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Self-Regulatory Organizations; The Depository Trust Company; Order Granting Approval of Proposed Rule Change Relating to the Implementation of the Global Corporate Action Hub Service

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Information about this document as published in the Federal Register.

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Start Preamble April 18, 2002.

On March 30, 2001, The Depository Trust Company (“DTC”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change, File No. SR-DTC-2001-04, 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 November 13, 2001.[2] No comment letters were received. For the reasons discussed below, the Commission is granting approval of the proposed rule change.

I. Description

The Global Corporate Action Hub (“GCAH”) is a new service that will provide efficient means of systemically transmitting corporate actions information and consolidating related messages between investment managers and their multiple custodians. GCAH will: (1) Provide a single, automated point of access through a centralized communications conduit for custodians and investment managers; (2) standardize corporate action market practice and embrace the recently released ISO 15022 MT56X message formats; (3) use Internet-based technology to provide easy access to all parties; (4) offer a seamless exchange of information between bank and broker custodians, investment managers, and DTC; and (5) enhance service delivery by providing an efficient, industry-wide corporate action processing solution.

Under the GCAH, each custodian will create the corporate action message for its recipients, who are investment managers servicing mutual customers. Custodians may, but are not required to, use information supplied by DTC in creating their corporate action message. Regardless of whether or not custodians use information supplied by DTC, custodians remain responsible for the content of the messages. Using event-specific templates with standardized election options, each custodian will provide or validate the terms and conditions, then will add account and position information for each customer. GCAH will route these announcements, along with those generated by other custodians, to the specified investment managers. DTC will ensure that mandatory fields are completed but will not edit, change, or validate the terms and conditions of the announcements that remain unique to the custodians.

Each investment manager will receive all of its custodians' announcements and any DTC announcements for a single event on a single display. Investment managers will select their election option for voluntary offers. Investment managers will have the opportunity to make their election decisions for all accounts, for accounts handled by individual custodians, or by customer account, and their election decisions will be sent to the custodians using GCAH. Investment managers will receive status updates reflecting the state of the message (e.g., unread).

GCAH contains built-in, real-time status flow monitoring that keeps all parties informed at all times of a transaction's status, with each party seeing changing status indicators that effectively track the progressive stages in the communication process. The GCAH home page includes summary alerts to highlight pending transactions and deadlines. Additional protection is provided by an e-mail alert built into the system that provides warning messages well in advance of transaction deadlines. Each party, therefore, sees both status indicators and affirmative messages.

Users of GCAH who are not DTC participants will sign an agreement substantially in the form of the agreement attached as Exhibit B to DTC's filing. “Participant Operating Procedures” containing more detailed information about GCAH are attached to DTC's filing as Exhibit C.

II. Discussion

Section 17A(b)(3)(F) [3] 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. The GCAH service will facilitate efficient, industry-wide corporate action processing. GCAH will provide its users with a single point of access to automated, real-time transaction information. The GCAH service will allow DTC to further standardize and automate the processing of corporate actions. Therefore, the Commission finds that DTC's proposed rule change is consistent with its obligation under Start Printed Page 20563section 17A(b)(3)(F) of the Act to remove impediments to and perfect the mechanism of the national system for clearance and settlement.

III. Conclusion

On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act and in particular 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 (File No. SR-DTC-2001-04) be and hereby is approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[4]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


2.  Securities Exchange Act Release No. 45025 (November 5, 2001), 66 FR 56869.

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3.  15 U.S.C. 78q-1(b)(3)(F).

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[FR Doc. 02-10156 Filed 4-24-02; 8:45 am]