81 FR 54639 - Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Add a Participants Fund Maintenance Fee

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 158 (August 16, 2016)

Page Range		54639-54640
FR Document		2016-19440
Federal Register, Volume 81 Issue 158 (Tuesday, August 16, 2016)
[Federal Register Volume 81, Number 158 (Tuesday, August 16, 2016)]
[Notices]
[Pages 54639-54640]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-19440]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78530; File No. SR-DTC-2016-006]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Add a Participants Fund Maintenance Fee

August 10, 2016.
    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 July 29, 2016, 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 the clearing agency. DTC filed the proposed rule change 
pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder.\4\ The proposed rule change was effective upon filing with 
the Commission. The Commission is publishing this notice to 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of modifications to the Fee 
Schedule \5\ of DTC in order to add a new fee that will be charged to 
Participants in connection with the maintenance of the Participants 
Fund, as described in greater detail below.\6\
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    \5\ Available at http://www.dtcc.com/~/media/Files/Downloads/
legal/fee-guides/dtcfeeguide.pdf?la=en.
    \6\ Capitalized terms not defined herein are defined in the 
Rules, By-Laws and Organization Certificate of DTC (the ``Rules''), 
available at www.dtcc.com/~/media/Files/Downloads/legal/rules/
dtc_rules.pdf.
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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, the clearing agency 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. The clearing agency 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 proposed rule change will add a fee that will be charged to 
Participants in connection with the maintenance of the Participants 
Fund.
Participants Fund Maintenance Fee
    Pursuant to the proposed rule change, DTC proposes to introduce a 
new fee, to be known as the Participants Fund Maintenance Fee, which 
will be charged to Participants in arrears on a monthly basis.
    The proposed rule change will (i) diversify DTC's revenue sources 
and mitigate DTC's dependence on revenues driven by settlement volumes 
and (ii) add a stable revenue source that will contribute to DTC's 
operating margin by offsetting increasing costs and expenses, as 
further described below.
Diversify Revenue Sources
    DTC's current revenues from settlement are variable, but, as a 
utility, DTC's expenses are largely fixed. The combination of fixed 
costs and variable revenues represents a financial risk for DTC. To 
mitigate such financial risk, DTC is seeking to further diversify its 
variable revenues with the proposed new fee, which will introduce a 
revenue source that is not dependent on settlement volumes. The 
Participants Fund Maintenance Fee will be ratably based on the 
Participant's average Actual Participants Fund Deposit.
Offset Increasing Costs and Expenses
    DTC seeks to achieve a target operating margin to cover operating 
expenses and fund capital expenditures as well as investments in its 
services and risk management infrastructure; however, DTC faces 
continued increasing risk management costs as well as regulatory and 
compliance-related expenses that need to be offset by revenue growth in 
order to meet the target operating margin. Such increased costs and 
expenses, if not offset by revenue growth, could weaken DTC's financial 
position over time. As such, DTC is seeking to implement the 
Participants Fund Maintenance Fee to add an additional revenue source 
to offset increasing costs and expenses.
    Proceeds of the Participants Fund Maintenance Fee will be used 
primarily to offset risk management costs, regulatory and compliance 
expenses and for general operating expenses.
Calculation
    The amount of the monthly Participants Fund Maintenance Fee for a 
Participant will be calculated monthly, in arrears, as the product of 
0.25% and the average of the Participant's Actual Participants Fund 
Deposit as of the end of each day of the month, multiplied by the 
number of days in that month and divided by 360; provided that, the 
investment rate of return on investment by DTC of the Participants Fund 
for that month is equal to or greater than 0.25%. No fee will be 
charged to any Participant for a month in which the monthly rate of 
return on investment of the Participants Fund is less than 0.25%.
    Based on the 2015 average Actual Participants Fund Deposit, the 
expected annual revenue to be generated by the

[[Page 54640]]

Participants Fund Maintenance Fee is approximately $5 million.
Participant Impact
    The proposed rule change will impose the Participants Fund 
Maintenance Fee on all Participants.
    The Participants Fund Maintenance Fee is a monthly fee based 
ratably upon the amount of the Participant's daily Actual Participants 
Fund Deposit; it is applicable when the monthly rate of return on 
investment of the Participants Fund is equal to or greater than 0.25%.
    Because the Participants Fund Maintenance Fee per Participant is 
proportional to the average monthly Actual Participants Fund Deposit, 
Participants that, based on their usage of DTC's settlement service, 
place a greater demand on the settlement system will generally be 
subject to a higher fee, because such Participants are required to 
maintain higher deposits to the Participants Fund pursuant to the 
Rules.
    DTC views the proposed implementation of the Participants Fund 
Maintenance Fee as a prudent way to minimize the magnitude of, and 
mitigate the need for, potential future increases in other fees.
    The proposed change will take effect on August 1, 2016.
2. Statutory Basis
    Section 17A(b)(3)(D) of the Act \7\ requires that DTC's Rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its participants. The proposed fee is equitably 
allocated among Participants because it is based on each Participant's 
utilization of DTC's settlement service, as measured by their deposits 
to the Participants Fund. In addition, DTC believes that the proposed 
fee is reasonable because it will enable DTC to better align its 
revenue with the costs and expenses required for DTC to provide 
services to its Participants with a nominal impact on Participants. 
Therefore, DTC believes the proposed rule change is consistent with 
section 17A(b)(3)(D).\8\
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    \7\ 15 U.S.C. 78q-1(b)(3)(D).
    \8\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    DTC does not believe that the proposed rule change will impose a 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, because the proposed fee will 
be equitably allocated among Participants as described above. That is, 
a Participant that, based on its usage of DTC's settlement service, 
places a greater demand on the settlement system will generally be 
subject to a higher fee, because such a Participant is required to 
maintain higher deposits to the Participants Fund pursuant to the 
Rules. Participants that place a lesser demand on the settlement system 
will pay less.

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

    DTC has not received or solicited any written comments relating to 
this proposal. 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

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A) \9\ of the Act and paragraph (f) of Rule 19b-4 \10\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f).
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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 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-2016-006 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-DTC-2016-006. 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-2016-006 and should be 
submitted on or before September 6, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19440 Filed 8-15-16; 8:45 am]
BILLING CODE 8011-01-P
Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices 54639

continued listing requirements.34 If the (‘‘DTC’’) filed with the Securities and mitigate DTC’s dependence on revenues
Fund is not in compliance with the Exchange Commission (‘‘Commission’’) driven by settlement volumes and (ii)
applicable listing requirements, the the proposed rule change as described add a stable revenue source that will
Exchange will commence delisting in Items I, II and III below, which Items contribute to DTC’s operating margin by
procedures under the Nasdaq 5800 have been prepared by the clearing offsetting increasing costs and expenses,
Series.35 This approval order is based on agency. DTC filed the proposed rule as further described below.
all of the Exchange’s representations, change pursuant to section 19(b)(3)(A)
Diversify Revenue Sources
including those set forth above and in of the Act 3 and Rule 19b–4(f)(2)
the Notice, as modified by Amendment thereunder.4 The proposed rule change DTC’s current revenues from
No. 1 to the proposed rule change. was effective upon filing with the settlement are variable, but, as a utility,
For the foregoing reasons, the Commission. The Commission is DTC’s expenses are largely fixed. The
Commission finds that the proposed publishing this notice to solicit combination of fixed costs and variable
rule change, as modified by Amendment comments on the proposed rule change revenues represents a financial risk for
No. 1 thereto, is consistent with Section from interested persons. DTC. To mitigate such financial risk,
6(b)(5) of the Act 36 and the rules and DTC is seeking to further diversify its
regulations thereunder applicable to a I. Clearing Agency’s Statement of the variable revenues with the proposed
national securities exchange. Terms of Substance of the Proposed new fee, which will introduce a revenue
Rule Change source that is not dependent on
IV. Conclusion
The proposed rule change consists of settlement volumes. The Participants
It is Therefore Ordered, pursuant to modifications to the Fee Schedule 5 of Fund Maintenance Fee will be ratably
Section 19(b)(2) of the Exchange Act,37 DTC in order to add a new fee that will based on the Participant’s average
that the proposed rule change (SR– be charged to Participants in connection Actual Participants Fund Deposit.
NASDAQ–2016–086), as modified by with the maintenance of the Participants
Amendment No. 1 thereto, be, and it Offset Increasing Costs and Expenses
Fund, as described in greater detail
hereby is, approved. below.6 DTC seeks to achieve a target
For the Commission, by the Division of operating margin to cover operating
II. Clearing Agency’s Statement of the expenses and fund capital expenditures
Trading and Markets, pursuant to delegated
authority.38 Purpose of, and Statutory Basis for, the as well as investments in its services
Proposed Rule Change and risk management infrastructure;
Robert W. Errett,
Deputy Secretary. In its filing with the Commission, the however, DTC faces continued
[FR Doc. 2016–19442 Filed 8–15–16; 8:45 am] clearing agency included statements increasing risk management costs as
BILLING CODE 8011–01–P
concerning the purpose of and basis for well as regulatory and compliance-
the proposed rule change and discussed related expenses that need to be offset
any comments it received on the by revenue growth in order to meet the
SECURITIES AND EXCHANGE proposed rule change. The text of these target operating margin. Such increased
COMMISSION statements may be examined at the costs and expenses, if not offset by
places specified in Item IV below. The revenue growth, could weaken DTC’s
[Release No. 34–78530; File No. SR–DTC– clearing agency has prepared financial position over time. As such,
2016–006]
summaries, set forth in sections A, B, DTC is seeking to implement the
Self-Regulatory Organizations; The and C below, of the most significant Participants Fund Maintenance Fee to
Depository Trust Company; Notice of aspects of such statements. add an additional revenue source to
Filing and Immediate Effectiveness of offset increasing costs and expenses.
(A) Clearing Agency’s Statement of the Proceeds of the Participants Fund
a Proposed Rule Change To Add a Purpose of, and Statutory Basis for, the
Participants Fund Maintenance Fee Maintenance Fee will be used primarily
Proposed Rule Change to offset risk management costs,
August 10, 2016. 1. Purpose regulatory and compliance expenses
Pursuant to Section 19(b)(1) of the The proposed rule change will add a and for general operating expenses.
Securities Exchange Act of 1934 fee that will be charged to Participants Calculation
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 in connection with the maintenance of
notice is hereby given that on July 29, The amount of the monthly
the Participants Fund. Participants Fund Maintenance Fee for
2016, The Depository Trust Company
Participants Fund Maintenance Fee a Participant will be calculated
34 The Commission notes that certain other Pursuant to the proposed rule change, monthly, in arrears, as the product of
proposals for the listing and trading of Managed
DTC proposes to introduce a new fee, to 0.25% and the average of the
Fund Shares include a representation that the Participant’s Actual Participants Fund
exchange will ‘‘surveil’’ for compliance with the be known as the Participants Fund
continued listing requirements. See, e.g., Securities Maintenance Fee, which will be charged Deposit as of the end of each day of the
Exchange Act Release No. 78005 (Jun. 7, 2016), 81 to Participants in arrears on a monthly month, multiplied by the number of
FR 38247 (Jun. 13, 2016) (SR–BATS–2015–100). In
basis. days in that month and divided by 360;
the context of this representation, it is the provided that, the investment rate of
Commission’s view that ‘‘monitor’’ and ‘‘surveil’’ The proposed rule change will (i)
both mean ongoing oversight of a fund’s compliance diversify DTC’s revenue sources and return on investment by DTC of the
Participants Fund for that month is
asabaliauskas on DSK3SPTVN1PROD with NOTICES

with the continued listing requirements. Therefore,
the Commission does not view ‘‘monitor’’ as a more 3 15 U.S.C. 78s(b)(3)(A). equal to or greater than 0.25%. No fee
or less stringent obligation than ‘‘surveil’’ with 4 17 will be charged to any Participant for a
CFR 240.19b–4(f)(2).
respect to the continued listing requirements.
35 See id. at 42775.
5 Available at http://www.dtcc.com/∼/media/ month in which the monthly rate of
36 15 U.S.C. 78f(b)(5).
Files/Downloads/legal/fee-guides/ return on investment of the Participants
dtcfeeguide.pdf?la=en.
37 15 U.S.C. 78s(b)(2).
6 Capitalized terms not defined herein are defined
Fund is less than 0.25%.
38 17 CFR 200.30–3(a)(12).
in the Rules, By-Laws and Organization Certificate
Based on the 2015 average Actual
1 15 U.S.C. 78s(b)(1).
of DTC (the ‘‘Rules’’), available at www.dtcc.com/ Participants Fund Deposit, the expected
2 17 CFR 240.19b–4. ∼/media/Files/Downloads/legal/rules/dtc_rules.pdf. annual revenue to be generated by the

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54640 Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices

Participants Fund Maintenance Fee is places a greater demand on the Internet Web site (http://www.sec.gov/
approximately $5 million. settlement system will generally be rules/sro.shtml). Copies of the
subject to a higher fee, because such a submission, all subsequent
Participant Impact
Participant is required to maintain amendments, all written statements
The proposed rule change will impose higher deposits to the Participants Fund with respect to the proposed rule
the Participants Fund Maintenance Fee pursuant to the Rules. Participants that change that are filed with the
on all Participants. place a lesser demand on the settlement Commission, and all written
The Participants Fund Maintenance system will pay less. communications relating to the
Fee is a monthly fee based ratably upon proposed rule change between the
the amount of the Participant’s daily (C) Clearing Agency’s Statement on Commission and any person, other than
Actual Participants Fund Deposit; it is Comments on the Proposed Rule those that may be withheld from the
applicable when the monthly rate of Change Received From Members, public in accordance with the
return on investment of the Participants Participants, or Others provisions of 5 U.S.C. 552, will be
Fund is equal to or greater than 0.25%. DTC has not received or solicited any available for Web site viewing and
Because the Participants Fund written comments relating to this printing in the Commission’s Public
Maintenance Fee per Participant is proposal. DTC will notify the Reference Room, 100 F Street NE.,
proportional to the average monthly Commission of any written comments Washington, DC 20549 on official
Actual Participants Fund Deposit, received by DTC. business days between the hours of
Participants that, based on their usage of 10:00 a.m. and 3:00 p.m. Copies of the
DTC’s settlement service, place a greater III. Date of Effectiveness of the
filing also will be available for
demand on the settlement system will Proposed Rule Change and Timing for
inspection and copying at the principal
generally be subject to a higher fee, Commission Action office of DTC and on DTCC’s Web site
because such Participants are required The foregoing rule change has become (http://dtcc.com/legal/sec-rule-
to maintain higher deposits to the effective pursuant to section filings.aspx). All comments received
Participants Fund pursuant to the Rules. 19(b)(3)(A) 9 of the Act and paragraph (f) will be posted without change; the
DTC views the proposed of Rule 19b–4 10 thereunder. At any time Commission does not edit personal
implementation of the Participants within 60 days of the filing of the identifying information from
Fund Maintenance Fee as a prudent way proposed rule change, the Commission submissions. You should submit only
to minimize the magnitude of, and summarily may temporarily suspend information that you wish to make
mitigate the need for, potential future such rule change if it appears to the available publicly. All submissions
increases in other fees. Commission that such action is should refer to File Number SR–DTC–
The proposed change will take effect necessary or appropriate in the public 2016–006 and should be submitted on
on August 1, 2016. interest, for the protection of investors, or before September 6, 2016.
or otherwise in furtherance of the For the Commission, by the Division of
2. Statutory Basis
purposes of the Act. Trading and Markets, pursuant to delegated
Section 17A(b)(3)(D) of the Act 7 authority.11
requires that DTC’s Rules provide for IV. Solicitation of Comments
Robert W. Errett,
the equitable allocation of reasonable Interested persons are invited to Deputy Secretary.
dues, fees, and other charges among its submit written data, views, and [FR Doc. 2016–19440 Filed 8–15–16; 8:45 am]
participants. The proposed fee is arguments concerning the foregoing,
BILLING CODE 8011–01–P
equitably allocated among Participants including whether the proposed rule
because it is based on each Participant’s change is consistent with the Act.
utilization of DTC’s settlement service, Comments may be submitted by any of SECURITIES AND EXCHANGE
as measured by their deposits to the the following methods: COMMISSION
Participants Fund. In addition, DTC
believes that the proposed fee is Electronic Comments [Release No. 34–78535; File No. SR–
reasonable because it will enable DTC to • Use the Commission’s Internet BatsEDGX–2016–42]
better align its revenue with the costs comment form (http://www.sec.gov/
rules/sro.shtml); or Self-Regulatory Organizations; Bats
and expenses required for DTC to
• Send an email to rule-comments@ EDGX Exchange, Inc.; Notice of Filing
provide services to its Participants with and Immediate Effectiveness of a
a nominal impact on Participants. sec.gov. Please include File Number SR–
DTC–2016–006 on the subject line. Proposed Rule Change Related to Fees
Therefore, DTC believes the proposed
rule change is consistent with section Paper Comments August 10, 2016.
17A(b)(3)(D).8 Pursuant to Section 19(b)(1) of the
• Send paper comments in triplicate Securities Exchange Act of 1934 (the
(B) Clearing Agency’s Statement on to Secretary, Securities and Exchange ‘‘Act’’),1 and Rule 19b–4 thereunder,2
Burden on Competition Commission, 100 F Street NE., notice is hereby given that on August 5,
DTC does not believe that the Washington, DC 20549. 2016, Bats EDGX Exchange, Inc. (the
proposed rule change will impose a All submissions should refer to File ‘‘Exchange’’ or ‘‘EDGX’’) filed with the
burden on competition that is not Number SR–DTC–2016–006. This file Securities and Exchange Commission
asabaliauskas on DSK3SPTVN1PROD with NOTICES

necessary or appropriate in furtherance number should be included on the (‘‘Commission’’) the proposed rule
of the purposes of the Act, because the subject line if email is used. To help the change as described in Items I, II and III
proposed fee will be equitably allocated Commission process and review your below, which Items have been prepared
among Participants as described above. comments more efficiently, please use by the Exchange. The Exchange has
That is, a Participant that, based on its only one method. The Commission will designated the proposed rule change as
usage of DTC’s settlement service, post all comments on the Commission’s
11 17 CFR 200.30–3(a)(12).
7 15 U.S.C. 78q–1(b)(3)(D). 9 15 U.S.C. 78s(b)(3)(A). 1 15 U.S.C. 78s(b)(1).
8 Id. 10 17 CFR 240.19b–4(f). 2 17 CFR 240.19b–4.

VerDate Sep<11>2014 18:36 Aug 15, 2016 Jkt 238001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 E:\FR\FM\16AUN1.SGM 16AUN1
Document Created: 2016-08-16 03:20:29
Document Modified: 2016-08-16 03:20:29
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		81 FR 54639