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Notice

Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to an Enhancement of Custody Reorganization and Redemption Services

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Start Preamble March 30, 2000.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] notice is hereby given that on December 27, 1999, 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 parties.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The proposed rule change would implement the short-term redemption service as an ancillary service of the custody reorganization and redemption service.

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 these statements.[2]

(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 implement the short-term redemption service. The short-term redemption service will enhance the custody reorganization and redemption services, which are a part of DTC's custody service. DTC believes that the proposed rule change will provide its participants with additional flexibility in their use of the custody reorganization and redemption services.[3]

The short-term redemption service will be available for the following instruments as they are handled within the custody reorganization and redemption services: certificated bankers acceptances, municipal variable-rate demand obligations issued in commercial paper mode, institutional certificates of deposit, and other instruments held in custody which must be presented to the paying agent on, but not before, the scheduled payable date with the agent making payment of principal or income proceeds later that same afternoon, which is too late for processing through DTC's settlement system. Some instruments may also have certificates with different payable dates identified by the same CUSIP number.

Under the short-term redemption service, the payable date and other relevant payment details are captured at the certificate level by DTC when the eligible instruments are deposited into custody. A short-term redemption payment projection report detailing instruments with payable dates within the next five business days is produced daily and forwarded to the participant. It is the participant's responsibility to verify the completeness and accuracy of this report and to immediately notify DTC of any discrepancies (e.g., a security payable within the next five days is not shown on the report or an incorrect paying agent name or address is shown on the report). Securities shown on the projection report are automatically routed by DTC to the short-term redemption prep box. DTC then arranges for the securities to be delivered to the paying agent on the payable date. The securities are accompanied by a letter of transmittal instructing the agent to wire the proceeds directly to the bank account designated by the participant for this purpose. It is the participant's responsibility to follow-up with the agent to ensure timely payment and reconcile any payment discrepancies.

The fee per item for this enhanced service is $32.25, which fee is an aggregate of several custody service fees previously filed with DTC's 1999 fee schedule.[4]

DTC believes that the proposed rule change is consistent with the requirements of Section 17A of the Act [5] and the rules and regulations thereunder because the proposal will give participants greater flexibility in use of the custody reorganization and redemption services. 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 custody reorganization and redemption services, as modified by the proposed rule charge, will be similar to the current operation of the function.

(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

The proposed rule change has been developed through discussions with several participants. Written comments Start Printed Page 18400relating to the proposed rule change have not yet been solicited or 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) [6] of the Act and Rule 19b-4(f)(4) [7] promulgated thereunder because the proposal effects a change in an existing service of DTC that does not adversely affect the safeguarding of securities or funds in the custody or control of DTC and that 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 such 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.

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 also will be available for inspection and copying at the principal office of DTC. All submissions should refer to File No. SR-DTC-99-26 and should be submitted by April 28, 2000.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[8]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

2.  The Commission has modified the text of the summaries prepared by DTC.

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3.  Securities Exchange Act Release No. 37314 (June 21, 1996), 61 FR 31989.

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4.  Securities Exchange Act Release No. 41508 (June 17, 1999), 64 FR 32574.

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6.  15 U.S.C. 78s(b)(3)(A)(iii).

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[FR Doc. 00-8492 Filed 4-6-00; 8:45 am]

BILLING CODE 8010-01-M