[Federal Register Volume 78, Number 113 (Wednesday, June 12, 2013)]
[Notices]
[Pages 35333-35334]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13888]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69708; File No. SR-FICC-2013-01]
Self-Regulatory Organizations; The Fixed Income Clearing
Corporation; Order Granting Approval of a Proposed Rule Change To Amend
the Mortgage-Backed Securities Division Rule To Reflect Recommendations
of the Treasury Market Practice Group
June 6, 2013.
I. Introduction
On April 15, 2013, the Fixed Income Clearing Corporation (``FICC'')
filed with the Securities and Exchange Commission (``Commission'')
proposed rule change SR-FICC-2013-01 pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder.\2\ The proposed rule change was published for comment in
the Federal Register on April 29, 2013.\3\ The Commission received no
comment letters. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 69424 (April 22, 2013),
78 FR 25115 (April 29, 2013).
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II. Description
To address the persistent settlement fails in agency debt and
mortgage-backed securities (``MBS'') transactions and to encourage
market participants to resolve such fails promptly, the Treasury Market
Practices Group (``TMPG'') recommended in February 2012 that the MBS
market impose a fails charge.\4\ FICC's Mortgage-Backed Securities
Division (``MBSD'') amended Rule 12 (Fails Charges) of MBSD's
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Clearing Rules in March 2012 to reflect TMPG's recommendations.\5\ The
fails charge for MBS transactions applies to certain trades settled in
the MBSD central counterparty (``CCP'') (i.e., settlement of pools
versus FICC involving failing agency MBS issued or guaranteed by Fannie
Mae, Freddie Mac, and Ginnie Mae.) Consistent with the TMPG's initial
recommendation, MBSD's Rule 12 did not impose a fails charge if
delivery occurred on either of the two business days following the
contractual settlement date. The two business days are sometimes
referred to as the ``resolution period.''
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\4\ The TMPG is a group of market participants active in the
treasury securities market sponsored by the Federal Reserve Bank of
New York.
\5\ See Securities Exchange Act Release No. 66550 (March 9,
2012), 77 FR 15155 (March 14, 2012) (File No. SR-FICC-2008-01).
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However, on March 1, 2013, the TMPG issued a new recommendation to
remove the two-day resolution period from the current practice.\6\ The
TMPG has advised that the revised recommendation should apply to
transactions in agency MBS transactions entered into on or after July
1, 2013, as well as to transactions that were entered into prior to but
remain unsettled as of July 1, 2013. This rule change amends the
existing fails charge rule to reflect TMPG's most recent recommendation
by removing the two-day resolution period provision from the rule.
Consequently, an agency MBS settlement fail will be subject to a fails
charge for each calendar day that the fail is outstanding, even if the
delivery occurs on either of the first two business days following the
contractual settlement date. FICC is making the rule change effective
as of July 1, 2013, in accordance with the TPMG's recommendation. All
other provisions of the agency MBS fails charge rule, including the
fails charge rate and trading practices, remain unchanged.
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\6\ Press Release, Federal Reserve Bank of New York, TMPG
Revises Agency MBS Fails Charge Trading Practice (March 1, 2013)
(available at www.newyorkfed.org/tmpg/03_01_2013_Fails_charges_press_release.pdf).
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III. Discussion
Section 19(b)(2)(C) of the Act \7\ 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. Section 17A(b)(3)(F) of the Act
requires, among other things, that the rules of a clearing agency be
designed to promote the prompt and accurate clearance and settlement of
securities transactions and to remove impediments to and perfect the
mechanism of a national system for the prompt and accurate clearance
and settlement of securities transactions.\8\ The Commission finds that
FICC's rule change should facilitate the prompt and accurate clearance
and settlement of securities transactions because the rule change will
discourage persistent settlement fails in agency debt and MBS
transactions and encourage market participants to resolve such fails
promptly.
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\7\ 15 U.S.C. 78s(b)(2)(C).
\8\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act,
particularly with the requirements of Section 17A of the Act, and the
rules and regulations thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (File No. SR-FICC-2013-01) be and
hereby is approved.\10\
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\9\ 15 U.S.C. 78s(b)(2).
\10\ In approving this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13888 Filed 6-11-13; 8:45 am]
BILLING CODE 8011-01-P