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Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to an Enhancement of the End-of-Day Settlement Process of the Depository Trust Company

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Start Preamble April 11, 2001.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] notice is hereby given that on January 24, 2001, 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 consists of an enhancement to the end-of-day Start Printed Page 19822settlement process of DTC. The enhancement will enable settling banks to use the Federal Reserve Bank's (“Fed”) National Net Settlement Service (“NSS”) as an alternative vehicle to satisfy their net-net debit balances at DTC.[2] As described more fully below, NSS permits DTC to submit instructions to have the Fed accounts of participating settling banks charged for their DTC net-net debit balance. Utilization of NSS will serve to eliminate the need for a settling bank to initiate a wire to DTC's Fed Account in satisfaction of a net-net debit balance and therefore will reduce the risk a settling bank may incur a late payment fee due to a delay in wiring funds to DTC. Fees connected with DTC's end-of-day settlement process remain unchanged with respect to the NSS enhancements.

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.[3]

(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 provide settling banks with additional flexibility in the end-of-day settlement process of DTC. Currently, settling banks settle their DTC end-of-day net-net balances over the Fedwire system. If, however, a settling bank chooses to utilize NSS, once the settling bank acknowledges its net-net debit balances, DTC will transmit a file to the Fed with instructions to charge the participating settling bank with a net-net debit.[4] DTC will receive a message from the Fed when the file is successfully processed and balances updated. If a settling bank's Fed account does not have sufficient funds to complete the charge, DTC will be notified by the Fed, and DTC will contact the settling bank directly to obtain required funding.

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 applicable to DTC because the proposed rule change will give participants more efficient usage of DTC's settlement processes. 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 because the new operation of DTC's settlement processes, as modified by the proposed rule change, will enhance 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 from participants or others have not been solicited or 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)(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 a registered clearing agency that does not adversely affect the safeguarding of securities or funds in the custody or control of the clearing agency or for which it is responsible and does not significantly affect the respective rights or obligations of the clearing agency 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-01-02 and should be submitted by May 8, 2001.

Start Signature

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

Jonathan G. Katz,


End Signature End Preamble


2.  DTC implemented NSS on February 5, 2001. Thirteen settling banks currently use the service.

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

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4.  Settling banks in a net-net credit situation will continue to be credited via the Fedwire system outside of NSS in accordance with DTC's current procedures.

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6.  15 U.S.C. 78s(b)(3)(A)(iii).

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[FR Doc. 01-9505 Filed 4-16-01; 8:45 am]