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Federal Register / Vol. 86, No. 136 / Tuesday, July 20, 2021 / Notices
including Rule 30, of the service guide Guide 7 for the DTC Canadian-Link Service Canadian-Link Service and the DTC Operational Arrangements Necessary for Securities to Become and Remain Eligible for DTC Services OA 8 relating to the elimination of the Canadian dollar CAD settlement feature of the Canadian-Link Service, as described 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.
A Clearing Agencys Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The proposed rule change consists of modifications to the text of the Rules and the Procedures, including Rule 30,9
the Guide and the OA relating to the elimination of the CAD settlement feature of the Canadian-Link Service, as described below.
Background
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In 2006, DTC established a northbound Canadian-Link Service that supports transactions settled in CAD.10 Rule 30 11 describes the operation of the Canadian-Link Service, that permits DTC Participants using the Canadian Link Service Canadian-Link Participants to A settle Delivery Versus Payment DVP Securities transactions with participants CDS
Participants of The Canadian Depository for Securities Limited CDS and other Canadian-Link Participants in CAD and B transfer CAD to or receive CAD from CDS
Participants and other Canadian-Link bound by the Rules. See Rule 27 at 97, supra note 5.
7 Available at http www.dtcc.com//media/
Files/Downloads/legal/service-guides/Canadian_
Dollar_Settlement.pdf.
8 Available at http www.dtcc.com//media/
Files/Downloads/legal/issue-eligibility/eligibility/
operational-arrangements.pdf.
9 Supra note 5.
10 See Securities Exchange Act Release No. 52784
November 16, 2005, 70 FR 70902 November 23, 2005 SRDTC200508.
11 Supra note 5.

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Participants without any corresponding delivery or receipt of Securities.12
The Canadian-Link Service provides Participants with a single depository interface for CAD transactions. The link facilitates Participants ability to maintain U.S. and Canadian Security positions in their DTC accounts for Securities listed in both Canada and the United States i.e., dually listed. This eliminates the need for Participants to maintain separate positions in an eligible 13 Security in CDS for CAD
settlements and in DTC for USD
settlements. It also eliminates the need for Participants to reposition Securities inventory between DTC and CDS in preparation for corporate action events and or transaction processing for dually listed issues.
Transactions between Canadian-Link Participants and CDS Participants are processed through an omnibus account maintained by DTC at CDS DTC
Omnibus Account in accordance with the rules and procedures of CDS.
Canadian-Link Participants are able i to deliver Securities to or receive Securities from CDS Participants against payment i.e., DVP in CAD and ii to transfer funds to or receive funds from CDS Participants in CAD without any corresponding delivery or receipt of Securities. Transactions between Canadian-Link Participants and other Canadian-Link Participants are processed through accounts at DTC in accordance with the Rules.
For both transactions i between Canadian-Link Participants and CDS
Participants processed through the DTC
Omnibus Account and ii between Canadian-Link Participants and other Canadian-Link Participants processed through accounts at DTC, there is a single end-of-day CAD money settlement between DTC and its Canadian-Link Participants.14 For the 12 The Canadian-Link Service also provides for Cross-Border USD Securities Transactions between Participants and CDS Participants. See Rule 30, Section 1a2, supra note 5. See also Securities Exchange Act Release No. 55239 February 5, 2007, 72 FR 6797 February 13, 2007 SRDTC200615.
13 DTC may determine the Securities that are eligible for the Canadian-Link Service. Some Securities may be eligible for all purposes of the Canadian-Link Service, and some Securities may be eligible only for limited purposes e.g., clearance and settlement through the facilities of CDS but only custody and asset servicing through the facilities of DTC. See Rule 30, Section 4, supra note 5.
14 Pursuant to Section 1h15 of Rule 30, the term Canadian-Link CAD Money Settlement is defined as the money settlement of Canadian-Link Transactions in CAD Funds between the DTC and Canadian-Link Participants. Rule 30, supra note 5.
DTC notes that in a list of defined terms at the beginning of Rule 30, the definition of CanadianLink CAD Money Settlement is specified to appear in Section 1a15; however, the definition actually
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transactions between Canadian-Link Participants and CDS Participants processed through the DTC Omnibus Account, there is a separate end-of-day CAD money settlement between CDS
and DTC.
As with all transactions processed at DTC, DTC maintains risk controls with respect to transactions processed by Canadian-Link Participants, including the Net Debit Cap and Collateral Monitor.15 With respect to Collateral Monitor, each Canadian-Link Participant has a single Collateral Monitor with respect to transactions processed for such Participant through the Canadian-Link Service and other transactions processed by DTC for such Participant.
Proposed Rule Change In recent years, activity at DTC in CAD has accounted for less than 0.20
percent of DTCs average daily valued settlement volume. Most of this activity relates to distributions such as principal, interest and dividend payments in Securities held at CDS by DTC on behalf of Participants. While Participants continue to use the Canadian-Link Service for custody purposes to position Securities inventory at CDS through DTCs CDS
account and receive related distribution payments, no Participants have effectuated a DVP of Securities through the Canadian-Link Service since 2018.
DTC attributes this lack of DVP activity to a lack of demand among its Participants for the DVP aspect of the Canadian-Link Service.
CDS recently communicated to CDSs participants, including DTC, that it will be modernizing its settlement system through an initiative referred to as the Post Trade Modernization CDS PTM
Project.16 For DTC to continue to maintain access to CDSs CAD
settlement services, it would have been necessary for DTC to perform systems development in order to be able to continue to use this aspect of the Canadian-Link service. However, the CDS modernization does not adversely impact DTCs ability to hold Securities appears in Section 1h15 of Rule 30 and not Section 1a15 of Rule 30. Id.
15 The term Collateral Monitor of a Participant, as used with respect to its obligations to the Corporation, means, on any Business Day, the record maintained by the Corporation for the Participant which records, in the manner specified in Procedures, the algebraic sum of i the Net Credit or Debit Balance of the Participant and ii the aggregate Collateral Value of the Collateral of the Participant. Rule 1, Section 1 at 3, supra note 5.
16 See CDSs website at https www.cds.ca/
about/post-trade-modernization for information published by CDS regarding CDS PTM.

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