Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of a Proposed Rule Change Relating to the Federal Reserve's National Settlement System, 61859-61861 [E5-5943]
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Federal Register / Vol. 70, No. 206 / Wednesday, October 26, 2005 / Notices
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:
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.18
Jonathan G. Katz,
Secretary.
[FR Doc. E5–5945 Filed 10–25–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
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–CBOE–2005–71 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
[Release No. 34–52631; File No. SR–FICC–
2005–14]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing of a Proposed Rule Change
Relating to the Federal Reserve’s
National Settlement System
October 18, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
September 9, 2005, Fixed Income
Clearing Corporation (‘‘FICC’’) filed
All submissions should refer to File
with the Securities and Exchange
Number SR–CBOE–2005–71. This file
Commission (‘‘Commission’’) the
number should be included on the
proposed rule change as described in
subject line if e-mail is used. To help the Items I, II, and III below, which items
Commission process and review your
have been prepared primarily by FICC.
comments more efficiently, please use
The Commission is publishing this
only one method. The Commission will notice to solicit comments on the
post all comments on the Commission’s proposed rule change from interested
persons.
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
I. Self-Regulatory Organization’s
submission, all subsequent
Statement of the Terms of Substance of
amendments, all written statements
the Proposed Rule Change
with respect to the proposed rule
The proposed rule change would
change, as amended, that are filed with
amend the rules of FICC’s Government
the Commission, and all written
Securities Division (‘‘GSD’’) to have
communications relating to the
funds-only settlement obligation
proposed rule change, as amended,
payment processing occur through the
between the Commission and any
Federal Reserve’s National Settlement
person, other than those that may be
withheld from the public in accordance System (‘‘NSS’’).
with the provisions of 5 U.S.C. 552, will II. Self-Regulatory Organization’s
be available for inspection and copying
Statement of the Purpose of, and
in the Commission’s Public Reference
Statutory Basis for, the Proposed Rule
Room. Copies of such filing also will be Change
available for inspection and copying at
In its filing with the Commission,
the principal office of the CBOE. All
FICC included statements concerning
comments received will be posted
the purpose of and basis for the
without change; the Commission does
proposed rule change and discussed any
not edit personal identifying
comments it received on the proposed
information from submissions. You
rule change. The text of these statements
should submit only information that
may be examined at the places specified
you wish to make available publicly. All
in Item IV below. FICC has prepared
submissions should refer to File
summaries, set forth in Sections (A), (B),
Number SR–CBOE–2005–71 and should and (C) below, of the most significant
be submitted on or before November 16, aspects of such statements.2
2005.
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 The Commission has modified parts of these
statements.
1 15
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16:26 Oct 25, 2005
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61859
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
The purpose of the proposed rule
change is to amend the rules of GSD to
require netting members to satisfy their
funds-only settlement amounts
ultimately through the Federal Reserve’s
NSS.3 GSD’s funds-only settlement
process is set forth in GSD Rule 13. On
a daily basis, FICC reports a funds-only
settlement amount, which is either a
debit amount or a credit amount, to each
netting member. Each netting member
that has a debit is required to satisfy its
obligation by the applicable deadline.
Netting members with credits are
subsequently paid by FICC by the
applicable deadline. All payments of
funds-only settlement amounts by a
netting member to FICC and all
collections of funds-only settlement
amounts by a netting member from FICC
are done through depository institutions
that are designated by such netting
member and FICC to act on their
behalves with regard to such payments
and collections. All payments are made
by fund wires from one depository
institution to the other.
In 1997, the Commission approved an
enhancement to GSCC’s 4 funds-only
settlement payment processing (‘‘1997
Filing’’).5 This enhancement gave
members the option to participate in an
auto-debit arrangement that was to
eliminate the need to send fund wires
for the satisfaction of funds-only
settlement payments. Under the autodeposit arrangement, GSCC, the netting
member, and the netting member’s
depository institution would enter into
a ‘‘funds-only settlement procedures
agreement’’ whereby the depository
institution would pay or collect fundsonly settlement amounts on behalf of
the netting member and GSCC through
accounts of the member at the
depository institution. As a result, the
3 This is consistent with the manner in which
FICC’s affiliates, The Depository Trust Company
(‘‘DTC’’) and the National Securities Clearing
Corporation (‘‘NSCC’’), handle their funds
settlement process. DTC and NSCC do not currently
use NSS for the processing of funds credits,
whereas FICC is proposing to have the GSD process
both the debits and credits of its funds-only
settlement process through NSS.
4 The Government Securities Clearing
Corporation (‘‘GSCC’’) was the predecessor to GSD.
GSCC became the GSD division of FICC when GSCC
and the Mortgage Backed Securities Clearing
Corporation were merged to create FICC in 2002.
5 Securities Exchange Act Release No. 39309
(November 7, 1997), 62 FR 61158 (November 14,
1997) [File No. SR–GSCC–97–06].
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Federal Register / Vol. 70, No. 206 / Wednesday, October 26, 2005 / Notices
need for fund wire payments would be
eliminated.6
The proposed rule change will replace
the auto-debit process of the 1997 Filing
and will provide even further
enhancements to the current approach
to payment processing than was
envisioned by the 1997 Filing. Under
the proposed rule change, the required
payment mechanism for the satisfaction
of funds-only settlement amounts will
be the NSS. FICC will appoint The
Depository Trust Company (‘‘DTC’’) as
its settlement agent for purposes of
interfacing with the NSS.7
In order to satisfy their funds-only
settlement obligations through the NSS
process, netting members must appoint
banks or trust companies to act as their
‘‘funds-only settling banks.’’ A netting
member that qualifies may act as its
own funds-only settling bank.
The GSD will establish a limited
membership category for the funds-only
settling banks. Banks or trust companies
that are DTC settling banks, as defined
in DTC’s rules and procedures, or that
are GSD netting members with direct
access to the Federal Reserve and the
NSS will be eligible to become GSD
funds-only settling bank members by
executing the requisite membership
agreement for this purpose. Other banks
or trust companies that desire to become
funds-only settling bank members must
apply to FICC. They must also have
direct access to a Federal Reserve Bank
and the NSS as well as satisfy the
financial responsibility standards
imposed by FICC from time to time.
Initially, these applicants must meet
and maintain a Tier 1 capital ratio of 6
percent.8
In addition to the membership
agreement, the funds-only settling bank
and the netting member must execute an
agreement whereby the member will
appoint the bank to act on its behalf for
funds-only settlement purposes. The
bank must also execute any agreements
required by the Federal Reserve Bank
for participation in the NSS for FICC’s
funds-only settlement process.
The funds-only settling banks will be
required to follow the procedures for
funds-only settlement payment
processing set forth in FICC’s proposed
6 This was a voluntary arrangement that was
never implemented because until recently GSCC
and then GSD continued to make manual
adjustments to the final funds-only settlement
amounts of netting members. These manual
adjustments have recently largely been eliminated.
7 DTC currently performs this service for NSCC.
8 This is the same financial requirement for NSCC
settling bank-only members. Under FICC’s proposal,
FICC would retain the discretion to change this
financial criterion by providing advanced notice to
the fund-only settling banks and the netting
members through important notice.
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16:26 Oct 25, 2005
Jkt 208001
new rules. This will include, for
example, providing FICC or its
settlement agent with the requisite
acknowledgement of the bank’s
intention to settle the funds-only
settlement amounts of the netting
members it represents on a timely basis
and participating in the NSS process.
Funds-only settling banks will have the
right to refuse to settle for a particular
netting member and will also be able to
opt out of NSS for one business day if
they are experiencing extenuating
circumstances.9 Under FICC’s proposal,
the netting member shall be responsible
for ensuring that its funds-only debit is
wired to the depository institution
designated by FICC for this purpose by
the payment deadline. The proposed
rule change makes clear that the
obligation of a netting member to fulfill
its funds-only settlement amount
remains at all times with the netting
member.
As FICC’s settlement agent, DTC will
submit instructions to have the Federal
Reserve Bank accounts of the funds-only
settlement banks charged for the debit
amounts and credited for the credit
amounts. Utilization of NSS will
eliminate the need for the initiation of
wire transfers in satisfaction of fundsonly settlement amounts, and FICC
believes that it will therefore reduce the
risk that the netting member that
designated the bank may incur a late
payment fine due to delay in wiring
funds. The proposal will also reduce
operational burden for the operations
staff of FICC.
The NSS is governed by the Federal
Reserve’s Operating Circular No. 12
(‘‘Circular’’). Under the Circular, DTC,
as FICC’s settlement agent, has certain
responsibilities with respect to an
indemnity claim made by a relevant
Federal Reserve Bank as a result of the
NSS process. FICC will apportion the
entirety of any such liability to the
netting members for whom the fundsonly settling bank to which the
indemnity claim relates was acting. This
allocation will be done in proportion to
the amount of such members’ fundsonly settlement amounts on the
business day in question. If for any
reason such allocation is not sufficient
to fully satisfy the Federal Reserve
Bank’s indemnity claim, the remaining
loss shall be treated as an ‘‘Other Loss’’
as defined by the GSD’s Rule 4 and
allocated accordingly.
The proposed rule change will not
change the current GSD deadlines
regarding the payment and receipt of
9 These procedures are consistent with the NSCC
and DTC procedures in this respect.
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funds-only settlement amounts, which
are set forth in the GSD’s rules.
FICC believes the proposed rule
change is consistent with the
requirements of Section 17A of the Act,
and the rules and regulations
thereunder because it will enhance the
current operation of the GSD’s fundsonly settlement payment process by
promoting the timely processing of
funds payments and credits. As such,
the proposed rule change should
support the prompt and accurate
clearance and settlement of securities
transactions.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
FICC does not believe that the
proposed rule change would 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.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within thirty-five 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
ninety 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 self-regulatory
organization consents, the Commission
will:
(a) By order approve the proposed
rule change or
(b) Institute proceedings to determine
whether the proposed rule change
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 is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml) or
• Send an e-mail to rule-comments@
sec.gov. Please include File Number SR–
FICC–2005–14 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
E:\FR\FM\26OCN1.SGM
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Federal Register / Vol. 70, No. 206 / Wednesday, October 26, 2005 / Notices
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
Number SR–FICC–2005–14. 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, 100 F Street, NE., 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 https://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–2005–14 and should
be submitted on or before November 16,
2005.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.10
Jonathan G. Katz,
Secretary.
[FR Doc. E5–5943 Filed 10–25–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52637; File No. SR–NASD–
2004–026]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing of
Amendments No. 3 and 4 to Proposed
Rule Change To Amend NASD Rule
2320(a) Governing Best Execution
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 22
and September 22, 2005, the National
Association of Securities Dealers, Inc.
(‘‘NASD’’) filed with the Securities and
Exchange Commission (‘‘Commission’’
or ‘‘SEC’’) Amendments No. 3 and 4 to
the proposed rule change as described
in Items I, II, and III below which Items
have substantially been prepared by the
NASD. The proposed rule change,
incorporating Amendments No. 1 and 2,
was published for comment in the
Federal Register on February 25, 2005.3
The Commission is publishing this
notice to solicit comments on the
proposed rule change, as amended by
Amendments No. 3 and 4 from
interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
In response to comments on the
original proposal, NASD is proposing
additional amendments to Rule 2320(a)
(‘‘Best Execution Rule’’). Below is the
text of the proposed rule change marked
to show changes from the text that was
published previously.4 Proposed
deletions are in brackets. The discussion
section of this notice focuses on the
changes made in Amendments No. 3
and 4. For an explanation of the original
filing, see the release cited in footnote
3.
2300. TRANSACTIONS WITH
CUSTOMERS
2320. Best Execution and
Interpositioning
(a) In any transaction for or with a
customer or a customer of another
broker-dealer, a member and persons
associated with a member shall use
reasonable diligence to ascertain the
best market [center] for the subject
security and buy or sell in such market
[center] so that the resultant price to the
customer is as favorable as possible
under prevailing market conditions.
Among the factors that will be
considered in determining whether a
member has used ‘‘reasonable
diligence’’ are:
(1) The character of the market for the
security, e.g., price, volatility, relative
liquidity, and pressure on available
communications;
(2) The size and type of transaction;
(3) The number of markets checked;
(4) Accessibility of the quotation; and
October 19, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
10 CFR
200.30–3(a)(12).
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16:26 Oct 25, 2005
Jkt 208001
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 51229
(Feb. 18, 2005), 70 FR 9416.
4 Id.
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61861
(5) The terms and conditions of the
order which result in the transaction, as
communicated to the member and
persons associated with the member.
(b) through (g) No change.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NASD 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. NASD 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
1. Purpose
Background
The Best Execution Rule currently
requires a member, in any transaction
for or with a customer, to use reasonable
diligence to ascertain the best interdealer market for a security and to buy
or sell in such a market so that the price
to the customer is as favorable as
possible under the prevailing market
conditions. NASD has received a
number of questions regarding the
application of the term ‘‘customer,’’ in
the context of best execution. NASD
Rule 0120(g) defines ‘‘customer’’ to
exclude a broker or dealer, unless the
context otherwise requires. For
example, if a firm that receives an order
from a customer (‘‘originating brokerdealer’’) routes the order to a member
firm (‘‘recipient member’’) and the
recipient member executes the order in
a manner inconsistent with the Best
Execution Rule, the recipient member
could argue that it has not violated the
Best Execution Rule because the
transaction was not ‘‘for or with a
customer,’’ but rather for or with a
broker-dealer.
NASD believes that not applying the
Best Execution Rule to recipient
members is contrary to both the
interests of the investing public and the
general intent of the Best Execution
Rule.
Proposal
NASD filed Amendments No. 3 and 4
in response to the commenters’
concerns about how the proposed rule
change would apply to the debt markets
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]]>Agencies
[Federal Register Volume 70, Number 206 (Wednesday, October 26, 2005)]
[Notices]
[Pages 61859-61861]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-5943]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52631; File No. SR-FICC-2005-14]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of a Proposed Rule Change Relating to the Federal
Reserve's National Settlement System
October 18, 2005.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on September 9, 2005, 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
primarily by FICC. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change would amend the rules of FICC's Government
Securities Division (``GSD'') to have funds-only settlement obligation
payment processing occur through the Federal Reserve's National
Settlement System (``NSS'').
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 such
statements.\2\
---------------------------------------------------------------------------
\2\ The Commission has modified parts of these statements.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to amend the rules of
GSD to require netting members to satisfy their funds-only settlement
amounts ultimately through the Federal Reserve's NSS.\3\ GSD's funds-
only settlement process is set forth in GSD Rule 13. On a daily basis,
FICC reports a funds-only settlement amount, which is either a debit
amount or a credit amount, to each netting member. Each netting member
that has a debit is required to satisfy its obligation by the
applicable deadline. Netting members with credits are subsequently paid
by FICC by the applicable deadline. All payments of funds-only
settlement amounts by a netting member to FICC and all collections of
funds-only settlement amounts by a netting member from FICC are done
through depository institutions that are designated by such netting
member and FICC to act on their behalves with regard to such payments
and collections. All payments are made by fund wires from one
depository institution to the other.
---------------------------------------------------------------------------
\3\ This is consistent with the manner in which FICC's
affiliates, The Depository Trust Company (``DTC'') and the National
Securities Clearing Corporation (``NSCC''), handle their funds
settlement process. DTC and NSCC do not currently use NSS for the
processing of funds credits, whereas FICC is proposing to have the
GSD process both the debits and credits of its funds-only settlement
process through NSS.
---------------------------------------------------------------------------
In 1997, the Commission approved an enhancement to GSCC's \4\
funds-only settlement payment processing (``1997 Filing'').\5\ This
enhancement gave members the option to participate in an auto-debit
arrangement that was to eliminate the need to send fund wires for the
satisfaction of funds-only settlement payments. Under the auto-deposit
arrangement, GSCC, the netting member, and the netting member's
depository institution would enter into a ``funds-only settlement
procedures agreement'' whereby the depository institution would pay or
collect funds-only settlement amounts on behalf of the netting member
and GSCC through accounts of the member at the depository institution.
As a result, the
[[Page 61860]]
need for fund wire payments would be eliminated.\6\
---------------------------------------------------------------------------
\4\ The Government Securities Clearing Corporation (``GSCC'')
was the predecessor to GSD. GSCC became the GSD division of FICC
when GSCC and the Mortgage Backed Securities Clearing Corporation
were merged to create FICC in 2002.
\5\ Securities Exchange Act Release No. 39309 (November 7,
1997), 62 FR 61158 (November 14, 1997) [File No. SR-GSCC-97-06].
\6\ This was a voluntary arrangement that was never implemented
because until recently GSCC and then GSD continued to make manual
adjustments to the final funds-only settlement amounts of netting
members. These manual adjustments have recently largely been
eliminated.
---------------------------------------------------------------------------
The proposed rule change will replace the auto-debit process of the
1997 Filing and will provide even further enhancements to the current
approach to payment processing than was envisioned by the 1997 Filing.
Under the proposed rule change, the required payment mechanism for the
satisfaction of funds-only settlement amounts will be the NSS. FICC
will appoint The Depository Trust Company (``DTC'') as its settlement
agent for purposes of interfacing with the NSS.\7\
---------------------------------------------------------------------------
\7\ DTC currently performs this service for NSCC.
---------------------------------------------------------------------------
In order to satisfy their funds-only settlement obligations through
the NSS process, netting members must appoint banks or trust companies
to act as their ``funds-only settling banks.'' A netting member that
qualifies may act as its own funds-only settling bank.
The GSD will establish a limited membership category for the funds-
only settling banks. Banks or trust companies that are DTC settling
banks, as defined in DTC's rules and procedures, or that are GSD
netting members with direct access to the Federal Reserve and the NSS
will be eligible to become GSD funds-only settling bank members by
executing the requisite membership agreement for this purpose. Other
banks or trust companies that desire to become funds-only settling bank
members must apply to FICC. They must also have direct access to a
Federal Reserve Bank and the NSS as well as satisfy the financial
responsibility standards imposed by FICC from time to time. Initially,
these applicants must meet and maintain a Tier 1 capital ratio of 6
percent.\8\
---------------------------------------------------------------------------
\8\ This is the same financial requirement for NSCC settling
bank-only members. Under FICC's proposal, FICC would retain the
discretion to change this financial criterion by providing advanced
notice to the fund-only settling banks and the netting members
through important notice.
---------------------------------------------------------------------------
In addition to the membership agreement, the funds-only settling
bank and the netting member must execute an agreement whereby the
member will appoint the bank to act on its behalf for funds-only
settlement purposes. The bank must also execute any agreements required
by the Federal Reserve Bank for participation in the NSS for FICC's
funds-only settlement process.
The funds-only settling banks will be required to follow the
procedures for funds-only settlement payment processing set forth in
FICC's proposed new rules. This will include, for example, providing
FICC or its settlement agent with the requisite acknowledgement of the
bank's intention to settle the funds-only settlement amounts of the
netting members it represents on a timely basis and participating in
the NSS process. Funds-only settling banks will have the right to
refuse to settle for a particular netting member and will also be able
to opt out of NSS for one business day if they are experiencing
extenuating circumstances.\9\ Under FICC's proposal, the netting member
shall be responsible for ensuring that its funds-only debit is wired to
the depository institution designated by FICC for this purpose by the
payment deadline. The proposed rule change makes clear that the
obligation of a netting member to fulfill its funds-only settlement
amount remains at all times with the netting member.
---------------------------------------------------------------------------
\9\ These procedures are consistent with the NSCC and DTC
procedures in this respect.
---------------------------------------------------------------------------
As FICC's settlement agent, DTC will submit instructions to have
the Federal Reserve Bank accounts of the funds-only settlement banks
charged for the debit amounts and credited for the credit amounts.
Utilization of NSS will eliminate the need for the initiation of wire
transfers in satisfaction of funds-only settlement amounts, and FICC
believes that it will therefore reduce the risk that the netting member
that designated the bank may incur a late payment fine due to delay in
wiring funds. The proposal will also reduce operational burden for the
operations staff of FICC.
The NSS is governed by the Federal Reserve's Operating Circular No.
12 (``Circular''). Under the Circular, DTC, as FICC's settlement agent,
has certain responsibilities with respect to an indemnity claim made by
a relevant Federal Reserve Bank as a result of the NSS process. FICC
will apportion the entirety of any such liability to the netting
members for whom the funds-only settling bank to which the indemnity
claim relates was acting. This allocation will be done in proportion to
the amount of such members' funds-only settlement amounts on the
business day in question. If for any reason such allocation is not
sufficient to fully satisfy the Federal Reserve Bank's indemnity claim,
the remaining loss shall be treated as an ``Other Loss'' as defined by
the GSD's Rule 4 and allocated accordingly.
The proposed rule change will not change the current GSD deadlines
regarding the payment and receipt of funds-only settlement amounts,
which are set forth in the GSD's rules.
FICC believes the proposed rule change is consistent with the
requirements of Section 17A of the Act, and the rules and regulations
thereunder because it will enhance the current operation of the GSD's
funds-only settlement payment process by promoting the timely
processing of funds payments and credits. As such, the proposed rule
change should support the prompt and accurate clearance and settlement
of securities transactions.
(B) Self-Regulatory Organization's Statement on Burden on Competition
FICC does not believe that the proposed rule change would 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.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within thirty-five 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 ninety 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 self-regulatory organization consents,
the Commission will:
(a) By order approve the proposed rule change or
(b) Institute proceedings to determine whether the proposed rule
change 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 is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml) or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-FICC-2005-14 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary,
[[Page 61861]]
Securities and Exchange Commission, 100 F Street, NE., Washington, DC
20549-9303.
All submissions should refer to File Number SR-FICC-2005-14. 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, 100 F Street,
NE., 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 https://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-2005-14 and should be submitted on
or before November 16, 2005.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-5943 Filed 10-25-05; 8:45 am]
BILLING CODE 8010-01-P
