
[Federal Register: May 8, 2008 (Volume 73, Number 90)]
[Notices]               
[Page 26181-26182]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08my08-140]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57768; File No. SR-DTC-2007-10]

 
Self-Regulatory Organizations; The Depository Trust Company; 
Order Granting Accelerated Approval of an Amended Proposed Rule Change 
To Implement the New Issue Information Dissemination Service for 
Municipal Securities

May 2, 2008.

I. Introduction

    On August 16, 2007, The Depository Trust Company (``DTC'') filed 
with the Securities and Exchange Commission (``Commission'') and on 
September 12, 2007,\1\ March 3, 2008,\2\ and April 9, 2008 \3\ amended 
proposed rule change SR-DTC-2007-10 pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\4\ Notice of the proposal 
was published in the Federal Register on October 3, 2007,\5\ March 24, 
2008,\6\ and April 16, 2008.\7\ The Commission received no comment 
letters. For the reasons discussed below, the Commission is approving 
the proposed rule change on an accelerated basis.
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    \1\ The amendment changed a misplaced word in a footnote.
    \2\ The amendment changed the implementation date of the service 
and made other technical changes.
    \3\ The amendment changed the implementation date of the 
service.
    \4\ 15 U.S.C. 78s(b)(1).
    \5\ Securities Exchange Act Release No. 56552 (September 27, 
2007), 72 FR 56407.
    \6\ Securities Exchange Act Release No. 57513 (March 17, 2008), 
73 FR 15548.
    \7\ Securities Exchange Act Release No. 57647 (April 10, 2008), 
73 FR 20727.
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II. Description

    The New Issue Identification Dissemination Service (``NIIDS'') is 
designed to improve the process by which municipal securities new issue 
information is provided by underwriters to information vendors. NIIDS 
will provide for the collection of information about new issues from 
underwriters or their representatives in an electronic format and for 
making that data available immediately to information vendors. NIIDS is 
designed to enable the dissemination of new issue information as 
quickly and efficiently as possible after the information is made 
available by underwriters.
    Municipal Securities Rulemaking Board (``MSRB'') Rule G-14 
generally requires municipal securities dealers to report municipal 
securities transactions to the MSRB within 15 minutes of the time of 
the trade.\8\ Inter-dealer trades eligible for comparison by a clearing 
agency are required to be submitted to the MSRB through the National 
Securities Clearing Corporation's (``NSCC'') Real Time Trade Matching 
System (``RTTM'') within the 15 minute time frame in Rule G-14. NSCC 
requires certain securities information in order to process and to 
report transactions involving those securities. Therefore, it is 
necessary that dealers trading newly issued municipal securities have 
the securities information needed for trade submission by the time the 
trade is required to be reported.
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    \8\ MSRB Rule G-14, RTRS Procedures (a)(ii).
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    Pursuant to current practice in the municipal securities market, 
each information vendor works separately to obtain information from 
offering documents and from underwriters. Each information vendor's 
success in obtaining information about newly issued municipal 
securities depends in large part upon the voluntary cooperation of the 
underwriters. It is not unusual for information vendors to have 
inconsistent information or for some information vendors to receive 
information before others. Consequently, critical new issue information 
may be missing, inaccurate, or both in the automated trade processing 
systems used by dealers to report trades in new issues. This can result 
in the late submission of trade reports or in trade reports that must 
be canceled and resubmitted or amended because they contain inaccurate 
data.
    To address concerns that dealers often lack timely access to 
electronically formatted accurate securities information necessary to 
process and report municipal securities transactions in real-time, MSRB 
Rule G-14 provides for reporting of trades within three-hours of the 
time of trade for a dealer trading in ``when, as, and if issued'' 
municipal securities if the dealer is not a syndicate manager or 
syndicate member for the issue, has not traded the issue in the 
previous year, and does not have the CUSIP information or indicative 
data for that issue in their securities master file (``Reporting 
Exemption'').\9\ The Reporting Exemption will expire in 2008. In order 
to prepare for the Reporting Exemption's expiration, the Securities 
Industry and Financial Markets Association asked DTC to include a 
centralized automated mechanism for the real-time collection and 
dissemination of the required information as part of the planned 
reengineering of DTC's underwriting system. In response to this 
request, DTC built NIIDS to help make the collection and dissemination 
of municipal securities new issue information more efficient for the 
industry.
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    \9\ MSRB Rule G-14, RTRS Procedures (a)(ii)(C).
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NIIDS Process

    To commence the process, the Dissemination Agent for a new issue 
municipal security must input the key data elements required for the 
reporting, comparison, confirmation, and settlement of trades in 
municipal securities (``NIIDS Data Elements'') into NIIDS. The 
inputting will constitute a request that DTC make the information 
available to the industry through NIIDS. DTC will not confirm the 
accuracy of the NIIDS Data Elements and will act only as a conduit to 
pass along such information to data vendors.\10\ DTC anticipates the 
data vendors will then disseminate the information to the industry 
thereby enabling dealers to make timely and accurate reporting of their 
municipal trades. DTC will record the name of the Dissemination Agent 
that inputs the NIIDS Data Elements and the time such information is 
submitted. DTC will begin disseminating the data when it has received 
authorization from the Dissemination Agent through NIIDS. In addition, 
NIIDS will contain the contact information for the Dissemination Agent 
that populated the NIIDS Data Elements for each issue to enable users 
of the data to contact them with questions or comments.
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    \10\ Data vendors or others that wish to receive NIIDS Data 
Elements must register in advance with DTC.
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    DTC is providing NIIDS to the industry in order to facilitate the 
collection and dissemination of municipal securities new issue 
information. As DTC is only a conduit of the information and does not 
confirm the validity of any of the NIIDS Data Elements, use of NIIDS by 
any party will constitute an agreement that DTC shall not be liable for 
any loss or damages in relation to its collection and dissemination of 
NIIDS Data Elements. Each NIIDS user will agree to indemnify

[[Page 26182]]

and hold harmless DTC and its affiliates from and against any and all 
losses, damages, liabilities, costs, judgments, charges, and expenses 
arising out of or relating to the use of NIIDS.

Optional Use of NIIDS

    The MSRB would like dealers to be able to use NIIDS before 
requiring them to so by rule.\11\ The MSRB has filed with the 
Commission a proposed rule change that ultimately would require 
underwriters to use NIIDS in 2008.\12\ DTC intends to provide the 
municipal securities industry the opportunity to start using NIIDS on 
May 5, 2008. Mandated use of NIIDS for municipal securities is expected 
to commence September 2, 2008. DTC believes that the municipal 
securities industry will use NIIDS during the period NIIDS is optional 
(``Optional Period'') in order to become accustomed to it. This may 
result in Dissemination Agents inputting incomplete or inaccurate NIIDS 
Data Elements while getting acquainted with NIIDS. Therefore, no one 
should rely on the accuracy of the NIIDS Data Elements during the 
Optional Period but rather should continue to also use existing 
authorized sources of such information.
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    \11\ The MSRB received comment on its proposed rules that would 
require underwriters of municipal securities to participate in 
NIIDS. See Comments on MSRB Notice 2007-10 (March 5, 2007) at http:/
/www.msrb.org/msrb1/rules/RFC/2007/2007-10/2007-
10CommentLetters.asp.
    \12\ Securities Exchange Act Release No. 57131 (January 11, 
2008), 73 FR 3295 (January 17, 2008) [SR-MSRB-2007-08].
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    DTC will not charge a service fee to underwriters that input or 
receive information through NIIDS. Additionally, DTC will not charge a 
service fee to information vendors that receive information through 
NIIDS for further dissemination. DTC will charge a connectivity fee to 
underwriters, service providers, and information vendors that use 
NIIDS.

III. Discussion

    Section 19(b) of the Act directs the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
such proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to such 
organization.\13\ 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.\14\ The 
Commission finds that DTC's rule change implementing NIIDS is 
consistent with this requirement because by automating, standardizing, 
and centralizing the collection and dissemination of new issue 
information for municipal securities NIIDS should make the reporting 
and clearance and settlement of trades in municipal securities more 
timely and accurate. As a result, DTC's proposed rule change should 
promote the prompt and accurate clearance and settlement of securities 
transactions.\15\
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    \13\ 15 U.S.C. 78s(b).
    \14\ 15 U.S.C. 78q-1(b)(3)(F).
    \15\ 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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    The Commission believes there is good cause for approving the 
proposed rule change prior to the thirtieth day after the date of 
publication of notice of filing because by so approving the proposed 
rule change DTC will be able to provide a longer Optional Period for 
users to use and become accustom to NIIDS before its use is mandated 
and will allow DTC to implement NIIDS according to its system 
implementation schedule.

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.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (File No. SR-DTC-2007-10) be and 
hereby is approved on an accelerated basis.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-10213 Filed 5-7-08; 8:45 am]

BILLING CODE 8010-01-P
