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Securities Law

DTCC Delays Action on Fee Hike, Pending Talks

The Depository Trust & Clearing Corp. has postponed action on a plan to increase fees for municipal securities with multiple CUSIPs pending discussions with municipal market groups, according to a DTCC spokesperson.

The announcement comes three months after the Securities Industry and Financial Markets Association, the National Association of Independent Public Finance Advisors and the Government Finance Officers Association urged DTCC in a letter to meet with underwriters, muni advisors and issuers before implementing a plan that would boost some issuers’ fees by five-fold.

Bari Trontz, spokesperson for New York City-based DTCC, said in an email that the company has delayed a decision to change its fees “as we continue discussions and work collaboratively with our members and industry organizations to determine next steps.”

DTCC, through its subsidiaries, provides clearing, settlement and information services for municipal bonds, equities and other financial instruments.

Market insiders welcomed the news.

“NAIPFA is very pleased to learn the DTCC has officially announced that they will not be increasing their fees at this time,” said Jeanine Rodgers Caruso, NAIPFA board president. “It is our continued belief that the amount of the fee increase that was being discussed by DTCC would be too large and would have a disproportionate impact on small communities.”

“We look forward to working with DTCC and other industry groups on this important issue,” said Susan Gaffney, the former director of GFOA’s federal liaison center, who still assists the group.

SIFMA declined to comment.

In October, sources said DTCC was discussing fee changes, but had not put forth an official proposal, which would have to be approved by the Securities and Exchange Commission.

DTCC did not comment on its plan, but the groups’ Oct. 16 letter about it said DTCC was considering charging $200 for the first CUSIP of a multi-CUSIP security, plus $150 for each additional CUSIP.

Currently DTCC charges a flat $500 fee for munis with multiple CUSIPs.

Many munis have multiple maturities and require many nine-digit CUSIPs. Underwriters typically pay DTCC fees, but issuers reimburse them, the letter said.

DTCC was also considering decreasing the fee charged for munis with a single CUSIP from $350 to $200, sources said.

The letter said the proposal would hike issuers’ expenses and particularly impact smaller issuers, who would pay a greater percent of par amount in expenses.

An issuer’s cost for bonds with 20 maturities — and 20 CUSIPS — would climb from $500 to $3,050, the letter noted.

The letter said the planned changes also did not reflect DTCC’s muni-related costs.

“This is especially disconcerting since advanced technology undoubtedly eliminates much of the manual effort that was once necessary to add CUSIPs to an issue,” the groups wrote.

They suggested DTCC drop the plan or scale fees based on the size of the issue, and phase the changes in slowly.

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