DTC Rules
DTC Rules
DTC Rules
___________________________________________
BY-LAWS
___________________________________________
ORGANIZATION CERTIFICATE
JUNE 2011
RULES, BY-LAWS
AND ORGANIZATION CERTIFICATE
OF
THE DEPOSITORY TRUST COMPANY
INDEX
Page
RULE 1 DEFINITIONS........................................................................................................ 1
RULE 4(A) PLEDGE OF PROPERTY TO THE CORPORATION AND ITS LENDERS ... 38
RULE 6 SERVICES............................................................................................................ 43
RULE 27 PROCEDURES..................................................................................................... 88
BY-LAWS ...........................................................................................................118
ORGANIZATION CERTIFICATE.....................................................................129
ii JUNE 2011
RULE 1
Section 1. Unless the context requires otherwise, the terms defined in this Rule shall, for
all purposes of these Rules, have the meanings herein specified:
Account
Account Family
The term “Actual Participants Fund Deposit” of a Participant means the actual
amount the Participant has Deposited to the Participants Fund, including both its
Required Participants Fund Deposit and any Voluntary Participants Fund Deposit.
The term "Actual Preferred Stock Investment" of a Participant means the actual
amount of Preferred Stock the Participant owns, expressed in dollars by multiplying
(i) the number of shares of Preferred Stock the Participant owns by (ii) the Preferred
Stock Par Value.
Affiliated Family
The term “Affiliated Family” means each Participant that controls or is controlled
by another Participant and each Participant that is under the common control of any
Person. For purposes of this definition, “control” means the direct or indirect ownership
of more than 50% of the voting securities or other voting interests of any Person.
3 DECEMBER 2008
Aggregate Actual Deposit and Investment
The term "Aggregate Actual Deposit and Investment" of a Participant means the
sum of its (i) Actual Participants Fund Deposit and (ii) Actual Preferred Stock
Investment.
The term “Aggregate Affiliated Family Net Debit Cap” means the sum of the Net
Debit Caps for the Participants that are part of an Affiliated Family in the manner
specified in the Procedures; provided, however, that the maximum Aggregate Affiliated
Family Net Debit Cap shall not exceed the total available liquidity resources of the
Corporation.
Board of Directors
The term “Board of Directors” means the Board of Directors of the Corporation.
Business Day
The term “Business Day” means any day on which the Corporation is open for
business.
By-Laws
The term “By-Laws” means the By-Laws of the Corporation, as amended from
time to time.
Certificated Security
The term “Certificated Security” has the meaning given to the term “certificated
security” in Section 8-102 of the NYUCC.
4 DECEMBER 2008
Clearing Agency Agreement
The term “Clearing Agency Agreement” means any agreement between the
Corporation and any other clearing agency registered under Section 17A of the Exchange
Act which provides, with respect to any Person that is concurrently a Participant and
member of the other clearing agency, for (i) a netting of the settlement payments due to
and from such Person, (ii) the provision of liquidity to the Corporation or the other
clearing agency on account of a default by such Person in the performance of its
obligations and/or (iii) a guaranty of any of the obligations of such Person to the
Corporation or the other clearing agency.
Collateral
The term “Collateral” of a Participant on any Business Day means the sum of (i)
the Actual Participants Fund Deposit of the Participant, (ii) the Actual Preferred Stock
Investment of a Participant, (iii) all Net Additions of the Participant and (iv) any
settlement progress payments wired by the Participant to the account of the Corporation
at the Federal Reserve Bank of New York in the manner specified in the Procedures.
Collateral Monitor
Collateral Value
The term "Collateral Value" means (i) with respect to the Actual Participants
Fund Deposit of a Participant, the amount of such Actual Participants Fund Deposit, (ii)
with respect to the Actual Preferred Stock Investment of a Participant, the amount of such
Actual Preferred Stock Investment, (iii) with respect to the Net Additions of a Participant,
an amount determined by applying to the Market Value of such Net Additions a
percentage determined by the Corporation, in its sole discretion, and (iv) with respect to
any settlement progress payments wired by a Participant to the account of the
Corporation at the Federal Reserve Bank of New York in the manner specified in the
Procedures, the amount of such settlement progress payments.
Control
The term “Control” has the meaning given to the term “control” in Section 8-106
of the NYUCC. A Pledgee has Control of Pledged Securities until they are Delivered,
Released or Withdrawn by the Pledgee.
5 DECEMBER 2008
Controlling Management
The term “Controlling Management” shall mean the Chief Executive Officer, the
Chief Financial Officer, and the Chief Operations Officer, or their equivalents, of an
applicant or Participant.
Corporation
Deliverer
The term “Deliverer”, as used with respect to a Delivery of a Security, means the
Person which Delivers the Security.
Delivery
(2) as used with respect to a Certificated Security, has the meaning provided
in Section 8-301(a) of the NYUCC;
The term “Delivery Versus Payment” means a Delivery against a settlement debit
to the Account of the Receiver, as provided in Rule 9(A) and Rule 9(B) and as specified
in the Procedures.
Deposit
6 DECEMBER 2008
(1) as used with respect to a Certificated Security, means (A) Delivering a
Security Certificate to the Corporation and (B) crediting the Security to an
Account of a Participant;
Deposited Security
Devaluation
Eligible Security
The term “Eligible Security” means a Security described in the first paragraph of
Section 1 of Rule 5.
Entitlement Holder
The term “Entitlement Holder” has the meaning given to the term “entitlement
holder” in Section 8-102 of the NYUCC. A Participant or Pledgee is an Entitlement
Holder with respect to a Security credited to its Account.
Entitlement Order
The term “Entitlement Order” has the meaning given to the term “entitlement
order” in Section 8-102 of the NYUCC. An instruction from a Participant or Pledgee to
the Corporation with respect to a Delivery, Pledge or Withdrawal of a Security credited
to a Securities Account is an Entitlement Order.
7 DECEMBER 2008
Exchange Act
The term “Exchange Act” means the Securities Exchange Act of 1934, as
amended from time to time.
The term “Family Net Credit” means the amount by which the sum of all money
credits to the Accounts in an Account Family exceeds the sum of all money debits and
charges thereto.
The term “Family Net Debit” means the amount by which the algebraic sum of all
money debits and charges to the Accounts in an Account Family exceeds the sum of all
money credits thereto.
Fedwire
The term “Fedwire” means the wire system for the transfer of funds operated by
the Federal Reserve System.
Free Delivery
The term “Free Delivery” means a Delivery free of any payment by the Receiver
through the facilities of the Corporation, as provided in Rule 9(A) and Rule 9(B) and as
specified in the Procedures.
Free Pledge
The term “Free Pledge” means a Pledge free of any payment by the Pledgee
through the facilities of the Corporation, as provided in Section 3 of Rule 2 and as
specified in the Procedures.
Free Release
The term “Free Release” means a Release free of any payment by the Pledgor
through the facilities of the Corporation, as provided in Rule 2 and Rule 9(B) and as
specified in the Procedures.
The term “Gross Credit Balance” of a Participant on any Business Day means the
aggregate amount of money the Corporation credits to all of the Accounts in all of the
Account Families of the Participant without accounting for any amount of money the
8 DECEMBER 2008
Corporation debits or charges thereto. The Aggregate Actual Deposit and Investment of
a Participant shall not constitute a part of the Gross Credit Balance of the Participant.
The term “Gross Debit Balance” of a Participant on any Business Day means the
aggregate amount of money the Corporation debits or charges to all of the Accounts in all
of the Account Families of the Participant without accounting for any amount of money
the Corporation credits thereto. Any obligation of a Participant to make a Required
Participants Fund Deposit or Required Preferred Stock Investment or satisfy a deficiency
therein shall not constitute a part of the Gross Debit Balance of the Participant.
The term “Income Payment Refusal” means the refusal of an MMI Paying Agent
to pay for an Income Presentment, as provided in Rule 9(C) and as specified in the
Procedures.
Income Presentment
Incomplete Transaction
9 DECEMBER 2008
(3) as used with respect to a Release, means a Release Versus Payment of
Securities from a Pledgee to a Pledgor where, pursuant to Rule 9(B), the
Securities (A) have been credited to the Account of the Corporation, (B)
have not yet been credited to the Account of the Pledgor, except
provisionally in the manner specified in the Procedures, and (C) have not
been Delivered, Pledged or Withdrawn by the Pledgor.
Instructor
The term “Instructor” means a Participant or Pledgee which gives the Corporation
an instruction with respect to (i) a Delivery, Pledge, Release or Withdrawal of Securities,
(ii) a payment in connection with a transaction in Securities or (iii) any other instruction
pursuant to these Rules and the Procedures.
The term “Investment Advisers Act” means the Investment Advisers Act of 1940,
as amended from time to time.
The term “Investment Company Act” means the Investment Company Act of
1940, as amended from time to time.
The term “Issuing Agent Account” means the Account of an MMI Issuing Agent,
designated as such by the MMI Issuing Agent in the manner specified in the Procedures,
as the Account to be used in connection with the issuance of MMI Securities for which it
is the MMI Issuing Agent.
Lender
The term “Lender” means a bank which has extended credit to the Corporation for
purposes authorized by these Rules.
Limited Participant
Market Value
The term “Market Value” means the current market value of a Deposited
Security, as determined by the Corporation in the manner specified in the Procedures.
10 DECEMBER 2008
Maturity Payment Refusal
The term “Maturity Payment Refusal” means the refusal of an MMI Paying Agent
to pay for a Maturity Presentment, as provided in Rule 9(C) and as specified in the
Procedures.
Maturity Presentment
The term “MMI Issuing Agent” means a Participant, acting as an issuing agent for
an issuer with respect to a particular issue of MMI Securities of that issuer, which has
executed such agreements as the Corporation shall require in connection with the
participation of such Participant in the MMI Program in that capacity.
The term “MMI Paying Agent” means a Participant, acting as a paying agent for
an issuer with respect to a particular issue of MMI Securities of that issuer, which has
executed such agreements as the Corporation shall require in connection with the
participation of such Participant in the MMI Program in that capacity.
MMI Program
The term “MMI Program” means the Program for transactions in MMI Securities,
as provided in Rule 9(C) and as specified in the Procedures.
11 DECEMBER 2008
MMI Security
The term “MMI Security” means an Eligible Security described in the second
paragraph of Section 1 of Rule 5.
The term “Net Credit Balance” of a Participant means the amount by which the
Gross Credit Balance of the Participant exceeds its Gross Debit Balance.
The term “Net Debit Balance” of a Participant means the amount by which the
Gross Debit Balance of the Participant exceeds its Gross Credit Balance.
The term “Net Debit Cap” of a Participant means an amount determined by the
Corporation in the manner specified in the Procedures; provided, however, that the
maximum Net Debit Cap of the Participant shall be the least of (i) a maximum amount
applicable to all Participants based on the liquidity resources of the Corporation, (ii) the
Settling Bank Net Debit Cap applicable to such Participant or (iii) any other amount
determined by the Corporation, in its sole discretion.
NSCC
NYUCC
The term “NYUCC” means the Uniform Commercial Code of New York, as
amended from time to time.
12 DECEMBER 2008
Participant
Participants Fund
The term “Participants Fund” means the fund created pursuant to Section 1 of
Rule 4.
Participants Investment
Payee
The term “Payee”, as used with respect to a Delivery, Pledge or Release Versus
Payment of Securities, means the Participant, Pledgor or Pledgee which receives a money
credit.
The term “Paying Agent Account” means the Account of an MMI Paying Agent,
designated as such by the MMI Paying Agent in the manner specified in the Procedures,
as the Account to receive Presentments for which it is the MMI Paying Agent.
Payment Refusal
Payor
The term “Payor”, as used with respect to a Delivery or Pledge Versus Payment
of Securities, means the Participant, Pledgee or Pledgor which is charged a money debit.
Person
The term “Person” means the Corporation, a Participant or Pledgee or any other
natural or legal person, as the case may be.
Pledge
13 DECEMBER 2008
(1) for purposes of Rule 4(A), has the meaning specified in Rule 4(A); and
(2) for all purposes under these Rules, means creating a security interest in a
Certificated or Uncertificated Security, a Securities Account or a
Securities Entitlement in accordance with the NYUCC.
A Pledge may be a Free Pledge or a Pledge Versus Payment, as the context may
require.
Pledged Security
Pledgee
The term “Pledge Versus Payment” means a Pledge against a settlement debit to
the Account of the Pledgee, as provided in Section 3 of Rule 2, including a Participant
which is so approved.
Pledgor
Preferred Stock
The term "Preferred Stock" means the Series A Preferred Stock of the
Corporation.
The term "Preferred Stock Dividend Date" means the date a dividend is paid on
the Preferred Stock.
14 DECEMBER 2008
Preferred Stock Par Value
The term "Preferred Stock Par Value" means $100 per share of Preferred Stock.
Presenting Participant
Presentment
The term “Principal Payment Refusal” means the refusal of an MMI Paying
Agent to pay for a Principal Presentment, as provided in Rule 9(C).
Principal Presentment
Procedures
The term “Procedures” means the Procedures, service guides, and regulations of
the Corporation adopted pursuant to Rule 27, as amended from time to time.
Program
Receiver
The term “Receiver”, as used with respect to a Delivery of a Security, means the
Person which receives the Security.
15 DECEMBER 2008
Release
The term “Release” means the release of a Security from Pledge. A “Release”
may be a Free Release or a Release Versus Payment, as the context may require.
The term “Release Versus Payment” means a Release against a settlement debit to
the Account of the Pledgor, as provided in Rule 2 and Rule 9(B) and as specified in the
Procedures.
Reorganization Action
The term “Reorganization Payment Refusal” means the refusal of an MMI Paying
Agent to pay for a Reorganization Presentment of MMI Securities, as provided in Rule
9(C) and as specified in the Procedures.
Reorganization Presentment
The term “Required Participants Fund Deposit” of a Participant means the amount
the Participant is required to Deposit to the Participants Fund pursuant to Section 1 of
Rule 4.
16 DECEMBER 2008
Rule
The term “Rule” means one of these Rules, as amended from time to time.
SEC
The term “SEC” means the United States Securities and Exchange Commission.
Securities Account
(2) as used with respect to the Corporation, means an internal account of the
Corporation to which Securities transactions are debited and credited to
the Corporation.
Securities Act
The term “Securities Act” means the Securities Act of 1933, as amended from
time to time.
Securities Intermediary
The term “Securities Intermediary” has the meaning given to the term “securities
intermediary” in Section 8-102 of the NYUCC. The Corporation is a Securities
Intermediary.
Security
The term “Security” has the meaning given to the term “financial asset” in
Section 8-102 of the NYUCC. Any item credited to an Account (by the act of being
credited to the Account) shall be deemed a Security under these Rules and shall be
treated as a financial asset under Article 8 of the NYUCC. A Security may be an Eligible
Security, a Deposited Security, a Pledged Security, a Segregated Security or an MMI
Security, or some or all of them collectively, as the context may require. The term
“Security” shall not include Preferred Stock.
Security Certificate
The term “Security Certificate” has the meaning given to the term “security
certificate” in Section 8-102 of the NYUCC.
17 DECEMBER 2008
Security Entitlement
The term “Security Entitlement” has the meaning given to the term “security
entitlement” in Section 8-102 of the NYUCC. The interest of a Participant or Pledgee in
a Security credited to its Account is a Security Entitlement.
Segregated Account
Segregated Security
Settlement Account
(2) as used with respect to the Corporation means an internal account of the
Corporation to which money transactions are debited and credited to the
Corporation.
Settling Bank
The term “Settling Bank” means a Participant which is a bank or trust company,
subject to supervision or regulation pursuant to Federal or State banking laws, and a party
to an effective Settling Bank Agreement.
The term “Settling Bank Agreement” means an agreement by and among the
Corporation, a Settling Bank and a Participant pursuant to which the Settling Bank
undertakes to perform settlement services for the Participant on terms approved by the
Corporation.
18 DECEMBER 2008
Settling Bank Net Debit Cap
The term “Settling Bank Net Debit Cap” has the meaning provided in Rule 9(D).
Uncertificated Security
The term “Uncertificated Security” has the meaning given to the term
“uncertificated security” in Section 8-102 of the NYUCC.
Withdrawal
The term “Withdrawal”, as used with respect to a Security held in the form of a
Security Entitlement of a Participant or Pledgee on the books of the Corporation, means
(i) debiting the Security from an Account of a Participant or Pledgee and (ii) Delivering
the Security to a Participant or Pledgee (or its designee) outside the facilities of the
Corporation.
Section 2. Set forth below are certain other terms defined in these Rules, and the place in
these Rules where such other terms are defined and used:
19 DECEMBER 2008
P&I Scheduled Payment Rule 4(A) Section 3
P&I Security Interest Rule 4(A) Section 3
Pool Rule 22 Section 3
Preferred Stock Security Interest Rule 4 Section 2
Section 8 Pro Rata Charge Rule 4 Section 6
Settling Bank Refusal Rule 9(D)
Short Charge Rule 9(B) Section 2
Special Representative Rule 6
Time of Insolvency Rule 12 Section 4
Transaction Rule 6
Voting Rights Rule 6
Section 3. Unless the context otherwise requires, in these Rules (a) words using the
singular number include the plural number, (b) words of masculine gender include the feminine
gender, (c) words defined as nouns shall have their correlative meanings as adjectives or verbs
and words defined as verbs shall have their correlative meanings as adjectives or nouns, (d) the
terms “Rule” or “Section” refer to the specified Rule or Section of these Rules, (e) the terms
“Chairman of the Board”, “President”, “Secretary”, “Managing Director” and “Vice President”
refer to the Chairman of the Board, President, Secretary and any Managing Director or Vice
President of the Corporation, (f) any reference to a number of days shall mean calendar days
unless Business Days are specified and (g) any reference to notice shall mean written notice
unless another form of notice is specified.
Section 4. The Rules, Procedures and the rights and obligations under the By-Laws, the
Rules and the Procedures, shall be governed by, and construed in accordance with, the laws of
the State of New York applicable to contracts executed and performed therein.
20 MARCH 2007
RULE 2
Section 1. The Corporation shall make its services, or certain of its services, available to
partnerships, corporations or other organizations or entities which (i) apply to the Corporation for
the use of such services, (ii) meet the qualifications specified in Rule 3, (iii) are approved by the
Corporation and (iv) if required, make a Required Participants Fund Deposit pursuant to Section
1 of Rule 4 and Required Preferred Stock Investment pursuant to Section 2 of Rule 4. The
Corporation shall approve applications only upon a determination by the Corporation that the
applicant meets the standards of financial condition, operational capability and character defined
below:
(a) the applicant has demonstrated that it has sufficient financial ability to make
any Required Participants Fund Deposit and Required Preferred Stock Investment and
meet all of its anticipated obligations to the Corporation;
(b) the applicant has demonstrated that it has adequate personnel capable of
handling transactions with the Corporation and adequate physical facilities, books and
records and procedures to fulfill its anticipated commitments to, and to meet the
operational requirements of, the Corporation, other Participants and Pledgees with
necessary promptness and accuracy and to conform to any condition and requirement
which the Corporation reasonably deems necessary for its protection; and
(i) the Corporation shall have reasonable grounds to believe that the
applicant or its Controlling Management to be responsible for (A) making a
misstatement of a material fact or omitting to state a material fact to the
Corporation in connection with its application to become a Participant or there-
after or (B) fraudulent acts or the violation of the Securities Act, the Exchange
Act, the Investment Company Act, the Investment Advisers Act or any rule or
regulation thereunder;
In addition to items (a) through (c) above, the Corporation shall retain the right to deny
membership to an applicant if the Corporation becomes aware of any factor or circumstance
about the applicant or its Controlling Management which may impact the suitability of that
particular applicant as a Participant of the Corporation. Further, applicants are required to
inform the Corporation as to any member of its Controlling Management that is or becomes
subject to statutory disqualification (as defined in Section 3(a)(39) of the Exchange Act).
The Corporation may approve the application of any applicant, either unconditionally or on an
appropriate temporary or other conditional basis, if the Corporation determines that any standard
specified in this Section, as applied to such applicant or its Controlling Management, is unduly
or disproportionately severe or that the conduct of such applicant or its Controlling Management
has been such as not to make it against the interest of the Corporation, other Participants or
Pledgees or the public to approve such application.
Notwithstanding the foregoing, the Corporation may decline to accept the application of any
applicant upon a determination by the Corporation that the Corporation does not have adequate
personnel, space, data processing capacity or other operational capability at that time to perform
its services for additional Participants without impairing the ability of the Corporation to provide
services for its existing Participants, to assure the prompt, accurate and orderly processing and
settlement of Securities transactions, to safeguard the funds and Securities held by or for the
Corporation for Participants or Pledgees or otherwise to carry out its functions; provided,
however, that applicants whose applications are denied pursuant to this paragraph shall be
approved as promptly as the capabilities of the Corporation permit in the order in which their
applications were filed with the Corporation.
22 SEPTEMBER 2001
The Corporation shall apply the foregoing requirements on a nondiscriminatory basis.
Any applicant aggrieved by action taken by the Corporation in applying such qualifications shall
be entitled to a right of appeal in accordance with Rule 22.
The entities which have made a Required Participants Fund Deposit pursuant to Section 1
of Rule 4 and Required Preferred Stock Investment pursuant to Section 2 of Rule 4 and to which
the Corporation makes all of its services available shall be known as Participants. The entities
which, if required, have made a Required Participants Fund Deposit pursuant to Section 1 of
Rule 4 and Required Preferred Stock Investment pursuant to Section 2 of Rule 4 and to which
the Corporation makes only certain of its services available shall be known as Limited
Participants. For purposes of these Rules, the term "Participant" shall include the term "Limited
Participant" unless the (i) context otherwise requires or (ii) the Procedures otherwise provide.
The Corporation may at any time cease either temporarily or definitively to make its
services available to a Participant in accordance with these Rules and the Participant shall, upon
receipt of notice thereof given by the Corporation as provided in these Rules cease to be a
Participant; provided, however, that if the Corporation notifies a Participant that it has ceased to
act for it only with respect to a particular transaction or transactions, the Participant shall
continue to be a Participant. A Participant may terminate its business with the Corporation by
notifying the Corporation as provided in Sections 7 or 8 of Rule 4 or, if for a reason other than
those specified in said Sections 7 and 8, by notifying the Corporation thereof; the Participant
shall, upon receipt of such notice by the Corporation, cease to be a Participant. In the event that
a Participant shall cease to be a Participant, the Corporation shall thereupon cease to make its
services available to the Participant, except that the Corporation may perform services on behalf
of the Participant or its successor in interest necessary to terminate the business of the Participant
or its successor with the Corporation, and the Participant or its successor shall pay to the
Corporation the fees and charges provided by these Rules with respect to services performed by
the Corporation subsequent to the time when the Participant ceases to be a Participant. The
Corporation shall immediately notify the SEC if it temporarily or definitively ceases to make its
services available to a Participant in accordance with these Rules.
Upon the request of the Corporation, a Participant shall furnish to the Corporation
information sufficient to demonstrate its satisfactory financial condition and operational
capability; provided, however, that the furnishing of any such financial or operational
information to the Corporation shall be subject to any applicable laws or rules and regulations of
regulatory bodies having jurisdiction over the Participant which relate to the confidentiality of
records.
23 SEPTEMBER 2001
(a) The Participant shall abide by the By-Laws and Rules of the Corporation and
shall be bound by all of the provisions thereof including the provisions prescribing the
rights and remedies which the Corporation shall have with respect to Securities held by or
for the Corporation for the Participant’s account, and the Corporation shall have all of the
rights and remedies contemplated by the By-Laws and Rules of the Corporation.
Notwithstanding that the Participant may have ceased to be a Participant, the Participant
shall continue to be bound by the By-Laws and Rules of the Corporation as to all matters
and transactions occurring while the Participant was a Participant.
(b) The By-Laws and Rules of the Corporation shall be a part of the terms and
conditions of every contract or transaction which the Participant may make or have with
the Corporation.
(c) The Participant shall pay to the Corporation the compensation due it for
services rendered to the Participant based on the Corporation’s fee schedules, and such
fines as may be imposed or deposits as may be required in accordance with the By-Laws
and Rules of the Corporation for the failure to comply therewith.
(d) The Participant shall pay to the Corporation any amounts which, pursuant to
the provisions of Rule 4, shall become payable by the Participant to the Corporation.
(e) The Participant’s books and records, to the extent only that they relate to
services rendered to the Participant by the Corporation, shall at all times during the
regular business hours of the Participant (and at such other times as may be acceptable to
the Participant) be open to the inspection of the duly authorized employees or agents of
the Corporation, and the Corporation shall be furnished with all such information with
respect to such services rendered to the Participant as it may require; provided, however,
that (i) the Corporation’s right to inspect the books and records of the Participant and to
be furnished with information as provided herein shall extend only to books, records and
information relating to the Participant’s relationship with the Corporation or to contracts
or transactions which the Participant has made or had with the Corporation and shall not
extend to books, records and information relating to the Participant’s relationship with
Persons upon whose behalf it may obtain the services of the Corporation nor to books,
records and information relating to such persons, their accounts or market activity and (ii)
the Corporation’s right to inspect the books and records of the Participant and to be
furnished with information as provided herein shall be subject to any applicable laws or
rules and regulations of regulatory bodies having jurisdiction over the Participant which
relate to the confidentiality of records.
(f) The Corporation is authorized to provide to the issuer of any Security at any
time credited to the Account of the Participant the name of the Participant and the amount
of the issuer’s Securities so credited, and the Corporation is authorized to provide similar
information to any appropriate governmental authority.
(g) The determination of the Corporation by its Board of Directors shall be final
and conclusive on all questions relating to (i) any charge against the Participant, (ii) any
application of, or other action taken with respect to, the Actual Participants Fund Deposit
24 SEPTEMBER 2001
of the Participant or (iii) any Pledge or sale of, or other action taken with respect to, the
Actual Preferred Stock Investment of the Participant.
(h) The Participant appoints the Corporation its agent and attorney-in-fact (i) to
enter into a custody agreement with any bank, trust company or other appropriate entity
(a “Custodian”) chosen by it, such agreement to be in such form and containing such
terms and provisions as the Corporation may, in its sole discretion, approve, and the
Participant hereby ratifies and confirms any and all action heretofore taken by the
Corporation in this connection, and (ii) to instruct each Custodian as to the delivery of
any and all Securities held by any such Custodian pursuant to any such agreement.
(i) The Participant shall, except as otherwise permitted by the Corporation, give
all instructions by it concerning any Securities held by the Corporation for the
Participant’s account, or by any Custodian subject to the instructions of the Corporation,
through the Corporation and not otherwise.
(j) Each Custodian shall be entitled to act and rely in all respects upon, and as
regards such Custodian the Participant shall be bound by, the instructions of the
Corporation with respect to any Securities held by or for the Corporation for the
Participant’s account or by any such Custodian subject to the instructions of the
Corporation.
(k) Each Security delivered for the Participant’s account to the Corporation for
Deposit with the Corporation may be transferred into the name of any nominee
designated by the Corporation or by such Custodian as the Corporation may select, if it is
Delivered to such Custodian, and retained by the Corporation or Delivered to such
Custodian as the Corporation may select, and the Participant shall indemnify the
Corporation, and any nominee of the Corporation in the name of which Securities
credited to the Participant’s Account are registered, against all loss, liability and expense
which they may sustain, without fault on the Corporation’s part, as a result of Securities
credited to the Participant’s Account being registered in the name of any such nominee,
including (i) assessments, (ii) losses, liabilities and expenses arising from claims of third
parties and from taxes and other governmental charges, and (iii) related expenses with
respect to any such Securities.
(l) The Participant shall be bound by any amendment to the By-Laws or Rules of
the Corporation with respect to any transaction occurring subsequent to the time such
amendment takes effect as fully as though such amendment were now a part of the By-
Laws and Rules of the Corporation; provided, however, that (i) no such amendment shall
affect the Participant's right to cease to be a Participant, and (ii) unless the Participant is
given ten Business Days notice thereof and the opportunity to give written notice to the
Corporation of its election to terminate its business with the Corporation, no such
amendment shall change (A) the provisions of Section 1 of Rule 4 or the formula in
accordance with which the Required Participants Fund Deposit of the Participant is
determined or (B) the provisions of Section 2 of Rule 4 or the formula in accordance with
which the Required Preferred Stock Investment of the Participant is determined.
25 SEPTEMBER 2001
(m) The Participant’s agreement with the Corporation shall inure to the benefit of
and be binding upon the parties thereto and their respective successors and assigns.
A Participant shall use its best efforts to provide to the Corporation, at the request of the
Corporation, during the regular business hours of the Participant, current market prices and/or
bid and asked quotations for any Eligible Security.
Section 2. A Participant which utilizes the services of the Corporation for a Person which
is not a Participant shall, so far as the rights of the Corporation, other Participants and Pledgees
are concerned, be liable as principal.
Section 3. Subject to the By-Laws and these Rules, the services of the Corporation shall
be available to banks, trust companies and other persons approved by the Corporation which
have entered into an agreement with the Corporation satisfactory to it for the purpose of
facilitating loans to Participants and effecting the Pledge of Securities held by or for the
Corporation for a Participant’s account. Such banks, trust companies and other persons as are
approved by the Corporation and have entered into such an agreement shall be known as
Pledgees. A Pledgee may but need not be a Participant. Only a Pledgee which is a Participant
may receive a Pledge Versus Payment.
Section 4. Any notice from the Corporation to a Participant or Pledgee under these Rules
or under any agreement between the Corporation and a Participant or Pledgee shall be
sufficiently served on such Participant or Pledgee if the notice is in writing and electronically
made available or transmitted to the Participant or Pledgee by any means normally employed by
the Corporation for the delivery of electronic communications to such Participant or Pledgee.
Alternatively, any non electronic notice shall be sufficiently served on a Participant or Pledgee if
it is in writing and delivered or mailed to the Participant’s or Pledgee’s office address as
provided below. Any notice from a Participant or Pledgee to the Corporation, including any
notice under any agreement between the Corporation and a Participant or Pledgee, shall be
sufficiently served on the Corporation if the notice is in writing and delivered or mailed to the
Corporation at 55 Water Street, New York, New York 10041, Attention: Secretary. Any such
notice to a Participant or Pledgee, if made available or transmitted electronically, shall be
deemed to have been given, respectively, at the time of availability or transmission. Any such
notice to a Participant or Pledgee, if delivered or mailed, shall be deemed to have been given,
respectively, at the time of delivery or when deposited in the United States Postal Service, with
postage thereon prepaid, directed to the Participant or Pledgee at the Participant’s or Pledgee’s
office address to the attention of such Person as the Participant or Pledgee shall have designated
in writing or, if the Participant or Pledgee shall have filed with the Corporation a written request
that notice, if made by delivery or mail, be delivered at some other address, then to such other
address. Any such notice to the Corporation, if mailed, shall be deemed to have been given
when received by the Corporation at the address specified above.
Section 5. These Rules and the Procedures and the terms and conditions of every
agreement and transaction by and among Participants or Pledgees and the Corporation in
connection therewith and pursuant thereto are not intended to confer upon any persons other than
such Participants or Pledgees any rights or remedies against the Corporation.
26 SEPTEMBER 2001
Section 6. The Corporation is authorized, under conditions established by the
Corporation in its sole discretion, to provide information throughout each Business Day relating
to a Participant’s Aggregate Actual Deposit and Investment (and each Component thereof),
Collateral, Net Credit Balance and Net Debit Balance (i) to any other clearing agency that is
registered with the SEC of which the Participant is a member, (ii) to any clearing organization
that is affiliated with or has been designated by a futures contract market under the oversight of
the Commodities Futures Trading Commission of which the Participant is a member and (iii)
upon the request of the Participant, to such other entities, including information service
providers, as the Participant may designate. This authorization shall in no manner be deemed to
limit the Corporation’s authority to provide such information to other self-regulatory
organizations registered with the SEC and to regulators of the Corporation or as required by
valid legal process served upon the Corporation.
Section 7. Notwithstanding any affiliation between the Corporation and any other entity,
including another clearing agency, except as otherwise expressly provided by written agreement
between the Corporation and such other entity:
(a) the Corporation shall not be liable for any obligations of such other entity nor
shall the Participants Fund or other assets of the Corporation be available to such
other entity (or any person claiming through such other entity) for any purpose,
and no participant or member of such entity shall assert against the Corporation
any claim based upon any obligations of such other entity to such participant or
member; and
(b) such other entity shall not be liable for any obligations of the Corporation, nor
shall the Clearing Fund or any other assets of such other entity be available to the
Corporation (or any person claiming through the Corporation) for any purpose,
and no Participant or Member shall assert against such other entity any claim
based upon any obligations of the Corporation to such participant or member.
Section 8. In connection with their use of the Corporation’s services, Participants and
Pledgees must comply with all applicable laws, including all applicable laws relating to
securities, taxation, and money laundering, as well as sanctions administered and enforced by the
Office of Foreign Assets Control (“OFAC”). As part of their compliance with OFAC sanctions
regulations, all Participants and Pledgees must agree not to conduct any transaction or activity
through DTC that it knows violates sanctions administered and enforced by OFAC.
Participants and Pledgees subject to the jurisdiction of the United States are required to
periodically confirm that the Participant or Pledgee has implemented a risk-based program
reasonably designed to comply with applicable OFAC sanctions regulations.
27 SEPTEMBER 2009
RULE 3
PARTICIPANTS QUALIFICATIONS
(h) if it does not qualify under paragraphs (a) through (g) above, it is (i) a
financial institution which demonstrates to the Board of Directors that its business and
capabilities are such that it could reasonably expect material benefit from direct access to
the Corporation’s services or (ii) a broker-dealer registered under the Exchange Act.
28 AUGUST 1998
RULE 4
Section 1. The Participants Fund shall comprise the Actual Participants Fund Deposits of all
Participants, as provided in these Rules and as specified in the Procedures.
(b) The Corporation shall determine on a daily basis for each Participant the
amount of its Required Participants Fund Deposit, and the Corporation shall notify each
Participant of any change in the amount of its Required Participants Fund Deposit. If the
Actual Participants Fund Deposit of a Participant is less than the amount of its Required
Participants Fund Deposit, the Participant shall Deposit to the Participants Fund, in the
manner specified in the Procedures, the amount needed to eliminate the deficiency. If the
Actual Participants Fund Deposit of a Participant is more than the amount of its Required
Participants Fund Deposit, the Corporation shall pay to the Participant from the
Participants Fund, in the manner specified in the Procedures, the amount of the excess, or
such lesser amount as the Participant may request; provided, however, that the
Corporation may determine, in its sole discretion, not to return such excess deposit (i) if
the Collateral Monitor with respect to any Account Family of the Participant is negative
or will be negative as a consequence thereof, (ii) if any Account Family of the Participant
will, immediately after the return of such excess deposit, have a negative balance which
exceeds the Net Debit Cap for that Account Family, (iii) until any amount which is
required to be charged or levied against the Participant or its Required Participants Fund
Deposit is paid by the Participant to the Corporation, (iv) if the Corporation determines
that the recent use of any service of the Corporation by the Participant is materially
different from its prior use of such service and that a higher Required Participants Fund
29 SEPTEMBER 2000
Deposit is thereby justified and (v) until after the amounts, if any, to be charged or levied
against the Participant or its Required Participants Fund Deposit on account of
transactions which occurred previously have been satisfied. Notwithstanding the
foregoing, the Corporation may withhold all or part of any excess deposit of a Participant
if the Corporation determines, in its sole discretion, that such action is necessary for the
protection of the Corporation, other Participants or Pledgees.
(d) The Required Participants Fund Deposit and any Voluntary Participants Fund
Deposit of a Participant shall be in cash. All amounts due to or from a Participant in
connection with increases and decreases in its Required Participants Fund Deposit
(pursuant to this Section or Section 2 of Rule 9(A)) and any Voluntary Participants Fund
Deposit may be credited to or debited from its Settlement Account.
(e) A Participant with more than one Account Family may, in the manner
specified in the Procedures, designate the portion of its Actual Participants Fund Deposit
to be allocated to each Account Family at the opening of business each Business Day.
The Corporation shall not be obligated to make any allocations in accordance with such
instructions if the Corporation determines, in its sole discretion, that such action might
result in financial loss to the Corporation, other Participants or Pledgees. The
Corporation may allocate, in the manner specified in the Procedures, any portion of the
Actual Participants Fund Deposit of a Participant which is not allocated by the
Participant.
(f) The Actual Participants Fund Deposits of Participants to the Participants Fund
shall be held by the Corporation and shall be applied as provided in these Rules and as
specified in the Procedures. The Participants Fund shall be limited to the satisfaction of
losses or liabilities of the Corporation incident to the business of the Corporation. For
purposes of this Section, the term "business" with respect to the Corporation shall mean
the doing of all things in connection with or relating to the Corporation's performance of
the services specified in the first and second paragraphs of Rule 6 or the cessation of such
services. Notwithstanding anything to the contrary in this Rule, the Participants Fund
may be used as provided in any Clearing Agency Agreement.
(g) The cash in the Participants Fund may be partially or wholly invested by the
Corporation, in its sole discretion, for its account in securities issued or guaranteed as to
principal and interest by the United States or agencies or instrumentalities of the United
States or repurchase agreements relating to securities issued or guaranteed as to principal
and interest by the United States or agencies or instrumentalities of the United States and
to the extent not so invested shall be deposited by the Corporation in its name in a
depository or depositories selected by the Corporation. Any securities, repurchase
agreements or deposits in which cash in the Participants Fund is invested may be sold by
the Corporation or Pledged as security for loans made to the Corporation, as provided in
30 SEPTEMBER 2000
Rule 4(A). The Corporation shall pay interest to a Participant on the cash such
Participant has Deposited to the Participants Fund at the rate the Corporation earns on
securities and repurchase agreements in which such cash is invested or as specified in the
Procedures.
(h) After three months from when a Person has ceased to be a Participant, the
Corporation shall return to such Person (or its successor in interest or legal
representative) the amount of the Actual Participants Fund Deposit of the former
Participant plus accrued and unpaid interest to the date of such payment (including any
amount added to the Actual Participants Fund Deposit of the former Participant pursuant
to Section 2(h) of this Rule), provided that the Corporation receives such indemnities and
guarantees as the Corporation deems satisfactory with respect to the matured and
contingent obligations of the former Participant to the Corporation. Otherwise, within
four years after a Person has ceased to be a Participant, the Corporation shall return to
such Person (or its successor in interest or legal representative) the amount of the Actual
Participants Fund Deposit of the former Participant plus accrued and unpaid interest to
the date of such payment, except that the Corporation may offset against such payment
the amount of any known loss or liability to the Corporation arising out of a related to the
obligations of the former Participant to the Corporation.
Section 2. The Participants Investment shall comprise the Required Preferred Stock Investments
of all Participants, as provided in these Rules and as specified in the Procedures.
(b) The Corporation shall determine on a quarterly basis for each Participant the
amount of its Required Preferred Stock Investment, and the Corporation shall notify each
Participant of any change in the amount of its Required Preferred Stock Investment. If
the Actual Preferred Stock Investment of a Participant is less than the amount of its
Required Preferred Stock Investment, such Participant shall purchase, in the manner
specified in the Procedures, the number of outstanding shares of Preferred Stock needed
to eliminate the deficiency. If the Actual Preferred Stock Investment of a Participant is
more than the amount of its Required Preferred Stock Investment, such Participant shall
sell, in the manner specified in the Procedures, the number of its shares of Preferred
Stock needed to eliminate the excess. The Corporation, acting as agent and attorney-in-
31 SEPTEMBER 2000
fact for its Participants, shall effect the foregoing purchases and sales of shares of
Preferred Stock on their behalf, so that each Participant shall own the amount of its
Required Preferred Stock Investment, as adjusted from time to time in accordance with
the provisions of Paragraph (a) of this Section 2 and this Paragraph (b).
(c) A Participant may not purchase from the Corporation or any other Participant
any shares of Preferred Stock in excess of the amount of its Required Preferred Stock
Investment.
(e) A Participant with more than one Account Family may, in the manner
specified in the Procedures, designate the portion of its Actual Preferred Stock
Investment to be allocated to each Account Family at the opening of business each
Business Day. The Corporation shall not be obligated to make any allocations in
accordance with such instructions if the Corporation determines, in its sole discretion,
that such action might result in financial loss to the Corporation, other Participants or
Pledgees. The Corporation may allocate, in the manner specified in the Procedures, any
portion of the Actual Preferred Stock Investment of a Participant which is not allocated
by the Participant.
32 SEPTEMBER 2000
(f) To secure the obligations of Participants to the Corporation, the Corporation,
acting as agent and attorney-in-fact for its Participants, may (i) Pledge the entire right,
title and interest of any Participant in and to some or all of its shares of Preferred Stock,
together with all distributions thereon, proceeds thereof and replacements or substitutions
therefor (a "Preferred Stock Security Interest"), as collateral security for the obligations
of the Corporation to its Lenders under any credit facility maintained by the Corporation
for the purpose of funding the end-of-day settlement of transactions processed through
the facilities of the Corporation (an "End-of-Day Credit Facility") or (ii) sell some or all
of the shares of Preferred Stock of any Participant to other Participants (who shall be
obligated to purchase such shares pro rata their Required Preferred Stock Investments at
the time of such purchase), and apply the proceeds of such sale to the obligations of such
Participant to the Corporation. Any such Pledge of a Preferred Stock Security Interest
pursuant to this Paragraph (f), shall be made by appropriate entries on the books of the
Corporation (and such entries shall be deemed to be a security agreement for purposes of
the NYUCC) or by any other means provided in the NYUCC, and each Participant
hereby grants to the Corporation an irrevocable power of attorney (coupled with an
interest) to execute and deliver, in the name and on behalf of such Participant, any and all
additional documents, instruments, agreements and financing statements necessary or
desirable as determined by the Corporation, in its sole discretion, to create and perfect the
Pledge of the Preferred Stock Security Interest by the Corporation to its Lenders under
the End-of-Day Credit Facility. Any such sale of shares of Preferred Stock pursuant to
this Paragraph (f), and application of the proceeds thereof as provided herein, shall be
effected by the Corporation without any further action or consent required on the part of
the Participant whose shares of Preferred Stock are sold, and the Settlement Account of
such Participant shall be credited with the full amount of such proceeds.
(g) The Corporation shall pay dividends on the Preferred Stock at a rate fixed by
the Board of Directors in accordance with the Organization Certificate of the
Corporation.
(h) Promptly after a Person has ceased to be a Participant, the Corporation, acting
as agent and attorney-in-fact for such Person (or its successor in interest or legal
representative), shall sell all of the shares of Preferred Stock of the former Participant to
current Participants (who shall be required to purchase such shares pro rata their
Required Preferred Stock Investments at the time of such purchase), and add the proceeds
thereof to the Actual Participants Fund Deposit of the former Participant for disposition
in accordance with Section 1(h) of this Rule.
(A) if (1) such Participant gives the Corporation at least twenty Business Days
prior written notice of the proposed transfer and (2) such transfer is effected in the
course of or pursuant to (x) a merger or consolidation of such Participant into or
with such Person or (y) a sale of all or substantially all of the business and assets
of such Participant to such Person and (3) such Person is also a Participant; or
33 SEPTEMBER 2000
(B) if (1) such Participant (x) gives the Corporation and all other Participants
at least twenty Business Days prior written notice of the proposed transfer and (y)
offers to sell the shares to such other Participants (pro rata their Required
Preferred Stock Investments at the time of such offer) at the lower of (I) the
aggregate purchase price that such Person has agreed to pay for the shares or (II)
the aggregate Preferred Stock Par Value of the shares and (2) the Corporation,
acting as agent and attorney-in-fact for such other Participants, declines on their
behalf to purchase the shares on such terms.
Section 3. If a Participant is obligated to the Corporation, other than for a pro rata charge
pursuant to Section 5 of this Rule, and fails to satisfy such obligation, including without
limitation the obligation of the Participant to reimburse the Corporation for the amount of any
payment with respect to such Participant paid by or owing from the Corporation to any other
clearing agency pursuant to a Clearing Agency Agreement, the Corporation shall, in such order
and in such amounts as the Corporation shall determine, in its sole discretion, to the extent
necessary to eliminate such obligation:
(a) apply some or all of the Actual Participants Fund Deposit of such Participant
to such obligation;
(b) Pledge some or all of the shares of Preferred Stock of such Participant to its
Lenders as collateral security for a loan under the End-of-Day Facility; and/or
(c) sell some or all of the shares of Preferred Stock of such Participant to other
Participants (who shall be required to purchase such shares pro rata their Required
Preferred Stock Investments at the time of such purchase), and apply the proceeds of such
sale to such obligation.
If the Corporation takes any of the foregoing actions, the Participant shall, upon the demand of
the Corporation, within such time as the Corporation shall require:
(a) Deposit to the Participants Fund the amount in cash needed to eliminate any
resulting deficiency in its Required Participants Fund Deposit;
(b) wire to the Corporation an amount in cash sufficient to discharge any loan
secured by its shares of Preferred Stock; and/or
(c) repurchase any of its shares of Preferred Stock sold to other Participants.
34 SEPTEMBER 2000
If the Participant shall fail to take any action demanded by the Corporation, the Corporation may
take disciplinary action against the Participant pursuant to these Rules. Any disciplinary action
which the Corporation takes pursuant to these Rules, or the voluntary or involuntary cessation of
participation by the Participant, shall not affect the obligation of the Participant to the
Corporation or any remedy to which the Corporation may be entitled under applicable law.
Section 4. If the Corporation incurs a loss or liability which is not satisfied by charging
the Participant or Participants responsible for causing the loss or liability pursuant to Section 3 of
this Rule, the Corporation shall, in such order and in such amounts as the Corporation shall
determine, in its sole discretion, to the extent necessary to satisfy such loss or liability:
(a) apply some or all of the Actual Participants Fund Deposits of all other
Participants to such loss or liability, in which case:
(1) with respect to any loss or liability incurred by the Corporation in connection
with any payment required to be made by the Corporation to any other
clearing agency pursuant to a Clearing Agency Agreement, the Actual
Participants Fund Deposit of each Participant that is concurrently a member
of such other clearing agency, excluding the Participant or Participants
responsible for causing the loss or liability, shall be applied pro rata (A) its
Required Participants Fund Deposit (as such Required Participants Fund
Deposit was fixed at the time the loss or liability was discovered) less (B) any
portion of such Required Participants Fund Deposit attributable to any
additional amount that such Participant was required to Deposit to the
Participants Fund pursuant to Section 2 of Rule 9(A); or
(2) with respect to any other loss or liability incurred by the Corporation, the
Actual Participants Fund Deposit of each Participant, excluding the
Participant or Participants responsible for causing the loss or liability, shall be
applied pro rata (A) its Required Participants Fund Deposit (as such Required
Participants Fund Deposit was fixed at the time the loss or liability was
discovered) less (B) any portion of such Required Participants Fund Deposit
attributable to any additional amount that such Participant was required to
Deposit to the Participants Fund pursuant to Section 2 of Rule 9(A); and/or
(b) charge the existing retained earnings and undivided profits of the
Corporation.
If the Participants Fund is applied to a loss or liability, the Corporation shall promptly
after the event notify each Participant and the SEC of the amount applied and the reasons
therefor.
Section 5. Except as provided in Section 8 of this Rule, if a pro rata charge is made
pursuant to Section 4 of this Rule against the Required Participants Fund Deposit of a
Participant, and, as a consequence, the Actual Participants Fund Deposit of such Participant is
less than its Required Participants Fund Deposit, the Participant shall, upon the demand of the
Corporation, within such time as the Corporation shall require, Deposit to the Participants Fund
35 SEPTEMBER 2000
the amount in cash needed to eliminate any resulting deficiency in its Required Participants Fund
Deposit. If the Participant shall fail to make such deposit to the Participants Fund, the
Corporation may take disciplinary action against the Participant pursuant to these Rules. Any
disciplinary action which the Corporation takes pursuant to these Rules, or the voluntary or
involuntary cessation of participation by the Participant, shall not affect the obligations of the
Participant to the Corporation or any remedy to which the Corporation may be entitled under
applicable law.
Section 7. Except for any increase in the amount of the Required Participants Fund
Deposit of a Participant pursuant to Section 2 of Rule 9(A), the Corporation shall give a
Participant at least ten Business Days prior notice of any proposed increase in its Required
Participants Fund Deposit or Required Preferred Stock Investment.
(a) If a Participant does not, within the time allowed, give the Corporation notice
(in the manner specified in Section 4 of Rule 2) of its election to terminate its business
with the Corporation, the Participant shall be required to Deposit the amount needed to
satisfy any such increase in its Required Participants Fund Deposit, and the obligation of
the Participant to make such deposit shall not be affected by any subsequent voluntary or
involuntary cessation of participation of the Participant. From and after the time such
increase becomes effective, the obligations of the Participant to the Corporation shall be
determined in accordance with such increased Required Participants Fund Deposit of the
Participant whether or not the appropriate amount has been Deposited in the Participants
Fund. For purposes of this Section, an increase in the Required Participants Fund
Deposit of a Participant shall include an increase resulting from the application of the
formulas provided for in Section 1 of this Rule and shall also include an increase
resulting from a change in such formulas.
36 SEPTEMBER 2000
(b) If a Participant does not, within the time allowed, give the Corporation notice
(in the manner specified in Section 4 of Rule 2) of its election to terminate its business
with the Corporation, the Participant shall be required to purchase the number of shares
of Preferred Stock needed to satisfy any such increase in its Required Preferred Stock
Investment, and the obligation of the Participant to make such purchase shall not be
affected by any subsequent voluntary or involuntary cessation of participation of the
Participant. From and after the time such increase becomes effective, the obligations of
the Participant to the Corporation shall be determined in accordance with such increased
Required Preferred Stock Investment of the Participant whether or not the appropriate
number of shares of Preferred Stock have been purchased. For purposes of this Section,
an increase in the Required Preferred Stock Investment of a Participant shall include an
increase resulting from the application of the formulas provided for in Section 2 of this
Rule and shall also include any increase resulting from a change in such formulas.
Section 8. If a Participant, within ten Business Days after receipt of notice of a pro rata
charge for a loss or liability incurred by the Corporation pursuant to Section 4 of this Rule, gives
notice to the Corporation of its election to terminate its business with the Corporation, the
Participant shall nevertheless remain obligated for such pro rata charge.
The Corporation may also make additional pro rata charges attributable to the same loss
or liability. In that event, notwithstanding the limitation set forth in Section 6 of this Rule, the
obligation of a Participant which elects to terminate its business with the Corporation pursuant to
this Section shall be limited to the greater of (a) the amount of its Aggregate Required Deposit
and Investment, as fixed immediately prior to the time of the first pro rata charge, plus 100% of
the amount thereof, or (b) the amount of all prior pro rata charges attributable to the same loss or
liability with respect to which the Participant has not timely exercised its right to limit its
obligation as provided above.
Section 9. If a loss charged pro rata is afterward recovered by the Corporation, in whole
or in part, the net amount of the recovery shall be credited to the Persons against whom the loss
was charged in proportion to the amounts charged against them by (a) crediting the appropriate
amounts to the Actual Participants Fund Deposits of Persons which are still Participants and (b)
paying the appropriate amounts in cash to Persons which are not still Participants.
37 SEPTEMBER 2000
RULE 4(A)
Section 1. In furtherance of the rights of the Corporation pursuant to these Rules and the
Procedures and for the purpose of securing loans made to the Corporation, subject only to such
terms and conditions as may be provided in these Rules, the Corporation shall have full power
and authority to pledge, repledge, hypothecate, transfer, create a security interest in, or assign
(any such act being referred to as a “Pledge” for purposes of this Rule) any or all of the
following property or the proceeds thereof: (a) cash deposits to the Participants Fund (any such
cash deposits being referred to as “Cash” for purposes of this Rule), and all securities, repurchase
agreements or deposits in which such Cash is invested, (b) Net Additions, including any Security
Entitlements of Participants in Net Additions, and (c) Preferred Stock. Such loans shall be on
terms and conditions deemed necessary or advisable by the Corporation (including
collateralization thereof), in its sole discretion, and may be in amounts greater, and extend for
periods of time longer, than the obligations, if any, of any Participant to the Corporation secured
by the Pledge (by book entry or otherwise) of such property. No Participant shall have any right,
claim or action against any secured Lender (or any collateral agent of such secured Lender) for
the return, or otherwise in respect, of any such collateral Pledged by the Corporation to such
secured Lender (or its collateral agent), so long as any loans made by such Lender to the
Corporation or other obligations, secured by such collateral, are unpaid and outstanding. The
reduction in the amount of any Required Participants Fund Deposit or Required Preferred Stock
Investment of a Participant at any time after property of the Participant has been Pledged by the
Corporation to a Lender shall not be effective until that Pledge is Released by the Lender.
Subject to the foregoing and to the terms and conditions of any loan to the Corporation secured
by property Pledged pursuant hereto, the Corporation shall remain obligated to each Participant
to return, and to allow substitution for or withdrawal of, Cash, Net Additions and Preferred
Stock, under the circumstances and within the time frames provided in these Rules and specified
in the Procedures. In the event of any conflict or inconsistency between this Rule 4(A) and any
agreement between the Corporation and any Participant, this Rule 4(A) shall govern and prevail.
Section 2. Any of the property specified in items (a) through (c) of Section 1 of this Rule
or the proceeds thereof which constitute Securities (or an interest therein) which (a) if
certificated, are in the custody of the Corporation or its custodian bank and in bearer form or
endorsed in blank by an appropriate person or registered in the name of the Corporation, its
custodian bank or the nominee of either, or (b) if uncertificated, are registered in the name of the
Corporation, its custodian bank or the nominee of either and (c) in either case, are credited to an
Account of a Participant on the books of the Corporation, may be Pledged to the Corporation by
the Participant and may be re-Pledged or transferred by the Corporation to its Lenders, or to its
Participants as provided in Section 2 of Rule 9(B), by book entry on the books of the Corporation
as provided herein. When the property is so Pledged or re-Pledged, the Corporation shall make
appropriate entries to reflect the transfer of a security interest in the subject property from the
Participant to the Corporation and from the Corporation to the Lender or to a Participant, as the
case may be.
38 JULY 2003
In the case of Net Additions other than Incomplete Transactions, when designated as Net
Additions upon the instruction of the Participant or by operation of these Rules and the Proced-
ures, the Corporation shall make appropriate book entries.
The Release of any such Pledge shall be effected by appropriate book entries made by the
Corporation reflecting such Release either (a) when instructed by the Pledgee or (b) where the
Corporation is the Pledgee, upon its determination, subject to the terms and conditions of any
agreement between the Corporation and its Lenders, that such Release is in accordance with the
requirements of these Rules and the Procedures.
Section 3. If the Corporation does not receive a scheduled principal, interest, dividend,
reorganization or redemption payment (a “P&I Scheduled Payment”) on a Security held by or for
the Corporation for the account of a Participant or Pledgee by a time specified in the Procedures
on the payment date therefor (the “P&I Payment Date”), the Corporation may advance to the
Participant or, as specified in the Procedures, to the Pledgee an amount equal to the P&I
Scheduled Payment due on that Security on that P&I Payment Date (a “P&I Cash Advance”), as
follows:
(a) To fund a P&I Cash Advance, the Corporation may borrow the required
amount under a credit facility maintained by the Corporation for that purpose with one or
more Lenders (a “P&I Credit Facility”), on such terms and conditions as the Corporation
deems necessary or advisable.
(c) A P&I Cash Advance from the Corporation to a Participant or Pledgee shall
be made by an immediate credit to the Account of such Participant or the Account
designated by such Pledgee.
39 JULY 2003
determined by the Corporation, in its sole discretion, to create and perfect (i) the Pledge
of the P&I Security Interest by the Participant or Pledgee to the Corporation and (ii) the
re-Pledge of the P&I Security Interest by the Corporation to its Lenders under the P&I
Credit Facility.
(e) If the Corporation or its Lenders pursuant to their security interest receive a
P&I Scheduled Payment, with respect to which the Corporation has made a P&I Cash
Advance, on or after the P&I Payment Date (the “P&I Receipt Date”), (i) the P&I Cash
Advance shall constitute full satisfaction of the obligation of the Corporation to credit the
Account of the Participant or Pledgee for the amount of the P&I Scheduled Payment, (ii)
the Corporation shall retain the P&I Scheduled Payment, and debit the Account of the
Participant or Pledgee for the P&I Finance Cost (as defined below) of the Corporation for
the P&I Finance Period (as defined below), in full satisfaction of the obligation of the
Participant or Pledgee to repay the P&I Cash Advance, and (iii) the Pledge shall be
released and the entries on the books of the Corporation effecting the Pledge shall be
reversed.
(f) If the Corporation or its Lenders pursuant to their security interest do not
receive a P&I Scheduled Payment, with respect to which the Corporation has made a
P&I Cash Advance, within a time specified in the Procedures (the “P&I Reversal Date”),
the Corporation shall debit the Account of the Participant or Pledgee in the aggregate
amount of the P&I Cash Advance, together with the P&I Finance Cost of the Corporation
for the P&I Finance Period, in full satisfaction of the obligation of the Participant or
Pledgee to repay the P&I Cash Advance.
(g) Upon the repayment of all amounts due from the Corporation to its Lenders
under the P&I Credit Facility, the re-Pledge shall be released and the entries on the books
of the Corporation effecting the re-Pledge shall be reversed.
The term “P&I Finance Cost” with respect to a P&I Cash Advance shall mean the interest
and other charges payable by the Corporation to its Lenders under the P&I Credit Facility on
money borrowed by the Corporation to fund the P&I Cash Advance.
The term “P&I Finance Period” shall mean the period from and including the
P&I Payment Date to but not including the earlier of (x) the P&I Receipt Date or (y) the P&I
Reversal Date.
40 JULY 2003
RULE 5
ELIGIBLE SECURITIES
MMI Securities shall only be those money market instruments which meet the
requirements of the preceding paragraph and which, in the sole discretion of the Corporation, are
designated as eligible for the MMI Program as specified in the Procedures.
Participants and Pledgees shall not have credited, or continue to have credited, to their
accounts at the Corporation, or seek to have the Corporation accept as an Eligible Security, any
Security of an issuer that is listed on the Office of Foreign Assets Control (“OFAC”) issuer list
distributed by the U.S. Department of the Treasury, or of an issuer that is incorporated in a
country that is on the OFAC list of “pariah” countries.
Section 2. An Eligible Security which the Corporation in its sole discretion, determines
no longer meets the requirements of Section 1 of this Rule shall cease to be an Eligible Security.
In addition, the Corporation may determine that an Eligible Security shall cease to be such in the
event that (a) it shall have been suspended from being traded over-the-counter by the SEC
pursuant to Section 15(c)(5) of the Exchange Act or from being traded on any national securities
exchange, (b) the Board of Directors finds (i) that the level of activity concerning the Security
during the period of three consecutive months preceding that determination is insufficient to pro-
duce benefits commensurate with the costs for Participants arising from its continued inclusion
or (ii) that the availability of certificates representing the Security has been insufficient to permit
the Corporation to render its services to Participants or Pledgees in respect thereof, (c) the
Corporation determines that the Security must be exchanged for, or will be converted into,
another Security which is not an Eligible Security or (d) the Security is subject to a tender offer
or an exchange offer.
With respect to MMI Securities whose eligibility is premised (in whole or in part) on a
published credit rating, if the rating of a particular MMI Security is lowered by a rating agency,
as specified in the Procedures, or if the issuer of an MMI Security becomes insolvent, as defined
in Rule 12 and as specified in the Procedures, or if there is a Payment Refusal, as provided in
Rule 9(C) and as specified in the Procedures, the Corporation may, in its sole discretion and as
specified in the Procedures, terminate eligibility and discharge that MMI Security from the MMI
Program, or maintain eligibility but Devalue that MMI Security within the MMI Program. Any
41 APRIL 2003
such termination of eligibility or discharge or Devaluation shall be purely internal to the
Corporation and the MMI Program and shall not be construed or deemed to reflect any
independent credit judgment of the Corporation as to the MMI Security, the issuer, the MMI
Issuing Agent or the MMI Paying Agent; a termination of eligibility or discharge or Devaluation
is not intended to affect the underlying rights and obligations of parties to transactions in the
MMI Security, subject to applicable law, rules and regulations, agreements or any subsequent
adjudication thereof.
Notwithstanding any of the foregoing, and further to the purpose of the preceding
paragraph, any Security (including any MMI Security) shall cease to be an Eligible Security as
provided in the two preceding paragraphs or upon a finding by the Corporation, in its judgment,
that the continued eligibility of the Security might endanger the financial condition of the
Corporation, other Participants or Pledgees.
42 APRIL 2003
RULE 6
SERVICES
Subject to the provisions of these Rules and the Procedures, the Corporation, acting in ac-
cordance with duly authorized instructions from the Participant or Participants and the Pledgee
or Pledgees, if any, having an interest in the transaction, shall: accept Eligible Securities from
Participants for Deposit with the Corporation; credit the Account of a Participant with the
Securities it Deposits with the Corporation prior to such time as the registration of the transfer
thereof into the name of the Corporation’s nominee is effected unless (a) the Corporation rejects
the Deposit due to its determination, in its sole discretion, that the Securities Deposited are not in
proper form for registration of transfer or (b) the Securities are part of an issue with respect to
which the Corporation, by reason of the historical transfer performance of the issuer thereof or
the transfer agent therefor, shall have, at least ten Business Days prior to the day of the deposit,
given notice to Participants and the SEC that it will not credit the Accounts of Participants which
Deposit Securities of that issue until such time as it determines that the registration of the transfer
thereof into the name of the Corporation’s nominee has been effected, in which event such credit
shall be effected upon the Corporation’s determination that such registration of transfer has been
effected; effect transfers by a Participant of its Deposited Securities to another Participant or
Participants; effect Pledges by a Participant of its Deposited Securities to a Pledgee or Pledgees
and effect the release of such Pledges, except that if the Corporation has not made a
determination that a specific issue of Securities may lawfully be the subject of a Pledge by
book-entry or if the Corporation has designated Deposited Securities of such issue as ineligible
for Pledge through its facilities, the Corporation shall not be obligated to effect Pledges of such
Deposited Securities; Deliver to a Participant or its designee a Participant’s Deposited Securities
(x) registered in the name of and endorsed by the Corporation’s nominee, (y) endorsed to the
Corporation’s nominee and endorsed by the Corporation’s nominee or (z) subject to the
availability of transfer services, registered in the name of such Participant or its designee; deliver
dividends, distributions, rights, securities, proxy material and other property or documents
received by the Corporation with respect to a Participant’s Deposited Securities or Pledged
Securities, except as provided below in this Rule or in the Procedures; disburse money to, and
receive money from, Participants and Pledgees on behalf of other Participants or Pledgees in
connection with related Securities transactions; and acting on its own or by appropriate instruc-
tion, provide to Participants and Pledgees information and statements of account regarding their
business with the Corporation. Such transactions shall be effected in accordance with the
By-Laws, these Rules and the Procedures.
The Corporation may also provide such other services as are consistent with the purposes
and powers of the Corporation; provided, however, that the Corporation shall not initiate any
change in the nature of, or any service other than, the services specified in the first paragraph of
this Rule without first notifying the SEC thereof.
The Corporation may limit certain services to particular issues of Eligible Securities.
43 JULY 2009
Any or all Deposited Securities or Pledged Securities may be required by the Corporation
to be removed from the Account of a Participant or Pledgee by Delivery of such Securities to
such Participant or Pledgee outside the facilities of the Corporation when the Corporation in its
discretion deems such removal necessary or expedient.
Any instruction given to the Corporation by the Special Representative on any Business
Day to Deliver Securities from the Account of the Special Representative to the Account of a
Participant shall not be effective, and any entry made by the Corporation in accordance with such
instruction shall not be final, until the “effective time” (as defined in the Rules and Procedures of
NSCC) on such Business Day.
The Corporation may accept or rely upon any instruction given to the Corporation by a
Participant or Pledgee, including any instruction given by physical delivery or delivery by other
means such as wire transmission, facsimile copy, magnetic tape or other recording media, in
form acceptable to the Corporation and in accordance with the Procedures, which reasonably is
understood by the Corporation to have been given to the Corporation by the Participant or
Pledgee, and the Corporation shall have no responsibility or liability for any errors which may
occur, without negligence on the Corporation’s part, in the course of transmission or recording of
any transmissions or which may exist in any document, magnetic tape or other recording media
so delivered to the Corporation.
44 JULY 2009
The Corporation may accept and rely upon any instruction given to the Corporation by
the Special Representative, including any instruction given by physical delivery or delivery by
other means such as wire transmission, facsimile copy, magnetic tape or other recording media,
in form acceptable to the Corporation in accordance with the Procedures, which reasonably is
understood by the Corporation to have been given to the Corporation by the Special
Representative, provided that such instruction relates only to the transfer of Securities from the
Account of a Participant to the Account of the Special Representative, and the Corporation shall
have no responsibility or liability for any errors which may occur, without fault on the
Corporation’s part, in the course of transmission or recording of transmission or which may exist
in any document, magnetic tape or other recording media so delivered to the Corporation, and
the Corporation shall be entitled to act pursuant to any such instruction as though such
instruction had been received from the Participant from whose Account the transfer is to be made
notwithstanding any information the Corporation may have to the contrary.
Notwithstanding the foregoing, the Corporation shall not act upon any instructions
purporting to have been given by the Special Representative, or any instructions purporting to
have been given by a Participant or Pledgee or the Special Representative by wire transmission,
facsimile copy, magnetic tape or other recording media or any means other than in writing,
commencing one Business Day after the Corporation receives notice from the Participant or
Pledgee that the Corporation shall not accept such instructions until such time as the Participant
or the Pledgee shall withdraw such notice.
45 JULY 2009
The term “Special Representative” of a Participant shall be NSCC but only insofar as
NSCC acts on behalf of the Participant and (a) the Participant is a member of NSCC or (b) the
Participant was a member of NSCC and the Corporation has not received notice that such
Participant has ceased to be a member of NSCC.
If the Corporation (a) receives notice that an issuer of an Eligible Security has declared a
stock or cash dividend on such Security or has authorized a stock split or combination or a
distribution of rights or of other property or any other transaction with respect to such Security (a
“Transaction”) prior to the record date for the Transaction or (b) receives notice of a proposed
meeting of holders of an Eligible Security or other occasion for the exercise of voting rights or
the giving of consents (“Voting Rights”) prior to the record date for the Voting Rights, the
Corporation may (i) assign a cut-off date for the Transaction or Voting Rights or (ii) if such
notice is received after the time which the Corporation, in its sole discretion, deems to be the
proper cut-off date for such Transaction or Voting Rights, notify Participants that it will not
assign a cut-off date for the Transaction or Voting Rights. If the Corporation assigns a cut-off
date for the Transaction or Voting Rights and a Participant Deposits a Security subject to the
Transaction or Voting Rights after the cut-off date, the Corporation shall not credit the proceeds
of the Transaction to the Account of the Participant or provide for the exercise of the Voting
Rights by the Participant. In the case of a Transaction, if a quantity of the Securities equivalent
to the amount Deposited to the Account of the Participant after the cut-off date does not remain
in the Account on the record date for the Transaction, the Corporation shall have the right to
deduct from the Account the proceeds of the Transaction with respect to the quantity not
remaining in the Account. In the case of Voting Rights, if a quantity of Securities equivalent to
the amount Deposited to the Account of the Participant after the cut-off date does not remain in
the Account on the record date for the exercise of the Voting Rights, the Corporation shall have
the right to claim from the Participant, and the Participant shall be obligated to use its best efforts
to obtain for the Corporation, appropriate proxies or Voting Rights from the registered owner of
the Securities on the record date with respect to the quantity not remaining in the Account. The
Corporation shall use its best efforts to effect the transfer of all certificates held by the
Corporation representing such Security into the name of the Corporation’s nominee. On or
immediately after the record date for the exercise of Voting Rights, the Corporation shall use its
best efforts to permit Participants to exercise Voting Rights in accordance with this Rule and the
Procedures. The Corporation shall have no responsibility or obligation to Participants or others
with respect to the exercise of Voting Rights except to use its best efforts to act in accordance
with this Rule and the Procedures. Without limiting the generality of the foregoing, the
Corporation shall have no responsibility in the event that (x) the Corporation, without fault on its
part, receives insufficient notice of a proposed meeting to permit action in accordance with this
paragraph, (y) the Corporation is unable, without fault on its part, to effect transfer of all certifi-
cates into the name of the Corporation’s nominee prior to the record date or (z) no record date for
a Transaction or the exercise of Voting Rights is established by the issuer.
The Corporation shall not have any lien on or other interest in any Segregated Securities.
The Collateral Value of Segregated Securities shall not be included in the Collateral Monitor for
a Participant.
The Corporation may, as necessary to protect itself and its Participants, in its reasonable
judgment, Devalue Securities; any Devaluation shall apply for internal credit and
46 JULY 2009
collateralization purposes only and is not intended to prejudice the underlying rights and
obligations of the parties to any transaction in those Securities or of Participants generally,
subject to applicable law, rules or regulations, or agreements as such rights and obligations may
be determined or adjudicated outside the Corporation. The Corporation may, in its sole
discretion, subsequently restore Devalued Securities to their original Collateral Value or any
intermediate Collateral Value which the Corporation shall determine is appropriate and in the
best interests of the Corporation and its Participants.
Under no circumstances will the Corporation be liable for the acts, delays, omissions,
bankruptcy, or insolvency of any third party, including without limitation, any depository,
custodian, sub-custodian, clearing or settlement system, transfer agent, registrar, data
communication service or delivery service (“Third Party”), unless caused directly by the
Corporation’s gross negligence, willful misconduct, or violation of Federal securities laws for
which there is a private right of action.
Under no circumstance shall the Corporation be liable for selecting or accepting any
Third Party as an agent of the Corporation, including as a transfer agent participating in the Fast
Automated Securities Transfer (FAST) Program.
47 JULY 2009
RULE 7
PARTICIPANT REPRESENTATIVES
Section 1. There shall be present at the location of each Participant on each Business Day
between the hours of 9:15 A.M. and 5:30 P.M., New York City time, and until the Participant’s
account with the Corporation, in the judgment of the Corporation, is settled and in balance, a
representative authorized in the name and on behalf of the Participant to sign all instruments,
correct errors, perform such duties as may be required under these Rules and the Procedures and
transact all business requisite in connection with the Participant’s business with, and the
operations of, the Corporation (a “Participant Representative”). In the case of a Participant
which is a partnership, if the Participant Representative of the Participant is not a general partner
of the Participant, such Participant Representative shall be authorized to act by written power of
attorney. In the case of a Participant which is a corporation, such Participant Representative
shall be authorized to act by resolution of the Board of Directors of such corporation. Such
power of attorney or resolution, as the case may be, shall be in form approved by the
Corporation.
Section 2. Every Participant shall file with the Corporation the signature of each Person
who is authorized to act on behalf of the Participant pursuant to Section 1 of this Rule together
with the power of attorney or resolution giving such authority.
Section 3. A Participant may appoint another Participant as its agent with respect to all of
the appointing Participant’s business carried out with the Corporation, provided such appoint-
ment has been consented to by the Corporation and is evidenced by such appointments,
authorizations, certifications and other agreements in such form as the Corporation may require.
Section 4. Each Participant which does not appoint another Participant as its agent
pursuant to Section 3 of this Rule shall make operational arrangements satisfactory to the
Corporation to deliver to, and receive from, an office, agency or custodian of the Corporation
Securities, instructions and other documents. In addition, if required by the Corporation because
of the location of the Participant, the Participant shall arrange communications facilities between
the Participant and the Corporation which shall be satisfactory to the Corporation.
Section 5. Each Settling Bank, in addition to satisfying the requirements of this Rule as a
Participant, shall satisfy the requirements of this Rule with respect to its activities as a Settling
Bank.
48 APRIL 1998
RULE 8
The Corporation shall receive on Business Days at its offices and agencies specified in
the Procedures deliveries of confirmations, advices and other records relating to transactions
effected through the facilities of the Corporation from Participants and Pledgees addressed to
other Participants and Pledgees. Such deliveries shall be sorted and made available to the
Participants and Pledgees to whom they are addressed in accordance with the Procedures.
The receipt and delivery of such confirmations, advices and other records by the
Corporation on behalf of Participants and Pledgees, the times at which such confirmations,
advices and other records shall be accepted and delivered by the Corporation, the contents of
such deliveries and all other matters relating thereto shall be governed by the Procedures.
All such confirmations, advices and other records received by the Corporation on behalf
of Participants and Pledgees shall be deemed for all purposes to be delivered to the receiving
Participant or Pledgee; provided, however, that any transaction reflected in any such
confirmation, advice or other record which is to be effected through the facilities of the
Corporation shall not be deemed effective by reason of any such delivery. Any delivery
containing items not authorized by the Procedures shall be the sole responsibility of the
Participant or Pledgee making the delivery.
49 FEBRUARY 1996
RULE 9(A)
Section 1. Deliveries of Securities through the facilities of the Corporation shall be made
in accordance with these Rules and the Procedures.
Any Participant making a Delivery Versus Payment of Securities through the facilities of
the Corporation shall provide the Corporation with an instruction specifying the amount of the
payment therefor in accordance with the Procedures. After receipt of such instruction (or upon its
own initiative pursuant to Section 1 of Rule 9(C)), the Corporation is authorized to, and shall
(subject to the right of the Corporation to cease to act for a Participant pursuant to these Rules
and the Procedures), credit the Account of the Deliverer with the amount specified and debit the
Account of the Receiver with the same amount.
Payments through the facilities of the Corporation shall be made in accordance with these
Rules and the Procedures.
50 SEPTEMBER 2000
Section 2. Except as otherwise provided in the Procedures, payments between
Participants pursuant to Section 1 of this Rule shall be made through the facilities of the
Corporation as provided in this Section 2. In addition to the debit or credit of amounts pursuant
to Section 1 of this Rule, the Corporation shall debit or credit itself, Participants and Pledgees
with other amounts receivable and payable in accordance with these Rules and the Procedures.
On each Business Day, the Corporation shall net all of the debits and credits to all of the
Accounts of each Participant and Pledgee. Any agreement between the Participant and the
Corporation to the contrary notwithstanding, if a Participant has multiple Accounts, the
Corporation may treat them as one Account for the purposes of this Rule.
At the request of the Corporation, a Participant or Pledgee shall immediately furnish the
Corporation with such assurances as the Corporation shall require of the financial ability of the
Participant or Pledgee to fulfill its commitments and shall conform to any conditions which the
Corporation deems necessary for the protection of the Corporation, other Participants or
Pledgees, including deposits to the Participants Fund; provided, however, that any such
conditions shall not be inconsistent with any applicable laws or rules or regulations of regulatory
bodies having jurisdiction over the Participant or Pledgee.
(c) A Participant or Pledgee shall pay the Corporation the whole or any part of its
Net Debit Balance at any time upon the demand of the Corporation.
Section 3. If the Account of a Payee is credited and the Account of a Payor is debited
with an amount of money as provided in Section 1 of this Rule, and the Payor shall fail to make
payment to the Corporation of such amount or, having made payment thereof, the Corporation
shall be required to return such payment to the Payor or its representative, the Payee shall be
obligated to return to the Corporation the amount that was not paid by the Payor to the
Corporation or the amount required to be returned by the Corporation to the Payor or its
representative, and the Corporation shall be entitled to debit the Account of the Payee for such
amount at any time.
51 SEPTEMBER 2000
RULE 9(B)
This Rule applies to all services provided by the Corporation, including the services
provided by the Corporation in the MMI Program.
Section 1. The Corporation shall not act on an instruction received by the Corporation
from an Instructor to effect a Delivery, Pledge, Release or Withdrawal, or any other transaction
affecting the Account of the Instructor or another Participant or Pledgee (other than a transaction
classified in the Procedures as exempt from this Section), unless the Securities (if the transaction
involves Securities) are, prior to the transaction, Deposited Securities or Pledged Securities
reflected in the Account of the Instructor, as specified in the Procedures, and:
(a) immediately after the transaction, the Collateral Monitor for the Account
Family of the Instructor which includes the Account from which the Securities subject of
the instruction are Delivered, Pledged or Withdrawn, as reduced by the amount of the
Largest Provisional Net Credit (as defined below) for such Account Family, will not be
negative and the Family Net Debit for that Account Family, as increased by the amount
of such Largest Provisional Net Credit, will not exceed the Net Debit Cap for such
Account Family;
(b) immediately after the transaction, if the transaction subject of the instruction
affects an Account in the Account Family of another Participant or Pledgee or an
Account in the same or another Account Family of the Instructor (in either case, a
“Contra Party”), the Collateral Monitor for the Account Family of the Contra Party, as
reduced by the amount of the Largest Provisional Net Credit for such Account Family,
will not be negative and the Family Net Debit for that Account Family, as increased by
the amount of such Largest Provisional Net Credit, will not exceed the Net Debit Cap for
such Account Family; and
(c) if the transaction subject of the instruction involves a Free Delivery, Pledge or
Release of Securities or a Delivery, Pledge or Release of Securities substantially
undervalued, as specified in the Procedures, the Securities subject of the instruction shall
not be MMI Securities subject of an Incomplete Transaction.
52 JUNE 2001
The term “Largest Provisional Net Credit” means the aggregate net credit to an Account
Family attributable to transactions in the MMI Securities of an issuer which is largest of any
aggregate net credit to such Account Family attributable to transactions in the MMI Securities of
any issuer; provided, however, that the reductions in the Collateral Monitor and increases in the
Family Net Debit described in clauses (a) and (b) above shall be effected only during the time
period each Business Day specified in the Procedures.
(a) the Account of the Instructor is debited, and the Account of the Corporation is
credited, by the amount of the obligation or the number of shares or rights subject of the
instruction (whereby the Corporation shall be the holder of the Securities subject of the
instruction);
(b) the Account of the Instructor is credited, and the Account of the Corporation
is debited, by the amount of the payment specified in the instruction; and
(c) as specified in the Procedures, (i) the debits and credits to the Accounts of the
Corporation are replicated as Incomplete Transactions in the Accounts of the Contra
Party and (ii) the Collateral Monitor for the Contra Party is appropriately adjusted.
(a) the time it is finally determined by the Corporation on that Business Day that
the balance in the Settlement Account of the Contra Party for that Business Day is not
negative;
(b) the time the Contra Party pays the amount of the negative balance in its
Settlement Account, as finally determined by the Corporation for that Business Day, to
the Corporation, as provided in these Rules and as specified in the Procedures; or
53 JUNE 2001
(c) the time during that Business Day when:
(2) in the case of a Pledge Versus Payment, the Contra Party instructs
the Corporation to effect a Delivery, Release or Withdrawal of
Securities;
(3) in the case of a Release Versus Payment, the Contra Party instructs
the Corporation to effect a Delivery, Pledge or Withdrawal of
Securities; and
(4) in each case, the applicable tests in clauses (a), (b) and (c) of the
first paragraph of this Section are satisfied.
A Participant may at any time during a Business Day wire Federal funds to the account of
the Corporation at the Federal Reserve Bank of New York by Fedwire in order to reduce or
eliminate a negative balance or create a positive balance in its Settlement Account.
Each Participant and the Corporation shall settle the balance of the Settlement Account of
the Participant on a daily basis in accordance with these Rules and the Procedures. Except as
provided in the Procedures, the Corporation shall not be obligated to make any settlement
payments to any Participants until the Corporation has received all of the settlement payments
that Settling Banks and Participants are required to make to the Corporation.
54 JUNE 2001
Section 2. In the manner and for the purposes set forth in these Rules and the Procedures,
and subject to applicable law, (i) the Corporation shall hold the entire interest in, and shall have
the authority of a holder of Securities to act, in its sole discretion, with respect to any Securities
Delivered Versus Payment, which are the subject of an Incomplete Transaction, to issue or
transfer the entire interest in such Securities, including the authority to sell, Pledge or otherwise
dispose of such Securities, (ii) the Corporation shall hold a security interest in any Securities
Pledged or Released Versus Payment, which are the subject of an Incomplete Transaction, to
Pledge for value or Release for value a security interest in such Securities, and shall have the
authority of a secured party to sell, Pledge or otherwise dispose of such Securities, and (iii) the
Corporation, acting as agent and attorney-in-fact for its Participants, shall have the authority to
Pledge or sell on their behalf any of their shares of Preferred Stock.
If a Participant fails to pay the amount of a negative balance in its Settlement Account, as
finally determined by the Corporation on a Business Day, at the time and in the manner provided
in these Rules and as specified in the Procedures, or if the Corporation determines that, in light
of the financial or operating condition of a Participant, it is in the best interests of the
Corporation, other Participants or Pledgees not to complete certain transactions with respect to
the Participant, although it does not cease to act therefor, or the Corporation terminates or
suspends some or all of the transactions of a Participant in the MMI Program with respect to
some or all MMI Securities subject of those transactions, during the Business Day, the
Corporation may, with respect to any such Participant (a "Defaulting Participant"), in such order
and in such amounts as the Corporation shall determine, in its sole discretion:
(a) Pledge any or all Net Additions and Preferred Stock of the Defaulting
Participant to secure a loan to the Corporation; or
(b) sell any or all Net Additions and Preferred Stock of the Defaulting Participant
in the manner specified in Section 4 of this Rule.
The Corporation may Pledge or sell any or all Net Additions of a Defaulting Participant
notwithstanding the fact that the proceeds may exceed the negative balance in the Settlement
Account of the Defaulting Participant. The proceeds of any Pledge or sale shall be applied as
provided in these Rules and as specified in the Procedures.
The Corporation may Pledge or sell any or all shares of the Preferred Stock of a
Defaulting Participant notwithstanding the fact that the proceeds may exceed the negative
balance in the Settlement Account of the Defaulting Participant. The proceeds of any Pledge or
sale shall be applied as provided in these Rules and as specified in the Procedures.
Each Defaulting Participant which fails to settle its Settlement Account at the time
specified in the Procedures shall be charged interest on the amount of the required payment. The
Corporation may also assess penalties against the Defaulting Participant, as specified in the
Procedures, if the Defaulting Participant fails to settle.
55 JUNE 2001
The Corporation may borrow from some or all of its Participants, in the manner and to
the extent specified in the Procedures, an amount up to the entire amount of the Gross Credit
Balances of such Participants on the Business Day on which one or more Participants fails to
settle its Net Debit Balance. Such borrowing shall be secured by the Pledge, to the lending
Participants, on the books of the Corporation, of the Net Additions of the Defaulting Participant
or Participants which failed to settle, in the manner specified in Section 2 of Rule 4(A).
Section 3. A Participant may, during a Business Day, instruct the Corporation to transfer
Securities from its Minimum Amount to its Net Additions and from its Net Additions to its
Minimum Amount. If a Deliverer instructs the Corporation to Deliver Securities to a Receiver
and the instruction cannot be satisfied out of the Net Additions of the Deliverer, the instruction
shall be deemed to be an instruction to first transfer from the Minimum Amount of the Deliverer
to the Net Additions of the Deliverer sufficient Securities so that the instruction to Deliver
Securities from the Deliverer to the Receiver can be satisfied out of the Net Additions of the
Deliverer. An instruction to transfer Securities from the Minimum Amount of a Deliverer to the
Net Additions of the Deliverer, or which is deemed to be such an instruction, shall constitute a
representation by the Deliverer that it has full authority, under applicable law, to do so.
Notwithstanding any other provisions of this Rule, a Participant may restrict Deliveries to
its Account by other Participants in the manner specified in the Procedures, and the Corporation
may restrict Deliveries in the manner specified in the Procedures if the Corporation determines,
in its sole discretion, that a Delivery is overvalued or for other reasons.
A Participant with more than one Account may, in the manner specified in the
Procedures, (a) group one or more of its Accounts into one or more Account Families, (b)
designate the portion of its Collateral to be allocated to each of its Account Families and (c)
designate the portion of its Net Debit Cap to be allocated to each of its Account Families. The
Corporation shall not be obligated to make any allocations in accordance with such instructions
if the Corporation determines, in its sole discretion, that such action might result in financial loss
to the Corporation, other Participants or Pledgees. The Corporation may allocate, in the manner
specified in the Procedures, any portion of the Collateral of a Participant or its Net Debit Cap
which is not allocated by the Participant. If a Participant has more than one Account but does
not group its Accounts into one or more Account Families, the Corporation shall group all of the
Accounts of the Participant into one Account Family.
The Corporation is authorized to establish priorities for the completion of any transaction
the Participant instructs the Corporation to make but which is not completed because of
limitations set forth in these Rules.
Each Participant shall settle through its Settling Bank or Back-Up Settling Bank, if any,
or, if its Settling Bank or Back-Up Settling Bank, if any, refuses to settle on its behalf, the
Participant shall settle with the Corporation directly.
56 JUNE 2001
A Participant shall be deemed to have failed to settle when (a) the Corporation receives a
Settling Bank Refusal (as defined in Rule 9(D)) from the Settling Bank representing the
Participant or when the Settling Bank representing the Participant has failed to pay its Net-Net
Debit Balance (as defined in Rule 9(D)) by the time specified in the Procedures and (b) the
Participant has not paid its Net Debit Balance to the Corporation by the time specified in the
Procedures.
Section 4. If the Corporation shall sell any Securities, the sale may be made in any
available market or at public auction or by private sale, and may be made without demand or
notice to any Participant. If the sale is made in any market, or if the sale is made at public
auction, the Corporation may purchase the Securities sold for its own account.
57 JUNE 2001
RULE 9(C)
This Rule applies only to the services provided by the Corporation in the MMI Program:
Section 1. Each MMI Issuing Agent and MMI Paying Agent shall maintain one or more
Accounts for its issuing agent activity and its paying agent activity with respect to the issues of
MMI Securities for which it acts in that capacity, as specified in the Procedures. One Account
may serve a Participant acting in both capacities but that Account shall be governed in each
capacity by any Rule relating to that function of the Account as follows:
(a) The Issuing Agent Account with respect to an issue of MMI Securities shall
comprise the Account which records the Delivery of such issue of MMI Securities by that
MMI Issuing Agent and the Account to which payments therefor are credited as provided
in this Rule and as specified in the Procedures.
(b) The Paying Agent Account with respect to an issue of MMI Securities shall
comprise the Account to which payments for Presentments with respect to MMI
Securities of that issue are debited and the Account to which MMI Securities of that issue
which are the subject of Maturity Presentments or Reorganization Presentments are
Delivered.
The instruction of an MMI Issuing Agent to the Corporation to Deliver MMI Securities in
connection with their issuance shall constitute a representation that such MMI Securities are
issued in accordance with applicable law. MMI Securities may be subject of a Free Delivery or a
Delivery Versus Payment.
If, in connection with their issuance, MMI Securities are subject of a Free Delivery, upon
the instruction of an MMI Issuing Agent, the MMI Securities shall be credited to the Account of
the Receiver designated by the MMI Issuing Agent and, simultaneously, a memo entry shall be
made to the Issuing Agent Account reflecting that the MMI Securities have been Delivered as
instructed.
If, in connection with their issuance, MMI Securities are subject of a Delivery Versus
Payment, such Delivery shall be effected as otherwise provided for Deliveries of Securities
subject of Incomplete Transactions in Rule 9(B), subject to the further controls provided in
Section 2 of this Rule; provided, however, that instead of a debit to the Issuing Agent Account, a
memo entry shall be made reflecting that the MMI Securities have been entered on the Account
of the Corporation as Securities subject of an Incomplete Transaction and that the credit of
payment therefor to the Issuing Agent Account is subject to the further controls provided in
Section 2 of this Rule.
58 APRIL 1998
A Presentment with respect to MMI Securities may be initiated by the Corporation or by
a Presenting Participant, as specified in the Procedures; if a Delivery Versus Payment is so
initiated by the Corporation, the instruction therefor shall be deemed to have been given by the
Presenting Participant pursuant to these Rules and the Procedures.
59 APRIL 1998
(c) On the day of an issuer’s insolvency, as defined in Rule 12, or a Payment
Refusal, as specified in the Procedures, the Corporation shall not complete any Income
Presentment or Principal Presentment in the MMI Securities of that issuer. Any credits to
the Accounts of the Corporation and Participants, and any debits to the Paying Agent
Account on account of such Presentments, shall be cancelled and the transactions shall be
null and void and of no effect. The parties to the transactions shall resolve their
respective rights and obligations outside the Corporation. If all of the Presentments the
Corporation did not complete pursuant to paragraphs (a) and (b) of this Section and the
first two sentences of this paragraph are Income Presentments, and if the issuer is not
insolvent, as defined in Rule 12, on the Business Day next following the Payment
Refusal, the Corporation may re-initiate such Income Presentments and any Incomplete
Transactions in newly issued MMI Securities of the issuer that the Corporation did not
complete pursuant to the first sentence of paragraph (a) of this Section. If there is another
Payment Refusal with respect to the MMI Securities of the issuer on such Business Day,
the Corporation may then take the actions described in paragraphs (a) and (b) of this
Section and the first two sentences of this paragraph, and all other actions authorized by
these Rules.
(d) The credit cancellations provided in paragraphs (a), (b) and (c) of this Section
may increase the Family Net Debit of the parties to such transactions over and above
their Net Debit Caps. The Participants affected thereby are nevertheless fully obligated
to satisfy any Net Debit Balances outstanding. The cancellation of debits and credits of
payments and of debits and credits of MMI Securities, under the circumstances provided
in these Rules and as specified in the Procedures, are not intended to affect or prejudice
the underlying rights and obligations of the parties to the transactions as such rights and
obligations may be determined outside the Corporation, subject to applicable law, rules or
regulations, agreements or any adjudication thereof.
(e) All MMI Securities of an issuer which is insolvent, as defined in Rule 12, or
subject of a Payment Refusal of a MMI Paying Agent, as specified in the Procedures,
shall, at the time of such insolvency or Payment Refusal, be Devalued to a Collateral
Value of zero and shall not collateralize any transaction. This Devaluation is intended to
serve only to protect the integrity of the MMI Program without prejudice to the
underlying rights and obligations of the parties to the transactions as such rights and
obligations may be determined outside the Corporation, subject to applicable law, rules or
regulations, agreements and any adjudication thereof.
(f) A Delivery Versus Payment of MMI Securities shall be effected only if the
principal amount of the MMI Securities being Delivered does not exceed the designated
amount specified in the Procedures.
(g) In the event that a Receiver fails to settle its Net Debit Balance, the
Corporation shall resolve the obligations of the parties to the transaction pursuant to the
Failure to Settle Procedure included in the Procedures, as such Procedures may apply
particularly to MMI Securities, including but not limited to the obligation of Participants
(i) to lend to the Corporation, secured by a Pledge of Securities, and (ii) to repurchase
Securities from the Corporation, if so required.
60 APRIL 1998
RULE 9(D)
SETTLING BANKS
A Settling Bank shall settle for itself and may settle for other Participants. Each Settling
Bank shall agree to abide by these Rules and the Procedures and shall enter into a separate
Settling Bank Agreement with the Corporation and each Participant which the Settling Bank
represents.
Each Settling Bank shall have the communications facilities with the Corporation
specified in the Procedures, shall meet any other requirements specified in the Procedures and
shall have on-line access to the Fedwire.
Each Settling Bank shall settle with the Corporation on a net-net basis on each Business
Day. The Net Credit Balance of each Participant which settles through a Settling Bank and has a
Net Credit Balance on that Business Day and the Net Debit Balance of each Participant which
settles through the same Settling Bank and has Net Debit Balance on that Business Day shall be
aggregated with the Net Debit Balance or Net Credit Balance on that Business Day of the
Settling Bank itself and all such balances shall be netted to a single “Net-Net Debit Balance” or
“Net-Net Credit Balance” for the Settling Bank for that Business Day. Throughout each
Business Day, the Corporation shall provide each Settling Bank with reports of the Net Debit
Balance or Net Credit Balance of each Participant which the Settling Bank represents and the
algebraic sum of these amounts. The Settling Bank shall be responsible for collecting the Net
Debit Balances from, and paying the Net Credit Balances to, the Participants represented by the
Settling Bank.
A Settling Bank may refuse to settle for one or more of its Participants (but not for less
than the entire Net Debit Balance of any Participant) in the manner and at the time specified in
the Procedures (a “Settling Bank Refusal”). The Settling Bank shall, if it has a Net-Net Debit
Balance after any Settling Bank Refusal, pay the amount thereof by the time and manner
specified in the Procedures.
A Settling Bank may establish a “Settling Bank Net Debit Cap” for each Participant
which the Settling Bank represents and shall inform the Corporation of the amount thereof in the
manner specified in the Procedures. A Settling Bank may increase or decrease the amount of the
Settling Bank Net Debit Cap for any Participant it represents in the manner and at the times
specified in the Procedures.
If a Settling Bank fails to settle in the manner and at the time prescribed in the
Procedures, the Settling Bank shall be charged interest on the amount of the required payment
calculated in the manner specified in the Procedures and the charge shall be made to the Account
of the Settling Bank. In the event of the insolvency of a Settling Bank, the charge shall be made
against the Account of the Settling Bank to the extent of the Collateral of the Settling Bank; any
remaining charge shall be made against the other Participants represented by the Settling Bank.
The Corporation may also assess penalties against a Settling Bank, as specified in the
Procedures, in the event that the Settling Bank fails to settle.
61 NOVEMBER 2003
A Settling Bank shall not terminate its status as a Settling Bank and shall not terminate its
representation of a Participant without having given the Corporation ten Business Days prior
notice thereof. No Settling Bank shall commence representation of a Participant without having
given the Corporation five Business Days prior notice thereof.
Each applicant to become a Participant and each Participant shall designate, in the
manner specified in the Procedures, its Settling Bank and its Back-Up Settling Bank, if any.
In the event that a Settling Bank fails to settle with the Corporation in the manner and at
the time specified in the Procedures, due to insolvency or other cause, each Participant
represented by that Settling Bank shall cause its Back-Up Settling Bank, if any, to settle with the
Corporation. If the Back-Up Settling Bank has a Net-Net Debit Balance after including any Net
Credit Balance or Net Debit Balance of such Participant in the net-net settlement between such
Back-Up Settling Bank and the Corporation, the Back-Up Settling Bank shall pay the
Corporation the amount of such Net-Net Debit Balance. If the Back-Up Settling Bank has a Net-
Net Credit Balance after including any Net Credit Balance or Net Debit Balance of such
Participant in the net-net settlement between such Back-Up Settling Bank and the Corporation,
the Corporation shall pay the Back-Up Settling Bank the amount of such Net-Net Credit
Balance. If the Participant does not have a Back-Up Settling Bank, or if its Back-Up Settling
Bank also fails to settle with the Corporation, (a) the Participant shall pay the Corporation the
amount of its Net Debit Balance or (b) the Corporation shall pay the Participant the amount of its
Net Credit Balance.
Notwithstanding anything else contained herein, the Corporation shall have no obligation
to any Participant for any obligation of a Settling Bank or Back-Up Settling Bank to a
Participant, including any obligation of the Settling Bank or Back-Up Settling Bank to remit to
the Participant the amount of any Net Credit Balance of the Participant included in the net-net
settlement between such Settling Bank or Back-Up Settling Bank and the Corporation.
62 NOVEMBER 2003
RULE 9(E)
Section 1. All of the terms, conditions and provisions of any Clearing Agency
Agreement between the Corporation and any other clearing agency are hereby incorporated by
reference in and shall be a part of these Rules, and, subject to Section 2 of this Rule, in the event
of any conflict between the terms, conditions and provisions of such Clearing Agency
Agreement and any other Rules, the terms, conditions and provisions of the Clearing Agency
Agreement shall prevail.
63 NOVEMBER 2003
RULE 10
DISCRETIONARY TERMINATION
Section 1. Based on its judgment that adequate cause exists to do so, the Corporation
may at any time (a) cease to act for a Participant with respect to a particular transaction or
transactions, a Program or transactions generally or (b) terminate a Participant’s right to act as a
Settling Bank. Adequate cause for ceasing to act for a Participant or terminating a Participant’s
right to act as a Settling Bank shall be deemed to exist if:
(i) the Participant has failed to make any payments required by Rule 4 for a
period of ten Business Days after demand;
(ii) the Participant has failed to make any required deposit with the Corporation;
(iii) the Participant or Settling Bank has failed to pay any fine, fee or other charge
provided for in these Rules or the Procedures on the payment date therefor;
(iv) the Participant has failed to pay any amounts owing with respect to Securities
subject to Delivery to it, other than Securities as to which a reclamation is made pursuant
to the Procedures, by the time required by the Procedures or reasonable grounds exist for
a determination by the Corporation that the Participant will not make such timely
payment;
(v) the Participant or the Settling Bank is in such financial or operating condition
that reasonable grounds exist for a determination by the Board of Directors, or by the
Corporation if time does not permit action by the Board of Directors, that its continuation
as a Participant or Settling Bank would jeopardize the interests of the Corporation, other
Participants or Pledgees;
(vii) the Participant or its Controlling Management has been convicted within the
ten years preceding the filing of its application to become a Participant or at any time
thereafter of any crime, felony or misdemeanor which involves the purchase, sale or
transfer of any Security or the breach of fiduciary duty, or arises out of conduct of the
business of a broker, dealer, investment company, investment adviser, underwriter, bank,
64 DECEMBER 2008
trust company, fiduciary, insurance company or other financial institution; or involves
robbery, larceny, embezzlement, fraudulent conversion, forgery or misappropriation of
funds, Securities or other property; or involves any violation of Section 1341, 1342 or
1343 of Title 18 of the United States Code;
Further, Participants are required to inform the Corporation as to any member of its
Controlling Management that is or becomes subject to statutory disqualification (as defined in
Section 3(a)(39) of the Exchange Act).
A Settling Bank’s right to act as such shall terminate at such time as it ceases to be a
Participant.
A written report of the reasons for such action shall be promptly made and filed with the
Corporation’s records. When the Corporation ceases to act for a Participant with respect to a
particular transaction or transactions, it shall notify such Participant and such other Participants
and Pledgees as it deems proper and shall determine what steps are to be taken with respect to
the transaction or transactions with respect to which it is ceasing to act for such Participant.
When the Corporation ceases to act for a Participant with respect to a Program or transactions
generally, it shall notify such Participant and all other Participants and Pledgees. The notice that
65 DECEMBER 2008
the Corporation has ceased to act for a Participant given by the Corporation shall state in at least
general terms how pending transactions will be affected.
Section 2. Notwithstanding Section 1 of this Rule, the Corporation may not at any
time refuse to Deliver a Participant’s Deposited Securities to such Participant.
Section 3. After the Corporation has ceased to act for a Participant generally,
except as provided by the Board of Directors in any particular case:
(a) The Corporation shall decline to accept instructions from other Participants with
respect to any Delivery of Deposited Securities to the Participant and shall decline to
accept instructions from the Participant with respect to the Delivery of Deposited
Securities to other Participants or Pledgees.
(b) The Corporation shall not give effect to the net result to date of the aggregation of
instructions between the Participant and any other Participant pursuant to the fourth or
fifth paragraph of Section 1 of Rule 9(A), and shall provide the Participant and any such
other Participant with a list of the net quantity of each issue of Securities with respect to
which the Corporation shall not in the future effect such instructions. The Participant
shall be free to seek such remedies as shall be available to it from any such other
Participant for any loss it may suffer because such instructions were not effected by the
Corporation. The Corporation shall not, however, have any liability with respect to any
such loss (provided that the loss is not caused by the Corporation’s gross negligence or
willful misconduct).
Notwithstanding the foregoing, the Corporation shall Deliver to the Participant any
Securities Pledged by such Participant to a Pledgee upon the instructions of such Pledgee.
Section 4. After the Corporation has ceased to act for a Participant with respect to a
Program, so far as that Program is concerned, except as provided by the Board of Directors in
any particular case:
(a) The Corporation shall decline to accept instructions from other Participants with
respect to any Delivery of Deposited Securities to the Participant and shall decline to
accept instructions from the Participant with respect to the Delivery of Deposited
Securities to other Participants or Pledgees.
(b) The Corporation shall not give effect to the net result to date of the aggregation of
instructions between the Participant and any other Participant pursuant to the fourth or
fifth paragraph of Section 1 of Rule 9(A), and shall provide the Participant and any such
other Participant with a list of the net quantity of each issue of Securities with respect to
which the Corporation shall not in the future effect such instructions. The Participant
shall be free to seek such remedies as shall be available to it from any such other
Participant for any loss it may suffer because such instructions were not effected by the
Corporation. The Corporation shall not, however, have any liability with respect to any
such loss (provided that the loss is not caused by the Corporation’s gross negligence or
willful misconduct).
66 DECEMBER 2008
Notwithstanding the foregoing, the Corporation shall Deliver to the Participant any
Securities pledged by such Participant to a Pledgee upon the instructions of such Pledgee.
Section 5. After the Corporation has ceased to act for a Participant with respect to either
a particular transaction or transactions generally, the Corporation shall nevertheless have the
same rights and remedies with respect to any Net Debit Balance due from such Participant or any
liability incurred on its behalf or on account of its default as though the Corporation had not
ceased to act for it.
Section 6. The provisions of this Rule shall not apply in a case where a Participant is
insolvent, as defined in Rule 12, and in such case the provisions of Rule 12 shall govern.
67 DECEMBER 2008
RULE 11
MANDATORY TERMINATION
The Corporation, upon determining to its reasonable satisfaction that none of the qualifi-
cations set forth in Rule 3 apply to a Participant, shall cease to act for such Participant with
respect to transactions generally as provided in Rule 10, and in such case the provisions of Rule
10 and the provisions therein as to notice shall govern.
68 FEBRUARY 1996
RULE 12
INSOLVENCY
(a) in the event specified in Section 1 of this Rule; provided, however, that a
Participant shall not be treated as insolvent hereunder in such event if such Participant
provides or posts a bond, indemnity or guaranty which the Corporation, in its sole
discretion, deems satisfactory to insure such Participant’s performance under such
contracts or obligations (without being deemed to have admitted its liability thereunder);
(c) in the event that the Participant is determined to be insolvent by any agency
which regulates such Participant or in the event of the entry of a decree or order by a
court having jurisdiction in the premises adjudging the Participant a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Participant under the Federal
Bankruptcy Code or any other applicable Federal or State law, or appointing a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the Participant or of
any substantial part of its property, or ordering the winding up or liquidation of its affairs
or the institution by the Participant of proceedings to be adjudicated a bankrupt or
insolvent or the consent by it to the institution of bankruptcy or insolvency proceedings
against it, or the filing by it of a petition or answer or consent seeking reorganization or
relief under the Federal Bankruptcy Code or any other applicable Federal or State law, or
the consent by it to the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the Participant or of
any substantial part of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts generally as they
become due, or the taking of corporate action by the Participant in furtherance of any
such action.
Section 3. An issuer of MMI Securities subject of any transaction in the MMI Program
shall be treated by the Corporation in all respects as insolvent in the event that the issuer is
determined to be insolvent by any agency which regulates such issuer or in the event of the entry
of a decree or order by a court having jurisdiction in the premises adjudging the issuer a bankrupt
or insolvent, or approving as properly filed a petition seeking reorganization, arrangement,
69 APRIL 1998
adjustment or composition of or in respect of the issuer under the Federal Bankruptcy Code or
any other applicable Federal or State law or appointing a receiver, liquidator, assignee, trustee,
sequester (or other similar official) of the issuer or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs or the institution by the issuer of proceedings
to be adjudicated a bankrupt or insolvent or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Code or any other applicable Federal or
State law, or the consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequester (or other similar official) of the issuer or of any
substantial part of its property, or the admission by it in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action by the issuer in furtherance of
any such action and, notwithstanding the foregoing, upon the filing by the issuer of a petition
seeking reorganization, arrangement, adjustment or composition of or in respect of the issuer
under the Federal Bankruptcy Code or any other applicable Federal or State law, or the filing
against it of any such petition or application, at any time the Corporation receives notice thereof,
either written or oral and from whatsoever source and, without awaiting any further adjudication,
consent thereto, acceptance or approval of such filing, determines to its reasonable satisfaction
that such has occurred.
Section 4. From and after the time when the Corporation determines to its reasonable
satisfaction that an event specified in Section 2 of this Rule has occurred with respect to a
Participant (the “Time of Insolvency”), the Corporation shall cease to act for such Participant,
except as determined by the Corporation in any particular case. The Corporation shall, as soon
as possible after the Time of Insolvency, notify the insolvent Participant and other Participants
and Pledgees whether it has ceased to act for the insolvent Participant pursuant to the provisions
of this Rule and such notice shall state, at least in general terms, how pending matters will be
affected and what steps are to be taken in connection therewith.
Section 5. From and after the Time of Insolvency of a Participant, except as provided by
the Board of Directors in any particular case:
(a) The Corporation shall decline to accept instructions from other Participants
with respect to any Delivery of Deposited Securities to the insolvent Participant and shall
decline to accept instructions from the insolvent Participant with respect to the Delivery
of Deposited Securities to other Participants or Pledgees.
(b) The Corporation shall not give effect to the net result to date of the
aggregation of instructions between the insolvent Participant and any other Participant
pursuant to the fourth or fifth paragraph of Section 1 of Rule 9(A), and shall provide the
insolvent Participant and any such other Participant with a list of the net quantity of each
issue of Securities with respect to which the Corporation shall not in the future effect
such instructions. The insolvent Participant shall be free to seek such remedies as shall
be available to it from any such other Participant for any loss it may suffer because such
instructions were not effected by the Corporation. The Corporation shall not, however,
have any liability with respect to any such loss (provided that the loss is not caused by the
Corporation’s gross negligence or willful misconduct).
70 APRIL 1998
Notwithstanding the foregoing, the Corporation shall Deliver to the insolvent Participant
any Securities that have been Pledged by such Participant to a Pledgee upon the instructions of
such Pledgee.
71 APRIL 1998
RULE 13
REINSTATEMENT
A Participant for which the Corporation shall have ceased to act pursuant to the
provisions of Rule 10, 11 or 12 may at any time be reinstated by the affirmative vote of a
majority of the entire Board of Directors.
72 FEBRUARY 1996
RULE 14
INSURANCE
The Corporation shall use its best efforts to maintain such insurance, including fidelity
bonds, in such amounts and having such coverage as the Board of Directors shall deem
appropriate. The insurance policies or contracts pursuant to which such insurance is provided
shall be open to the inspection of Participants and Pledgees at the offices of the Corporation
during regular business hours on Business Days. If the Corporation shall materially reduce the
amount or coverage of any such insurance, or the Persons providing such insurance shall notify
the Corporation of a material reduction in the amount or coverage thereof, the Corporation shall
promptly notify each Participant and Pledgee and the SEC thereof stating the effective date of
such reduction.
73 APRIL 1998
RULE 15
REPORTS
As soon as practicable after the end of each calendar year, the Corporation shall provide
to each Participant and Pledgee financial statements of the Corporation audited by independent
public accountants for such calendar year. The Corporation shall provide unaudited financial
statements of the Corporation for each of the first three calendar quarters of each calendar year.
74 FEBRUARY 1996
RULE 16
LISTS TO BE MAINTAINED
Section 1. The Corporation shall maintain lists of all Eligible Securities, including MMI
Securities, and the Corporation may from time to time add Securities to, or delete Securities
from, such lists in accordance with the provisions of Rule 5.
Section 2. The Corporation shall maintain lists of all Participants and Pledgees.
75 FEBRUARY 1996
RULE 17
ADMISSION TO PREMISES
No Person shall be permitted to enter the premises of the Corporation on behalf of any
Participant unless he has first been approved by the Corporation and has been issued such
credentials as the Corporation may from time to time prescribe and such credentials shall not
have been cancelled or revoked. Such credentials must be shown on demand and to gain entry to
the Corporation’s premises, must be prominently displayed while on said premises and may limit
the portions of the premises to which access is permitted thereunder. Any credentials issued
pursuant to this Rule may be revoked at any time by the Corporation, in its sole discretion, and
prompt notice of such revocation shall be given to the employer of the Person whose credentials
have been so revoked.
Every Person to whom credentials have been or may hereafter be issued by the
Corporation (which credentials have not been revoked) authorizing such Person to have access,
during the hours when deliveries are to be received, to the portion of the Corporation’s premises
in which deliveries are received, shall be deemed to have been authorized by such Participant to
receive and deliver Securities or other items on behalf of such Participant.
Each Participant shall, if any Person in its employ to whom any credentials have been
issued pursuant to this Rule or to whom a power of attorney or other authorization has been
given to act for it in connection with the business of the Corporation shall for any reason cease to
be so employed, give to the Corporation immediate notice of such termination of employment
and, if any such power of attorney or other authorization is otherwise revoked or cancelled,
likewise give to the Corporation immediate notice of such revocation or cancellation. All
credentials issued pursuant to this Rule shall be immediately surrendered to the Corporation,
accompanied by a written statement specifying that they are being surrendered pursuant to this
Rule, upon their revocation by the Corporation or by the employer or upon the termination of the
employment of the holder thereof.
Unless revoked by the Corporation, all credentials, authorizations and powers of attorney
issued pursuant to this Rule or in connection with the work of the Corporation shall remain in
full force and effect until the Corporation shall have received notice of the revocation thereof or
of the termination of the holder’s employment.
76 APRIL 1998
RULE 18
The time fixed by these Rules and the Procedures for the doing of any act or acts may be
extended or the doing of any act or acts required by these Rules or the Procedures may be waived
or any provision of these Rules or the Procedures may be suspended by the Board of Directors,
the Chairman of the Board, the President or any Managing Director whenever, in its or his
judgment, such extension, waiver or suspension is necessary or expedient.
A written report of any such extension, waiver or suspension (other than an extension of
time of less than one hour), stating the pertinent facts, the identity of the Person or Persons who
authorized such extension, waiver or suspension and the reason such extension, waiver or
suspension was deemed necessary or expedient, shall be promptly made and filed with the
Corporation’s records and shall be available for inspection by any Participant or Pledgee during
regular business hours on Business Days. Any such extension or waiver may continue in effect
after the event or events giving rise thereto but shall not continue in effect for more than 60 days
after the date thereof unless it shall be approved by the Board of Directors within such period of
60 days.
77 AUGUST 2002
RULE 19
The Corporation shall immediately notify all Participants and Pledgees of any proposal it
has made to change or revise these Rules and of any proposal it has made to add or repeal any
Rule, and of the text of any such proposal. Participants and Pledgees may submit to the
Corporation for its consideration their comments with respect to any such proposal, and such
comments shall be filed with the Corporation’s records and copies thereof shall be delivered to
the SEC.
78 FEBRUARY 1996
RULE 20
Each Participant shall pay such fees and charges to the Corporation as shall be specified
in the Procedures and approved by the Board of Directors on a reasonable and nondiscriminatory
basis. The Board of Directors may by resolution delegate to the Chairman of the Board the
power to approve such fees and charges. In addition, a Participant may be charged for any
unusual expenses caused directly or indirectly by such Participant or incurred at its request
including, but without limitation, the cost of producing records pursuant to a court order, or other
legal process in any litigation or other legal proceeding to which such Participant is a party or in
which such records relating to such Participant are so required to be produced, whether such
production is required at the instance of such Participant or of any other party.
79 APRIL 1998
RULE 21
DISCIPLINARY SANCTIONS
The Corporation may discipline a Participant or Pledgee for a violation of these Rules or
the Procedures or for errors, delays or other conduct detrimental to the operations of the
Corporation, other Participants or Pledgees, or for not providing adequate facilities for its
business with the Corporation by imposing any of the following sanctions: expulsion;
suspension; limitation of activities, functions and operations; fine; censure; and any other fitting
sanction. In addition, in the event that a Participant shall violate these Rules, the Procedures or
any of its agreements with the Corporation, the Corporation may require such cash or other
deposit by a Participant to the Participants Fund or otherwise as shall be necessary or appropriate
to protect the Corporation, other Participants or Pledgees, in the circumstances.
In the event that a Participant shall fail to settle, the Corporation is authorized by these
Rules and the Procedures to charge interest to that Participant and/or other Participants in
substantially the same amounts as the Corporation shall have paid by reason of such event; the
charge of such interest shall not be considered a disciplinary sanction subject to this Rule or
Rule 22.
When the Corporation proposes to impose a sanction it shall send the Participant
or Pledgee a written statement describing the reason for the proposed sanction and notifying the
Participant or Pledgee that it has an opportunity to respond pursuant to Rule 22. The sanction
proposed may be imposed by the Chairman of the Board, the President or the Secretary unless,
within five Business Days after notification of such proposed sanction, the Participant or Pledgee
provides notice of its desire to contest the sanction, as provided in Rule 22. The right to contest
a sanction before it is imposed pursuant to Rule 22 shall not apply to a case where the
Corporation summarily suspends and closes the accounts of a Participant or Pledgee pursuant to
the Exchange Act.
80 FEBRUARY 1996
RULE 22
(b) to cease to act for the Participant pursuant to Rule 10, 11 or 12;
(c) to summarily suspend and close the Accounts of the Participant or Pledgee
pursuant to the Exchange Act;
(d) to terminate its agreement with the Pledgee, as provided in Section 3 of Rule
2;
(f) any determination of the Corporation that an Eligible Security shall cease to
be such.
The failure of the Interested Person to file the written request referred to above within the
time period required by these Rules and/or the failure of the Interested Person to submit the
written statement referred to above within the time period specified above shall constitute a
waiver by the Interested Person of its right to a hearing. The Corporation shall notify the
81 FEBRUARY 2008
Interested Person in writing of the date, place and hour of the hearing at least five Business Days
prior to the hearing.
A Minor Rule Violation as defined in this Rule shall be deemed a minor rule violation
within the meaning of Rule 19d-1(c)(2) under the Securities Exchange Act of 1934, as amended
(the “Act”), and this Rule shall be deemed a “plan” within the meaning thereof.
Section 5. A hearing requested in connection with any matter which is not deemed a
“Minor Rule Violation” as defined in Section 4 of this Rule, and any hearing requested in
connection with an appeal of the decision of the Minor Rule Violation Panel, shall be before
three members of a panel (a “Panel”) selected by the Chairman of the Board from a pool (a
“Pool”) of Persons employed by or partners of Participants. Persons shall be appointed members
of the Pool by the Board of Directors or the Chairman of the Board.
82 FEBRUARY 2008
Notwithstanding the above, the Panel shall not include any Person who had responsibility
for the action or proposed action of the Corporation as to which the hearing relates.
At the hearing, the Interested Person shall be afforded an opportunity to be heard and
may be represented by counsel if the Interested Person has so elected pursuant to Section 2 of
this Rule. A record shall be kept of any hearing held pursuant to this Rule, and the cost
associated with the hearing may, in the discretion of the Panel, be charged in whole or in part to
the Interested Person in the event that the decision at the hearing is adverse to the Interested
Person.
The Panel shall advise the Interested Person of its decision in writing within ten Business
Days after the conclusion of the hearing. If the decision of the Panel shall have been to deny the
Interested Person’s application to become a Participant or a Pledgee, or to terminate the
eligibility of a Security for the services of the Corporation, a notice of decision setting forth the
specific grounds upon which the decision is based shall be furnished to the Interested Person. If
the decision of the Panel shall have been to impose a disciplinary sanction on the Interested
Person in accordance with Rule 21 or to affirm any summary action previously taken against the
Interested Person pursuant to the Exchange Act, the Interested Person shall be given a notice of
decision setting forth (a) any act or practice in which the Interested Person has been found to
have engaged, or which the Interested Person has been found to have omitted, (b) the specific
provision(s) of these Rules or the Procedures or of the Participant’s agreements with the
Corporation which any such act or practice or omission to act has been deemed to violate and (c)
the sanction imposed and the reasons therefore. A copy of the Panel’s notice of decision shall
also be furnished to the Chairman of the Board.
Decisions of the Panel are final, but the Board of Directors may in its discretion modify
any sanction or reverse any decision of the Panel that is adverse to the Interested Person.
The reversal or modification at the hearing or subsequently by the Board of Directors, the
SEC or any other Person of any action previously taken against the Interested Person pursuant to
the Exchange Act shall not invalidate the acts of the Corporation or its officers, directors,
employees or agents taken prior to such reversal or modification.
Section 7. Any action or proposed action of the Corporation as to which an Interested Person
has the right request a hearing pursuant to this Rule, shall be deemed final (a) when the
Interested Person stipulates to the taking of such action by the Corporation, at which time the
Corporation shall furnish the Interested Person with a statement containing the information
referred to in Section 5 of this Rule, or (b) upon the expiration of the applicable time period
provided in these Rules for the filing of a written request or a written statement pursuant to
Section 2 of this Rule, at which time any such proposed action of the Corporation shall become
effective and at which time the Corporation shall furnish the Interested Person with a statement
containing the information referred to in Section 5 of this Rule, or (c) if a hearing has been held
pursuant to this Rule, when the Corporation gives notice to the Interested Person of the Panel’s
decision pursuant to Section 5 of this Rule.
83 FEBRUARY 2008
RULE 23
BILLS RENDERED
The Corporation shall render bills to Participants in the manner specified in the
Procedures for charges on account of services provided or fines imposed.
84 APRIL 2003
RULE 24
FORMS
85 APRIL 2003
RULE 25
BUSINESS DAYS
The Procedures shall specify the days on which the Corporation will be open for
business. The Corporation shall not be required to be open for business on any day solely
because it is a business day in one or more locations where Participants engage in business. Any
deliveries to the Corporation, any deliveries which the Corporation is required to make and any
transactions which the Corporation is instructed to effect on days on which the Corporation is not
open for business shall be accepted, made or effected on the next day on which the Corporation
is open for business. In the MMI Program, which provides for the Corporation to initiate
Maturity, Reorganization, Income and Principal Presentments, the Corporation shall schedule
such Presentments for a day on which the Corporation will be open for business as specified in
the Procedures; provided, however, that in the event such a Presentment would nevertheless
occur on a day on which the Corporation is not open for business, the Corporation shall initiate
the Presentment on the next day on which the Corporation is open for business subject to such
terms, conditions and other arrangements as the Corporation and affected Participants may make
under the circumstances at the time.
86 APRIL 2003
RULE 26
FACSIMILE SIGNATURES
The Corporation may, at its option, in lieu of relying on an original signature, rely on a
signature as if it were (and the signature shall be considered and have the same effect as) a valid
and binding original signature in the following circumstances:
87 APRIL 2003
RULE 27
PROCEDURES
The Board of Directors shall, pursuant to these Rules, prescribe from time to time
Procedures with respect to the business of the Corporation. The Board of Directors may by
resolution delegate to the Chairman of the Board, or any other DTC officer referenced in such
resolution, the power to prescribe Procedures. Each Participant and the Corporation shall be
bound by such Procedures and any amendment thereto in the same manner as it is bound by the
provisions of the By-Laws and these Rules. Participants and Pledgees shall be given ten
Business Days notice of any amendment of the Procedures, service guides, and regulations.
88 MAY 2002
RULE 28
DELEGATION
Where action by the Board of Directors is required by these Rules, the Corporation may
act, to the full extent permitted by law, by the Chairman of the Board, the President or any
Managing Director or Vice President or by such other Person or Persons, whether or not
employed by the Corporation, as may be designated by the Board of Directors from time to time.
89 MAY 2002
RULE 29
CAPTIONS
Captions to these Rules are for information and guidance only, are not a part of these
Rules and are to be given no consideration in applying or construing these Rules.
90 FEBRUARY 1996
RULE 30
CANADIAN-LINK SERVICE
For convenience of reference, set forth below are terms defined in this Rule 30 and the Section in
which such terms are defined:
Defined Term Section
CAD Funds 1(h)(3)
Canadian-Link CAD Money Settlement 1(a)(15)
Canadian-Link CAD Net Debit Cap 8(a)
Canadian-Link CAD Net Settlement Credit 12(b)
Canadian-Link CAD Net Settlement Debit 12(b)
Canadian-Link Funds Transactions 1(h)(8)
Canadian-Link Interface 5(a)
Canadian-Link Net Debit Cap 8(a)
Canadian-Link Net Settlement Credit 12(b)
Canadian-Link Net Settlement Debit 12(b)
Canadian-Link Participants 1(h)(1)
Canadian-Link Participants Fund Cash 6(c)
Canadian-Link Required Participants Fund Deposit 6(a)
Canadian-Link Securities 1(h)(14)
Canadian-Link Securities Transactions 1(h)(7)
Canadian-Link Service 1(a)
Canadian-Link Transactions 1(h)(11)
Canadian-Link USD Net Debit Cap 8(a)
Canadian-Link USD Net Settlement Credit 12(b)
Canadian-Link USD Net Settlement Debit 12(b)
CDS 1(a)
CDS Business Day 11(a)
CDS Documents 2(a)
CDS Participants 1(h)(2)
CDS Payment Exchange 13(a)
CDS Settlement Recap 12(a)
CDS Settlement Recap Time 12(a)
Collateral Monitor Conversion Rate 16(b)
Cross-Border CAD Funds Transactions 1(a)(4)
Cross-Border CAD Securities Transactions 1(a)(1)
Cross-Border Net Additions 7(b)
Cross-Border Securities 1(h)(12)
Cross-Border Securities Transactions 1(h)(6)
Cross-Border USD Securities Transactions 1(a)(2)
Cross-Border Transactions 1(h)(9)
DTC Business Day 11(a)
DTC Canadian Settlement Bank 13(a)
DTC Omnibus Account 5(a)
DTC Omnibus Account CAD Net Debit Cap 8(a)
DTC Omnibus Account CAD Net Settlement Credit 12(a)
91 FEBRUARY 2007
DTC Omnibus Account CAD Net Settlement Debit 12(a)
DTC Omnibus Account Net Debit Cap 8(a)
DTC Omnibus Account Net Settlement Credit 12(a)
DTC Omnibus Account Net Settlement Debit 12(a)
DTC Omnibus Account USD Net Debit Cap 8(a)
DTC Omnibus Account USD Net Settlement Credit 12(a)
DTC Omnibus Account USD Net Settlement Debit 12(a)
DTC Settlement Payment Deadline 13(b)
DTC Settlement Recap 12(b)
DTC Settlement Recap Time 12(b)
Full-Service Canadian-Link Security 4(a)
Funds 1(h)(5)
Intra-DTC CAD Funds Transactions 1(a)(5)
Intra-DTC CAD Securities Transactions 1(a)(3)
Intra-DTC Securities 1(h)(13)
Intra-DTC Transactions 1(h)(10)
Limited-Service Canadian-Link Security 4(a)
Participant Canadian Settlement Bank 13(d)
Payment Default Conversion Rate 16(c)
Payment Default Exchange Rate 16(a)
Rules and Procedures of CDS 2(a)
USD Funds 1(h)(4)
In General
(a) Through a link between the Corporation and CDS Clearing and Depository Services
Inc. (“CDS”), the Corporation provides a service (the “Canadian-Link Service”) for:
(1) the settlement of valued transactions (A) in Securities that are Eligible Securities (as
described in Section 1 of Rule 5) and Securities that are not Eligible Securities (B)
in Canadian dollars (C) between Participants of the Corporation and participants of
CDS (“Cross-Border CAD Securities Transactions”);
(2) the settlement of valued transactions in (A) Securities that are not Eligible Securities
(B) in US dollars (C) between Participants of the Corporation and participants of
CDS (“Cross-Border USD Securities Transactions”);
92 FEBRUARY 2007
(3) the settlement of valued transactions (A) in Securities that are Eligible Securities (B)
in Canadian dollars (C) between Participants of the Corporation and other
Participants of the Corporation (“Intra-DTC CAD Securities Transactions”);
(4) the transfer of Canadian dollars between Participants of the Corporation and
participants of CDS (“Cross-Border CAD Funds Transactions”); and
(5) the transfer of Canadian dollars between Participants of the Corporation and other
Participants of the Corporation (“Intra-DTC CAD Funds Transactions”).
(b) The Corporation provides the Canadian-Link Service as a securities intermediary for
its Participants. All transactions in securities and transfers of funds are subject to the Rules and
Procedures of the Corporation, including this Rule 30 and the Procedures adopted hereunder. In
the event of a conflict between the provisions of this Rule 30 and the Procedures adopted
hereunder and the provisions of any other Rules and Procedures of the Corporation, the
provisions of this Rule 30 and the Procedures adopted hereunder shall prevail. The Canadian-
Link Service shall constitute a Program for purposes of the Rules and Procedures of the
Corporation.
Specific Transactions
(1) where a Participant of the Corporation is the seller of the Securities, (A) the
Securities are debited from the account of the seller at the Corporation, credited to
the account of the Corporation at CDS and delivered against payment to the
purchaser through the facilities of CDS, (B) money settlement between the
Corporation and CDS is included in the Canadian dollar settlement of transactions
processed through the facilities of CDS and (C) money settlement between the
Corporation and the seller takes place between Canadian settlement banks acting for
the Corporation and the Seller; and
(2) where a Participant of the Corporation is the purchaser of the Securities, (A) the
Securities are delivered against payment to the Corporation through the facilities of
CDS, debited from the account of the Corporation at CDS and credited to the
account of the purchaser at the Corporation, (B) money settlement between the
Corporation and CDS is included in the Canadian dollar settlement of transactions
processed through the facilities of CDS and (C) money settlement between the
Corporation and the purchaser takes place between Canadian settlement banks
acting for the Corporation and the purchaser.
93 FEBRUARY 2007
(1) where a Participant of the Corporation is the seller of the Securities, (A) the
Securities are debited from the account of the seller at the Corporation, credited to
the account the Corporation at CDS and delivered against payment to the purchaser
through the facilities of CDS, (B) money settlement between the Corporation and
CDS is included in the US dollar settlement of transactions processed through the
facilities of the Corporation and (C) money settlement between the Corporation and
the seller is also included in the US dollar settlement of transactions processed
through the facilities of the Corporation; and
(2) where a Participant of the Corporation is the purchaser of the Securities, (A) the
Securities are delivered against payment to the Corporation through the facilities of
CDS, debited from the account of the Corporation at CDS and credited to the
account of the purchaser at the Corporation, (B) money settlement between the
Corporation and CDS is included in the US dollar settlement of transactions
processed through the facilities of the Corporation and (C) money settlement
between the Corporation and the purchaser is also included in the US dollar
settlement of transactions processed through the facilities of the Corporation.
(1) the Securities are debited from the account of the seller at the Corporation and
credited to the account of the purchaser at the Corporation;
(2) money settlement between the Corporation and the seller takes place between
Canadian settlement banks acting for the Corporation and the seller; and
(3) money settlement between the Corporation and the purchaser also takes place
between Canadian settlement banks acting for the Corporation and the purchaser.
(g) An Intra-DTC CAD Funds Transaction between a Participant of the Corporation and
another Participant of Corporation is processed though Canadian settlement banks acting for the
Corporation and such Participants.
Certain Definitions
(1) Participants of the Corporation that use the Canadian-Link Service are referred to as
“Canadian-Link Participants”;
(2) participants of CDS (other than the Corporation) are referred to as “CDS
Participants”;
94 FEBRUARY 2007
(3) funds denominated in Canadian dollars are referred to as “CAD Funds”;
(5) CAD Funds and USD Funds are referred to, individually or collectively as the
context may require, as “Funds”;
(8) Cross-Border CAD Funds Transactions and Intra-DTC CAD Funds Transactions are
referred to, individually or collectively as the context may require, as “Canadian-
Link Funds Transactions”;
(10) Intra-DTC CAD Securities Transactions and Intra-DTC CAD Funds Transactions
are referred to, individually or collectively as the context may require, as “Intra-
DTC Transactions”;
(11) Cross-Border Transactions and Intra-DTC Transactions are referred to, individually
or collectively as the context may require, as “Canadian-Link Transactions”;
(12) Securities that are the subject of Cross-Border CAD Securities Transactions or
Cross-Border USD Securities Transactions are referred to, individually or
collectively as the context may require, as “Cross-Border Securities”;
(13) Securities that are the subject of Intra-DTC CAD Securities Transactions are
referred to, individually or collectively as the context may require, as “Intra-DTC
Securities”;
(14) Cross-Border Securities and Intra-DTC Securities are referred to, individually or
collectively as the context may require, as “Canadian-Link Securities”; and
(15) the money settlement of Canadian-Link Transactions in CAD Funds between the
Corporation and Canadian-Link Participants is referred to as “Canadian-Link CAD
Money Settlement”.
95 FEBRUARY 2007
Section 2. CDS Documents.
(a) The Corporation has entered into various agreements with CDS, and as a participant
of CDS has undertaken to abide by the rules, procedures and user guides of CDS (the “Rules and
Procedures of CDS”). Such agreements and the Rules and Procedures of CDS, as the same may
be amended or supplemented from time to time, are collectively referred to as the “CDS
Documents”. Notwithstanding anything else contained in this Rule 30 or otherwise in the Rules
and Procedures of the Corporation, the Corporation shall offer the Canadian-Link Service only
for so long as the Corporation continues to be a participant of CDS and there have been no
changes in the CDS Documents, or actions taken by CDS, which would, in the judgment of the
Corporation, prevent or impair the ability of the Corporation to offer the Canadian-Link Service
or make it impractical or onerous for the Corporation to do so.
(b) Each Canadian-Link Participant shall observe and comply with the CDS Documents
applicable to the Canadian-Link Service as if such Canadian-Link Participant were a CDS
Participant and a direct party to the CDS Documents. Each Canadian-Link Participant
acknowledges that the CDS Documents may include grants of security interests in and liens on
Cross-Border Securities and CAD Funds in which such Canadian-Link Participant may have an
interest, and that certain risk management controls, failure to settle procedures, loss allocation
rules and other terms and conditions of the CDS Documents may also affect such interest. Each
Canadian-Link Participant further acknowledges that, pursuant to the CDS Documents, the
Corporation must observe and comply with the CDS Documents applicable to the Canadian-Link
Service and that, in the event of a conflict between provisions of the CDS Documents and
provisions of the Rules and Procedures of the Corporation, the provisions of the CDS Documents
shall prevail. Accordingly, in no case shall the performance of the obligations of the Corporation
to CDS and CDS Participants under the CDS Documents be deemed to constitute a default in the
performance of the obligations of the Corporation to any Canadian-Link Participants under the
Rules and Procedures of the Corporation.
(c) The Corporation shall make copies of all CDS Documents available to Canadian-
Link Participants.
(b) Each Canadian-Link Participant shall enter into such agreements, execute such
documents and instruments and provide such information as the Corporation may require in
connection with its use of the Canadian-Link Service.
96 FEBRUARY 2007
(c) The Corporation shall maintain a list of all Canadian-Link Participants, and the
Corporation may, from time to time, add Participants to or delete Participants from such list in
accordance with this Section 3.
(a) The Corporation shall designate and set forth in the Procedures the criteria for a
Security to be a Canadian-Link Security and whether a Canadian-Link Security shall be eligible
for all purposes of the Canadian-Link Service (a “Full-Service Canadian-Link Security”) or
whether a Canadian-Link Security shall be eligible for only certain purposes of the Canadian-
Link Service (a “Limited-Service Canadian-Link Security”). The Corporation shall determine,
in its sole and absolute discretion, whether a Security shall be a Canadian-Link Security and, if
so, whether it shall be a Full-Service Canadian-Link Security or a Limited-Service Canadian-
Link Security. The Corporation shall further determine, in its sole and absolute discretion, what
limitations shall apply to the custody and processing of a Canadian-Link Security that is a
Limited-Service Canadian-Link Security. A Security that is an Eligible Security may or may not
be a Canadian-Link Security and may or may not be the subject of Cross-Border CAD Securities
Transactions, Cross-Border USD Securities Transactions and/or Intra-DTC Securities
Transactions. A Security that is not an Eligible Security may be a Limited-Service Canadian-
Link Security but it may not be a Full-Service Canadian-Link Security and may not be the
subject of Intra-DTC CAD Securities Transactions. In no case may a Security be a Canadian-
Link Security if the issuer is on an OFAC list of specially designated nationals and blocked
persons or is incorporated in a jurisdiction on an OFAC list of sanctioned countries. The
Corporation may determine, in its sole and absolute discretion, (i) that a Security is no longer a
Full-Service Canadian-Link Security but may be a Limited-Service Canadian-Link Security, (ii)
that a Security which is a Limited-Service Canadian-Link Security may become a Full-Service
Canadian-Link Security or (iii) that a Security is no longer a Canadian-Link Security.
(b) For purposes of this Rule 30, all references to a Canadian-Link Security shall mean a
Full-Service Canadian-Link Security unless otherwise specified.
(c) The Corporation shall maintain a list of all Full-Service Canadian-Link Securities and
all Limited-Service Canadian-Link Securities, and the Corporation may, from time to time, add
Securities to or delete Securities from such list in accordance with this Section 4.
(a) The Corporation maintains certain accounts for CDS and CDS maintains certain
accounts for the Corporation pursuant to which positions in Cross-Border Securities may be
moved from the Corporation to CDS and from CDS to the Corporation by electronic book-entry
in accordance with the Rules and Procedures of the Corporation and the Rules and Procedures of
CDS (such accounts collectively, the “Canadian-Link Interface”). CDS also maintains for the
Corporation, as a participant of CDS, one or more ledgers, each consisting of a series of
accounts, including a securities account (to record Cross-Border Securities held by CDS for the
Corporation and Cross-Border Securities to be delivered by the Corporation to CDS) and a funds
account denominated in Canadian dollars (to record the net amount of CAD Funds owing from
time to time intra-day between CDS and the Corporation) or US dollars (to record the net amount
97 FEBRUARY 2007
of USD Funds owing from time to time intra-day between CDS and the Corporation). Such
ledgers and the accounts included in such ledgers are collectively referred to as the “DTC
Omnibus Account”.
(b) The Corporation shall make the DTC Omnibus Account available for the purpose of
processing Cross-Border Transactions between Canadian-Link Participants and CDS
Participants. The Corporation shall act on behalf of Canadian-Link Participants and in
accordance with their instructions but shall at all times maintain control over the Cross-Border
Securities and Funds credited to the DTC Omnibus Account.
(c) Cross-Border Securities credited to the DTC Omnibus Account are held by CDS as a
securities intermediary for the Corporation. The interest of a Canadian-Link Participant in such
Cross-Border Securities credited to the DTC Omnibus Account (i) can be no greater than the
interest of the Corporation in such Cross-Border Securities and (ii) is subject to all of the
obligations of the Corporation and rights of CDS and CDS Participants in respect of such Cross-
Border Securities under the CDS Documents.
(d) The Canadian-Link Interface and the DTC Omnibus Account are not Accounts (as
defined in Section 1 of Rule 1), except for the limited purpose specified in Section 9(b) of this
Rule 30.
(a) Each Canadian-Link Participant shall be required to deposit to the Participants Fund
(as described in Section 1 of Rule 4) an amount of USD Funds in addition to the amount of USD
Funds specified in Section 1(a)(i) of Rule 4 (a “Canadian-Link Required Participants Fund
Deposit”). The Canadian-Link Required Participants Fund Deposit shall be in cash. The
Canadian-Link Required Participants Fund Deposit of each Canadian-Link Participant shall be
determined by a formula (taking into account the volume of transactions of each Canadian-Link
Participant) that shall be fixed by the Corporation and set forth in the Procedures. The
Corporation may, from time to time, change the formula for determining the Canadian-Link
Required Participants Fund Deposits of Canadian-Link Participants; provided, however, that
notice of such change shall be given to each Canadian-Link Participant at least ten Business
Days in advance of the effective date thereof.
(b) For all purposes under the Rules and Procedures of the Corporation, the Canadian-
Link Required Participants Fund Deposit of a Participant that is a Canadian-Link Participant
shall be deemed to be a part of the Required Participants Fund Deposit of such Participant and all
references to the Required Participants Fund Deposit of a Participant shall be deemed to include
the Canadian-Link Required Participants Fund Deposit of a Participant that is a Canadian-Link
Participant.
(c) That portion of the cash in the Participants Fund equal to the aggregate amount of the
Canadian-Link Required Participants Fund Deposits of all Canadian-Link Participants
(“Canadian-Link Participants Fund Cash”) may be partially or wholly invested by the
Corporation, in its sole discretion for its account, either (i) in the manner provided in Section
1(g) of Rule 4 or (ii) in securities issued or guaranteed as to principal and interest by the
98 FEBRUARY 2007
Government of Canada or repurchase agreements relating to securities issued or guaranteed as to
principal and interest by the Government of Canada and to the extent not so invested shall be
deposited by the Corporation in its name in a depository or depositories selected by the
Corporation. Any securities, repurchase agreements or deposits in which Canadian-Link
Participants Fund Cash is invested may be sold by the Corporation or Pledged (as defined in
Section 1 of Rule 4(A)) as security for loans made to the Corporation, as provided in Rule 4(A).
The Corporation shall pay interest to a Canadian-Link Participant on its Canadian-Link Required
Participants Fund Deposit at the rate the Corporation earns on its investment of Canadian-Link
Participants Fund Cash or as specified in the Procedures.
(b) In addition, in the manner and for the purposes set forth in this Rule 30 and the
Procedures adopted hereunder, the Corporation shall hold the entire interest in, and shall have the
authority of a holder of securities to act, in its sole discretion, with respect to any Cross-Border
Securities credited to the DTC Omnibus Account (“Cross-Border Net Additions”), to issue or
transfer the entire interest in such Securities, including the authority to sell, Pledge or otherwise
dispose of such Securities. In furtherance of the rights of the Corporation pursuant to this Rule
30 and the Procedures adopted hereunder and for the purpose of securing loans made to the
Corporation, subject only to such terms and conditions as may be provided in the Rules and
Procedures of the Corporation, the Corporation shall have full power and authority to Pledge any
or all Cross-Border Net Additions. Such loans shall be on terms and conditions deemed
necessary or advisable by the Corporation (including collateralization thereof), in its sole
discretion, and may be in amounts greater, and extend for periods of time longer, than the
obligations, if any, of any Canadian-Link Participant to the Corporation secured by the Pledge
(by book entry or otherwise) of such property. No Canadian-Link Participant shall have any
right, claim or action against any secured Lender (as defined in Section 1 of Rule 1) or any
collateral agent of such secured Lender, for the return or otherwise in respect, of any such
collateral Pledged by the Corporation to such secured Lender, or its collateral agent, so long as
any loans made by such secured Lender to the Corporation or other obligations, secured by such
collateral, are unpaid and outstanding.
(a) Pursuant to the Rules and Procedures of CDS, a limit is established by CDS (i) on the
negative CAD Funds balance that may, from time to time, be incurred in the DTC Omnibus
Account in respect of Cross-Border Transactions processed for the Corporation through the
facilities of CDS in CAD Funds (the “DTC Omnibus Account CAD Net Debit Cap”) and (ii) on
the negative USD Funds balance that may, from time to time, be incurred in the DTC Omnibus
Account in respect of Cross-Border Transactions processed for the Corporation through the
facilities of CDS in USD Funds (the “DTC Omnibus Account USD Net Debit Cap”). The DTC
Omnibus Account CAD Net Debit Cap and DTC Omnibus Account USD Net Debit Cap are
99 FEBRUARY 2007
referred to, individually or collectively as the context may require, as the “DTC Omnibus
Account Net Debit Cap”. A limit shall be established by the Corporation (i) on the negative
CAD Funds balance that may, from time to time, be incurred by a Canadian-Link Participant in
respect of Canadian-Link Transactions processed for such Participant through the Canadian-Link
Service in CAD Funds (each a “Canadian-Link CAD Net Debit Cap”) and (ii) on the negative
USD Funds balance that may, from time to time, be incurred by a Canadian-Link Participant in
respect to Canadian-Link Transactions processed for such Participant through the Canadian-Link
Service in USD Funds (each, a “Canadian-Link USD Net Debit Cap”). The Canadian-Link CAD
Net Debit Cap and Canadian-Link USD Net Debit Cap are referred to, individually or
collectively as the context may require, as the “Canadian-Link Net Debit Cap”. The Canadian-
Link Net Debit Cap of each Canadian-Link Participant shall be determined by a formula (taking
into account the volume of Canadian-Link Transactions of each Canadian-Link Participant) that
shall be fixed by the Corporation and set forth in the Procedures.
(c) The Corporation shall not comply with any instruction from a Canadian-Link
Participant in respect of any Canadian-Link Transaction that would cause the Corporation to
exceed its DTC Omnibus Account Net Debit Cap or cause such Canadian-Link Participant to
exceed its Canadian-Link Net Debit Cap but rather shall pend such Canadian-Link Transaction
(subject to the Rules and Procedures of the Corporation) until such Canadian-Link Transaction
may be processed without causing the Corporation to exceed its DTC Omnibus Account Net
Debit Cap or causing such Canadian-Link Participant to exceed its Canadian-Link Net Debit
Cap.
(a) For the purpose of calculating the Collateral Monitor (as defined in Section 1 of Rule
1) of a Participant that is a Canadian-Link Participant on any day that is a CDS Business Day:
(1) There shall be added to the Net Credit Balance (as defined in Section 1 of Rule 1), if
any, of such Participant an amount of USD Funds equal to the amount, if any, by which
the aggregate amount of Funds payable by the Corporation to such Participant in respect
of its Canadian-Link Transactions exceeds the aggregate amount of Funds payable by
such Participant to the Corporation in respect of such Canadian-Link Transactions.
(2) There shall be added to the Net Debit Balance (as defined in Section 1 of Rule 1), if
any, of such Participant an amount of USD Funds equal to the amount, if any, by which
the aggregate amount of Funds payable by such Participant to the Corporation in respect
of its Canadian-Link Transactions exceeds the aggregate amount of Funds payable by the
Corporation to such Participant in respect of such Canadian-Link Transactions.
(3) There shall be deducted from the aggregate Collateral Value of the Collateral (as
each is defined in Section 1 of Rule 1) of such Participant an amount of USD Funds equal
(4) Collateral Value in USD Funds shall be given to Intra-DTC Securities received by
such Participant from other Canadian-Link Participants but no Collateral Value shall be
given to any Cross-Border Securities received by such Participant from CDS Participants
(unless and until such Securities are credited to an Account of such Participant).
(a) A Canadian-Link Participant may give the Corporation an instruction to clear and
settle a Canadian-Link Securities Transaction or effect a Canadian-Link Funds Transaction, as
follows:
(b) A Canadian-Link Participant that gives the Corporation an instruction represents and
warrants to the Corporation that it has the full right, power and authority to give such instruction.
(e) The Corporation shall provide to Canadian-Link Participants all reports, notices,
documents and other information received from CDS with respect to their Cross-Border
Transactions. The Corporation shall provide such reports, notices, documents and other
information to Canadian-Link Participants in the same form and medium in which it is received
from CDS or in any other form or medium used for communications between the Corporation
and Participants of the Corporation. The Corporation may review all such reports, notices,
documents and other information received from CDS in respect of the Cross-Border Transactions
of Canadian-Link Participants but such Canadian-Link Participants shall have the sole
responsibility for confirming the accuracy and completeness of such reports, notices, documents
and other information and informing the Corporation of any errors or omissions.
(c) There shall be present at the location of each Canadian-Link Participant on each CDS
Business Day that is not also a DTC Business Day, during the hours that CDS is open for
business and until, in the judgment of the Corporation, the obligations of such Canadian-Link
Participant to the Corporation for such CDS Business Day have been satisfied, a Participant
Representative (as defined in Section 1 of Rule 7), meeting all of the qualifications and having
all of the powers and responsibilities of a Participant Representative set forth in Sections 1
through 4 of Rule 7.
(d) On every day that is a CDS Business Day, whether or not it is also a DTC Business
Day, a Canadian-Link Participant shall ensure that it has the financial and operational ability to
perform all of its obligations to the Corporation with respect to its use of the Canadian-Link
Service.
(a) On each CDS Business Day, by a time set forth in the Rules and Procedures of CDS,
CDS calculates and provides to the Corporation a settlement recap (the “CDS Settlement
Recap”) with (i) the net amount of CAD Funds payable by CDS to the Corporation (a “DTC
Omnibus Account CAD Net Settlement Credit”) or by the Corporation to CDS (a “DTC
Omnibus Account CAD Net Settlement Debit”), (ii) the net amount of USD Funds payable by
CDS to the Corporation (a “DTC Omnibus Account USD Net Settlement Credit”) or by the
Corporation to CDS (a “DTC Omnibus Account USD Net Settlement Debit”) and (iii) other
information in respect of the Cross-Border Transactions processed by CDS for the Corporation
on such CDS Business Day. The DTC Omnibus Account CAD Net Settlement Credit and DTC
Omnibus Account USD Net Settlement Credit are referred to, individually or collectively as the
context may require, as the “DTC Omnibus Account Net Settlement Credit”. The DTC Omnibus
Account CAD Net Settlement Debit and DTC Omnibus Account USD Net Settlement Debit are
referred to, individually or collectively as the context may require, as the “DTC Omnibus
Account Net Settlement Debit”. The time when CDS provides such information to the
Corporation is referred to as the “CDS Settlement Recap Time”.
(b) On each CDS Business Day, by a time set forth in the Procedures of the Corporation,
the Corporation shall calculate and provide to each Canadian-Link Participant a settlement recap
(a “DTC Settlement Recap”) with (i) the net amount of CAD Funds payable by the Corporation
to such Canadian-Link Participant (a “Canadian-Link CAD Net Settlement Credit”) or by such
Canadian-Link Participant to the Corporation (a “Canadian-Link CAD Net Settlement Debit”),
(ii) the net amount of USD Funds payable by the Corporation to such Canadian-Link Participant
(a “Canadian-Link USD Net Settlement Credit”) or by such Canadian-Link Participant to the
Corporation (a “Canadian-Link USD Net Settlement Debit”) and (iii) other information in
respect of the Canadian-Link Transactions of such Canadian-Link Participant processed through
the Canadian-Link Service on such CDS Business Day, including both Cross-Border
Transactions with CDS Participants processed for such Participant through the DTC Omnibus
(a) On each CDS Business Day, during a period of time set forth in the Rules and
Procedures of CDS, CDS is required to pay to the Corporation the amount of its DTC Omnibus
Account CAD Net Settlement Credit, or the Corporation is required to pay to CDS the amount of
its DTC Omnibus Account CAD Net Settlement Debit, as specified in the CDS Settlement
Recap. Such period of time is referred to as “CDS Payment Exchange”. All such payments to or
by the Corporation are made to or by a Canadian bank acting on behalf of the Corporation (the
“DTC Canadian Settlement Bank”).
(b) On each CDS Business Day, by a time set forth in the Procedures of the Corporation,
each Canadian-Link Participant with a Canadian-Link CAD Net Settlement Debit shall pay to
the Corporation the amount of its Canadian-Link CAD Net Settlement Debit, as specified in the
DTC Settlement Recap. The time when such payment must be made is referred to as the “DTC
Settlement Payment Deadline”. Because the Corporation must receive CAD Funds from
Canadian-Link Participants with Canadian-Link CAD Net Settlement Debits before it can pay
CAD Funds to CDS, the DTC Settlement Payment Deadline shall be earlier than the end of CDS
Payment Exchange.
(c) On each CDS Business Day, as soon as possible after CDS Payment Exchange, DTC
shall pay to each Canadian-Link Participant with a Canadian-Link CAD Net Settlement Credit
the amount of its Canadian-Link CAD Net Settlement Credit; provided, however, that the
amount of any Canadian-Link CAD Net Settlement Credit payable to a Canadian-Link
Participant may be withheld and applied by the Corporation to satisfy (i) any obligation of such
Participant to the Corporation or (ii) any obligation of the Corporation in respect of such
Participant under any Clearing Agency Agreement (as defined in Section 1 of Rule 1).
(e) Except as provided in the Procedures, the Corporation shall not be obligated to
complete Canadian-Link CAD Money Settlement or make payment of any Canadian-Link CAD
Net Settlement Credits owing to Canadian-Link Participants unless and until the Corporation
shall have received payment of all Canadian-Link CAD Net Settlement Debits due from
Canadian-Link Participants and any DTC Omnibus Account CAD Net Settlement Credit due
from CDS.
(f) All DTC Omnibus Account USD Net Settlement Credits and DTC Omnibus Account
USD Net Settlement Debits between the Corporation and CDS, and all Canadian-Link USD Net
Settlement Credits and Canadian-Link USD Net Settlement Debits between the Corporation and
Canadian-Link Participants, in respect of Cross-Border USD Securities Transactions shall be
included in the US dollar settlement of transactions processed through the facilities of the
Corporation in accordance with these Rules and the Procedures of the Corporation.
(a) At the end of each CDS Business Day, after completion of CDS Money Settlement
and subject to the Rules and Procedures of CDS, all Cross-Border Securities credited to the DTC
Omnibus Account shall be transferred, free of payment, from the DTC Omnibus Account
through the Canadian-Link Interface to the Accounts of the Canadian-Link Participants for
which such Cross-Border Securities are held by the Corporation.
(a) If a Canadian-Link Participant shall fail to pay a Canadian-Link CAD Net Settlement
Debit to the Corporation by the DTC Settlement Payment Deadline (or such later time prior to
the end of CDS Payment Exchange as the Corporation may allow, on a case by case basis, in its
sole and absolute discretion), then:
(1) if the day of such Canadian-Link Money Settlement default is a DTC Business Day,
the Corporation may either:
(B) add an amount of USD Funds equal to the amount of such Canadian-Link
CAD Net Settlement Debit to the Gross Debit Balance (as defined in Section
1 of Rule 1) of such Canadian-Link Participant in the US dollar settlement of
transactions processed through the facilities of the Corporation on such DTC
Business Day (as provided in Rule 9(A) and the Procedures thereunder); or
(2) if the day of such Canadian-Link Money Settlement default is not a DTC Business
Day, such Participant shall, automatically and without any further action required on
the part of the Corporation, be deemed to be a Defaulting Participant, in which case
the Corporation shall be entitled to implement the failure to settle procedures set
forth in Section 2 of Rule 9(B) and exercise all of its other rights and remedies in
accordance with the Rules and Procedures of the Corporation.
(b) Each Canadian-Link Participant hereby irrevocably appoints the Corporation (at such
time as such Participant becomes a Defaulting Participant) as its attorney-in-fact and agent for
the purpose of carrying out the provisions of this Section 15, and for such purpose the
Corporation may substitute one or more persons with like power.
(a) If any amount of USD Funds has to be exchanged for an amount of CAD Funds to
pay (or re-fund) a DTC Omnibus Account CAD Net Settlement Debit to CDS in accordance with
Section 13 of this Rule 30 because a Canadian-Link Participant failed to pay the Corporation the
amount of its Canadian-Link CAD Net Settlement Debit, the exchange rate for such purpose
shall be a rate determined by a formula (taking into account all factors incident to the default of
such Participant in the payment of its Canadian-Link CAD Net Settlement Debit) that shall be
fixed by the Corporation and set forth in the Procedures (the “Payment Default Exchange Rate”).
(b) If any computation has to be made requiring the conversion of an amount of CAD
Funds into an amount of USD Funds for the purpose of calculating the Collateral Monitor of a
Canadian-Link Participant pursuant to Section 9 of this Rule 30, the conversion rate for such
purpose shall be a rate determined by a formula (taking into account exchange rate fluctuations)
that shall be fixed by the Corporation and set forth in the Procedures (the “Collateral Monitor
Conversion Rate”).
(c) If any computation has to be made requiring the conversion of an amount of CAD
Funds into an amount of USD Funds for the purpose of calculating the Gross Settlement Debit of
a Canadian-Link Participant pursuant to Section 15 of this Rule 30, the conversion rate for such
purpose shall be a rate determined by a formula (taking into account all factors incident to the
default of such Participant in the payment of its Canadian-Link CAD Net Settlement Debit) that
shall be fixed by the Corporation and set forth in the Procedures (the “Payment Default
Conversion Rate”).
(d) The determination of the Payment Default Exchange Rate, Collateral Monitor
Conversion Rate and Payment Default Conversion Rate, as the case may be, by the Corporation
(a) Each Canadian-Link Participant acknowledges that Cross-Border Securities and other
property credited to the DTC Omnibus Account are located in Ontario, Canada, that Cross-
Border Transactions between Canadian-Link Participants and CDS Participants are processed
through the facilities of CDS in Ontario and that the CDS Documents are expressed to be
governed by the laws of Ontario, including with respect to the operation of the DTC Omnibus
Account, the role of CDS as a securities intermediary maintaining the DTC Omnibus Account
for the Corporation and the proprietary consequences of Cross-Border Transactions processed
through the facilities of CDS.
(a) Each Participant shall pay all fees and charges of the Corporation for the Canadian-
Link Service, which fees and charges shall include without limitation (i) the fees and charges of
CDS for holding Cross-Border Securities and processing Cross-Border Transactions between
Canadian-Link Participants and CDS Participants for the Corporation, (ii) the expenses and
interest costs of any liquidity facilities maintained by the Corporation to collateralize the
obligations of the Corporation to CDS and/or finance the settlement obligations of Canadian-
Link Participants to the Corporation, (iii) other third-party fees and charges related to the
Canadian-Link Service, (iv) internal allocated costs, (v) taxes (except taxes imposed on or
measured by the net income of the Corporation), other governmental charges and obligations to
deduct or withhold taxes on dividend, interest and other payments related to Cross-Border
Securities held by the Corporation for Canadian-Link Participants, together with interest and
penalties thereon and additions thereto (other than interest, penalties and additions imposed
because of the gross negligence or willful misconduct of the Corporation or its agents) and (vi)
penalties and other charges imposed by any governmental or regulatory authority for any failure
to file documents or information required with respect to Cross-Border Securities held by the
Corporation for Canadian-Link Participants (other than a failure caused by the gross negligence
or willful misconduct of the Corporation or its agents).
(b) The fees and charges for the Canadian-Link Service shall be billed and paid in
accordance with Rules 20 and 23.
“DTCC” means The Depository Trust & Clearing Corporation, the holder of all of
the capital stock of the Corporation.
“Common Shares” has the meaning given to such term in the Shareholders
Agreement.
“Mandatory Purchaser Participant” has the meaning given to such term in the
Shareholders Agreement.
“Voluntary Purchaser Participant” has the meaning given to such term in the
Shareholders Agreement.
Section 2. As a condition to its use of the services and facilities of the Corporation, a
Participant other than (i) a non-U.S. based central securities depository or (ii) a Limited
Participant shall be required to purchase and own Common Shares in accordance with the terms
of the Shareholders Agreement and be a party to the Shareholders Agreement. For purposes of
the Shareholders Agreement, a Participant (other than (i) a non-U.S. based central securities
depository or (ii) a Limited Participant) shall be a Mandatory Purchaser Participant.
Section 4. The Corporation shall execute and deliver the Shareholders Agreement as
attorney in fact for a Participant that purchases Common Shares pursuant to Section 2 of this
Rule 31 if such Participant is not already a party to the Shareholders Agreement. In addition, the
Corporation may on behalf of DTCC pursuant to the Shareholders Agreement, without
duplication of payment, (A) debit the Settlement Account of a Participant for any amount
payable by the Participant to DTCC for Common Shares purchased by the Participant and (B)
credit the Settlement Account of a Participant for any amount payable by DTCC to the
Participant for Common Shares sold by the Participant.
∗
Note that, if a Limited Participant is also a member or participant of another clearing agency subsidiary of DTCC,
such Limited Participant may be a Mandatory Purchase Participant or a Voluntary Purchaser Participants pursuant to
the terms of the Shareholders Agreement and the rules and procedures of such other subsidiary.
WIND-DOWN OF A PARTICIPANT
When a Participant notifies the Corporation that it intends to wind down its activities, the
Corporation may, in its sole discretion, in order to protect itself and its Participants, determine
that such Participant is a “Wind-Down Participant”. In that event and, without limiting any other
rights of the Corporation under these Rules and Procedures, the Corporation may impose
conditions on, or take actions with respect to, the Wind-Down Participant as provided below.
The Corporation may, in its discretion, impose conditions on, or take actions with respect to, the
Wind-Down Participant as appropriate to mitigate risk the Corporation perceives may be
presented by the Wind-Down Participant, including but not limited to, the following:
(ii) Permitting the Wind-Down Participant to continue use of one or more of the
Corporation’s services, notwithstanding that it may not meet some or all of the
financial or operational requirements for continuance as a Participant;
(iii) Restricting or modifying the Wind-Down Participant’s use of any or all of the
Corporation’s services (whether generally, or with respect to certain transactions);
(iv) Requiring the Wind-Down Participant to utilize the Honest Broker System where
applicable;
(v) Requiring additional assurances of the financial responsibility or operational
capability of the Wind-Down Participant through, for example, submission of a
guaranty of the Wind-Down Participant’s obligations to the Corporation by an
entity acceptable to the Corporation and/or additional reporting by the Wind-Down
Participant; or
(vi) Requiring the Wind-Down Participant to post increased Participant Fund deposits in
accordance with Section 1 of Rule 4.
If the Corporation takes, or mandates, any action pursuant to this Rule, the Corporation shall, as
soon as practicable thereafter, notify the SEC and such other Participants and Pledgees as it
deems proper due to the nature of such action.
Notwithstanding the foregoing, the Corporation shall not be restricted from exercising any of its
rights in these Rules or in any agreements between itself and the Participant at any time,
ON THE
ADMISSION OF PARTICIPANTS
In evaluating whether its members continue to meet these standards, DTC relies on the
fact that all of its Participants are subject to federal or state regulation relating to, among other
things, capital adequacy, financial reporting and recordkeeping, operating performance,
disqualification from employment, and business conduct. Pursuant to such regulation, DTC's
Participants receive periodic regulatory examinations to assure their compliance with these
requirements and are subject to disciplinary action if violations are found.
Notwithstanding the above, however, in the event an organization that is not subject to
regulatory oversight desires to become a direct participant at DTC, DTC will explore with such
organization the economic and operational implications of direct participation as well as how its
participation could be structured to comply with this policy statement.
In addition to executing the standard DTC Participants Agreement, the foreign entity
must agree to:
(a) in respect of any action brought by DTC to enforce the entity’s obligations under
the Participants Agreement,
(i) irrevocably waive all immunity from DTC's attachment of the entity’s
own assets in the U.S.;
(iii) irrevocably waive any objection to the laying of venue in a court in the
U.S.; and
(iv) state that any judgment obtained against the foreign entity by DTC may be
enforced in the courts of any jurisdiction where the foreign entity or its
property may be located, and that the foreign entity will irrevocably
submit to the jurisdiction of each such courts.
(b) obtain an opinion of foreign counsel satisfactory to DTC providing, among other
things, that the agreements described above may be enforced against the foreign
entity in the courts of its home country or other jurisdictions where the entity or
its property may be found∗;
(c) designate a person in New York as its agent to receive service of process;
(d) provide to DTC, for financial monitoring purposes, audited financial statements
prepared in accordance with U.S. generally accepted accounting principles or
other generally accepted accounting principles that are satisfactory to DTC. In
order to address the risk presented by the acceptance of financial statements
prepared in non-U.S. GAAP, the existing minimum financial requirements for
non-U.S. GAAP standards will each have a specific premium applied as follows:
∗
DTC reserves the right to require the entity to deposit additional amounts to DTC’s Participants Fund and to post a
letter of credit in an instance where DTC, in its sole discretion, believes the entity presents legal risk.
(a) The foreign entity would have to be subject to regulation in its home country and
its home country regulator must have entered into a Bilateral Information Sharing
Arrangement or Memorandum of Understanding with the U.S. Securities and
Exchange Commission regarding the sharing or exchange of information.
(b) The foreign entity must be in compliance with the financial reporting and
responsibility standards of its home country regulator.
(c) The foreign entity must be eligible to become a member of its home country
central securities depository, if any.
(d) The Non-US entity must provide sufficient information to DTC in order to
evaluate AML risk, including whether the Non-US entity is subject to comparable
AML requirements (to those imposed in the US) in its home country jurisdiction.
Preliminary Note: For purposes of this Policy Statement, (i) the term “security” has the
meaning provided in Section 2(a)(1) of the Securities Act of 1933 (the “Securities Act”), (ii) the
term “foreign issuer” has the meaning provided in Rule 405 of the Securities and Exchange
Commission (the “Commission”) under the Securities Act (and includes both a “foreign
government” and a “foreign private issuer” as defined in Rule 405) and (iii) capitalized terms
that are used but not otherwise defined in this Policy Statement have the meanings given to such
terms in the Rules of the Corporation.
Section 1. Categories of Foreign Securities Eligible for the Services of the Corporation.
The following categories of securities of foreign issuers (“Foreign Securities”) shall be eligible
for the book-entry delivery services of the Corporation as and to the extent set forth below:
(a) Foreign Securities that are registered under the Securities Act (“Registered Foreign
Securities”) shall be eligible for all services of the Corporation.
(b) Foreign Securities that are exempt from registration under the Securities Act pursuant
to an exemption that does not involve any resale restrictions (“Exempt Foreign Securities”) shall
be eligible for all services of the Corporation.
(c) Foreign Securities that are exempt from registration under the Securities Act pursuant
to Regulation S (“Foreign Regulation S Securities”)* shall be eligible for all services of the
Corporation; this shall include both Category 1 securities and Category 2 securities under
Regulation S.
(d) Foreign Securities that may be resold without registration under the Securities Act
pursuant to Rule 144A (“Foreign Rule 144A Securities”)* shall be eligible for all services of the
Corporation; if such Foreign Rule 144A Securities are not investment grade securities
(nonconvertible debt securities or nonconvertible preferred stock rated in one of the top four
categories by a nationally recognized statistical rating agency), then, to be eligible for DTC
services, such Foreign Rule 144A Securities must be securities designated for inclusion in a
system of a self-regulatory organization approved by the Commission for the reporting of
quotation and trade information on Rule 144A transactions (an “SRO Rule 144A System”).
(e) Foreign Securities that may be resold without registration under the Securities Act
pursuant to Rule 144 (“Foreign Restricted Securities”)* shall be eligible for all services of the
Corporation.
(f) Foreign Securities that may be resold without registration under the Securities Act
pursuant to any other exemption (“Foreign Other Eligible Securities”)* shall be eligible for all
services of the Corporation; this shall include (without limitation) an exemption pursuant to Rule
801 in connection with a rights offering or an exemption pursuant to Rule 802 in connection with
an exchange offer.
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AUGUST 2007
Although all the foregoing categories of Foreign Securities shall be eligible for deposit
and book-entry transfer through the facilities of the Corporation, the Corporation shall have the
right, and may adopt associated procedures, to determine, in accordance with Rule 5 Section 1 of
the Rules of the Corporation, and its obligations as a registered clearing agency subject to
regulation by the Commission, whether any particular issue shall be accepted for deposit and
made eligible for some or all services of the Corporation.
(a) New Issues. With respect to Foreign Securities deposited with the Corporation at the
time that such Foreign Securities are first distributed (referred to as “new issues”):
(1) For all Foreign Securities, the Corporation will require (i) from the Participant
seeking eligibility (e.g., the underwriter), an Eligibility Questionnaire that sets forth inter alia
the basis on which the securities are eligible for deposit and book-entry transfer though the
facilities of the Corporation, and (ii) from the issuer, a Letter of Representations with
representations that incorporate by reference substantially all of the standard representations
set forth in the “Operational Arrangements (Necessary for an Issue to Become and Remain
Eligible for DTC Services)” of the Corporation.
(2) For Foreign Regulation S Securities, the Corporation will require from the issuer
a rider to the Letter of Representations with inter alia additional representations relating to
the securities being eligible for resale pursuant to Regulation S and having a CUSIP or CINS
identification number different from the CUSIP or CINS identification number of any
registered securities of the issuer of the same class.
(3) For Foreign Rule 144A Securities, the Corporation will require from the issuer a
rider to the Letter of Representations with inter alia additional representations relating to the
securities being eligible for resale pursuant to Rule 144A, having a CUSIP or CINS
identification number different from the CUSIP or CINS identification number of any
registered securities of the issuer of the same class and whether the securities are investment
grade securities or securities designated for inclusion in an SRO Rule 144A System.
(b) Older Issues. With respect to Foreign Securities deposited with the Corporation
subsequent to the time that such Foreign Securities are first distributed (referred to as “older
issues”):
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AUGUST 2007
(1) The Corporation (i) will determine that any unregistered Foreign Securities
deposited with the Corporation have a CUSIP or CINS identification number that is different
from the CUSIP or CINS identification of any registered securities of the issuer of the same
class and (ii) will confirm that any Foreign Rule 144A Securities deposited with the
Corporation are investment grade securities or securities designated for inclusion in an SRO
Rule 144A System.
(2) The Corporation will require from any Participant that wishes to deposit any
unregistered Foreign Securities with the Corporation, or engage in any transactions in
unregistered Foreign Securities through the facilities of the Corporation, a one-time blanket
Letter of Representations (a “Participant Foreign Securities BLOR”) with inter alia
representations that such Participant (i) will not deposit any unregistered Foreign Securities
with the Corporation unless such securities are eligible for resale without registration under
the Securities Act and (ii) will not engage in any transactions in Foreign Securities, including
any distribution of unregistered Foreign Securities through the facilities of the Corporation,
in violation of the Securities Act and the rules and regulations of the Commission thereunder.
(3) The Corporation will systemically block any Participant that has not executed a
Participant Foreign Securities BLOR from (i) depositing any unregistered Foreign Securities
with the Corporation or (ii) engaging in any transactions in unregistered Foreign Securities
through the facilities of the Corporation.
(c) Additional Documentation. Although the foregoing documentation (for new issues
and older issues) shall be provided by issuers or Participants in connection with the deposit of
Foreign Securities with the Corporation and/or as a condition to engaging in transactions in
Foreign Securities through the facilities of the Corporation, the Corporation shall have the right
and may adopt associated procedures to determine in accordance with Rule 5 Section 1 of the
Rules of the Corporation, and its obligations as a registered clearing agency subject to regulation
by the Commission, whether any other or additional documentation shall be required.
NOTE
∗
The categories of Foreign Regulation S Securities, Foreign Rule 144A Securities, Foreign Restricted Securities
and Foreign Other Eligible Securities are not all mutually exclusive. For example, (i) Foreign Regulation S
Securities may be resold to qualified institutional buyers (as defined in Rule 144A) pursuant to Rule 144A, (ii)
Foreign Rule 144A Securities may be resold in offshore transactions (as defined in Regulation S) pursuant to
Regulation S and (iii) Foreign Regulation S Securities and Foreign Rule 144A Securities that are restricted securities
(as defined in Rule 144) may be resold pursuant to Rule 144.
117
AUGUST 2007
BY-LAWS
OF
ARTICLE I
Stockholders
Section 1.1. Annual Meeting. The annual meeting of the stockholders of the
Corporation for the election of directors and the transaction of such other business as may
properly come before the meeting shall be held within the first four months of each calendar year
at such hour and place within or without the State of New York as the Board of Directors shall
determine, or, if not so determined, at 10:00 A.M. on the last day in April at the principal office
of the Corporation in the City of New York, New York or, if that day shall be a Saturday,
Sunday or a legal holiday in the place where the meeting is to be held, on the immediately
preceding day not a Saturday, Sunday or a legal holiday. Notice of such meeting, which shall
state the place, date and hour thereof, shall be given to each stockholder in the manner provided
in Section 1.4.
Section 1.2. Special Meetings. Special meetings of the stockholders may be called by
the Board of Directors, and shall be called by the Executive Chairman of the Board, the Chief
Executive Officer, the President, a Managing Director or the Secretary at the written demand of a
majority of the Board of Directors, or at the written demand of the holders of at least twenty-five
percent (25%) of all outstanding shares entitled to vote on the action proposed to be taken at such
meeting, or, with respect to special meetings for the election of directors pursuant to section
6003 of the Banking Law, at the written demand of the holders of ten percent (10%) of all
outstanding shares entitled to vote in an election of directors, or as required by law. Any such
call or demand shall state the purpose or purposes of the proposed meeting. On failure of any
officer above specified to call such special meeting when duly demanded, any signer of such
demand may call such special meeting and give the notice thereof. Special meetings shall be
held at such place within or without the State of New York as may be specified in the notice
thereof. At any special meeting only such business may be transacted which is related to the
purpose or purposes set forth in the notice thereof, but any special meeting may be called and
held in conjunction with an annual meeting of the stockholders.
Section 1.3. Record Date for Meetings and Other Purposes. For the purpose of
determining the stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to or dissent from any proposal without a
meeting, or for the purpose of determining stockholders entitled to receive payment of any
dividend or the allotment of any rights, or for the purpose of any other action, the Board of
Directors may fix, in advance a date as the record date for any such determination of
stockholders. Such date shall not be more than fifty nor less than ten days before the date of
such meeting, nor more than fifty days prior to any other action.
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JUNE 2011
If no record date is so fixed by the Board of Directors, (a) the record date for the
determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be
at the close of business on the day next preceding the day on which notice is given, or, if no
notice is given, the day on which the meeting is held, and (b) the record date for determining
stockholders for any other purpose shall be at the close of business on the day on which the
resolution of Board of Directors relating thereto is adopted.
When a meeting is adjourned to another time or place, it shall not be necessary to give
any notice of the adjourned meeting, if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned meeting any
business may be transacted that might have been transacted on the original date of the meeting.
However, if after the adjournment, the Board of Directors fixes a new record date for the
adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of
record on the new record date entitled to notice under this Section.
Section 1.5. Waivers of Notice. Notice of any meeting of stockholders need not be
given to any stockholder who submits a signed waiver of notice, in person or by proxy, whether
before or after the meeting. The attendance of any stockholder at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting the lack of notice of such
meeting, shall constitute a waiver of notice by him.
Section 1.7. Quorum at Meetings. Except as otherwise provided by law, the holders
of a majority of the shares entitled to vote thereat shall constitute a quorum at any meeting of
stockholders for the transaction of any business, but the stockholders present may adjourn any
119
JUNE 2011
meeting to another time or place despite the absence of a quorum. When a quorum is once
present to organize a meeting, it shall not be broken by the subsequent withdrawal of any
stockholders.
Section 1.8. Presiding Officer and Secretary. At any meeting of the stockholders, if
none of the Executive Chairman of the Board, the Chief Executive Officer or other person
designated by the Board of Directors to preside at the meeting is present, the stockholders shall
appoint a presiding officer to the meeting. If neither the Secretary nor an Assistant Secretary is
present, the appointee of the person presiding at the meeting shall act as secretary of the meeting.
The inspectors shall determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum, the validity and effect of
proxies, and shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the person presiding at the meeting or any stockholder
entitled to vote thereat, the inspectors shall make a report in writing of any challenge, question or
matter determined by them and execute a certificate of any fact found by them.
Section 1.11. Voting. Whenever directors are to be elected by the stockholders, they
shall be elected by a plurality of the votes cast at a meeting of stockholders by the holders of
shares entitled to vote in the election. Whenever any corporate action, other than the election of
directors, is to be taken by vote of the stockholders, it shall, except as otherwise required by law
or the Organization Certificate or these By-Laws, be authorized by a majority of the votes cast at
a meeting of stockholders by the holders of shares entitled to vote thereon.
Except as otherwise provided by law, every holder of record of shares of the Corporation
entitled to vote on any matter at any meeting of stockholders shall be entitled to one vote for
every such share standing in his name on the record of stockholders of the Corporation on the
record date for the determination of the stockholders entitled to notice of or to vote at the
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meeting. Upon the demand of any stockholder, the vote at any election of directors, or the vote
upon any question before a meeting, shall be by ballot; but otherwise the method of voting shall
be discretionary with the person presiding at the meeting.
ARTICLE II
Board of Directors
Section 2.1 Number of Directors. The entire Board shall consist of twenty-five
directors until changed as hereinafter provided. The number of directors may be changed to no
less than seven nor more than twenty-five at any time and from time to time in accordance with
Article IX. Unless and until changed in accordance with this Section the number of directors
constituting the entire Board shall continue in effect and no further action shall be required to fix
such number at any meeting of the stockholders for the election of directors.
Section 2.2. Election and Term of Directors. At each annual meeting of stockholders,
directors shall be elected to hold office until the next annual meeting. Each director shall, unless
sooner removed or disqualified, hold office from the time of his election and qualification until
the annual meeting of stockholders next succeeding his election and until his successor has been
elected and qualified, and has taken the oath prescribed by Section 7015 of the Banking Law.
Section 2.3. Newly Created Directorships and Vacancies. All vacancies in the office
of director, including newly created directorships resulting from an increase in the number of
directors shall be filled by election by the stockholders at any annual or special meeting of the
stockholders, except as hereinafter provided. Vacancies not exceeding one-third of the entire
Board may be filled by the affirmative vote of a majority of the directors then in office, and the
directors so elected shall hold office for the balance of the unexpired term.
Section 2.4. Resignations. Any director may resign from his office at any time by
delivering his resignation in writing to the Corporation, and the acceptance of such resignation,
unless required by the terms thereof, shall not be necessary to make such resignation effective.
Section 2.5. Removal of Directors. Except as otherwise provided by law, any or all of
the directors may be removed, for cause or without cause, by vote of the stockholders.
Section 2.6. Meetings. Meetings of the Board, regular or special, may be held at any
place within or without the State of New York as the Board from time to time may fix or as shall
be specified in the respective notice or waivers of notice thereof. An annual meeting of the
Board for the election or appointment of officers shall be held within twenty-five days after the
day on which the annual meeting of the stockholders shall have been held, at the same place and
as soon after the holding of such meeting of stockholders as is practicable, and no notice thereof
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need be given. The Board may fix times and places for regular monthly meetings of the Board,
which shall be held at least ten times a year provided, however, that during any three consecutive
calendar months the Board shall meet at least twice, and no notice of such meetings need be
given. The Executive Committee shall meet at least once in each thirty day period during which
the Board does not meet. Special meetings of the Board shall be held whenever called by the
Executive Chairman of the Board, the Chief Executive Officer, the President, a Managing
Director or by at least one-third of the directors for the time being in office. Notice of each such
meeting shall be given by the Secretary or by a person calling the meeting to each director by
mailing the same not later than two days before the meeting, or by telegraphing, cabling,
telephoning, faxing, electronically transmitting or personally delivering the same not later than
one day before the meeting. Notice of a meeting need not be given to any director who submits a
signed waiver of notice whether before or after the meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice to him.
Any one or more members of the board or any committee thereof may participate in a
meeting of such board or committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in person at the meeting.
Section 2.7. Quorum and Voting. Except as provided in the Organization Certificate,
a majority of the entire Board shall constitute a quorum for the transaction of business or of any
specified item of business; provided, however, that, when a majority of the entire Board is once
present to organize a meeting, one-third of the entire Board shall thereafter constitute a quorum
for the transaction of business or any specified item of business at such meeting. Except as
otherwise provided by law, by these By-Laws or by the Organization Certificate, the vote of a
majority of the directors present at the time of the vote, if a quorum is present at such time, shall
be the act of the Board; provided that a majority of the directors present, whether or not a
quorum is present, may adjourn any meeting to another time and place. No notice of any such
adjournment need be given.
Section 2.9. Audit Committee. These shall be an Audit Committee of the Board of
Directors, consisting of three or more directors other than officers of the Corporation appointed
by the Board of Directors. Members of the Audit Committee shall serve at the pleasure of the
Board. The Audit Committee shall review the progress of all internal audits conducted by the
Auditor (if there be one) and all periodic reports of such audits submitted to it by the Auditor
pursuant to Section 3.9 and shall supervise, and cooperate and coordinate with, the Auditor in the
performance of his duties. The Audit Committee shall review with the Corporation's
independent certified public accountants the scope of their auditing procedures, the financial
statements of the Corporation which the accountants propose to certify, the proposed
certification thereof and such other matters relating to the auditing of the Corporation by its
independent certified public accountants as such Committee shall deem appropriate, and shall
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have such other and further duties and powers as may be delegated to it by resolution of the
Board of Directors from time to time. The Board may designate one or more directors as
alternate members of the Audit Committee, who may replace any absent member or members at
any meeting of the Audit Committee.
Section 2.10. Other Committees. The Board of Directors may also appoint or provide
for such other committees consisting of such directors, officers or other persons and having such
powers and functions in the management of the Corporation as the Board of Directors may see
fit.
ARTICLE III
Section 3.1. General Provisions. The officers of the Corporation shall be a Executive
Chairman of the Board and a Chief Executive Officer, each of whom shall be elected by the
Board of Directors from among its own number, a Chief Operating Officer, one or more
Managing Directors, a Secretary, a Treasurer, a Comptroller and an Auditor, and may include
one or more Assistant Secretaries and one or more Assistant Treasurers. The officers shall be
elected by the Board at the first meeting of the Board after the annual meeting of the
shareholders in each year. The Board may elect or appoint other officers (including, but not
limited to, a Vice Chairman of the Board, a President and one or more Vice Presidents), agents
and employees, who shall have such authority and perform such duties as may be prescribed by
the Board. Each officer shall hold office for the term for which he is elected or appointed and
until his successor has been elected or appointed and qualified. Any two or more offices may be
held by the same person, except that neither the Secretary nor any Assistant Secretary shall be
the Executive Chairman of the Board, the Vice Chairman of the Board, the President, the Chief
Executive Officer or the Chief Operating Officer. Any officer, agent or employee of the
Corporation may be removed, or his authority suspended, by the Board with or without cause.
Such removal or suspension of authority without cause shall be without prejudice to such
person's contract rights, if any, but the election or appointment of any person as an officer, agent
or employee of the Corporation shall not be deemed of itself to create contract rights. The Board
may require any officer, agent or employee to give security for the faithful performance of his
duties.
Section 3.2. Powers and Duties of the Executive Chairman of the Board. The
Executive Chairman of the Board shall have the responsibility for carrying out the policies of the
Board. He shall have general supervision over the risk management and control functions
(including, but not limited to, compliance and internal audit) of the Corporation, subject to the
direction of the Board. He shall preside at all meetings of the stockholders and of the Board at
which he is present.
The Executive Chairman of the Board, or in his absence the Chief Executive Officer,
may vote the shares or other securities of any other domestic or foreign corporation of any type
or kind which may at any time be owned by the Corporation, may execute any shareholders' or
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other consents in respect thereof and may in his direction delegate such powers by executing
proxies, or otherwise, on behalf of the Corporation. The Board, by resolution from time to time,
may confer like powers upon any other person or persons.
The Executive Chairman of the Board shall have other powers and perform such other
duties as the Board may designate. The performance of any such duty by the Executive
Chairman of the Board shall be conclusive evidence of his power to act.
Section 3.3 Powers and Duties of the Chief Executive Officer. The Chief Executive
Officer shall have general supervision over the overall business strategy, business operations,
systems, customer outreach and staff functions (including, but not limited to, finance, legal and
human resources) of the Corporation, subject to the direction of the Board and the Executive
Chairman of the Board.
In the absence of the Executive Chairman of the Board, the Chief Executive Officer shall
preside at all meetings of the stockholders and of the Board at which he is present. He shall have
such other powers and perform such other duties as the Board or the Executive Chairman of the
Board may designate.
Section 3.4 Powers and Duties of the Chief Operating Officer. The Chief Operating
Officer shall have general supervision over the operations of the Corporation, subject to the
direction of the Board and the Chief Executive Officer. He shall have such other powers and
perform such other duties as the Board or the Chief Executive Officer may designate. In the
absence or inability to act of the Chief Executive Officer, unless the Board shall otherwise
provide, that person previously designated by the Board, or, if there has been no such previous
designation, the Chief Operating Officer shall perform all the duties and may exercise any of the
powers of the Chief Executive Officer. The performance of any such duty by the Chief
Operating Officer shall be conclusive evidence of his power to act.
Section 3.5. Powers and Duties of Managing Directors. Each Managing Director
shall have such powers and perform such duties as the Board of Directors or the Executive
Chairman of the Board or the Chief Executive Officer may assign to him.
Section 3.6. Powers and Duties of the Secretary. The Secretary shall have charge of
the minutes of all proceedings of the shareholders and of the Board of Directors. He shall attend
to the giving of all notices to shareholders and directors. He shall have charge of the seal of the
Corporation and shall attest the same by his signature whenever required. He shall have charge
of the record of shareholders of the Corporation, and of such other books and papers as the Board
may direct. He shall have all such powers and duties as generally are incident to the position of
Secretary or as the Board or the Executive Chairman of the Board may assign to him.
Section 3.7. Powers and Duties of the Treasurer. The Treasurer shall have charge of
all funds and securities beneficially owned by the Corporation, shall endorse the same for deposit
or collection when necessary and deposit the same to the credit of the Corporation in such banks
or depositories as the Board of Directors may authorize. He may endorse all commercial
documents requiring endorsements for or on behalf of the Corporation and may sign all receipts
and vouchers for payments made to the Corporation. He shall have all such powers and duties as
generally are incident to the position of Treasurer or as the Board or the Chief Executive Officer
may assign to him.
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Section 3.8. Powers and Duties of the Comptroller. The Comptroller shall have
charge of the accounting operations and procedures of the Corporation. He shall have all such
powers and duties as generally are incident to the position of Comptroller or as the Board of
Directors or the Chief Executive Officer may assign to him. He shall render annually to the
Board a report relating to the general condition and internal operations of the Corporation.
Section 3.9. Powers and Duties of the Auditor. The Auditor shall make such
examination of the accounts, records and transactions of the Corporation as may be required by
the Board of Directors and he shall perform such other duties as are prescribed in an audit
program approved by the Board. He shall be free to examine any department or section of the
Corporation routinely without previous officer consultation. He shall maintain a summary
record of dates of completed audits, and shall make periodic reports to the Board or a committee
thereof which shall include such suggestions and recommendations which he may consider
advisable to make. He shall make periodic reports to the Board or a committee thereof on
subjects specified by the Board or a committee thereof or on those chosen by the Auditor on the
status of any audit in progress and shall cooperate and coordinate with the Board or a committee
thereof in the performance of his duties.
Section 3.10. Powers and Duties of Assistant Secretaries. In the absence or inability to
act of the Secretary, any Assistant Secretary may perform all the duties and exercise all the
powers of the Secretary. The performance of any such duty shall be conclusive evidence of his
power to act. An Assistant Secretary shall also perform such other duties as the Board of
Directors or the Secretary may assign to him.
Section 3.11. Powers and Duties of Assistant Treasurers. In the absence or inability to
act of the Treasurer, an Assistant Treasurer may perform all the duties and exercise all the
powers of the Treasurer. The performance of any such duty shall be conclusive evidence of his
power to act. An Assistant Treasurer shall also perform such other duties as the Board of
Directors or the Treasurer may assign to him.
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ARTICLE IV
Indemnification
The Corporation shall, to the fullest extent to which it is empowered to do so by the New
York Business Corporation law or any other applicable laws, as may from time to time be in
effect, indemnify any person who was or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of that fact that he or she, or his or her testator or intestate, is or was a
director or officer of the Corporation, is or was a member of a committee established by the
Board of Directors of the Corporation, or is or was serving any other corporation, domestic or
foreign, partnership, joint venture, trust, employee benefit plan or other business enterprise or
entity in any capacity at the request of the Corporation, against all expenses (including attorneys
fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him
or her in connection with such action, suit or proceeding. The Corporation may advance his or
her related expenses and secure appropriate indemnification insurance, to the full extent
permitted by law.
ARTICLE V
Rules
The Board of Directors may prescribe, and from time to time amend, rules relating to and
regulating the business of the Corporation and the relationship of the Corporation with the
persons for whom it provides services and among such persons (the "Rules"). The Rules of the
Corporation, made in accordance with these By-Laws, shall have the same force and effect as
though a part hereof.
The Board of Directors of the Corporation shall have power to interpret the Rules
adopted pursuant to the provisions of this Article and any and all amendments or changes therein
and additions thereto and any such interpretation so made shall be final and conclusive.
ARTICLE VI
Section 6.1. Certificates for Shares. The shares of the Corporation shall be
represented by certificates in such form as shall be determined by the Board of Directors. Such
certificates shall be signed by the Executive Chairman of the Board, the President, the Chief
Executive Officer, or the Chief Operating Officer and the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer of the Corporation, may be sealed with the seal of the
Corporation or a facsimile thereof, and shall contain such information as is required by law to be
stated thereon. All certificates for shares shall be consecutively numbered or otherwise
identified. All certificates exchanged or surrendered to the Corporation for transfer shall be
cancelled.
Section 6.2. Record of Stockholders. The Corporation shall keep at the office of the
Corporation in the State of New York a record containing the names and addresses of all
stockholders, the number and class of shares held by each and the dates when they respectively
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became the owners of record thereof. The Corporation shall be entitled to treat the persons in
whose names shares stand on the record of stockholders as the owners thereof for all purposes.
Section 6.4. Lost, Stolen or Destroyed Certificates. The Corporation may issue a new
certificate for shares in place of any certificates theretofore issued by it, alleged to have been
lost, stolen or destroyed, and the Board may require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the
Corporation against any claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of any such new certificate. The Board may
require such owner to satisfy other reasonable requirements.
ARTICLE VII
Seal
The seal of the Corporation shall be circular in form and contain the name of the
Corporation, the words "Corporate Seal" and "New York" and the year the Corporation was
formed in the center. The Corporation may use the seal by causing it or a facsimile to be affixed
or impressed or reproduced in any manner.
ARTICLE VIII
Checks, notes, drafts, acceptances, bills of exchange and other orders or obligations for
the payment of money shall be signed by such officer or officers or person or persons as the
Board of Directors shall from time to time determine.
ARTICLE IX
Amendments
These By-Laws may be amended or repealed, and new By-Laws may be adopted, (1) by
vote of the holders of the shares at the time entitled to vote in the election of any directors, at any
annual meeting of the stockholders, or at any special meeting of the stockholders called for that
purpose, or (2) by the Board of Directors. Any By-Laws adopted by the Board may be amended
or repealed by the stockholders entitled to vote thereon as herein provided. A By-Law adopted
by the stockholders may provide that such By-Law shall not be subject to amendment or repeal
by the Board. If any By-Law regulating an impending election of directors is adopted, amended
or repealed by the Board, there shall be set forth in the notice of the next meeting of stockholders
for the election of directors the By-Law so adopted, amended or repealed, together with a
concise statement of the changes made.
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ARTICLE X
Gender References
These By-Laws are intended to be gender neutral. Any reference in these By-Laws to
one gender shall be deemed to include the other.
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ORGANIZATION CERTIFICATE*
OF
We, the undersigned all being of full age, all of us being citizens of the United States and
three of us being residents of the State of New York, having associated ourselves together for the
purpose of forming a limited purpose trust company under and pursuant to the Banking Law of
the State of New York, do hereby certify:
FIRST. That the name by which the corporation is to be known is The Depository Trust
Company.
SECOND. That the place where its principal office is to be located is 55 Water Street,
New York, New York, 10041.
THIRD. The amount of authorized stock which the Corporation is hereafter to have is
$151,850,000 and the number of shares into which such capital stock is to be divided is
1,518,500 shares consisting of 18,500 shares of Common Stock, par value $100 per share, and
1,500,000 shares of Preferred Stock, par value $100 per share, which shall be issued in one or
more classes or series having such designations, relative rights, preferences or limitations as
fixed by the Board of Directors of the Corporation at the time of issuance of any such Preferred
Stock.
FOURTH. The name, place of residence and citizenship of each incorporator, and the
number of shares or capital notes subscribed for by each are:
* * *
__________________
SIXTH. The number of directors is to be not less than seven nor more than twenty-five.
SEVENTH. The names of the incorporators who shall be the directors until the first
annual meeting of stockholders are:
* * *
____________________
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cumulative voting, he would be entitled to cast for the election of directors with respect to his
shares multiplied by the number of directors to be elected. Each stockholder may cast all of such
votes for a single director or may distribute them among the number to be voted for, or any two
or more of them, as he may see fit.
NINTH. A majority of the entire board shall constitute a quorum for the transaction of
any business by the board of directors, except that three-fourths of the entire board shall
constitute a quorum for the purpose of electing or appointing the Chairman of the Board and the
President of the corporation.
TENTH. The vote of a majority of the directors present at the time of the vote, if a
quorum is present at such time, shall be the act of the board of directors, except that the vote of
three-fourths of the entire board, if a quorum is present at such time, shall be necessary for the
election or appointment of the Chairman of the Board and the President of the corporation;
provided, however, that the foregoing exception shall have no force and effect at any time at
which the outstanding shares of the corporation are held of record by more than one person
(other than outstanding shares held of record by directors for the purpose of qualifying as such).
ELEVENTH. The votes of any three directors shall be sufficient to defeat any motion
before the board of directors which would change the fees, procedures or mode of operation of
the corporation; provided, however, that this provision shall have no force and effect at any time
at which the outstanding shares of the corporation are held of record by more than one person
(other than outstanding shares held of record by directors for the purpose of qualifying as such).
TWELFTH. The Corporation shall exercise the general corporate powers provided in
Section 2001 of the Banking Law subject to the restrictions and limitations contained herein and
in the law of the State of New York and the regulations pursuant thereto, provided, however, that
the Corporation shall possess only those powers of a trust company specified in Section 96, 97,
98, and 100 of the Banking Law which are specifically enumerated below, subject to the further
modifications and limitations provided below. The Corporation shall not exercise any additional
or greater power than permitted hereby except after the acceptance and filing in accordance with
the Banking Law of an amendment to this instrument empowering the Corporation to exercise
such additional or greater power.
1. General Powers
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the powers enumerated in this Article TWELFTH; to distribute on such terms as
the Corporation shall prescribe to entities utilizing the Corporation’s services as
described in this Article TWELFTH and others information regarding property of
the type authorized by this Article TWELFTH to be received by the Corporation
for deposit or deposit for safe-keeping for hire; and to exercise all such incidental
powers as shall be necessary to carry on the business of the Corporation
consistent with the powers provided in this Organization Certificate.
(b) To receive upon deposit for safe-keeping for hire upon terms and
conditions to be prescribed by the Corporation money, securities, papers of any
kind and any other personal property, provided that the Corporation shall not pay
interest on any such deposits, and provided, further, that each and every such
deposit is received by the Corporation from or for the account of an entity
utilizing the Corporation's services (i) in connection with the Corporation's acting
as a clearing corporation under the Uniform Commercial Code, or (ii) in the
course of the performance of services by the Corporation as fiscal or transfer
agent or shareholder servicing agent, dividend distribution agent, registrar, paying
agent, escrow agent, custodian, trustee (to the limited extent authorized in
paragraph 4 infra) or recordkeeping agent or (iii) in connection with securities
clearance and/or settlement or lock-box services, such deposits to be used solely
in the course of the performance by the Corporation of services consistent with
the powers enumerated in this Article TWELFTH.
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(g) To execute and deliver such guarantees as may be incidental or usual in
carrying on the trust business of a trust company.
(a) Bonds, notes, debentures and other obligations for payment of money,
which are not in default as to either principal or interest when acquired.
The Corporation shall not purchase, acquire or hold for its account any
stock of any corporation except as provided in this Article TWELFTH.
(a) The Corporation may purchase, hold, lease and convey real property as
follows:
(i) A plot whereon there is or may be erected a
building suitable for the convenient transaction of
its business, from portions of which not required for
its own use a revenue may be derived, and a plot
whereon parking accommodations are, or are to be,
provided, with or without charge, primarily for its
customers or employees or both, and a building or a
portion or portions thereof for use by the
Corporation in its business, provided that the
aggregate of all investments of the Corporation in
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such plots and buildings and in a leased building or
a portion or portions thereof or in the stock,
debentures or other obligations of any corporation
holding such plots or buildings shall not exceed
forty per centum of the aggregate of the capital
stock, surplus fund and undivided profits of the
Corporation, except with the approval of the
superintendent and provided further that the
superintendent shall have approved thereof in
writing prior to each purchase of real property
permitted by this paragraph (i).
4. Fiduciary powers.
The Corporation shall have, subject to the restrictions and limitations contained in
the Banking Law, the following powers:
To act as the fiscal or transfer agent of the United States, any state, municipality,
body politic or corporation; and in such capacity to receive and disburse money, to
transfer, register and countersign certificates of stock, bonds or other evidences of
indebtedness or other securities and to act as attorney in fact or agent of any corporation,
foreign or domestic, for any lawful purpose.
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THIRTEENTH. The Corporation shall have the authority to issue 1,500,000
shares of Series A Preferred Stock (the "Series A Stock") having the relative rights,
preferences and limitations set forth herein:
(a) Definitions. For purposes of this Article THIRTEENTH, the following terms shall
have the following meanings:
The term "Common Stock" shall mean the Common Stock of the Corporation,
par value $100 per share.
The term "Dividend Date" for a Dividend Period shall mean the last Business
Day of the first calendar month following such Dividend Period.
The term "Dividend Period" shall mean a calendar quarter (or part thereof with
respect to any shares of Series A Stock that are not outstanding during an entire
calendar quarter).
The term "Dividend Rate" for a Dividend Period shall mean a rate (expressed
as a percentage) which is derived from a fraction, the numerator of which is A(1-B)
and the denominator of which is B(C-1) + 1, where:
A = the weighted average rate of interest paid by the Corporation on Required
Participants Fund Deposits to the Participants Fund during the Dividend
Period
B = the aggregate effective rate of federal, state and local income tax imposed
on the Corporation, as determined on the relevant Dividend Date
C = the federal dividends received deduction on dividends received by a
corporation (other than dividends received by a small business investment
company or qualifying dividends), as in effect on the relevant Dividend
Date
The term "Junior Stock" shall mean the Common Stock of the Corporation, par
value $100 per share, and any other stock of the Corporation ranking as to
dividends or distributions of the assets of the Corporation junior to the Series A
Stock.
The term "Participant" shall have the meaning given to such term in the Rules.
The term "Participants Fund" shall have the meaning given to such term in the
Rules.
The term "Preferred Stock" shall mean the Preferred Stock of the Corporation,
par value $100 per share, including the Series A Stock.
The term "Required Participants Fund Deposit" shall have the meaning given
to such term in the Rules.
The term "Rules" shall mean the Rules of the Corporation, as in effect from
time to time.
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The term "Settlement Account" shall have the meaning given to such term in
the Rules.
(b) Issue. All shares of Series A Stock issued by the Corporation shall be issued at a
price per share equal to the par value of the Series A Stock. The Corporation may
issue shares of Series A Stock in fractions where necessary to effect the share
transfers and distributions required by the Rules, which fractions may be expressed
in decimal units of one-hundred-thousandth of a share.
(c) Dividends. Dividends on shares of Series A Stock shall be payable, when and as
declared by the Board of Directors of the Corporation, on each Dividend Date at the
Dividend Rate for the immediately preceding Dividend Period. Dividends shall not
be cumulative.
(d) Purchase of Shares. The Corporation may, at any time and from time to time,
subject to applicable provisions of the Banking Law, purchase some or all
outstanding shares of Series A Stock.
(e) Redemption of Shares. The Corporation may, at any time and from time to time,
subject to applicable provisions of the Banking Law, redeem some or all outstanding
shares of Series A Stock at a redemption price per share equal to the par value of the
Series A Stock plus accrued and unpaid dividends thereon to the redemption date. If
less than all outstanding shares of Series A Stock are to be redeemed, the shares to be
redeemed shall be selected by the Corporation pro rata or by lot or in such other
equitable manner as the Board of Directors of the Corporation shall determine.
Notice of such redemption (and the number of shares to be redeemed if less than all)
shall be sent to each holder of record of shares of Series A Stock by mail, telecopy,
electronic transmission or personal delivery. On the redemption date, without any
action required on the part of any record holder of shares of Series A Stock, the
shares of Series A Stock of such holder subject to redemption shall be redeemed by
the Corporation and (i) on such redemption date, an amount equal to the aggregate
par value of the redeemed shares of Series A Stock shall be (A) credited to the
Settlement Account of the holder if the holder is then a Participant or (B) wired to an
account specified by the holder if the holder is not then a Participant, and (ii) on the
last Business Day of the first calendar month following the calendar year in which
such redemption occurs, an amount equal to the accrued and unpaid dividends on the
redeemed shares to the redemption date shall be (A) credited to the Settlement
Account of the holder if the holder is then a Participant or (B) wired to an account
specified by the holder if the holder is not then a Participant.
(f) Voting. Except as otherwise set forth below or required by the Banking Law, shares
of Series A Stock shall have no voting power. Without the consent of the holders of
shares of Series A Stock entitled to cast at least two-thirds of the votes entitled to be
cast by the holders of all shares of Series A Stock then outstanding, the Corporation
may not (a) create any class or series of stock which shall have parity with or a
preference over any outstanding shares of Series A Stock with respect to dividends
or distribution of the assets of the Corporation or (b) alter or change the provisions of
the Organization Certificate of the Corporation so as to adversely affect the voting
power, preferences or special rights of the holders of the Series A Stock.
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(g) Liquidation Preference. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the Series A Stock shall
be entitled to receive, out of the assets of the Corporation available for distribution to
stockholders, before any distribution of the assets of the Corporation shall be made
to the holders of Junior Stock, an amount per share equal to the Issue Price plus any
accrued and unpaid dividends thereon to the distribution date. After payment to the
holders of the Series A Stock of the full preferential amounts provided for in this
Paragraph (g), the holders of the Series A Stock shall be entitled to no further
participation in any distribution of the assets of the Corporation. The consolidation
or merger of the Corporation with or into any other corporation, or the sale of
substantially all the assets of the Corporation in consideration for the issuance of
equity securities of another corporation, shall not be regarded as a liquidation,
dissolution or winding up of the Corporation within the meaning of this Paragraph
(g) if such consolidation, merger or sale of assets does not in any way impair the
voting power, preferences or special rights of the holders of the Series A Stock.
(h) Limitations on Dividends on Junior Stock. So long as any shares of Series A Stock
are outstanding, the Corporation shall not declare any dividends on any Junior Stock
or make any payment on account of, or set apart money for, a sinking or other
analogous fund for the purchase, redemption or retirement of any shares of Junior
Stock, or make any distribution in respect thereof, whether in cash or property or in
obligations or stock of the Corporation (other than Junior Stock) unless, on the date
of such declaration or setting apart or distribution, the Corporation shall not be in
default with respect to any of its obligations on the Series A Stock.
(i) Stock Certificates. All outstanding shares of Series A Stock shall be represented by
a single certificate held in custody by the Corporation. The ownership of shares of
Series A Stock shall be evidenced by entries made on the books of the Corporation.
The certificate representing all outstanding shares of Series A Stock shall bear the
following legend:
"THE SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER
DISPOSITION OF THIS INSTRUMENT AND THE SHARES REPRESENTED
HEREBY ARE SUBJECT TO ALL TERMS, CONDITIONS AND
RESTRICTIONS, INCLUDING RESTRICTIONS ON WHO MAY BE
REGISTERED BY THE ISSUER AS A HOLDER HEREOF, CONTAINED IN
THE RULES OF THE DEPOSITORY TRUST COMPANY AS THE SAME
MAY FROM TIME TO TIME BE AMENDED AS THEREIN PROVIDED, TO
ALL OF WHICH SUCH HOLDERS, BY ACCEPTANCE HEREOF, ASSENT.
A COPY OF SAID RULES, TO WHICH REFERENCE IS HEREBY MADE, IS
ON FILE IN THE OFFICE OF THE SECRETARY OF THE DEPOSITORY
TRUST COMPANY. THIS INSTRUMENT AND THE SHARES
REPRESENTED HEREBY SHALL NOT BE TRANSFERABLE AT ANY
TIME UNLESS SUCH TRANSFER IS CONSISTENT WITH THE TERMS OF
SAID RULES, AND (i) A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED FROM TIME TO TIME, IS IN
EFFECT WITH RESPECT TO SUCH SHARES AT SUCH TIME, OR (ii)
COUNSEL REASONABLY SATISFACTORY TO THE DEPOSITORY TRUST
COMPANY HAS GIVEN IT AN OPINION TO THE EFFECT THAT SUCH
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TRANSFER AT SUCH TIME WILL NOT VIOLATE THE SECURITIES ACT
OF 1933, AS AMENDED FROM TIME TO TIME."
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