80 FR 74819 - Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change Regarding the Acknowledgment of End-of-Day Net-Net Settlement Balances by Settling Banks
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 229 (November 30, 2015)
Federal Register Volume 80, Issue 229 (November 30, 2015)
| Page Range | 74819-74822 | |
| FR Document | 2015-30245 |
[Federal Register Volume 80, Number 229 (Monday, November 30, 2015)] [Notices] [Pages 74819-74822] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-30245] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76510; File No. SR-DTC-2015-011] Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change Regarding the Acknowledgment of End-of-Day Net-Net Settlement Balances by Settling Banks November 23, 2015. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on November 16, 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. DTC filed the proposed rule change pursuant to section 19(b)(2) \3\ of the Act thereunder. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would amend the DTC Settlement Service Guide (``Guide'') to provide that any Settling Bank that does not affirmatively acknowledge by the Acknowledgment Cutoff Time (as defined below) its end-of-day net-net settlement balance \4\ or notify DTC of its refusal to settle for one or more Participants for which it is the designated Settling Bank, would be deemed to have acknowledged its end- of-day net-net settlement balance.\5\ DTC would also make other changes to the Guide as set forth below. --------------------------------------------------------------------------- \4\ The end-of-day net-net settlement balance for each Settling Bank reflects (i) a net credit amount due to the Settling Bank from DTC, (ii) a net debit amount due from the Settling Bank to DTC, or (iii) a zero balance so that no payment is due to or from the Settling Bank. In accordance with the timeframes set forth in the Guide, DTC's end-of-day funds settlement process begins with the posting by DTC of ``final settlement figures'' at approximately 3:45 p.m. each Business Day unless extended. \5\ Terms not otherwise defined herein have the meaning set forth in the DTC Rules (the ``Rules''), available at http://www.dtcc.com/legal/rules-and-procedures.aspx.> --------------------------------------------------------------------------- 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 this proposed rule change is to mitigate a risk to DTC in settlement relating to a Settling Bank's failure to take the action required to acknowledge its end-of-day net-net settlement balance, or notify DTC of a refusal to settle for any Participant for which it is the designated Settling Bank, by the Acknowledgment Cutoff Time (as defined below). Background The DTC end-of-day net settlement structure depends upon the use of Settling Banks.\6\ Each Participant must designate a Settling Bank to settle on its behalf. Any Participant that is a bank may settle for itself.\7\ Today, a Settling Bank that settles for other Participants must acknowledge its end-of-day net-net settlement balance for the group of Participants for which it settles, or notify DTC if it refuses to settle for any Participant for which it is the designated Settling Bank, by the later of 4:15 p.m. and the time that is 30 minutes after the Settling Bank end-of-day net-net settlement balances are first made available by DTC (``Acknowledgment Cutoff Time'').\8\ --------------------------------------------------------------------------- \6\ See the Guide at pp. 17-18, available at http:// www.dtcc.com/~/media/Files/Downloads/legal/service-guides/ Settlement.pdf for an overview of the end-of-day net settlement process. \7\ See Rule 9(B), supra note 5. \8\ Currently, a Settling Bank that settles only for itself may opt out of the requirement to acknowledge its balance, but it cannot refuse to settle for itself. --------------------------------------------------------------------------- If a Settling Bank notifies DTC that it refuses to settle for a Participant, DTC would recalculate the Settling Bank's net-net settlement balance by excluding the net settlement balance of the Participant for which the Settling Bank refused to settle.\9\ DTC would then provide the Settling Bank with its adjusted net-net settlement balance (``Post-Refusal Adjusted Balance''). The Settling Bank may not refuse to settle for any other Participant on that day and must immediately respond to DTC to acknowledge its Post-Refusal Adjusted Balance. --------------------------------------------------------------------------- \9\ Any Participant for which its designated Settling Bank has refused to settle on its behalf remains obligated to DTC for the payment of any net debit balance and must make another arrangement to timely pay that amount by Fedwire. --------------------------------------------------------------------------- After the Acknowledgment Cutoff Time and any adjustments, DTC will prepare and submit to the National Settlement Service (``NSS'') provided by the Federal Reserve Banks (individually and collectively, the ``Fed'') a file (``NSS File'') reflecting the net debits or credits from and to all Settling Banks. NSS will process a debit or credit of each Settling Bank's Fed account (``Fed Account''), as applicable.\10\ --------------------------------------------------------------------------- \10\ The Guide currently provides that if NSS is unavailable then, if instructed by DTC, Settling Banks in a net-net debit balance must remit payments to DTC via Fedwire by the later of 5:00 p.m. or 1 hour after net settlement balances are first made available. This provision would be clarified to note an operational detail that all such payments must be remitted prior to the close of Fedwire. --------------------------------------------------------------------------- Today, failure of a Settling Bank to timely respond to DTC after posting of final settlement figures creates uncertainty with respect to timely completion of settlement at DTC. The proposed rule change is intended to address this issue as discussed below. Proposal To promote settlement certainty, DTC is proposing to treat a Settling Bank that fails to timely provide its affirmative acknowledgement of its end-of-day net-net settlement balance or notify DTC of its refusal to settle for one or more Participants for which it is the designated Settling Bank, as having been deemed to acknowledge its end-of-day net-net settlement balance. DTC proposes to modify the Guide to provide that a Settling Bank that (i) fails to affirmatively acknowledge its end-of-day net-net settlement balance, or (ii) does not notify DTC of its refusal to settle on behalf of a Participant or Participants for which it is the designated Settling Bank, by the Acknowledgement Cutoff Time, would be deemed to have acknowledged its end-of-day net-net settlement balance.\11\ [[Page 74820]] The Settling Bank's balance would then, in the ordinary course of settlement processing, be debited from or credited to its Fed Account through the NSS process. Likewise, DTC proposes that the Guide provide that a Settling Bank that fails to acknowledge immediately upon receipt its Post-Refusal Adjusted Balance, if any, would be deemed to have acknowledged its Post-Refusal Adjusted Balance and the Post-Refusal Adjusted Balance would then, in the ordinary course of settlement processing, be debited from or credited to its designated Fed Account through the NSS process. --------------------------------------------------------------------------- \11\ DTC would provide reminders to Settling Banks when they have not affirmatively acknowledged their settlement balance. Notwithstanding delivery of reminders, once a Settling Bank is deemed to have acknowledged its balance, it may not notify DTC of a refusal to settle for a Participant for which it is the designated Settling Bank. --------------------------------------------------------------------------- DTC would continue to maintain flexibility and allow for a Settling Bank to request extra time if the Settling Bank has a reason that it cannot affirmatively acknowledge or refuse its net-net settlement balance so long as the Settling Bank notifies DTC accordingly at or before the Acknowledgement Cutoff Time, or, in the case of a Post- Refusal Adjusted Balance, it notifies DTC immediately where it is unable to affirmatively acknowledge its Post-Refusal Adjusted Balance. In this regard, the Guide would be updated to clarify that the Settling Bank is required to notify DTC of its request for extra time via a dedicated DTC Settlement phone ``hotline'' prior to the Acknowledgment Cutoff Time. In the event that DTC provides the Settling Bank with a Post-Refusal Adjusted Balance, the Settling Bank would be required to notify DTC of its request for extra time immediately via the hotline. Any Settling Bank that timely complies with this notification requirement would not be deemed to have acknowledged its net-net Settlement Balance or its Post-Refusal Adjusted Balance.\12\ --------------------------------------------------------------------------- \12\ If the problem is due to a connectivity issue with DTC, DTC may then direct the Settling Bank to submit its acknowledgement/ refusal instruction via email or as otherwise specified by DTC at that time. --------------------------------------------------------------------------- If, after the initial release of final settlement figures, a Settling Bank's net-net settlement balance is adjusted for any reason, other than as a result of the Settling Bank's refusal to settle, then the Acknowledgment Cutoff Time for that Settling Bank would be extended to 30 minutes after DTC advises the Settling Bank of the adjusted net- net settlement balance. DTC would attempt to contact the Settling Bank if DTC does not receive a response in the form of (i) an acknowledgment or refusal prior to the Acknowledgment Cutoff Time, (ii) an immediate acknowledgment of a Post-Refusal Adjusted Balance, or (iii) a notification from the Settling Bank that it cannot acknowledge or refuse, as described in the preceding paragraph.\13\ If DTC is able to contact the Settling Bank and the Settling Bank notifies DTC that it cannot, at that time, acknowledge or refuse its net-net settlement balance, or Post-Refusal Adjusted Balance, as applicable, then the Settling Bank would not be deemed to have acknowledged its net-net settlement balance. However, if the Settling Bank cannot be reached, the Settling Bank would be deemed to have acknowledged its net-net settlement balance or Post-Refusal Adjusted Balance, as applicable. --------------------------------------------------------------------------- \13\ DTC uses the most recent contact information provided by the Settling Bank to its DTC Relationship Manager for this purpose. --------------------------------------------------------------------------- DTC would update the Guide to clarify that each Settling Bank must ensure that it maintains accurate contact details with DTC so that DTC may contact the Settling Bank regarding settlement issues. Settling Banks must update any contact details by contacting their DTC Relationship Manager. The Fed's cutoff for NSS processing, unless extended, is 5:30 p.m. In order to facilitate timely processing of the NSS File, DTC would maintain discretion to exclude a Settling Bank's balance from the NSS File if the Settling Bank (i) (A) does not acknowledge its net-net settlement balance by the Acknowledgment Cutoff Time, or (B) does not immediately acknowledge its Post-Refusal Adjusted Balance; and (ii) is not deemed to have acknowledged its net-net settlement balance or Post- Refusal Adjusted Balance because it has notified DTC that it is unable to affirmatively acknowledge its net-net settlement balance or to refuse to settle on behalf of a Participant. If DTC proceeds to process the NSS File excluding the Settling Bank's debit balance, then the Settling Bank must pay the debit balance via Fedwire. If DTC proceeds to process the NSS File excluding the Settling Bank's credit balance, then DTC would pay the credit balance via Fedwire after the Settling Bank acknowledges its settlement balance. The text of the Guide would also state that a Settling Bank which settles on behalf of others that timely notifies DTC that it cannot acknowledge or refuse its end-of-day net-net settlement balance would not be assessed a flat fee for failure to acknowledge or notify DTC of its refusal to settle. However, such a Settling Bank would be charged interest with respect to any borrowing DTC is required to make to complete settlement that day for any Participant that the Settling Bank settles on behalf of, if the Settling Bank has not timely refused to settle for that Participant. Additionally, DTC would revise the Guide to: (i) clarify that it is DTC's Settlement Operations group that controls and coordinates the settling of Participant and Settling Bank accounts on DTC's systems; (ii) define the Federal Reserve Banks individually and collectively within the Guide's text as the ``Fed'' unless indicated otherwise; (iii) clarify text for descriptive purposes, and consistent with the Rules, that Participants make formal arrangements for a Settling Bank to be designated as the Settling Bank to settle with DTC on the Participant's behalf; (iv) clarify that certain online reports DTC provides Participants and Settling Banks through the processing day reflect ``intraday'' gross debits and credits, and net debit and credit balances; (v) clarify that a Settling Bank's end-of-day net-net settlement balance includes the Settling Bank's own settlement obligations as a Participant if it settles for itself; (vi) add text for the purpose of context, consistent with the Rules, that each Participant is obligated to settle timely with DTC and if its Settling Bank refuses to settle for it then it must make alternative arrangements to make payment to DTC via Fedwire, [sic] (vii) add text for the purpose of context, consistent with the Rules, that a Participant that acts as its own Settling Bank may not refuse to settle for itself and that it will be in default if it does not fund its settlement obligation; (viii) for clarity, change the heading to an existing example of how a Settling Bank's settlement balance is calculated from ``Settlement Example'' to ``Example of the Calculation of a DTC Settling Bank's Net-Net Settlement Balance''; (ix) remove the provision from the Guide indicating that that a Settling Bank that settles only for itself would need to affirmatively opt out in order to not be required to affirmatively acknowledge its settlement balance, and add text simply stating that a Settling Bank that settles only for itself would not be required to acknowledge its settlement balance; (x) clarify the interest charged to Participants for a failure to settle; (xi) delete references to a Settling Bank's failure to timely settle its settlement balance from being referred to as a ``failure to settle'' and remove references to related procedures as being ``failure-to-settle'' procedures, as the terminology could be confused with an individual Participant's failure to meet its settlement obligation; [[Page 74821]] (xii) rewrite text in the Guide in light of the proposed changes, as applicable, including Addendum A of the Guide, to incorporate proposed changes, consolidate text, clarify text for readability and eliminate duplication; (xiii) clarify certain Settling Bank and settlement processing timeframes; (xiv) apply initial capitalization as appropriate for the terms ``Participant'' and ``Settling Bank'' where they are used as defined terms; (xv) remove references to Participant Terminal System (PTS) functions, which are no longer used for DTC settlement processing; and (xvi) insert the title of the Guide on the Guide's front page. Implementation The effective date of the proposed rule change would be announced via a DTC Important Notice. 2. Statutory Basis Section 17A(b)(3)(F) \14\ of the Act requires that the rules of the clearing agency be designed, inter alia, to promote the prompt and accurate clearance and settlement of securities transactions. DTC believes that the proposed rule change is consistent with this provision of the Act because the proposed rule change would reduce delays in the settlement process by allowing DTC to collect net debits and release net credits within scheduled timeframes despite the failure of a Settling Bank to affirmatively acknowledge its end-of-day net-net settlement balance or notify DTC of its refusal to settle for a Participant for which it is the designated Settling Bank on a timely basis. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- Rule 17Ad-22(d)(5) \15\ promulgated under the Act requires, inter alia, that a clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to, as applicable, employ money settlement arrangements that eliminate or strictly limit the clearing agency's settlement bank risks, that is, its credit and liquidity risks from the use of banks to effect money settlements with its participants; and require funds transfers to the clearing agency to be final when effected. DTC believes the proposed rule change is consistent with this provision because it would reduce DTC's credit and liquidity risk by mitigating the risk that end-of-day net-net debit settlement balances would not be paid due to the failure of a Settling Bank to respond to DTC after posting of final settlement figures. --------------------------------------------------------------------------- \15\ 17 CFR 240.17Ad-22(d)(5). --------------------------------------------------------------------------- (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 because the proposed rule change applies to all Settling Banks and would not have an impact on Settling Banks' current ability to timely acknowledge their net-net settlement balances or notify DTC of a refusal to settle on behalf of a Participant. (C) Clearing Agency's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others DTC filed a substantially similar proposed rule change on April 15, 2015 (``April Rule Filing''),\16\ which was subsequently withdrawn.\17\ --------------------------------------------------------------------------- \16\ Securities Exchange Act Release No. 74830 (April 29, 2015), 80 FR 25727 (May 5, 2015) (File No. SR-DTC-2015-003). \17\ Securities Exchange Act Release No. 74380 (July 7, 2015), 80 FR 40116 (July 13, 2015) (File No. SR-DTC-2015-003). --------------------------------------------------------------------------- The Commission received a favorable written comment to the April Rule Filing.\18\ DTC also received written comments in connection with the April Rule Filing from a Participant that is a Settling Bank for other Participants. The Participant commented to the effect that it was expecting, but the April Rule Filing did not clearly state, that a Settling Bank (i) will be granted an extension to acknowledge its net- net settlement balance whenever it is requested prior to DTC processing the NSS File, and (ii) will not be charged a fee in situations where such an extension has been requested. In order to fully consider these comments DTC withdrew the April Rule Filing. --------------------------------------------------------------------------- \18\ Letter from Suzanne Shatto (May 3, 2015), available at https://www.sec.gov/comments/sr-dtc-2015-003/dtc2015003.shtml. --------------------------------------------------------------------------- With respect to (i) above, in order to avoid wider disruption to the DTC settlement process and the industry, DTC must have the discretion to promptly complete settlement for the Settling Banks that have timely acknowledged or have been deemed to have acknowledged their respective net-net settlement balances. Therefore, although DTC can grant limited extensions, DTC cannot grant an indefinite extension to a Settling Bank to acknowledge its balance prior to DTC processing the NSS File.\19\ --------------------------------------------------------------------------- \19\ As stated above, DTC would maintain flexibility to allow for a Settling Bank to request extra time if the Settling Bank cannot affirmatively acknowledge or refuse, so long as the Settling Bank promptly notifies DTC at or before the Acknowledgement Cutoff Time or upon receipt of an Adjusted Balance. --------------------------------------------------------------------------- With respect to (ii) above, the proposed rule change adds text to the Guide so that a Settling Bank that timely notifies DTC that it cannot acknowledge or refuse its net-net settlement balance will not be charged a flat fee for failure to acknowledge its balance. However the Settling Bank may be charged interest. To the extent any additional written comments are received by DTC on the proposed rule change, DTC will forward them to the Commission. 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, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to rule-comments@sec.gov. Please include File Number SR-DTC-2015-011 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-DTC-2015-011. 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 [[Page 74822]] 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-2015-011 and should be submitted on or before December 21, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\20\ --------------------------------------------------------------------------- \20\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2015-30245 Filed 11-27-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Notices 74819
Plan, please see http:// would also make other changes to the refused to settle.9 DTC would then
www.globalchange.gov/strategic-plan. Guide as set forth below. provide the Settling Bank with its
adjusted net-net settlement balance
Ted Wackler, II. Clearing Agency’s Statement of the
(‘‘Post-Refusal Adjusted Balance’’). The
Deputy Chief of Staff and Assistant Director. Purpose of, and Statutory Basis for, the
Settling Bank may not refuse to settle for
[FR Doc. 2015–30292 Filed 11–27–15; 8:45 am] Proposed Rule Change
any other Participant on that day and
BILLING CODE 3270–F6–P must immediately respond to DTC to
In its filing with the Commission,
DTC included statements concerning acknowledge its Post-Refusal Adjusted
the purpose of, and basis for, the Balance.
SECURITIES AND EXCHANGE proposed rule change and discussed any After the Acknowledgment Cutoff
COMMISSION comments it received on the proposed Time and any adjustments, DTC will
[Release No. 34–76510; File No. SR–DTC– rule change. The text of these statements prepare and submit to the National
2015–011] may be examined at the places specified Settlement Service (‘‘NSS’’) provided by
in Item IV below. DTC has prepared the Federal Reserve Banks (individually
Self-Regulatory Organizations; The summaries, set forth in sections A, B, and collectively, the ‘‘Fed’’) a file (‘‘NSS
Depository Trust Company; Notice of and C below, of the most significant File’’) reflecting the net debits or credits
Filing of Proposed Rule Change aspects of such statements. from and to all Settling Banks. NSS will
Regarding the Acknowledgment of process a debit or credit of each Settling
End-of-Day Net-Net Settlement (A) Clearing Agency’s Statement of the
Bank’s Fed account (‘‘Fed Account’’), as
Balances by Settling Banks Purpose of, and Statutory Basis for, the
applicable.10
Proposed Rule Change
November 23, 2015.
Today, failure of a Settling Bank to
Pursuant to section 19(b)(1) of the 1. Purpose timely respond to DTC after posting of
Securities Exchange Act of 1934 final settlement figures creates
The purpose of this proposed rule uncertainty with respect to timely
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 change is to mitigate a risk to DTC in
notice is hereby given that on November completion of settlement at DTC. The
settlement relating to a Settling Bank’s proposed rule change is intended to
16, 2015, The Depository Trust failure to take the action required to
Company (‘‘DTC’’) filed with the address this issue as discussed below.
acknowledge its end-of-day net-net
Securities and Exchange Commission settlement balance, or notify DTC of a Proposal
(‘‘Commission’’) the proposed rule refusal to settle for any Participant for To promote settlement certainty, DTC
change as described in Items I, II and III which it is the designated Settling Bank, is proposing to treat a Settling Bank that
below, which Items have been prepared by the Acknowledgment Cutoff Time (as
by DTC. DTC filed the proposed rule fails to timely provide its affirmative
defined below). acknowledgement of its end-of-day net-
change pursuant to section 19(b)(2) 3 of
the Act thereunder. The Commission is Background net settlement balance or notify DTC of
publishing this notice to solicit its refusal to settle for one or more
The DTC end-of-day net settlement Participants for which it is the
comments on the proposed rule change structure depends upon the use of
from interested persons. designated Settling Bank, as having
Settling Banks.6 Each Participant must been deemed to acknowledge its end-of-
I. Clearing Agency’s Statement of the designate a Settling Bank to settle on its day net-net settlement balance.
Terms of Substance of the Proposed behalf. Any Participant that is a bank DTC proposes to modify the Guide to
Rule Change may settle for itself.7 Today, a Settling provide that a Settling Bank that (i) fails
Bank that settles for other Participants to affirmatively acknowledge its end-of-
The proposed rule change would
must acknowledge its end-of-day net-net day net-net settlement balance, or (ii)
amend the DTC Settlement Service
settlement balance for the group of does not notify DTC of its refusal to
Guide (‘‘Guide’’) to provide that any
Participants for which it settles, or settle on behalf of a Participant or
Settling Bank that does not affirmatively
notify DTC if it refuses to settle for any Participants for which it is the
acknowledge by the Acknowledgment
Participant for which it is the designated Settling Bank, by the
Cutoff Time (as defined below) its end-
designated Settling Bank, by the later of Acknowledgement Cutoff Time, would
of-day net-net settlement balance 4 or
4:15 p.m. and the time that is 30 be deemed to have acknowledged its
notify DTC of its refusal to settle for one
minutes after the Settling Bank end-of- end-of-day net-net settlement balance.11
or more Participants for which it is the
day net-net settlement balances are first
designated Settling Bank, would be
made available by DTC
deemed to have acknowledged its end- 9 Any Participant for which its designated
(‘‘Acknowledgment Cutoff Time’’).8 Settling Bank has refused to settle on its behalf
of-day net-net settlement balance.5 DTC
If a Settling Bank notifies DTC that it remains obligated to DTC for the payment of any
refuses to settle for a Participant, DTC net debit balance and must make another
1 15 U.S.C. 78s(b)(1). arrangement to timely pay that amount by Fedwire.
2 17 CFR 240.19b–4. would recalculate the Settling Bank’s 10 The Guide currently provides that if NSS is
3 15 U.S.C. 78s(b)(2). net-net settlement balance by excluding unavailable then, if instructed by DTC, Settling
4 The end-of-day net-net settlement balance for the net settlement balance of the Banks in a net-net debit balance must remit
each Settling Bank reflects (i) a net credit amount Participant for which the Settling Bank payments to DTC via Fedwire by the later of 5:00
due to the Settling Bank from DTC, (ii) a net debit p.m. or 1 hour after net settlement balances are first
amount due from the Settling Bank to DTC, or (iii) made available. This provision would be clarified
6 See the Guide at pp. 17–18,
a zero balance so that no payment is due to or from to note an operational detail that all such payments
jstallworth on DSK7TPTVN1PROD with NOTICES
the Settling Bank. In accordance with the available at http://www.dtcc.com/∼/media/Files/ must be remitted prior to the close of Fedwire.
timeframes set forth in the Guide, DTC’s end-of-day Downloads/legal/service-guides/Settlement.pdf for 11 DTC would provide reminders to Settling
funds settlement process begins with the posting by an overview of the end-of-day net settlement Banks when they have not affirmatively
DTC of ‘‘final settlement figures’’ at approximately process. acknowledged their settlement balance.
3:45 p.m. each Business Day unless extended. 7 See Rule 9(B), supra note 5.
Notwithstanding delivery of reminders, once a
5 Terms not otherwise defined herein have the 8 Currently, a Settling Bank that settles only for Settling Bank is deemed to have acknowledged its
meaning set forth in the DTC Rules (the ‘‘Rules’’), itself may opt out of the requirement to balance, it may not notify DTC of a refusal to settle
available at http://www.dtcc.com/legal/rules-and- acknowledge its balance, but it cannot refuse to for a Participant for which it is the designated
procedures.aspx.> settle for itself. Settling Bank.
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The Settling Bank’s balance would then, described in the preceding paragraph.13 Additionally, DTC would revise the
in the ordinary course of settlement If DTC is able to contact the Settling Guide to:
processing, be debited from or credited Bank and the Settling Bank notifies DTC (i) clarify that it is DTC’s Settlement
to its Fed Account through the NSS that it cannot, at that time, acknowledge Operations group that controls and
process. Likewise, DTC proposes that or refuse its net-net settlement balance, coordinates the settling of Participant
the Guide provide that a Settling Bank or Post-Refusal Adjusted Balance, as and Settling Bank accounts on DTC’s
that fails to acknowledge immediately applicable, then the Settling Bank systems;
upon receipt its Post-Refusal Adjusted would not be deemed to have (ii) define the Federal Reserve Banks
Balance, if any, would be deemed to acknowledged its net-net settlement individually and collectively within the
have acknowledged its Post-Refusal balance. However, if the Settling Bank Guide’s text as the ‘‘Fed’’ unless
Adjusted Balance and the Post-Refusal cannot be reached, the Settling Bank indicated otherwise;
Adjusted Balance would then, in the would be deemed to have acknowledged (iii) clarify text for descriptive
ordinary course of settlement its net-net settlement balance or Post- purposes, and consistent with the Rules,
processing, be debited from or credited Refusal Adjusted Balance, as applicable. that Participants make formal
to its designated Fed Account through DTC would update the Guide to arrangements for a Settling Bank to be
the NSS process. clarify that each Settling Bank must designated as the Settling Bank to settle
DTC would continue to maintain ensure that it maintains accurate contact with DTC on the Participant’s behalf;
flexibility and allow for a Settling Bank details with DTC so that DTC may (iv) clarify that certain online reports
to request extra time if the Settling Bank contact the Settling Bank regarding DTC provides Participants and Settling
has a reason that it cannot affirmatively settlement issues. Settling Banks must Banks through the processing day reflect
acknowledge or refuse its net-net update any contact details by contacting ‘‘intraday’’ gross debits and credits, and
settlement balance so long as the their DTC Relationship Manager. net debit and credit balances;
Settling Bank notifies DTC accordingly The Fed’s cutoff for NSS processing, (v) clarify that a Settling Bank’s end-
at or before the Acknowledgement unless extended, is 5:30 p.m. In order to of-day net-net settlement balance
Cutoff Time, or, in the case of a Post- facilitate timely processing of the NSS includes the Settling Bank’s own
Refusal Adjusted Balance, it notifies File, DTC would maintain discretion to settlement obligations as a Participant if
DTC immediately where it is unable to exclude a Settling Bank’s balance from it settles for itself;
affirmatively acknowledge its Post- the NSS File if the Settling Bank (i) (A) (vi) add text for the purpose of
Refusal Adjusted Balance. In this regard, does not acknowledge its net-net context, consistent with the Rules, that
the Guide would be updated to clarify settlement balance by the each Participant is obligated to settle
that the Settling Bank is required to Acknowledgment Cutoff Time, or (B) timely with DTC and if its Settling Bank
notify DTC of its request for extra time does not immediately acknowledge its refuses to settle for it then it must make
via a dedicated DTC Settlement phone Post-Refusal Adjusted Balance; and (ii) alternative arrangements to make
‘‘hotline’’ prior to the Acknowledgment is not deemed to have acknowledged its payment to DTC via Fedwire, [sic]
Cutoff Time. In the event that DTC net-net settlement balance or Post- (vii) add text for the purpose of
provides the Settling Bank with a Post- Refusal Adjusted Balance because it has
Refusal Adjusted Balance, the Settling context, consistent with the Rules, that
notified DTC that it is unable to a Participant that acts as its own Settling
Bank would be required to notify DTC affirmatively acknowledge its net-net
of its request for extra time immediately Bank may not refuse to settle for itself
settlement balance or to refuse to settle and that it will be in default if it does
via the hotline. Any Settling Bank that on behalf of a Participant. If DTC
timely complies with this notification not fund its settlement obligation;
proceeds to process the NSS File (viii) for clarity, change the heading to
requirement would not be deemed to excluding the Settling Bank’s debit
have acknowledged its net-net an existing example of how a Settling
balance, then the Settling Bank must Bank’s settlement balance is calculated
Settlement Balance or its Post-Refusal pay the debit balance via Fedwire. If
Adjusted Balance.12 from ‘‘Settlement Example’’ to
DTC proceeds to process the NSS File ‘‘Example of the Calculation of a DTC
If, after the initial release of final excluding the Settling Bank’s credit
settlement figures, a Settling Bank’s net- Settling Bank’s Net-Net Settlement
balance, then DTC would pay the credit Balance’’;
net settlement balance is adjusted for balance via Fedwire after the Settling
any reason, other than as a result of the (ix) remove the provision from the
Bank acknowledges its settlement Guide indicating that that a Settling
Settling Bank’s refusal to settle, then the balance.
Acknowledgment Cutoff Time for that Bank that settles only for itself would
The text of the Guide would also state
Settling Bank would be extended to 30 need to affirmatively opt out in order to
that a Settling Bank which settles on
minutes after DTC advises the Settling not be required to affirmatively
behalf of others that timely notifies DTC
Bank of the adjusted net-net settlement acknowledge its settlement balance, and
that it cannot acknowledge or refuse its
balance. add text simply stating that a Settling
end-of-day net-net settlement balance
DTC would attempt to contact the Bank that settles only for itself would
would not be assessed a flat fee for
Settling Bank if DTC does not receive a not be required to acknowledge its
failure to acknowledge or notify DTC of
response in the form of (i) an settlement balance;
its refusal to settle. However, such a
acknowledgment or refusal prior to the (x) clarify the interest charged to
Settling Bank would be charged interest
Acknowledgment Cutoff Time, (ii) an Participants for a failure to settle;
with respect to any borrowing DTC is
immediate acknowledgment of a Post- (xi) delete references to a Settling
required to make to complete settlement
Refusal Adjusted Balance, or (iii) a Bank’s failure to timely settle its
jstallworth on DSK7TPTVN1PROD with NOTICES
that day for any Participant that the
notification from the Settling Bank that settlement balance from being referred
Settling Bank settles on behalf of, if the
it cannot acknowledge or refuse, as to as a ‘‘failure to settle’’ and remove
Settling Bank has not timely refused to
references to related procedures as being
settle for that Participant.
12 If the problem is due to a connectivity issue
‘‘failure-to-settle’’ procedures, as the
with DTC, DTC may then direct the Settling Bank terminology could be confused with an
to submit its acknowledgement/refusal instruction 13 DTC uses the most recent contact information
via email or as otherwise specified by DTC at that provided by the Settling Bank to its DTC individual Participant’s failure to meet
time. Relationship Manager for this purpose. its settlement obligation;
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![74822 Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Notices
with respect to the proposed rule listed for the Closed Meeting in closed and at the Commission’s Public
change that are filed with the session. Reference Room.
Commission, and all written The subject matter of the Closed
II. Self-Regulatory Organization’s
communications relating to the Meeting will be:
Statement of the Purpose of, and
proposed rule change between the Institution and settlement of injunctive Statutory Basis for, the Proposed Rule
Commission and any person, other than actions; Change
those that may be withheld from the Institution and settlement of
public in accordance with the administrative proceedings; In its filing with the Commission, the
provisions of 5 U.S.C. 552, will be Adjudicatory matters; Exchange included statements
available for Web site viewing and Resolution of litigation claims; and concerning the purpose of, and basis for,
printing in the Commission’s Public Other matters relating to enforcement the proposed rule change and discussed
Reference Room, 100 F Street NE., proceedings. any comments it received on the
Washington, DC 20549 on official At times, changes in Commission proposed rule change. The text of these
business days between the hours of priorities require alterations in the statements may be examined at the
10:00 a.m. and 3:00 p.m. Copies of the scheduling of meeting items. places specified in Item IV below. The
filing also will be available for For further information and to self-regulatory organization has
inspection and copying at the principal ascertain what, if any, matters have been prepared summaries, set forth in
office of DTC and on DTCC’s Web site added, deleted or postponed, please Sections A, B and C below, of the most
(http://dtcc.com/legal/sec-rule- contact the Office of the Secretary at significant aspects of such statements.
filings.aspx). All comments received (202) 551–5400. A. Self-Regulatory Organization’s
will be posted without change; the Dated: November 25, 2015. Statement of the Purpose of, and
Commission does not edit personal Statutory Basis for, the Proposed Rule
Brent J. Fields,
identifying information from Change
submissions. You should submit only Secretary.
information that you wish to make [FR Doc. 2015–30481 Filed 11–25–15; 4:15 pm] 1. Purpose
available publicly. All submissions BILLING CODE 8011–01–P The purpose of the proposed rule
should refer to File Number SR–DTC– change is to amend the Schedule of Fees
2015–011 and should be submitted on to introduce a new set of rebates to the
or before December 21, 2015. SECURITIES AND EXCHANGE Qualified Contingent Cross (‘‘QCC’’)
COMMISSION and/or other solicited crossing orders,
For the Commission, by the Division of
Trading and Markets, pursuant to delegated [Release No. 34–76507; File No. SR–ISE– including solicited orders executed in
authority.20 2015–41] the Solicitation, Facilitation or Price
Robert W. Errett, Improvement Mechanisms, pricing
Self-Regulatory Organizations; initiative that offers rebates to members
Deputy Secretary.
International Securities Exchange, who execute a specified volume of QCC
[FR Doc. 2015–30245 Filed 11–27–15; 8:45 am]
LLC; Notice of Filing and Immediate and other solicited crossing orders in a
BILLING CODE 8011–01–P Effectiveness of Proposed Rule month. This new set of rebates, as
Change To Amend the Schedule of proposed, offers a lower rebate to
Fees members that execute a specified
SECURITIES AND EXCHANGE
COMMISSION November 23, 2015. volume of QCC and solicited orders
Pursuant to Section 19(b)(1) of the between two Priority Customers 3
Sunshine Act Meeting Securities Exchange Act of 1934 (the (‘‘‘Customer to Customer’ Orders’’). The
‘‘Act’’),1 and Rule 19b–4 thereunder,2 Exchange notes that there is no change
Notice is hereby given, pursuant to to how volume is calculated for the
the provisions of the Government in the notice is hereby given that on November
10, 2015, the International Securities volume tiers. Thus, members will
Sunshine Act, Pub. L. 94–409, that the continue to obtain the tier level based
Securities and Exchange Commission Exchange, LLC (the ‘‘Exchange’’ or
‘‘ISE’’) filed with the Securities and on all QCC and/or solicited crossing
will hold a Closed Meeting on orders’ originating side volume.
Thursday, December 3, 2015 at 2:00 Exchange Commission the proposed
rule change, as described in Items I, II, Members will receive the Non-
p.m. ‘‘Customer to Customer’’ Order 4 rebate
and III below, which Items have been
Commissioners, Counsel to the for their Non-‘‘Customer to Customer’’
prepared by the self-regulatory
Commissioners, the Secretary to the Orders and the ‘‘Customer to Customer’’
organization. The Commission is
Commission, and recording secretaries Order rebate for their ‘‘Customer to
publishing this notice to solicit
will attend the Closed Meeting. Certain Customer’’ Orders.
comments on the proposed rule change
staff members who have an interest in Currently, the Exchange offers
from interested persons.
the matters also may be present. members rebates in QCC and/or other
The General Counsel of the I. Self-Regulatory Organization’s solicited crossing orders (including
Commission, or her designee, has Statement of the Terms of Substance of ‘‘Customer to Customer’’ Orders), i.e.
certified that, in her opinion, one or the Proposed Rule Change orders executed in the Solicitation,
more of the exemptions set forth in 5 ISE proposes to amend the Schedule
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) 3 The term ‘‘Priority Customer’’ means a person
jstallworth on DSK7TPTVN1PROD with NOTICES
of Fees as described in more detail or entity that (i) is not a broker or dealer in
and 17 CFR 200.402(a)(3), (5), (7), 9(ii) below. The text of the proposed rule securities, and (ii) does not place more than 390
and (10), permit consideration of the change is available on the Exchange’s orders in listed options per day on average during
scheduled matter at the Closed Meeting. Internet Web site at http://www.ise.com, a calendar month for its own beneficial account(s).
Commissioner Aguilar, as duty at the principal office of the Exchange,
4 ‘‘Non-‘Customer to Customer’ Orders’’ are QCC
officer, voted to consider the items and/or other solicited crossing orders, including
solicited orders executed in the Solicitation,
1 15 U.S.C. 78s(b)(1). Facilitation or Price Improvement Mechanisms, and
20 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. excluding ‘‘Customer to Customer’’ Orders.
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Document Created: 2018-03-01 11:12:37
Document Modified: 2018-03-01 11:12:37
| 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 74819 |
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