[Federal Register Volume 67, Number 110 (Friday, June 7, 2002)]
[Notices]
[Pages 39454-39455]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14302]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-46018; File No. SR-DTC-2002-03]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Enhancements to the New York Window Service Allowing
Participants to Custody Sealed Envelopes at DTC
June 3, 2002.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on April 8, 2002, 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
primarily by DTC. 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change provides an enhancement to the New York
Window service \2\ of DTC, which is part of DTC's Custody service.\3\
The enhancement, ``the Sealed Envelope Service,'' allows DTC
participants to custody sealed envelopes at DTC.
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\2\ For additional information on DTC's New York Window service,
see Securities Exchange Act Release No. 40179 (July 8, 1998), 63 FR
30543 [File No. SR-DTC-98-9].
\3\ For additional information on DTC's Custody service, see
Securities Exchange Act Release No. 37314 (June 14, 1996), 61 FR
29158 [File No. SR-DTC-96-8].
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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 such
statements.\4\
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\4\ The Commission has modified parts of these statements.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to enhance DTC's New
York Window service, which is part of DTC's Custody service. The
proposed rule change expands upon a service currently offered by DTC's
New York Window service, pursuant to which sealed envelopes are
received from participants for immediate delivery to other participants
but are not held in custody. As part of DTC's role in supporting the
securities industry goal of immobilization, DTC's participants have
requested that DTC expand the number of instruments it holds in
custody. The instruments that could be deposited in the Sealed Envelope
Service are paper documents that are not securities otherwise eligible
for DTC's Custody service which include, but are not be limited to,
wills, deeds, bills of sale, confirmations, mortgages, letters of
credit, vouchers, option agreements, annuities, loan agreements, and
other contracts. DTC will not accept any assets in the Sealed Envelope
Service that are not documents, such as gold bars, jewelry, coins, etc.
The instruments will be deposited in sealed envelopes, which will
be held in one of DTC's vaults. The contents of the envelopes cannot be
viewed when sealed. DTC retains the right to reject any deposited
envelope that it considers not properly sealed. Each envelope will be
assigned by DTC a user number for tracking and record keeping purposes.
Depositing participants will be required to list the contents of the
envelope on the outside of the envelope; however, DTC will not verify
the contents of the envelope. Participants will balance their sealed
envelopes daily with DTC in the same manner as they presently do with
securities held in the Custody service.
DTC will not open any sealed envelopes. If the depositing
participant wants to view the contents of a sealed envelope that has
been deposited with DTC, the participant must withdraw the envelope,
using the normal Custody service withdrawal procedures. For security
purposes, DTC reserves the right to x-ray all sealed envelopes sent to
DTC.
Due to the nature of these instruments and the fact that the
contents of the sealed envelopes cannot be verified, DTC's liability
with respect to the sealed envelopes will be strictly limited. The
liability and indemnity standard applicable to the Sealed Envelope
Service is based on the standard currently applicable to the New York
Window service.\5\
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\5\ The standard of liability is attached as Exhibit 2 to DTC's
filing. Basically, as between DTC and a participant using the Sealed
Envelope Service, the participant shall be solely responsible for
and shall bear any loss, cost, damage, or expense which the
participant may suffer or incur on account of or as a result of any
use by the participant of the Sealed Envelope Service.
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DTC will apply its current Custody service fees to envelopes
deposited in the Sealed Envelope Service. Those fees are a long
position fee of $.56 per month per envelope, a deposit fee of $4.86 per
envelope, and a withdrawal fee of $16.91 per envelope.
The proposed rule change is consistent with the requirements of
Section 17A of the Act and the rules and regulations thereunder because
it supports the securities industry goal of immobilization. The
proposed rule change will be implemented consistently with the
safeguarding of securities and funds in DTC's custody or control or for
which it is responsible since the operation of the New York Window
service, which is part of the Custody service as modified by the
proposed rule change, will be similar to the current operation of the
New York Window and Custody services.
[[Page 39455]]
(B) Self-Regulatory Organization's Statement on Burden on Competition
DTC perceives no adverse impact on competition by reason of the
proposed rule change.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
Written comments from DTC's participants have not been solicited
nor received on the proposed rule change.
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)(iii) of the Act \6\ and Rule 19b-4(f)(4)\7\ promulgated
thereunder because the proposal effects a change in an existing service
of DTC that (A) does not adversely affect the safeguarding of
securities or funds in the custody or control of DTC or for which it is
responsible and (B) does not significantly affect the respective rights
or obligations of DTC 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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\6\ 15 U.S.C. 78s(b)(3)(A)(iii).
\7\ 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549-0609.
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, 450 Fifth Street NW.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of the DTC. All
submissions should refer to the File No. SR-DTC-2002-03 and should be
submitted by June 28, 2002.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-14302 Filed 6-6-02; 8:45 am]
BILLING CODE 8010-01-P