Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Establish the Minimum Financial Requirements for the Existing Membership Category of Registered Investment Company Netting Members in the Government Securities Division, 71702-71704 [2013-28569]
Download as PDF
71702
Federal Register / Vol. 78, No. 230 / Friday, November 29, 2013 / Notices
fees, and other charges among its
members and issuers and other persons
using its facilities.’’
• Section 6(b)(5) of the Act,23 which
requires that the rules of a national
securities exchange be designed to,
among other things, ‘‘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’’ and not be ‘‘designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.’’
• Section 6(b)(8) of the Act,24 which
requires that the rules of a national
securities exchange ‘‘not impose any
burden on competition not necessary or
appropriate’’ in furtherance of the Act.
VI. Commission’s Solicitation of
Comments
The Commission requests written
views, data, and arguments with respect
to the concerns identified above as well
as other relevant concerns. Such
comments should be submitted by
December 20, 2013. Rebuttal comments
should be submitted by January 3, 2014.
Although there do not appear to be any
issues relevant to approval or
disapproval which would be facilitated
by an oral presentation of views, data,
and arguments, the Commission will
consider, pursuant to Rule 19b–4, any
request for an opportunity to make an
oral presentation.25
The Commission asks that
commenters address the sufficiency and
merit of the Exchange’s statements in
support of the proposal, in addition to
any other comments they may wish to
submit about the proposed rule change.
Interested persons are invited to submit
written data, views, and arguments
concerning the proposed rule change,
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 rule-comments@
sec.gov. Please include File Number SR–
Phlx–2013–113 on the subject line.
sroberts on DSK5SPTVN1PROD with NOTICES
23 15
U.S.C. 78f(b)(5).
U.S.C. 78f(b)(8).
25 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act
grants the Commission flexibility to determine what
type of proceeding—either oral or notice and
opportunity for written comments—is appropriate
for consideration of a particular proposal by a selfregulatory organization. See Securities Act
Amendments of 1975, Senate Comm. on Banking,
Housing & Urban Affairs, S. Rep. No. 75, 94th
Cong., 1st Sess. 30 (1975).
24 15
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17:56 Nov 27, 2013
Jkt 232001
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–Phlx–2013–113. 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
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. 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
publicly available. All submissions
should refer to File Number SR–Phlx–
2013–113 and should be submitted on
or before December 20, 2013. Rebuttal
comments should be submitted by
January 3, 2014.
Conclusion
It is therefore ordered, pursuant to
Section 19(b)(3)(C) of the Act,26 that File
Number SR–Phlx–2013–113, be and
hereby is, temporarily suspended. In
addition, the Commission is instituting
proceedings to determine whether the
proposed rule changes should be
approved or disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–28724 Filed 11–27–13; 8:45 am]
BILLING CODE 8011–01–P
26 15
27 17
PO 00000
U.S.C. 78s(b)(3)(C).
CFR 200.30–3(a)(57) and (58).
Frm 00142
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70925; File No. SR–FICC–
2013–10]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing of Proposed Rule Change To
Establish the Minimum Financial
Requirements for the Existing
Membership Category of Registered
Investment Company Netting Members
in the Government Securities Division
November 22, 2013.
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
November 12, 2013, the 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 by FICC. 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
The purpose of this rule filing is to
amend the Rulebook (the ‘‘Rules’’) of the
Government Securities Division (the
‘‘GSD’’) of FICC to establish the
minimum financial requirements for the
existing membership category of
Registered Investment Company Netting
Members (‘‘RICs’’).3
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.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Pursuant to the GSD Rules, the term ‘‘Registered
Investment Company Netting Member’’ is an
Investment Company (1) that is registered with the
Commission, (2) admitted to membership in GSD’s
Netting System pursuant to the GSD Rules, and (3)
whose membership in the Netting System has not
been terminated.
2 17
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
(i) The purpose of this proposed rule
change is to establish financial
minimum requirements for RICs.
Historically, the GSD has served the
‘‘sell-side’’ community (which primarily
consists of entities such as banks and
broker-dealers) and excluded RICs,
which are key participants in the market
served by the GSD. FICC believes the
participation of this category as
guaranteed service members will
contribute to the safety, efficiency, and
transparency of the market by allowing
FICC to capture a greater part of the
activity of its existing members and by
introducing activity of current nonmembers to FICC. FICC also believes
that RICs will benefit from the GSD
netting service and the associated
operational efficiencies of a central
counterparty service. Currently, RICs are
already a permitted category in the GSD
Rules, however, the proposed rule
change establishes their minimum
financial requirements.4 Specifically,
Rule 2A (‘‘Initial Membership
Requirements’’) of the GSD Rules will
provide that the minimum financial
requirement for RICs will be $100
million in net asset value. The rules
have also been revised to state that the
GSD will make its services available to
Persons 5 in other categories as FICC
may determine, subject to the approval
of the Commission. This disclosure is
also reflected in the Clearing Rules of
the Mortgage-Backed Securities Division
(‘‘MBSD’’).
Currently, GSD Rule 3, ‘‘Ongoing
Membership Requirements,’’ permits
GSD to assess a premium against a
netting member whose Clearing Fund
requirement exceeds its specified
regulatory capital figure.6 This premium
sroberts on DSK5SPTVN1PROD with NOTICES
4 The
membership requirements for RICs will be
the same as those proposed for the central
counterparty service of the Mortgage-Backed
Securities Division.
5 Pursuant to the GSD Rules, the term ‘‘Person’’
means a partnership, Corporation, limited liability
corporation or other organization, entity, or
individual.
6 By way of example, under the current GSD
Rules, if a member has a Clearing Fund requirement
of $11.4 million and excess net capital of $10
million, its ‘‘ratio’’ is 1.14 (or 114 percent), and the
applicable collateral premium would be 114
percent of $1.4 million (which is equal to the
amount by which the member’s Clearing Fund
requirement exceeds its excess net capital), or
$1,596,000. The current GSD Rules provide that
FICC has the right to: (i) Apply a lesser collateral
premium (including no premium) based on specific
circumstances (such as a member being subject to
an unexpected haircut or capital charge that does
not fundamentally change its risk profile), and (ii)
return all or a portion of the collateral premium
VerDate Mar<15>2010
17:56 Nov 27, 2013
Jkt 232001
will now include RICs because they will
be netting members.
The concept of a ‘‘Tier One Netting
Member’’ and a ‘‘Tier Two Netting
Member’’ was introduced to the GSD
Rules by rule filing SR–FICC–2010–09.7
Tier One Netting Members will be
subject to potential loss mutualization,
whereas Tier Two Netting Members will
not be subject to loss mutualization due
to a legal prohibition. Under the present
rule filing, the registered investment
company members will be Tier Two
Netting Members because they are not
permitted by law to mutualize loss.
In rule filing SR–FICC–2010–09, FICC
also introduced an amended loss
allocation methodology whereby any
loss allocation is first made against the
retained earnings of FICC attributable to
the GSD (after application of the
defaulting member’s Clearing Fund,
funds-only settlement amounts and any
other collateral on deposit with the GSD
and any funds from any cross-margining
or cross-guaranty agreements), in an
amount up to 25 percent of FICC’s
retained earnings or such higher amount
as may be approved by the Board of
Directors of FICC. If a loss still remains,
the GSD will divide the loss between
the Tier One Netting Members and the
Tier Two Netting Members. Tier One
Netting Members will be allocated the
loss applicable to them first by assessing
the Clearing Fund deposit of each such
member in the amount of up to $50,000,
equally. If a loss remains, Tier One
Netting Members will be assessed
ratably, in accordance with the
respective amounts of their Required
Fund Deposits, based on the average
daily amount of the member’s Required
Fund Deposit over the prior twelve
months. Applicable Tier Two Netting
Members will be assigned the Tier Two
loss amount using a loss allocation
methodology which does not provide
for loss mutualization and is based on
the activity that the Tier Two Netting
Member conducted with the defaulting
member.8 As stated above, the RICs will
be treated as Tier Two Netting Members
under the present proposal.9
amount if it believes that the member’s risk profile
does not require the maintenance of that amount.
7 Tier One Members include banks, dealers,
futures commission merchants, government
securities issuers and registered clearing agencies
and Tier Two Members include RICs. See Securities
Exchange Act Release No. 34–63986 (Feb. 28, 2011),
76 FR 12144 (Mar. 4, 2011).
8 Please refer to Rule 4 Section 7 for the rules
which pertain to the satisfaction of any loss
incurred by FICC as a result of the failure of a
defaulting member to fulfill its obligations to FICC.
9 The MBSD has the same loss allocation
methodology.
PO 00000
Frm 00143
Fmt 4703
Sfmt 4703
71703
It should be noted that RICs will not
be permitted to utilize the GCF Repo®
service.
(ii) Statutory Basis.
The present filing is consistent with
the requirements of the Section
17A(b)(3)(F) of the Act, as amended, and
the rules and regulations thereunder
applicable to FICC because the proposed
rule change (1) establishes a statutory
category which is consistent with Rule
17A(b)(3)(B) of the Securities Exchange
Act of 1934 and thus prohibits the
unfair discrimination in the admission
of RICs, (2) permits the participation of
RICs, thereby providing these firms with
the benefits of central counterparty
service, and (3) allows FICC to capture
a greater market share of the activity of
its existing members and non-members
thus promoting the prompt and accurate
clearance and settlement of securities
transactions.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Establishing minimum financial
requirements for RICs and giving such
entities the opportunity to join GSD is
consistent with the Rule 17A(b)(3)(B) of
the Securities Exchange Act of 1934.
This Rule requires clearing agencies to
provide access to its services for certain
enumerated statutory categories and
RICs are reflected as one of the statutory
categories. Furthermore, subject to the
Commission’s approval of this rule
filing, RICs will be subject to the same
initial membership requirements and
ongoing membership requirements as
other GSD members. As a result, FICC
does not believe that the proposed rule
change will 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 changes have not yet been
solicited or received. FICC will notify
the Commission of any written
comments received by FICC.
D. Advance Notices Filed Pursuant to
Section 806(e) of the Payment, Clearing
and Settlement Supervision Act
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
E:\FR\FM\29NON1.SGM
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71704
Federal Register / Vol. 78, No. 230 / Friday, November 29, 2013 / Notices
Register or within such longer period
up to 90 days (i) as the Commission may
designate 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 or disapprove
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:
sroberts on DSK5SPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml), or
• Send an email to rule-comment@
sec.gov. Please include File Number SR–
FICC–2013–10 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–FICC- 2013–10. 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 of submission. 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 Web site viewing and
printing in the Commission’s Public
Reference Room Section located at 100
F Street NE., Washington, DC 20549–
1090 on official business days between
the hours of 10:00 a.m. and 3:00 p.m.
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.dtcc.com/
downloads/legal/rule_filings/2013/ficc/
SR_FICC_2013_10.pdf. All comments
VerDate Mar<15>2010
17:56 Nov 27, 2013
Jkt 232001
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–
2013–10 and should be submitted on or
before December 20, 2013.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.10
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–28569 Filed 11–27–13; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
Request for Comments on Draft SBA
Strategic Plan for FY 2014–2018
Office of Associate
Administrator for Performance
Management & Chief Financial Officer,
Small Business Administration.
ACTION: Request for Comments on Draft
SBA Strategic Plan for FY2014–2018.
AGENCY:
The Small Business
Administration (SBA) is seeking public
comment on its draft Strategic Plan for
fiscal years 2014–2018. The draft plan is
available on SBA’s Web site at https://
www.sba.gov/about-sba/sba_
performance/strategic_planning.
DATES: Submit comments within two
weeks of publication date.
ADDRESSES: Written comments can be
provided by email, fax or U.S. mail.
Email: strategicplan@sba.gov.
Fax: (202) 205–7274.
Mail: U.S. Small Business
Administration, Office of Performance
Management & Chief Financial Officer,
Attn: Strategic Plan Comments, 409 3rd
St SW., Suite 6000, Washington, DC
20416.
FOR FURTHER INFORMATION CONTACT:
Joshua Bull, Joshua.Bull@sba.gov.
SUPPLEMENTARY INFORMATION: The draft
Small Business Administration
FY2014–2018 Strategic Plan is provided
for public input as part of the strategic
planning process under the Government
Performance and Results Modernization
Act of 2010 (GPRA–MA) (Pub. L. 111–
352) to ensure that Agency stakeholders
are given an opportunity to comment on
this plan.
This Strategic Plan provides a
framework that will strengthen,
streamline, and simplify SBA’s
programs while leveraging partnerships
across the government and private
SUMMARY:
10 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00144
Fmt 4703
Sfmt 4703
sector to maximize the tools small
business owners and entrepreneurs
need to strengthen our economy, drive
American innovation, and increase our
global competitiveness. The SBA will
have three overarching goals for the next
five years: (1) Grow businesses and
create jobs; (2) Serve as the voice for
small business; and, (3) Build an
Agency that meets the needs of today’s
and tomorrow’s small businesses. Each
goal contains objectives which are
directly tied to performance both at the
individual level and Agency-wide.
The FY2014–2018 Strategic Plan
contains only slight modifications to the
existing FY2011–2016 Strategic Plan.
This draft document chiefly refines the
language of existing strategic objectives
and strategies while adding two new
strategic objectives concerning exports
and supply chains, respectively. The
text of the draft Strategic Plan FY2014–
2018 is available through the SBA’s Web
site at https://www.sba.gov/about-sba/
sba_performance/strategic_planning.
Jonathan I. Carver,
Associate Administrator for Performance
Management & Chief Financial Officer.
[FR Doc. 2013–28623 Filed 11–27–13; 8:45 am]
BILLING CODE 8025–01–P
DEPARTMENT OF STATE
[Public Notice 8538]
30-Day Notice of Proposed Information
Collection: Recording, Reporting and
Data Collection Requirements—
Student and Exchange Visitor
Information System (SEVIS)
Notice of request for public
comment and submission to OMB of
proposed collection of information.
ACTION:
The Department of State has
submitted the information collection
described below to the Office of
Management and Budget (OMB) for
approval. In accordance with the
Paperwork Reduction Act of 1995 we
are requesting comments on this
collection from all interested
individuals and organizations. The
purpose of this Notice is to allow 30
days for public comment.
DATES: Submit comments directly to the
Office of Management and Budget up to
December 30, 2013.
ADDRESSES: Direct comments to the
Department of State Desk Officer in the
Office of Information and Regulatory
Affairs at the Office of Management and
Budget (OMB). You may submit
comments by the following methods:
• Email: oira_submission@
omb.eop.gov. You must include the DS
SUMMARY:
E:\FR\FM\29NON1.SGM
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Agencies
[Federal Register Volume 78, Number 230 (Friday, November 29, 2013)]
[Notices]
[Pages 71702-71704]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28569]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70925; File No. SR-FICC-2013-10]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Proposed Rule Change To Establish the Minimum
Financial Requirements for the Existing Membership Category of
Registered Investment Company Netting Members in the Government
Securities Division
November 22, 2013.
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 November 12, 2013, the 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 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).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of this rule filing is to amend the Rulebook (the
``Rules'') of the Government Securities Division (the ``GSD'') of FICC
to establish the minimum financial requirements for the existing
membership category of Registered Investment Company Netting Members
(``RICs'').\3\
---------------------------------------------------------------------------
\3\ Pursuant to the GSD Rules, the term ``Registered Investment
Company Netting Member'' is an Investment Company (1) that is
registered with the Commission, (2) admitted to membership in GSD's
Netting System pursuant to the GSD Rules, and (3) whose membership
in the Netting System has not been terminated.
---------------------------------------------------------------------------
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.
[[Page 71703]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
(i) The purpose of this proposed rule change is to establish
financial minimum requirements for RICs. Historically, the GSD has
served the ``sell-side'' community (which primarily consists of
entities such as banks and broker-dealers) and excluded RICs, which are
key participants in the market served by the GSD. FICC believes the
participation of this category as guaranteed service members will
contribute to the safety, efficiency, and transparency of the market by
allowing FICC to capture a greater part of the activity of its existing
members and by introducing activity of current non-members to FICC.
FICC also believes that RICs will benefit from the GSD netting service
and the associated operational efficiencies of a central counterparty
service. Currently, RICs are already a permitted category in the GSD
Rules, however, the proposed rule change establishes their minimum
financial requirements.\4\ Specifically, Rule 2A (``Initial Membership
Requirements'') of the GSD Rules will provide that the minimum
financial requirement for RICs will be $100 million in net asset value.
The rules have also been revised to state that the GSD will make its
services available to Persons \5\ in other categories as FICC may
determine, subject to the approval of the Commission. This disclosure
is also reflected in the Clearing Rules of the Mortgage-Backed
Securities Division (``MBSD'').
---------------------------------------------------------------------------
\4\ The membership requirements for RICs will be the same as
those proposed for the central counterparty service of the Mortgage-
Backed Securities Division.
\5\ Pursuant to the GSD Rules, the term ``Person'' means a
partnership, Corporation, limited liability corporation or other
organization, entity, or individual.
---------------------------------------------------------------------------
Currently, GSD Rule 3, ``Ongoing Membership Requirements,'' permits
GSD to assess a premium against a netting member whose Clearing Fund
requirement exceeds its specified regulatory capital figure.\6\ This
premium will now include RICs because they will be netting members.
---------------------------------------------------------------------------
\6\ By way of example, under the current GSD Rules, if a member
has a Clearing Fund requirement of $11.4 million and excess net
capital of $10 million, its ``ratio'' is 1.14 (or 114 percent), and
the applicable collateral premium would be 114 percent of $1.4
million (which is equal to the amount by which the member's Clearing
Fund requirement exceeds its excess net capital), or $1,596,000. The
current GSD Rules provide that FICC has the right to: (i) Apply a
lesser collateral premium (including no premium) based on specific
circumstances (such as a member being subject to an unexpected
haircut or capital charge that does not fundamentally change its
risk profile), and (ii) return all or a portion of the collateral
premium amount if it believes that the member's risk profile does
not require the maintenance of that amount.
---------------------------------------------------------------------------
The concept of a ``Tier One Netting Member'' and a ``Tier Two
Netting Member'' was introduced to the GSD Rules by rule filing SR-
FICC-2010-09.\7\ Tier One Netting Members will be subject to potential
loss mutualization, whereas Tier Two Netting Members will not be
subject to loss mutualization due to a legal prohibition. Under the
present rule filing, the registered investment company members will be
Tier Two Netting Members because they are not permitted by law to
mutualize loss.
---------------------------------------------------------------------------
\7\ Tier One Members include banks, dealers, futures commission
merchants, government securities issuers and registered clearing
agencies and Tier Two Members include RICs. See Securities Exchange
Act Release No. 34-63986 (Feb. 28, 2011), 76 FR 12144 (Mar. 4,
2011).
---------------------------------------------------------------------------
In rule filing SR-FICC-2010-09, FICC also introduced an amended
loss allocation methodology whereby any loss allocation is first made
against the retained earnings of FICC attributable to the GSD (after
application of the defaulting member's Clearing Fund, funds-only
settlement amounts and any other collateral on deposit with the GSD and
any funds from any cross-margining or cross-guaranty agreements), in an
amount up to 25 percent of FICC's retained earnings or such higher
amount as may be approved by the Board of Directors of FICC. If a loss
still remains, the GSD will divide the loss between the Tier One
Netting Members and the Tier Two Netting Members. Tier One Netting
Members will be allocated the loss applicable to them first by
assessing the Clearing Fund deposit of each such member in the amount
of up to $50,000, equally. If a loss remains, Tier One Netting Members
will be assessed ratably, in accordance with the respective amounts of
their Required Fund Deposits, based on the average daily amount of the
member's Required Fund Deposit over the prior twelve months. Applicable
Tier Two Netting Members will be assigned the Tier Two loss amount
using a loss allocation methodology which does not provide for loss
mutualization and is based on the activity that the Tier Two Netting
Member conducted with the defaulting member.\8\ As stated above, the
RICs will be treated as Tier Two Netting Members under the present
proposal.\9\
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\8\ Please refer to Rule 4 Section 7 for the rules which pertain
to the satisfaction of any loss incurred by FICC as a result of the
failure of a defaulting member to fulfill its obligations to FICC.
\9\ The MBSD has the same loss allocation methodology.
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It should be noted that RICs will not be permitted to utilize the
GCF Repo[supreg] service.
(ii) Statutory Basis.
The present filing is consistent with the requirements of the
Section 17A(b)(3)(F) of the Act, as amended, and the rules and
regulations thereunder applicable to FICC because the proposed rule
change (1) establishes a statutory category which is consistent with
Rule 17A(b)(3)(B) of the Securities Exchange Act of 1934 and thus
prohibits the unfair discrimination in the admission of RICs, (2)
permits the participation of RICs, thereby providing these firms with
the benefits of central counterparty service, and (3) allows FICC to
capture a greater market share of the activity of its existing members
and non-members thus promoting the prompt and accurate clearance and
settlement of securities transactions.
B. Self-Regulatory Organization's Statement on Burden on Competition
Establishing minimum financial requirements for RICs and giving
such entities the opportunity to join GSD is consistent with the Rule
17A(b)(3)(B) of the Securities Exchange Act of 1934. This Rule requires
clearing agencies to provide access to its services for certain
enumerated statutory categories and RICs are reflected as one of the
statutory categories. Furthermore, subject to the Commission's approval
of this rule filing, RICs will be subject to the same initial
membership requirements and ongoing membership requirements as other
GSD members. As a result, FICC does not believe that the proposed rule
change will 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 changes have not yet
been solicited or received. FICC will notify the Commission of any
written comments received by FICC.
D. Advance Notices Filed Pursuant to Section 806(e) of the Payment,
Clearing and Settlement Supervision Act
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal
[[Page 71704]]
Register or within such longer period up to 90 days (i) as the
Commission may designate 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 or disapprove 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 email to rule-comment@sec.gov. Please include File
Number SR-FICC-2013-10 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-FICC- 2013-10. 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 of submission. 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 Web site
viewing and printing in the Commission's Public Reference Room Section
located at 100 F Street NE., Washington, DC 20549-1090 on official
business days between the hours of 10:00 a.m. and 3:00 p.m. 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.dtcc.com/downloads/legal/rule_filings/2013/ficc/SR_FICC_2013_10.pdf. 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-2013-10 and should be
submitted on or before December 20, 2013.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-28569 Filed 11-27-13; 8:45 am]
BILLING CODE 8011-01-P