

[Federal Register: February 15, 2008 (Volume 73, Number 32)]
[Notices]               
[Page 8921-8922]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15fe08-119]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57298; File No. SR-DTC-2007-13]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Order Granting Approval of a Proposed Rule Change Relating to the 
Foreign Currency Payment Option

February 8, 2007.

I. Introduction

    On September 26, 2007, The Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') proposed 
rule change SR-DTC-2007-13 pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal 
was published in the Federal Register on December 3, 2007.\2\ No 
comment letters were received. For the reasons discussed below, the 
Commission is granting approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 56840 (November 27, 
2007), 72 FR 67987.
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II. Description

    The proposed rule change provides that DTC's Foreign Currency 
Payment Option (``FCP Option'') may be used (1) in relation to 
securities denominated in U.S. dollars and (2) regardless of whether 
the terms of the issue originally contemplated the option of payment in 
one or more currencies. Currently, DTC offers the FCP Option in order 
for participants to elect to receive dividend, interest, principal, 
redemption, or maturity payments either in foreign currency outside of 
DTC or in U.S. dollars within DTC with respect to a foreign denominated 
issue when the foreign currency option is included in the initial 
offering terms of the DTC-eligible issue.

U.S. Denominated Securities

    The rule change clarifies that the FCP Option will be made 
available for U.S. denominated securities as well as foreign 
denominated securities. When

[[Page 8922]]

DTC initially filed to implement the FCP Option, the issues providing 
for multiple currencies payments were foreign denominated.\3\ The 
wording of the filing inadvertently put participants holding U.S. 
denominated securities at a disadvantage with respect to the FCP 
Option. This rule change remedies this unintentional result by allowing 
the FCP Option to be used with respect to U.S. denominated securities.
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    \3\ Securities Exchange Act Release Nos. 33597 (February 8, 
1994), 59 FR 7272 (February 15, 1994) (File No. SR-DTC-93-10) and 
29144 (April 30, 1991), 56 FR 21182 (May 7, 1991) (File No. SR-DTC-
90-09).
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Designation of Payment Option After Initial Issuance

    The rule change allows for the use of the FCP Option for DTC-
eligible securities that were not initially issued with the option of 
payment in multiple currencies. Additionally, DTC is amending its rules 
to allow an issuer or its agent to use the FCP Option to add an 
additional currency to the payment options originally offered in 
relation to a DTC-eligible security.\4\ In such a case, the issuer or 
its agent would instruct DTC within prescribed time frames and in a 
form satisfactory to DTC to send out a notice to participants holding 
positions in the subject security to inform them of the payment options 
for a particular payment event. Such a notice would contain all 
necessary information for a participant to be able to elect a 
particular currency option. The method of payment (U.S. dollars within 
DTC or foreign currency outside of DTC) and the election process would 
remain the same.
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    \4\ For example, payment in a different currency than that 
offered when a security was initially issued might be desirable in 
the event of a change in tax withholding legislation subsequent to 
the initial issuance which might make it more attractive for 
investors from a particular country to hold position in a security. 
It would in turn be helpful for such investors to have the ability 
to receive payments in relation to the subject security in their 
home country currency.
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III. Discussion

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. In the 1994 order 
approving DTC's original rule allowing the foreign currency payment 
option, the Commission found that the FCP Option facilitates the 
immobilization of certificates at DTC and therefore reduces the costs 
to secondary market participants by increasing the use of book-entry 
settlement.\5\ Similarly, we find that the proposed rule change by 
extending the FCP Option to U.S. denominated securities and to 
securities not originally issued with the option of receiving payments 
in multiple currencies should achieve the same result. As a result of 
the proposed rule change, DTC participants holding these securities 
will no longer have to withdraw their shares from DTC in order to 
receive payments in foreign currencies offered by an issuer or its 
agent. The proposed rule change should, therefore, provide cost savings 
and should expand the efficiencies related to book-entry transfer for 
DTC participants. For these reasons we find that the proposed rule 
change is designed to promote the prompt and accurate clearance and 
settlement of securities transactions consistent with DTC obligations 
under section 17A(b)(3)(F).
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    \5\ Securities Exchange Act Release No. 29144 (April 30, 1991), 
56 FR 21182 (May 7, 1991) (File No. SR-DTC-90-09).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular section 17A of the Act and the rules and regulations 
thereunder.\6\
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    \6\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).
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    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-DTC-2007-13) be and hereby 
is approved.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-2823 Filed 2-14-08; 8:45 am]

BILLING CODE 8011-01-P
