Subject: SR-DTC-2017-011
From: Robert A. Stevens
Affiliation: Globic Advisors

September 1, 2017

Good Day,

I would like to comment on DTC’s use of ATOP for executing consent solicitations.

While use of ATOP would automate the process, there is a ‘pay-to-play’ aspect that was not inherent to the process in the past. 

When thinking of municipal bonds, which often deal in multiple maturities (CUSIPs), DTC would charge $2k per CUSIP along with other fees associated with setting up ATOP in a short time period ($2k to $5k per CUSIP depending on the notice period).   These are costs that hit municipal obligors and trustees disproportionality harder than their corporate counter-parts, who often have fewer CUSIPs.

A few examples:

 

DTC does not charge issuers/trustees to utilize ATOP for tender/exchange offers.  The costs fall on their Participants, who pay it as a preferred method to executing these events on their behalf.  I do not understand why the cost of a consent should fall on the issuer/trustee, when the consent’s execution is in the best interests of the bondholder, and the inability to pay or meet DTC’s operational schedule only hurts the bondholders. 

This is not to say ATOP could not be a valuable resource, but a mandated one will create inequality in the system and an unfair operational hurdle. One should have the right to opt out of using ATOP when the cost is too much or the operational restrictions prevent the execution of the bondholder’s wishes.

Best,

Rob

Robert A. Stevens

Globic Advisors

880 Third Avenue- 12th Floor
New York NY, 10022