82 FR 48287 - Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate a Surcharge for Eligibility Requests Submitted to DTC Two Days Prior to Closing Date

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 199 (October 17, 2017)

[Federal Register Volume 82, Number 199 (Tuesday, October 17, 2017)]
[Notices]
[Pages 48287-48289]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-22391]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81854; File No. SR-DTC-2017-019]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Eliminate a Surcharge for Eligibility Requests Submitted to DTC Two 
Days Prior to Closing Date

October 11, 2017.

    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 October 2, 2017, 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 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 \5\ would revise the DTC Fee Schedule 
(``Fee Schedule'') \6\ to eliminate a fee charged to Participants that 
submit an eligibility request or required offering documents for a new 
issue (``Issue'') of Securities two business days prior to the Closing 
Date (``Two-Day Surcharge''), as discussed below.
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    \5\ Each term not otherwise defined herein has its respective 
meaning as set forth in the Rules, By-Laws and Organization 
Certificate of DTC (the ``Rules''), available at http://www.dtcc.com/legal/rules-and-procedures.aspx, and the DTC 
Operational Arrangements (Necessary for Securities to Become and 
Remain Eligible for DTC Services) (``OA''), available at http://
www.dtcc.com/~/media/Files/Downloads/legal/issue-eligibility/
eligibility/operational-arrangements.pdf.
    \6\ Available at http://www.dtcc.com/~/media/Files/Downloads/
legal/fee-guides/dtcfeeguide.pdf?la=en.
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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
Background
    The proposed rule change would revise the Fee Schedule \7\ to 
eliminate the Two-Day Surcharge, as discussed below.
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    \7\ Supra note 6.
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    Participants \8\ are required to provide an eligibility request for 
specified

[[Page 48288]]

Securities to DTC by the submission of all required ``Issuer'' \9\ and 
securities data and all required offering documents,\10\ at a minimum, 
through the online Securities Origination, Underwriting and Reliable 
Corporate Action Environment (``UW SOURCE'') system for the Security to 
be considered for full service eligibility at DTC.\11\ In addition to 
meeting other requirements as set forth in the OA,\12\ a Participant 
that seeks to make a new Issue eligible for Deposit at DTC must submit 
the eligibility request and offering documentation described above 
through UW SOURCE at least six business days prior to the Closing Date. 
If the Participant submits the eligibility request or the required 
offering documentation for a new Issue within two days or less prior to 
the Closing Date, it will be subject to fees, referred to in the Fee 
Schedule as surcharges (``Surcharges''), as outlined in the DTC Fee 
Schedule: (a) The Two-Day Surcharge is $2,000 per Issue (b) the 
Surcharge for submission of an eligibility request or the required 
offering documentation one day prior to the Closing Date is $5,000 per 
Issue (``One-Day Surcharge''), and (c) the Surcharge for submission of 
an eligibility request or required the offering documentation on the 
Closing Date is $10,000 per Issue (``Closing Date Surcharge'').\13\ The 
Surcharges are designed to cover costs to DTC of providing expedited 
processing of the eligibility request.
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    \8\ Only (i) Participants and (ii) underwriters with an approved 
correspondent relationship with a Participant, may request DTC 
eligibility for a new security being offered and distributed. It is 
therefore incumbent on an Issuer to have a relationship with an 
underwriter or other financial institution that is a Participant or 
is directly associated with a Participant that is willing to sponsor 
the eligibility process for the Issuer's securities. See OA, supra 
note 5 at 1-2.
    \9\ ``Issuer'' is defined as an issuer of Securities deposited 
at DTC. See OA, supra note 5 at 1.
    \10\ The eligibility request must contain the (i) identity of 
the lead underwriter, (ii) CUSIP number(s), (iii) principal/share 
amount, as applicable per CUSIP, and interest rates and maturity 
dates, as applicable per CUSIP. The preliminary offering document 
must be submitted and (e.g., official statement, prospectus, 
offering memorandum) provide relevant information necessary for DTC 
to process the Issue (e.g., Issuer name, description of the 
Security, denominations, name of the trustee, paying agent, transfer 
agent, and if applicable, other features of the Security, such as an 
early redemption). See Exhibit B of OA, supra note 5.
    \11\ See OA, supra note 5 at 1-2.
    \12\ See Exhibit B of OA, supra note 5.
    \13\ See Fee Schedule, supra note 6 at 28.
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Proposed Rule Change
    After reviewing its cost structure relating to eligibility 
processing, DTC has determined that due to the development of enhanced 
systemic and processing efficiencies over time, the Two-Day Surcharge 
is no longer necessary to be charged in order to cover the cost of 
processing an eligibility request for a new Issue submitted two days 
prior to Closing Date. Therefore, DTC proposes to eliminate the Two-Day 
Surcharge and revise the Fee Schedule accordingly. The Closing Date and 
One-Day Surcharges would remain unchanged and continue to be charged to 
Participants to offset costs associated with more manually intensive 
processing associated with the timely processing of eligibility 
requests submitted on or one day before Closing Date, as applicable.
Effective Date of Proposed Rule Change
    The proposed rule change would be effective on October 2, 2017.
2. Statutory Basis
    Section 17A(b)(3)(D) of the Act \14\ requires, in part, that the 
Rules provide for the equitable allocation of reasonable dues, fees, 
and other charges among its participants. DTC believes that the 
proposed rule change provides for the equitable allocation of fees 
charged to Participants, because elimination of the Two-Day Surcharge 
would apply to all Participants. In addition, DTC believes that the 
proposed change is reasonable, because the Two-Day Surcharge is no 
longer necessary to balance DTC revenue with its costs associated with 
processing of the applicable eligibility requests, as discussed above. 
Therefore, DTC believes that the proposed rule change is consistent 
with the requirements of Section 17A(b)(3)(D) of the Act.\15\
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    \14\ 15 U.S.C. 78q-1(b)(3)(D).
    \15\ Id.
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    The proposed rule change is also designed to be consistent with 
Rule 17Ad-22(e)(23) of the Act.\16\ Rule 17Ad-22(e)(23) requires DTC, 
inter alia, to establish, implement, maintain and enforce written 
policies and procedures reasonably designed to provide sufficient 
information to enable participants to identify and evaluate the risks, 
fees, and other material costs they incur by participating in the 
covered clearing agency. The proposed rule change, as described above, 
would update the Fee Schedule to reflect the proposed elimination of 
the Two-Day Surcharge. As such, DTC believes that the proposed change 
would promote disclosure of relevant rules and material procedures and 
provide sufficient information to enable participants and other users 
of DTC's services to evaluate fees and other material costs of 
utilizing DTC's services, in accordance with the requirements of Rule 
17Ad-22(e)(23), promulgated under the Act, cited above.
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    \16\ 17 CFR 240.17Ad-22(e)(23).
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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 on competition, because the Two-Day Surcharge is a minimal 
amount and its elimination should not have a material effect on (i) a 
determination by an underwriter on whether to submit an eligibility 
request for a new Issue or (ii) costs incurred by Participants in using 
DTC's eligibility services.

(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) of the Act \17\ and paragraph (f) of Rule 19b-4 
thereunder.\18\ 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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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 Submissions

     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-2017-019 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-2017-019. This file

[[Page 48289]]

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 20549-1090 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-2017-019 and should be 
submitted on or before November 7, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22391 Filed 10-16-17; 8:45 am]
BILLING CODE 8011-01-P