Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving a Proposed Rule Change Relating to Changes To Eliminate or Amend Rules That Are Inconsistent With Current Practice, Have Expired, Are Outdated, Are Unnecessary, or Require Technical Correction, 7983-7984 [E5-639]
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Federal Register / Vol. 70, No. 31 / Wednesday, February 16, 2005 / Notices
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
450 Fifth Street, NW., Washington, DC
20549–0609.
All submissions should refer to File
Number SR–FICC–2005–03. 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 (https://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 inspection and copying in
the Commission’s Public Reference
Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such
filing also will be available for
inspection and copying at the principal
office of FICC and on FICC’s Web site
at www.ficc.com. 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–
2005–03 and should be submitted on or
before March 9, 2005.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.6
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–638 Filed 2–15–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51175; File No. SR–FICC–
2004–19]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Order
Approving a Proposed Rule Change
Relating to Changes To Eliminate or
Amend Rules That Are Inconsistent
With Current Practice, Have Expired,
Are Outdated, Are Unnecessary, or
Require Technical Correction
February 9, 2005.
SUMMARY: On October 7, 2004, the Fixed
Income Clearing Corporation (‘‘FICC’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 (File No.
SR–FICC–2004–19). Notice of the
proposal was published in the Federal
Register on December 29, 2004.2 No
comment letters were received. For the
reasons discussed below, the
Commission is approving the proposed
rule change.
I. Description
The proposed rule change will
eliminate or amend FICC’s Government
Securities Division (‘‘GSD’’) and
Mortgage-Backed Securities Division
(‘‘MBSD’’) rules in the following
manner:
1. Delete Provisions in GSD’s Rules
Regarding the Automated Customer
Account Transfer Service (‘‘ACATS’’)
The ACATS provisions were added to
GSD’s rules in 1998, when the National
Securities Clearing Corporation
requested that the Government
Securities Clearing Corpoartion
(‘‘GSCC’’), the GSD’s predecessor,
establish with it an interface that would
enable account transfers involving
netting-eligible government securities to
be processed using GSCC’s existing
netting and settlement processes. This
service was never implemented, and its
continued reference in the rules is
inconsistent with current practice.
2. Delete Provisions From GSD’s Rules
That Designate Participation in the
Repo Comparison and Netting Processes
GSD’s rules used to refer to FICC as
designating a member to be eligible to
participate in the repo comparison and
repo netting processes. When these repo
services commenced in 1995, GSCC
required testing prior to participation
1 15
U.S.C. 78s(b)(1).
Exchange Act Release No. 50888 (Dec.
20, 2004), 69 FR 78073.
and subsequently designated members
as eligible to participate in the services.
Participation in these services has now
become commonplace and special
testing and designation for participation
in the repo services is no longer
necessary. As such, the provisions in
question are outdated and are being
deleted.
3. Make Technical Corrections to GSD
Rules By
i. Changing the definitions of ‘‘Interest
Adjustment Payment’’ and ‘‘Interest
Rate Mark Adjustment Payment’’ in
GSD Rule 1 (Definitions) to correct an
erroneous reference in both definitions
to the ‘‘Federal Funds Rate’’ and
replacing them with references to a
newly defined term, ‘‘Overnight
Investment Rate;’’
ii. changing the term in Rule 1
‘‘Multilateral Clearing Organization’’ to
‘‘Multilateral Clearing Agency;’’
iii. changing the language of the
definition in Rule 1 of ‘‘Member’’ to
reflect the fact that certain members
(i.e., comparison-only members) are
approved for membership by senior
management and not by the
Membership and Risk Management
Committee;
iv. correcting Section 1(d) of Rule 2,
where GSD is erroneously referred to as
its predecessors name, GSCC;
v. deleting subsection (b) of Rule 11B,
which has expired;
vi. changing an incorrect reference to
‘‘Rule 7’’ to ‘‘Rule 6C’’ in Rule 17,
Section 4; and
vii. changing a reference to the
‘‘Membership and Standards
Committee’’ to the ‘‘Membership and
Risk Management Committee’’ in Rule
48, Section 2.
4. Technical Corrections in the MBSD
Rules
FICC will renumber MBSD Rule 15
(Notices) of Article X to Rule 16 as it is
in fact the 16th rule in that article.
II. Discussion
Section 17A(b)(3)(A) of the Act
requires, among other things, that a
clearing agency be organized to facilitate
the prompt and accurate clearance and
settlement of securities transactions.3
FICC’s proposed rule change will
eliminate unnecessary or outdated
provisions, and make technical changes.
This should promote greater
transparency and understanding of
FICC’s actual practices and policies,
which should enhance FICC’s
organizational capacity to facilitate the
2 Securities
6 17
CFR 200.30–3(a)(12).
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12:44 Feb 15, 2005
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7983
3 15
E:\FR\FM\16FEN1.SGM
U.S.C. 78q–1(b)(3)(A).
16FEN1
7984
Federal Register / Vol. 70, No. 31 / Wednesday, February 16, 2005 / Notices
prompt and accurate clearance and
settlement of securities transactions.
III. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act and in particular with the
requirements of Section 17A of the Act 4
and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
section 19(b)(2) of the Act, that the
proposed rule change (File No. SR–
FICC–2004–19) be, and hereby is,
approved.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.5
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–639 Filed 2–15–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51146; File No. SR–FICC–
2004–13]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing of a Proposed Rule Change To
Amend the Rules of the MortgageBacked Securities Division To Impose
Fines on Members for Violations of
Minimum Financial Standards and To
Modify the Penalty Assessment
Process for Failures of Members To
Submit Requisite Financial Reports on
a Timely Basis
February 7, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
June 24, 2004, the Fixed Income
Clearing Corporation (‘‘FICC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) and on
February 2, 2005, amended the
proposed rule change described in Items
I, II, and III 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 parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FICC is seeking to amend the rules of
its Mortgage-Backed Securities Division
(‘‘MBSD’’) to impose fines on members
for violations of minimum financial
U.S.C. 78q–1.
5 17 CFR 200.30–3(a)(12).
1 1 15 U.S.C. 78s(b)(1).
12:44 Feb 15, 2005
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 IV below. FICC has prepared
summaries, set forth in sections (A), (B),
and (C) below, of the most significant
aspects of these statements.2
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
The proposed rule change would
amend the rules of the MBSD by
imposing fines on members for
violations of minimum financial
standards and by modifying the penalty
assessment process for failures of
members to submit requisite financial
reports on a timely basis.
1. Violations of Minimum Financial
Standards
The rules of the MBSD require
clearing members to meet and maintain
certain minimum financial standards at
all times. While the majority of MBSD
members consistently satisfy their
minimum financial requirements,
occasionally members do breach these
requirements and create undue risk for
FICC and its members.
Currently, the MBSD rules do not
impose specific margin consequences
for falling out of compliance with
minimum financial requirements but
allow the Membership and Risk
Management Committee in its discretion
to impose conditions which can include
an increase to the participant’s
minimum required deposits to the
Participants Fund.
Under the proposed rule change, a
violation of a minimum financial
requirement by an MBSD clearing
participant would result in the
imposition on such member of a margin
premium equal to the greater of (a) 25
percent of the member’s unadjusted 3
Participants Fund requirement or (b)
$1,000,000, to continue for ninety
calendar days after the later to occur of
2 The Commission has modified the text of the
summaries prepared by FICC.
3 ‘‘Unadjusted’’ means the standard calculation
before any additional assessments.
4 15
VerDate jul<14>2003
standards and to modify the penalty
assessment process for failures of
members to submit requisite financial
reports on a timely basis.
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(i) the member’s return to compliance
with applicable minimum financial
standards or (ii) FICC’s discovery of the
applicable violation.4 In addition, such
violation would result in (1) a report of
the violation to the FICC Membership
and Risk Management Committee at its
next regularly scheduled meeting or
sooner if deemed appropriate by FICC
and (2) the placement of such member
on FICC’s ‘‘watch list’’ subjecting it to
frequent and thorough monitoring. None
of these consequences would preclude
FICC from imposing any other margin
consequences permitted by the MBSD
rules.
2. Failure To Submit Requisite Financial
Reports on a Timely Basis
Certain members that are required to
provide monthly or quarterly financial
data to FICC at times have violated
MBSD’s membership requirements by
not timely providing such financial
data. In such instances, management
contacts each offending member and
follows up with a letter.
Failure to timely receive required
information creates risk to FICC and as
a result hinders FICC’s ability to
appropriately assess the financial
condition of such members. To
encourage timely submission of
required financial data, FICC has
established a mechanism to fine
delinquent participants.5 FICC is now
proposing two additional measures to
enforce timely filing of financial
information.
First, FICC proposes to subject
delinquent participants to a more
stringent Participants Fund
requirement. Specifically, the proposed
rule filing would automatically impose
a margin premium equal to the greater
of (1) 25 percent of the member’s
unadjusted Participants Fund
requirement or (2) $1,000,000. The
margin premium would be applied until
appropriate financial data is submitted
to FICC and reviewed for compliance
purposes. In addition, delinquent
members would be precluded from
taking back any excess Participants
Fund collateral to which they might
ordinarily be entitled.
Second, participants that fail to
submit requisite financial reports on a
timely basis would also automatically
be placed on FICC’s ‘‘watch list’’ and
4 The required clearing fund deposit premium
that will be assessed for violation of applicable
minimum financial standards will be effective
beginning on the day of the violation but will begin
to be assessed on the date FICC becomes aware of
the violation.
5 Securities Exchange Act Release No. 49947
(June 30, 2004), 69 FR 41316 [File No. SR–FICC–
2003–01].
E:\FR\FM\16FEN1.SGM
16FEN1
]]>Agencies
[Federal Register Volume 70, Number 31 (Wednesday, February 16, 2005)]
[Notices]
[Pages 7983-7984]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-639]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51175; File No. SR-FICC-2004-19]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Order Approving a Proposed Rule Change Relating to Changes To Eliminate
or Amend Rules That Are Inconsistent With Current Practice, Have
Expired, Are Outdated, Are Unnecessary, or Require Technical Correction
February 9, 2005.
SUMMARY: On October 7, 2004, the Fixed Income Clearing Corporation
(``FICC'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ (File No. SR-FICC-
2004-19). Notice of the proposal was published in the Federal Register
on December 29, 2004.\2\ No comment letters were received. For the
reasons discussed below, the Commission is approving the proposed rule
change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 50888 (Dec. 20, 2004),
69 FR 78073.
---------------------------------------------------------------------------
I. Description
The proposed rule change will eliminate or amend FICC's Government
Securities Division (``GSD'') and Mortgage-Backed Securities Division
(``MBSD'') rules in the following manner:
1. Delete Provisions in GSD's Rules Regarding the Automated Customer
Account Transfer Service (``ACATS'')
The ACATS provisions were added to GSD's rules in 1998, when the
National Securities Clearing Corporation requested that the Government
Securities Clearing Corpoartion (``GSCC''), the GSD's predecessor,
establish with it an interface that would enable account transfers
involving netting-eligible government securities to be processed using
GSCC's existing netting and settlement processes. This service was
never implemented, and its continued reference in the rules is
inconsistent with current practice.
2. Delete Provisions From GSD's Rules That Designate Participation in
the Repo Comparison and Netting Processes
GSD's rules used to refer to FICC as designating a member to be
eligible to participate in the repo comparison and repo netting
processes. When these repo services commenced in 1995, GSCC required
testing prior to participation and subsequently designated members as
eligible to participate in the services. Participation in these
services has now become commonplace and special testing and designation
for participation in the repo services is no longer necessary. As such,
the provisions in question are outdated and are being deleted.
3. Make Technical Corrections to GSD Rules By
i. Changing the definitions of ``Interest Adjustment Payment'' and
``Interest Rate Mark Adjustment Payment'' in GSD Rule 1 (Definitions)
to correct an erroneous reference in both definitions to the ``Federal
Funds Rate'' and replacing them with references to a newly defined
term, ``Overnight Investment Rate;''
ii. changing the term in Rule 1 ``Multilateral Clearing
Organization'' to ``Multilateral Clearing Agency;''
iii. changing the language of the definition in Rule 1 of
``Member'' to reflect the fact that certain members (i.e., comparison-
only members) are approved for membership by senior management and not
by the Membership and Risk Management Committee;
iv. correcting Section 1(d) of Rule 2, where GSD is erroneously
referred to as its predecessors name, GSCC;
v. deleting subsection (b) of Rule 11B, which has expired;
vi. changing an incorrect reference to ``Rule 7'' to ``Rule 6C'' in
Rule 17, Section 4; and
vii. changing a reference to the ``Membership and Standards
Committee'' to the ``Membership and Risk Management Committee'' in Rule
48, Section 2.
4. Technical Corrections in the MBSD Rules
FICC will renumber MBSD Rule 15 (Notices) of Article X to Rule 16
as it is in fact the 16th rule in that article.
II. Discussion
Section 17A(b)(3)(A) of the Act requires, among other things, that
a clearing agency be organized to facilitate the prompt and accurate
clearance and settlement of securities transactions.\3\ FICC's proposed
rule change will eliminate unnecessary or outdated provisions, and make
technical changes. This should promote greater transparency and
understanding of FICC's actual practices and policies, which should
enhance FICC's organizational capacity to facilitate the
[[Page 7984]]
prompt and accurate clearance and settlement of securities
transactions.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78q-1(b)(3)(A).
---------------------------------------------------------------------------
III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A of the Act \4\ and the
rules and regulations thereunder.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
It is therefore ordered, pursuant to section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-FICC-2004-19) be, and hereby
is, approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
---------------------------------------------------------------------------
\5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-639 Filed 2-15-05; 8:45 am]
BILLING CODE 8010-01-P
