[Federal Register: March 24, 2008 (Volume 73, Number 57)]
[Notices]
[Page 15548-15550]
[DOCID:fr24mr08-99]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57513; File No. SR-DTC-2007-10]

 Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Amended Proposed Rule Change To Implement the New
Issue Information Dissemination Service for Municipal Securities

March 17, 2008.
    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 August 16, 2007, The Depository Trust Company (``DTC'') filed with
the Securities and Exchange Commission (``Commission'') and on
September 12, 2007, and March 3, 2008, amended the proposed rule change
described in Items I, II, and III below, which items have been prepared
primarily by DTC. The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The proposed rule change seeks approval to implement the New Issue
Information Dissemination System (``NIIDS'') for municipal securities.
NIIDS is an automated system developed by DTC at the request of the
Securities Industry and Financial Markets Association (``SIFMA'') \3\
in order to improve the mechanism for disseminating new issue
information regarding municipal securities.
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    \3\ The request originated from The Bond Market Association
(``BMA''), which has since merged with the Securities Industry
Association to form SIFMA.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, DTC 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. DTC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.\4\
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    \4\ 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
Statutory Basis for, the Proposed Rule Change

    Currently, Municipal Securities Rulemaking Board (``MSRB'') Rule G-
14 generally requires municipal securities dealers to report municipal
securities transactions to the MSRB within 15 minutes of the time of
the trade.\5\ Inter-dealer trades eligible for comparison by a clearing
agency are required to be submitted through NSCC's Real Time Trade
Matching System (``RTTM'') within the time frame in Rule G-14. These
trades are subsequently reported to the MSRB by NSCC. NSCC requires
certain securities information in order to process and report
transactions involving those securities. Therefore, it is necessary
that dealers trading newly issued municipal securities have the
securities information needed for trade submission by the time the
trade reporting is required.
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    \5\ MSRB Rule G-14 RTRS Procedures (a)(ii).
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    Pursuant to current practice in the municipal securities market,
each information vendor works separately to obtain information from
offering documents and underwriters. Each information vendor's success
depends in large part upon the voluntary cooperation of the
underwriters. It is not unusual for information vendors to have
inconsistent information or for some information vendors to receive
information before others. Consequently, critical new issue information
may be missing or inaccurate in the automated trade processing systems
used by dealers to report the initial trades in new issues.

This can result in late trade reports or trade reports that must be
canceled and resubmitted or amended because they contain inaccurate
data.
    NIIDS is designed to improve the process by which new issue
information is provided by underwriters to information vendors by
collecting information about a new issue from underwriters in an
electronic format and making that data available immediately to
information vendors. NIIDS is designed to ensure that information is
disseminated as quickly and efficiently as possible after the
information is made available by the underwriters.\6\
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    \6\ NIIDS is being incorporated into the update of DTC's
underwriting system (``UW Source''). All applicable NIIDS Data
Elements must be input into UW Source for a municipal issue to close
at DTC.
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    To address concerns that dealers often lack timely access to
electronically formatted securities information necessary to process
and to report municipal securities transactions in real-time, MSRB Rule
G-14 includes a three-hour exemption available to a dealer transacting
``when, as, and if issued'' municipal securities if the dealer is not a
syndicate manager or member for this issue, has not traded the issue in
the previous year, and the CUSIP number and indicative data of the
issue are not in the dealer's securities master file (``Reporting
Exemption'').\7\ The Reporting Exemption will expire on or about June
30, 2008. In order to prepare for the Reporting Exemption's expiration,
SIFMA asked DTC to incorporate a centralized automated mechanism for
the collection and dissemination on a real-time basis of the required
information as part of the planned reengineering of DTC's underwriting
system. DTC built NIIDS to help make the collection and dissemination
of new issue information with respect to municipal securities more
efficient for the industry.
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    \7\ MSRB Rule G-14 RTRS Procedures (a)(ii)(C).
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    An industry working group of municipal securities dealers, SIFMA
members, the MSRB, and DTC have identified key data elements required
for the reporting, comparison, confirmation, and settlement of trades
in municipal securities (``NIIDS Data Elements''). Initially, DTC is
proposing to make NIIDS available to the municipal securities industry
on an optional basis to allow dealers to have some experience with
NIIDS before the MSRB mandates its use. DTC proposes to make NIIDS for
municipal securities available to participants on an optional basis in
April 2008. DTC will mandate the use of NIIDS for municipal securities
in June 2008, prior to the expiration of the MSRB Reporting Exemption.
DTC periodically has been informing participants of the upcoming
implementation of NIIDS and the NIIDS Data Elements through
periodically issued Important Notices. Only DTC participants or those
entities specifically authorized by a participant (``Correspondent'')
will be able to input information into NIIDS.\8\
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    \8\ Participants will be required to identify an authorized
party at the Correspondent with whom DTC may interact.
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    To commence the process, the dissemination agent (``Dissemination
Agent'') for a new issue must input the NIIDS Data Elements thereby
requesting that DTC make the information available to the industry
through NIIDS. DTC will not confirm the NIIDS Data Elements but rather
will act as a conduit to pass along such information to data vendors.
DTC anticipates the data vendors will then disseminate the information
to the industry thereby allowing dealers to make timely reporting of
their municipal trades. DTC will record the name of the Dissemination
Agent that inputs the Data Elements and the time such information is
submitted. DTC will begin disseminating the data when it has received
authorization from the Dissemination Agent through NIIDS. The
Dissemination Agent, by triggering the dissemination decision flag in
the NIIDS Data Elements, indicates the information is being sent by it
and is in compliance with the terms and conditions of NIIDS. In
addition, NIIDS will contain the contact information for the
Dissemination Agent that populated the NIIDS Data Elements for a
particular issue to enable users of the data to contact it with
questions or comments.
    DTC is proposing to provide NIIDS to the industry in order to
facilitate the collection and dissemination of new issue information in
relation to municipal securities. Because DTC does not confirm the
accuracy of NIIDS Data Elements and only acts as a conduit of the
information, use of NIIDS \9\ by any party, including but not limited
to participants, correspondents, and vendors (``NIIDS Users'') \10\
will constitute a waiver of any and all claims direct or indirect
against DTC and its affiliates and an agreement that DTC and its
affiliates shall not be liable for any loss in relation to the
dissemination or use of NIIDS Data Elements, which are provided ``as
is.'' Each NIIDS User will agree to indemnify and hold harmless DTC and
its affiliates from and against any and all losses, damages,
liabilities, costs, judgments, charges, and expenses arising out of or
relating to the use of NIIDS.
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    \9\ Use of NIIDS shall include but not be limited to the
population, dissemination, or processing of NIIDS Data Elements.
    \10\ Data vendors or others that wish to receive NIIDS Data
Elements must register in advance with DTC.
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    The MSRB would like dealers to be able to use NIIDS before
requiring them to so by rule.\11\ The MSRB has filed with the
Commission a rule change that would require underwriters to use NIIDS
beginning June 30, 2008, to coincide with the expiration of the
Reporting Exemption.\12\ DTC will provide the municipal securities
industry the opportunity to use NIIDS commencing April 2008. DTC
intends to mandate the use of NIIDS for municipal securities in June
2008. DTC believes that members of the municipal securities industry
will be using NIIDS during the period NIIDS is optional (``Optional
Period'') to become accustomed to using it. This may result in
Dissemination Agents inputting incomplete NIIDS Data Elements while
getting acquainted with NIIDS. Therefore, no one should rely on the
accuracy of the NIIDS Data Elements during the Optional Period but
rather should continue to use existing authorized sources of such
information.
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    \11\ The MSRB received comment on proposed rules that would
require underwriters of municipal securities to participate in
NIIDS. See MSRB Notice 2007-10 (March 5, 2007) at http://
www.msrb.org.
    \12\ Securities Exchange Act Release No. 57002 (December 20,
2007), 72 FR 73939 (December 28, 2007) [File No. SR-MSRB-2007-07].
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    DTC will not charge a service fee to underwriters that input or
receive information through NIIDS. Additionally, DTC will not charge a
service fee to information vendors that will receive information for
further dissemination through NIIDS. DTC will charge a connectivity fee
to underwriters, service providers, and information vendors that use
NIIDS.
    DTC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \13\ and the rules and
regulations thereunder because the proposed changes promote the prompt
and accurate clearance and settlement of securities transactions by
streamlining the collection and dissemination of new issue information
for municipal securities throughout the industry.
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    \13\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    DTC does not believe that the proposed rule change will have any
impact or impose any burden on competition.

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

    Written comments relating to the proposed rule change have not been
solicited or received. 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

    Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period: (i) As the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes 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. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml) or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-DTC-2007-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-DTC-2007-10. This file
number should be included on the subject line if e-mail 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 inspection and
copying in the Commission's Public Reference Section, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filings also will be available for
inspection and copying at the principal office of DTC and on DTC's Web
site at http://www.dtcc.com/downloads/legal/rule_filings/2007/dtc/
2007-10.pdf, http://www.dtcc.com/downloads/legal/rule_filings/2007/
dtc/2007-10-amendment.pdf, and http://dtcc.com/downloads/legal/rule--
filings/2007/dtc/2007-10-amendment2.pdf. 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-2007-10 and should be submitted on
or before April 8, 2008.

    For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-5796 Filed 3-21-08; 8:45 am]

BILLING CODE 8011-01-P