[Federal Register: July 8, 2008 (Volume 73, Number 131)]
[Notices]
[Page 39067-39068]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jy08-121]
[[Page 39067]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58042; File No. SR-DTC-2008-04]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule To
Establish an Alternate Choice in DTC Profile Surety Providers
June 26, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on June 5, 2008, the
Depository Trust Company (``DTC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change described
in Items I, II, and III below, which items have been prepared primarily
by DTC. DTC filed the proposal pursuant to Section 19(b)(3)(A)(iii) of
the Act \2\ and Rule 19b-4(f)(4) \3\ thereunder so that the proposal
was effective upon filing with the Commission. The Commission is
publishing this notice to solicit comments on the rule change from
interested parties.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78s(b)(3)(A)(iii).
\3\ 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of the rule change is to establish an alternate choice
in DTC Surety Providers.
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 these
statements.\4\
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\4\ The Commission has modified the text of the summaries
prepared by DTC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
DTC's Profile Modification System (``Profile'') is an electronic
communication hub between transfer agents that are Direct Registration
System (``DRS'') Limited Participants (``Limited Participants'') and
brokers that are DRS Participants (``Participants'' and, together with
Limited Participants, ``Users'').\5\ Profile allows Participants to
submit an investor's instruction to move a share position from the
investor's Limited Participant account to the Participant's account at
DTC (``Electronic Participant Instruction''). Profile also allows
Limited Participants to submit an investor's instruction to move a
share position from the Participant's account at DTC to an account
maintained by the Limited Participant (``Electronic Limited Participant
Instruction'' and, together with Electronic Participant Instruction,
``Electronic Instructions''). A User submitting an Electronic
Instruction through Profile is required to agree to a Participant
Terminal System (``PTS'') screen indemnity (``Screen Indemnity'').\6\
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\5\ For a description of Profile, see Securities Exchange Act
Release No. 41862 (September 10, 1999), 64 FR 51162 (September 21,
1999) (order approving implementation of Profile).
\6\ The Screen Indemnity protects, among others, the party
receiving the share position from liability in connection with the
transaction arising from a User's breach of the representation of
authority and consent to initiate the transaction. For a broader
description of the Screen Indemnity, see Securities Exchange Act
Release No. 42704 (April 19, 2000), 65 FR 24242 (April 25, 2000)
(order approving modification of Profile to incorporate use of the
Screen Indemnity).
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Under DTC's Profile Surety Program (``PSP''),\7\ all Users of
Profile must procure a surety bond relating to their obligations under
such indemnity.\8\ PSP requires a surety bond to back the
representations a User makes under the Screen Indemnity in the case of
a User breaching its representation of authority to initiate the
transaction (``Surety Bond''). Participation in PSP requires the
payment of an annual premium of $3,150 to a surety provider and a DTC
administration fee of $250. The current PSP surety provider provides
for a coverage limit of $3 million per occurrence, with an annual
aggregate limit of $6 million, which may not allow for the coverage of
larger transactions under a single Surety Bond.
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\7\ For a description of PSP, see Securities Exchange Act
Release No. 43586 (November 17, 2000), 65 FR 70745 (November 27,
2000).
\8\ Pursuant to the DTC Profile Modification System Indemnity
Insurance Program (``Indemnity Insurance Program''), Users of
Profile may procure Profile Modification System Indemnity Insurance
(``Insurance'') relating to a particular transaction according to
the value of each individual securities transaction rather than
procuring a Surety Bond. The Insurance option provides a coverage
limit of $25 million per occurrence per policy and an annual
aggregate limit of $100 million. In addition to any pass-through fee
from the insurer, DTC charges Users participating in the Indemnity
Insurance Program an annual administration fee of $250 and a $2.50
per transaction fee. Securities Exchange Release Act No. 52422
(September 14, 2005), 70 FR 55196 (September 20, 2005).
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DTC is proposing to provide Users of Profile an option to procure a
Surety Bond with a higher coverage limit then currently offered. Under
the proposal, the Surety Bond with the higher coverage limit will have
a limit of $7.5 million per occurrence and an annual aggregate limit of
$15 million. Users of this surety provider will be required to pay an
annual premium of $6,000 to a surety provider and a DTC administration
fee of $250. The intent of this program is to account for the larger
value Profile transactions that DRS currently handles, to provide
alternate surety options to Users, and for contingency planning. Users
will be permitted to participate with each surety provider, but will be
required to select only one provider per Profile transaction.
The surety company issuing the Surety Bond will either be a company
selected by DTC as the administrator of such program or a surety
company selected by the DRS User. If a User elects to use a surety
company other than the one DTC has selected, the surety company
selected will be required to issue its Surety Bond in a form consistent
with the bond issued by the surety company selected by DTC.
The proposed rule change is consistent with Section 17A of the
Act,\9\ as amended, because it modifies an existing service by
establishing an alternate choice for surety providers to provide a
broader range of options to safeguard transactions processed within the
service.
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\9\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC does not believe that the proposed rule change will have any
impact or impose any burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments relating to the proposed rule change have not yet
been solicited or received. DTC will notify the Commission of any
written comments received by DTC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change has become effective upon filing
pursuant to Section 19(b)(3)(A)(iii) of
[[Page 39068]]
the Act \10\ and Rule 19b-4(f)(4) \11\ thereunder because the proposed
rule change effects a change in an existing service of a registered
clearing agency that: (i) Does not adversely affect the safeguarding of
securities or funds in the custody or control of the clearing agency or
for which it is responsible and (ii) does not significantly affect the
respective rights or obligations of the clearing agency or persons
using the service. At any time within sixty days of the filing of the
proposed rule change, the Commission may summarily abrogate 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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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(4).
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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 (http://
www.sec.gov/rules/sro.shtml) or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-DTC-2008-04 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-DTC-2008-04. This file
number should be included on the subject line if e-mail 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 Web site (http://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 inspection and
copying in the Commission's Public Reference Section, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filings also will be available for
inspection and copying at the principal office of DTC and on DTC's Web
site at http://www.dtcc.com/downloads/legal/rule_filings/2008/dtc/
2008-04.pdf. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-DTC-
2008-04 and should be submitted on or before July 29, 2008.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-15353 Filed 7-7-08; 8:45 am]
BILLING CODE 8010-01-P