Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the Guide to the DTC Fee Schedule To Revise Certain Fees Charged to Participants for Settlement Services, 104282-104284 [2024-30351]
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104282
Federal Register / Vol. 89, No. 245 / Friday, December 20, 2024 / Notices
SECURITIES AND EXCHANGE
COMMISSION
and C below, of the most significant
aspects of such statements.
[Release No. 34–101923; File No. SR–DTC–
2024–013]
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
Self-Regulatory Organizations; The
Depository Trust Company; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Modify the
Guide to the DTC Fee Schedule To
Revise Certain Fees Charged to
Participants for Settlement Services
December 16, 2024.
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 December
9, 2024, 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)(2)
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
modify the Guide to the DTC Fee
Schedule 5 (‘‘Fee Guide’’) to revise
certain fees charged to Participants for
Settlement Services,6 as described in
greater detail below.7
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,
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)(2).
5 Available at www.dtcc.com/-/media/Files/
Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf.
6 Pursuant to Rule 2, Section 1, each Participant
shall pay to DTC the compensation due it for
services rendered to the Participant based on DTC’s
fee schedules. See Rule 2, infra note 7.
7 Each capitalized term not otherwise defined
herein has its respective meaning as set forth the
Rules, By-Laws and Organization Certificate of DTC
(the ‘‘Rules’’), available at www.dtcc.com/legal/
rules-and-procedures.
ddrumheller on DSK120RN23PROD with NOTICES1
2 17
VerDate Sep<11>2014
20:12 Dec 19, 2024
Jkt 265001
1. Purpose
The proposed rule change would
modify the Fee Guide to revise certain
fees charged to Participants for
Settlement Services, as described below.
Overview
DTC operates under a ‘‘cost plus a
low-margin markup’’ pricing model.
The markup is applied to recover
development costs and operating
expenses, and to accumulate capital
sufficient to meet regulatory and
economic requirements. DTC maintains
procedures to control costs and to
regularly review pricing levels against
costs of operation. It reviews pricing
levels against its costs of operation
during the annual budget process.
The budget is approved annually by
the Board. DTC’s fees are approved by
the Board or management (pursuant to
authority delegated by the Board), as
applicable. When estimating expected
revenues and costs, DTC typically uses
historical, current, and expected usage
and market trends to determine revenue
outlook and apply current budgeted
assumptions on costs. In addition to
assessing the overall impact of fee
changes at DTC, the Board also
considers impacts of fee changes from
an individual product/service category
(e.g., Settlement Services) perspective,
taking cost and capital considerations
relating to a given category into account.
After evaluation of DTC’s short-term
and long-term financial position in
consideration of expected Participant
activity, revenues, cost of funding,
market volatility, and the financial
markets more broadly, including
considering impacts for each product/
service category perspective, as more
fully described below, DTC has
determined that it should increase the
overall amount it collects from
Participants through fees. More
specifically, the proposed rule change
would increase certain fees relating to
Settlement Services, to better align cost
and revenue.
Operating expense increases for DTC’s
Settlement Services are driven by
compensation and contract inflation, IT
risk mitigation, resiliency initiatives and
infrastructure investments partially
offset by efficiencies. Therefore, the
proposed rule change would increase
certain fees relating to book-entry
delivery in the Settlement Services
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Fmt 4703
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section 8 of the Fee Guide to better align
costs and revenue, as described below.
Fee Revisions for Certain Settlement
Services
Fee Increase for DTC Deliver Orders
As background, a Participant may
submit an instruction (‘‘Deliver Order’’)
to DTC to make a Delivery 9 of Eligible
Securities via book-entry to another
Participant’s account.10 DTC reduces
the Deliverer’s 11 position and increases
the Receiver’s 12 position without the
need to move physical certificates.
Deliveries can be made Delivery Versus
Payment 13 or as a Free Delivery,14
depending on the applicable
Participant’s delivery instructions
provided in the Deliver Order.
When a Participant submits a Deliver
Order during DTC’s day settlement
cycle, the delivering Participant is
charged a fee (‘‘Day Deliver Order Fee’’)
of 54 cents, per deliver. When a
Participant submits a Deliver Order
during DTC’s night settlement cycle,15
the charge is 17 cents, per deliver
(‘‘Night Deliver Order Fee’’). The Night
Deliver Order Fee is less than the Day
Deliver Order Fee because DTC is
encouraging earlier submission of
transactions by Participants, which
results in more efficient settlement
processing by increasing the volume of
transactions processed in the nightcycle, which, in turn, lessens the burden
on the intraday settlement processing.16
If a Participant submits a Deliver
Order and elects for the Deliver to be
8 See
Fee Guide, supra note 5.
Rule 9(A), Rule 9(B), Rule 9(C) and Rule
9(D), supra note 7, and Settlement Service Guide
(‘‘Settlement Guide’’), available at www.dtcc.com//media/Files/Downloads/legal/service-guides/
Settlement.pdf. DTC allows a Participant to settle
securities transactions by making book-entry
Deliveries to another Participant’s account. DTC
reduces the seller’s position and increases the
buyer’s position without the need to move physical
certificates. See Settlement Guide at 5.
10 See Rule 9(B), supra note 7.
11 Pursuant to Rule 1, the term ‘‘Deliverer,’’ as
used with respect to a Delivery of a Security, means
the Person which Delivers the Security. See Rule 1,
supra note 7.
12 Pursuant to Rule 1, the term ‘‘Receiver,’’ as
used with respect to a Delivery of a Security, means
the Person which receives the Security. See id.
13 Pursuant to Rule 1, the term ‘‘Delivery Versus
Payment’’ means a Delivery against a settlement
debit to the Account of the Receiver, as provided
in Rule 9(A) and Rule 9(B) and as specified in the
Procedures. See Rule 1, supra note 7.
14 Pursuant to Rule 1, the term ‘‘Free Delivery’’
means a Delivery free of any payment by the
Receiver through the facilities of the Corporation,
as provided in Rule 9(B) and as specified in the
Procedures. See id.
15 A Deliver Order input on the day prior to
settlement. A reduced rate is charged for Night
Deliver Order transactions. See Settlement Guide,
supra note 9.
16 See Securities Exchange Act Release No. 84768
(Dec. 10, 2018), 83 FR 64401 (Dec. 14, 2018) (SR–
DTC–2018–011).
9 See
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Federal Register / Vol. 89, No. 245 / Friday, December 20, 2024 / Notices
tracked through DTC’s income tracking
systems, specifically the stock loan
income tracking system 17 or the
repurchase agreement (‘‘Repo’’) tracking
system,18 then the Deliver is charged an
additional 18 cents, regardless of time.
This fee is designated in the Fee Guide
as the ‘‘Repos, stock loans and returns’’
fee (‘‘Tracking Fee’’).
The Receiver of a Deliver is charged
11 cents (‘‘Receive Fee), regardless of
time, per receive.19
Pursuant to this proposed rule
change, DTC would update the Fee
Guide to reflect the following fee
increases: (1) Day Deliver Order Fee
from 54 cents to 68 cents per delivery,
(2) Night Deliver Order Fee from 17
cents to 21 cents per delivery, (3)
Tracking Fee from 18 cents to 22 cents
per tracking, and (4) Receive Fee from
11 cents to 14 cents per receive.
The proposed fee changes reflect an
amount that would facilitate DTC’s
ability to maintain a cost plus lowmargin markup model, as discussed
above, with respect these Settlement
Services.
Fee Increase for DTC Deliveries and
Receives to and From NSCC’s CNS
System
ddrumheller on DSK120RN23PROD with NOTICES1
In addition to the Deliver Orders
described above, DTC also completes
Deliveries of Securities transactions
cleared by its affiliate, the National
Securities Clearing Corporation
(‘‘NSCC’’), through the NSCC
Continuous Net Settlement (‘‘CNS’’)
20:12 Dec 19, 2024
Jkt 265001
Participant Outreach
DTC has conducted ongoing outreach
to each Participant to provide them with
notice of the proposed changes and the
anticipated impact for the Participant.
The impact of the proposed changes was
provided to Participants using year-todate, July 2024 annualized data. As of
the date of this filing, no written
comments relating to the proposed
changes have been received. The
Commission will be notified of any
written comments received.
Implementation Timeframe
17 In a stock loan agreement, the lender of a
Security is entitled to recover from the borrower
any income distributions paid on the loaned
Security. The stock loan income tracking system
allows DTC to track the lender’s (Deliverer’s)
position on the Securities. The stock loan income
tracking system tracks cash dividend and interest
payments relating to Deliver Orders submitted
using certain reason codes for stock loan
transactions, as described in the DTC Corporate
Actions Distributions Service Guide (‘‘Distributions
Guide’’). See Distributions Guide, available at
www.dtcc.com/-/media/Files/Downloads/legal/
service-guides/Service-Guide-Distributions.pdf, at
37–38, for additional information relating to stock
loan transactions and the related reason codes.
18 A Repo is an agreement between two parties
that allows the seller of Securities to later
repurchase them at an agreed-upon price. The seller
usually retains the right to periodic income
distributions. However, since the Securities will not
reside in the seller’s account on record date, the
seller would not be credited the periodic principal
and income distributions paid on the Securities. To
recover these entitlements, the seller must claim the
Repo buyer. DTC’s Repo Tracking System
automates claims of these entitlements by tracking
the Repo transactions (Deliveries) relating to Deliver
Orders submitted using certain reason codes
designated for Repo transactions and adjusting the
entitlement payments accordingly on payable date.
See Distributions Guide, id. at 39–40, for additional
information relating to Repo transactions and
related reason codes.
19 See Fee Guide, supra note 5, at 18.
VerDate Sep<11>2014
system. Such Deliveries are processed at
DTC as Free Deliveries.20 Similarly,
DTC also processes Free Deliveries
relating to NSCC’s Automated Customer
Account Transfer Service (‘‘ACATS’’).21
Both the delivering and receiving
Participants of CNS Deliveries and
ACATS Deliveries are charged 17 cents,
per delivery (‘‘CNS/ACATS Delivery
Fee’’).22 Pursuant to this proposed rule
change, DTC would increase the CNS/
ACATS Delivery Fee from 17 cents to 21
cents.
As with the proposed changes to the
other Delivery and Receive fees
described earlier, the proposed fee
change to the CNS/ACATS Delivery Fee
is designed to enable DTC to offset its
associated costs and expenses for this
Settlement Service while maintaining
low-margin markup, consistent with its
pricing model.
DTC would implement this proposal
on January 1, 2025. To that effect, a
legend will be added to the Fee Guide
stating there are changes that have
become effective upon filing with the
Commission but have not yet been
implemented. The proposed legend also
would include a date on which such
changes would be implemented and the
file number of this proposal, and state
that, once this proposal is implemented,
the legend would automatically be
removed from the Fee Guide.
2. Statutory Basis
DTC believes this proposal is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a registered
clearing agency. Specifically, DTC
believes the proposed changes to modify
fees charged to Participants for the
Settlement Services described above are
consistent with Section 17A(b)(3)(D) of
the Act 23 and Rule 17ad–22(e)(23)(ii),24
20 See
Settlement Guide, supra note 9.
promulgated under the Act, for the
reasons described below.
Section 17A(b)(3)(D) of the Act
requires, inter alia, that the Rules
provide for the equitable allocation of
reasonable dues, fees, and other charges
among participants.25 DTC believes the
proposed rule change to revise the
above-described fees charged to
Participants for Settlement Services
would provide for the equitable
allocation of reasonable fees. Because all
Participants subject to these fees would
be charged the same increase, and those
increases are directly proportional to the
Participants’ use of the applicable DTC
service, DTC believes the fees continue
to be equitably allocated.
DTC also believes that the proposed
fees will continue to be reasonable
under the described changes. As
described above, DTC’s fees are costbased, plus a low-margin markup to
recover development costs and
operating expenses, and to accumulate
capital sufficient to meet regulatory and
economic requirements. The proposed
fee changes are simply designed to
better align to DTC’s projected operating
costs and expenses relating to these
specific Settlement Services. For this
reason, DTC believes that the proposed
fee changes, as described above, are
reasonable and consistent with Section
17A(b)(3)(D) of the Act.26
Rule 17ad–22(e)(23)(ii) under the
Act 27 requires DTC to establish,
implement, maintain, and enforce
written policies and procedures
reasonably designed to provide
sufficient information to enable
participants to identify and evaluate the
risks, fees, and other material costs they
incur by participating in the covered
clearing agency. The proposed fees
would be clearly and transparently
published in the Fee Guide, which is
available on a public website,28 thereby
enabling Participants to identify the fees
and costs associated with participating
in DTC. As such, DTC believes the
proposed rule change to update the Fee
Guide to reflect the proposed fee
changes is consistent with Rule 17ad–
22(e)(23)(ii) under the Act.29
(B) Clearing Agency’s Statement on
Burden on Competition
The proposed rule change may impact
competition and that impact may be a
burden because it would result in
increased fees paid by Participants, as
described above. However, DTC does
27 15
U.S.C. 78q–1(b)(3)(D).
21 Id.
26 Id.
22 See
27 17
23 15
28 See
Fee Guide, supra note 5.
U.S.C. 78q–1(b)(3)(D).
24 17 CFR.17ad–22(e)(23)(ii).
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104283
CFR 240.17ad–22(e)(23)(ii).
supra note 5.
29 17 CFR 240.17ad–22(e)(23)(ii).
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Federal Register / Vol. 89, No. 245 / Friday, December 20, 2024 / Notices
not believe such a burden would be
significant because the fees would be
charged equally to all Participants that
utilize the applicable Settlement
Services and would merely reflect the
Participants’ related activity at DTC.
Regardless, DTC believes any burden
would be necessary and appropriate in
furtherance of the purposes of the Act,
as permitted by Section 17A(b)(3)(I) of
the Act.30
DTC believes any such burden would
be necessary because the proposed fee
increases would better align the fees
with DTC’s associated costs, helping
DTC to achieve and maintain its net
income margin. Meanwhile, DTC also
believes that any such burden would be
appropriate because the fees would
continue to be equitably and reasonably
allocated among all Participants, as
described above.
ddrumheller on DSK120RN23PROD with NOTICES1
(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 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
sec.gov/regulatory-actions/how-tosubmit-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) 31 of the Act and paragraph
30 15
31 15
U.S.C. 78q–1(b)(3)(I).
U.S.C. 78s(b)(3)(A).
VerDate Sep<11>2014
20:12 Dec 19, 2024
(f) 32 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–2024–013 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–2024–013. 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
a.m. and 3 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 (www.dtcc.com/
legal/sec-rule-filings). Do not include
personal identifiable information in
submissions; you should submit only
information that you wish to make
32 17
Jkt 265001
PO 00000
CFR 240.19b–4(f).
Frm 00213
Fmt 4703
available publicly. We may redact in
part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–DTC–2024–013 and
should be submitted on or before
January 10, 2025.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–30351 Filed 12–19–24; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
[Docket No. FAA–2024–2690]
Agency Information Collection
Activities: Requests for Comments;
Clearance of a Renewed Approval of
Information Collection: Safety
Assurance System (SAS) External
Portal
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice and request for
comments.
AGENCY:
In accordance with the
Paperwork Reduction Act of 1995, FAA
invites public comments about our
intention to request the Office of
Management and Budget (OMB)
approval to renew an information
collection. The SAS external portal is a
web-based tool developed for applicants
and certificate holders (also referred to
as external users) to exchange
information with Flight Standards (FS)
employees, primarily to collaborate and
communicate with their FS counterparts
regarding initial certification
applications, and requesting new
programs for acceptance and approval.
DATES: Written comments should be
submitted by February 18, 2025.
ADDRESSES: Please send written
comments:
By Electronic Docket:
www.regulations.gov (Enter docket
number into search field.)
By Mail: Derek Lockhart (c/o Denise
Beaudoin), 13873 Park Center Rd.,
Herndon, VA 20171.
By Fax: 703–481–6043.
FOR FURTHER INFORMATION CONTACT:
Derek Lockhart by email at
Derek.Lockhart@faa.gov or by phone at
(571) 249–6740.
SUPPLEMENTARY INFORMATION:
SUMMARY:
33 17
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E:\FR\FM\20DEN1.SGM
CFR 200.30–3(a)(12).
20DEN1
Agencies
[Federal Register Volume 89, Number 245 (Friday, December 20, 2024)]
[Notices]
[Pages 104282-104284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30351]
[[Page 104282]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101923; File No. SR-DTC-2024-013]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Modify the Guide to the DTC Fee Schedule To Revise Certain Fees
Charged to Participants for Settlement Services
December 16, 2024.
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 December 9, 2024, 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)(2) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change would modify the Guide to the DTC Fee
Schedule \5\ (``Fee Guide'') to revise certain fees charged to
Participants for Settlement Services,\6\ as described in greater detail
below.\7\
---------------------------------------------------------------------------
\5\ Available at www.dtcc.com/-/media/Files/Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf.
\6\ Pursuant to Rule 2, Section 1, each Participant shall pay to
DTC the compensation due it for services rendered to the Participant
based on DTC's fee schedules. See Rule 2, infra note 7.
\7\ Each capitalized term not otherwise defined herein has its
respective meaning as set forth the Rules, By-Laws and Organization
Certificate of DTC (the ``Rules''), available at www.dtcc.com/legal/rules-and-procedures.
---------------------------------------------------------------------------
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 modify the Fee Guide to revise
certain fees charged to Participants for Settlement Services, as
described below.
Overview
DTC operates under a ``cost plus a low-margin markup'' pricing
model. The markup is applied to recover development costs and operating
expenses, and to accumulate capital sufficient to meet regulatory and
economic requirements. DTC maintains procedures to control costs and to
regularly review pricing levels against costs of operation. It reviews
pricing levels against its costs of operation during the annual budget
process.
The budget is approved annually by the Board. DTC's fees are
approved by the Board or management (pursuant to authority delegated by
the Board), as applicable. When estimating expected revenues and costs,
DTC typically uses historical, current, and expected usage and market
trends to determine revenue outlook and apply current budgeted
assumptions on costs. In addition to assessing the overall impact of
fee changes at DTC, the Board also considers impacts of fee changes
from an individual product/service category (e.g., Settlement Services)
perspective, taking cost and capital considerations relating to a given
category into account.
After evaluation of DTC's short-term and long-term financial
position in consideration of expected Participant activity, revenues,
cost of funding, market volatility, and the financial markets more
broadly, including considering impacts for each product/service
category perspective, as more fully described below, DTC has determined
that it should increase the overall amount it collects from
Participants through fees. More specifically, the proposed rule change
would increase certain fees relating to Settlement Services, to better
align cost and revenue.
Operating expense increases for DTC's Settlement Services are
driven by compensation and contract inflation, IT risk mitigation,
resiliency initiatives and infrastructure investments partially offset
by efficiencies. Therefore, the proposed rule change would increase
certain fees relating to book-entry delivery in the Settlement Services
section \8\ of the Fee Guide to better align costs and revenue, as
described below.
---------------------------------------------------------------------------
\8\ See Fee Guide, supra note 5.
Fee Revisions for Certain Settlement Services
Fee Increase for DTC Deliver Orders
As background, a Participant may submit an instruction (``Deliver
Order'') to DTC to make a Delivery \9\ of Eligible Securities via book-
entry to another Participant's account.\10\ DTC reduces the Deliverer's
\11\ position and increases the Receiver's \12\ position without the
need to move physical certificates. Deliveries can be made Delivery
Versus Payment \13\ or as a Free Delivery,\14\ depending on the
applicable Participant's delivery instructions provided in the Deliver
Order.
---------------------------------------------------------------------------
\9\ See Rule 9(A), Rule 9(B), Rule 9(C) and Rule 9(D), supra
note 7, and Settlement Service Guide (``Settlement Guide''),
available at www.dtcc.com/-/media/Files/Downloads/legal/service-guides/Settlement.pdf. DTC allows a Participant to settle securities
transactions by making book-entry Deliveries to another
Participant's account. DTC reduces the seller's position and
increases the buyer's position without the need to move physical
certificates. See Settlement Guide at 5.
\10\ See Rule 9(B), supra note 7.
\11\ Pursuant to Rule 1, the term ``Deliverer,'' as used with
respect to a Delivery of a Security, means the Person which Delivers
the Security. See Rule 1, supra note 7.
\12\ Pursuant to Rule 1, the term ``Receiver,'' as used with
respect to a Delivery of a Security, means the Person which receives
the Security. See id.
\13\ Pursuant to Rule 1, the term ``Delivery Versus Payment''
means a Delivery against a settlement debit to the Account of the
Receiver, as provided in Rule 9(A) and Rule 9(B) and as specified in
the Procedures. See Rule 1, supra note 7.
\14\ Pursuant to Rule 1, the term ``Free Delivery'' means a
Delivery free of any payment by the Receiver through the facilities
of the Corporation, as provided in Rule 9(B) and as specified in the
Procedures. See id.
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When a Participant submits a Deliver Order during DTC's day
settlement cycle, the delivering Participant is charged a fee (``Day
Deliver Order Fee'') of 54 cents, per deliver. When a Participant
submits a Deliver Order during DTC's night settlement cycle,\15\ the
charge is 17 cents, per deliver (``Night Deliver Order Fee''). The
Night Deliver Order Fee is less than the Day Deliver Order Fee because
DTC is encouraging earlier submission of transactions by Participants,
which results in more efficient settlement processing by increasing the
volume of transactions processed in the night-cycle, which, in turn,
lessens the burden on the intraday settlement processing.\16\
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\15\ A Deliver Order input on the day prior to settlement. A
reduced rate is charged for Night Deliver Order transactions. See
Settlement Guide, supra note 9.
\16\ See Securities Exchange Act Release No. 84768 (Dec. 10,
2018), 83 FR 64401 (Dec. 14, 2018) (SR-DTC-2018-011).
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If a Participant submits a Deliver Order and elects for the Deliver
to be
[[Page 104283]]
tracked through DTC's income tracking systems, specifically the stock
loan income tracking system \17\ or the repurchase agreement (``Repo'')
tracking system,\18\ then the Deliver is charged an additional 18
cents, regardless of time. This fee is designated in the Fee Guide as
the ``Repos, stock loans and returns'' fee (``Tracking Fee'').
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\17\ In a stock loan agreement, the lender of a Security is
entitled to recover from the borrower any income distributions paid
on the loaned Security. The stock loan income tracking system allows
DTC to track the lender's (Deliverer's) position on the Securities.
The stock loan income tracking system tracks cash dividend and
interest payments relating to Deliver Orders submitted using certain
reason codes for stock loan transactions, as described in the DTC
Corporate Actions Distributions Service Guide (``Distributions
Guide''). See Distributions Guide, available at www.dtcc.com/-/media/Files/Downloads/legal/service-guides/Service-Guide-Distributions.pdf, at 37-38, for additional information relating to
stock loan transactions and the related reason codes.
\18\ A Repo is an agreement between two parties that allows the
seller of Securities to later repurchase them at an agreed-upon
price. The seller usually retains the right to periodic income
distributions. However, since the Securities will not reside in the
seller's account on record date, the seller would not be credited
the periodic principal and income distributions paid on the
Securities. To recover these entitlements, the seller must claim the
Repo buyer. DTC's Repo Tracking System automates claims of these
entitlements by tracking the Repo transactions (Deliveries) relating
to Deliver Orders submitted using certain reason codes designated
for Repo transactions and adjusting the entitlement payments
accordingly on payable date. See Distributions Guide, id. at 39-40,
for additional information relating to Repo transactions and related
reason codes.
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The Receiver of a Deliver is charged 11 cents (``Receive Fee),
regardless of time, per receive.\19\
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\19\ See Fee Guide, supra note 5, at 18.
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Pursuant to this proposed rule change, DTC would update the Fee
Guide to reflect the following fee increases: (1) Day Deliver Order Fee
from 54 cents to 68 cents per delivery, (2) Night Deliver Order Fee
from 17 cents to 21 cents per delivery, (3) Tracking Fee from 18 cents
to 22 cents per tracking, and (4) Receive Fee from 11 cents to 14 cents
per receive.
The proposed fee changes reflect an amount that would facilitate
DTC's ability to maintain a cost plus low-margin markup model, as
discussed above, with respect these Settlement Services.
Fee Increase for DTC Deliveries and Receives to and From NSCC's CNS
System
In addition to the Deliver Orders described above, DTC also
completes Deliveries of Securities transactions cleared by its
affiliate, the National Securities Clearing Corporation (``NSCC''),
through the NSCC Continuous Net Settlement (``CNS'') system. Such
Deliveries are processed at DTC as Free Deliveries.\20\ Similarly, DTC
also processes Free Deliveries relating to NSCC's Automated Customer
Account Transfer Service (``ACATS'').\21\
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\20\ See Settlement Guide, supra note 9.
\21\ Id.
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Both the delivering and receiving Participants of CNS Deliveries
and ACATS Deliveries are charged 17 cents, per delivery (``CNS/ACATS
Delivery Fee'').\22\ Pursuant to this proposed rule change, DTC would
increase the CNS/ACATS Delivery Fee from 17 cents to 21 cents.
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\22\ See Fee Guide, supra note 5.
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As with the proposed changes to the other Delivery and Receive fees
described earlier, the proposed fee change to the CNS/ACATS Delivery
Fee is designed to enable DTC to offset its associated costs and
expenses for this Settlement Service while maintaining low-margin
markup, consistent with its pricing model.
Participant Outreach
DTC has conducted ongoing outreach to each Participant to provide
them with notice of the proposed changes and the anticipated impact for
the Participant. The impact of the proposed changes was provided to
Participants using year-to-date, July 2024 annualized data. As of the
date of this filing, no written comments relating to the proposed
changes have been received. The Commission will be notified of any
written comments received.
Implementation Timeframe
DTC would implement this proposal on January 1, 2025. To that
effect, a legend will be added to the Fee Guide stating there are
changes that have become effective upon filing with the Commission but
have not yet been implemented. The proposed legend also would include a
date on which such changes would be implemented and the file number of
this proposal, and state that, once this proposal is implemented, the
legend would automatically be removed from the Fee Guide.
2. Statutory Basis
DTC believes this proposal is consistent with the requirements of
the Act and the rules and regulations thereunder applicable to a
registered clearing agency. Specifically, DTC believes the proposed
changes to modify fees charged to Participants for the Settlement
Services described above are consistent with Section 17A(b)(3)(D) of
the Act \23\ and Rule 17ad-22(e)(23)(ii),\24\ promulgated under the
Act, for the reasons described below.
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\23\ 15 U.S.C. 78q-1(b)(3)(D).
\24\ 17 CFR.17ad-22(e)(23)(ii).
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Section 17A(b)(3)(D) of the Act requires, inter alia, that the
Rules provide for the equitable allocation of reasonable dues, fees,
and other charges among participants.\25\ DTC believes the proposed
rule change to revise the above-described fees charged to Participants
for Settlement Services would provide for the equitable allocation of
reasonable fees. Because all Participants subject to these fees would
be charged the same increase, and those increases are directly
proportional to the Participants' use of the applicable DTC service,
DTC believes the fees continue to be equitably allocated.
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\27\ 15 U.S.C. 78q-1(b)(3)(D).
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DTC also believes that the proposed fees will continue to be
reasonable under the described changes. As described above, DTC's fees
are cost-based, plus a low-margin markup to recover development costs
and operating expenses, and to accumulate capital sufficient to meet
regulatory and economic requirements. The proposed fee changes are
simply designed to better align to DTC's projected operating costs and
expenses relating to these specific Settlement Services. For this
reason, DTC believes that the proposed fee changes, as described above,
are reasonable and consistent with Section 17A(b)(3)(D) of the Act.\26\
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\26\ Id.
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Rule 17ad-22(e)(23)(ii) under the Act \27\ requires DTC to
establish, implement, maintain, and enforce written policies and
procedures reasonably designed to provide sufficient information to
enable participants to identify and evaluate the risks, fees, and other
material costs they incur by participating in the covered clearing
agency. The proposed fees would be clearly and transparently published
in the Fee Guide, which is available on a public website,\28\ thereby
enabling Participants to identify the fees and costs associated with
participating in DTC. As such, DTC believes the proposed rule change to
update the Fee Guide to reflect the proposed fee changes is consistent
with Rule 17ad-22(e)(23)(ii) under the Act.\29\
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\27\ 17 CFR 240.17ad-22(e)(23)(ii).
\28\ See supra note 5.
\29\ 17 CFR 240.17ad-22(e)(23)(ii).
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(B) Clearing Agency's Statement on Burden on Competition
The proposed rule change may impact competition and that impact may
be a burden because it would result in increased fees paid by
Participants, as described above. However, DTC does
[[Page 104284]]
not believe such a burden would be significant because the fees would
be charged equally to all Participants that utilize the applicable
Settlement Services and would merely reflect the Participants' related
activity at DTC. Regardless, DTC believes any burden would be necessary
and 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\ 15 U.S.C. 78q-1(b)(3)(I).
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DTC believes any such burden would be necessary because the
proposed fee increases would better align the fees with DTC's
associated costs, helping DTC to achieve and maintain its net income
margin. Meanwhile, DTC also believes that any such burden would be
appropriate because the fees would continue to be equitably and
reasonably allocated among all Participants, as described above.
(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 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 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) \31\ of the Act and paragraph (f) \32\ 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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\31\ 15 U.S.C. 78s(b)(3)(A).
\32\ 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-2024-013 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-2024-013. 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
a.m. and 3 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 (www.dtcc.com/legal/sec-rule-filings). Do not include personal
identifiable information in submissions; you should submit only
information that you wish to make available publicly. We may redact in
part or withhold entirely from publication submitted material that is
obscene or subject to copyright protection. All submissions should
refer to File Number SR-DTC-2024-013 and should be submitted on or
before January 10, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-30351 Filed 12-19-24; 8:45 am]
BILLING CODE 8011-01-P