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Self-Regulatory Organizations; The Depository Trust Company; Order Approving a Proposed Rule Change Authorizing DTC To Act Upon Instructions Provided by a Central Matching Service Provider

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Start Preamble October 4, 2001.

On June 27, 2001, The Depository Trust Company (“DTC”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change (File No. SR-DTC-2001-11) pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”).[1] Notice of the proposal was published in the Federal Register on August 22, 2001.[2] No comment letters were received. For the reasons discussed below, the Commission is approving the proposed rule change.

I. Description

On April 17, 2001, the Commission approved DTC's proposal to combine its TradeSuite business with institutional trade processing services offered by Thomson Financial ESG in a newly-formed joint venture company, Omego LLC (“Omego”).[3] The Commission also granted an exemption from clearing agency registration to Global Joint Venture Matching Services—US, LLC, a wholly-owned subsidiary of Omego, with respect to Omego's provision of Central Matching Services.[4] DTC expects that other entities will seek to become Central Matching Services Providers.[5]

DTC neither engages in matching institutional trade information nor Start Printed Page 51988communicates to its participants or others prior to settlement that a transaction has been matched. DTC assumes that the Central Matching Services Provider,[6] Such as Global Joint Venture Matching Services—US, LLC, will make arrangements for the communication of this information to the DTC participants expected to settle matched transactions by book-entry delivery at DTC. DTC is prepared to accept from a Central Matching Service Provider a file of deliver order instructions to settle transactions between DTC participants that have authorized DTC to accept such instructions from the Central Matching Services Provider. This Order grants Commission approval of DTC's proposal whereby DTC will act upon delivery order instructions received from the Central Matching Services Provider and will collect service fees on behalf of the Central Matching Services Provider [7] without the delay and inconvenience to both Central Matching Services Providers and DTC participants that would result if DTC were to require each participant to execute a written form of authorization. DTC will provide notice to participants of its intention to act upon the instructions of a Central Matching Services Provider, as described above, giving each participant the opportunity to advice DTC not to accept such instructions with respect to its account.

II. Discussion

Section 17A(b)(3)(F) of the Act requires that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions.[8] The Commission believes that the approval of DTC's rule change is consistent with this Section because it allows DTC to act upon deliver order instructions received from a Central Matching Services Provider. This will provide a means whereby DTC can help both Central Matching Services Providers and participants avoid the delay and inconvenience that would result were DTC to require each participant using a Central Matching Services Provider to independently submit deliver order instructions to DTC.

III. Conclusion

On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of section 17A of the Act and the rules and regulations thereunder.

It is therefore ordered, pursuant to section 19(b)(2) of the Act, that the proposed rule change (Fine No. SR-DTC-2001-11) be and hereby is approved.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[9]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


2.  Securities Exchange Act Release No. 44713 (August 16, 2001), 66 FR 44191.

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3.  Securities Exchange Act Release No. 44189 (April 17, 2001), 66 FR 20502 [File No. DTC-00-10].

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4.  Securities Exchange Act Release No. 44188 (April 17, 2001), 66 FR 20494 [File No. 600-32].

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5.  GSTP AG has filed with the Commission an application for an exemption from registration as a clearing agency. If such exemption is granted, under the proposed rule change, DTC would accept and act upon instructions submitted by GSTP AG.

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6.  Central Matching Services Provider as such term is used in this proposed rule change refers to an entity that (i) provides a Central Matching Services and (ii) has registered with the Commission as a clearing agency or has been granted an exemption by the Commission from clearing agency registration. Central Matching Service means an electronic service to centrally match information between a broker-dealer and its institutional customer (so long as one or both such parties is a U.S. person) relating to transactions in securities issued by a U.S. issuer regardless of where the transactions are settled.

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7.  While DTC will include such fees as debits in the participant's settlement account, DTC's collection of such amounts shall be on a “best efforts” basis.

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8.  15 U.S.C. 78q-1(b)(3)(F).

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[FR Doc. 01-25537 Filed 10-10-01; 8:45 am]