80 FR 32425 - Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change Regarding the Discontinuance of the Distribution of Fractional Shares in Respect of Corporate Actions for New Issues in DTC's System

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 109 (June 8, 2015)

Page Range		32425-32427
FR Document		2015-13869
Federal Register, Volume 80 Issue 109 (Monday, June 8, 2015)
[Federal Register Volume 80, Number 109 (Monday, June 8, 2015)]
[Notices]
[Pages 32425-32427]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-13869]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75094: File No. SR-DTC-2015-007]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change Regarding the Discontinuance 
of the Distribution of Fractional Shares in Respect of Corporate 
Actions for New Issues in DTC's System

June 2, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on May 27, 2015, 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 by DTC. The Commission is publishing this notice to

[[Page 32426]]

solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change by DTC would discontinue the option 
offered by DTC to issuers that allows for the distribution of 
fractional shares of securities in DTC's system, when DTC is handling 
fractional dispositions of shares resulting from corporate actions, for 
new issues, as more fully described below.\3\ The proposed change does 
not affect the text of DTC's Rules and Procedures.
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    \3\ Terms not otherwise defined herein have the meaning set 
forth in the DTC Rules and Procedures (``DTC Rules''), available at 
http://www.dtcc.com/legal/rules-and-procedures.aspx.
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II. Clearing Agency'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 such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to discontinue the 
option offered by DTC to issuers that allows for the distribution of 
fractional shares of securities in DTC's system, when DTC is handling 
fractional dispositions of shares resulting from corporate actions, for 
new issues, as more fully described below.
Background
    When a securities issue is made eligible at DTC, DTC offers three 
options to the issuer for handling the disposition of fractional shares 
in DTC's system resulting from a corporate action for the issue. The 
issuer may: (i) Round up to the next full share or drop fractions, (ii) 
pay ``cash-in-lieu'' of fractional shares, or (iii) issue the 
fractional shares into an identifying number (``Fractional 
Identifier'') generated by DTC.\4\ The assets comprising the 
disposition of fractional shares, whether in the form of shares or 
cash, once received from the issuer's transfer or paying agent, are 
credited by DTC in proportional amounts to the respective accounts of 
Participants depending on the amount shares of the issue they have on 
deposit. Participants then distribute credits on their own books, as 
applicable, to their customers that hold beneficial interests in those 
shares.
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    \4\ The Fractional Identifier generated for the third option 
above is separate from the CUSIP[supreg] identifier (``CUSIP'') that 
is universally recognized by the marketplace.
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    The first two options for handling the disposition of fractional 
shares are specified in the DTC Distributions Service Guide (``Guide'') 
\5\ and DTC's Operational Arrangements (``OA'').\6\ Distributions of 
fractional shares in DTC's system under the third option are delivered 
to Participants in accordance with the provisions of DTC Rule 6 that 
are applicable to DTC services related to Deposited Securities.\7\
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    \5\ See the Guide, p. 31, available at http://www.dtcc.com/~/
media/Files/Downloads/legal/service-guides/
Distributions%20Service%20Guide%20FINAL%20November%202014.pdf.
    \6\ See the OA, p. 31, available at http://www.dtcc.com/~/media/
Files/Downloads/legal/issue-eligibility/eligibility/operational-
arrangements.pdf.
    \7\ See DTC Rules (Rule 6 (Services)), p. 45, available at 
http://www.dtcc.com/~/media/Files/Downloads/legal/rules/
dtc_rules.pdf.
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Proposal
    Fractional shares are not tradable. The distribution of fractional 
shares in respect of corporate actions reduces efficiencies for 
investors in an issue, including with respect to the value and 
transferability of assets delivered, as investors are required to wait 
for an extended period for the aggregation of fractional shares into a 
full share that may be traded. Tracking, processing and reporting of 
fractional shares separately from the associated CUSIP, which are 
necessitated by this process, increases costs to DTC and the industry.
    In order to improve efficiencies for investors and reduce costs for 
DTC and the industry, DTC proposes to discontinue the option for 
issuers to distribute any fractional shares for new issues into DTC's 
system. DTC would continue to allow issuers undergoing a corporate 
action with a choice between: (i) The rounding up and dropping of 
fractions, and (ii) the payment of cash-in-lieu of fractional shares. 
DTC would maintain the Fractional Identifiers previously designated for 
existing fractional shares within DTC, and continue to perform 
corporate actions processing with respect to those Fractional 
Identifiers.
Implementation
    The effective date of the proposed rule change would be announced 
via a DTC Important Notice.
2. Statutory Basis
    By eliminating the distribution of fractional shares for new issues 
within DTC's system, the proposed rule change would improve 
efficiencies for investors relating to the disposition of fractional 
shares in corporate action events, as well as reduce the costs for DTC 
and the industry relating to DTC tracking, processing and reporting on 
separate Fractional Identifiers for those issues. Therefore, by 
improving efficiencies for investors and reducing costs for DTC and the 
industry, the proposed rule change is consistent with the provisions of 
Section 17A(b)(3)(F) \8\ of the Act, which requires that the rules of 
the clearing agency be designed, inter alia, to promote the prompt and 
accurate clearance and settlement of securities transactions, as well 
as, in general, protect the interests of investors.
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Clearing Agency's Statement on Burden on Competition

    DTC does not believe that the proposed rule change would have any 
impact, or impose any burden, on competition.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    Written comments relating to the proposed rule change have not yet 
been solicited or received. DTC will notify the Commission of any 
written comments received by DTC.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing,

[[Page 32427]]

including whether the proposed rule change is consistent with the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-DTC-2015-007 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-DTC-2015-007. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of DTC and on DTCC's 
Web site (http://dtcc.com/legal/sec-rule-filings.aspx). All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-DTC-2015-007 and should be 
submitted on or before June 29, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-13869 Filed 6-5-15; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 80, No. 109 / Monday, June 8, 2015 / Notices 32425

restrictions on cash payments for client publication. The Commission may not Section 19(b)(2) of the Act 5 provides
solicitations. The rule requires that an conduct or sponsor a collection of that, within 45 days of the publication
adviser pay all solicitors’ fees pursuant information unless it displays a of notice of the filing of a proposed rule
to a written agreement. When an adviser currently valid OMB number. No person change, or within such longer period up
will provide only impersonal advisory shall be subject to any penalty for failing to 90 days as the Commission may
services to the prospective client, the to comply with a collection of designate if it finds such longer period
rule imposes no disclosure information subject to the PRA that does to be appropriate and publishes its
requirements. When the solicitor is not display a valid OMB number. reasons for so finding or as to which the
affiliated with the adviser and the Please direct your written comments self-regulatory organization consents,
adviser will provide individualized to Pamela Dyson, Director/Chief the Commission shall either approve the
advisory services to the prospective Information Officer, Securities and proposed rule change, disapprove the
client, the solicitor must, at the time of Exchange Commission, C/O Remi proposed rule change, or institute
the solicitation or referral, indicate to Pavlik-Simon, 100 F Street NE., proceedings to determine whether the
the prospective client that he is Washington, DC 20549; or send an email proposed rule change should be
affiliated with the adviser. When the to: PRA_Mailbox@sec.gov. disapproved. The Commission is
solicitor is not affiliated with the Dated: June 2, 2015.
extending this 45-day time period. The
adviser and the adviser will provide Commission finds that it is appropriate
Robert W. Errett,
individualized advisory services to the to designate a longer period within
Deputy Secretary. which to take action on the proposed
prospective client, the solicitor must, at
[FR Doc. 2015–13876 Filed 6–5–15; 8:45 am] rule change so that it has sufficient time
the time of the solicitation or referral,
provide the prospective client with a BILLING CODE 8011–01–P to consider the proposed rule change.
copy of the adviser’s brochure and a Accordingly, the Commission,
disclosure document containing pursuant to Section 19(b)(2) of the Act,6
SECURITIES AND EXCHANGE designates July 20, 2015, as the date by
information specified in rule 206(4)–3.
COMMISSION which the Commission shall either
Amendments to rule 206(4)–3, adopted
in 2010 in connection with rule 206(4)– [Release No. 34–75093; File No. SR–
approve or disapprove or institute
5, specify that solicitation activities NYSEArca–2015–25] proceedings to determine whether to
involving a government entity, as disapprove the proposed rule change
defined in rule 206(4)–5, are subject to Self-Regulatory Organizations; NYSE (File Number SR–NYSEArca–2015–25).
the additional limitations of rule Arca, Inc.; Notice of Designation of a For the Commission, by the Division of
206(4)–5. The information rule 206(4)– Longer Period for Commission Action Trading and Markets, pursuant to delegated
3 requires is necessary to inform on Proposed Rule Change, as Modified authority.7
advisory clients about the nature of the by Amendment No. 1, To List and Robert W. Errett,
solicitor’s financial interest in the Trade Shares of the iShares iBonds Deputy Secretary.
recommendation so the prospective Dec 2021 AMT-Free Muni Bond ETF [FR Doc. 2015–13868 Filed 6–5–15; 8:45 am]
clients may consider the solicitor’s and iShares iBonds Dec 2022 AMT- BILLING CODE 8011–01–P
potential bias, and to protect clients Free Muni Bond ETF Under NYSE Arca
against solicitation activities being Equities Rule 5.2(j)(3)
carried out in a manner inconsistent SECURITIES AND EXCHANGE
June 2, 2015.
with the adviser’s fiduciary duty to COMMISSION
clients. Rule 206(4)–3 is applicable to On March 31, 2015, NYSE Arca, Inc.
(the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed [Release No. 34–75094: File No. SR–DTC–
all Commission-registered investment 2015–007]
advisers. The Commission believes that with the Securities and Exchange
approximately 4,422 of these advisers Commission (the ‘‘Commission’’),
Self-Regulatory Organizations; The
have cash referral fee arrangements. The pursuant to Section 19(b)(1) 1 of the
Depository Trust Company; Notice of
rule requires approximately 7.04 burden Securities Exchange Act of 1934 (the Filing of Proposed Rule Change
hours per year per adviser and results in ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 a Regarding the Discontinuance of the
a total of approximately 31,130 total proposed rule change to list and trade Distribution of Fractional Shares in
burden hours (7.04 × 4,422) for all shares of the following series of the Respect of Corporate Actions for New
advisers. iShares Trust: iShares iBonds Dec 2021 Issues in DTC’s System
AMT-Free Muni Bond ETF and iShares
Written comments are invited on: (a) iBonds Dec 2022 AMT-Free Muni Bond June 2, 2015.
Whether the proposed collection of ETF under NYSE Arca Equities Rule Pursuant to Section 19(b)(1) 1 of the
information is necessary for the proper 5.2(j)(3), Commentary .02. On April 14, Securities Exchange Act of 1934 (‘‘Act’’)
performance of the functions of the 2015, the Exchange filed Amendment and Rule 19b–4 2 thereunder, notice is
agency, including whether the No. 1 to the proposed rule change, hereby given that on May 27, 2015, The
information will have practical utility; which superseded the original filing. Depository Trust Company (‘‘DTC’’)
(b) the accuracy of the agency’s estimate The proposed rule change, as modified filed with the Securities and Exchange
of the burden of the collection of by Amendment No. 1, was published for Commission (‘‘Commission’’) the
information; (c) ways to enhance the comment in the Federal Register on proposed rule change as described in
quality, utility, and clarity of the April 21, 2015.4 The Commission has Items I, II and III below, which Items
mstockstill on DSK4VPTVN1PROD with NOTICES

information collected; and (d) ways to received no comment letters on the have been prepared by DTC. The
minimize the burden of the collection of proposed rule change. Commission is publishing this notice to
information on respondents, including
through the use of automated collection 1 15 5 15 U.S.C. 78s(b)(2).
U.S.C. 78s(b)(1).
techniques or other forms of information 2 15 U.S.C. 78a. 6 Id.
technology. Consideration will be given 3 17 CFR 240.19b–4. 7 17 CFR 200.30–3(a)(31).
to comments and suggestions submitted 4 See Securities Exchange Act Release No. 74730 1 15 U.S.C. 78s(b)(1).
in writing within 60 days of this (April 15, 2015), 80 FR 22234 (‘‘Notice’’). 2 17 CFR 240.19b–4.

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Document Created: 2018-02-22 10:12:54
Document Modified: 2018-02-22 10:12:54
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 32425