Notice2025-06523
Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Money Market Instruments Modernization
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 17, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 73 (Thursday, April 17, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 73 (Thursday, April 17, 2025)]
[Notices]
[Pages 16188-16194]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-06523]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102841; File No. SR-DTC-2025-005]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Money Market Instruments Modernization
April 11, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on April 10, 2025, 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 Exchange Act \3\ and
Rule 19b-4(f)(4) thereunder.\4\ 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)(3)(A).
\4\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of amendments the Underwriting
Service Guide, OA,\5\ and the Policy Statement on the Eligibility of
Foreign Securities (``Policy Statement'') set forth in the DTC Rules
\6\ to facilitate enhancements to the securities eligibility process
within DTC's Underwriting Service. More specifically, the proposed rule
change would (i) migrate the processing of eligibility requests for
money market instruments (``MMI'' or ``MMI Securities'') from a legacy
platform to an existing, proven, modernized platform currently
servicing eligibility requests for Electronic Certificates of Deposit
(``E-CDs'') and (ii) simplify and update rule text, consolidate certain
provisions, remove outdated, redundant, or extraneous rule text and
requirements, reduce the amount of eligibility documentation required
from Participants and issuers, and make other changes.
---------------------------------------------------------------------------
\5\ The OA and Underwriting Service Guide are each Procedures of
DTC. Pursuant to the DTC Rules, the term ``Procedures'' means the
Procedures, service guides, and regulations of DTC adopted pursuant
to DTC Rule 27, as amended from time to time. See DTC Rule 1,
Section 1, infra note 6. They are binding on DTC and each
Participant in the same manner that they are bound by the DTC Rules.
\6\ Capitalized terms not defined herein are defined in the
Rules, By-Laws and Organization Certificate of DTC (``DTC Rules''),
the DTC Operational Arrangements (Necessary for Securities to Become
and Remain Eligible for DTC Services) (``OA''), and the DTC
Underwriting Service Guide (each available at <a href="http://www.dtcc.com/legal/rules-and-procedures">www.dtcc.com/legal/rules-and-procedures</a>.
---------------------------------------------------------------------------
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 purpose of this proposed rule change is to amend the
Underwriting Service Guide, OA, and the Policy Statement set forth in
the DTC Rules to facilitate enhancements to the securities eligibility
process within DTC's Underwriting Service. More specifically, the
proposed rule change would (i) migrate the processing of eligibility
requests for MMI Securities from a legacy platform to an existing,
proven, modernized platform currently servicing eligibility requests
for E-CDs and (ii) simplify and update rule text, consolidate certain
provisions, remove outdated, redundant, or extraneous rule text and
requirements, reduce the amount of eligibility documentation required
from Participants and issuers, and make other changes.
(i) Background
DTC, through its Underwriting Service, serves the financial
industry by making securities eligible for depository services.
Participants can distribute new and secondary offerings quickly and
economically by electronic book-entry delivery and settlement through
DTC.
[[Page 16189]]
Most eligible securities are introduced into the DTC system through
DTC's Underwriting Department.\7\ Securities may be credited to the
accounts of underwriters that are Participants or correspondents of
Participants working through Participant accounts and distributed to
the market by delivery to other Participants.
---------------------------------------------------------------------------
\7\ Other issues of securities may be added through corporate
actions with respect to existing securities, including events such
as name changes, mergers and spinoffs.
---------------------------------------------------------------------------
For non-MMI Securities, only a Participant, or its correspondent,
may submit a request to make a security eligible for DTC services.
However, eligibility requests with respect to MMI Securities may only
be submitted by a Participant that is also an MMI Issuing and MMI
Paying Agent (``IPA'').\8\
---------------------------------------------------------------------------
\8\ Pursuant to the DTC Rules, the term (i) ``MMI Issuing
Agent'' means a Participant, acting as an issuing agent for an
issuer with respect to a particular issue for MMI Securities of that
issuer, that has executed such agreements as the Corporation shall
require in connection with the participation of such Participant in
the MMI Program in that capacity, and (ii) ``MMI Paying Agent''
means a Participant, acting as a paying agent for an issuer with
respect to a particular issue of MMI Securities of that issuer, that
has executed such agreements as [DTC] shall require in connection
with the participation of such Participant in the MMI Program in
that capacity. See Rule 1, supra note 6. While the DTC Rules provide
for separate definitions for MMI Issuing Agent and MMI Paying Agent,
typically a single firm acts in both capacities on behalf of a given
issuer of MMI Securities.
---------------------------------------------------------------------------
The Participant or correspondent seeking to make a security
eligible for DTC services is required to provide an eligibility request
by the submission of certain required issuer and securities data and
related offering documents to DTC through a designated platform for a
given security type. These platforms include the online Securities
Origination, Underwriting and Reliable Corporate Action Environment
(``UW SOURCE'') system, the Underwriting Central (``UWC'') system or
MMI Web Underwriting Application (``MMI Web''). UW SOURCE is currently
used for processing eligibility requests of security types other than
E-CDs and MMI Securities, for which requests are processed through UWC
and MMI Web, respectively.\9\
---------------------------------------------------------------------------
\9\ See OA, supra note 6 at 6-7 and the Underwriting Service
Guide, supra note 6 at 11. See also Securities Exchange Act Release
No. 90895 (Jan. 11, 2021), 86 FR 4151 (Jan. 15, 2021) (SR-DTC-2020-
017) (``E-CD Release'').
---------------------------------------------------------------------------
While these systems process eligibility requests in an efficient
manner, DTC has identified opportunities for enhancement.
First, as more fully described below, DTC has identified an
opportunity to enhance the efficiency and convenience for processing of
MMI Securities by migrating the MMI eligibility process from MMI Web, a
legacy system, to UWC, a modern system that offers greater
opportunities for automation and future improvements.
Second, DTC has identified opportunities to reduce administrative
burden for Participants and issuers relating to DTC eligibility of
issues generally, whether for MMI or non-MMI Securities, through (i)
simplification and updates to the texts of the OA, the Underwriting
Service Guide and the DTC Rules, including consolidation of certain
provisions and the removal of outdated, redundant or extraneous text
and requirements and (ii) the consolidation, and reduction in the
amount, of paperwork required from Participants and issuers in
connection with eligibility requests, as described below.
(ii) Proposed Rule Changes
A. Migration of MMI Eligibility Processing
UW SOURCE and MMI Web are legacy applications that are robust and
reliable. However, because they are comprised of various distinct
mainframe legacy applications, enhancements and maintenance of such
systems are becoming more difficult and more costly. They also offer
reduced opportunities for automation than more modern systems. UWC, a
newer, modern platform that is currently used for eligibility
processing for E-CDs,\10\ provides for a more integrated user
experience by reducing the need for manual processing of documentation
outside the system. Due to its modern design, UWC also provides a base
for future enhancements for eligibility services because it is designed
to provide a system that is streamlined, resilient and in line with the
needs and usability standards of Participants and issuers.
---------------------------------------------------------------------------
\10\ UWC's design eliminates the need for physical certificates
for certain issue types of CDs, which previously would have been
processed through UW SOURCE, by allowing them to be issued and held
in electronic form. UW SOURCE, remains available for other types of
issuances, including the issuances of CDs in physical form. See E-CD
Release, supra note 9.
---------------------------------------------------------------------------
To expand the use of UWC's modern design, including streamlined
functionality, DTC proposes to migrate the processing of MMI
eligibility requests from MMI Web to UWC. In this way, DTC expects that
IPAs would realize benefits in efficiency and convenience in processing
of MMI eligibility requests, similar to those when DTC made UWC
available for processing of certificates of deposit as an alternative
to using UW SOURCE.\11\
---------------------------------------------------------------------------
\11\ UWC is a web interface and the migration from MMI Web to
UWC will not require system changes by, or impose any additional
costs on, IPAs. All IPAs have successfully completed testing of the
use of UWC for MMI eligibility requests.
---------------------------------------------------------------------------
Therefore, pursuant to the proposed rule change, DTC would revise
the section of the Underwriting Service Guide titled ``How MMI
Eligibility Works'' to designate UWC, rather than MMI Web, as the
system utilized by IPAs to submit MMI eligibility requests.
B. Technical and Clarifying Changes
In addition, the proposed rule change would make changes to the
Underwriting Service Guide, OA and the DTC Rules to reduce
administrative burden for Participants and issuers relating to DTC
eligibility generally, through (i) simplification and updates to rule
text, including consolidation of certain provisions and the removal of
outdated, redundant or extraneous rule text and requirements and (ii)
the consolidation, and reduction in the amount of eligibility
documentation required from Participants and issuers in connection with
eligibility requests, as described below.
I. Amendments to the Underwriting Service Guide
1. Background on MMI Underwriting Process
The Underwriting Service Guide provides that MMI Web be used by
IPAs for eligibility processing of MMI Securities so that an IPA may
then issue, service, and settle MMI Securities that it introduces into
the marketplace through DTC. In this regard, an IPA enters details for
its issuances into MMI Web.\12\ The Underwriting Service Guide also
states that the IPA must also provide to DTC a completed and signed
Letter of Representations (``LOR'') for MMI Securities to be made
eligible, a master note, and a list of base CUSIP numbers (``CUSIP
List'') \13\ that would be used for upcoming issuances of that
type.\14\ The Underwriting Service Guide
[[Page 16190]]
provides that other documentation may also be required.\15\
---------------------------------------------------------------------------
\12\ These details include the IPA's DTC account number, issuer
name, SEC registration or exemption information, issuer contact
information, state/country of domicile and program features (e.g.,
indexed to principal, variable rate, redeemable prior to maturity)
(``Program Features'').
\13\ A CUSIP number is the identification number created by the
American Banking Association's Committee on Uniform Security
Identification Procedures (``CUSIP'') to uniquely identify issuers
and issues of securities and financial instruments. See Committee on
Uniform Securities Identification Procedures, available at
<a href="http://www.aba.com/about-us/our-story/cusip-securities-identification">www.aba.com/about-us/our-story/cusip-securities-identification</a>. See
Underwriting Service Guide, supra note 6 at 13.
\14\ The availability of a list of multiple CUSIPs facilitates
the ability for an IPA to issue new MMI Securities through DTC
without further manual intervention by DTC.
\15\ See OA, supra note 6 at 8-17.
---------------------------------------------------------------------------
The LOR and other documentation are provided manually via email.
The required CUSIPs may be submitted either by email or through MMI
Web.
Once the IPA has submitted the required documentation and
information, DTC reviews the IPA's submission to confirm that an issue
satisfies DTC's eligibility and processing requirements. After
reviewing and approving a submission, the DTC Underwriting Group
(``Underwriting Group'') produces the MMI issuer control table
(``ICT'').\16\ The MMI ICT allows the IPA to directly create an
instruction to add the CUSIP and security-level details (e.g., interest
rate, maturity date, payment frequency) to DTC's master file (``Master
File'').\17\
---------------------------------------------------------------------------
\16\ See Underwriting Service Guide, supra note 6 at 13.
\17\ DTC maintains the Master File of all CUSIPs representing
securities made eligible at DTC. See Underwriting Service Guide,
supra note 6 at 10.
---------------------------------------------------------------------------
DTC proposes to amend the Underwriting Service Guide in order to
simplify and consolidate processes, as described below.
2. Removal of Program Features Data Entry
Currently, MMI Web requires an IPA to indicate in a ``Yes/No''
format whether an issuance contains certain Program Features, including
payment and redemption details of the MMI Securities brought for
eligibility. These Program Features, while informational, are not
necessary for DTC to process the eligibility request or to service an
MMI Security and may not reflect all features of a given MMI Security.
To remove an outdated requirement and reduce the steps required to make
an MMI Security eligible, UWC will no longer require IPAs to enter
indicators for Program Features, and text related to this requirement
in the section of the Underwriting Service Guide entitled ``How MMI
Eligibility Works'' would be removed.
3. Removal of Reference to ICT
The text in the section ``How MMI Eligibility Works'' includes a
description of the process of adding an MMI Security to Master File,
including the review and approval of the issue by the Underwriting
Group and the Underwriting Group's creation of the ICT, which allows
the IPA to add a CUSIP to the Master File. However, the use of ICT to
perform this process is transparent to IPAs. Therefore, in order to
simplify the text, while DTC would continue to utilize the ICT, DTC
would remove the reference to it from the Underwriting Service Guide.
4. Changes to Exhibit A to the MMI Certificate Agreement
The Underwriting Service Guide provides that the IPA will provide
an ``Exhibit A'' \18\ to the MMI Certificate Agreement \19\ listing the
issuer name and CUSIP base for a group of MMI Securities to be issued.
However, the actual form of Exhibit A does not require the CUSIP to be
listed as the CUSIP for the MMI Securities is either entered directly
into MMI Web or delivered to DTC by email. Exhibit A does require
certain specified issuance details, including (i) issuer name, (ii)
certain program information (which may include (a) series; (b) rank of
indebtedness; and (c) reference to the provision of the Securities Act
of 1933, as amended, (``Securities Act'') \20\ pursuant to which the
Program is exempt from registration, if any).
---------------------------------------------------------------------------
\18\ Available at www.dtcc.com/-/media/Files/Downloads/legal/
issue-eligibility/mmi-letters/EXHIBIT_A.docx.
\19\ Pursuant to an ``MMI Certificate Agreement,'' an IPA
maintains a securities certificate, registered in the name of DTC's
nominee, Cede & Co., for each MMI Security that it issues through
DTC. Having an IPA maintain the certificate eliminates the need for
DTC to hold a certificate in its vault that would need to be
delivered to an IPA upon redemption of an MMI Security.
\20\ 17 CFR 230.144A.
---------------------------------------------------------------------------
Exhibit A is currently provided by an IPA in Word format using a
form available on DTCC's website.\21\ Upon implementation of the use of
UWC for MMI eligibility processing, this document will be opened
directly through UWC for the IPA to review. Rather than providing a
physical signature, the IPA will provide an electronic attestation to
the form. In addition, to facilitate consolidation of documentation, a
separate form required for issues denominated in a foreign currency
(``Foreign Currency Rider'') \22\ when used for MMI Securities will
also be incorporated within the Exhibit A, and, if applicable (i.e.,
the issue is denominated in a foreign currency), will be deemed
acknowledged upon submission of the electronic attestation.
---------------------------------------------------------------------------
\21\ Supra note 18.
\22\ One of two forms is used for this purpose, depending on
whether the issuance offers the option for payments in the foreign
currency or U.S. dollar payments only. Available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/riders/Curr-Rider-With-USD-Option.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/riders/Curr-Rider-With-USD-Option.pdf</a> and <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/riders/Curr-Rider-USD-Only.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/riders/Curr-Rider-USD-Only.pdf</a>.
---------------------------------------------------------------------------
Pursuant to the proposed rule change, to reflect the content and
revised format of Exhibit A for use under UWC as discussed above, the
text would be revised to remove the reference to inclusion of the base
CUSIP and instead add ``including specified issuance details and a
foreign currency rider, as applicable.''
II. Amendments to the Operational Arrangements
1. Consolidation of MMI Letter of Representations Terms Within the OA
(and Update of Related Reference in the Underwriting Service Guide)
An issuer and IPA jointly sign a LOR for each group of MMI
Securities represented by a base CUSIP made DTC-eligible, which is
valid for all MMI Securities issued under the respective CUSIP List.
There are currently nine forms of LOR for different types of MMI
Securities. They include LORs used for (i) institutional certificates
of deposit (``Institutional LOR''),\23\ (ii) municipal variable rate
demand obligations (``Muni VRDO LOR''),\24\ (iii) municipal tax-exempt
commercial paper (``Muni TECP LOR''),\25\ (iv) corporate commercial
paper (``CP LOR''),\26\ (v) preferred stock (``Preferred LOR''),\27\
(vi) corporate variable rate demand obligations (``CVRDO LOR''),\28\
(vii) discount notes (``Discount LOR''),\29\ (viii) medium-term notes/
medium-term bank notes/deposit notes (``Medium Term/Deposit LOR''),\30\
and (ix) short-term bank notes (``Short Term LOR'').\31\
---------------------------------------------------------------------------
\23\ Available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/eligibility/21747-CD_2019.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/eligibility/21747-CD_2019.pdf</a>.
\24\ Available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/21793-VMC.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/21793-VMC.pdf</a>.
\25\ Available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-master-note/Municipal-Commercial-Paper-Master-Note-Form.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-master-note/Municipal-Commercial-Paper-Master-Note-Form.pdf</a>.
\26\ Available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/21848-CP.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/21848-CP.pdf</a>.
\27\ Available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/21859-PCP.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/21859-PCP.pdf</a>.
\28\ Available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/21884-VCC.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/21884-VCC.pdf</a>.
\29\ Available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/21904-DN.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/21904-DN.pdf</a>.
\30\ Available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/22029-MT.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/22029-MT.pdf</a>.
\31\ Available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/22036-SB.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/mmi-letters/22036-SB.pdf</a>.
---------------------------------------------------------------------------
Each LOR contains terms binding the issuer and the IPA. Many terms
within a form of LOR for one MMI Security type are the same or similar
to those in another form.
For non-MMI Securities, DTC offers the option for an issuer to
provide either a LOR for a discrete issuance, or a
[[Page 16191]]
Blanket Letter of Representations (``BLOR''), which once executed is
valid for all issuances of that issuer, obviating the need to obtain a
new LOR with each issuance. The non-MMI LOR and BLOR represents the
issuer's agreement to comply with the requirements set forth in the OA,
as amended from time to time. In this regard, relevant terms that would
otherwise be included in a LOR (such as in the MMI model) are set forth
in the OA. Incorporating terms into the OA removes the need for the
creation of separate forms for each security product type (e.g., common
stock, corporate debt, municipal debt, etc.)
Following the practice used for non-MMI Securities, the proposed
rule change would eliminate the requirement for nine different letters
of representation for MMI Securities and instead allow issuers and
paying agents to sign an MMI BLOR.
In this regard, subsection I.B.1.a. (Letters of Representations)
would be revised to provide the requirement for issuers and MMI Issuing
Agents to provide a fully executed MMI BLOR effective for each MMI
security issued by them and provide a link to a copy of the document.
The BLOR would apply to all issuances of a given issuer and its
identified IPA. However, if an issuer designates a different IPA for
its issuances, or if an IPA acts on behalf of a different issuer, a new
BLOR must be executed by the relevant parties. Also, text in this
subsection would be clarified to distinguish which provisions relate to
non-MMI BLORs.
The provisions previously included in the individual MMI LORs are
otherwise substantively covered by provisions already included in the
OA today, or, if not already covered, would be incorporated into the OA
as described below.
In this regard, subsection I.B.1.d. of the OA, which contains
agreements of various stakeholders, including issuers and agents, would
be supplemented with a new subsection I.B.1.e. to include specific
terms relating to MMI Securities.
First, the title of this section would be changed from ``Agreements
of Underwriter, Issuer and Agent'' to ``Agreements of Underwriter,
Issuer and Agent (including MMI Issuing Agent and MMI Paying Agent for
MMI Securities).''
Second, new subsection I.B.1.e.i. would be added to include a
requirement relating to the issuer and MMI Issuing Agent obtaining the
CUSIP List mentioned above. The text would cross-reference to a new
subsection II.A.1. (CUSIP Number Assignment) as II.A.1.a. which would
include the requirements that the issuer or MMI Issuing Agent must
obtain a CUSIP List from CUSIP Global Services and require an
additional CUSIP List to be obtained once a certain number of CUSIPs
remains unassigned. Consistent with the current LORs, the issuer or MMI
Issuing Agent would be required to obtain a CUSIP List of 900 CUSIPs
for debt securities and 79 CUSIPs for equity securities.
Third, new subsection I.B.1.e.ii. would add a provision from the
MMI LORs relating to the ability of an MMI Issuing Agent to provide
cancellation instructions for an issuance through the DTC settlement
user interface (``Settlement User Interface'') \32\ so long as the
issuance is scheduled to take place one or more days after the MMI
Issuing Agent has given issuance instructions to DTC.
---------------------------------------------------------------------------
\32\ The ``Settlement User Interface'' is defined in the DTC
Settlement Service Guide as any system or combination of systems
that allows for input/inquiry into the DTC Settlement System. See
DTC Settlement Service Guide, available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/service-guides/Settlement.pdf">www.dtcc.com/-/media/Files/Downloads/legal/service-guides/Settlement.pdf</a> at 6.
_____________________________________-
Fourth, new subsection I.B.1.E.iii. would add a provision stating
that a MMI Paying Agent may request the withdrawal of securities that
it holds in its DTC account by giving a withdrawal instruction through
the Settlement User Interface.
Fifth, new subsection I.B.1.E.iv. would add a provision that was
included in the MMI LORs stating that a paying agent may override DTC's
determination of interest and principal through DTC's corporate actions
system.\33\ This provision would also include a reference that such
overrides are subject to any applicable fees set forth in DTC's Guide
to Fee Schedule (``DTC Fee Guide'').\34\
---------------------------------------------------------------------------
\33\ The user interfaces for the corporate actions system
include the Participant Browser Service (``PBS''), Participant
Terminal System, CA Web and certain other formats. The override
instructions contemplated in this subsection are currently submitted
through the ``PAMM'' function in PBS. However, because DTC is
currently undergoing a modernization of its systems, the general
reference to the corporate actions system is being used here in case
the function is updated as part of the modernization effort.
\34\ The DTC Fee Guide includes fees relating to MMI position
reinstatements, event type modifications and rate changes. See DTC
Fee Guide, available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf">www.dtcc.com/-/media/Files/Downloads/legal/fee-guides/DTC-Fee-Schedule.pdf</a> at 7-8.
---------------------------------------------------------------------------
The MMI BLOR would also provide that the IPA (in the capacity as
MMI Paying Agent) has entered into the applicable form of MMI
Certificate Agreement, and it would include the note program in its
Exhibit A (to the MMI Certificate Agreement), prior to issuance of the
MMI Securities.
For consistency across Procedures, the text of the Underwriting
Service Guide would be revised to remove the requirement that the
required MMI LOR be ``product-specific'' and instead refer to a
``Blanket Letter of Representations'' in this regard, rather than a
``Letter of Representations.''
2. Changes With Respect to Required Riders to LORs
Rule 144A \35\ and Regulation S (``Reg S'') \36\ are provisions
under the Securities Act that facilitate the sale of securities to
institutional investors and non-U.S. investors, respectively. Rule 144A
allows for the resale of restricted securities (``144A Securities'') to
qualified institutional buyers without the need for SEC registration,
while Reg S provides a safe harbor for offers and sales of securities
(``Reg S Securities'') outside the United States, exempting them from
SEC registration requirements.
---------------------------------------------------------------------------
\35\ 17 CFR 230.144A.
\36\ 17 CFR 230.901-230.905.
---------------------------------------------------------------------------
The Participant requesting eligibility for 144A or Reg S Securities
must provide a rider to LOR signed by the issuer. This rider includes
representations regarding the restricted status of the securities under
the respective rule or regulation. Additionally, the issuer must obtain
a CUSIP for the security that is distinct from any non-restricted
security in the same class. The riders also include representations
concerning the rights of DTC, Cede & Co, and Participants, covering
aspects such as voting, distributions, and the receipt of certificates.
The proposed rule change would eliminate the requirement to obtain
144A riders and Reg S riders for all new issues, whether MMI or non-MMI
Securities. Currently, these riders are required for all Rule 144A and
Reg S Securities. However, DTC does not believe they are necessary for
new issues because the issuer is typically involved in the underwriting
process and works directly with a Participant to bring the new issue to
market. As part of this process, the issuer has a vested interest in
ensuring compliance with applicable securities laws and DTC
requirements, thereby reducing the need for separate rider
representations. In contrast, for older issues, where the issuer may
not be as closely tied to the Participant bringing the security to DTC,
the requirement to provide the riders would remain in place.
The representations previously included in the 144A and Reg S
riders would be incorporated into the OA,
[[Page 16192]]
ensuring that the necessary regulatory and compliance obligations
remain intact. Since issuers and IPAs executing a BLOR are legally
bound by the OA, this change promotes efficiency without introducing
additional legal risk for DTC.
In this regard, subsection I.B.1.b. (Required Riders to the LOR)
would be revised to qualify this requirement such that Rule 144A and
Reg S riders are only required with respect to older issues. Also,
subsection I.B.1.d. relating to agreements of issuers and others, would
be amended to add item xi that issuers make representations set forth
in a new subsection II.A.1.b. (Rule 144A and Reg S CUSIPs), which would
contain the requirements currently set forth in the Rule 144A and Reg S
riders.
These modifications, along with the creation of the MMI BLOR as
described above, simplify the eligibility process by reducing the
number of required documents, allowing for a single BLOR per issuer-IPA
combination and the incorporation of the Rule 144A rider and Reg S
rider provisions into the OA, thereby expediting the rapid issuance of
MMI Securities while maintaining the related compliance and legal
requirements.
In addition, the proposed rule change would make certain technical
and clarifying changes to the same subsection I.B.1.b.
First, a provision stating that a rider is required with respect to
each security of a U.K. issuer would be revised to also include that a
rider is required with respect to each security of an Ireland issuer.
DTC collects these riders \37\ to obtain representations relating to
unique tax considerations relating to U.K. and Ireland debt securities;
however, the OA currently only refers to the U.K. Rider. Therefore, a
reference to the Irish Rider is being added for transparency relating
to this requirement.
---------------------------------------------------------------------------
\37\ Available at <a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/riders/Irish-Rider.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/riders/Irish-Rider.pdf</a> (``Irish Rider'') and
<a href="http://www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/riders/UK-Rider.pdf">www.dtcc.com/-/media/Files/Downloads/legal/issue-eligibility/riders/UK-Rider.pdf</a> (``U.K. Rider'').
---------------------------------------------------------------------------
Second, a sentence that provides links to certain forms of BLOR and
LOR would be revised to clarify that the referenced forms are used for
non-MMI Securities.
Third, a link to the form of MMI BLOR would be added.
3. Special Rules and Processes for MMI
Subsection I.A.2. of the OA contains text noting that while the
general arrangements of the OA apply to MMI Securities, under the DTC
Rules, MMI are processed differently than other Securities. To provide
clarity to stakeholders with respect to applicable Rules and
Procedures, the proposed rule change would add a reference stating that
in addition to the OA, Rules and Procedures relating to MMI include,
but are not limited to, those set forth in the DTC Rules (including,
but not limited to Rule 9(C)), DTC Distributions Service Guide, the
Underwriting Service Guide, DTC Redemptions Service Guide, DTC
Reorganizations Service Guide, and DTC Settlement Service Guide.
4. Other Technical Changes
Subsection I.B.1.d.ii. provides that the Issuer recognizes that DTC
does not undertake to, and shall not have any responsibility to,
monitor or ascertain the compliance of any transactions in securities
with any applicable law, rule or regulation and lists applicable laws
and rules and lists out certain applicable laws. However, it
inadvertently omits a reference to the Securities Act and applicable
rules and regulations, which are foundational to DTC's eligibility
requirements.\38\ The proposed rule change would correct this omission
by including a reference to the Securities Act, Rule 144A, Reg S and/or
any exemptions from registration thereto.
---------------------------------------------------------------------------
\38\ Generally, the issues that may be made eligible for DTC's
book-entry delivery, settlement and depository services are those
that have been issued in a transaction that (i) has been registered
with the Commission pursuant to the Securities Act; (ii) was exempt
from registration pursuant to a Securities Act exemption that does
not involve (or, at the time of the request for eligibility, no
longer involves) transfer or ownership restrictions; or (iii)
permits resale of the securities pursuant to Rule 144A or Regulation
S, and, in all cases, such securities otherwise meet DTC's
eligibility criteria. See OA, supra note 6 at 8.
---------------------------------------------------------------------------
Subsection I.B.1.d.iv. provides that DTC may direct any issuer or
agent to use any DTC telephone number or address as the number or
address to which notices or payments may be sent. The proposed rule
change would update this provision to ``street address'' and also
include ``email address or other electronic means.''
III. Amendments to the Policy Statement in the Rules
The proposed rule change would make a technical amendment to the
Policy Statement to delete a duplicative provision covered by the OA
and also align the DTC Rules with current practice and regulatory
requirements.
The Policy Statement covers eligibility provisions for both foreign
securities deposited with DTC at the time that such foreign securities
are first distributed (referred to as ``new issues'') and foreign
securities deposited with DTC subsequent to the time that such foreign
securities are first distributed (referred to as ``older issues.'')
Section 3 of the Policy Statement (``Section 3'') provides various
measures designed to facilitate compliance by issuers and Participants
with their obligations to DTC and pursuant to the federal securities
laws.
Subsections 3(a)(2) and (3) reference the requirement that, for new
issues, an issuer must provide a 144A rider or Reg S rider for
securities eligible for resale under Rule 144A or Reg S, respectively.
These provisions state that the text of both riders must contain
representations regarding the securities' eligibility for resale under
the applicable rule and their CUSIP or ``CINS'' identification
number,\39\ if any for any registered securities of the issuer of the
same class.
---------------------------------------------------------------------------
\39\ CINS is the acronym for the CUSIP International Numbering
System. A CINS number is an alphanumeric identifier used as a
securities identifier in several non-North American markets. See
CUSIP Global Services, Supporting Efficient Global Capital Markets,
<a href="http://cusip.com">cusip.com</a> (2025), <a href="http://www.cusip.com/identifiers.html#/CINS">www.cusip.com/identifiers.html#/CINS</a>.
---------------------------------------------------------------------------
Subsection 3(b)(1), subparagraph (ii) also includes a requirement
that issuers represent whether the securities are investment-grade
securities or securities designated for inclusion in an SRO Rule 144A
system. A similar provision under Subsection 3(b) states that for older
issues, DTC would confirm that any foreign 144A Securities deposited
with DTC are investment grade securities designated for including in an
SRO Rule 144A System.
DTC would delete Subsections 3(a)(2), 3(a)(3) and 3(b)(1),
subparagraph (ii) for the reasons described below.
First, the deletion of the provisions relating to the 144A and Reg
S riders from the Policy Statement would simplify the related Rules and
Procedures, as these riders are already addressed in the OA, which sets
forth eligibility requirements more broadly and apply beyond just
foreign securities.
Second, the reference to securities being designated for inclusion
in an SRO Rule 144A system is outdated, as this requirement was
eliminated in a prior rule filing by DTC \40\ but was never removed
from the Policy Statement. This proposed rule change would correct that
oversight by eliminating obsolete text as a technical clarification.
---------------------------------------------------------------------------
\40\ See Securities Exchange Act Release No. 59384 (Feb. 11,
2009), 74 FR 7941 (Feb. 20, 2009) (SR-DTC-2008-13).
---------------------------------------------------------------------------
Third, the investment grade requirement would be removed because
DTC's underwriting process need not assess the investment grade status
of securities as part of the eligibility determination process. This
aligns with the broader approach taken by DTC's
[[Page 16193]]
eligibility requirements which focus on compliance with regulatory and
operational criteria rather than subjective credit assessments. As a
result, removing this requirement from the Policy Statement better
reflects current practice and ensures consistency with the actual
procedures followed by DTC.
By implementing these changes, DTC enhances clarity, reduces
redundancy, and ensures that its Rules and Procedures remain aligned
with operational and regulatory frameworks.
2. Statutory Basis
DTC believes that the proposed rule change is consistent with the
requirements of the Exchange Act, and the rules and regulations
thereunder applicable to a registered clearing agency. Specifically,
DTC believes that the proposed rule change is consistent with Section
17A(b)(3)(F) of the Exchange Act \41\ for the reasons described below.
---------------------------------------------------------------------------
\41\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Section 17A(b)(3)(F) of the Exchange Act requires, in part, that
the rules of a clearing agency, such as DTC, be designed to promote the
prompt and accurate clearance and settlement of securities
transactions.\42\ As described above, the proposed rule change would
amend the Underwriting Service Guide, OA, and the Policy Statement to
facilitate enhancements to the securities eligibility process within
DTC's Underwriting Service.
---------------------------------------------------------------------------
\42\ Id.
---------------------------------------------------------------------------
The proposed amendments to the Underwriting Service Guide include
providing for the migration of the processing of eligibility requests
for MMI Securities from a legacy platform to an existing, proven,
modernized platform currently servicing eligibility requests for E-CDs.
By migrating the MMI Securities eligibility functionality to a system
with enhanced usability, flexibility, and resiliency, the proposed rule
change is designed to support a more effective and efficient model for
making MMI Securities eligible for DTC services, including clearance
and settlement.
Additionally, the proposal aims to simplify and update text,
consolidate certain provisions, remove outdated, redundant, or
extraneous text and requirements, and reduce the amount of eligibility
documentation required from Participants and issuers and make other
technical changes.
First, the amendments to the Underwriting Service Guide include
removal of the requirement for IPAs to enter indicators for Program
Features and eliminate references to the ICT which are not necessary
for the processing of eligibility requests. Furthermore, the proposed
rule change would reflect the content and revised format of Exhibit A,
as described above, and the consolidation of the Foreign Currency Rider
under the Exhibit A for MMI Securities. This change clarifies and
simplifies the eligibility process by removing outdated requirements
and unnecessary references, and consolidating documentation, thereby
streamlining the process for making securities eligible for DTC
services, including clearance and settlement, while maintaining related
compliance and legal requirements.
Second, the amendments to the OA involve consolidating the terms of
the MMI LOR within the OA and allowing issuers and paying agents to
sign a BLOR instead of multiple product-specific LORs, and eliminating
the requirement to obtain 144A and Reg S riders for all new issues.
This change simplifies the eligibility process by reducing the number
of required documents to make securities eligible for DTC services,
thereby expediting the process for securities to become eligible for
DTC services, including clearance and settlement services, while
maintaining the related compliance and legal requirements.
Third, the amendments to the Policy Statement include deleting
duplicative provisions covered by the OA and aligning the DTC Rules
with current practice and regulatory requirements. This involves
removing outdated references to securities being designated for
inclusion in a SRO Rule 144A system and eliminating the investment
grade requirement, which is not necessary for DTC's eligibility
determination process, further clarifying related requirements and
streamlining the eligibility process.
The migration of the MMI eligibility functionality to a modernized
platform improves the efficiency and accuracy of processing eligibility
requests to make securities eligible for DTC services, including
clearance and settlement, thereby promoting the prompt and accurate
clearance and settlement of securities transactions. Simplifying and
updating the text, consolidating provisions, and reducing the amount of
eligibility documentation required from Participants and issuers
clarifies and streamlines provisions relating to making securities
eligible for DTC services, including clearance and settlement, further
supporting the prompt and accurate clearance and settlement of
transactions. Therefore, the Clearing Agencies believe the proposed
changes described above are consistent with Section 17A(b)(3)(F) of the
Exchange Act.\43\
---------------------------------------------------------------------------
\43\ Id.
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
DTC does not believe that the proposed changes to the Underwriting
Service Guide, OA, and Policy Statement, as described above, will have
any impact, or impose any burden, on competition. As described above,
the proposed rule change would amend the Underwriting Service Guide,
OA, and the Policy Statement to facilitate enhancements to the
securities eligibility process within DTC's Underwriting Service. More
specifically, the proposed rule change will (i) migrate the processing
of eligibility requests for MMI Securities from a legacy platform to an
existing, proven, modernized platform and (ii) simplify and update rule
text, consolidate certain provisions, remove outdated, redundant, or
extraneous rule text and requirements, reduce the amount of eligibility
documentation required from Participants and issuers, and make other
technical changes, as described above.
The proposed migration of MMI eligibility functionality from MMI
Web to UWC entails changing to a system with enhanced usability and
flexibility that will be available to all users equally at no
additional cost or effort to them, except for user testing which has
been completed. The proposed changes that would simplify and update
rule text, consolidate certain provisions, remove outdated, redundant,
or extraneous rule text and requirements, reduce the amount of
eligibility documentation required from Participants and issuers, and
make other changes would also apply to all affected Participants and
issuers, except for the elimination of the 144A rider for new issues
such that this rider will still be required for older issues.
Maintaining the requirement for a 144A rider for older issues does not
impose a burden on competition because it applies uniformly to all
older issues, ensuring a consistent and fair approach. Additionally,
the continued use of the 144A rider for older issues helps maintain the
integrity and reliability of the eligibility process for these
securities, without introducing any additional costs or efforts for
users. In light of the foregoing, DTC does not believe that the
proposed rule change would impose a burden on competition.
[[Page 16194]]
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
The DTC has not received or solicited any written comments relating
to this proposal. If any written comments are received, DTC will amend
its filing to publicly file such comments as an Exhibit 2 to its
filing, as required by Form 19b-4 and the General Instructions thereto.
Persons submitting written comments are cautioned that, according
to Section IV (Solicitation of Comments) of the Exhibit 1A in the
General Instructions to Form 19b-4, the Commission does not edit
personal identifying information from comment submissions. Commenters
should submit only information that they wish to make available
publicly, including their name, email address, and any other
identifying information.
All prospective commenters should follow the Commission's
instructions on How to Submit a Comment, available at <a href="http://www.sec.gov/regulatory-actions/how-to-submit-comments">www.sec.gov/regulatory-actions/how-to-submit-comments</a>. General questions regarding
the rule filing process or logistical questions regarding this filing
should be directed to the Main Office of the Commission's Division of
Trading and Markets at <a href="/cdn-cgi/l/email-protection#8efafcefeae7e0e9efe0eae3effce5ebfafdcefdebeda0e9e1f8"><span class="__cf_email__" data-cfemail="b1c5c3d0d5d8dfd6d0dfd5dcd0c3dad4c5c2f1c2d4d29fd6dec7">[email protected]</span></a> or 202-551-5777.
DTC reserves the right to not respond to any comments received.
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 Exchange Act and paragraph (f) of Rule 19b-4
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 Exchange Act.
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 Exchange Act. Comments may be submitted
by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#542621383179373b3939313a2027142731377a333b22"><span class="__cf_email__" data-cfemail="9ae8eff6ffb7f9f5f7f7fff4eee9dae9fff9b4fdf5ec">[email protected]</span></a>. Please include
file number SR-DTC-2025-005 on the subject line.
Paper Comments
<bullet> 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-2025-005. 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 website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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 website 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of DTC and on DTCC's
website (<a href="http://www.dtcc.com/legal/sec-rule-filings">www.dtcc.com/legal/sec-rule-filings</a>). Do not include personal
identifiable information in submissions; you should submit only
information that you wish to make available publicly. We may redact in
part or withhold entirely from publication submitted material that is
obscene or subject to copyright protection. All submissions should
refer to File Number SR-DTC-2025-005 and should be submitted on or
before May 8, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\44\
---------------------------------------------------------------------------
\44\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-06523 Filed 4-16-25; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on April 17, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.