[Federal Register Volume 89, Number 71 (Thursday, April 11, 2024)]
[Notices]
[Pages 25684-25686]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07640]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99911; File No. SR-DTC-2024-004]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Update the Deposits Service Guide and the Operational Arrangements
April 5, 2024.
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 April 2, 2024, 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
primarily 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 would amend the Deposits Guide and the
Operational Arrangements to reflect the upcoming migration of the
Deposit/Withdrawal at Custodian (``DWAC'') functionality for securities
in the DTC Fast Automated Securities Transfer (``FAST'') program
(``FAST-eligible Securities'') \5\ from PTS/PBS \6\ to the new DTC
Securities Processing Application (``SPA'') system. In addition, DTC is
proposing to amend the Deposits Guide to make technical and ministerial
changes, as described in greater detail below.\7\
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\5\ A FAST-eligible Security is a DTC-eligible Security that has
a transfer agent that is an approved FAST transfer agent.
\6\ PTS (Participant Terminal System) and PBS (Participant
Browser System) are user interfaces for DTC settlement and asset
services functions. PTS is mainframe-based, and PBS is web-based
with a mainframe back-end. Participants may use either PTS or PBS,
as they are functionally equivalent.
\7\ Each term not otherwise defined herein has its respective
meaning as set forth in the Rules, By-Laws and Organization
Certificate of DTC (``Rules''), the Deposits Service Guide
(``Deposits Guide''), the Operational Arrangements (Necessary for
Securities to Become and Remain Eligible for DTC Services)
(``Operational Arrangements''), 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 amend the Deposits Guide and the
Operational Arrangements to reflect the upcoming migration of the
Deposit/Withdrawal at Custodian (``DWAC'') functionality for securities
in the DTC Fast Automated Securities Transfer (``FAST'') program
(``FAST-eligible Securities'') \8\ from PTS/PBS \9\ to the new DTC
Securities Processing Application (``SPA'') system. In addition, DTC is
proposing to amend the Deposits Guide to make technical and ministerial
changes, as more fully described below.
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\8\ A FAST-eligible Security is a DTC-eligible Security that has
a transfer agent that is an approved FAST transfer agent.
\9\ PTS (Participant Terminal System) and PBS (Participant
Browser System) are user interfaces for DTC settlement and asset
services functions. PTS is mainframe-based, and PBS is web-based
with a mainframe back-end. Participants may use either PTS or PBS,
as they are functionally equivalent.
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(i) Background
Securities Processing Modernization Program
DTC has undertaken a multiyear and multiphase initiative to enhance
and modernize its securities processing systems. DTC's current security
processing system (``SPS'') applications utilize legacy mainframe,
terminal-based, centralized computing technology, which Participants
and FAST Agents typically access through PTS/PBS. The SPS applications
are, and have been for decades, robust and reliable. However, because
the SPS is comprised of various distinct mainframe legacy applications,
enhancements and maintenance of such are becoming more difficult and
more costly. Accordingly, as part of its overall modernization efforts,
DTC determined to create a more effective and efficient securities
processing model with greater flexibility for new products, maintenance
and future enhancements--the SPA system.
With this proposed rule change, DTC would migrate the DWAC
functionality currently used by Participants and FAST Agents through
PTS/PBS to the SPA system, without any cost or investment needed by
Participants or FAST Agents. SPA is built on distributed server-based
computing and is designed to provide a system that is streamlined,
resilient and in line with the needs and usability standards of
Participants and FAST Agents.
About FAST and DWAC
The FAST program reduces and streamlines certificate movements
between DTC and transfer agents. For FAST-eligible Securities, the FAST
Agent, as custodian for DTC, hold the securities registered in the name
of DTC's nominee, Cede & Co., in the form of global balance
certificates (``FAST Balance Certificate''). Each FAST Balance
Certificate represents the amount (e.g., shares, units, obligations) of
a specific security registered to Cede & Co., as nominee of DTC, on the
books of the FAST Agent (i.e., the ``DTC FAST Balance'' of the
security).
A FAST Agent may custody the FAST Balance Certificates in the form
of a certificate that either (i) evidences a fixed number of shares,
units, or obligations and is cancelled and reissued daily, or (ii)
reflects that the amount of the DTC FAST Balance shown on the books of
the issuer is represented by such certificate, and the certificate is
not cancelled as that number of share, units, or obligations
fluctuates. FAST Agents are required to confirm daily to DTC the
numbers of share, units or obligations, as the case
[[Page 25685]]
may be, reflected on each FAST Balance Certificate and registered in
the same [sic] of Cede & Co.
A Participant can deposit a physical certificate for a FAST-
eligible Security with DTC directly, and DTC will credit the
Participant's account by the amount of the deposit, and send the
certificate received from the Participant to the FAST Agent. The FAST
Agent will cancel the certificate and increase the DTC FAST Balance for
the security by the amount being deposited.\10\
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\10\ For more information about FAST, see Securities Exchange
Act Release Nos. 12353 (Apr. 20, 1976), 41 FR 17823 (Apr. 28, 1976)
(SR-DTC-76-3); 13342 (Mar. 8, 1977) (SR-DTC-76-3); 14997 (Jul. 26,
1978), 43 FR 33977 (Aug. 2, 1978) (SR-DTC-78-11); 21401 (Oct. 16,
1984) (SR-DTC-84-8); 31941 (Mar. 3, 1993), 58 FR 13291 (Mar. 10,
1993) (SR-DTC-92-15); 46956 (Dec. 6, 2002), 67 FR 77115 (Dec. 16,
2002) (SR-DTC 2002-15); 64191 (Apr. 5, 2011), 76 FR 20061 (Apr. 11,
2011) (SR-DTC-2010-15).
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The deposit functionality of DWAC permits a Participant to make a
deposit of a FAST-eligible Security directly with the FAST Agent for
the security, which will then cancel the certificate (if a physical
deposit) and increase the DTC FAST Balance for the security by the
amount being deposited. The FAST Agent will confirm the deposit to DTC,
which will credit the Participant's account with the amount of the
deposit. Similarly, a Participant can make a DWAC withdrawal, in which
the FAST Agent will reduce the DTC FAST Balance for the amount of the
security being withdrawn and will re-register the amount of the
security being withdrawn into the name of the Participant or to another
party identified by the Participant.\11\
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\11\ For more information about the DWAC service, see Securities
Exchange Act Release No. 30283 (Jan. 23, 1992), 57 FR 3658 (Jan. 30,
1992) (SR-DTC-91-16).
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(ii) Proposed Rule Change
DWAC Functionality
FAST Agents currently use the Custodian Deposit/Withdrawal at
Custodian (``CDWC'') function on PTS (or the TA Direct Deposit/
Withdrawal function on PBS), to view and approve the DWAC transactions
of Participants. In addition, FAST Agents can also use the optional
DWAC Centralized Billing through PTS/PBS to automate the billing and
collection of pass-through DWAC fees charged to Participants by the
FAST Agent. Participants currently use the Participant Deposit/
Withdrawal at Custodian (``PDWC'') function on PTS (or the Part Direct
Deposit/Withdrawal functions on PBS) to view and to input deposit and
withdrawal instructions for their DWAC transactions.
Pursuant to the proposed rule change, the DWAC functionality
currently used by Participants and FAST Agents through PTS/PBS will
migrate to the SPA system. As of March 28, 2024, FAST Agents and
Participants will be required to conduct these activities through the
SPA system, which is accessible through the DTCC Portal at MyDTCC.com.
In addition, pursuant to the proposed rule change, APIs for the SPA
system would be available in connection with DWAC.
Deposits Guide and Operational Arrangements Amendments
To effectuate the proposed rule change, DTC would make the
following changes to the Deposits Guide and the Operational
Arrangements:
(a) The Deposits Guide
(i) In the ``Depositing Securities at DTC'' section:
(1) Add a reference to the Securities Processing Application (SPA)
system and, in the list of methods for deposit, replace ``The Fast
Automated Securities Transfer system (FAST) (via the PTS function PDWC
and PBS function Participant Direct Deposit Withdrawal)'' with ``The
SPA System (via Application Programming Interface (API) or via the DTCC
Portal) to inquire, create and review transactions;'' and
(2) Clarify that a Participant receives same-day credit for its
DWAC deposit, as long as the DWAC deposit is ``entered by the
Participant and created via SPA and approved by the custodian/agent''
prior to noon Eastern Time.\12\
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\12\ Pursuant to the proposed rule change, DTC would also remove
``Standard'' from the references to ``Eastern Standard Time'' in
this subsection.
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(ii) In the ``Deposit/Withdrawal at Custodian (DWAC)'' section:
(1) In the ``About the Product'' subsection, add the following at
the end of the paragraph, ``DWAC is available on the Securities
Processing Application (SPA) system via the DTCC Portal or Application
Programming Interface (API).''
(2) In the ``How the Product Works'' subsection:
(a) Replace references to DWACs being performed through PTS/PBS
with references to the SPA system, and add language to reflect that
when a Participant requests a DWAC, a unique Transaction ID is assigned
(which allows for tracking by the Participant and the custodian/agent);
(b) Replace references to the confirmation ticket and confirmation
status types generated by PTS/PBS with a list of the SPA Transaction
Status types available in the SPA DWAC transaction life cycle; and
(c) Add a note that the information is available via API and that
information on APIs is available on the DTCC API Marketplace via
https://www.dtcc.com/api.
(3) Replace the entirety of the ``Associated PTS/PBS File
Functions'' subsection with the new ``Associated SPA Portal Navigation/
File Functions/Application Programming Interface (APIs)'' subsection.
The new subsection would provide a table of the applicable SPA Function
access path and a description of the function, as well as a row
reflecting API and the continuing availability of the CCF Batch Files.
(b) The Operational Arrangements
(i) In Section II.B.2.c (DWAC), (i) add a reference to the SPA
system for processing DWAC transactions; (ii) replace a reference to
DWAC with ``SPA system;'' and (iii) replace a reference to PTS/PBS with
``SPA system.''
2. Statutory Basis
Section 17A(b)(3)(F) of the Securities Exchange Act of 1934
(``Act'') requires, inter alia, that the Rules be designed to promote
the prompt and accurate clearance and settlement of securities
transactions.\13\ As described above, the proposed rule change would
amend the Deposits Guide and the Operational Arrangements to reflect
the upcoming migration of the DWAC functionality for Participants and
FAST Agents from the legacy PTS/PBS system to the new SPA system. By
migrating the DWAC functionality to a system with enhanced usability,
flexibility, and resiliency, the proposed rule change is designed to
support a more effective and efficient DTC securities processing model.
Accordingly, DTC believes that the proposed rule change would promote
the prompt and accurate clearance and settlement of securities
transactions, consistent with the requirements of Section 17A(b)(3)(F)
of the Act, cited above.
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\13\ 15 U.S.C. 78q-1(b)(3)(F).
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The proposed rule changes are also designed to be consistent with
Rule 17ad-22(e)(21) which requires, in part, that each covered clearing
agency establish, implement, maintain and enforce written policies and
procedures reasonably designed to be efficient and effective in meeting
the requirements of its participants and the markets it serves.\14\ As
described above, by migrating the DWAC functionality to a system with
enhanced usability, flexibility, and resiliency, the proposed rule
change is designed to support a more effective and efficient DTC
securities processing model which
[[Page 25686]]
would make DTC more effective and efficient in meeting the requirements
of its participants and the markets it serves, in accordance with the
requirements of Rule 17ad-22(e)(21).
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\14\ 17 CFR 240.17ad-22(e)(21).
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(B) Clearing Agency's Statement on Burden on Competition
DTC believes that the proposed rule change to amend the Deposits
Guide and the Operational Arrangements to reflect the upcoming
migration of the DWAC functionality for Participants and FAST Agents
from the legacy PTS/PBS system to the new SPA system would not have any
impact on competition.\15\ The proposed rule change would migrate the
DWAC functionality to a system with enhanced usability and flexibility
that will be available to all Participants and FAST Agents equally at
no additional cost or effort to them. In light of the foregoing, DTC
does not believe that the proposed rule change would impose a burden on
competition.\16\
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\15\ 15 U.S.C. 78q-1(b)(3)(I).
\16\ Id.
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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 received or solicited any written comments relating to
this proposal. If any written comments are received, they would be
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to
Section IV (Solicitation of Comments) of the Exhibit 1A in the General
Instructions to Form 19b-4, the Commission does not edit personal
identifying information from comment submissions. Commenters should
submit only information that they wish to make available publicly,
including their name, email address, and any other identifying
information.
All prospective commenters should follow the Commission's
instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/how-to-submit-comments. General
questions regarding the rule filing process or logistical questions
regarding this filing should be directed to the Main Office of the
Commission's Division of Trading and Markets at
[email protected] or 202-551-5777.
DTC reserves the right to not respond to any comments received.
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 and paragraph (f) of Rule 19b-4 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.
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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-DTC-2024-004 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-2024-004. 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 (https://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
a.m. and 3 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 (dtcc.com/legal/sec-rule-filings). Do not include personal
identifiable information in submissions; you should submit only
information that you wish to make available publicly. We may redact in
part or withhold entirely from publication submitted material that is
obscene or subject to copyright protection. All submissions should
refer to File Number SR-DTC-2024-004 and should be submitted on or
before May 2, 2024.
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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-07640 Filed 4-10-24; 8:45 am]
BILLING CODE 8011-01-P