Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving Proposed Rule Change To Amend the Fee Structure of the Government Securities Division Rulebook, 27812-27816 [2018-12754]

Download as PDF 27812 Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act 12 and Rule 19b–4(f)(2) thereunder,13 because it establishes or changes a due, or fee. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule 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: daltland on DSKBBV9HB2PROD with NOTICES 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– BOX–2018–21 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–BOX–2018–21. 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 website (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 12 15 13 17 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). VerDate Sep<11>2014 16:38 Jun 13, 2018 Jkt 244001 available for website 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BOX–2018–21, and should be submitted on or before July 5, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–12751 Filed 6–13–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83401; File No. SR–FICC– 2018–003] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving Proposed Rule Change To Amend the Fee Structure of the Government Securities Division Rulebook June 8, 2018. On April 27, 2018, Fixed Income Clearing Corporation (‘‘FICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) proposed rule change SR–FICC–2018–003, 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 May 8, 2018.3 The Commission received one comment letter on the proposed rule change.4 For the reasons discussed below, the 14 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. 83153 (May 2, 2018), 83 FR 20882 (May 8, 2018) (SR–FICC– 2018–003) (‘‘Notice’’). 4 Letter from Ted Bragg, Vice President—Head of U.S. Fixed Income, Nasdaq (‘‘Nasdaq’’), dated May 14, 2018, to Eduardo A. Aleman, Assistant Secretary, Commission (‘‘Nasdaq Letter’’) available at https://www.sec.gov/comments/sr-ficc-2018-003/ ficc2018003.htm. Commission approves the proposed rule change. I. Description of the Proposed Rule Change The proposed rule change would amend the FICC Government Securities Division (‘‘GSD’’) Rulebook (‘‘GSD Rules’’) 5 to modify the GSD Fee Structure. FICC states that it designed the proposed rule change to reduce complexity and to better align pricing with the costs of services provided by GSD.6 More specifically, FICC states that the transaction processing fees and the position management fees associated with the delivery-versus-payment (‘‘DVP’’) service account for approximately 30 percent and 70 percent, respectively, of GSD’s projected costs from the DVP service.7 Accordingly, FICC states that the proposed fee changes are designed to align GSD’s revenue with that 30/70 percent split between transaction processing and position management costs, respectively.8 In doing so, FICC would shift the GSD Fee Structure regarding the DVP service away from the existing volume-driven approach to a position-based approach.9 Ultimately, FICC expects GSD’s net revenue to remain relatively unchanged as a result of this proposal.10 A. Proposed Changes to the GSD Fee Structure The proposed GSD Fee Structure would, in effect, establish 4 new fees, modify 1 existing fee, and eliminate 12 fees.11 These proposed changes are summarized below. 1. New Fees In proposed Section I of the GSD Fee Structure, FICC would replace the seven-tiered trade submission fees for both dealer accounts and broker accounts with a single transaction processing fee that would be charged to GSD members (‘‘Members’’) upon the comparison of a side of a buy/sell transaction or a Repo Transaction in the DVP service.12 Specifically, dealer accounts would be charged a fee of $0.04 per million par value for transaction processing, and broker accounts would be charged a fee of 1 15 PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 5 Available at https://www.dtcc.com/legal/rulesand-procedures. 6 Notice, 83 FR at 20882. 7 Id. at 20884. 8 Id. 9 Id. 10 Id. 11 Id. 12 Id. E:\FR\FM\14JNN1.SGM 14JNN1 Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices $0.02 per million par value for transaction processing.13 FICC also would add two position management fees applicable to the DVP service in proposed Section II of the GSD Fee Structure.14 The first position management fee would be the intraday position fee of $0.04 per million par value that would be calculated for a Member each business day based on the largest gross position of the Member (including positions of any non-Member that the Member is clearing for) that business day.15 FICC states that it would determine the gross position of a Member in 15-minute intervals between 9:00 a.m. and 4:00 p.m. each business day by netting the par value of all compared buy/sell transactions, Repo Transactions, and unsettled obligations of the Member (including any such activity submitted by the Member for a non-Member that the Member is clearing for) by CUSIP number and taking the sum of the absolute par value of each such CUSIP number.16 The second position management fee would be the end of day position fee of $0.115 per million par value that would be calculated for a Member each business day based on the end of day gross position of the Member (including positions of any non-Member that the Member is clearing for) that business day.17 FICC states that it would determine the end of day gross position of a Member by netting the par value of all compared buy/sell transactions, Repo Transactions, and unsettled obligations of the Member (including any such activity submitted by the Member for a non-Member that the Member is clearing for) at the end of the business day by CUSIP number and taking the sum of the absolute par value of each such CUSIP number.18 daltland on DSKBBV9HB2PROD with NOTICES 2. Modified Existing Fee FICC would modify the existing minimum monthly fee in proposed Section V of the GSD Fee Structure.19 The minimum monthly fee would be increased from $1,000 to $2,500 per account and would apply to all accounts of every comparison-only Member and netting Member instead of just their sole or primary account.20 FICC states that it 13 Id. Broker accounts submit two sides per transaction. Id. As such, a broker account would be charged a total of $0.04 per million par value (i.e., $0.02 per million par value times two) for each transaction. Id. 14 Notice, 83 FR at 20882. 15 Id. 16 Id. 17 Id. at 20884–85. 18 Id. at 20885. 19 Id. 20 Id. The minimum monthly fee would apply to all accounts of a netting Member, including any VerDate Sep<11>2014 16:38 Jun 13, 2018 Jkt 244001 is proposing to increase the minimum monthly fee to $2,500 per account because FICC believes this change would better reflect GSD’s costs of account monitoring.21 27813 states that the Term Repo Transactions would be assessed the proposed position management fees, just like overnight Repo Transactions and buy/ sell transactions.29 Additionally, FICC would eliminate fees applicable to additional accounts from current Section V of the GSD Fee Structure.30 FICC currently differentiates its fees based on whether an account is a Member’s primary or secondary account. FICC would no longer draw this distinction. FICC states that eliminating fees applicable to additional accounts would reduce pricing complexity and thereby enhance pricing transparency because Members would no longer need to keep track of their primary versus secondary accounts. 3. Eliminated Fees FICC is proposing to delete fees in Section I of the GSD Fee Structure that are no longer applicable.22 Specifically, FICC is proposing to delete Section I.B. of the GSD Fee Structure, which imposes certain surcharges on Members submitting trade data to GSD using submission methods other than the Interactive Submission Method (e.g., the Multiple Batch Submission Method or the Single Batch Submission Method).23 FICC states that these surcharges are no longer required because all Members currently submit trade data to GSD using the Interactive Submission Method, and FICC does not expect that to change in the future because of technological advancements in real-time trade submission capability across the financial industry.24 FICC would also make conforming re-lettering of the subsequent provisions in Section I of the GSD Fee Structure.25 FICC would eliminate all netting fees provided in renumbered Section IV of the GSD Fee Structure, including (i) the two seven-tiered netting fees for both broker accounts and dealer accounts; (ii) the ‘‘into the net’’ fees of $0.015 per one million of par value for broker accounts and $0.016 per one million of par value for dealer accounts for each compared trade, start leg of a Repo Transaction, close leg of a Repo Transaction, fail deliver obligation, and fail receive obligation; and (iii) the ‘‘out of the net’’ fees of $0.175 per one million of par value for each deliver obligation and receive obligation created as a result of the netting process.26 In addition, FICC would delete from renumbered Section IV.C. of the GSD Fee Structure the Repo Transaction processing fees and related language for Term Repo Transactions in the DVP service that have been compared and netted but not yet settled.27 FICC states that this would no longer separate the Repo Transaction processing fees for Term Repo Transactions.28 Rather, FICC 4. Conforming, Clarifying, and Technical Changes As described below, FICC proposes to make a number of conforming, clarifying, and technical changes. First, FICC would rename the heading of Section I of the GSD Fee Structure from ‘‘Trade Comparison Fees’’ to ‘‘Transaction Fees.’’ 31 FICC states that this would better reflect the proposed changes to that section, as described above.32 FICC would rename the heading of Section I.A. of the GSD Fee Structure from ‘‘Trade Submission’’ to ‘‘Transaction Processing.’’ 33 In addition, FICC would make changes throughout Section I.A. of the GSD Fee Structure to clarify that references to a ‘‘trade’’ means a ‘‘buy/sell transaction.’’ 34 FICC would also make a number of conforming changes in Section I.A. of the GSD Fee Structure.35 Specifically, FICC would delete a reference to ‘‘submission fee’’ and replace it with ‘‘processing fee.’’ 36 FICC would update the reference to ‘‘subsection D’’ to reflect the proposed re-lettering of that subsection.37 Additionally, FICC would update the format of (i) the ‘‘$.50’’ rejection fee to ‘‘$0.50’’ in Section I.A. of the GSD Fee Structure; (ii) the ‘‘15 cents’’ yield-toprice conversion charge to ‘‘$0.15’’ in the proposed Section I.B. of the GSD Fee Structure; (iii) the ‘‘25 cents’’ and ‘‘5 account the netting Member may have as a sponsoring Member. Id. 21 Notice, 83 FR at 20885. 22 Id. at 20884. 23 Id. 24 Id. 25 Id. 26 Id. at 20885. 27 Id. 28 Id. The term ‘‘Term Repo Transaction’’ means, on any particular business day, a Repo Transaction for which settlement of the close leg is scheduled to occur two or more business days after the scheduled settlement of the start leg. See GSD Rule 1, Definitions, GSD Rules, supra note 5. 29 Notice, 83 FR at 20885. 30 Id. 31 Id. at 20886. 32 Id. 33 Id. 34 Id. 35 Id. 36 Id. 37 Id. PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 E:\FR\FM\14JNN1.SGM 14JNN1 daltland on DSKBBV9HB2PROD with NOTICES 27814 Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices cents’’ modification/cancellation fees to ‘‘$0.25’’ and ‘‘$0.05,’’ respectively, in the proposed Section I.C. of the GSD Fee Structure; (iv) the ‘‘25 cents’’ coupon pass-through fee to ‘‘$0.25’’ in the proposed Section I.D. of the GSD Fee Structure; (v) the ‘‘$.75’’ repurchase agreement collateral substitution fee to ‘‘$0.75’’ in the proposed Section I.E. of the GSD Fee Structure; (vi) the ‘‘$.07’’ and ‘‘$.025’’ recording fees to ‘‘$0.07’’ and ‘‘$0.025’’ in the proposed Section I.G. of the GSD Fee Structure; and (vii) the ‘‘$.07’’ recording fee to ‘‘$0.07’’ in the proposed Section I.H. of the GSD Fee Restructure, in order to be consistent with the format of the other fees in the GSD Fee Structure.38 FICC states that for better organization of the GSD Fee Structure, FICC would relocate current Sections III.B. (Auction Takedown Process), III.F. (Coupon PassThrough Fee), and III.G. (Repo Collateral Substitution Fees), which cover fees associated with the Auction Takedown Service, pass-through of coupon payments, and the processing of repurchase agreement collateral substitution requests, to proposed Sections I.F., I.D., and I.E., respectively, of the GSD Fee Structure because each of these fees is a type of transaction fee.39 In addition, FICC would revise the section on Auction Takedown Process (proposed Section I.D. of the GSD Fee Structure) by replacing the words ‘‘locked-in trades’’ with ‘‘buy/sell transactions’’ because, FICC states, all trades associated with the Auction Takedown Service are locked-in.40 FICC would change this section to reflect that, instead of the ‘‘Trade Submission’’ fees, fees for trades associated with the Auction Takedown Service would include the proposed ‘‘Transaction Processing’’ fees in Section I.A. of the GSD Fee Structure and the proposed ‘‘Position Management Fees’’ in Section II of the GSD Fee Structure.41 FICC would make a conforming change in the proposed Section I.G. of the GSD Fee Structure by deleting the reference to ‘‘Trade Submission’’ fee schedule and replacing it with ‘‘Transaction Processing’’ fees.42 FICC would renumber current Section II of the GSD Fee Structure to proposed Section III of the GSD Fee Structure.43 FICC would rename the heading of renumbered Section IV of the GSD Fee Structure from ‘‘Netting Fee and Charges (in addition to the comparison fee)’’ to ‘‘Other Charges (in addition to the transaction fees)’’ to, FICC states, better reflect the proposed changes to this section, as described above.44 As described above, FICC would relocate current Sections III.B. (Auction Takedown Process), III.F. (Coupon PassThrough Fee), and III.G. (Repo Collateral Substitution Fees) to proposed Sections I.F., I.D., and I.E., respectively, of the GSD Fee Structure.45 These proposed changes would necessitate a re-lettering of all subsequent provisions in renumbered Section IV of the GSD Fee Structure.46 In addition, FICC would rename the heading of renumbered Section IV.C. of the GSD Fee Structure from ‘‘Repo Transaction Processing Fee’’ to ‘‘GCF Repo Transaction and CCIT Transaction Processing Fee’’ to better reflect the proposed changes to this section.47 FICC would make two conforming changes: (i) Relocate and update the reference to ‘‘Repo Broker’’ definition to appear right after the first usage of ‘‘Repo Broker’’ in this section; and (ii) reflect the remaining fee in renumbered Section IV.C. of the GSD Fee Structure in a singular form.48 In addition, FICC would make a conforming change in renumbered Section IV.D. of the GSD Fee Structure to reflect the proposed renumbering of sections in the GSD Fee Structure by changing a reference from ‘‘Section III’’ to ‘‘Section IV.’’ 49 FICC would add a sentence to proposed Section V of the GSD Fee Structure that, FICC states, would make it clear to Members that the minimum monthly fee would not apply to an account if the total monthly fees incurred by the account pursuant to Sections I, II (a proposed new section), and IV (renumbered from III) of the GSD Fee Structure exceed $2,500.50 FICC would make changes in Section VI of the GSD Fee Structure to, FICC states, clarify that references to ‘‘trades’’ means ‘‘buy/sell transactions and Repo Transactions.’’ 51 FICC would make two changes to Section VII of the GSD Fee Structure. FICC would delete the reference to the fee for additional accounts, which is being eliminated under the proposal.52 FICC states that the second change would make it clear that a sponsoring Member would be subject to the minimum monthly fee set forth in proposed Section V of the GSD Fee Structure.53 FICC states that this proposed change would make it clear to a sponsoring Member that its sponsoring Member omnibus account would be subject to the minimum monthly fee.54 In current Section VIII of the GSD Fee Structure, FICC would (i) make a technical change to reflect the reference to the GSD Fee Structure as ‘‘Fee Structure’’ instead of ‘‘fee structure,’’ and (ii) make changes to clarify that references to a ‘‘trade’’ means a ‘‘buy/ sell transaction.’’ 55 In addition, FICC would clarify that a CCIT Transaction, like a Term GCF Repo Transaction, would be considered to have one Start Leg and one Close Leg during its term.56 FICC would make a conforming change in current Section XII of the GSD Fee Structure by deleting the reference to ‘‘comparison and netting fees’’ and replacing it with ‘‘transaction fees.’’ 57 In addition, FICC would make a technical change by deleting the outdated reference to ‘‘Operations and Planning Committee’’ and replacing it with Board, which is defined in GSD Rule 1 (Definitions) as ‘‘the Board of Directors of Fixed Income Clearing Corporation or a committee thereof acting under delegated authority.’’ 58 FICC plans to implement all of the above proposed changes on July 2, 2018.59 II. Summary of Comment Received The Commission received one comment letter to the proposed rule change.60 The Nasdaq Letter supports the proposed rule change. Specifically, Nasdaq states that it ‘‘supports the [proposed rule change] because it: (1) Simplifies and adds transparency to FICC’s fee schedule; (2) introduces a sensible risk-based fee model; and (3) permits and incentivizes more market participants to utilize central clearing for U.S. Treasury Securities. . . .’’ 61 Nasdaq further states that the proposed rule change would likely result in more widespread use of FICC’s central clearing services, reducing systemic risk by moving the industry closer to comprehensive central clearing.62 Nasdaq states that more widespread industry use of FICC’s central clearing 53 Id. at 20886–87. at 20887. 44 Id. 54 Id. 45 Id. 55 Id. 46 Id. 56 Id. 38 Id. 47 Id. 57 Id. 39 Id. 48 Id. 58 Id.; 40 Id. 49 Id. 59 Id. 41 Id. 50 Id. 42 Id. 51 Id. 43 Id. 52 Id. VerDate Sep<11>2014 16:38 Jun 13, 2018 Jkt 244001 PO 00000 Frm 00066 see GSD Rule 1, GSD Rules, supra note 5. at 20887. 60 Nasdaq Letter, supra note 4. 61 Id. at 1. 62 Id. at 1–2. Fmt 4703 Sfmt 4703 E:\FR\FM\14JNN1.SGM 14JNN1 Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices services would also increase overall transparency of trade reporting data of U.S. Treasury securities.63 Additionally, Nasdaq believes that the proposed rule change would advance the goals articulated in the October 2017 report by the U.S. Department of the Treasury on U.S. Capital Markets 64 by reforming FICC’s fee structure to make it more simple, clear, transparent, and understandable to market participants and regulators.65 III. Discussion and Commission Findings Section 19(b)(2)(C) 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 rules and regulations thereunder applicable to such organization.66 After carefully considering the proposed rule change and the comment letter received, the Commission finds that the proposed rule change is consistent with Act, specifically Sections 17A(b)(3)(D) 67 and 17A(b)(3)(F) 68 of the Act and Rule 17Ad–22(e)(23)(ii) 69 under the Act. A. Section 17A(b)(3)(D) of the Act Section 17A(b)(3)(D) of the Act requires that the rules of a clearing agency, such as FICC, provide for the equitable allocation of reasonable dues, fees, and other charges among its participants.70 As discussed above, the proposed rule change would make a number of changes to the GSD Fee Structure. Specifically, FICC would, in effect, create 4 new fees, modify 1 existing fee, and eliminate 12 fees. The proposed fee changes are designed, in part, to (i) shift the GSD Fee Structure regarding the DVP service away from a transaction or volume-driven approach to a more position-based approach, and (ii) align GSD’s revenue with the approximate 30/ 70 split between transaction processing and position management costs, respectively. Despite the proposed changes, FICC expects GSD’s net revenue to remain relatively unchanged as a result of this proposal. 63 Id. at 2. U.S. Department of the Treasury, A Financial System That Creates Economic Opportunities: Capital Markets (October 2017), available at https://www.treasury.gov/press-center/ press-releases/Documents/A-Financial-SystemCapital-Markets-FINAL-FINAL.pdf. 65 Nasdaq Letter at 1–2. 66 15 U.S.C. 78s(b)(2)(C). 67 15 U.S.C. 78q–1(b)(3)(D). 68 15 U.S.C. 78q–1(b)(3)(F). 69 17 CFR 240.17Ad–22(e)(23)(ii). 70 15 U.S.C. 78q–1(b)(3)(D). daltland on DSKBBV9HB2PROD with NOTICES 64 See VerDate Sep<11>2014 16:38 Jun 13, 2018 Jkt 244001 The Commission believes that adding the 4 proposed fees and eliminating the 12 existing fees is equitable and reasonable because these changes are designed to apply to all Members in a manner that better aligns the fees (i.e., fees associated with the DVP service as well as the minimum monthly fee) with the costs attributed to GSD’s management of Members’ DVP positions and account monitoring. Under the proposed changes, a Member whose DVP positions result in higher position management costs to GSD would be charged a relatively higher fee because the higher fee would be reflective of the higher costs to GSD in managing those positions. On the other hand, a Member whose DVP positions require less management by GSD would be charged a lower fee because the lower fee would be reflective of the lower costs to GSD in managing those positions. In addition, taken collectively, the proposed fee changes are designed to maintain GSD’s existing revenue derived from fees associated with the DVP service. With respect to the proposed modification to the minimum monthly fee, each account of every comparisononly Member and every netting Member would be subject to a minimum monthly fee of $2,500. This proposed fee is designed to be commensurate with the minimum costs to FICC associated with monitoring a Member’s account. Therefore, for the above reasons, the Commission believes that the proposed rule change is consistent with Section 17A(b)(3)(D) of the Act, as the proposal would provide for the equitable allocation of reasonable dues, fees, and other charges among Members. B. Section 17A(b)(3)(F) of the Act Section 17A(b)(3)(F) of the Act requires, in part, that the rules of a clearing agency, such as FICC, be designed to promote the prompt and accurate clearance and settlement of securities transactions.71 As described above, FICC proposes to, effectively, establish 4 new fees, modify 1 existing fee, eliminate 12 fees, and make conforming, clarifying, and technical changes to the GSD Rules. These proposed changes are designed to reduce the complexity of the GSD Fee Structure by helping to ensure that the GSD Fee Structure is more transparent and clear to Members.72 Providing more transparent and clear terms and descriptions in the GSD Fee Structure 71 15 U.S.C. 78q-1(b)(3)(F). also Nasdaq Letter at 1–2 (supporting the proposed rule change because it renders FICC’s fee schedule more simple, clear, transparent, and understandable to market participants). 72 See PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 27815 would help Members better understand GSD’s fees and provide increased predictability and certainty regarding the fees Members incur. This increased understanding, predictability, and certainty could, in turn, help Members satisfy their obligations to FICC more easily, which would help promote the prompt and accurate clearance and settlement of securities transactions.73 Accordingly, the Commission believes that the proposed rule change is consistent with the requirements of Section 17A(b)(3)(F) of the Act. C. Rule 17Ad–22(e)(23)(ii) Under the Act Rule 17Ad–22(e)(23)(ii) under the Act requires each covered clearing agency 74 to establish, implement, maintain and enforce written policies and procedures reasonably designed to provide sufficient information to enable participants to identify and evaluate the risks, fees, and other material costs they incur by participating in the covered clearing agency.75 As described above, FICC proposes to, effectively, establish 4 new fees, modify 1 existing fee, eliminate 12 fees, and make conforming, clarifying, and technical changes to the GSD Rules. These proposed changes are designed to reduce the complexity of the GSD Fee Structure by helping to ensure that the GSD Fee Structure is more transparent and clear to Members. Having a more transparent and clear GSD Fee Structure would help Members and other stakeholders to better understand GSD’s fees and help provide Members with increased predictability and certainty regarding the fees they incur in participating in GSD.76 As such, the Commission believes that the proposed rule change is consistent with Rule 17Ad–22(e)(23)(ii) under the Act. IV. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the 73 See also Nasdaq Letter at 2 (arguing that FICC’s efforts to simplify its fee structure would encourage more widespread central clearing among market participants). 74 A ‘‘covered clearing agency’’ means, among other things, a clearing agency registered with the Commission under Section 17A of the Exchange Act (15 U.S.C. 78q–1 et seq.) that is designated systemically important by Financial Stability Oversight Council (‘‘FSOC’’) pursuant to the Clearing Supervision Act (12 U.S.C. 5461 et seq.). See 17 CFR 240.17Ad–22(a)(5)–(6). Because FICC is a registered clearing agency with the Commission that has been designated systemically important by FSOC, FICC is a covered clearing agency. 75 17 CFR 240.17Ad–22(e)(23)(ii). 76 See also Nasdaq Letter at 1–2 (supporting the proposed rule change because it renders FICC’s fee schedule more simple, clear, transparent, and understandable to market participants). E:\FR\FM\14JNN1.SGM 14JNN1 27816 Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices Act, in particular the requirements of Section 17A of the Act 77 and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that proposed rule change SR–FICC–2018– 003 be, and hereby is, Approved.78 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.79 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–12754 Filed 6–13–18; 8:45 am] BILLING CODE 8011–01–P SOCIAL SECURITY ADMINISTRATION [Docket No. SSA–2017–0030] Social Security Rulings (SSRs) 96–3p and 96–4p; Rescission of SSRs 96–3p and 96–4p Social Security Administration. Notice of rescission of SSRs. AGENCY: ACTION: We give notice of the rescission of SSRs 96–3p and 96–4p. DATES: We will apply this rescission notice on June 14, 2018. FOR FURTHER INFORMATION CONTACT: Dan O’Brien, Office of Vocational, Evaluation, and Process Policy in the Office of Disability Policy, Social Security Administration, 6401 Security Boulevard, Baltimore, MD 21235–6401, (410) 597–1632. For information on eligibility or filing for benefits, call our national toll-free number, 1–800–772– 1213 or visit our internet site, Social Security Online, at https:// www.socialsecurity.gov. SUMMARY: We use SSRs to make available to the public precedential decisions relating to the Federal old-age, survivors, disability, supplemental security income, and special veterans benefits programs. We may base SSRs on determinations or decisions made in our administrative review process, Federal court decisions, decisions of our Commissioner, opinions from our Office of the General Counsel, or other interpretations of law and regulations. In accordance with 20 CFR 402.35(b)(1), we give notice that we are rescinding the following SSRs: • SSR 96–3p: Titles II and XVI: Considering Allegations of Pain and Other Symptoms in Determining daltland on DSKBBV9HB2PROD with NOTICES SUPPLEMENTARY INFORMATION: 77 15 U.S.C. 78q–1. approving the proposed rule change, the Commission considered the proposals’ impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 79 17 CFR 200.30–3(a)(12). 78 In VerDate Sep<11>2014 16:38 Jun 13, 2018 Jkt 244001 Whether a Medically Determinable Impairment is Severe. • SSR 96–4p: Titles II and XVI: Symptoms, Medically Determinable Physical and Mental Impairments, and Exertional and Nonexertional Limitations. These SSRs are unnecessarily duplicative of SSR 16–3p Titles II and XVI: Evaluation of Symptoms in Disability Claims, which was applicable on March 28, 2016, published in the Federal Register on March 16, 2016, 81 FR 14166.1 SSR 16–3p, a more comprehensive statement of our policy on symptoms, explains how we evaluate the extent to which alleged symptoms limit an adult’s ability to perform workrelated activities and a child’s ability to function effectively in an ageappropriate manner. SSR 96–3p clarified how adjudicators should consider allegations of pain and other symptoms in determining whether a medically determinable impairment (MDI) is severe. SSR 16–3p explains our two-step process for evaluating an individual’s symptoms where, at the first step, we determine whether the individual has an MDI that could reasonably be expected to produce the individual’s alleged symptoms. At the second step, we evaluate the intensity and persistence of an individual’s symptoms such as pain and determine the extent to which an individual’s symptoms limit his or her ability to perform work-related activities for an adult or to function independently, appropriately, and effectively in an ageappropriate manner for a child with a title XVI disability claim. SSR 16–3p explains that we will consider symptoms and functional limitations to determine whether an impairment is severe unless the objective medical evidence alone establishes a severe MDI or combination of impairments that meets our duration requirement. Therefore, the information contained in SSR 96–3p duplicates policy in SSR 16– 3p. SSR 96–4p explained that no symptom, by itself, could establish the existence of a medically determinable physical or mental impairment. In SSR 16–3p, we clarified that an individual’s symptoms alone are not enough to establish the existence of a physical or mental impairment or disability, and 1 On March 24, 2016, we published a correction notice in the Federal Register that amended and corrected the effective date of SSR 16–3p (81 FR 15776). On October 25, 2017, we published a notice of Social Security Ruling in the Federal Register that changes the ‘‘effective date’’ to ‘‘applicable date’’ and revises the Social Security Ruling to explain how we apply the Ruling as it relates to the applicable date (82 FR 49462). PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 that we will not find an individual disabled based on alleged symptoms alone. Therefore, the information contained in SSR 96–4p duplicates policy in SSR 16–3p. Consequently, we are rescinding SSRs 96–3p and 96–4p. (Catalog of Federal Domestic Assistance, Programs Nos. 96.001, Social Security— Disability Insurance; 96.002, Social Security— Retirement Insurance; 96.004, Social Security—Survivors Insurance; 96.006—Supplemental Security Income.) Nancy A. Berryhill, Acting Commissioner of Social Security. [FR Doc. 2018–12820 Filed 6–13–18; 8:45 am] BILLING CODE 4191–02–P SOCIAL SECURITY ADMINISTRATION [Docket No. SSA–2015–0003] Privacy Act of 1974; System of Records Deputy Commissioner of Budget, Finance, and Management, Social Security Administration (SSA). ACTION: Notice of a new system of records. AGENCY: In accordance with the Privacy Act, we are issuing public notice of our intent to establish a new system of records entitled, Social Security Administration Violence Evaluation and Reporting System (SSAvers) (60–0379). We are establishing SSAvers to cover information we collect about employees, contractors, and members of the public who are allegedly involved in, or witness incidents of, workplace and domestic violence. DATES: The System of Records Notice (SORN) is applicable upon its publication in today’s Federal Register, with the exception of the routine uses which are effective July 16, 2018. We invite public comment on the routine uses or other aspects of this SORN. In accordance with 5 U.S.C. 552a(e)(4) and (e)(11), the public is given a 30-day period in which to submit comments. Therefore, please submit any comments by July 16, 2018. ADDRESSES: The public, Office of Management and Budget (OMB), and Congress may comment on this publication by writing to the Executive Director, Office of Privacy and Disclosure, Office of the General Counsel, SSA, Room G–401 West High Rise, 6401 Security Boulevard, Baltimore, Maryland 21235–6401, or through the Federal e-Rulemaking Portal at https://www.regulations.gov, please reference docket number SSA–2015– 0003. All comments we receive will be SUMMARY: E:\FR\FM\14JNN1.SGM 14JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 83, Number 115 (Thursday, June 14, 2018)]
[Notices]
[Pages 27812-27816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-12754]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83401; File No. SR-FICC-2018-003]

Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Order Approving Proposed Rule Change To Amend the Fee Structure of the
Government Securities Division Rulebook

June 8, 2018.
On April 27, 2018, Fixed Income Clearing Corporation (``FICC'')
filed with the Securities and Exchange Commission (``Commission'')
proposed rule change SR-FICC-2018-003, 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 May 8, 2018.\3\ The Commission received one
comment letter on the proposed rule change.\4\ For the reasons
discussed below, the Commission approves the proposed rule change.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 83153 (May 2, 2018), 83
FR 20882 (May 8, 2018) (SR-FICC-2018-003) (``Notice'').
\4\ Letter from Ted Bragg, Vice President--Head of U.S. Fixed
Income, Nasdaq (``Nasdaq''), dated May 14, 2018, to Eduardo A.
Aleman, Assistant Secretary, Commission (``Nasdaq Letter'')
available at https://www.sec.gov/comments/sr-ficc-2018-003/ficc2018003.htm.
---------------------------------------------------------------------------

I. Description of the Proposed Rule Change

The proposed rule change would amend the FICC Government Securities
Division (``GSD'') Rulebook (``GSD Rules'') \5\ to modify the GSD Fee
Structure. FICC states that it designed the proposed rule change to
reduce complexity and to better align pricing with the costs of
services provided by GSD.\6\ More specifically, FICC states that the
transaction processing fees and the position management fees associated
with the delivery-versus-payment (``DVP'') service account for
approximately 30 percent and 70 percent, respectively, of GSD's
projected costs from the DVP service.\7\ Accordingly, FICC states that
the proposed fee changes are designed to align GSD's revenue with that
30/70 percent split between transaction processing and position
management costs, respectively.\8\ In doing so, FICC would shift the
GSD Fee Structure regarding the DVP service away from the existing
volume-driven approach to a position-based approach.\9\ Ultimately,
FICC expects GSD's net revenue to remain relatively unchanged as a
result of this proposal.\10\
---------------------------------------------------------------------------

\5\ Available at https://www.dtcc.com/legal/rules-and-procedures.
\6\ Notice, 83 FR at 20882.
\7\ Id. at 20884.
\8\ Id.
\9\ Id.
\10\ Id.
---------------------------------------------------------------------------

A. Proposed Changes to the GSD Fee Structure

The proposed GSD Fee Structure would, in effect, establish 4 new
fees, modify 1 existing fee, and eliminate 12 fees.\11\ These proposed
changes are summarized below.
---------------------------------------------------------------------------

\11\ Id.
---------------------------------------------------------------------------

1. New Fees
In proposed Section I of the GSD Fee Structure, FICC would replace
the seven-tiered trade submission fees for both dealer accounts and
broker accounts with a single transaction processing fee that would be
charged to GSD members (``Members'') upon the comparison of a side of a
buy/sell transaction or a Repo Transaction in the DVP service.\12\
Specifically, dealer accounts would be charged a fee of $0.04 per
million par value for transaction processing, and broker accounts would
be charged a fee of

[[Page 27813]]

$0.02 per million par value for transaction processing.\13\
---------------------------------------------------------------------------

\12\ Id.
\13\ Id. Broker accounts submit two sides per transaction. Id.
As such, a broker account would be charged a total of $0.04 per
million par value (i.e., $0.02 per million par value times two) for
each transaction. Id.
---------------------------------------------------------------------------

FICC also would add two position management fees applicable to the
DVP service in proposed Section II of the GSD Fee Structure.\14\ The
first position management fee would be the intraday position fee of
$0.04 per million par value that would be calculated for a Member each
business day based on the largest gross position of the Member
(including positions of any non-Member that the Member is clearing for)
that business day.\15\ FICC states that it would determine the gross
position of a Member in 15-minute intervals between 9:00 a.m. and 4:00
p.m. each business day by netting the par value of all compared buy/
sell transactions, Repo Transactions, and unsettled obligations of the
Member (including any such activity submitted by the Member for a non-
Member that the Member is clearing for) by CUSIP number and taking the
sum of the absolute par value of each such CUSIP number.\16\
---------------------------------------------------------------------------

\14\ Notice, 83 FR at 20882.
\15\ Id.
\16\ Id.
---------------------------------------------------------------------------

The second position management fee would be the end of day position
fee of $0.115 per million par value that would be calculated for a
Member each business day based on the end of day gross position of the
Member (including positions of any non-Member that the Member is
clearing for) that business day.\17\ FICC states that it would
determine the end of day gross position of a Member by netting the par
value of all compared buy/sell transactions, Repo Transactions, and
unsettled obligations of the Member (including any such activity
submitted by the Member for a non-Member that the Member is clearing
for) at the end of the business day by CUSIP number and taking the sum
of the absolute par value of each such CUSIP number.\18\
---------------------------------------------------------------------------

\17\ Id. at 20884-85.
\18\ Id. at 20885.
---------------------------------------------------------------------------

2. Modified Existing Fee
FICC would modify the existing minimum monthly fee in proposed
Section V of the GSD Fee Structure.\19\ The minimum monthly fee would
be increased from $1,000 to $2,500 per account and would apply to all
accounts of every comparison-only Member and netting Member instead of
just their sole or primary account.\20\ FICC states that it is
proposing to increase the minimum monthly fee to $2,500 per account
because FICC believes this change would better reflect GSD's costs of
account monitoring.\21\
---------------------------------------------------------------------------

\19\ Id.
\20\ Id. The minimum monthly fee would apply to all accounts of
a netting Member, including any account the netting Member may have
as a sponsoring Member. Id.
\21\ Notice, 83 FR at 20885.
---------------------------------------------------------------------------

3. Eliminated Fees
FICC is proposing to delete fees in Section I of the GSD Fee
Structure that are no longer applicable.\22\ Specifically, FICC is
proposing to delete Section I.B. of the GSD Fee Structure, which
imposes certain surcharges on Members submitting trade data to GSD
using submission methods other than the Interactive Submission Method
(e.g., the Multiple Batch Submission Method or the Single Batch
Submission Method).\23\ FICC states that these surcharges are no longer
required because all Members currently submit trade data to GSD using
the Interactive Submission Method, and FICC does not expect that to
change in the future because of technological advancements in real-time
trade submission capability across the financial industry.\24\ FICC
would also make conforming re-lettering of the subsequent provisions in
Section I of the GSD Fee Structure.\25\
---------------------------------------------------------------------------

\22\ Id. at 20884.
\23\ Id.
\24\ Id.
\25\ Id.
---------------------------------------------------------------------------

FICC would eliminate all netting fees provided in renumbered
Section IV of the GSD Fee Structure, including (i) the two seven-tiered
netting fees for both broker accounts and dealer accounts; (ii) the
``into the net'' fees of $0.015 per one million of par value for broker
accounts and $0.016 per one million of par value for dealer accounts
for each compared trade, start leg of a Repo Transaction, close leg of
a Repo Transaction, fail deliver obligation, and fail receive
obligation; and (iii) the ``out of the net'' fees of $0.175 per one
million of par value for each deliver obligation and receive obligation
created as a result of the netting process.\26\
---------------------------------------------------------------------------

\26\ Id. at 20885.
---------------------------------------------------------------------------

In addition, FICC would delete from renumbered Section IV.C. of the
GSD Fee Structure the Repo Transaction processing fees and related
language for Term Repo Transactions in the DVP service that have been
compared and netted but not yet settled.\27\ FICC states that this
would no longer separate the Repo Transaction processing fees for Term
Repo Transactions.\28\ Rather, FICC states that the Term Repo
Transactions would be assessed the proposed position management fees,
just like overnight Repo Transactions and buy/sell transactions.\29\
---------------------------------------------------------------------------

\27\ Id.
\28\ Id. The term ``Term Repo Transaction'' means, on any
particular business day, a Repo Transaction for which settlement of
the close leg is scheduled to occur two or more business days after
the scheduled settlement of the start leg. See GSD Rule 1,
Definitions, GSD Rules, supra note 5.
\29\ Notice, 83 FR at 20885.
---------------------------------------------------------------------------

Additionally, FICC would eliminate fees applicable to additional
accounts from current Section V of the GSD Fee Structure.\30\ FICC
currently differentiates its fees based on whether an account is a
Member's primary or secondary account. FICC would no longer draw this
distinction. FICC states that eliminating fees applicable to additional
accounts would reduce pricing complexity and thereby enhance pricing
transparency because Members would no longer need to keep track of
their primary versus secondary accounts.
---------------------------------------------------------------------------

\30\ Id.
---------------------------------------------------------------------------

4. Conforming, Clarifying, and Technical Changes
As described below, FICC proposes to make a number of conforming,
clarifying, and technical changes.
First, FICC would rename the heading of Section I of the GSD Fee
Structure from ``Trade Comparison Fees'' to ``Transaction Fees.'' \31\
FICC states that this would better reflect the proposed changes to that
section, as described above.\32\
---------------------------------------------------------------------------

\31\ Id. at 20886.
\32\ Id.
---------------------------------------------------------------------------

FICC would rename the heading of Section I.A. of the GSD Fee
Structure from ``Trade Submission'' to ``Transaction Processing.'' \33\
In addition, FICC would make changes throughout Section I.A. of the GSD
Fee Structure to clarify that references to a ``trade'' means a ``buy/
sell transaction.'' \34\ FICC would also make a number of conforming
changes in Section I.A. of the GSD Fee Structure.\35\ Specifically,
FICC would delete a reference to ``submission fee'' and replace it with
``processing fee.'' \36\ FICC would update the reference to
``subsection D'' to reflect the proposed re-lettering of that
subsection.\37\
---------------------------------------------------------------------------

\33\ Id.
\34\ Id.
\35\ Id.
\36\ Id.
\37\ Id.
---------------------------------------------------------------------------

Additionally, FICC would update the format of (i) the ``$.50''
rejection fee to ``$0.50'' in Section I.A. of the GSD Fee Structure;
(ii) the ``15 cents'' yield-to-price conversion charge to ``$0.15'' in
the proposed Section I.B. of the GSD Fee Structure; (iii) the ``25
cents'' and ``5

[[Page 27814]]

cents'' modification/cancellation fees to ``$0.25'' and ``$0.05,''
respectively, in the proposed Section I.C. of the GSD Fee Structure;
(iv) the ``25 cents'' coupon pass-through fee to ``$0.25'' in the
proposed Section I.D. of the GSD Fee Structure; (v) the ``$.75''
repurchase agreement collateral substitution fee to ``$0.75'' in the
proposed Section I.E. of the GSD Fee Structure; (vi) the ``$.07'' and
``$.025'' recording fees to ``$0.07'' and ``$0.025'' in the proposed
Section I.G. of the GSD Fee Structure; and (vii) the ``$.07'' recording
fee to ``$0.07'' in the proposed Section I.H. of the GSD Fee
Restructure, in order to be consistent with the format of the other
fees in the GSD Fee Structure.\38\
---------------------------------------------------------------------------

\38\ Id.
---------------------------------------------------------------------------

FICC states that for better organization of the GSD Fee Structure,
FICC would relocate current Sections III.B. (Auction Takedown Process),
III.F. (Coupon Pass-Through Fee), and III.G. (Repo Collateral
Substitution Fees), which cover fees associated with the Auction
Takedown Service, pass-through of coupon payments, and the processing
of repurchase agreement collateral substitution requests, to proposed
Sections I.F., I.D., and I.E., respectively, of the GSD Fee Structure
because each of these fees is a type of transaction fee.\39\
---------------------------------------------------------------------------

\39\ Id.
---------------------------------------------------------------------------

In addition, FICC would revise the section on Auction Takedown
Process (proposed Section I.D. of the GSD Fee Structure) by replacing
the words ``locked-in trades'' with ``buy/sell transactions'' because,
FICC states, all trades associated with the Auction Takedown Service
are locked-in.\40\ FICC would change this section to reflect that,
instead of the ``Trade Submission'' fees, fees for trades associated
with the Auction Takedown Service would include the proposed
``Transaction Processing'' fees in Section I.A. of the GSD Fee
Structure and the proposed ``Position Management Fees'' in Section II
of the GSD Fee Structure.\41\
---------------------------------------------------------------------------

\40\ Id.
\41\ Id.
---------------------------------------------------------------------------

FICC would make a conforming change in the proposed Section I.G. of
the GSD Fee Structure by deleting the reference to ``Trade Submission''
fee schedule and replacing it with ``Transaction Processing'' fees.\42\
---------------------------------------------------------------------------

\42\ Id.
---------------------------------------------------------------------------

FICC would renumber current Section II of the GSD Fee Structure to
proposed Section III of the GSD Fee Structure.\43\
---------------------------------------------------------------------------

\43\ Id.
---------------------------------------------------------------------------

FICC would rename the heading of renumbered Section IV of the GSD
Fee Structure from ``Netting Fee and Charges (in addition to the
comparison fee)'' to ``Other Charges (in addition to the transaction
fees)'' to, FICC states, better reflect the proposed changes to this
section, as described above.\44\
---------------------------------------------------------------------------

\44\ Id.
---------------------------------------------------------------------------

As described above, FICC would relocate current Sections III.B.
(Auction Takedown Process), III.F. (Coupon Pass-Through Fee), and
III.G. (Repo Collateral Substitution Fees) to proposed Sections I.F.,
I.D., and I.E., respectively, of the GSD Fee Structure.\45\ These
proposed changes would necessitate a re-lettering of all subsequent
provisions in renumbered Section IV of the GSD Fee Structure.\46\
---------------------------------------------------------------------------

\45\ Id.
\46\ Id.
---------------------------------------------------------------------------

In addition, FICC would rename the heading of renumbered Section
IV.C. of the GSD Fee Structure from ``Repo Transaction Processing Fee''
to ``GCF Repo Transaction and CCIT Transaction Processing Fee'' to
better reflect the proposed changes to this section.\47\ FICC would
make two conforming changes: (i) Relocate and update the reference to
``Repo Broker'' definition to appear right after the first usage of
``Repo Broker'' in this section; and (ii) reflect the remaining fee in
renumbered Section IV.C. of the GSD Fee Structure in a singular
form.\48\
---------------------------------------------------------------------------

\47\ Id.
\48\ Id.
---------------------------------------------------------------------------

In addition, FICC would make a conforming change in renumbered
Section IV.D. of the GSD Fee Structure to reflect the proposed
renumbering of sections in the GSD Fee Structure by changing a
reference from ``Section III'' to ``Section IV.'' \49\
---------------------------------------------------------------------------

\49\ Id.
---------------------------------------------------------------------------

FICC would add a sentence to proposed Section V of the GSD Fee
Structure that, FICC states, would make it clear to Members that the
minimum monthly fee would not apply to an account if the total monthly
fees incurred by the account pursuant to Sections I, II (a proposed new
section), and IV (renumbered from III) of the GSD Fee Structure exceed
$2,500.\50\
---------------------------------------------------------------------------

\50\ Id.
---------------------------------------------------------------------------

FICC would make changes in Section VI of the GSD Fee Structure to,
FICC states, clarify that references to ``trades'' means ``buy/sell
transactions and Repo Transactions.'' \51\
---------------------------------------------------------------------------

\51\ Id.
---------------------------------------------------------------------------

FICC would make two changes to Section VII of the GSD Fee
Structure. FICC would delete the reference to the fee for additional
accounts, which is being eliminated under the proposal.\52\ FICC states
that the second change would make it clear that a sponsoring Member
would be subject to the minimum monthly fee set forth in proposed
Section V of the GSD Fee Structure.\53\ FICC states that this proposed
change would make it clear to a sponsoring Member that its sponsoring
Member omnibus account would be subject to the minimum monthly fee.\54\
---------------------------------------------------------------------------

\52\ Id.
\53\ Id. at 20886-87.
\54\ Id. at 20887.
---------------------------------------------------------------------------

In current Section VIII of the GSD Fee Structure, FICC would (i)
make a technical change to reflect the reference to the GSD Fee
Structure as ``Fee Structure'' instead of ``fee structure,'' and (ii)
make changes to clarify that references to a ``trade'' means a ``buy/
sell transaction.'' \55\ In addition, FICC would clarify that a CCIT
Transaction, like a Term GCF Repo Transaction, would be considered to
have one Start Leg and one Close Leg during its term.\56\
---------------------------------------------------------------------------

\55\ Id.
\56\ Id.
---------------------------------------------------------------------------

FICC would make a conforming change in current Section XII of the
GSD Fee Structure by deleting the reference to ``comparison and netting
fees'' and replacing it with ``transaction fees.'' \57\ In addition,
FICC would make a technical change by deleting the outdated reference
to ``Operations and Planning Committee'' and replacing it with Board,
which is defined in GSD Rule 1 (Definitions) as ``the Board of
Directors of Fixed Income Clearing Corporation or a committee thereof
acting under delegated authority.'' \58\
---------------------------------------------------------------------------

\57\ Id.
\58\ Id.; see GSD Rule 1, GSD Rules, supra note 5.
---------------------------------------------------------------------------

FICC plans to implement all of the above proposed changes on July
2, 2018.\59\
---------------------------------------------------------------------------

\59\ Id. at 20887.
---------------------------------------------------------------------------

II. Summary of Comment Received

The Commission received one comment letter to the proposed rule
change.\60\ The Nasdaq Letter supports the proposed rule change.
Specifically, Nasdaq states that it ``supports the [proposed rule
change] because it: (1) Simplifies and adds transparency to FICC's fee
schedule; (2) introduces a sensible risk-based fee model; and (3)
permits and incentivizes more market participants to utilize central
clearing for U.S. Treasury Securities. . . .'' \61\ Nasdaq further
states that the proposed rule change would likely result in more
widespread use of FICC's central clearing services, reducing systemic
risk by moving the industry closer to comprehensive central
clearing.\62\ Nasdaq states that more widespread industry use of FICC's
central clearing

[[Page 27815]]

services would also increase overall transparency of trade reporting
data of U.S. Treasury securities.\63\ Additionally, Nasdaq believes
that the proposed rule change would advance the goals articulated in
the October 2017 report by the U.S. Department of the Treasury on U.S.
Capital Markets \64\ by reforming FICC's fee structure to make it more
simple, clear, transparent, and understandable to market participants
and regulators.\65\
---------------------------------------------------------------------------

\60\ Nasdaq Letter, supra note 4.
\61\ Id. at 1.
\62\ Id. at 1-2.
\63\ Id. at 2.
\64\ See U.S. Department of the Treasury, A Financial System
That Creates Economic Opportunities: Capital Markets (October 2017),
available at https://www.treasury.gov/press-center/press-releases/Documents/A-Financial-System-Capital-Markets-FINAL-FINAL.pdf.
\65\ Nasdaq Letter at 1-2.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

Section 19(b)(2)(C) 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 rules and regulations thereunder applicable to such
organization.\66\ After carefully considering the proposed rule change
and the comment letter received, the Commission finds that the proposed
rule change is consistent with Act, specifically Sections 17A(b)(3)(D)
\67\ and 17A(b)(3)(F) \68\ of the Act and Rule 17Ad-22(e)(23)(ii) \69\
under the Act.
---------------------------------------------------------------------------

\66\ 15 U.S.C. 78s(b)(2)(C).
\67\ 15 U.S.C. 78q-1(b)(3)(D).
\68\ 15 U.S.C. 78q-1(b)(3)(F).
\69\ 17 CFR 240.17Ad-22(e)(23)(ii).
---------------------------------------------------------------------------

A. Section 17A(b)(3)(D) of the Act

Section 17A(b)(3)(D) of the Act requires that the rules of a
clearing agency, such as FICC, provide for the equitable allocation of
reasonable dues, fees, and other charges among its participants.\70\
---------------------------------------------------------------------------

\70\ 15 U.S.C. 78q-1(b)(3)(D).
---------------------------------------------------------------------------

As discussed above, the proposed rule change would make a number of
changes to the GSD Fee Structure. Specifically, FICC would, in effect,
create 4 new fees, modify 1 existing fee, and eliminate 12 fees. The
proposed fee changes are designed, in part, to (i) shift the GSD Fee
Structure regarding the DVP service away from a transaction or volume-
driven approach to a more position-based approach, and (ii) align GSD's
revenue with the approximate 30/70 split between transaction processing
and position management costs, respectively. Despite the proposed
changes, FICC expects GSD's net revenue to remain relatively unchanged
as a result of this proposal.
The Commission believes that adding the 4 proposed fees and
eliminating the 12 existing fees is equitable and reasonable because
these changes are designed to apply to all Members in a manner that
better aligns the fees (i.e., fees associated with the DVP service as
well as the minimum monthly fee) with the costs attributed to GSD's
management of Members' DVP positions and account monitoring. Under the
proposed changes, a Member whose DVP positions result in higher
position management costs to GSD would be charged a relatively higher
fee because the higher fee would be reflective of the higher costs to
GSD in managing those positions. On the other hand, a Member whose DVP
positions require less management by GSD would be charged a lower fee
because the lower fee would be reflective of the lower costs to GSD in
managing those positions. In addition, taken collectively, the proposed
fee changes are designed to maintain GSD's existing revenue derived
from fees associated with the DVP service.
With respect to the proposed modification to the minimum monthly
fee, each account of every comparison-only Member and every netting
Member would be subject to a minimum monthly fee of $2,500. This
proposed fee is designed to be commensurate with the minimum costs to
FICC associated with monitoring a Member's account.
Therefore, for the above reasons, the Commission believes that the
proposed rule change is consistent with Section 17A(b)(3)(D) of the
Act, as the proposal would provide for the equitable allocation of
reasonable dues, fees, and other charges among Members.

B. Section 17A(b)(3)(F) of the Act

Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a clearing agency, such as FICC, be designed to promote the prompt
and accurate clearance and settlement of securities transactions.\71\
---------------------------------------------------------------------------

\71\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

As described above, FICC proposes to, effectively, establish 4 new
fees, modify 1 existing fee, eliminate 12 fees, and make conforming,
clarifying, and technical changes to the GSD Rules. These proposed
changes are designed to reduce the complexity of the GSD Fee Structure
by helping to ensure that the GSD Fee Structure is more transparent and
clear to Members.\72\ Providing more transparent and clear terms and
descriptions in the GSD Fee Structure would help Members better
understand GSD's fees and provide increased predictability and
certainty regarding the fees Members incur. This increased
understanding, predictability, and certainty could, in turn, help
Members satisfy their obligations to FICC more easily, which would help
promote the prompt and accurate clearance and settlement of securities
transactions.\73\ Accordingly, the Commission believes that the
proposed rule change is consistent with the requirements of Section
17A(b)(3)(F) of the Act.
---------------------------------------------------------------------------

\72\ See also Nasdaq Letter at 1-2 (supporting the proposed rule
change because it renders FICC's fee schedule more simple, clear,
transparent, and understandable to market participants).
\73\ See also Nasdaq Letter at 2 (arguing that FICC's efforts to
simplify its fee structure would encourage more widespread central
clearing among market participants).
---------------------------------------------------------------------------

C. Rule 17Ad-22(e)(23)(ii) Under the Act

Rule 17Ad-22(e)(23)(ii) under the Act requires each covered
clearing agency \74\ to establish, implement, maintain and enforce
written policies and procedures reasonably designed to provide
sufficient information to enable participants to identify and evaluate
the risks, fees, and other material costs they incur by participating
in the covered clearing agency.\75\
---------------------------------------------------------------------------

\74\ A ``covered clearing agency'' means, among other things, a
clearing agency registered with the Commission under Section 17A of
the Exchange Act (15 U.S.C. 78q-1 et seq.) that is designated
systemically important by Financial Stability Oversight Council
(``FSOC'') pursuant to the Clearing Supervision Act (12 U.S.C. 5461
et seq.). See 17 CFR 240.17Ad-22(a)(5)-(6). Because FICC is a
registered clearing agency with the Commission that has been
designated systemically important by FSOC, FICC is a covered
clearing agency.
\75\ 17 CFR 240.17Ad-22(e)(23)(ii).
---------------------------------------------------------------------------

As described above, FICC proposes to, effectively, establish 4 new
fees, modify 1 existing fee, eliminate 12 fees, and make conforming,
clarifying, and technical changes to the GSD Rules. These proposed
changes are designed to reduce the complexity of the GSD Fee Structure
by helping to ensure that the GSD Fee Structure is more transparent and
clear to Members. Having a more transparent and clear GSD Fee Structure
would help Members and other stakeholders to better understand GSD's
fees and help provide Members with increased predictability and
certainty regarding the fees they incur in participating in GSD.\76\ As
such, the Commission believes that the proposed rule change is
consistent with Rule 17Ad-22(e)(23)(ii) under the Act.
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\76\ See also Nasdaq Letter at 1-2 (supporting the proposed rule
change because it renders FICC's fee schedule more simple, clear,
transparent, and understandable to market participants).
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IV. Conclusion

On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the

[[Page 27816]]

Act, in particular the requirements of Section 17A of the Act \77\ and
the rules and regulations thereunder.
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\77\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that proposed rule change SR-FICC-2018-003 be, and hereby is,
Approved.\78\
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\78\ In approving the proposed rule change, the Commission
considered the proposals' impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\79\
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\79\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12754 Filed 6-13-18; 8:45 am]
BILLING CODE 8011-01-P

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