Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing of Proposed Rule Change Relating to Revisions to the Procedures for Running Call Lotteries for Book Entry Only Securities

[Federal Register Volume 64, Number 248 (Tuesday, December 28, 1999)]
[Notices]
[Pages 72709-72710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33547]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42257; File No. SR-DTC-99-22]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing of Proposed Rule Change Relating to Revisions to the 
Procedures for Running Call Lotteries for Book Entry Only Securities

December 20, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 23, 1999, The 
Depository Trust Company (``DTC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-DTC-99-22) as described in Items I, II, III below, which items have 
been prepared primarily by DTC. The Commission is publishing this 
notice to solicit comments from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Under the proposed rule change, DTC will revise its procedures for 
running call lotteries on book-entry only (``BEO'') securities for 
which DTC receives notice of the call after the redemption date. 
Specifically, DTC will run lotteries in these instances using 
participants' positions as of the close of business on the day prior to 
the call publication date instead of the date on which the call is 
announced by DTC.

II Self-Regulatory Organization's Statement of the Purpose of, and 
the Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
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 self-regulatory organization 
has prepared summaries, set forth in sections A, B, and C below, of the 
most significant aspects of such statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by DTC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

    Currently, DTC's call lottery process allocates called BEO 
securities among participants having positions in the called securities 
as of the close of business on the day DTC announces the call lottery 
(``DTC call announcement date''). DTC adopted these procedures in March 
1998 with the approval of the Securities Exchange Commission and the 
endorsement of the Corporate Actions Division of the Securities 
Industry Association (``Corporate Actions Division'').\3\ Prior to 
March 1998, DTC ran its lotteries based on participants' positions as 
of the close of business on the day prior to publication date (``call 
publication date'').\4\
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    \3\ See Securities Exchange Act Release 34-39658 (February 20, 
1998) 63 FR 8726 [File No. SR-DTC-97-14].
    \4\ For a discussion of DTC's call lottery process, refer to 
Securities Exchange Act Release Nos. 21523 (November 27, 1984), 49 
FR 47352 [File No. SR-DTC-84-09] (notice of filing and immediate 
effectiveness of proposed rule change); 30552 (April 2, 1992) 57 FR 
12352 [File No. SR-DTC-90-02] (order temporarily approving a 
proposed rule change by DTC relating to the establishment of a 
procedure to recall certain deliveries which have created short 
positions as a result of call lotteries); 35034 (November 30, 1994) 
59 FR 63396 [File Nos. SR-DTC-94-08 and SR-DTC-94-09] (order 
granting temporary approval of proposed rule changes to establish 
procedures to recall certain deliveries which have created short 
positions as a result of call lotteries and rejected deposits); 
36651 (December 28, 1995) 61 FR 429 [File No. SR-DTC-95-21] (order 
granting accelerated permanent approval of a proposed rule change 
concerning short position reclamation procedures); and 34-39658 
(February 20, 1998) 63 FR 8726 [File No. SR-DTC-97-14] (order 
approving proposed rule change regarding call lottery procedures for 
BEO securities).
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    DTC is proposing to change the date for the allocation in the call 
lottery only

[[Page 72710]]

for calls of BEO securities in which DTC is notified of the call after 
the redemption date has passed. Allocation lotteries for other calls of 
BEO securities, where notice is received on or before the redemption 
date, will continue to be run using participants' positions as of the 
DTC call announcement date.
    When the call notice is received by DTC after the redemption date, 
the DTC call announcement date is necessarily after the date as of 
which the called securities are deemed to have been redeemed by the 
issuer. Use of the DTC call announcement date in these instances can 
have an adverse impact on participants and their customers who have 
acquired a security position during the period between the redemption 
date and the DTC call announcement date because they have acquired the 
called security without notice that the security has been redeemed. 
Therefore, for call notices received after the redemption date, DTC 
proposes to process its call lottery with reference to participant 
positions as of the close of business on the day prior to the call 
publication date. Use of the call publication date to determine lottery 
allocations is consistent with DTC's procedures for lotteries in 
certificated issues.
    DTC's proposed rule change is designed to mitigate the negative 
impact of calls of BEO securities which are processed through DTC's 
lottery process after the redemption date due to late notification from 
the issuer. The proposed rule change is consistent with the 
requirements of Section 17A of the Act and the rules and regulations 
thereunder applicable to DTC in that it promotes efficiencies in the 
prompt and accurate clearance and settlement of securities transactions 
and, in general, furthers the protection of investors and the public 
interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    DTC does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, in the public interest, and for 
the protection of investors.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    DTC has discussed the proposed rule change with participants and 
the Corporate Actions Division of the Securities Industry Association. 
DTC presented the proposed rule change to the Board of Directors of the 
Corporate Action Division on March 23, 1999. Further discussions 
between DTC and the Corporate Actions Division took place on September 
15, 1999. No written comments have been solicited or received.

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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or such longer period (i) as the Commission may 
delegate up to ninety days of such date if it finds such longer period 
to be appropriate and published its reasons for so finding or (ii) as 
to which the self-regulatory organization consents, the Commission 
will:

(A) by order approve 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, D.C. 20549-0609. 
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 inspection and copying in the 
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, 
D.C. Copies of such filing will also be available for inspection and 
copying at the principal office of the above-mentioned self-regulatory 
organization. All submissions should refer to file No. SR-STC-99-22 and 
should be submitted by January 18, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-33547 Filed 12-27-99; 8:45 am]
BILLING CODE 8010-01-M