Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving Proposed Rule Change To Amend the Rules of the Mortgage-Backed 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, 15959-15960 [E5-1381]
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Federal Register / Vol. 70, No. 59 / Tuesday, March 29, 2005 / Notices
2. Statutory Basis
The Exchange believes that the
proposal, as amended, is consistent with
the requirements of section 6(b) of the
Act,8 in general, and section 6(b)(5) of
the Act,9 in particular, in that it is
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and
protect investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change, as amended,
will result in any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received written comments with respect
to the proposed rule change, as
amended.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission will:
(A) By order approve such proposed
rule change, as amended; or
(B) Institute proceedings to determine
whether the proposed rule change, as
amended, should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
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–BSE–2005–01. 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, as amended, that are filed with
the Commission, and all written
communications relating to the
proposed rule change, as amended,
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
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of the BSE. 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–BSE–2005–01 and should
be submitted on or before April 19,
2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.10
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5–1383 Filed 3–28–05; 8:45 am]
BILLING CODE 8010–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–BSE–2005–01 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51412; File No. SR–FICC–
2004–13]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Order
Approving 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
March 23, 2005.
I. Introduction
On June 24, 2004, the Fixed Income
Clearing Corporation (‘‘FICC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) and on
February 2, 2005, amended proposed
rule change SR–FICC–2004–13 pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’).1 Notice
of the proposal was published in the
Federal Register on February 16, 2005.2
No comment letters were received. For
the reasons discussed below, the
Commission is approving the proposed
rule change.
II. Description
FICC is seeking to amend the rules of
its Mortgage-Backed Securities Division
(‘‘MBSD’’) 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.
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 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 in the participant’s
minimum required deposits to the
Participants Fund.
1 15
8 15
U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(5).
VerDate jul<14>2003
17:01 Mar 28, 2005
U.S.C. 78s(b)(1).
Exchange Act Release No. 51146
(February 7, 2005), 70 FR 7984.
2 Securities
10 17
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Federal Register / Vol. 70, No. 59 / Tuesday, March 29, 2005 / Notices
Under the proposed rule change, a
violation of a minimum financial
requirement by an MBSD clearing
participant will 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
which will begin on the day the
participant fell below its minimum
financial requirement and will continue
for ninety calendar days after the later
of (i) the member’s return to compliance
with its applicable minimum financial
standards or (ii) FICC’s discovery of the
violation.4 In addition, such violation
will 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 staff and
(2) the placement of such member on
FICC’s watch list subjecting it to
frequent and thorough monitoring. None
of these consequences will 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 providing such financial data in a
timely manner. In such instances,
management contacts the offending
member and follows up with a letter.
Failure to receive required
information in a timely manner hinders
FICC’s ability to appropriately assess the
financial condition of such members
and as a result creates risk to FICC. 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 will subject delinquent
participants to a more stringent
Participants Fund requirement.
Specifically, FICC will now
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 will be applied until
appropriate financial data is submitted
to FICC and reviewed for compliance
purposes. In addition, delinquent
members will 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 will also automatically be
placed on FICC’s watch list and subject
to frequent and thorough monitoring.
III. Discussion
Section 17A(b)(3)(F) of the Act
requires that the rules of a clearing
agency be designed to facilitate the
safeguarding of securities and funds
which are in its custody or control or for
which it is responsible.6 The
Commission finds that FICC’s proposed
rule change is consistent with this
requirement because it assures the
safeguarding of such securities and
funds by incentivizing participants to
maintain their minimum financial
standards and to submit their required
financial reports on a timely basis. As a
result, FICC’s ability to monitor its
participants and to maintain a
financially sound participant base
should be enhanced.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and in
particular section 17A of the Act 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–2004–13) be and hereby is
approved.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.7
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5–1381 Filed 3–28–05; 8:45 am]
BILLING CODE 8010–01–P
3 ‘‘Unadjusted’’ means the standard calculation
before any additional assessments.
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 Securites Exchange Act Release No. 49947 [June
30, 2004), 69 FR 41316 (File No. SR–FICC–2003–
01].
VerDate jul<14>2003
17:01 Mar 28, 2005
Jkt 205001
PO 00000
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51413; File No. SR–FICC–
2004–17]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing of a Proposed Rule Change To
Modify the Assessment Process for
Late Submissions of Collateral Made
Through the GCF Repo Service and To
Increase the Types of Securities
Available To Satisfy Collateral
Allocation Obligations
March 23, 2005.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
August 13, 2004, the Fixed Income
Clearing Corporation (‘‘FICC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) and on
March 14, 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
the Government Securities Division
(‘‘GSD’’) of FICC to modify the
assessment process for late submissions
of collateral allocations made through
its GCF Repo service and to increase the
types of securities that can be used by
a member in satisfaction of collateral
obligations.2
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),
1 15
U.S.C. 78s(b)(1).
proposed rule change also amends GSD’s
rules to clarify that where a collateral allocation
obligation is satisfied by the posting of U.S.
Treasury Bills, notes, or bonds, such securities must
mature in a time frame no greater than that of the
securities that have been traded except where such
traded securities are U.S. Treasury Bills, such
obligations must be satisfied with the posting of
‘‘comparable securities’’ and/or cash only.
2 The
6 15
7 17
U.S.C. 78q–1(b)(3)(F).
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 70, Number 59 (Tuesday, March 29, 2005)]
[Notices]
[Pages 15959-15960]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-1381]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51412; File No. SR-FICC-2004-13]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Order Approving Proposed Rule Change To Amend the Rules of the
Mortgage-Backed 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
March 23, 2005.
I. Introduction
On June 24, 2004, the Fixed Income Clearing Corporation (``FICC'')
filed with the Securities and Exchange Commission (``Commission'') and
on February 2, 2005, amended proposed rule change SR-FICC-2004-13
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'').\1\ Notice of the proposal was published in the Federal
Register on February 16, 2005.\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. 51146 (February 7,
2005), 70 FR 7984.
---------------------------------------------------------------------------
II. Description
FICC is seeking to amend the rules of its Mortgage-Backed
Securities Division (``MBSD'') 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.
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 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 in
the participant's minimum required deposits to the Participants Fund.
[[Page 15960]]
Under the proposed rule change, a violation of a minimum financial
requirement by an MBSD clearing participant will 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 which will begin on the day the
participant fell below its minimum financial requirement and will
continue for ninety calendar days after the later of (i) the member's
return to compliance with its applicable minimum financial standards or
(ii) FICC's discovery of the violation.\4\ In addition, such violation
will 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 staff and (2) the placement of
such member on FICC's watch list subjecting it to frequent and thorough
monitoring. None of these consequences will preclude FICC from imposing
any other margin consequences permitted by the MBSD rules.
---------------------------------------------------------------------------
\3\ ``Unadjusted'' means the standard calculation before any
additional assessments.
\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.
---------------------------------------------------------------------------
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 providing such financial data in a timely manner.
In such instances, management contacts the offending member and follows
up with a letter.
Failure to receive required information in a timely manner hinders
FICC's ability to appropriately assess the financial condition of such
members and as a result creates risk to FICC. 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.
---------------------------------------------------------------------------
\5\ Securites Exchange Act Release No. 49947 [June 30, 2004), 69
FR 41316 (File No. SR-FICC-2003-01].
---------------------------------------------------------------------------
First, FICC will subject delinquent participants to a more
stringent Participants Fund requirement. Specifically, FICC will now
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 will be applied until appropriate
financial data is submitted to FICC and reviewed for compliance
purposes. In addition, delinquent members will 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 will also automatically be placed on FICC's
watch list and subject to frequent and thorough monitoring.
III. Discussion
Section 17A(b)(3)(F) of the Act requires that the rules of a
clearing agency be designed to facilitate the safeguarding of
securities and funds which are in its custody or control or for which
it is responsible.\6\ The Commission finds that FICC's proposed rule
change is consistent with this requirement because it assures the
safeguarding of such securities and funds by incentivizing participants
to maintain their minimum financial standards and to submit their
required financial reports on a timely basis. As a result, FICC's
ability to monitor its participants and to maintain a financially sound
participant base should be enhanced.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular section 17A of the Act 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-2004-13) be and hereby
is approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\7\
---------------------------------------------------------------------------
\7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-1381 Filed 3-28-05; 8:45 am]
BILLING CODE 8010-01-P
