[Federal Register Volume 79, Number 227 (Tuesday, November 25, 2014)]
[Notices]
[Pages 70258-70259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-27840]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73642; File No. SR-FICC-2014-08]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Clarify That Federal Reserve Banks, Central Counterparties, and Central
Securities Depositories Shall Not Be Considered Either ``Mandatory
Purchaser Participants'' or ``Voluntary Purchaser Participants'' and
Registered Investment Companies Shall Be Considered ``Voluntary
Purchaser Participants''
November 19, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 12, 2014, Fixed Income Clearing Corporation (``FICC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II and III below, which
Items have been prepared by FICC. FICC filed the proposed rule change
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(1)
thereunder.\4\ The proposed rule change was effective upon filing with
the Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(1).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of amendments to Rule 49 of the
Rulebook of the Government Securities Division (``GSD'' and its
Rulebook, ``GSD Rules'') of FICC, and Rule 39 of the Clearing Rules of
the Mortgage-Backed Securities Division (``MBSD'' and its Clearing
Rules, ``MBSD Rules'') of FICC in order to clarify that Federal Reserve
Banks, central counterparties, and central securities depositories
shall not be considered either ``Mandatory Purchaser Participants'' or
``Voluntary Purchaser Participants,'' and further to clarify that
Registered Investment Companies shall be considered ``Voluntary
Purchaser Participants,'' as more fully described below.
II. Clearing Agency'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 IV below. FICC has prepared summaries, set forth in sections A, B
and C below, of the most significant aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
Pursuant to the Third Amended and Restated Shareholders Agreement,
dated as of December 7, 2005 (``Shareholders Agreement''), by and among
The Depository Trust & Clearing Corporation (``DTCC''), The Depository
Trust Company (``DTC''), National Securities Clearing Corporation
(``NSCC''), FICC, and the other parties thereto, and MBSD Rule 39,
Clearing Members (as such term is defined in the MBSD Rules \5\) other
than non-U.S. based central securities depositories are required to be
``Mandatory Purchaser Participants'' (as such term is defined in MBSD
Rule 39) and be parties to the Shareholders Agreement, and all other
users are not permitted to purchase and own shares of DTCC common stock
(``Common Shares'') or be parties to the Shareholders Agreement.
Further, pursuant to the Shareholders Agreement and GSD Rule 49: (1)
Netting Members (as such term is defined in the GSD Rules \6\) other
than non-U.S. based central securities depositories are required to be
``Mandatory Purchaser Participants'' (as such term is defined in the
GSD Rules) and be parties to the Shareholders Agreement; (2)
Comparison-Only Members (as such term is defined in the GSD Rules) are
permitted, but not required to purchase and own Common Shares and be
parties to the Shareholders Agreement; and (3)
[[Page 70259]]
Sponsored Members (as such term is defined in the GSD Rules) are not
permitted to purchase and own Common Shares or be parties to the
Shareholders Agreement.
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\5\ MBSD Rules are available at http://dtcc.com/legal/rules-and-procedures.aspx.
\6\ GSD Rules are available at http://dtcc.com/legal/rules-and-procedures.aspx.
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FICC is proposing to amend MBSD Rule 39 and GSD Rule 49, as marked
on Exhibit 5 hereto, in order to make clear Federal Reserve Banks,
central counterparties, and central securities depositories shall not
be considered either Mandatory Purchaser Participants or Voluntary
Purchaser Participants. FICC has interpreted MBSD Rule 39 and GSD Rule
49 to exclude from their provisions: (1) Federal Reserve Banks, because
it was never intended that such governmental authorities should be
required to own shares in DTCC, notwithstanding that they may use
certain services of FICC; and (2) central counterparties and central
securities depositories, because link arrangements between FICC and
these entities are for the purpose of extending clearing agency
services across borders or among closely related activities and
products, but not for ownership purposes.
FICC is also proposing to amend MBSD Rule 39 and GSD Rule 49 in
order to make clear Registered Investment Companies (as such term is
defined in the MBSD Rules and the GSD Rules) (``RICs'') in any
membership category shall be considered Voluntary Purchaser
Participants. As Voluntary Purchaser Participants, RICs would be
permitted, but not required, to purchase and own Common Shares and be
parties to the Shareholders Agreement. Regulatory requirements
applicable to RICs, including limitations on the amount of illiquid
securities these entities are permitted to hold on an on-going basis
and requirements that stock purchases receive shareholder approval,
significantly restrict the ability of RICs to participate in a
mandatory stock purchase. These restrictions are unique to RICs. FICC
would consider the applicability of the requirements in MBSD Rule 39
and GSD Rule 49 to any new members, as necessary.
2. Statutory Basis
The proposed rule change is consistent with the Act, and the rules
and regulations thereunder, in particular Section 17A(b)(3)(C) which
requires that the rules of FICC ``assure a fair representation of its
shareholders (or members) and participants in the selection of its
directors and administration of its affairs . . . [and the Commission]
may determine that the representation of participants is fair if they
are afforded a reasonable opportunity to acquire voting stock of the
clearing agency, directly or indirectly, in reasonable proportion to
their use of such clearing agency.'' \7\ FICC implements and meets this
requirement through MBSD Rule 39 and GSD Rule 49, which afford MBSD and
GSD users a reasonable opportunity to acquire voting stock indirectly
in the clearing agency in reasonable proportion to their use of the
clearing agency.\8\ The proposed rule change constitutes a stated
policy, practice, or interpretation with respect to the meaning,
administration, or enforcement of these existing rules.
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\7\ 15 U.S.C. 78q-1(b)(3)(C).
\8\ See Commission orders approving NSCC and DTC's rule filings
which implemented the current stock ownership structure that
satisfies the fair representation requirements. Securities Exchange
Act Release No. 41800 (August 27, 1999), 64 FR 48694 (September 7,
1999) (SR-NSCC-1999-10); and Securities Exchange Act Release No.
41786 (August 24, 1999), 64 FR 47882 (September 1, 1999) (SR-DTC-
1999-17).
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(B) Clearing Agency's Statement on Burden on Competition
The proposed rule change will not have any impact, or impose any
burden, on competition.
(C) Clearing Agency'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 yet
been solicited or received. FICC will notify the Commission of any
written comments received by FICC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) \9\ of the Act and paragraph (f) of Rule 19b-4 \10\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f).
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IV. 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 email to [email protected]. Please include
File Number SR-FICC-2014-08 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FICC-2014-08. This
file number should be included on the subject line if email 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 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
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of FICC and on
FICC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). 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
submissions should refer to File Number SR-FICC-2014-08 and should be
submitted on or before December 16, 2014.
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. 2014-27840 Filed 11-24-14; 8:45 am]
BILLING CODE 8011-01-P