Notice2025-07989
Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Rules Relating to the Legal Entity Identifier Requirement
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
May 8, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 88 (Thursday, May 8, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 88 (Thursday, May 8, 2025)]
[Notices]
[Pages 19571-19574]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-07989]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102982; File No. SR-DTC-2025-009]
Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Rules Relating to the Legal Entity Identifier Requirement
May 2, 2025.
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 April 25, 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 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 to the Rules in
order to require (i) each applicant applying to become a Participant,
Pledgee, DRS Agent or FAST Agent to obtain and provide a Legal Entity
Identifier (``LEI'') to DTC as part of its membership application, (ii)
each Participant, Pledgee, DRS Agent and FAST Agent to have a current
LEI on file with DTC at all times, and (iii) CDS Clearing and
Depository Services Inc. (``CDS'') to provide DTC with an LEI for each
current participant of CDS (``CDS Participant'') for which CDS
maintains a subaccount at DTC and for each newly added CDS Participant
going forward.<SUP>5 6</SUP>
---------------------------------------------------------------------------
\5\ CDS, the Canadian central securities depository and central
counterparty, is a Participant of DTC. The relationship between DTC
and CDS enables CDS Participants to settle trades with DTC
Participants through sub-accounts at DTC maintained by CDS on behalf
of CDS Participants. DTC provides the Canadian-Link Service for the
settlement of securities among DTC Participants and CDS
Participants. See Rule 30, infra note 6.
\6\ Terms not defined herein are defined in the Rules, By-Laws
and Organization Certificate of DTC (the ``Rules''), 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 the proposed rule change is to amend the Rules in
order to require (i) each applicant applying to become a Participant,
Pledgee, DRS Agent or FAST Agent to obtain and provide an LEI to DTC as
part of its membership application, (ii) each Participant, Pledgee, DRS
Agent and FAST Agent to have a current LEI on file with DTC at all
times, and (iii) CDS to provide DTC with an LEI for each current CDS
Participant for which CDS maintains a subaccount at DTC and for each
newly added CDS Participant going forward.\7\
---------------------------------------------------------------------------
\7\ Supra note 5.
---------------------------------------------------------------------------
Background
LEI Background
An LEI is a 20-character reference code to uniquely identify
legally distinct entities that engage in financial transactions.\8\ The
LEI system was developed by the Financial Stability Board \9\ together
with finance ministers and central bank governors represented in the
Group of 20 in the wake of the 2008 financial crisis.\10\ The Financial
Stability Board established GLEIF in June 2014 to support the
implementation and use of LEIs.\11\ The Regulatory Oversight Committee
(``ROC''), a group of public authorities from around the globe,
oversees GLEIF and the global LEI system.\12\
---------------------------------------------------------------------------
\8\ See <a href="http://www.gleif.org/en/about-lei/introducing-the-legal-entity-identifier-lei">www.gleif.org/en/about-lei/introducing-the-legal-entity-identifier-lei</a>. The LEI is based on the ISO 17442 standard developed
by the International Organization for Standardization and satisfies
the standards implemented by the Global Legal Entity Identifier
Foundation (``GLEIF''). See <a href="http://www.gleif.org/en/about-lei/introducing-the-legal-entity-identifier-lei">www.gleif.org/en/about-lei/introducing-the-legal-entity-identifier-lei</a>.
\9\ The Financial Stability Board is an international body that
monitors and makes recommendations about the global financial
system. See <a href="http://www.fsb.org">www.fsb.org</a>.
\10\ See <a href="http://www.gleif.org/en/about/history">www.gleif.org/en/about/history</a>.
\11\ See supra note 8. See also <a href="http://www.gleif.org/en/about/this-is-gleif">www.gleif.org/en/about/this-is-gleif</a>.
\12\ The ROC is a group of public authorities from around the
globe established in January 2013 to coordinate and oversee the
global LEI system. See <a href="http://www.gleif.org/en/about/governance/regulatory-oversight-committee-roc">www.gleif.org/en/about/governance/regulatory-oversight-committee-roc</a>.
---------------------------------------------------------------------------
LEIs are issued by entities called Local Operating Units (``LOUs'')
that are accredited by GLEIF to issue LEIs within certain
jurisdictions.\13\ LOUs validate information about an entity and issue
a unique LEI for that entity. An LEI provides information about legal
entities, including the official legal name, registered address,
country of incorporation, registration authority and the entities'
ownership structure, including parent and child organizations.
---------------------------------------------------------------------------
\13\ See <a href="http://www.gleif.org/en/about-lei/get-an-lei-find-lei-issuing-organizations">www.gleif.org/en/about-lei/get-an-lei-find-lei-issuing-organizations</a>.
---------------------------------------------------------------------------
Adding the LEI Requirement for DTC
DTC's parent entity, The Depository Trust & Clearing Corporation
(``DTCC''),\14\ provides technology resources and support services to
DTC and DTCC's other subsidiaries, including providing support for
onboarding, lifecycle management and risk management of the
subsidiaries' applicants and participants. Certain of DTCC's
subsidiaries currently require
[[Page 19572]]
that its applicants and participants obtain and provide an LEI.
However, this requirement is not consistent across DTCC's other
subsidiaries, including DTC.
---------------------------------------------------------------------------
\14\ DTCC is a non-public holding company that owns three
registered clearing agencies and related businesses. In addition to
DTC, DTCC also owns the following registered clearing agencies:
National Securities Clearing Corporation and the Fixed Income
Clearing Corporation (``FICC''). FICC has two divisions: the
Government Securities Division and the Mortgage-Backed Securities
Division.
---------------------------------------------------------------------------
DTC is proposing to add a requirement that its applicants and
participants obtain and provide an LEI to DTC similar to the
requirement currently in place for its affiliate, FICC, which requires
LEIs for members of its Government Securities Division.\15\ DTC
believes that requiring that its applicants and participants obtain and
provide an LEI to DTC would improve the quality of data that is
collected from its participants as well as the process for collecting
that data, including providing the following benefits:
---------------------------------------------------------------------------
\15\ FICC implemented LEI requirements for its Government
Securities Division in compliance with a rule adopted by the Office
of Financial Research of the U.S. Department of Treasury
establishing a data collection requirement covering centrally
cleared transactions in the U.S. repurchase market. See Securities
Exchange Act Release No. 88557 (Apr. 3, 2020), 85 FR 19979 (Apr. 9,
2020) (SR-FICC-2020-002).
---------------------------------------------------------------------------
<bullet> Simplify Operational Processes--LEIs would help simplify
and expedite due diligence and know your customer (``KYC'')
verification of participants enabling DTC to do business with
participants faster and safer.
<bullet> Enhance Risk Management--LEIs provide information about
counterparty relationships and hierarchies within and between financial
entities, improving counterparty risk assessment and management.
<bullet> Leverage Existing Capabilities--The use of LEIs would
allow DTC to leverage existing DTCC technology and data to create
automatic upfront validations to support participant onboarding and
lifecycle management for DTC and DTCC's other subsidiaries.
<bullet> Reliable Data Source--The LEI system is supported by a
trusted method of verifying the identity of the legal entity in
question and would provide a reliable data source. This is supported by
the LOUs maintenance of all respective reference and identification
data and the overall global LEI system which is coordinated and
overseen by ROC.
<bullet> Reduction in Record Duplication--The use of LEIs would
reduce overlap and duplication of data within databases, helps
streamline data reconciliations and reduce data errors by decreasing
the requirements for manual comparison of different databases.
Implementing an LEI requirement is also intended to improve DTCC's
ability to manage data across its subsidiaries, including DTC. Many
participants are shared among DTC and its affiliates. Currently, there
is no consistent requirement for submission of an industry identifier
by DTC and DTCC's other subsidiaries. This has impacted DTCC's ability
to profile its subsidiaries' participants quickly and efficiently
across all the subsidiaries' products and services. DTCC's other
subsidiaries are also implementing an LEI requirement consistent with
the LEI requirements being proposed for DTC.
Member Impact
Based on an analysis by DTC, approximately 89% of Participants, 71%
of Pledgees, 46% of DRS Agents, and 100% of CDS Participants currently
have an LEI. Adding the LEI requirement would require the DTC
participants that have not obtained an LEI to select an LOU,\16\ apply
for an LEI, and once obtained provide the LEI to DTC. In addition, CDS
would be required to obtain LEIs from CDS Participants. The DTC
participants and CDS Participants would also need to renew the LEI
periodically. The expense of obtaining and renewing an LEI is minimal,
and it can usually be obtained within a few days once the entity
provides the necessary information to the LOU.\17\
---------------------------------------------------------------------------
\16\ Only entities that are accredited by GLEIF may issue LEIs.
A list of accredited LOUs can be found on the GLEIF website:
<a href="http://www.gleif.org/en/about-lei/get-an-lei-find-lei-issuing-organizations">www.gleif.org/en/about-lei/get-an-lei-find-lei-issuing-organizations</a>.
\17\ Based on a review by DTCC, the average cost for registering
a new LEI is approximately $71, the average cost for maintenance is
approximately $62, and the application processing time is typically
24-48 business hours.
---------------------------------------------------------------------------
Failure to adhere to the LEI requirement could result in a fine in
accordance with the Rules.\18\
---------------------------------------------------------------------------
\18\ See Rule 21, supra note 6 (provides that DTC may discipline
any Participant or Pledgee for violations of the Rules, including
but not limited to a fine).
---------------------------------------------------------------------------
Rule Changes
LEI Requirement
In order to add the requirement that participants obtain and
provide an LEI, DTC is proposing to make the following changes.
(i) Defined Term
DTC would add a new defined term, LEI, to Rule 1. DTC would use the
terminology of the GLEIF for the definition.\19\
---------------------------------------------------------------------------
\19\ See supra note 8.
---------------------------------------------------------------------------
(ii) Applicants, Participants and Pledgees
DTC would add a new Section 12 to Rule 2 to require (i) each DTC
applicant to obtain and provide an LEI to DTC as part of its membership
application and (ii) each Participant, Pledgee, DRS Agent and FAST
Agent to always have a current LEI on file with DTC. DTC is proposing
to add a footnote in that section which states such Participants,
Pledgees, DRS Agents and FAST Agents shall have 60 calendar days from
the date they are notified by Important Notice to submit their LEIs.
The footnote would provide that it would sunset at the end of the 60-
calendar day period.
(iii) CDS Participants
DTC would add a new Section 11 to Rule 30 to require that CDS
provide DTC with an LEI for each CDS Participant for which CDS opens
and maintains a subaccount at the Corporation such that the Corporation
shall have a current LEI for each such CDS Participant at all times.
DTC is proposing to add a footnote in that section which states that
CDS shall have 60 calendar days from the date that CDS is notified by
Important Notice to submit LEIs for each of the CDS Participants. The
footnote would provide that it would sunset at the end of the 60-
calendar day period.
Implementation Timeframe
DTCC is determining a framework relating to the adoption of the
selected LEI option across all DTCC subsidiaries and product lines,
including an approach to managing the implementation of the LEI
requirement for both existing and new clients of DTC. DTC would provide
notice to existing Participants, Pledgees, DRS Agents, FAST Agents and
CDS, including by Important Notice, advising them of the LEI
requirements for DTC and notifying them of the dates by which they are
expected to have obtained and provided an LEI to DTC. DTC would give
Participants, Pledgees, DRS Agents, FAST Agents and CDS that do not
currently have the requisite LEIs, 60-calendar days from the date of
the notice to obtain and provide the requisite LEIs to DTC. DTC
considers 60-calendar days to be sufficient for obtaining an LEI, as it
can typically be acquired within a few days once the entity provides
the necessary entity information to the LOU.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act, requires, that the Rules be
designed to, among other things, promote the prompt and accurate
clearance and settlement of securities transactions.\20\
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
DTC believes that the proposed changes to add an LEI requirement
are
[[Page 19573]]
consistent with this provision because the proposed revisions would
improve the quality of data that is collected from DTC's participants
as well as the process for collecting that data including (i)
simplifying and expediting certain operational processes, including due
diligence and KYC, by utilizing an efficient and accurate method to
verify identity of DTC participants, (ii) enhancing counterparty risk
assessment and management of DTC participants by improving information
about counterparty relationships and hierarchies within and between DTC
participants, (iii) creating efficiencies relating to onboarding and
lifecycle management for DTC and DTCC's other subsidiaries that share
participants, (iv) obtaining reliable data from the standardized global
LEI system, a dependable source of verified data, and (v) reducing
overlap and duplication of data within databases and helping to
streamline data reconciliations and reduce data errors. DTC believes
that creating efficiencies in operational processes, onboarding and
lifecycle management and improving risk management by improving the
quality of verified data that is collected from DTC's participants as
well as the process for collecting that data would promote the prompt
and accurate clearance and settlement of securities transactions by
DTC. As such, DTC believes the proposed rule changes are consistent
with Section 17A(b)(3)(F) of the Act.\21\
---------------------------------------------------------------------------
\21\ Id.
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
DTC believes that the proposed changes to add an LEI requirement
could impose a burden on competition because these changes would impose
a cost on firms that currently do not have an LEI to obtain and
maintain them. DTC does not believe that any burden on competition
imposed by the proposed rule change would be significant because the
cost to obtain and maintain an LEI is relatively small,\22\ and DTC
understands that many of its participants already maintain LEIs for
other purposes. Regardless of whether the potential burden on
competition is deemed significant, DTC believes the proposed rule
change is both necessary and appropriate in furtherance of the purposes
of the Act. Specifically, DTC believes that any burden on competition
that is created by the proposed changes would be necessary in
furtherance of the purposes of the Act \23\ because creating
efficiencies in operational processes, onboarding and lifecycle
management and improving risk management by improving the quality of
verified data that is collected from DTC's participants as well as the
process for collecting that data would promote the prompt and accurate
clearance and settlement of securities transactions by DTC. DTC also
believes that any burden that is created by the proposed rule change
would be appropriate in furtherance of the purposes of the Act \24\
because the proposed changes would be limited to requiring an LEI that
is easily obtained through the established global LEI system at a
relatively minor cost.
---------------------------------------------------------------------------
\22\ As noted above, based on a review by DTCC, the average cost
for registering a new LEI is approximately $71 and the average cost
for maintenance is approximately $62.
\23\ 15 U.S.C. 78q-1(b)(3)(I).
\24\ Id.
---------------------------------------------------------------------------
(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. If any written comments are received, they will be
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
Persons submitting 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#03777162676a6d64626d676e627168667770437066602d646c75"><span class="__cf_email__" data-cfemail="ea9e988b8e83848d8b848e878b98818f9e99aa998f89c48d859c">[email protected]</span></a> or 202-551-5777.
DTC reserves the right not to 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 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 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 Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#9be9eef7feb6f8f4f6f6fef5efe8dbe8fef8b5fcf4ed"><span class="__cf_email__" data-cfemail="fc8e899099d19f9391919992888fbc8f999fd29b938a">[email protected]</span></a>. Please include
file number SR-DTC-2025-009 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-2025-009. 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="https://dtcc.com/legal/sec-rule-filings.aspx">https://dtcc.com/legal/sec-rule-filings.aspx</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
[[Page 19574]]
to file number SR-DTC-2025-009 and should be submitted on or before May
29, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
---------------------------------------------------------------------------
\25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-07989 Filed 5-7-25; 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 May 8, 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.