[Federal Register Volume 84, Number 245 (Friday, December 20, 2019)]
[Notices]
[Pages 70256-70258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27452]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87756; File No. SR-DTC-2019-012]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Extend the Implementation Timeframe for a Rule Change To Implement a
New Algorithm for Transactions Processed in the Night Cycle
December 16, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 13, 2019, 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 the clearing agency. 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 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 \5\ would amend the Procedures \6\ set
forth in the DTC Settlement Service Guide (``Settlement Guide'')\7\ to
extend the implementation timeframe for a rule change (``Approved Rule
Change''), that became effective pursuant to rule filing SR-DTC-2019-
005, as amended (``Original Rule Filing'') \8\ upon approval by the
Commission.\9\ In this regard, pursuant to the proposed rule change,
the Settlement Guide would be amended to state that the Approved Rule
Change will be implemented by March 6, 2020, rather than being
implemented by December 6, 2019, as stated in the Settlement Guide, as
discussed below.
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\5\ Capitalized terms not defined herein are defined in the
Rules, By-Laws and Organization Certificate of DTC (``Rules''),
available at http://www.dtcc.com/~/media/Files/Downloads/legal/
rules/dtc_rules.pdf.
\6\ Pursuant to the Rules, the term ``Procedures'' means the
Procedures, service guides, and regulations of DTC adopted pursuant
to Rule 27, as amended from time to time. See Rule 1, Section 1,
supra note 5. Pursuant to Rule 27, each Participant and DTC is bound
by the Procedures and any amendment thereto in the same manner as it
is bound by the Rules. See Rule 27, supra note 5.
\7\ Available at http://www.dtcc.com/~/media/Files/Downloads/
legal/service-guides/Settlement.pdf.
\8\ Available at http://www.dtcc.com/legal/sec-rule-filings?subsidiary=DTC&pgs=1.
\9\ See Securities Exchange Act Release No. 87022 (September 19,
2019), 84 FR 50541 (September 25, 2019) (SR-DTC-2019-005).
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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 amend the Procedures set forth in
the Settlement Guide \10\ to extend the implementation timeframe for
the Approved Rule Change. In this regard, pursuant to the proposed rule
change, the Settlement Guide would be
[[Page 70257]]
amended to state that the Approved Rule Change will be implemented by
March 6, 2020, rather than being implemented by December 6, 2019, as
stated in the Settlement Guide, as discussed below.
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\10\ Supra note 7.
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Background
Pursuant to the Approved Rule Change, DTC will implement changes
(``Night Cycle Reengineering'') related to its processing of book-entry
Deliveries \11\ and Payment Orders \12\ in the DTC night cycle (``Night
Cycle''). As more fully described in the Original Rule Filing, Night
Cycle Reengineering is designed to maximize transaction throughput by
optimizing available positions and controlling the order in which
transactions are attempted for settlement within existing Night Cycle
timeframes. Upon implementation, the reengineered Night Cycle will
introduce a new, advanced settlement processing algorithm capable of
evaluating each Participant's transaction obligations, available
positions, transaction priorities and risk management controls,
including Net Debit Cap and Collateral Monitor,\13\ to identify the
transaction processing order that maximizes Night Cycle settlement
rates.
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\11\ Pursuant to Rule 1, the term ``Delivery'' as used with
respect to a Security held in the form of a Security Entitlement on
the books of DTC, means debiting the Security from an Account of the
Deliverer and crediting the Security to an Account of the Receiver.
Supra note 1.
\12\ Pursuant to the Settlement Guide, ``Payment Order'' means a
transaction in which a Participant charges another Participant for
changes in value for outstanding stock loans or option contract
premiums. See Settlement Guide, supra note 7, at 5.
\13\ In managing its credit risk, DTC uses the Collateral
Monitor and Net Debit Cap. These two controls work together to
protect the DTC settlement system in the event of Participant
default. The Collateral Monitor requires net debit settlement
obligations, as they accrue intraday, to be fully collateralized;
the Net Debit Cap limits the amount of any Participant's net debit
settlement obligation to an amount that can be satisfied with DTC
liquidity resources (the Participants Fund and the committed line of
credit from a consortium of lenders). See Settlement Guide, supra
note 7, at 64-67.
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Pursuant to the Settlement Guide, the changes set forth in the
Approved Rule Change are to take effect by December 6, 2019. DTC
proposes to extend the implementation timeframe for the Approved Rule
Change to allow additional time to facilitate finalization of
operational testing of DTC systems changes related to the
implementation of the Approved Rule Change.
In this regard, pursuant to the proposed rule change, DTC proposes
to amend the Settlement Guide with respect to the implementation
timeframe setting forth the date by which the Approved Rule Change will
become effective, as described below.
Proposed Rule Change
The Settlement Guide contains the following legend (``Original
Legend'') \14\ regarding the implementation timeframe for the Approved
Rule Change.
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\14\ See Settlement Guide, supra note 7 at 1.
[Changes to these Procedures, as amended by File No. SR-DTC-
2019-005, are available at dtcc.com/legal/sec-rule-filings?subsidiary=DTC. These changes have been approved by the
Securities and Exchange Commission but have not yet been
implemented. By December 6, 2019, these changes will be implemented,
and this legend will automatically be removed from these
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Procedures.]
Pursuant to the proposed rule change, this legend would be deleted
and replaced with the following revised legend (``Revised Legend'').
[Changes to these Procedures, as amended by File No. SR-DTC-
2019-005, are available at dtcc.com/legal/sec-rule-filings?subsidiary=DTC. These changes have been approved by the
Securities and Exchange Commission but have not yet been
implemented. By March 6, 2020, these changes will be implemented,
and this legend will automatically be removed from these
Procedures.]
Implementation Timeframe
The proposed rule change would become effective upon filing with
the Commission such that the text of the Settlement Guide would be
revised to delete the Original Legend and replace it with the Revised
Legend, as discussed above.
2. Statutory Basis
DTC believes this proposal is consistent with the requirements of
the Act and the rules and regulations thereunder applicable to a
registered clearing agency. Specifically, DTC believes this proposal is
consistent with Section 17A(b)(3)(F) of the Act \15\ for the reason
described below.
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\15\ 15 U.S.C. 78q-1(b)(3)(F).
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Section 17A(b)(3)(F) of the Act requires, in part, that the Rules
be designed to promote the prompt and accurate clearance and settlement
of securities transactions.\16\ DTC believes that by allowing
additional time to finalize operational testing of DTC system changes
related to the implementation of the Approved Rule Change, the proposed
rule change would facilitate the ability of DTC to implement the
Approved Rule Change in a manner that minimizes the possibility of
disruptions relating to implementation of Night Cycle Reengineering,
which is designed to maximize transaction throughput in the Night
Cycle, as discussed above. Therefore, DTC believes that the proposed
rule change to extend the implementation timeframe, which would allow
additional time for DTC to complete operational testing relating to the
Approved Rule Change, would promote the prompt and accurate clearance
and settlement of securities transactions, consistent with Section
17A(b)(3)(F) of the Act.
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\16\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
DTC does not believe the proposed rule change would have any impact
on competition. The proposed rule change would extend the
implementation timeframe for the Approved Rule Change and not affect
existing processing of securities transactions at DTC.
(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 written
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.
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) of the Act \17\ and paragraph (f) of Rule 19b-4
thereunder.\18\ 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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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 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:
[[Page 70258]]
Electronic Comments
Use the Commission's internet comment form
(http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-DTC-2019-012 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-2019-012. 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 website (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 website 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 website
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-DTC-2019-012 and should be submitted on
or before January 10, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27452 Filed 12-19-19; 8:45 am]
BILLING CODE 8011-01-P