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Federal Register / Vol. 86, No. 1 / Monday, January 4, 2021 / Notices
SECURITIES AND EXCHANGE
COMMISSION
Release No. 3490805; File No. SRDTC
2020020

Self-Regulatory Organizations; The Depository Trust Company; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Add a Fee for the New ClaimConnectTM Service December 28, 2020.

Pursuant to Section 19b1 of the Securities Exchange Act of 1934
Act 1 and Rule 19b4 thereunder,2
notice is hereby given that on December 18, 2020, 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 19b3A of the Act 3 and Rule 19b4f2 thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
I. Clearing Agencys Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change 5 consists of amendments to the Guide to the DTC
Fee Schedule Fee Guide 6 to add a fee for the new ClaimConnect service at DTC,7 as described in greater detail below.
II. Clearing Agencys 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.
1 15

U.S.C. 78sb1.
CFR 240.19b4.
3 15 U.S.C. 78sb3A.
4 17 CFR 240.19b4f2.
5 Capitalized terms not defined herein are defined in the Rules, By-Laws and Organization Certificate of DTC Rules available at http www.dtcc.com/
/media/Files/Downloads/legal/rules/dtc_rules.pdf, or in the ClaimConnectTM Service Guide available at https www.dtcc.com/-/media/Files/Downloads/
legal/service-guides/ClaimConnect.pdf.
6 Available at http www.dtcc.com/-/media/
Files/Downloads/legal/fee-guides/dtcfeeguide.pdf.
7 See Securities Exchange Act Release No. 90481
November 23, 2020, 85 FR 76640 November 30, 2020 SRDTC2020012 Approval Order.
2 17

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A Clearing Agencys 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 Fee Guide to add a fee for the new ClaimConnect service at DTC.
ClaimConnect, an optional DTC
service, enables Participants to bilaterally match and settle cash claim transactions at DTC.8 More specifically, ClaimConnect is a validation and matching engine that continually monitors claims throughout their lifecycle in order to settle and close claims through DTCs settlement process. Claims can be matched manually i.e., Affirmed by ClaimConnect users or automatically i.e., Auto-matched by the ClaimConnect service when it matches two like claims based on the alignment of certain data elements. Once matched, claims are settled through systematic Securities Payment Orders SPOs generated and submitted by ClaimConnect at set times intraday on a settlement date.9
With this proposed rule change, DTC
is establishing a ClaimConnect matching fee of a $1.75 per side, per-matched claim, whether or not the claim is Affirmed or Auto-matched. In other words, both parties to a matched claim will be charged $1.75, such that DTC
would collect $3.50 for each matched claim.10 No charge will be assessed for claims that do not match e.g., Uncompared, DK-uncompared, or Canceled claims.11
This per-side matching fee for claims processing will be new for Participants that use Asset Services products. In choosing this fee and fee structure, DTC
considered various factors. First, DTC
followed its pricing policy of setting fees at cost plus a low-margin markup.
The low-margin markup is applied to recover development costs and operating expenses, and to accumulate capital sufficient to meet regulatory and 8 With respect to ClaimConnect, a cash claim or cash claim transaction is a cash entitlement i.e., a request for cash from one Participant to another Participant. Typically, cash claims arise as a result of trading exceptions from a Corporate Action event, where a cash entitlement needs to be delivered from one holder to another. Trading exceptions include, but are not limited to, trades outside of the markets agreed upon settlement cycle, lack of due bill fail tracking, stock loan or repo transaction discrepancy, or tax treaty differences.
9 See ClaimConnect Service Guide, supra note 5.
10 Separate from ClaimConnect, an existing SPO
fee of $.10 per side, per SPO will continue to be charged. Fee ID 186, Fee Guide, supra note 6.
11 See ClaimConnect Service Guide, supra note 5, regarding claim states.

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economic requirements. In consideration of that policy, the aggregate amount of $3.50 per-matched claim will help facilitate a four-year return on investment for DTCs creation of ClaimConnect and help cover continued operating expenses for the service. Second, the per-side structure was chosen to allocate the cost evenly between a claims two counterparties.
Third, in order to align charges for the ClaimConnect service with Participants actual usage of the service, the fee was structured as a per-usage fee i.e., permatched claim instead of a flat monthly or annual fixed-rate fee. Fourth, in setting the fee, DTC was mindful that, although there are no competing services, Participants could choose not to use ClaimConnect and continue to settle claims as they did prior to ClaimConnect e.g., using internal/
proprietary systems, third-party software, or some combination thereof.
Fifth, DTC evaluated its existing Stock, Loan, Repo & Fail Adjustments fee that DTC charges Participants for such entitlement/allocation adjustment activity Adjustment Service Fee, similar to a cash claim.12 There, DTC
charges a $1.50 per adjustment, not per side. In other words, whichever party submits an adjustment is charged $1.50.
However, because there is no validation and matching process for adjustments, unlike with ClaimConnect claims, counterparties often need to submit multiple adjustments between each other before reaching final agreement;
thus, the total adjustment cost routinely exceeds $3.50.
Changes to the Fee Guide To effectuate the ClaimConnect fee, the Corporate Action subsection of the Custody and Securities Processing section of the Fee Guide will be updated to include a ClaimConnect Matching Fee of $1.75, per each claim side after matching.
Implementation Timeframe The ClaimConnect fee will be added to the 2021 Fee Guide and charged beginning January 1, 2021.
2. Statutory Basis Section 17Ab3D of the Act requires that DTCs Rules provide for the equitable allocation of reasonable dues, fees, and other charges among its Participants.13 DTC believes that the ClaimConnect fee is consistent with this provision of the Act.
As described above, the ClaimConnect service is an optional service that was 12 Fee 13 15

E:FRFM04JAN1.SGM

ID 709, Fee Guide, supra note 6.
U.S.C. 78q1b3D.

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