Self-Regulatory Organizations; The Depository Trust Company; Filing of Proposed Rule Change Relating to an Increase in the Fixed Net Debit Cap Employed in The Depository Trust Company's Same-Day Funds Settlement System

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33457; File No. SR-DTC-93-13]

Self-Regulatory Organizations; The Depository Trust Company;

Filing of Proposed Rule Change Relating to an Increase in the Fixed Net

Debit Cap Employed in The Depository Trust Company's Same-Day Funds

Settlement System

January 11, 1994.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''),\1\ notice is hereby given that on December 1, 1993, The

Depository Trust Company (``DTC'') filed with the Securities and

Exchange Commission (``Commission'') the proposed rule change (File No.

SR-DTC-93-13) as 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 from interested

persons.

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\1\15 U.S.C. 78s(b)(1).

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I. Self-Regulatory Organization's Statement of the Terms of the

Proposed Rule Change

The proposed rule change filed by DTC consists of an increase of

$187 million in the fixed net debit cap employed in DTC's Same-Day

Funds Settlement (``SDFS'') system. Such increase will applicable only

to the net debits of SDFS participants that elect to share DTC's costs

of increasing its external committed line of credit.

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 that 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 such statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule Change

DTC employs a fixed net debit cap in its SDFS system in order to

assure that DTC's liquidity resources are sufficient to complete

settlement if due to insolvency or, more likely, a temporary

operational problem, an SDFS participant were to fail to settle its net

debit obligation.\2\ The fixed net debit cap is set at 75% of: (1) the

aggregate cash deposits to the SDFS participants fund and (2) DTC's

internal and external lines of credit. The cap is currently set at $387

million.

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\2\Each Participant's net debit is limited throughout the

processing day by a net debit cap that is the lesser of: (1) the

adjustable cap, that is a multiple of the participant's deposits to

the SDFS participants fund, or (2) the fixed net debit cap.

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DTC has on deposit approximately 72% of the commercial paper

(``CP'') outstanding in the U.S. and expects that virtually all CP

outstanding in the U.S., except CP that is in direct issuers'

proprietary book-entry systems, will be included in DTC's CP program

sometime in 1994. DTC plans to add other types of money market

instruments (``MMI'') to its SDFS system within the next year beginning

with a new program for institutional certificates of deposit.\3\

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\3\Securities Exchange Act Release No. 33126 (November 1, 1993)

58 FR 59283 [File No. SR-DTC-93-12] (notice of proposed rule change

to implement a MMI program). Under the MMI program, DTC also

proposes to make eligible municipal CP and bankers' acceptances.

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DTC is concerned that with the anticipated increase in volume the

fixed net debit cap at its current level could have the undesirable

effect of temporarily blocking substantial numbers of book-entry

deliveries. In order to ease the flow of transactions through the

system, DTC has decided to increase its external committee line of

credit by $250 million and thereby raise the fixed net debit cap that

will be applied to the net debits of SDFS participants that elect to

share DTC's cost of obtaining the increased line of credit. At this

time for twenty-two SDFS participants, the fixed net debit cap is the

operative cap limiting their net debits.

DTC believes that the securities resources available to it to

collateralize any borrowing it should have to make under the increased

line of credit are more than adequate.\4\

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\4\DTC's line of credit agreement provides that any borrowing

may be collaterlized by collateral securities in the account of a

failing participant as well as by securities that have been

deposited by DTC participants to the SDFS participants fund. On

November 15, 1993, deposits to the SDFS participants fund included

securities having a market value of approximately $632 million.

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DTC believes the proposed rule change is consistent with the

requirements of Section 17A of the Act and the rules and regulations

thereunder because it promotes the prompt and accurate clearance and

settlement of securities transactions.

(B) Self-Regulatory Organization's Statement on Burden on Competition

DTC does not believe that the proposed rule change will impose any

burden on competition not necessary or appropriate in furtherance of

the purposes of the Act.

(C) Self-Regulatory Organization's Statement on Comments on the

Proposed Rule Change Received From Members, Participants, or Others

DTC has not solicited or received comments on the proposed rule

change. Informally, a number of SDFS participants to which the

increased fixed net debit cap will be available have expressed support

for the proposal.

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.

V. Solicitation of Comments

Interested persons are invited to submit written data, views, and

arguments concerning the foregoing. Persons making written submissions

should file six copies thereof with the Secretary, Securities and

Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. 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, 450 Fifth Street NW.,

Washington, DC 20549. Copies of such filing will also be available for

inspection and copying at the principal office of DTC. All submissions

should refer to the File No. SR-DTC-93-13 and should be submitted

February 9, 1994.

For the Commission by the Division of Market Regulation,

pursuant to delegated authority.\5\

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\5\17 CFR 200.30-3(a)(12) (1992).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-1223 Filed 1-18-94; 8:45 am]

BILLING CODE 8010-01-7