

[Federal Register: March 8, 2006 (Volume 71, Number 45)]
[Notices]               
[Page 11693-11694]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08mr06-131]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53395; File Nos. SR-DTC-2006-04, SR-FICC-2006-01, and 
SR-NSCC-2006-01]

 
Self-Regulatory Organizations; The Depository Trust Company, 
Fixed Income Clearing Corporation, and National Securities Clearing 
Corporation; Notice of Filing and Order Granting Accelerated Approval 
of a Proposed Rule Change To Exclude Non-U.S.-Based Central Securities 
Depositories From a Requirement To Purchase Shares of the Common Stock 
of The Depository Trust & Clearing Corporation

March 2, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 9, 2006, The 
Depository Trust Company (``DTC''), the Fixed Income Clearing 
Corporation (``FICC''), and the National Securities Clearing 
Corporation (``NSCC'') filed with the Securities and Exchange 
Commission (``Commission'') proposed rule changes SR-DTC-2006-04, SR-
FICC-2006-01, and SR-NSCC-2006-01 as described in Items I, II, and III 
below, which items have been prepared primarily by DTC, FICC, and NSCC. 
The Commission is publishing this notice and order to solicit comments 
on the proposed rule changes from interested parties and to grant 
accelerated approval of the proposed rule changes.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    DTC, FICC, and NSCC are seeking to exclude non-U.S.-based central 
securities depositories from the requirement to purchase shares of the 
common stock of The Depository Trust & Clearing Corporation (``DTCC'').

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, FICC, and NSCC 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, FICC, and NSCC have prepared 
summaries, set forth in sections (A), (B), and (C) below, of the most 
significant aspects of these statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by DTC, FICC, and NSCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    DTCC is a holding company parent of DTC, FICC, and NSCC, each a 
clearing agency registered with the Commission. In 2005, amendments 
were made to DTCC's Shareholders Agreement and new provisions were 
added to the rules of each of the three clearing agencies pursuant to 
which participants of DTC, FICC, and NSCC that make full use of the 
services of one or more of the clearing agencies will be required to 
purchase DTCC common shares (``Mandatory Purchaser Participants''). 
Other participants that make only limited use of the services of one or 
more of the clearing agencies will have the right but not the 
obligation to purchase DTCC common shares (``Voluntary Purchaser 
Participants'').\3\
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    \3\ Securities Exchange Act Release No. 52922 (December 7, 
2005), 70 FR 74070 (December 14, 2005) [File Nos. SR-DTC-2005-16, 
SR-FICC-2005-19, and SR-NSCC-2005-14].
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    The purpose of those amendments to DTCC's Shareholders Agreement 
and revisions to the agency rules was to help ensure that participants 
continue to govern and to control the activities of DTC, FICC, and 
NSCC, including the services provided, service fees charged, and the 
practice of returning to participants revenues in excess of expenses 
and necessary reserves, by providing that all DTCC common shares are 
owned by participants of the three clearing agencies.
    DTCC's clearing agency subsidiaries have links with non-U.S.-based 
central securities depositories (``non-U.S. CSDs'') in order to support 
the activities of the clearing agencies' participants. The definition 
of ``Mandatory Purchaser Participant'' in each of DTC, FICC, and NSCC's 
Rules has the unintended consequence of requiring non-U.S. CSDs to 
purchase DTCC common shares.\4\ Most of these non-U.S. CSDs have ``free 
of payment'' links and therefore do not expose the clearing agencies to 
settlement risk. In other cases, where the non-U.S. CSD is permitted to 
process transactions ``against payment'' and therefore benefits from 
settlement guarantees provided by the clearing agencies, there are 
reciprocal arrangements under which the clearing agency subsidiaries 
obtains the benefits of settlement guarantees provided by the non-U.S. 
CSD.
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    \4\ The definition of ``Mandatory Purchaser Participant'' is 
contained in DTC Rule 31, FICC Rule 49, and NSCC Rule 64.
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    The purpose of the current proposed rule changes is to provide that 
non-U.S. CSDs would be excluded from the category of DTC, FICC, and 
NSCC participants that are required to purchase DTCC common shares. 
These entities would, however, have the right to purchase DTCC common 
shares.
    DTC, FICC, and NSCC each believe that their proposed rule change is 
consistent with the requirements of Section 17A of the Act \5\ and the 
rules and regulations thereunder applicable to DTC, FICC, and NSCC 
because each believe the proposed changes to DTCC's Shareholders 
Agreement and to their rules will assure fair representation of DTC, 
FICC, and NSCC's participants in the selection of their directors and 
the

[[Page 11694]]

administration of their affairs, respectively.
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    \5\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC, FICC, and NSCC do 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, FICC, and NSCC will notify the 
Commission of any written comments they receive.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder and particularly with the requirements of Section 
17A(b)(3)(C).\6\ Section 17A(b)(3)(C) requires that the rules of a 
clearing agency be designed to assure fair representation in the 
selection of its directors and in the administration of its affairs. 
The Commission finds that DTC, FICC, and NSCC's proposed rule changes 
are consistent with this requirement because the allocation of common 
share purchase requirements will more accurately represent the actual 
use of the clearing agencies' services and the risks posed by such 
uses. Moreover, the removal of non-U.S. CSDs from the definition of 
Mandatory Purchaser Participant should not result in a significant 
increase in the burden imposed on the remaining shareholders, because 
the common shares that would otherwise be purchased by the non-U.S. 
CSDs represent slightly more than one percent of the total number of 
DTCC common shares to be purchased by the Mandatory Purchaser 
Participants.
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    \6\ 15 U.S.C. 78q-1(b)(3)(C).
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    DTC, FICC, and NSCC have requested that the Commission approve the 
proposed rules prior to the thirtieth day after publication of the 
notice of the filing. The Commission finds good cause for approving the 
proposed rule change prior to the thirtieth day after the publication 
of notice because such approval will permit DTCC to complete the 
necessary calculations to determine the number of shares to be 
purchased by Mandatory Purchaser Participants without including the 
non-U.S. CSDs, and will permit the clearing agencies' participants to 
complete their purchases of such shares prior to DTCC, DTC, FICC, and 
NSCC's annual shareholders meetings to be held in April 2006.

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 Numbers SR-DTC-2006-04, SR-FICC-2006-01, and SR-NSCC-2006-01 in 
the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Numbers SR-DTC-2006-04, SR-
FICC-2006-01, and SR-NSCC-2006-01. 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. Copies of 
such filings also will be available for inspection and copying at the 
principal offices of DTC, FICC, and NSCC and on DTC's Web site at 
http://www.dtc.org, and on FICC's Web site at http://www.ficc.com, and on NSCC's Web site, http://www.nscc.com. 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 Numbers SR-DTC-2006-04, SR-FICC-2006-01, and SR-
NSCC-2006-01 and should be submitted on or before March 29, 2006.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-3269 Filed 3-7-06; 8:45 am]

BILLING CODE 8010-01-P
