Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving a Proposed Rule Change Relating to Financial Responsibility, Operational Capability, Insolvency, and Ceasing To Act, 75283-75284 [E6-21234]

Download as PDF Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Notices thereunder because it constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate 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. identifying information from submissions. You should submit only information that you wish to make available publicly. All submission should refer to File No. SR–DTC–2006– 13 and should be submitted on or before January 4, 2007. 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: BILLING CODE 8011–01–P rwilkins on PROD1PC63 with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File No. SR–DTC–2006–13 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File No. SR–DTC–2006–13. 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 (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 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 DTC’s principal office and on DTC’s Web site at http://www.dtc.org/impNtc/ mor/index.html. All comments received will be posted without change; the Commission does not edit personal VerDate Aug<31>2005 17:54 Dec 13, 2006 Jkt 211000 For the Commission by the Division of Market Regulation, pursuant to delegated authority.10 Florence E. Harmon, Deputy Secretary. [FR Doc. E6–21277 Filed 12–13–06; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54879; File No. SR–FICC– 2006–12] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving a Proposed Rule Change Relating to Financial Responsibility, Operational Capability, Insolvency, and Ceasing To Act December 6, 2006. On June 15, 2006 the Fixed Income Clearing Corporation (‘‘FICC’’) filed a proposed rule change with the Securities and Exchange Commission (‘‘Commission’’) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and on September 22, 2006, amended the proposed rule change. Notice of the proposal was published in the Federal Register on October 4, 2006.2 No comment letters were received. For the reasons discussed below, the Commission is approving the proposed rule change. I. Description The rule change will amend FICC’s Government Securities Division’s (‘‘GSD’’) and Mortgage Backed Securities Division’s (‘‘MBSD’’) rules relating to members’ or applicants’ financial responsibility, operational capability, and insolvency and to FICC ceasing to act for members. A. Cease To Act and Insolvency Rules FICC will amend GSD’s rules governing when FICC will cease to act for a member in a noninsolvency situation, GSD Rule 21, and in an insolvency situation, GSD Rule 22. Such changes will conform GSD’s rules to the rules of FICC’s clearing agency affiliate, the National Securities Clearing Corporation (‘‘NSCC’’). 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 Securities Exchange Act Release No. 54570 (Oct. 4, 2006), 71 FR 60591. 1 15 PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 75283 GSD Rule 21, which addressed noninsolvency situations, will be renamed ‘‘Restriction on Access to Services’’ and will be similar to NSCC Rule 46. While revised Rule 21 is triggered by essentially the same criteria that are contained in the old GSD rule,3 the revised rule expands the remedies that FICC could exercise beyond only ‘‘ceasing to act’’ or ‘‘ceasing to accept data’’ on behalf of the member. Specifically, FICC, after notifying and providing an opportunity to request a hearing to the member, will be able to suspend, prohibit, or limit a member’s access to one or more of FICC’s services. GSD Rule 22, which addresses insolvency situations, remains essentially in its old form except that its close-out provisions are amended and are being moved to new Rule 22A. New Rule 22A sets forth the procedures that FICC will follow when it ceases to act for a member pursuant to either Rule 21 or Rule 22. Under new Rule 22A, FICC will initiate the closeout process with respect to a member for which it has ceased to act for any reason permitted by its rules.4 In addition, the term Cut-Off Time for noninsolvency situations will be added to Rule 22A.5 Although this term is similar to the Time of Insolvency term used in old Rule 22, a key difference between the terms is that members will be notified in advance of the Cut-Off Time. The rule change also makes technical changes to conform existing references to Rules 21 and 22 throughout GSD’s rules to these revisions.6 B. General Continuance Standards FICC will add new language to Section 5 of GSD Rule 3 and a new Section 18, Article III, Rule 1 to MBSD’s rules, which will be similar to NSCC Rule 15, that enables FICC when it deems necessary or advisable to assure itself of a member’s or an applicant’s financial responsibility and operational capability. To assure itself, FICC may, but is not limited to: restrict or modify the member’s use of any or all of FICC’s services; require additional reporting by the member of its financial or operational condition; increase the member’s clearing fund collateral; alter the proportions of cash, eligible netting 3 Such triggers include the member failing to perform its obligations to FICC and FICC’s determination that the member is in or is approaching financial difficulty. 4 Currently, the close-out process applies only when FICC deems a member insolvent. 5 As used in Rule 22A, the term Cut Off Time means the time that is specified in advance by FICC in a notice to members to be the time when FICC is deemed to have ceased to act for a member. 6 Technical, conforming changes are being made to Rules 1, 3A, 4, 6A, 14 and new Rule 22A. E:\FR\FM\14DEN1.SGM 14DEN1 75284 Federal Register / Vol. 71, No. 240 / Thursday, December 14, 2006 / Notices securities, and letters of credit contributing to the member’s required clearing fund deposits; and prohibit the member from withdrawing excess clearing fund deposits.7 Because the proposed rule change gives FICC the general authority to require additional clearing fund collateral when FICC is seeking additional assurances from a member or applicant, the provisions in GSD’s Rule 4 that require the posting of additional collateral for specific circumstances are being deleted. For the Commission by the Division of Market Regulation, pursuant to delegated authority.11 Florence E. Harmon, Deputy Secretary. [FR Doc. E6–21234 Filed 12–13–06; 8:45 am] C. Technical Amendments FICC will make several technical amendments to GSD’s and MBSD’s rules. The terms ‘‘Board’’ and ‘‘Board of Directors’’ will be redefined to include a committee of FICC’s Board of Directors that is acting under delegated authority of the Board. Accordingly, references to specific board committees throughout both divisions’ rules will be replaced simply by the term ‘‘Board,’’ which will include any such board committees. Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving a Proposed Rule Change Relating to Establishing New Reporting Processes To Support the Bilateral Comparison of Pool Details Associated With Specified Pool Trade Activity II. Discussion Section 17A(b)(3)(F) of the Act 8 requires that the rules of a clearing agency assure the safeguarding of securities and funds that are in the custody or control of the clearing agency or for which it is responsible. The Commission finds that the proposed rule change is consistent with this obligation because it should enhance FICC’s ability to identify members that present greater financial and operational risk and expands the remedies available to FICC to protect itself when dealing with such members. As a result, the proposed rule change should improve FICC’s capacity to safeguard securities and funds in its custody or control or for which it is responsible. rwilkins on PROD1PC63 with NOTICES 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 9 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–2006–12) be, and hereby is, approved.10 7 These proposed actions are similar to those that FICC has proposed to undertake with respect to a member undergoing a wind-down in a rule filing pending with the Commission. SR–FICC–2006–05. 8 15 U.S.C. 78q–1(b)(3)(F). 9 15 U.S.C. 78q–1. 10 In approving the proposed rule change, the Commission considered the proposal’s impact on VerDate Aug<31>2005 17:54 Dec 13, 2006 Jkt 211000 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54899; File No. SR–FICC– 2006–11] December 8, 2006. On June 15, 2006, 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 and on June 30, 2006, amended the proposed rule change. Notice of the proposed rule change was published in the Federal Register on October 24, 2006.2 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 add new rules to FICC’s Mortgage Backed Securities Division (‘‘MBSD’’) Rulebook to establish new reporting processes to support the bilateral comparison of pool details associated with specified pool trade (‘‘SPT’’) activity. Specifically, FICC will enable MBSD members to submit the pool number and original face value for all SPT activity through its real time trade matching (‘‘RTTM’’) service. This rule filing will not change how MBSD currently manages risk for these trades at the TBA level in that MBSD’s rules will continue to stipulate that SPT’s may be treated as TBA’s in instances of member insolvency. In conjunction with establishing this new service, FICC will make two new reports available to members: The RTTM Purchase and Sale Report and the efficiency, competition and capital formation. 15 U.S.C. 78c(f). 11 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 Securities Exchange Act Release No. 54609 (Oct. 16, 2006), 71 FR 62324. PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 RTTM Open Commitment Report.3 These reports will reflect the submission of pool number and original face value 4 as matching criteria submitted by members. Finally, FICC will include new fees for the submission of SPTs to the Schedule of Charges in the MBSD Rulebook. II. Discussion Section 17A(b)(3)(F) of the Act 5 requires that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions. The Commission finds that the proposed rule change is consistent with this requirement because it will provide a more efficient process for MBSD members to report and compare SPT transaction information and thereby should promote the prompt and accurate clearance and settlement of such 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 6 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–2006–11) be, and hereby is, approved.7 For the Commission by the Division of Market Regulation, pursuant to delegated authority.8 Florence E. Harmon, Deputy Secretary. [FR Doc. E6–21278 Filed 12–13–06; 8:45 am] BILLING CODE 8011–01–P 3 These reports will not replace MBSD’s Purchase and Sale Report or Open Commitment Report, which will continue to reflect specified pool trades as TBA trades. 4 In addition to pool number and original face value, existing matching fields (such as TBA CUSIP and price) will continue to be populated by members. 5 15 U.S.C. 78q–1(b)(3)(F). 6 15 U.S.C. 78q–1. 7 In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 8 17 CFR 200.30–3(a)(12). E:\FR\FM\14DEN1.SGM 14DEN1

Agencies

[Federal Register Volume 71, Number 240 (Thursday, December 14, 2006)]
[Notices]
[Pages 75283-75284]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-21234]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54879; File No. SR-FICC-2006-12]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Order Approving a Proposed Rule Change Relating to Financial 
Responsibility, Operational Capability, Insolvency, and Ceasing To Act

December 6, 2006.
    On June 15, 2006 the Fixed Income Clearing Corporation (``FICC'') 
filed a proposed rule change with the Securities and Exchange 
Commission (``Commission'') pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and on September 22, 
2006, amended the proposed rule change. Notice of the proposal was 
published in the Federal Register on October 4, 2006.\2\ No comment 
letters were received. For the reasons discussed below, the Commission 
is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 54570 (Oct. 4, 2006), 71 
FR 60591.
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I. Description

    The rule change will amend FICC's Government Securities Division's 
(``GSD'') and Mortgage Backed Securities Division's (``MBSD'') rules 
relating to members' or applicants' financial responsibility, 
operational capability, and insolvency and to FICC ceasing to act for 
members.

A. Cease To Act and Insolvency Rules

    FICC will amend GSD's rules governing when FICC will cease to act 
for a member in a noninsolvency situation, GSD Rule 21, and in an 
insolvency situation, GSD Rule 22. Such changes will conform GSD's 
rules to the rules of FICC's clearing agency affiliate, the National 
Securities Clearing Corporation (``NSCC'').
    GSD Rule 21, which addressed noninsolvency situations, will be 
renamed ``Restriction on Access to Services'' and will be similar to 
NSCC Rule 46. While revised Rule 21 is triggered by essentially the 
same criteria that are contained in the old GSD rule,\3\ the revised 
rule expands the remedies that FICC could exercise beyond only 
``ceasing to act'' or ``ceasing to accept data'' on behalf of the 
member. Specifically, FICC, after notifying and providing an 
opportunity to request a hearing to the member, will be able to 
suspend, prohibit, or limit a member's access to one or more of FICC's 
services.
---------------------------------------------------------------------------

    \3\ Such triggers include the member failing to perform its 
obligations to FICC and FICC's determination that the member is in 
or is approaching financial difficulty.
---------------------------------------------------------------------------

    GSD Rule 22, which addresses insolvency situations, remains 
essentially in its old form except that its close-out provisions are 
amended and are being moved to new Rule 22A.
    New Rule 22A sets forth the procedures that FICC will follow when 
it ceases to act for a member pursuant to either Rule 21 or Rule 22. 
Under new Rule 22A, FICC will initiate the close-out process with 
respect to a member for which it has ceased to act for any reason 
permitted by its rules.\4\ In addition, the term Cut-Off Time for 
noninsolvency situations will be added to Rule 22A.\5\ Although this 
term is similar to the Time of Insolvency term used in old Rule 22, a 
key difference between the terms is that members will be notified in 
advance of the Cut-Off Time.
---------------------------------------------------------------------------

    \4\ Currently, the close-out process applies only when FICC 
deems a member insolvent.
    \5\ As used in Rule 22A, the term Cut Off Time means the time 
that is specified in advance by FICC in a notice to members to be 
the time when FICC is deemed to have ceased to act for a member.
---------------------------------------------------------------------------

    The rule change also makes technical changes to conform existing 
references to Rules 21 and 22 throughout GSD's rules to these 
revisions.\6\
---------------------------------------------------------------------------

    \6\ Technical, conforming changes are being made to Rules 1, 3A, 
4, 6A, 14 and new Rule 22A.
---------------------------------------------------------------------------

B. General Continuance Standards

    FICC will add new language to Section 5 of GSD Rule 3 and a new 
Section 18, Article III, Rule 1 to MBSD's rules, which will be similar 
to NSCC Rule 15, that enables FICC when it deems necessary or advisable 
to assure itself of a member's or an applicant's financial 
responsibility and operational capability. To assure itself, FICC may, 
but is not limited to: restrict or modify the member's use of any or 
all of FICC's services; require additional reporting by the member of 
its financial or operational condition; increase the member's clearing 
fund collateral; alter the proportions of cash, eligible netting

[[Page 75284]]

securities, and letters of credit contributing to the member's required 
clearing fund deposits; and prohibit the member from withdrawing excess 
clearing fund deposits.\7\
---------------------------------------------------------------------------

    \7\ These proposed actions are similar to those that FICC has 
proposed to undertake with respect to a member undergoing a wind-
down in a rule filing pending with the Commission. SR-FICC-2006-05.
---------------------------------------------------------------------------

    Because the proposed rule change gives FICC the general authority 
to require additional clearing fund collateral when FICC is seeking 
additional assurances from a member or applicant, the provisions in 
GSD's Rule 4 that require the posting of additional collateral for 
specific circumstances are being deleted.

C. Technical Amendments

    FICC will make several technical amendments to GSD's and MBSD's 
rules. The terms ``Board'' and ``Board of Directors'' will be redefined 
to include a committee of FICC's Board of Directors that is acting 
under delegated authority of the Board. Accordingly, references to 
specific board committees throughout both divisions' rules will be 
replaced simply by the term ``Board,'' which will include any such 
board committees.

II. Discussion

    Section 17A(b)(3)(F) of the Act \8\ requires that the rules of a 
clearing agency assure the safeguarding of securities and funds that 
are in the custody or control of the clearing agency or for which it is 
responsible. The Commission finds that the proposed rule change is 
consistent with this obligation because it should enhance FICC's 
ability to identify members that present greater financial and 
operational risk and expands the remedies available to FICC to protect 
itself when dealing with such members. As a result, the proposed rule 
change should improve FICC's capacity to safeguard securities and funds 
in its custody or control or for which it is responsible.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

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 \9\ and the 
rules and regulations thereunder.
---------------------------------------------------------------------------

    \9\ 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-2006-12) be, and hereby 
is, approved.\10\
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    \10\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E6-21234 Filed 12-13-06; 8:45 am]
BILLING CODE 8011-01-P