
[Federal Register Volume 81, Number 206 (Tuesday, October 25, 2016)]
[Notices]
[Pages 73450-73452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25686]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79122; File No. SR-DTC-2016-010]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Allow DTC To Automate the Process for Participants To Submit 
Eligibility Requests for Older Issues

October 19, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4,\2\ notice is hereby given that on October 
14, 2016, 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 by DTC. DTC filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(4) thereunder.\4\ The 
proposed rule change was effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change would amend the DTC Operational 
Arrangements for Securities to Become and Remain Eligible for DTC 
Services (``OA'') \5\ and the DTC Underwriting Service Guide 
(``Guide'') \6\ to allow DTC to automate the process by which 
Participants submit requests and related documents for Securities that 
are already issued and outstanding (``Older Issues'') to become 
eligible for Deposit and book-entry transfer services at DTC (``Older 
Issue Eligibility Requests'').\7\ Upon its implementation, the proposed 
rule change would enhance efficiencies for Participants and DTC by 
providing a secure, centralized environment for the submission of Older 
Issue Eligibility Requests.
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    \5\ Available at http://www.dtcc.com/~/media/Files/Downloads/
legal/issue-eligibility/eligibility/operational-arrangements.pdf.
    \6\ Available at http://www.dtcc.com/~/media/Files/Downloads/
Settlement-Asset-Services/Underwriting/Underwriting-Service-
Guide.pdf.
    \7\ Capitalized terms not otherwise defined herein have the 
respective meanings set forth in the DTC Rules, By-laws and 
Organization Certificate (``Rules''), available at http://www.dtcc.com/legal/rules-and-procedures.aspx.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency 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. The clearing agency has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    The proposed rule change would change the method of submission of 
Older Issue Eligibility Requests by Participants from the current email 
method to instead utilize DTC's Securities Origination, Underwriting 
and Reliable Corporate Action Environment (``UW SOURCE'') for this 
purpose.\8\
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    \8\ UW SOURCE is an existing Internet-based system currently 
used by Participants to submit eligibility requests for newly-issued 
Securities (``New Issues''). See OA, supra note 5, at 1. The process 
for submitting eligibility requests for New Issues through UW SOURCE 
would not change as a result of the proposed rule change. See 
generally DTC UW Reengineering Web page, available at http://dtcc.com/matching-settlement-and-asset-services/underwriting/uw-source-info (providing background and links to additional 
information on UW SOURCE).
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    In order for an Older Issue to be made eligible for Deposit and 
book-entry transfer services at DTC, a Participant must submit an Older 
Issue Eligibility Request to DTC \9\ that evidences that the Older 
Issue meets DTC's requirements for Securities to become and remain 
eligible for DTC services \10\ as set forth in the OA (``Eligibility 
Requirements'').\11\ The Older Issue Eligibility Request must at a 
minimum include a questionnaire (``Older

[[Page 73451]]

Eligibility Questionnaire''),\12\ a copy of the Security certificate 
for the Older Issue, an attestation form signed by the ``Agent'' \13\ 
for the issue (``Agent Attestation Form'') \14\ and the original 
offering documents prepared by the issuer of the Older Issue 
(collectively, ``Eligibility Request Documents'').\15\ Today, 
Participants submit Older Issue Eligibility Requests, including the 
Eligibility Request Documents, to DTC using email.
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    \9\ Only Participants can request that DTC make a Security 
eligible. See OA, supra note 5, at 1-2.
    \10\ It is the responsibility of the Participant requesting 
eligibility for the Securities to provide evidence that the 
Securities satisfy the criteria set forth in DTC's OA. See id.
    \11\ See OA, supra note 5, at 2-13 (for DTC's eligibility 
criteria).
    \12\ The Older Issue Eligibility Questionnaire is a form that a 
Participant must complete with respect to the Older Issue to provide 
DTC with the issuer's name, issue description, CUSIP number, 
information relating to compliance with Eligibility Requirements, 
contact information, and other information required in order for DTC 
to process the issue. In addition, by signing the Older Eligibility 
Questionnaire, the Participant (i) represents and warrants (a) that 
the issuer complies with all applicable securities laws, rules and 
regulations, and banking regulations, (b) the registration or 
exemption status of the Older Issue under the Securities Act of 
1933, and (c) that the information provided on the form is true, 
accurate and complete, (ii) agrees to indemnify DTC and its 
affiliates for any loss, damage, cost or expense, arising out of the 
eligibility request and the Deposit of the referenced Security, and 
(iii) certifies that it complies with the Rules regarding compliance 
with sanctions administered and enforced by the Office of Foreign 
Assets Control (OFAC) and that the Participant has implemented a 
risk-based OFAC compliance program. (See Rule 2, Section 8, supra 
note 7.).
    \13\ ``Agent'' in the OA means an issuer's auction agent, 
custodian, depositary, dividend reinvestment plan administrator, 
exchange agent, issuing and/or paying agent, redemption agent, 
remarketing agent, registrar, tender agent, transfer agent, trustee, 
trust company, and/or any other person or entity acting in an agency 
capacity on behalf of the issuer. See OA, supra note 5, at 1.
    \14\ By signing the Agent Attestation Form, the Agent for the 
issue represents that the Agent will comply with the requirements 
stated in the OA with respect to the issue upon acceptance of the 
issue as eligible for deposit at DTC.
    \15\ Further documents and information (e.g., legal opinions, 
indemnifications and other documentation) may be required as part of 
the eligibility review. See OA, supra note 5, at 2-13.
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    Pursuant to the proposed rule change, in an effort to improve 
processing efficiencies and provide a centralized, secure method for 
the submission of Older Issue Eligibility Requests, Participants would 
be required to submit their Older Issue Eligibility Requests, including 
required Eligibility Request Documents, through UW SOURCE with the 
designation as an ``Eligibility Only'' request.\16\ In other words, 
pursuant to the proposed rule change, rather than attaching the 
Eligibility Request Documents to an email message to be sent to a DTC 
email box as in the current method, Participants would instead transmit 
the Eligibility Request Documents to DTC via online transmission by 
uploading the documents into UW SOURCE.\17\
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    \16\ Designating the submission as ``Eligibility Only'' in UW 
SOURCE signifies that the issue is not a New Issue and allows the 
Participant to deposit the Securities for the issue as soon as it 
has been made eligible by DTC.
    \17\ The forms of the Eligibility Request Documents as described 
above would not change.
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    Implementation of the proposed rule change would provide several 
advantages to Participants and DTC in relation to the current email-
based method used for Participants to transmit Older Issue Eligibility 
Requests to DTC. First, UW SOURCE would enhance security in 
transmission of Older Issue Eligibility Requests by using a secure 
online system instead of the current email method.\18\ Second, use of 
UW SOURCE for this purpose would enhance transparency for Participants 
with respect to the status of their Older Issue Eligibility 
Requests.\19\ Third, the migration of this function to UW SOURCE would 
enhance efficiencies associated with DTC's processing of Older Issue 
Eligibility Requests by providing an automated and centralized means of 
receiving and managing Eligibility Request Documents rather than having 
to manually retrieve them from multiple emails as it does today.
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    \18\ UW SOURCE is a secure, centralized online system managed by 
DTC, whereas Participant security protocols for the transmission of 
emails may vary.
    \19\ UW SOURCE provides Participants with the ability to view 
the status of their eligibility request online and directly obtain 
the contact information for the DTC staff person that is handling 
the request.
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Proposed Changes to the OA and Guide Text
    Pursuant to the proposed rule change, DTC would amend the text of 
the OA to:
    i. State that Eligibility Request Documents must be submitted 
through UW SOURCE;
    ii. update an Internet link to an informational page on DTCC's Web 
site relating to UW SOURCE; and
    iii. update the copyright date of the OA.
    In addition, DTC would amend the Guide to:
    i. Delete text indicating that Older Issue Eligibility Requests are 
submitted either by providing DTC with copies of security certificates 
or a file on a diskette, and replacing it with text that would reflect 
the proposed UW SOURCE-based submission process;
    ii. conform relevant text relating to the Older Issue Eligibility 
Request process to the text of the OA, as amended by this proposed rule 
change;
    iii. provide the Internet address for the OA in order for 
Participants to reference additional information on the Eligibility 
Requirements and related documentation; and
    iv. delete an incorrect statement indicating that when a 
certificate is received in connection with an Older Issue Eligibility 
Request that does not have a CUSIP number assigned to it, DTC would 
facilitate the assignment of a CUSIP number.\20\
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    \20\ DTC performs this function in regards to its Custody 
Service. See the DTC Custody Service Guide, at 4, available at 
http://www.dtcc.com/~/media/Files/Downloads/legal/service-guides/
Custody.pdf.
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Implementation Date
    DTC would announce the implementation date for the proposed rule 
change via a DTC Important Notice.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act \21\ requires that the rules of the 
clearing agency be designed, inter alia, to promote the prompt and 
accurate clearance and settlement of securities transactions. DTC 
believes that the proposed rule change is consistent with this 
provision of the Act because it would (i) improve processing 
efficiencies and provide for a more secure transmission method for 
Older Issue Eligibility Requests by replacing an email-based method of 
submission with a secure online submission method, and (ii) provide 
greater transparency to Participants by providing them with a direct 
online view into the status of their Older Issue Eligibility Requests. 
As a result, the proposed rule change would facilitate processing of 
Participant requests to make Older Issues eligible for Deposit and 
book-entry transfer services at DTC, and therefore promote the prompt 
and accurate clearance and settlement of securities transactions 
through DTC, consistent with the Act, in particular Section 
17A(b)(3)(F) cited above.
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    \21\ 15 U.S.C. 78q-1(b)(3)(F).
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    Rule 17Ad-22(d)(6) promulgated under the Act \22\ requires that 
each registered clearing agency shall establish, implement, maintain 
and enforce written policies and procedures reasonably designed to, as 
applicable, be cost-effective in meeting the requirements of 
participants while maintaining safe and secure operations. DTC believes 
that the proposed rule change is consistent with Rule 17Ad-22(d)(6) 
because (i) by enhancing the efficiency of the processing of Older 
Issue Eligibility Requests without increasing costs to Participants to 
access the service,\23\ the proposed rule change would be cost-
effective in meeting requirements of Participants, and (ii) by 
processing Older Issue Eligibility Requests through UW SOURCE, a

[[Page 73452]]

centralized and secure online application, DTC would maintain safe and 
secure operations with respect to transmission and processing of such 
requests.
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    \22\ 17 CFR 240.17Ad-22(d)(6).
    \23\ DTC does not charge Participants a fee for access to UW 
SOURCE.
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(B) Clearing Agency's Statement on Burden on Competition

    DTC does not believe that the proposed rule change would have any 
adverse impact, or impose any burden, on competition because DTC does 
not charge a fee for access to UW SOURCE and therefore the proposal 
would not impose additional costs on Participants in this regard. In 
addition, the process for Participant's to register for UW SOURCE is 
transparent and available on DTCC's Web site \24\ and identical to that 
used by Participants to register for DTC Web-based services generally. 
Moreover, because the proposed rule change improves the efficiency of 
the Older Issue Eligibility Request process, the proposed rule change 
may have a positive effect on competition among DTC Participants.
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    \24\ See DTC's UW SOURCE Registration Information, available at 
http://www.dtcc.com/matching-settlement-and-asset-services/underwriting/uw-source-registration-information.
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    DTC has not solicited and does not intend to solicit, comments 
regarding the proposed rule change. DTC has not received any 
unsolicited written comments from interested parties. To the extent DTC 
receives written comments on the proposed rule change, DTC will forward 
such comments to the Commission. DTC has issued an Important Notice to 
provide notice and related information with regard to the 
implementation of the proposal.\25\
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    \25\ Available at http://www.dtcc.com/~/media/Files/pdf/2016/8/
10/3896-16.pdf.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \26\ of the Act and paragraph (f) of Rule 19b-4 \27\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend 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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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 17 CFR 240.19b-4(f).
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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 email to rule-comments@sec.gov. Please include 
File Number SR-DTC-2016-010 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-DTC-2016-010. This file 
number should be included on the subject line if email 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of DTC and on DTCC's 
Web site (http://dtcc.com/legal/sec-rule-filings.aspx). 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-2016-010 and should be 
submitted on or before November 15, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-25686 Filed 10-24-16; 8:45 am]
 BILLING CODE 8011-01-P


