[Federal Register Volume 76, Number 97 (Thursday, May 19, 2011)]
[Notices]
[Pages 29018-29019]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-12331]
[[Page 29018]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64488; File No. SR-FICC-2011-03]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change Relating to Updating the Range of Haircuts To Be Applied to
Eligible Clearing Fund Securities and Eligible Participants Fund
Securities
May 13, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on May 10, 2011, the Fixed
Income Clearing Corporation (``FICC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I and II below, which Items have been prepared
primarily by FICC. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons and to
approve the proposed rule change on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of this filing is to modify the range of haircuts
currently applied to Eligible Clearing Fund Securities by FICC's
Government Securities Division (``GSD'') and Eligible Participants Fund
Securities by FICC's Mortgage-Backed Securities Division (``MBSD'').
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FICC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item III below. FICC has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
Under GSD's Rulebook and MBSD's Clearing Rules (``Rules''), GSD
Members and MBSD Participants are required to make deposits to the GSD
Clearing Fund and MBSD Participants Fund, respectively, with the amount
of each Member's and Participant's required deposit being fixed by FICC
in accordance with formulas as specified in the Rules (``Required
Deposit'').
A GSD Member or MBSD Participant may satisfy its Required Deposit
with a cash deposit, and FICC may permit a portion of the Member's or
Participant's deposit to be evidenced by an open account indebtedness
secured by Eligible Clearing Fund Securities (for the GSD) and Eligible
Participants Fund Securities (for the MBSD). Eligible Clearing Fund
Securities and Eligible Participants Fund Securities consist of certain
Treasury, agency, and mortgage-backed securities. Eligible Clearing
Fund Securities and Eligible Participants Fund Securities pledged as
Clearing Fund collateral are subject to haircuts.
For reasons set forth in a companion rule filing, FICC's affiliate,
the National Securities Clearing Corporation (``NSCC''), has increased
haircuts on Clearing Fund collateral.\2\ Given that the haircuts are
applied to NSCC and FICC systemically and on a harmonized basis, these
changes are also proposed to be applied to FICC. Moreover, FICC
believes that adjusting FICC's haircuts on Clearing Fund and
Participants Fund collateral will ensure that adequate collateral
levels are maintained to facilitate settlement in the event of a member
or participant default.
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\2\ Securities Exchange Act Release No. 64487 (May 13, 2011)
(SR-NSCC-2011-02).
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Accordingly, FICC proposes to increase the haircut applied to (i)
agency notes and bonds from the current range of 2 to 7 percent based
on term to a proposed range of 7 to 10 percent based on term, (ii) zero
coupon obligations of Agency Securities from the current range of 5 to
12 percent based on term to a proposed 7 to 18 percent based on term,
and (iii) mortgage-backed pass-through securities issued by Ginnie Mae
from the current 6 percent to a proposed 7 percent.
A complete listing of the haircut schedule and the proposed changes
is attached to FICC's proposed rule filing as Exhibit 5 and can be
viewed online at http://www.dtcc.com/legal/rule_filings/ficc/2011.php.
Subject to approval by the Commission, the proposed haircut changes
on Clearing Fund and Participants Fund collateral will become effective
on May 16, 2011.
FICC states that the proposed rule change is consistent with the
requirements of the Act \3\ and the rules and regulations thereunder
applicable to FICC because it facilitates the prompt and accurate
clearance and settlement of securities transactions by adjusting FICC's
haircuts on Clearing Fund and Participants Fund collateral to ensure
adequate collateral levels are maintained to facilitate settlement in
the event of a member or participant default.
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\3\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition
FICC does not believe that the proposed rule change will have any
impact or impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments relating to the proposed rule change have not been
solicited or received by FICC. FICC will notify the Commission of any
written comments it receives.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
Send an e-mail to [email protected]. Please include
File No. SR-FICC-2011-03 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC, 20549-1090.
All submissions should refer to File No. SR-FICC-2011-03. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than
[[Page 29019]]
those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filings also will be available for
inspection and copying at FICC's principal office and on FICC's Web
site at http://www.dtcc.com/legal/rule_filings/ficc/2011.php. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submission should refer to File No. SR-FICC-2011-03 and should be
submitted on or before June 9, 2011.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
Section 19(b) of the Act \4\ directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization. The Commission finds that the proposed rule change is
consistent with the requirements of the Act, in particular the
requirements of Section 17A of the Act,\5\ and the rules and
regulations thereunder applicable to FICC. Specifically, the Commission
finds that the proposed rule change is consistent with Section
17A(b)(3)(F) of the Act,\6\ which requires, among other things, that
the rules of a registered clearing agency be designed to assure the
safeguarding of securities and funds which are in the custody or
control of the clearing agency or for which it is responsible. The
Commission finds that FICC's rule change is consistent with this
requirement because increasing the haircuts that are applied to the
securities that FICC's members and participants deposit as Clearing
Fund or Participants Fund collateral should help ensure that FICC
maintains adequate collateral levels to facilitate settlement in the
event of a member or participant default, which should therefore help
minimize risk to FICC and its members and participants. Accordingly,
the proposed rule change should improve FICC's ability to assure the
safeguarding of securities and funds in its custody or control or for
which it is responsible.
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\4\ 15 U.S.C. 78s(b).
\5\ 15 U.S.C. 78q-1. In approving this proposed rule change, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
\6\ 15 U.S.C. 78q-1(b)(3)(F).
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FICC has requested that the Commission approve the proposed rule
change on an accelerated basis such that it would become effective on
May 16, 2011. By granting accelerated approval to the proposed change
so that FICC will be able to adjust its haircuts for securities pledged
as Clearing Fund or Participants Fund collateral by May 16, 2011, so
that it haircuts remain harmonious with those of NSCC. As a result,
FICC should be better able to maintain adequate collateral levels to
protect itself and its members and participants in the event of a
member or participant default. Accordingly, the Commission finds good
cause to approve the proposed rule change prior to the 30th day after
the date of publication of notice of the proposed rule change in the
Federal Register.
V. Conclusion
It is therefore ordered pursuant to Section 19(b)(2) of the Act \7\
that the proposed rule change (SR-FICC-2011-03) be, and it hereby is,
approved on an accelerated basis.
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\7\ Id.
For the Commission by the Division of Trading and Markets
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-12331 Filed 5-18-11; 8:45 am]
BILLING CODE 8011-01-P