guide, available at https://www.dtcc.com/~/
media/Files/Downloads/legal/fee-guides/2022-DTC-Fee-Schedule-FINAL,
at 15.
---------------------------------------------------------------------------
2. Statutory Basis
DTC believes that the proposed rule change is consistent with the
requirements of the Securities Exchange Act of 1934 (``Act''), and the
rules and regulations thereunder applicable to DTC, in particular
Section 17A(b)(3)(F) \26\ of the Act.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Section 17A(b)(3)(F) of the Act requires, inter alia, that the
rules of the clearing agency be designed to promote the prompt and
accurate clearance and settlement of securities transactions.\27\ As
described above, the proposed rule change would update the
Distributions Guide to (i) include the distribution of Announcements
for two new Event Sub-Types, (ii) eliminate the CUSIP Limit for
the1042-S [sic] Classification Event Sub-Type, and (iii) make certain
related clarifying changes, as described above. By enhancing the Tax
Event Announcement Feature in this regard, the proposed rule change
would enhance the Tax Events to help facilitate Participants'
compliance with U.S. federal tax withholding obligations for Eligible
Securities subject to Tax Events categorized within Event Sub-Types
that are on Deposit at DTC and making use of DTC's book-entry transfer
and settlement services. This would further facilitate Participants'
ability to continue to maintain Eligible Securities on Deposit at DTC
and make use of DTC's book-entry transfer and settlement services with
respect to those Securities, in accordance with DTC Rules requirements
relating to the use of DTC services by Participants.\28\ Therefore, by
facilitating Participant's ability to continue to use DTC's book-entry
transfer and settlement services at DTC with respect to Eligible
Securities that are subject to such Event Sub-Types, the proposed rule
change would help 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) of the Act, cited above.
---------------------------------------------------------------------------
\27\ Id.
\28\ In connection with their use of DTC's services,
Participants must comply with all applicable laws, including, but
not limited to, all applicable laws relating to taxation. See DTC
Rule 2, Section 8, supra note 5.
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
DTC believes that the proposed rule change to amend the
Distributions Guide to (i) include the distribution of Announcements
for two new Event Sub-Types, (ii) eliminate the CUSIP Limit for the
1042-S Classification Event Sub-Type, and (iii) make certain related
clarifying changes, as described above, could impose a burden on
competition by subjecting Participants to additional costs. More
specifically, Participants that hold Eligible Securities that may be
subject to categorization under the proposed 1446(f) Excess of
Cumulative Net Income or 92-Day Exemption Qualified Notice Event Sub-
Types, as well as the 1042-S Classification (to the extent an issuer or
its affiliates submit 1042-S Classification information that exceeds
the current CUSIP Limit), to additional fees, which may negatively
affect such Participant's operating costs.
DTC believes any burden on competition imposed by the proposed rule
changes would not be significant, and to the extent the proposed rule
[[Page 75082]]
change may impose a burden on competition, DTC believes it would be
necessary and appropriate in furtherance of the purposes of the
Act.\29\
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\29\ 15 U.S.C. 78q-1(b)(3)(I).
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DTC has discussed the proposal with Participants that hold Eligible
Securities that may be subject to categorization under the 1446(f)
Excess of Cumulative Net Income, 92-Day Exemption Qualified Notice
Event and 1042-S Classification Sub-Types, and issuers of those
Securities, and DTC understands that Participants and their customers
would otherwise need to obtain the necessary information directly from
the respective individual issuers or from third-party vendors. DTC
understands that having to obtain this information on an individual
CUSIP-by-CUSIP basis from issuers or getting this information after the
distribution from a vendor, creates inefficiencies and timing issues
for Participants and their customers relating to the piecemeal nature
of the retrieval of such information, that would be mitigated if such
information were made available in a more centralized format through
DTC.
DTC believes that any burden on competition imposed by the proposal
would be necessary because the proposed rule change would provide
Participants with a centralized means to receive announcement
information needed to facilitate their compliance with tax withholding
and reporting obligations relating to payments on Eligible Securities
for which issuers provide information to DTC relating to Eligible
Securities categorized under the various Event Sub-Types, as described
above.
DTC believes that any burden on competition imposed by the proposal
would be appropriate because the fees are intended to provide revenue
that is close to the costs to DTC of building and providing the
services described above. DTC believes the Tax Event Announcements
feature has a positive effect on competition among Participants because
the service allows Participants to receive applicable tax information
in a more efficient manner, thereby reducing the resources they would
need to allocate to obtain the applicable tax-related information on a
CUSIP-by-CUSIP basis through issuers and third-party vendors. The
service also provides issuers with a more efficient method of providing
Tax Event information to parties that need to see such information in
order to facilitate timely tax withholding and reporting. DTC believes
this enhances competition among Participants by allowing parties to
receive such information more quickly and in a more streamlined manner.
Based on experiences with existing services provided through the
Tax Event Announcements feature and discussions with Participants, DTC
believes that despite the Tax Event Fee that would be charged to
Participants holding affected Securities for the distribution of
1446(f) Excess of Cumulative Net Income and 92-Day Exemption Qualified
Notice-related information, the distribution of such information
through the facilities of DTC would provide benefits to Participants in
terms of processing and timing efficiencies that should mitigate the
impact of any such fees charged. As such, DTC believes these proposed
rule changes would be appropriate in furtherance of the purposes of the
Act, as permitted by Section 17A(b)(3)(I) of the Act.\30\
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\30\ Id.
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DTC does not believe that the aspect of the proposed rule change to
make certain clarifying changes to the Distributions Guide, as
described above, would have an impact on competition.\31\ Having a
clearer Distributions Guide facilitates Participants' understanding of
the Distributions Guide and provide Participants with increased
predictability and certainty regarding their obligations about DTC Tax
Event Announcement feature. Therefore, DTC believes that the proposed
rule change to make clarifying changes to the Rules and the Settlement
Guide would not have an impact on competition.\32\
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\31\ Id.
\32\ Id.
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DTC believes that the aspect of the proposed rule change to
eliminate the CUSIP Limit for an issuer and its affiliates to be able
to submit up to 12 templates per month, as described above, could
promote competition for issuers and their affiliates, because issuers
and their affiliates would no longer be subject to the CUSIP Limit for
submission of templates per month, and all Participants holding the
applicable issues would be able to receive the aggregate amount of
notices for any issuer and its affiliates as all other Participants
holding the same issues.
(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 would 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 Securities and Exchange Commission
(``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.
DTC reserves the right to not respond to any comments received.
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) \33\ of the Act and paragraph (f) \34\ 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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\33\ 15 U.S.C. 78s(b)(3)(A).
\34\ 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-2022-012 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549.
[[Page 75083]]
All submissions should refer to File Number SR-DTC-2022-012. 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-2022-012 and should be submitted on
or before December 28, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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\35\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-26536 Filed 12-6-22; 8:45 am]
BILLING CODE 8011-01-P
