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Notice

Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Distribution of Notices of Participants and Pledges

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Start Preamble September 28, 2001.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] notice is hereby given that on July 2, 2001, The Depository Trust Company (“DTC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which items have been prepared primarily by DTC. The Commission is publishing this notice and order to solicit comments from interested persons and to grant accelerated approval of the proposal.

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

The proposed rule change permits DTC to serve notices on participants and pledgees electronically and states service is deemed given at the time the notices are made available or transmitted to such participants and pledgees. In addition, the proposed rule change discontinues the practice of hard-copy distribution of notices to participant boxes maintained by DTC on its premises. Subject to regulatory approval, these changes will be effective October 1, 2001.

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 Start Printed Page 51082may 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.[2]

(A) Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

Historically, DTC provided its participants and pledgees (hereinafter, collectively referred to as “participants”) with notices in hard-copy format only. Beginning in 1997, DTC also made such notices, most typically known as Important Notices, available electronically on its internet website, www.DTC.org. This site maintains all DTC Important Notices issued over the most recent two complete with scanned forms and attachments.

In addition to the website, Important Notices issued over the most recent thirty day period have also been available electronically in the IMPP function on DTC's participant terminal system (“PTS”) although forms and attachments to these notices are viewable only on DTC's website.

DTC and its participants have now gained three years of experience with the electronic delivery of Important Notices over the internet, a delivery system that has helped DTC provide for the prompt, efficient, and time distribution of important information. According, to further automate its services and reduce the inefficiencies and costs associated with the manual production of physical documents, on October 1, 2001, DTC will discontinue the practice of hard-copy distribution of notices to participant boxes maintained by DTC on its premises.[3]

DTC will continue to provide participants with Important Notices electronically, at this time via the DTC's internet website and PTS. DTC's internet website will also include a no fee Important notice subscription servcie, to be initiated prior to the implementation of the proposed rule change. This new service wil send all registered participants and non-participants an e-mail alert when DTC Important Notices are posted to the website. The proposed rule change will still permit DTC to alternatively serve notices on participants via direct delivery or U.S. mail delivery.

Specifically, the proposed rule change will now provide that any notice from DTC to a participant shall be sufficiently served if the notice is in writing and is electronically made available or transmitted to a participant by any means normally employed by DTC for the delivery of electronic communications to such participant. Alternatively, any non-electronic notice shall be sufficiently served on a participant if it is in writing and is delivered or mailed to the participant's office address. Any notice, if made available or transmitted electronically shall be deemed to have been given, respectively, at the time of availability or transmission. Any notice, if delivered or mailed shall be deemed to have been given, respectively, at the time of delivery or when deposited in the United States Postal Service with postage thereon prepaid.

DTC belives that the proposed rule change is consistent with the requirements of Section 17A of the Act [4] and the rules and regulations thereunder applicable to DTC since the proposed rule change will provide participants with more immediate access to DTC notices and alleviates current operational distribution inefficiencies. In addition, DTC states that 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 all of DTC's risk management controls will remain in effect.

(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 was developed in response to an ongoing effort by DTC to automate processing services that are now handled manually. The proposed rule change was developed through discussions with participants. Written comments from DTC participants or others have not been solicited or received on the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder and particularly with the requirements of Section 17A(b)(3)(F).[5] Section 17A(b)(3)(F) requires that the rules of a clearing agency be designed to remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions. By replacing the practice of hard-copy distribution of notices to participants with electronic distribution, DTC is further automating its operations which should help to perfect the national clearance and settlement system.

DTC has requested that the Commission approve the proposed rule change prior to the thirtieth day after publication of the notice of the filing. The Commission finds good cause for approving the proposed rule change prior to the thirtieth day of the publication of the notice of filing because accelerated approval will permit DTC to begin distributing electronic notices to its participants on the planned implementation date of October 1, 2001.

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 copes 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 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 Room, 450 Fifth Street, NW, Washington, DC 20549. Copies of such filing will also be available for inspection and copying at the principal office of DTC. All submissions should refer to File No. SR-DTC-2001-12 and should be submitted by October 26, 2001.

It is Therefore Ordered, pursuant to Section 19(b)(2) of the Act,[6] that the proposed rule change (File No. SR-Start Printed Page 51083DTC-2001-12) be and hereby is approved.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[7]

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.  In calendar year 2000 alone, DTC delivered approximately 3,000 Important Notices in hard-copy format to participants, printing a total of approximately 17,525,400 pages.

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5.  15 U.S.C. 78q-1(b)(3)(F).

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[FR Doc. 01-24992 Filed 10-4-01; 8:45 am]

BILLING CODE 8010-01-M