Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving Proposed Rule Change, as Modified by Amendment No. 1, To Replace the Mortgage-Backed Securities Division Clearing Fund Calculation Methodology With a Yield-Driven Value-at-Risk Methodology, 19537-19539 [E8-7504]
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Federal Register / Vol. 73, No. 70 / Thursday, April 10, 2008 / Notices
and a national market system, and, in
general, to protect investors and the
public interest. The Commission
believes that the proposal should allow
for greater flexibility in pricing largesized orders and may provide a greater
opportunity for price improvement. The
Commission also notes that the proposal
is substantially similar to requirements
set forth in the rules of another
exchange.12
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–CBOE–2008–
14), be, and hereby is approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–7505 Filed 4–9–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57615; File No. SR–CBOE–
2007–120]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Approving
Proposed Rule Change and
Amendments No. 1 and No. 2 Thereto
Relating to Market-Makers and Remote
Maker-Makers
April 3, 2008.
On October 11, 2007, the Chicago
Board Options Exchange, Incorporated
(‘‘CBOE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change
relating to Market-Makers and Remote
Market-Makers (‘‘RMMs’’). On February
13, 2008, the Exchange submitted
Amendment No. 1 to the proposed rule
change.3 The proposed rule change was
published for comment in the Federal
Register on February 29, 2008.4 On
April 2, 2008, the Exchange submitted
Amendment No. 2 to the proposed rule
change.5 The Commission received no
12 See
paragraphs (d) and (e) of ISE Rule 716.
U.S.C. 78s(b)(2).
14 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Amendment 1 replaced the original filing in its
entirety.
4 See Securities Exchange Act Release No. 57367
(February 21, 2008), 73 FR 11168 (‘‘Notice’’).
5 In Amendment No. 2, CBOE made minor
revisions to the proposed rule text to reflect changes
mstockstill on PROD1PC66 with NOTICES
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comments regarding the proposal. This
order approves the proposed rule
change, as amended.
CBOE proposes to amend its rules
relating to Market-Makers and RMMs.
The Exchange notes that, since the time
the RMM rules were adopted, the ability
of Market-Makers to quote from a
location outside of the trading crowd or
trading floor has expanded. CBOE also
states that the existing obligations of
Market-Makers and RMMs are generally
the same. CBOE therefore does not see
a reason to maintain the RMM category
of market participant and proposes to
delete all references to RMMs in its
rules. In connection with this change,
CBOE’s proposal also: (i) Amends the
definition of Market-Maker to include
member organizations; (ii) amends
CBOE Rule 3.3 to clarify that the
member organization membership
statuses that are approved by the
Membership Committee include MarketMaker; and (iii) deletes Interpretation
and Policy .02 to CBOE Rule 3.8, and
amends CBOE Rule 3.8(a)(ii), to allow
any member organization that is the
owner or lessee of more than one
membership to designate one individual
to be the nominee for all memberships
utilized by the organization (except that,
for each membership utilized for trading
in open outcry on the trading floor, the
organization must designate a different
individual to be the nominee for each of
the memberships).
CBOE also proposes to reorganize the
text of two of the Exchange’s pilot
programs relating to the ability of eDPMs, Off-Floor DPMs, and RMMs to
have affiliated Market-Makers in the
same class and clarify that they would
no longer apply to RMMs.6 The
Exchange also is adding a new provision
to CBOE Rule 8.3 that provides that
there is no restriction on affiliated
Market-Makers holding an appointment
and submitting electronic quotations in
the same class, provided CBOE uses an
allocation algorithm in the class that
does not allocate electronic trades, in
whole or in part, in an equal percentage
based on the number of market
participants quoting at the best bid or
offer.7
made in a subsequent rule filing that extended two
of the Exchange’s pilot programs. See Securities
Exchange Act Release No. 57519 (March 18, 2008)
73 FR 15805 (March 25, 2008) (‘‘Pilot Extension’’).
These changes are technical and are not subject to
public comment.
6 In the Notice, the Exchange indicated that it
proposed extending these pilot programs for an
additional year. This extension was subsequently
made in a separate filing. See Pilot Extension in
note 5, supra.
7 CBOE’s proposal also: (i) Amends CBOE Rule
8.3 to provide that the appointment of a MarketMaker to a certain option class can be made by the
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19537
The Commission finds that the
proposal, as amended, is consistent with
section 6(b)(5) of the Act,8 which
requires, among other things, that the
rules of a national securities exchange
be 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, in
general, to protect investors and the
public interest.9 Specifically, the
Commission finds that it is consistent
with the Act for CBOE to clarify, update,
and consolidate the Exchange’s rules
related to Market-Makers and their
obligations on the Exchange.
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,10 that the
proposed rule change (SR–CBOE–2007–
120), as amended, is approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–7512 Filed 4–9–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57586; File No. SR–FICC–
2007–10]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Order
Approving Proposed Rule Change, as
Modified by Amendment No. 1, To
Replace the Mortgage-Backed
Securities Division Clearing Fund
Calculation Methodology With a YieldDriven Value-at-Risk Methodology
March 31, 2008.
I. Introduction
On August 31, 2007, the Fixed Income
Clearing Corporation (‘‘FICC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) and on
September 27, 2007, amended proposed
rule change SR-FICC–2007–10 pursuant
Market-Maker’s selection or by CBOE, consistent
with certain criteria set forth in CBOE Rule 8.3; (ii)
amends CBOE Rule 8.3 to delete the requirement
that a Market-Maker may hold an appointment in
an appropriate number of Hybrid option classes that
are located at one trading station; (iii) amends
CBOE Rule 8.7 to delete references to RMMs and
other outdated references, and (iv) updates or
deletes outdated provisions in other CBOE Rules,
including CBOE Rule 8.3A relating to Class Quoting
Limits.
8 15 U.S.C. 78f(b)(5).
9 In approving this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition and capital formation. 15
U.S.C. 78c(f).
10 15 U.S.C. 78s(b)(2).
11 17 CFR 200.30–3(a)(12).
E:\FR\FM\10APN1.SGM
10APN1
19538
Federal Register / Vol. 73, No. 70 / Thursday, April 10, 2008 / Notices
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 November 30,
2007.2 The Commission received no
comment letters in response to the
proposed rule change. For the reasons
discussed below, the Commission is
approving the proposed rule change, as
amended.
II. Description
FICC is replacing the MortgageBacked Securities Division (‘‘MBSD’’)
margin calculation methodology with a
value-at-risk (‘‘VaR’’) methodology.
Clearing participants of MBSD are
required to maintain participants’ fund
deposits. Each participant’s required
deposit is calculated daily to ensure
enough funds are available to cover the
risks associated with that participant’s
activities.
The purpose served by the
participants fund is to have on deposit
from each participant assets sufficient to
satisfy any losses that may otherwise be
incurred by MBSD participants as the
result of the default by another
participant and the resultant close out of
the defaulting participant’s settlement
positions.
FICC is replacing the current
participants’ fund methodology, which
uses haircuts and offsets, with a VaR
model. FICC expects the VaR model to
better reflect market volatility and to
more thoroughly distinguish levels of
risk presented by individual securities.
Specifically, FICC will replace the
existing MBSD margin calculation with
a yield-driven VaR model. VaR is
defined to be the maximum amount of
money that may be lost on a portfolio
over a given period of time within a
given level of confidence. With respect
to MBSD, FICC will use a 99 percent
three-day VaR.
The changes to the components that
comprise the current participants fund
calculation as compared to the VaR
calculation in relation to the risks
addressed by the components are
summarized below:
Existing methodology
Risk addressed
VaR methodology
Market Margin Differential, which is the greater
of:
(i) The P&L Requirement or
(ii) The Market Volatility Requirement.
Final margin requirement generated for second
processing cycle4.
Adjusting contract price to market price and
post mark-to-market fluctuations in security
prices.
The sum of:
(i) Mark-to-market and
(ii) Interest rate or index-driven model, as appropriate.3
Margin Requirement Differential (‘‘MRD’’) to
include intraday portfolio variations and protection regarding late margin deficit satisfaction.
Prefunding of certain debit cash obligation
items through the participants fund (offset
for credits)5
Coverage Component (if necessary, applies
additional charge to bring coverage to the
applicable confidence level).
A minimum charge of the greater of: (i)
$100,000 or (ii) a defined percentage of
gross portfolio.
Additional exposure due to portfolio variation.
Prefunding of certain debit cash obligation
items through the participants fund (no offset
for credits).
N/A ......................................................................
Uncertainty of whether a member will satisfy
its cash settlement obligation.
Minimum Market Margin Differential (currently
$250,000).
Maintenance of a minimum amount of collateral to support potential counterparty liquidation losses.
In addition, FICC may include in a
participant’s participant fund
calculation a ‘‘special charge’’ as
determined by FICC from time to time
in view of market conditions and the
financial and operational capabilities of
the participant. FICC will make any
such determination based on such
factors as it determines to be
appropriate.
Because it will become obsolete upon
the implementation of a VaR based
participants fund calculation, FICC is
also eliminating the provision in MBSD
rules requiring participants to maintain
a Basic Deposit and Minimum Market
Margin Differential Deposit with MBSD
pursuant to Article IV, Rule 1
(Participants Fund), Section 1(a) and (b).
1 15
U.S.C. 78s(b)(1).
Exchange Act Release No. 56837
(November 26, 2007), 72 FR 67770 (SR–FICC–2007–
10).
3 FICC shall have the discretion to not apply the
interest rate model to classes of securities whose
volatility is less amenable to statistical analysis
(e.g., a security that has a lack of pricing history).
In lieu of such a calculation, the required charge
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2 Securities
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16:48 Apr 09, 2008
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Potential loss in unlikely situations beyond the
model’s effective range.
III. Discussion
Section 19(b) of the Act directs the
Commission to approve a proposed rule
change of a self-regulatory organization
if it finds that such proposed rule
change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
such organization. Section 17A(b)(3)(F)
of the Act requires that the rules of a
clearing agency be designed to assure
the safeguarding of securities and funds
in FICC’s custody or control or for
which it is responsible.6 Because FICC’s
proposed rule change implements a VaR
methodology that should better reflect
market volatility and should more
thoroughly distinguish the levels of risk
presented by individual securities, FICC
should be able to more accurately
with respect to such positions will be determined
based on an historic index volatility model.
4 MBSD generates a preliminary margin report as
part of a first processing cycle at the close of the
business day and calculates a final margin
requirement as part of a second processing cycle
completed at approximately 11:30 am each business
day. Upon the implementation of the new VaR
methodology, the MBSD will no longer generate a
margin requirement as part of the second cycle.
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
calculate the risk presented by each of
its member’s activity and to make
participants fund collections to protect
against that risk. As a result, FICC
should be in a better position to assure
the safeguarding of securities and funds
in its custody or control or for which it
is responsible.
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. In
approving the proposed rule change, the
Commission considered the proposal’s
impact on efficiency, competition and
capital formation.7
Instead, a final margin requirement will be
established after the running of the first cycle at
approximately 9:00 pm.
5 Cash obligation item credits are retained by
MBSD and are not passed through to the
participant. As a result, MBSD has correspondingly
`
less risk vis-a-vis a firm with cash obligation credits
and therefore requires less collateral.
6 15 U.S.C. 78q–1(b)(3)(F).
7 15 U.S.C. 78c(f).
E:\FR\FM\10APN1.SGM
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Federal Register / Vol. 73, No. 70 / Thursday, April 10, 2008 / Notices
Reference Room, and https://
www.nasdaq.com/about/
LegalCompliance.stm.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change (File No. SR–
FICC–2007–10), as amended, be and
hereby is approved.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.8
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–7504 Filed 4–9–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57614; File No. SR–
NASDAQ–2008–029]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify a
Pricing Incentive Program for Market
Makers in Exchange-Traded Funds and
Index-Linked Securities Listed on
NASDAQ
April 3, 2008.
mstockstill on PROD1PC66 with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 31,
2008, The NASDAQ Stock Market LLC
(‘‘NASDAQ’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by NASDAQ. Pursuant to
Section 19(b)(3)(A)(ii) of the Act 3 and
Rule 19b–4(f)(2) thereunder,4 NASDAQ
has designated this proposal as
establishing or changing a due, fee, or
other charge, which renders the
proposed rule change effective
immediately upon filing. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ proposes to modify a
pricing incentive program for market
makers in exchange-traded funds
(‘‘ETFs’’) and index-linked securities
(‘‘ILSs’’) listed on NASDAQ. NASDAQ
will implement the proposed rule
change on April 1, 2008. The text of the
proposed rule change is available at the
Exchange, the Commission’s Public
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
1 15
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16:48 Apr 09, 2008
Jkt 214001
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NASDAQ 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.
NASDAQ 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
Last year, NASDAQ introduced a
pricing incentive program for market
makers in ETFs and ILSs listed on
NASDAQ. The program was designed
both to enhance NASDAQ’s
competitiveness as a listing venue for
ETFs and ILSs and to further strengthen
its market quality as a transaction venue
for ETFs and ILSs.
Under NASDAQ’s program, a market
maker in an ETF or ILS may become a
‘‘Designated Liquidity Provider’’ in a
‘‘Qualified Security’’ and receive
favorable incentive pricing. A
‘‘Designated Liquidity Provider’’ is a
registered NASDAQ market maker in a
Qualified Security that has committed
to maintain minimum performance
standards. The minimum performance
standards applicable to a Designated
Liquidity Provider may be determined
from time to time by NASDAQ and may
vary depending on the price, liquidity,
and volatility of a particular Qualified
Security. The performance
measurements include: (A) Percent of
time at the national best bid/best offer
(‘‘NBBO’’); (B) percent of executions
better than the NBBO; (C) average
displayed size; and (D) average quoted
spread. NASDAQ may remove
Designated Liquidity Providers that do
not meet performance standards or that
decide to change their status at any
time.
A Qualified Security is an ETF or ILS
that is listed on NASDAQ, has at least
one Designated Liquidity Provider, and
trades at volumes below a NASDAQdesignated maximum trading volume.
Since the inception of the program, the
maximum trading volume has been set
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
19539
such that a security is no longer eligible
to be a Qualified Security once there
have been two calendar months in any
three calendar-month period during
which its average daily volume on
NASDAQ exceeded 250,000 shares.
Although the program has had some
success in encouraging additional
listings of ETFs on NASDAQ since its
inception, NASDAQ has concluded,
based on feedback from sponsors of
ETFs and ILSs and market makers, that
the attractiveness of NASDAQ as a
listing venue for these products would
be further enhanced by increasing the
maximum volume threshold such that a
security would no longer be a Qualified
Security once there have been two
calendar months in any three calendarmonth period during which its average
daily volume on NASDAQ exceeded
10,000,000 shares. NASDAQ believes
that this increase reflects a commitment
to make NASDAQ the most attractive
venue for listing and trading ETFs and
ILSs. The change will encourage market
maker support for ETFs and ILSs
beyond their initial introductory period
and thereby further enhance liquidity
for the products as their trading
volumes increase.
Designated Liquidity Providers will
continue to pay $0.003 per share
executed when accessing liquidity in
Qualified Securities; when providing
liquidity, the Designated Liquidity
Provider will continue to receive a
credit of $0.004 per share executed.
Consistent with the requirements of
Regulation NMS, in the unlikely event
that a security is trading at less than $1
per share, the normal execution fee and
credit schedule in Rule 7018(a)
regarding securities trading at less than
$1 would apply. Once the 10,000,000
share volume threshold is reached, the
pricing for the ETF or ILS becomes
consistent with pricing for other
securities traded on NASDAQ.
2. Statutory Basis
NASDAQ believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,5 in
general, and with Section 6(b)(4) and (5)
of the Act,6 in particular, in that the
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and issuers and other
persons using any facility or system
which NASDAQ operates or controls,
and 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, in
5 15
6 15
E:\FR\FM\10APN1.SGM
U.S.C. 78f.
U.S.C. 78f(b)(4) and (5).
10APN1
]]>Agencies
[Federal Register Volume 73, Number 70 (Thursday, April 10, 2008)]
[Notices]
[Pages 19537-19539]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-7504]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57586; File No. SR-FICC-2007-10]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Order Approving Proposed Rule Change, as Modified by Amendment No. 1,
To Replace the Mortgage-Backed Securities Division Clearing Fund
Calculation Methodology With a Yield-Driven Value-at-Risk Methodology
March 31, 2008.
I. Introduction
On August 31, 2007, the Fixed Income Clearing Corporation
(``FICC'') filed with the Securities and Exchange Commission
(``Commission'') and on September 27, 2007, amended proposed rule
change SR-FICC-2007-10 pursuant
[[Page 19538]]
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 November 30, 2007.\2\ The Commission received no comment
letters in response to the proposed rule change. For the reasons
discussed below, the Commission is approving the proposed rule change,
as amended.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 56837 (November 26,
2007), 72 FR 67770 (SR-FICC-2007-10).
---------------------------------------------------------------------------
II. Description
FICC is replacing the Mortgage-Backed Securities Division
(``MBSD'') margin calculation methodology with a value-at-risk
(``VaR'') methodology.
Clearing participants of MBSD are required to maintain
participants' fund deposits. Each participant's required deposit is
calculated daily to ensure enough funds are available to cover the
risks associated with that participant's activities.
The purpose served by the participants fund is to have on deposit
from each participant assets sufficient to satisfy any losses that may
otherwise be incurred by MBSD participants as the result of the default
by another participant and the resultant close out of the defaulting
participant's settlement positions.
FICC is replacing the current participants' fund methodology, which
uses haircuts and offsets, with a VaR model. FICC expects the VaR model
to better reflect market volatility and to more thoroughly distinguish
levels of risk presented by individual securities.
Specifically, FICC will replace the existing MBSD margin
calculation with a yield-driven VaR model. VaR is defined to be the
maximum amount of money that may be lost on a portfolio over a given
period of time within a given level of confidence. With respect to
MBSD, FICC will use a 99 percent three-day VaR.
The changes to the components that comprise the current
participants fund calculation as compared to the VaR calculation in
relation to the risks addressed by the components are summarized below:
------------------------------------------------------------------------
Existing methodology Risk addressed VaR methodology
------------------------------------------------------------------------
Market Margin Differential, Adjusting contract The sum of:
which is the greater of: price to market (i) Mark-to-market
(i) The P&L Requirement or. price and post mark- and
(ii) The Market Volatility to-market (ii) Interest rate
Requirement.. fluctuations in or index-driven
security prices. model, as
appropriate.\3\
Final margin requirement Additional exposure Margin Requirement
generated for second due to portfolio Differential
processing cycle\4\. variation.. (``MRD'') to
include intraday
portfolio
variations and
protection
regarding late
margin deficit
satisfaction.
Prefunding of certain debit Uncertainty of Prefunding of
cash obligation items whether a member certain debit cash
through the participants will satisfy its obligation items
fund (no offset for cash settlement through the
credits). obligation. participants fund
(offset for
credits)\5\
N/A........................ Potential loss in Coverage Component
unlikely situations (if necessary,
beyond the model's applies additional
effective range. charge to bring
coverage to the
applicable
confidence level).
Minimum Market Margin Maintenance of a A minimum charge of
Differential (currently minimum amount of the greater of: (i)
$250,000). collateral to $100,000 or (ii) a
support potential defined percentage
counterparty of gross portfolio.
liquidation losses.
------------------------------------------------------------------------
In addition, FICC may include in a participant's participant fund
calculation a ``special charge'' as determined by FICC from time to
time in view of market conditions and the financial and operational
capabilities of the participant. FICC will make any such determination
based on such factors as it determines to be appropriate.
---------------------------------------------------------------------------
\3\ FICC shall have the discretion to not apply the interest
rate model to classes of securities whose volatility is less
amenable to statistical analysis (e.g., a security that has a lack
of pricing history). In lieu of such a calculation, the required
charge with respect to such positions will be determined based on an
historic index volatility model.
\4\ MBSD generates a preliminary margin report as part of a
first processing cycle at the close of the business day and
calculates a final margin requirement as part of a second processing
cycle completed at approximately 11:30 am each business day. Upon
the implementation of the new VaR methodology, the MBSD will no
longer generate a margin requirement as part of the second cycle.
Instead, a final margin requirement will be established after the
running of the first cycle at approximately 9:00 pm.
\5\ Cash obligation item credits are retained by MBSD and are
not passed through to the participant. As a result, MBSD has
correspondingly less risk vis-a-vis a firm with cash obligation
credits and therefore requires less collateral.
---------------------------------------------------------------------------
Because it will become obsolete upon the implementation of a VaR
based participants fund calculation, FICC is also eliminating the
provision in MBSD rules requiring participants to maintain a Basic
Deposit and Minimum Market Margin Differential Deposit with MBSD
pursuant to Article IV, Rule 1 (Participants Fund), Section 1(a) and
(b).
III. Discussion
Section 19(b) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization. Section 17A(b)(3)(F) of the Act requires that the rules
of a clearing agency be designed to assure the safeguarding of
securities and funds in FICC's custody or control or for which it is
responsible.\6\ Because FICC's proposed rule change implements a VaR
methodology that should better reflect market volatility and should
more thoroughly distinguish the levels of risk presented by individual
securities, FICC should be able to more accurately calculate the risk
presented by each of its member's activity and to make participants
fund collections to protect against that risk. As a result, FICC should
be in a better position to assure the safeguarding of securities and
funds in its custody or control or for which it is responsible.
---------------------------------------------------------------------------
\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. In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition and capital
formation.\7\
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\7\ 15 U.S.C. 78c(f).
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[[Page 19539]]
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-FICC-2007-10), as amended,
be and hereby is approved.
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\8\ 17 CFR 200.30-3(a)(12).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\8\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7504 Filed 4-9-08; 8:45 am]
BILLING CODE 8011-01-P
