Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving Proposed Rule Change To Extend the Pilot Program for Certain Government Securities Division Rules Relating to the GCF Repo® Service, 47453-47455 [2013-18756]
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Federal Register / Vol. 78, No. 150 / Monday, August 5, 2013 / Notices
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
the proposed rule change protects
investors by allowing trading in options
as long as the underlying security is
trading on another exchange. Instead of
relying on the ‘‘primary market,’’ the
proposed rule change attempts to clarify
when options will trade on the
Exchange to allow greater continuity in
the marketplace. By allowing the
Exchange to trade options whenever the
underlying securities are trading, the
proposed changes seek to create less of
a disconnect if the ‘‘primary’’ market
should be experiencing technical
difficulties, an emergency, or situation
that may inhibit it to be connected to
the marketplace.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
C2 does not believe that the proposed
rule change will impose any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. The Exchange does
not believe the proposed rule change
imposes any burden on intramarket
competition because it is applied to all
TPHs. In addition, the Exchange does
not believe the proposed rule change
will impose any burden on intermarket
competition as it will merely give the
Exchange discretion to trade options
when there is an ample market for the
underlying security of those options.
Thus, the Exchange believes the
proposed rule change will promote
competition by giving the Exchange the
ability to trade options when the
underlying security is trading anywhere,
and, thus, helping the Exchange to
better participate in the marketplace.
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 comments on the proposed
rule change.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not:
A. Significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. become operative for 30 days from
the date on which it was filed, or such
shorter time as the Commission may
designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
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Act 8 and Rule 19b–4(f)(6) 9 thereunder.
At any time within 60 days of the filing
of the proposed rule change, the
Commission summarily may
temporarily suspend 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. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
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 email to rulecomments@sec.gov. Please include File
Number SR–C2–2013–027 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–C2–2013–027. This file
number should be included on the
subject line if email 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
8 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule
19b–4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
9 17
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47453
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. 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–C2–
2013–027 and should be submitted on
or before August 26, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–18748 Filed 8–2–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70068; File No. SR–FICC–
2013–06]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Order
Approving Proposed Rule Change To
Extend the Pilot Program for Certain
Government Securities Division Rules
Relating to the GCF Repo® Service
July 30, 2013.
On June 5, 2013, the Fixed Income
Clearing Corporation (‘‘FICC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–FICC–2013–06 pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder.2 The proposed rule
change was published for comment in
the Federal Register on June 21, 2013.3
The Commission received no comments
on the proposed rule change. For the
reasons discussed below, the
Commission is approving the proposed
rule change.
I. Description of the Proposed Rule
Change
FICC seeks the Commission’s
approval to extend the pilot program
that is currently in effect for the GCF
10 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 69653 (May
29, 2013), 78 FR 33456 (June 4, 2013) (SR–FICC–
2013–05).
1 15
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Federal Register / Vol. 78, No. 150 / Monday, August 5, 2013 / Notices
Repo® service (‘‘2012 Pilot Program’’).
FICC requests that the 2012 Pilot
Program be extended for one year
following the Commission’s approval of
this filing.4
A. The GCF Repo® Service
The GCF Repo® service allows dealer
members of FICC’s Government Services
Division to trade general collateral
repos 5 (‘‘GCF’’) throughout the day
without requiring intraday, trade-fortrade settlement on a delivery-versuspayment (‘‘DVP’’) 6 basis. The service
allows dealers to trade general collateral
repos, based on rate and term, with
inter-dealer broker netting members on
a blind basis. Standardized, generic
CUSIP numbers have been established
exclusively for GCF Repo processing,
and are used to specify the type of
underlying security that is eligible to
serve as collateral for GCF Repos. Only
Fedwire eligible, book-entry securities
may serve as collateral for GCF repos.
Acceptable collateral for GCF repos
include most U.S. Treasury securities,
non-mortgage-backed federal agency
securities, fixed and adjustable rate
mortgage-backed securities, Treasury
Inflation-Protected Securities (‘‘TIPS’’)
and separate trading of registered
interest and principal securities
(‘‘STRIPS’’).7
mstockstill on DSK4VPTVN1PROD with NOTICES
B. Background of the Pilot Program
Because FICC’s GCF Repo service
operates as a tri-party mechanism, FICC
was asked to alter the service to align it
with the recommendations of the TriParty Repo Infrastructure Reform Task
Force (‘‘TPR’’).8 FICC consequently
developed a pilot program (‘‘2011 Pilot
4 FICC has represented that, if it determines to
change the parameters of the service during the oneyear extension period, it will file a proposed rule
change with the Commission. FICC has further
warranted that, if it seeks to extend the 2012 Pilot
Program beyond the one-year extension period or
proposes to make the program permanent, it will
also file a proposed rule change with the
Commission.
5 A general collateral repo is a repo in which the
underlying securities collateral is nonspecific,
general collateral whose identification is at the
option of the seller. This is in contrast to a specific
collateral repo.
6 Delivery-versus-payment is a settlement
procedure in which the buyer’s cash payment for
the securities it has purchased is due at the time
the securities are delivered.
7 See Securities Exchange Act Release No. 58696
(September 30, 2008), 73 FR 58698–03, 58699
(October 7, 2008) (SR–FICC–2008–04).
8 The TPR was an industry group formed and
sponsored by the Federal Reserve Bank of New
York in 2009 to address weaknesses that emerged
in the tri-party repo market during the financial
crisis. The TPR’s chief goal was to develop
recommendations to address the risks presented by
the reversal of tri-party repo transactions, and to
develop procedures to ensure that tri-party repos
would be collateralized throughout the day, rather
than at the end of the day.
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19:07 Aug 02, 2013
Jkt 229001
Program’’) to address the TPR’s
recommendations,9 and sought
Commission approval to institute that
program.10 The Commission approved
the 2011 Pilot Program on August 29,
2011 for a period of one year.11 When
the expiration date for the 2011 Pilot
Program approached, FICC sought
Commission approval to implement the
2012 Pilot Program, which continued
the 2011 Pilot Program in some aspects,
and modified it in others.12 On August
8, 2012, the Commission approved the
2012 Pilot Program for a period of one
year.13
C. The 2012 Pilot Program
The 2012 Pilot Program has been the
subject of a number of notices and
approval orders published by the
Commission,14 many of which provide
extensive detail on both the GCF Repo®
service and the pilot program itself.
Under this proposed rule change, FICC
is not proposing to alter the 2012 Pilot
Program in any way; rather, it proposes
only to extend that program, as
approved in 2012, for one additional
year.15
9 The TPR issued preliminary and final reports
setting forth its recommendations for the reform of
the tri-party repo market. See Tri-Party Repo
Infrastructure Reform Task Force Report of May 17,
2000, available at https://www.newyorkfed.org/prc/
files/report_100517.pdf; see also Tri-Party Repo
Reform Infrastructure Task Force Final Report
(February 15, 2012), available at https://www.
newyorkfed.org/tripartyrepo/pdf/report_
120215.pdf.
10 Securities Exchange Act Release No. 64955
(July 25, 2011), 76 FR 45638 (July 29, 2011) (FICC–
2011–05).
11 Securities Exchange Act Release No. 65213
(August 29, 2011), 76 FR 54824 (September 2, 2011)
(SR–FICC–2011–05).
12 The 2012 Pilot Program implemented several
changes which, although described in the rule filing
that accompanied the 2011 Pilot Program, were not
implemented during the 2011 Pilot Program’s
period of effectiveness. They include: (i) Moving
the time for unwinding repos from 7:30 a.m. to 3:30
p.m.; (ii) moving the net-free-equity process from
morning to the evening; and (iii) establishing rules
for intraday GCF Repo collateral substitutions. See
Securities Exchange Act Release No. 67277 (June
20, 2012), 77 FR 38108, 38111 (June 26, 2012) (SR–
FICC–2012–05).
13 Securities Exchange Release No. 67621 (August
8, 2012), 77 FR 48572 (August 14, 2012) (SR–FICC–
2012–05).
14 See Securities Exchange Act Release Nos.
67277 (June 20, 2012), 77 FR 38108, 38109–12 (June
26, 2012) (SR–FICC–2012–05); 67621 (August 8,
2012), 77 FR 48572, 48573–76 (August 14, 2012)
(SR–FICC–2012–05); and 69774 (June 17, 2013), 78
FR 37631, 37632–35 (June 21, 2013) (SR–FICC–
2013–06).
15 FICC would be required to file a proposed rule
change with the Commission pursuant to Section
19(b) of the Act if were to do any of the following:
(i) Change the parameters of the GCF Repo® service
during the one-year extension period, (ii) extend the
Pilot Program beyond the one-year period extension
period, or (iii) establish the 2012 Pilot Program as
a permanent program.
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Sfmt 4703
II. Discussion
Section 19(b)(2)(C) of the Act 16
directs the Commission to approve a
proposed rule change of a selfregulatory 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 17 requires,
among other things, that the rules of a
clearing agency be designed to achieve
several goals, including (i) promoting
the prompt and accurate clearance and
settlement of securities transactions
and, to the extent applicable, derivative
agreements, contracts, and transactions,
(ii) assuring the safeguarding of
securities and funds that are in the
custody or control of the clearing agency
or for which it is responsible, and (iii)
protecting investors and the public
interest.
The Commission concludes that
extending the 2012 Pilot Program for
one additional year is consistent with
the requirements of the Act and the
rules and regulations thereunder. The
2012 Pilot Program furthers the Act’s
goals because it helps attenuate the
substantial risks confronting the triparty repo market, particularly those
risks associated with the provision of
intraday credit to market participants.18
The Commission believes that extending
the 2012 Pilot Program will ensure that
these risks remain subject to more
stringent controls and that this, in turn,
will help promote the prompt and
accurate clearance and settlement of
securities transactions. The Commission
further believes that, by requiring triparty repos to remain collateralized for
a longer period each day, the 2012 Pilot
Program helps to assure the safety of the
securities and funds within FICC’s
control, or for which it is responsible.19
III. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act, particularly
those set forth in Section 17A,20 and the
rules and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,21 that the
16 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
18 The TPR characterized the ‘‘practical
elimination’’ of this intraday credit as its ‘‘first and
most significant . . . recommendation.’’ See TriParty Repo Infrastructure Reform Task Force Final
Report, 4 (February 15, 2012), available at https://
www.newyorkfed.org/tripartyrepo/pdf/
report_120215.pdf.
19 See 15 U.S.C. 78q–1(b)(3)(F).
20 15 U.S.C. 78q–1.
21 15 U.S.C. 78s(b)(2).
17 15
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Federal Register / Vol. 78, No. 150 / Monday, August 5, 2013 / Notices
proposed rule change (File No. SR–
FICC–2013–06) be, and hereby is,
approved.22
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–18756 Filed 8–2–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70075; File No. SR–
NYSEArca–2013–75]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending NYSE Arca
Equities Rule 7.31(a)(2) To Specify
That the Exchange Would Use The
Last Official Closing Price To Calculate
the Market Order Trading Collar If
There Is No Consolidated Last Sale
Price That Trading Day
July 30, 2013.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on July 18,
2013, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. 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 the Substance
of the Proposed Rule Change
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The Exchange proposes to amend
NYSE Arca Equities Rule 7.31(a)(2) to
specify that the Exchange would use the
last official closing price to calculate the
market order trading collar if there is no
consolidated last sale price that trading
day. The text of the proposed rule
change is available on the Exchange’s
Web site at www.nyse.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
22 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
23 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
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19:07 Aug 02, 2013
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to amend
NYSE Arca Equities Rule 7.31(a)(2) to
specify that the Exchange would use the
last official closing price to calculate the
market order trading collar (‘‘Trading
Collar’’) if there is no consolidated last
sale price on that trading day. Pursuant
to Rule 7.31(a)(1), during Core Trading
Hours,4 a market order to buy (sell) will
not execute or route to another market
center at a price above (below) the
Trading Collar. Trading Collars are
based on a price that is a specified
percentage away from the consolidated
last sale price, which can be a price
either reported on the Consolidated
Tape or the UTP Trade Data Feed,
depending on which market the security
is listed. The upper boundary of the
Trading Collar is calculated by
increasing the consolidated last sale
price by a specific percentage, and the
lower boundary is calculated by
decreasing the consolidated last sale
price by the same specified percentage.
In thinly-traded securities, there may
not be a consolidated last sale price
available for a security that trading day.
Currently, if this occurs, the Exchange
does not calculate a Trading Collar until
there is a consolidated last during Core
Trading Hours, which means that the
first execution of a market order at the
Exchange may not be subject to a
Trading Collar.
The Exchange proposes to amend
Rule 7.31(a)(2) to specify that if there is
no consolidated last sale price on the
same trading day, the Exchange would
use the last official closing price for the
security. The Exchange proposes to
make this change to assure that there
4 See NYSE ARca Equities Rule 1.1(j) (defining
‘‘Core Trading Hours’’ as the hours of 6:30 a.m. to
1:00 p.m. (Pacific Time)).
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47455
will be a Trading Collar available for all
executions of market orders at the
Exchange, even if an execution has not
yet been reported for a security that day.
As proposed, the Exchange could use
a consolidated last sale price that is
reported to the Consolidated Tape or the
UTP Trade Data Feed before Core
Trading Hours begin that day. For
example, assume XYZ security, a thinlytraded security, had an official closing
price on Day 1 of $10.00. On Day 2, a
trade is reported to the Consolidated
Tape in XYZ security at 5:30 a.m.
Eastern for $10.01, but there are no
additional trades in XYZ during Core
Trading Hours. Accordingly, as
proposed, on Day 2, the Exchange
would use the $10.01 consolidated last
sale price as the reference price for
calculating the Trading Collar for XYZ,
and not the $10.00 official last close. If
there are no further trades on Day 2 and
no trades on Day 3, on Day 3, the
Exchange would use the Day 1 official
closing price to calculate the Trading
Collar, and not the Day 2 pre-Core
Trading Hours execution of $10.01. The
Exchange believes that it is appropriate
to use an execution that may occur on
the same day in the pre-Core Trading
Hours as the reference price because it
may be reflective of the current price of
the security. However, if there are no
further transactions in the security that
day or on the next day(s), the Exchange
believes that the last official closing
price is more indicative of the true value
of the security and should be used as
the reference price.
The Exchange would not use a
consolidated last sale price that is
reported after the official closing price
for the prior day. For example, if XYZ
had an official closing price on Day 1 of
$10.00 and an execution reported to the
Consolidated Tape at 5:30 p.m. Eastern
of $10.01, and no trades on Day 2, the
Exchange would use the $10.00 closing
price as the reference price for
calculating the Trading Collar for XYZ.
The Exchange also proposes to amend
Rule 7.31(a)(1) to clarify that Trading
Collars are available for the Market
Order Auction. Because the Market
Order Auction occurs during Core
Trading Hours,5 the Exchange believes
that it is implied in the rule that the
Trading Collars are also applicable
during the Market Order Auction.
However, in the interest of full
5 Pursuant to NYSE Arca Equities Rule 7.34(a)(1),
the Market Order Auction occurs during the
Exchange’s Opening Session. However, because the
Market Order Auction occurs no earlier than
9:30:00 a.m. Eastern, although it is part of the
Opening Session, it takes place during what are
defined as Core Trading Hours pursuant to Rule
1.1(j).
E:\FR\FM\05AUN1.SGM
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]]>Agencies
[Federal Register Volume 78, Number 150 (Monday, August 5, 2013)]
[Notices]
[Pages 47453-47455]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-18756]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70068; File No. SR-FICC-2013-06]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Order Approving Proposed Rule Change To Extend the Pilot Program for
Certain Government Securities Division Rules Relating to the GCF
Repo[supreg] Service
July 30, 2013.
On June 5, 2013, the Fixed Income Clearing Corporation (``FICC'')
filed with the Securities and Exchange Commission (``Commission'')
proposed rule change SR-FICC-2013-06 pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder.\2\ The proposed rule change was published for comment in
the Federal Register on June 21, 2013.\3\ The Commission received no
comments on the proposed rule change. For the reasons discussed below,
the Commission is approving the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 69653 (May 29, 2013), 78
FR 33456 (June 4, 2013) (SR-FICC-2013-05).
---------------------------------------------------------------------------
I. Description of the Proposed Rule Change
FICC seeks the Commission's approval to extend the pilot program
that is currently in effect for the GCF
[[Page 47454]]
Repo[supreg] service (``2012 Pilot Program''). FICC requests that the
2012 Pilot Program be extended for one year following the Commission's
approval of this filing.\4\
---------------------------------------------------------------------------
\4\ FICC has represented that, if it determines to change the
parameters of the service during the one-year extension period, it
will file a proposed rule change with the Commission. FICC has
further warranted that, if it seeks to extend the 2012 Pilot Program
beyond the one-year extension period or proposes to make the program
permanent, it will also file a proposed rule change with the
Commission.
---------------------------------------------------------------------------
A. The GCF Repo[supreg] Service
The GCF Repo[supreg] service allows dealer members of FICC's
Government Services Division to trade general collateral repos \5\
(``GCF'') throughout the day without requiring intraday, trade-for-
trade settlement on a delivery-versus-payment (``DVP'') \6\ basis. The
service allows dealers to trade general collateral repos, based on rate
and term, with inter-dealer broker netting members on a blind basis.
Standardized, generic CUSIP numbers have been established exclusively
for GCF Repo processing, and are used to specify the type of underlying
security that is eligible to serve as collateral for GCF Repos. Only
Fedwire eligible, book-entry securities may serve as collateral for GCF
repos. Acceptable collateral for GCF repos include most U.S. Treasury
securities, non-mortgage-backed federal agency securities, fixed and
adjustable rate mortgage-backed securities, Treasury Inflation-
Protected Securities (``TIPS'') and separate trading of registered
interest and principal securities (``STRIPS'').\7\
---------------------------------------------------------------------------
\5\ A general collateral repo is a repo in which the underlying
securities collateral is nonspecific, general collateral whose
identification is at the option of the seller. This is in contrast
to a specific collateral repo.
\6\ Delivery-versus-payment is a settlement procedure in which
the buyer's cash payment for the securities it has purchased is due
at the time the securities are delivered.
\7\ See Securities Exchange Act Release No. 58696 (September 30,
2008), 73 FR 58698-03, 58699 (October 7, 2008) (SR-FICC-2008-04).
---------------------------------------------------------------------------
B. Background of the Pilot Program
Because FICC's GCF Repo service operates as a tri-party mechanism,
FICC was asked to alter the service to align it with the
recommendations of the Tri-Party Repo Infrastructure Reform Task Force
(``TPR'').\8\ FICC consequently developed a pilot program (``2011 Pilot
Program'') to address the TPR's recommendations,\9\ and sought
Commission approval to institute that program.\10\ The Commission
approved the 2011 Pilot Program on August 29, 2011 for a period of one
year.\11\ When the expiration date for the 2011 Pilot Program
approached, FICC sought Commission approval to implement the 2012 Pilot
Program, which continued the 2011 Pilot Program in some aspects, and
modified it in others.\12\ On August 8, 2012, the Commission approved
the 2012 Pilot Program for a period of one year.\13\
---------------------------------------------------------------------------
\8\ The TPR was an industry group formed and sponsored by the
Federal Reserve Bank of New York in 2009 to address weaknesses that
emerged in the tri-party repo market during the financial crisis.
The TPR's chief goal was to develop recommendations to address the
risks presented by the reversal of tri-party repo transactions, and
to develop procedures to ensure that tri-party repos would be
collateralized throughout the day, rather than at the end of the
day.
\9\ The TPR issued preliminary and final reports setting forth
its recommendations for the reform of the tri-party repo market. See
Tri-Party Repo Infrastructure Reform Task Force Report of May 17,
2000, available at https://www.newyorkfed.org/prc/files/report_100517.pdf; see also Tri-Party Repo Reform Infrastructure Task Force
Final Report (February 15, 2012), available at https://www.newyorkfed.org/tripartyrepo/pdf/report_120215.pdf.
\10\ Securities Exchange Act Release No. 64955 (July 25, 2011),
76 FR 45638 (July 29, 2011) (FICC-2011-05).
\11\ Securities Exchange Act Release No. 65213 (August 29,
2011), 76 FR 54824 (September 2, 2011) (SR-FICC-2011-05).
\12\ The 2012 Pilot Program implemented several changes which,
although described in the rule filing that accompanied the 2011
Pilot Program, were not implemented during the 2011 Pilot Program's
period of effectiveness. They include: (i) Moving the time for
unwinding repos from 7:30 a.m. to 3:30 p.m.; (ii) moving the net-
free-equity process from morning to the evening; and (iii)
establishing rules for intraday GCF Repo collateral substitutions.
See Securities Exchange Act Release No. 67277 (June 20, 2012), 77 FR
38108, 38111 (June 26, 2012) (SR-FICC-2012-05).
\13\ Securities Exchange Release No. 67621 (August 8, 2012), 77
FR 48572 (August 14, 2012) (SR-FICC-2012-05).
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C. The 2012 Pilot Program
The 2012 Pilot Program has been the subject of a number of notices
and approval orders published by the Commission,\14\ many of which
provide extensive detail on both the GCF Repo[supreg] service and the
pilot program itself. Under this proposed rule change, FICC is not
proposing to alter the 2012 Pilot Program in any way; rather, it
proposes only to extend that program, as approved in 2012, for one
additional year.\15\
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\14\ See Securities Exchange Act Release Nos. 67277 (June 20,
2012), 77 FR 38108, 38109-12 (June 26, 2012) (SR-FICC-2012-05);
67621 (August 8, 2012), 77 FR 48572, 48573-76 (August 14, 2012) (SR-
FICC-2012-05); and 69774 (June 17, 2013), 78 FR 37631, 37632-35
(June 21, 2013) (SR-FICC-2013-06).
\15\ FICC would be required to file a proposed rule change with
the Commission pursuant to Section 19(b) of the Act if were to do
any of the following: (i) Change the parameters of the GCF
Repo[supreg] service during the one-year extension period, (ii)
extend the Pilot Program beyond the one-year period extension
period, or (iii) establish the 2012 Pilot Program as a permanent
program.
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II. Discussion
Section 19(b)(2)(C) of the Act \16\ 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 \17\
requires, among other things, that the rules of a clearing agency be
designed to achieve several goals, including (i) promoting the prompt
and accurate clearance and settlement of securities transactions and,
to the extent applicable, derivative agreements, contracts, and
transactions, (ii) assuring the safeguarding of securities and funds
that are in the custody or control of the clearing agency or for which
it is responsible, and (iii) protecting investors and the public
interest.
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\16\ 15 U.S.C. 78s(b)(2)(C).
\17\ 15 U.S.C. 78q-1(b)(3)(F).
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The Commission concludes that extending the 2012 Pilot Program for
one additional year is consistent with the requirements of the Act and
the rules and regulations thereunder. The 2012 Pilot Program furthers
the Act's goals because it helps attenuate the substantial risks
confronting the tri-party repo market, particularly those risks
associated with the provision of intraday credit to market
participants.\18\ The Commission believes that extending the 2012 Pilot
Program will ensure that these risks remain subject to more stringent
controls and that this, in turn, will help promote the prompt and
accurate clearance and settlement of securities transactions. The
Commission further believes that, by requiring tri-party repos to
remain collateralized for a longer period each day, the 2012 Pilot
Program helps to assure the safety of the securities and funds within
FICC's control, or for which it is responsible.\19\
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\18\ The TPR characterized the ``practical elimination'' of this
intraday credit as its ``first and most significant . . .
recommendation.'' See Tri-Party Repo Infrastructure Reform Task
Force Final Report, 4 (February 15, 2012), available at https://www.newyorkfed.org/tripartyrepo/pdf/report_120215.pdf.
\19\ See 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act,
particularly those set forth in Section 17A,\20\ and the rules and
regulations thereunder.
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\20\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\21\ that the
[[Page 47455]]
proposed rule change (File No. SR-FICC-2013-06) be, and hereby is,
approved.\22\
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\21\ 15 U.S.C. 78s(b)(2).
\22\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
\23\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-18756 Filed 8-2-13; 8:45 am]
BILLING CODE 8011-01-P
