[Federal Register: October 28, 1998 (Volume 63, Number 208)] [Notices] [Page 57716-57717] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr28oc98-113] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-40588; File No. SR-DTC-98-13] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change Relating to Establishing a Practice of Collecting the Difference Between a Participant's Required Fund Deposit and its Actual Fund Deposit More Frequently Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (``Act''), notice is hereby given that on June 11, 1998, 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 primarily by DTC. DTC amended the proposed rule change on July 29, 1998. The Commission is publishing this notice to solicit comments from interested persons on the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change establishes a practice of collecting the difference between a participant's required fund deposit \2\ and its actual fund deposit \3\ more frequently than monthly. --------------------------------------------------------------------------- \2\ Required fund deposit is defined in DTC's Rule 1 as the amount a participant is required to deposit to the participant's fund. \3\ Actual fund deposit is defined in DTC's Rule 1 as the amount a participant has deposited to DTC's participant fund, including both its required fund deposit and any voluntary fund deposit. --------------------------------------------------------------------------- II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, DTC 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. DTC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of such statements.\4\ --------------------------------------------------------------------------- \4\ The Commission has modified the text of the summaries prepared by DTC. --------------------------------------------------------------------------- (A) Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Currently, DTC calculates each participant's required fund deposit daily. If a participant's required fund deposit exceeds its actual fund deposit, DTC requires the participant to deposit the difference into DTC's participant fund on a monthly basis. The proposed rule change will further minimize DTC's exposure by providing for the collection of the difference between a participant's required fund deposit and actual fund deposit on a daily basis under certain circumstances. Under the proposal, DTC will calculate a participant's actual and required fund deposit daily and require a participant to deposit the difference if two conditions are met. First, the amount of the difference between the funds must be equal to or exceed $500,000, and second, the difference must represent 25% or more of the newly calculated required fund deposit. Under such circumstances, the participant will be required to deposit the difference into DTC's participant fund within two business days of the day the difference was calculated. This new standard will ensure that DTC's resources are sufficient to complete [[Page 57717]] settlement if a participant fails to settle its net debit obligation. DTC believes that the proposed rule change is consistent with the requirements of Section 17A of the Act \5\ and the rules and regulations thereunder because it assures the safeguarding of securities and funds which are in its custody or control. --------------------------------------------------------------------------- \5\ 15 U.S.C. 78q-1. --------------------------------------------------------------------------- (B) Self-Regulatory Organization's Statement on Burden on Competition DTC does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purpose of the Act. (C) Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments on the proposal from DTC participants or others have not been solicited or received. The staff of the Commission recommended that DTC establish a practice of collecting the difference between a participant's required fund deposit and actual fund deposit more often than monthly. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within thirty-five days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to ninety days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which DTC consents, the Commission will: (A) By order approve such proposed rule change or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 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 inspection and copying in the Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such filing also will be available for inspection and copying at the principal office of DTC. All submissions should refer to File No. SR-DTC-98-13 and should be submitted by November 18, 1998. For the Commission by the Division of Market Regulation, pursuant to delegated authority.\6\ --------------------------------------------------------------------------- \6\ 17 CFR 200.30-3(a)(13). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 98-28847 Filed 10-27-98; 8:45 am] BILLING CODE 8010-01-M