Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Correct Certain References, Provide Transparency to Existing Processes and Amend Existing Practices in Connection With the Mortgage-Backed Securities Division Electronic Pool Notification Rules, 40611-40617 [2018-17489]
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Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices
writing within 60 days of this
publication.
Rule 17f–1(c) is a reporting rule and
does not specify a retention period. The
rule requires an incident-based
reporting requirement by the reporting
institutions when securities certificates
are discovered to be missing, lost,
counterfeit, or stolen. Registering under
Rule 17f–1(c) is mandatory to obtain the
benefit of a central database that stores
information about missing, lost,
counterfeit, or stolen securities for the
Lost and Stolen Securities Program.
Reporting institutions required to
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be kept confidential.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
Please direct your written comments
to: Pamela Dyson, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Candace
Kenner, 100 F Street NE, Washington
DC 20549, or send an email to: PRA_
Mailbox@sec.gov.
Dated: August 9, 2018.
Eduardo A. Aleman.
Assistant Secretary.
[FR Doc. 2018–17487 Filed 8–14–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83808; File No. SR–FICC–
2018–007]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing of Proposed Rule Change To
Correct Certain References, Provide
Transparency to Existing Processes
and Amend Existing Practices in
Connection With the Mortgage-Backed
Securities Division Electronic Pool
Notification Rules
daltland on DSKBBV9HB2PROD with NOTICES
August 9, 2018.
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 August 3,
2018, 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 the clearing agency. The Commission
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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40611
is publishing this notice to solicit
comments on the proposed rule change
from interested persons.
guarantee and novation of transactions
submitted by Clearing Members through
MBSD’s Clearing System.6
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
amendments to the FICC MortgageBacked Securities Division (‘‘MBSD’’)
electronic pool notification (‘‘EPN’’)
Rules (the ‘‘EPN Rules’’) 3 as described
below.
FICC is proposing to correct the EPN
Rules by (i) deleting references to the
term ‘‘EPN Procedures,’’ (ii) amending
the definition of the term ‘‘Interested
Person’’ to delete the reference to
‘‘Comparison Only System,’’ (iii)
deleting the defined term for ‘‘Par
Amount,’’ (iv) replacing references to
the term ‘‘Vice President’’ with the term
‘‘Executive Director,’’ (v) amending Sec.
3 (Agreements of EPN User) in EPN Rule
1 (Requirements Applicable to EPN
Users) of Article III (EPN Users) to
clarify an EPN User’s obligation to
process Messages through the EPN
system during a system disruption, and
(vi) amending EPN Rule 4 (Admission to
Premises of Corporation; Power of
Attorney) of Article III (EPN Users) to
replace a reference to ‘‘he’’ with ‘‘such
person.’’
FICC is proposing to amend various
sections in the EPN Rules to provide
transparency to FICC’s existing
processes. Specifically, FICC is
proposing to amend EPN Rule 1
(Definitions) of Article I (Definitions and
General Provisions); Section 2
(Limitations) in EPN Rule 1 (Accounts)
and Section 1 (Availability of Reports),
Section 2 (Message Detail Report),
Section 3 (Message Summary Report),
and Section 5 (Good Delivery; Time
Stamps) in EPN Rule 2 (Reports) of
Article II (Messages Processed by the
Corporation); and EPN Rule 5 (Use of
EPN Service) of Article III (EPN Users).
FICC is also proposing to amend its
existing practice in connection with an
EPN User’s submission of a cancel and
correct Message.4 Specifically, FICC is
proposing to establish one good delivery
time stamp (referred to as the ‘‘T2’’ 5
time stamp) that reflects the same
processing time on the pool seller’s and
the pool buyer’s cancel and correct
Message, respectively. The proposed
change would not affect FICC’s
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
3 Terms not defined herein are defined in the EPN
Rules, available at https://www.dtcc.com/legal/rulesand-procedures.
4 See Article II, EPN Rule 2, Sec. 5, supra note
3.
5 The reference to ‘‘T2’’ does not relate to the two
business days settlement cycle for broker-dealer
securities transactions, known as ‘‘T+2.’’
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In its filing with the Commission, the
clearing agency 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. The
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
FICC is proposing to correct the EPN
Rules by (i) deleting references to the
term ‘‘EPN Procedures’’ because FICC
does not maintain EPN Procedures, (ii)
amending the definition of the term
‘‘Interested Person’’ to delete the
reference to ‘‘Comparison Only System’’
because MBSD does not maintain a
Comparison Only System, (iii) deleting
the defined term for ‘‘Par Amount’’
because this term is not used in the EPN
Rules, (iv) replacing references to the
term ‘‘Vice President’’ with the term
‘‘Executive Director’’ because FICC no
longer utilizes the Vice President title,
(v) amending Sec. 3 (Agreements of EPN
User) in EPN Rule 1 (Requirements
Applicable to EPN Users) of Article III
(EPN Users) to clarify an EPN User’s
obligation to process Messages through
the EPN system during a system
disruption because this change would
be an accurate reflection of FICC’s
existing practice, and (vi) amending
EPN Rule 4 (Admission to Premises of
Corporation; Power of Attorney) of
Article III (EPN User) to replace a
reference to ‘‘he’’ with ‘‘such person’’
because the reference to ‘‘such person’’
would be gender neutral.
6 MBSD maintains two sets of rulebooks. The EPN
Rules govern MBSD’s EPN Service, and the MBSD
Clearing Rules (the ‘‘MBSD Rules’’) govern MBSD’s
clearance and settlement service. The MBSD Rules
are available at https://www.dtcc.com/legal/rulesand-procedures. Pursuant to the MBSD Rules, the
term ‘‘Clearing System’’ means the (i) system of
services provided by MBSD to persons that are
Clearing Members thereof, including trade
comparison, to-be-announced netting, pool
comparison, pool netting, and settlement, as
applicable, and (ii) operations carried out by MBSD
in the course of providing such services, as
provided in the MBSD Rules. See MBSD Rule 1,
Definitions.
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FICC is proposing to amend various
sections in the EPN Rules to provide
transparency to FICC’s existing
processes. Specifically, FICC is
proposing to amend EPN Rule 1
(Definitions) of Article 1 (Definitions
and General Provisions); Section 2
(Limitations) in EPN Rule 1 (Accounts)
and Section 1 (Availability of Reports),
Section 2 (Message Detail Report),
Section 3 (Message Summary Report),
and Section 5 (Good Delivery; Time
Stamps) in EPN Rule 2 (Reports) of
Article II (Messages Processed by the
Corporation); and EPN Rule 5 (Use of
EPN Service) of Article III (EPN Users).
FICC is also proposing to amend its
existing practice in connection with an
EPN User’s submission of a cancel and
correct Message.7 Specifically, FICC is
proposing to establish one good delivery
T2 time stamp 8 that reflects the same
processing time on the pool seller’s and
the pool buyer’s cancel and correct
Message, respectively. As a result of this
change, in the event that the T2 time
stamp reflects a time that does not meet
the good delivery requirements in
accordance with the Securities Industry
and Financial Markets Association’s
(‘‘SIFMA’’) Uniform Practices Manual
for the Clearance and Settlement of
Mortgage-Backed Securities and Other
Related Securities (referred to in the
EPN Rules as the ‘‘SIFMA
Guidelines’’),9 the financing of the
mortgage pools associated with the
Message, if any, would be the
responsibility of the counterparties to
such Message, as determined by such
parties, in accordance with the SIFMA
Guidelines. FICC is proposing this
change because it would be consistent
with the SIFMA Guidelines, and FICC
believes that the parties to the Message
are best positioned to ensure that a
cancel and correct Message meets the
good delivery requirements. The
proposed change would not affect
FICC’s guarantee and novation of
transactions submitted by Clearing
Members through MBSD’s Clearing
System.
The proposed changes are described
in detail below.
(1) MBSD’s EPN Service
MBSD’s electronic pool notification
service (referred to in the EPN Rules as
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7 See
supra note 4.
good delivery T2 time stamp indicates
whether good delivery has occurred with respect to
a Message—meaning, if the T2 time stamp reflects
a time that is at or before the established deadline,
then good delivery has been established and the
pool buyer will accept the Message with respect to
the allocated securities.
9 The SIFMA Guidelines are available at https://
www.sifma.org/resources/general/tba-marketgovernance/.
8 The
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the ‘‘EPN Service’’) enables users to
reduce risk and streamline their
operations by providing an automated
manner for market participants that
have an obligation to deliver pools
(‘‘pool sellers’’) to transmit pool
information efficiently and reliably to
their counterparties (‘‘pool buyers’’) in
real time. Market participants that wish
to utilize the EPN Service are required
to submit an application to MBSD. The
application process and the use of the
EPN Service are governed by the EPN
Rules.10 The EPN Rules are designed to
be consistent with the SIFMA
Guidelines, which reflect common
industry practices for the trading,
clearance and settlement of mortgagebacked securities transactions. MBSD’s
Clearing Members are required to be
EPN Users; however, one can be an EPN
User and not a Clearing Member.11
(2) Proposed Changes To Correct the
EPN Rules
FICC is proposing to amend the EPN
Rules in order to correct various
provisions in the EPN Rules. The
proposed changes would help ensure
that the EPN Rules are clear and
accurate. The proposed changes reflect
MBSD’s existing practices and FICC
believes that these changes would help
EPN Users better understand their rights
and obligations under the EPN Rules.
The proposed changes are described in
detail below.
a. Article I—Definitions and General
Provisions
Proposed Changes to EPN Rule 1—
Definitions
FICC is proposing to delete the term
‘‘EPN Procedures.’’ EPN Rule 11 of
Article V empowers FICC to adopt EPN
Procedures as FICC ‘‘deems necessary or
desirable.’’ 12 It appears that when FICC
instituted the EPN Service and the
related EPN Rules, EPN Procedures
were not adopted at that time.13 Since
10 See
Article III, EPN Rule 1, supra note 3.
to the MBSD Rules, the term
‘‘Clearing Member’’ means any entity admitted into
membership pursuant to MBSD Rule 2A. See MBSD
Rule 1, Definitions, supra note 6.
12 See supra note 3.
13 FICC instituted the EPN Service and the related
EPN Rules on a pilot basis in February 1995. The
Commission’s temporary approval order notes that
Amendment No. 2 to the proposed rule change
clarified that ‘‘the only MBS rules and procedures
applicable to EPN users are the rules and
procedures located in Articles VI, VII, VIII, IX, and
X of MBS’s rules.’’ See Release No. 35009
(November 25, 1994) 59 FR 61913 (December 2,
1994) (SR–MBS–94–02). The Commission granted
permanent approval of the EPN Service and the
related EPN Rules in November 1995. See Release
No. 36540 (November 30, 1995) 60 FR 63089
(December 8, 1995) (SR–MBS–95–09). It should be
noted FICC submitted a proposed rule change in
11 Pursuant
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FICC does not currently maintain EPN
Procedures, FICC has decided to
conform the EPN Rules to its practices
by deleting this definition and the
related references throughout the EPN
Rules because this inchoate power is
itself not necessary.
FICC is proposing to amend the term
‘‘EPN Service’’ to delete the reference to
EPN Procedures.
FICC is proposing to amend the term
‘‘EPN User Profile’’ to delete the
reference to EPN Procedures. In
connection with this change, FICC is
proposing to make a grammatical
correction to this definition by replacing
the word ‘‘in’’ with ‘‘by’’ so that the
definition would state that ‘‘the EPN
User Profile would be on a form
specified ‘by’ FICC.’’
FICC is proposing to amend the term
‘‘Interested Person’’ to delete the
reference to Comparison Only System
because MBSD does not maintain a
Comparison Only System. FICC believes
that the inclusion of this term in the
EPN Rules was an error.
FICC is proposing to delete the term
‘‘Par Amount’’ because this term is not
otherwise referred to in the EPN Rules.
FICC believes that the inclusion of this
term in the EPN Rules was an error and
that it has no practical effect because
this term is not used in the EPN Rules.
FICC notes that this term was included
and not defined in a version of the EPN
Rules that was filed with the
Commission on October 20, 1999.14
b. Article III—EPN Users
i. Proposed Changes to EPN Rule 1—
Requirements Applicable to EPN Users
Section 3 (Agreements of EPN Users)
sets forth a list of terms that an
applicant is required to agree to, as
specified in the EPN User Agreement.
This list states, in part, that an applicant
shall agree (i) to abide by and be bound
by the EPN Rules and EPN Procedures,
(ii) that the EPN Rules and EPN
Procedures are incorporated into every
contract or Message, (iii) that the EPN
User shall pay fines that are imposed in
accordance with the EPN Rules and EPN
Procedures, and (iv) that it is bound by
any amendment to the EPN Rules and
EPN Procedures. FICC is proposing to
delete all references in this section to
the EPN Procedures.
Section 3 also includes a paragraph
that states that in the event of an EPN
June 2017 which, among other things, renumbered
the references of Articles VI, VII, VIII, IX, and X to
refer to Articles I, II, III, IV and V, respectively. See
Release No. 81002 (June 22, 2017) 82 FR 29355
(June 28, 2017) (SR–FICC–2017–015).
14 Release No. 42721 (April 25, 2000) 65 FR 25778
(May 3, 2000) (SR–MBSCC–99–8).
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system disruption and an extension of
the cut-off times for communicating
pool allocation information pursuant to
the SIFMA Guidelines, EPN Users
‘‘will’’ be relieved of their obligation to
process Messages through the EPN
Service until the beginning of the next
Business Day after the EPN system has
been recovered. FICC is proposing to
amend this provision to state that EPN
Users ‘‘may’’ be relieved of their
obligation to process Messages through
the EPN Service until ‘‘later in the
Business Day or’’ the beginning of the
next Business Day after the EPN system
has been recovered.
FICC is proposing this change because
the nature of the EPN system disruption
and MBSD’s ability to promptly fix such
disruption determines whether the cutoff time would be extended to later in
the Business Day or the next Business
Day. In the event that FICC has the
ability to promptly fix the EPN system
disruption, EPN Users may be required
to process their Messages in accordance
with the applicable timeframes for the
remainder of the Business Day.
However, if FICC cannot promptly fix
the EPN system disruption, MBSD
would relieve EPN Users of their
obligation to process Messages through
the EPN Service until the beginning of
the next Business Day. In all cases, FICC
coordinates with EPN Users and, to the
extent necessary, SIFMA to
communicate whether an extension of
the cut-off time is necessary. Though
EPN system disruptions are rare, the
proposed change is consistent with
MBSD’s existing practice of handling
system disruptions that impact the EPN
Service.
Section 5 (EPN Users Bound by EPN
Rules, EPN Procedures and Applicable
Laws) states, in part, that the use of
FICC’s facilities by an EPN User shall
constitute such EPN User’s agreement
with FICC and with all other EPN Users
to be bound by the provisions of, and by
any action taken or order issued by FICC
pursuant to the EPN Rules and any
amendment thereto, and to such EPN
Procedures that FICC from time to time
may adopt. FICC is proposing to amend
the title of this section and the
paragraph in this section to delete all
references to EPN Procedures.
Section 6 (EPN Rules and EPN
Procedures Incorporated in EPN User
Messages) states that the EPN Rules and
the EPN Procedures adopted from time
to time by FICC shall be deemed
incorporated in each Message that
occurs through the EPN Service. It also
states that if the terms contained in any
other agreement between EPN Users are
inconsistent with the provisions of the
EPN Rules or the EPN Procedures, the
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EPN Rules and the EPN Procedures
shall be controlling. FICC is proposing
to amend the title of this section and the
paragraph in this section to delete all
references to EPN Procedures.
ii. Proposed Changes to EPN Rule 3—
When the Corporation Declines To Act
for an EPN User
Section 1 (Ceasing to Act for an EPN
User) in EPN Rule 3 states, in part, that
FICC may at any time cease to act for an
EPN User if the EPN User has (i) failed
to perform its obligations to FICC or
other EPN Users under the EPN Rules or
the EPN Procedures or (ii) materially
violated any of the EPN Rules, EPN
Procedures or any agreement with FICC.
FICC is proposing to amend this section
to delete all references to the EPN
Procedures.
iii. Proposed Changes to EPN Rule 4—
Admission to Premises of Corporation;
Powers of Attorney
EPN Rule 4 states, in part, that no
person shall be permitted to enter
FICC’s premises as the representative of
any EPN User unless ‘‘he’’ has first been
approved by FICC. FICC is proposing to
delete the reference to ‘‘he’’ and replace
it with ‘‘such person’’ because FICC
believes that it would be more
appropriate to use gender neutral
terminology.
c. Article V—Miscellaneous
i. Proposed Changes to EPN Rule 1—
Action by the Corporation
EPN Rule 1 states that except where
action by the Board, or any committee
of the Board, is specifically required by
the By-Laws or the EPN Rules, FICC
may act by its President, any Managing
Director or any Vice President or by
such person as may be designated from
time to time by the Board. FICC is
proposing to amend this sentence to
delete the reference to Vice President
and replace it with Executive Director.
FICC is proposing this change because
FICC no longer utilizes the Vice
President title. This category of officers
is currently referred to as Executive
Directors.
ii. Proposed Changes to EPN Rule 3—
Fines and Other Sanctions
EPN Rule 3 states that FICC may
impose a fine on an EPN User for a
violation of the EPN Rules or EPN
Procedures. FICC is proposing to amend
this paragraph to delete the reference to
EPN Procedures.
iii. Proposed Changes to EPN Rule 4—
Communications
Section 1 (Communications) states, in
part, that each EPN User maintaining an
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40613
Account shall be required to maintain
such data processing and
communications equipment as FICC
may specify in the EPN Procedures.
FICC is proposing to delete the reference
to EPN Procedures and amend this
sentence to state that each EPN User
maintaining an Account shall be
required to maintain such data
processing and communications
equipment as FICC may specify from
time to time. The proposed change is
consistent with FICC’s existing practice
of providing data processing and
communications equipment
requirements to all approved applicants
during the membership onboarding
process. In the event that FICC changes
or updates its data processing and
communications equipment
requirements, FICC partners with
applicants and EPN Users to help
ensure that their equipment is adequate
and that such EPN Users are
operationally ready. EPN Users are
made aware of all changes or updates to
FICC’s data processing and
communications equipment
requirements because FICC
communicates such changes through
various forms of communication
including but not limited to important
notices, electronic mail and phone.
iv. Proposed Changes to EPN Rule 7—
Hearings
Section 1 (Requests for a Hearing)
states, in part, that if an Interested
Person’s written statement contests
FICC’s determination that such
Interested Person has violated an EPN
Rule or EPN Procedure, the statement
must specifically admit or deny each
violation alleged and detail the reasons
why the EPN Rules or EPN Procedures
alleged to have been violated are being
contested. FICC is proposing to amend
this sentence to delete all references to
the EPN Procedures.
v. Proposed Changes to EPN Rule 11—
EPN Procedures
FICC is proposing to delete this rule
its entirety because FICC does not
maintain EPN Procedures. EPN Rule 11
of Article V empowers FICC to adopt
EPN Procedures as FICC ‘‘deems
necessary or desirable.’’ 15 It appears
that when FICC instituted the EPN
Service and the related EPN Rules, EPN
Procedures were not adopted at that
time.16 Since FICC does not currently
maintain EPN Procedures, FICC has
decided to conform the EPN Rules to its
practices by deleting this Rule, the
defined term from EPN Rule 1 of Article
15 See
16 See
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supra note 3.
supra note 13.
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I (as stated above), and related
references throughout the EPN Rules
because this inchoate power is itself not
necessary. FICC would reserve this rule
for future use and this rule would be
entitled ‘‘Reserved for Future Use.’’
vi. Proposed Changes to EPN Rule 12—
Waivers, Etc.
EPN Rule 12 states, in part, that the
time fixed by the EPN Rules, the EPN
Procedures or any regulations issued by
FICC for the doing of any act may be
extended, waived or suspended by the
Board or by any officer of FICC having
a rank of Vice President or higher
whenever such extension, waiver or
suspension is necessary or expedient.
FICC is proposing to amend this
sentence to delete all references to EPN
Procedures and delete all references to
regulations issued by FICC. FICC is also
proposing to delete the reference to
‘‘Vice President’’ and replace it with
‘‘Executive Director’’ because FICC no
longer utilizes the Vice President title.
This category of officers is currently
referred to as Executive Directors.
vii. Proposed Changes to EPN Rule 17—
Forms
EPN Rule 17 states, in part, that any
information required to be delivered to
FICC by use of any such forms may be
delivered by the use of any media, as
shall be prescribed in the EPN
Procedures or by FICC from time to
time. FICC is proposing to delete the
reference to EPN Procedures. In the
event that FICC requires that a
particular form should be delivered by
use of any media, it is FICC’s existing
practice to provide this information
directly to the affected EPN User. To the
extent that such requirement is
applicable to a group or category of EPN
Users, such EPN Users are made aware
of FICC’s requirements because FICC
announces such information through
important notices, available at https://
www.dtcc.com/legal/important-notices.
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(3) Proposed Changes To Provide
Enhanced Transparency to the EPN
Rules
FICC is proposing to amend the EPN
Rules to provide transparency to various
provisions in the EPN Rules. The
proposed changes would help ensure
that the EPN Rules are clear and
accurate. The proposed changes reflect
MBSD’s existing practices and FICC
believes that these changes would help
EPN Users better understand their rights
and obligations under the EPN Rules.
The proposed changes are described in
detail below.
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a. Article I—Definitions and General
Provisions
Proposed Changes to EPN Rule 1—
Definitions
FICC is proposing to amend the term
‘‘Message’’ to delete the reference to
EPN Procedures. FICC would define this
term as all electronic messages sent and
received by an EPN User through the
EPN Service.
b. Article II—Messages Processed by the
Corporation
i. Proposed Changes to EPN Rule 1—
Accounts
Section 2 (Limitations) states that
FICC may specify in the EPN Procedures
that certain Messages between EPN
Users are not eligible for the EPN
Service. FICC is proposing to delete the
reference to EPN Procedures and amend
this section to state that certain
Messages may be ineligible if FICC
determines that such Messages are not
submitted in a manner that is consistent
with the communication links, formats,
timeframes, and deadlines established
by FICC.
Currently, an EPN User is informed of
the requisite communication links,
formats, timeframes, and deadlines
when such EPN User’s application has
been approved by MBSD. This
information is communicated to all
approved applicants during the
membership onboarding process. The
communication links and formats are
also available in MBSD’s
implementation guidelines at https://
www.dtcc.com/clearing-services/ficcmbsd/ficc-mbsd-user-documentation.
The timeframes and deadlines are
available at https://www.dtcc.com/∼/
media/Files/Downloads/ClearingServices/FICC/MBSD/MBSD-ClearingSchedules-and-Timeframes.pdf.
ii. Proposed Changes to EPN Rule 2—
Reports
Section 1 (Availability of Reports)
states that the Message Detail Report
and the Message Summary Report are
available at a time specified in the EPN
Procedures. FICC is proposing to delete
the reference to EPN Procedures and
amend this section to state that these
reports would be available at a time
specified in the time schedule posted on
FICC’s website. This proposed change
refers to the timeframes available at
https://www.dtcc.com/∼/media/Files/
Downloads/Clearing-Services/FICC/
MBSD/MBSD-Clearing-Schedules-andTimeframes.pdf.
Section 2 (Message Detail Report)
states that the Message Detail Report
shall list the contents of each Message
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as described in the EPN Procedures.
FICC is proposing to delete the reference
to EPN Procedures and amend this
section to state that for each Eligible
Security, the Message Detail Report
would include, but would not be
limited to, the pool number, original
face value, current face value, maturity
date, pool factor, CUSIP Number, issue
date, principal and interest, and total
net money. In connection with this
change, FICC is proposing to amend
Article I, EPN Rule 1 (Definitions) to
include a defined term for ‘‘CUSIP
Number.’’ This term would be defined
as the Committee on Uniform Securities
Identification Procedures identifying
number for an EPN Eligible Security.
The proposed change to this section
would be consistent with the
information that is currently included in
the Message Detail Report.
Section 3 (Message Summary Report)
states that the Message Summary Report
shall list the contents of each Message
as described in the EPN Procedures.
FICC is proposing to delete the reference
to EPN Procedures and amend this
section to state that for each Eligible
Security, the Message Summary Report
would include, but would not be
limited to, the total original face value,
total net money, CUSIP Number, and
summary of the number and type of
Messages. The proposed change to this
section would be consistent with the
information that is currently included in
the Message Summary Report.
Section 5 (Good Delivery; Time
Stamps) states that each EPN Message
shall include one or more time stamps,
one of which will include a good
delivery time stamp as described in the
EPN Procedures. FICC is proposing to
delete the reference to ‘‘EPN’’ in the
term ‘‘EPN Message’’ because ‘‘EPN
Message’’ is not a defined term,
however, ‘‘Message’’ is a defined term.
FICC is also proposing to delete the
reference to EPN Procedures. FICC is
also proposing to amend this section to
state that the good delivery time stamp
would be referred to as ‘‘T2’’ and that
the application of this time stamp
would determine good delivery among
EPN Users pursuant to the SIFMA
Guidelines. The proposed change would
also state that the remainder of the time
stamps would be for the EPN Service’s
operational, processing, and reporting
purposes.17
17 Each Message reflects additional time stamps
(e.g., T1, T3, T4, and T5) that are solely for FICC’s
operational, processing and reporting purposes. T1
represents the time when the Message is received
by the EPN Service for processing; T3 represents the
time when the EPN Service’s Message Processor
sends the Message to the Outbound Table; T4
represents the time when the Message Processor
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In accordance with the SIFMA
Guidelines, pool sellers use the EPN
Service to transmit pool information in
real-time to their pool buyer
counterparties. Two Business Days prior
to the established settlement date of tobe-announced settlement obligations
(known as ‘‘48-Hour Day’’), pool sellers
that have an obligation to deliver pools
to pool buyers must submit pool
information that such pool sellers
intend to allocate in satisfaction of their
settlement obligation. This notification
must occur by 3:00 p.m. on 48-Hour
Day.18 The 3:00 p.m. cut-off time
establishes that good delivery has
occurred for purposes of the established
settlement date—meaning that, if a pool
seller submits its pool information in a
Message by the 3:00 p.m. cut-off time on
48-Hour Day, then the pool buyer is
obligated to accept the mortgage pools
on the settlement date. In the event that
the pool seller’s notification does not
meet the 3:00 p.m. deadline, the pool
buyer will determine whether it is
willing to accept the pools subsequent
to the settlement date, and either the
pool seller or the pool buyer will
finance the mortgage pools until the
delivery date. The delivery of the
mortgage pools and any financing
arrangement occur outside of the EPN
Service.
Because the timing of each Message is
important, the EPN system applies time
stamps to each Message that is
processed through the EPN Service. The
time stamp designated as T2 establishes
whether the pool seller has met good
delivery—meaning, the 3:00 p.m. cut-off
time on 48-Hour Day.19
In the event that the pool seller
decides to substitute a mortgage pool for
which pool information has already
been provided, the pool seller must
submit a cancel and correct Message by
12:15 p.m. on any Business Day prior to
the delivery of the mortgage pool.20
Upon receipt of the pool seller’s
Message, the EPN system transmits the
Message to the pool buyer. The T2 time
stamp on the Message received by the
pool buyer establishes whether good
archives the Message; and T5 represents the time
when the EPN Service’s Output Formatter writes
the Message to the Outbound Table. The Message
Processor, Outbound Table and the Output
Formatter are operational components of the EPN
Service.
18 See MBSD’s timeframes, available at https://
www.dtcc.com/∼/media/Files/Downloads/ClearingServices/FICC/MBSD/MBSD-Clearing-Schedulesand-Timeframes.pdf; and see the SIFMA
Guidelines, Chapter 7, supra note 9.
19 In the event that a pool seller fails to submit
its pool information, such pool seller’s obligation to
submit the pool information remains ongoing until
the pool information is submitted.
20 Supra note 18.
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18:28 Aug 14, 2018
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delivery has occurred for purposes of
the pool seller’s pool substitution. In the
event that the T2 time stamp on the pool
buyer’s Message is after 12:15 p.m.,
FICC is responsible for financing the
mortgage pools associated with the
Message until the delivery date so long
as the T2 time stamp on the pool seller’s
Message reflects a time that is at or
before 12:15 p.m. As set forth in
subsection (4) below, FICC is proposing
to establish one good delivery T2 time
stamp that reflects the same processing
time on the pool seller’s Message and
the pool buyer’s Message, respectively.
This T2 time stamp would determine
whether the pool seller’s cancel and
correct Message has met the good
delivery requirement.
c. Article III—EPN Users
Proposed Changes to EPN Rule 5—Use
of EPN Service
EPN Rule 5 states, in part, that all
EPN Users will use the EPN Service for
EPN Eligible Securities in a manner set
forth in the EPN Procedures and that
this shall be accomplished by providing
(for each Message that an EPN User
sends or receives) the pricing and other
descriptive information, in the manner,
and by the cut-off times, specified in the
EPN Procedures. FICC is proposing to
delete the references to EPN Procedures
and amend this rule to state that the
EPN User will use the EPN Service in
a manner set forth in the EPN Rules and
that this shall be accomplished by
providing (for each Message that an EPN
User sends or receives) the pricing and
other descriptive information, in the
manner, and by the times, specified on
FICC’s website. This information is
communicated to all approved
applicants during the membership
onboarding process. The information
that an EPN User is required to include
in a Message is available at https://
www.dtcc.com/clearing-services/ficcmbsd/ficc-mbsd-userdocumentation.aspx, and the
timeframes are available at https://
www.dtcc.com/∼/media/Files/
Downloads/Clearing-Services/FICC/
MBSD/MBSD-Clearing-Schedules-andTimeframes.pdf.
(4) Proposed Change to the EPN
System’s Processing of the Good
Delivery T2 Time Stamp for Pool
Substitutions
As described above in subsection
(3)b.ii., if a pool seller decides to
substitute a mortgage pool for which
pool information has already been
provided, the pool seller must submit a
cancel and correct Message by 12:15
p.m. on any Business Day prior to the
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40615
delivery of the mortgage pool. Upon
receipt of the pool seller’s Message, the
EPN system applies a T2 time stamp to
the pool seller’s Message to reflect the
time that the EPN system received the
pool seller’s Message. The EPN system
also applies a T2 time stamp to the pool
buyer’s Message to reflect the time that
the pool buyer received the pool seller’s
Message. The T2 time stamp on the pool
buyer’s Message establishes whether
good delivery has occurred for purposes
of the pool seller’s pool substitution. In
the event that the T2 time stamp on the
pool buyer’s Message reflects a time that
is after 12:15 p.m., FICC is responsible
for financing the mortgage pools that are
associated with the Message until the
next Business Day.21
FICC is proposing to establish one
good delivery T2 time stamp that
reflects the same processing time on the
pool seller’s Message and the pool
buyer’s Message, respectively. This time
stamp would determine whether the
12:15 p.m. cut-off time has been met for
purposes of establishing good delivery
of the pool buyer’s pool substitution. As
a result of this change, in the event that
the T2 time stamp reflects a time that
does not meet the 12:15 p.m. cut-off
time, the financing of the mortgage
pools, if any, would be the
responsibility of the counterparties to
the Message as determined by such
parties in accordance with the SIFMA
Guidelines. FICC is proposing this
change because it would be consistent
with the SIFMA Guidelines and FICC
believes that the parties to the Message
are best positioned to ensure that the
Message meets the good delivery
requirements.
The proposed change would be
consistent with FICC’s proposal to
amend Section 5 (Good Delivery; Time
Stamps) in EPN Rule 2 (Reports) of
Article II (Messages Processed by the
Corporation) (as referenced above in
subsection (3)b.ii.) to state that the good
delivery time stamp would be referred
to as ‘‘T2’’ and the application of this
time stamp would determine good
delivery among EPN Users pursuant to
the SIFMA Guidelines.
The proposed change would not affect
FICC’s guarantee and novation of
transactions submitted by Clearing
Members through MBSD’s Clearing
System.
(5) Implementation of the Proposed
Rule Changes
The proposed changes to (i) correct
the EPN Rules (as described above in
21 To date, all Messages have met the established
good delivery requirements, and as a result, FICC
has not had to finance any mortgage pools.
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Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices
subsection (2)) and (ii) provide
transparency to the EPN Rules (as
described above in subsection (3))
would become operative on the date of
the Commission’s approval of this
proposed rule change.
The proposed change to the EPN
system’s processing of the good delivery
T2 time stamp for pool substitutions (as
described above in subsection (4))
would become operative within 45
Business Days after the date of the
Commission’s approval of this proposed
rule change. FICC would add a legend
to Article II (Messages Processed by the
Corporation) that identifies the
implementation date of the proposed
change to Section 5 of EPN Rule 2.
daltland on DSKBBV9HB2PROD with NOTICES
2. Statutory Basis
Section 17A(b)(3)(F) of the Securities
Exchange Act of 1934 (‘‘Act’’) requires,
in part, that the EPN Rules be designed
to promote the prompt and accurate
clearance and settlement of securities
transactions.22
The proposed changes to (i) correct
the EPN Rules (as described above in
subsection (2) of Item II.(A)1) and (ii)
provide transparency to the EPN Rules
(as described above in subsection (3) of
Item II (A)1) would help to ensure that
the EPN Rules are accurate and clear to
EPN Users. When EPN Users better
understand their rights and obligations
regarding the EPN Service, such EPN
Users are more likely to act in
accordance with the EPN Rules, which
FICC believes would promote the
prompt and accurate clearance and
settlement of securities transactions. As
such, FICC believes that the proposed
changes to correct and provide
transparency to the EPN Rules would be
consistent with Section 17A(b)(3)(F) of
the Act.23
The proposed change to established
one good delivery T2 time stamp (as
described above in subsection (4) of
Item II (A)1) would be consistent with
the SIFMA Guidelines and would
further encourage EPN Users to adhere
to the 12:15 p.m. deadline for
substitutions. Because the proposed
change would be consistent with the
SIFMA Guidelines, which reflect
industry best practices, FICC believes
that the proposed change would help
the seamless processing of transactions
through the EPN Service. As a result,
FICC believes the proposed change
further promotes the prompt and
accurate clearance and settlement of
securities transactions. As such, FICC
believes that the proposed change
would be consistent with Section
17A(b)(3)(F) of the Act.24
Rule 17Ad–22(e)(23)(i) under the Act
requires, in part, that FICC establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to provide for
publicly disclosing all relevant rules
and material procedures.25 As described
above, the proposed rule changes to (i)
correct the EPN Rules (as described
above in subsection (2) of Item II (A)1),
(ii) provide transparency to the EPN
Rules (as described above in subsection
(3) Item II (A)1) and (iii) amend the EPN
system’s processing of T2 time stamps
for pool substitutions would better
disclose all relevant and material
aspects of the EPN Service. Therefore,
FICC believes the proposed changes to
correct and provide transparency to the
EPN Rules are consistent with Rule
17Ad–22(e)(23)(i).26
(B) Clearing Agency’s Statement on
Burden on Competition
FICC does not believe the proposed
rule changes to (i) correct the EPN Rules
(as described above in subsection (2) of
Item II(A)1) and (ii) provide
transparency to the EPN Rules (as
described above in subsection (3) of
Item II(A)1) would impact competition.
The proposed rule changes would help
to ensure that the EPN Rules remain
clear and accurate. In addition, the
changes would facilitate EPN Users’
understanding of the EPN Rules and
their obligations thereunder. These
changes would apply equally to all EPN
Users and would not affect FICC’s
operations or the rights and obligations
of EPN membership. As such, FICC
believes the proposed rule changes to
correct and provide transparency to the
EPN Rules would not have any impact
on competition.
FICC believes that the proposed
change to establish one good delivery
T2 time stamp (as described above in
subsection (4) of Item II(A)1) could have
an impact on competition among the
parties to the Message because either the
pool seller or the pool buyer (as
determined by the parties in accordance
with the SIFMA Guidelines) would be
responsible for financing the substituted
mortgage pools associated with a
Message that does not meet the good
delivery requirements. FICC does not
believe that the burden on competition
would be significant because it would
similarly affect both counterparties to a
cancel and correct Message that does
not meet the good delivery requirements
in accordance with the SIFMA
Guidelines.
FICC believes that any burden on
competition that is created by the
proposed change would be necessary
and appropriate in furtherance of the
purposes of the Act, as permitted by
Section 17A(b)(3)(I) of the Act.27 FICC
believes that the proposed change
would be necessary in furtherance of the
Act because it would be consistent with
the SIFMA Guidelines, which reflect
best practices. The SIFMA Guidelines
require either the pool seller or the pool
buyer to take responsibility of the
mortgage pools in the event that a
cancel and correct Message does not
meet good delivery requirements. FICC
believes the proposed change would be
appropriate in furtherance of the Act
because EPN Users are parties to each
Message, aware of the good delivery
requirements and best positioned to
ensure that cancel and correct Messages
meet the good delivery requirements. As
a result, FICC believes any burden on
competition that is created by the
proposed rule change would be
necessary and appropriate in
furtherance of the purposes of the Act,
as permitted by Section 17A(b)(3)(I) of
the Act.28
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
FICC has not received or solicited any
written comments relating to this
proposal. FICC will notify the
Commission of any written comments
received by FICC.
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
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
such 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
24 Id.
22 15
U.S.C. 78q–1(b)(3)(F).
25 17
23 Id.
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CFR 240.17Ad–22(e)(23)(i).
26 Id.
18:28 Aug 14, 2018
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27 15
U.S.C. 78q–1(b)(3)(I).
28 Id.
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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–
FICC–2018–007 on the subject line.
daltland on DSKBBV9HB2PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–FICC–2018–007. 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
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 the
filing also will be available for
inspection and copying at the principal
office of FICC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). 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–FICC–
2018–007 and should be submitted on
or before September 5, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–17489 Filed 8–14–18; 8:45 am]
BILLING CODE 8011–01–P
29 17
18:28 Aug 14, 2018
Forms Submitted to the Office of
Management and Budget for Extension
of Clearance
Selective Service System.
Notice.
AGENCY:
ACTION:
The following form has been
submitted to the Office of Management
and Budget (OMB) for extension of
clearance with change in compliance
with the Paperwork Reduction Act:
SSS Form 1
Title: The Selective Service System
Registration Form.
Purpose: Is used to register men and
establish a data base for use in
identifying manpower to the military
services during a national emergency.
Respondents: All 18-year-old males
who are United States citizens and those
male immigrants residing in the United
States at the time of their 18th birthday
are required to register with the
Selective Service System.
Frequency: Registration with the
Selective Service System is a one-time
occurrence.
Burden: A burden of two minutes or
less on the individual respondent.
Change: Collecting telephone
numbers from respondents.
Copies of the above identified form
can be obtained upon written request to
the Selective Service System,
Operations Directorate, 1515 Wilson
Boulevard, Arlington, Virginia 22209–
2425.
Written comments and
recommendations for the proposed
extension of clearance with change of
the form should be sent within 30 days
of the publication of this notice to the
Selective Service System, Operations
Directorate, 1515 Wilson Boulevard,
Arlington, Virginia 22209–2425.
A copy of the comments should be
sent to the Office of Information and
Regulatory Affairs, Attention: Desk
Officer, Selective Service System, Office
of Management and Budget, New
Executive Office Building, Room 3235,
Washington, DC 20503.
Dated: August 7, 2018.
Donald M. Benton,
Director.
[FR Doc. 2018–17625 Filed 8–14–18; 8:45 am]
BILLING CODE 8015–01–P
SMALL BUSINESS ADMINISTRATION
Surrender of License of Small
Business Investment Company
Pursuant to the authority granted to
the United States Small Business
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
SELECTIVE SERVICE SYSTEM
Jkt 244001
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Administration under the Small
Business Investment Act of 1958, as
amended, under Section 309 of the Act
and Section 107.1900 of the Small
Business Administration Rules and
Regulations (13 CFR 107.1900) to
function as a small business investment
company under the Small Business
Investment Company License No. 09/
09–0465 issued to Levine Leichtman
Capital Partners, LP, said license is
hereby declared null and void.
United States Small Business
Administration.
Dated: April 23, 2018.
A. Joseph Shepard,
Associate Administrator for Investment and
Innovation.
[FR Doc. 2018–17579 Filed 8–14–18; 8:45 am]
BILLING CODE P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #15626 and #15627;
Nebraska Disaster Number NE–00071]
Administrative Declaration of a
Disaster for the State of Nebraska
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a notice of an
Administrative declaration of a disaster
for the State of Nebraska dated 08/07/
2018.
Incident: Severe Storms and Flooding.
Incident Period: 06/25/2018 through
06/30/2018.
DATES: Issued on 08/07/2018.
Physical Loan Application Deadline
Date: 10/09/2018.
Economic Injury (EIDL) Loan
Application Deadline Date: 05/07/2019.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
Administrator’s disaster declaration,
applications for disaster loans may be
filed at the address listed above or other
locally announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties:
Iowa.
Contiguous Counties:
SUMMARY:
E:\FR\FM\15AUN1.SGM
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]]>Agencies
[Federal Register Volume 83, Number 158 (Wednesday, August 15, 2018)]
[Notices]
[Pages 40611-40617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17489]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83808; File No. SR-FICC-2018-007]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Proposed Rule Change To Correct Certain References,
Provide Transparency to Existing Processes and Amend Existing Practices
in Connection With the Mortgage-Backed Securities Division Electronic
Pool Notification Rules
August 9, 2018.
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 August 3, 2018, 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 the clearing agency. 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. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of amendments to the FICC
Mortgage-Backed Securities Division (``MBSD'') electronic pool
notification (``EPN'') Rules (the ``EPN Rules'') \3\ as described
below.
---------------------------------------------------------------------------
\3\ Terms not defined herein are defined in the EPN Rules,
available at https://www.dtcc.com/legal/rules-and-procedures.
---------------------------------------------------------------------------
FICC is proposing to correct the EPN Rules by (i) deleting
references to the term ``EPN Procedures,'' (ii) amending the definition
of the term ``Interested Person'' to delete the reference to
``Comparison Only System,'' (iii) deleting the defined term for ``Par
Amount,'' (iv) replacing references to the term ``Vice President'' with
the term ``Executive Director,'' (v) amending Sec. 3 (Agreements of EPN
User) in EPN Rule 1 (Requirements Applicable to EPN Users) of Article
III (EPN Users) to clarify an EPN User's obligation to process Messages
through the EPN system during a system disruption, and (vi) amending
EPN Rule 4 (Admission to Premises of Corporation; Power of Attorney) of
Article III (EPN Users) to replace a reference to ``he'' with ``such
person.''
FICC is proposing to amend various sections in the EPN Rules to
provide transparency to FICC's existing processes. Specifically, FICC
is proposing to amend EPN Rule 1 (Definitions) of Article I
(Definitions and General Provisions); Section 2 (Limitations) in EPN
Rule 1 (Accounts) and Section 1 (Availability of Reports), Section 2
(Message Detail Report), Section 3 (Message Summary Report), and
Section 5 (Good Delivery; Time Stamps) in EPN Rule 2 (Reports) of
Article II (Messages Processed by the Corporation); and EPN Rule 5 (Use
of EPN Service) of Article III (EPN Users).
FICC is also proposing to amend its existing practice in connection
with an EPN User's submission of a cancel and correct Message.\4\
Specifically, FICC is proposing to establish one good delivery time
stamp (referred to as the ``T2'' \5\ time stamp) that reflects the same
processing time on the pool seller's and the pool buyer's cancel and
correct Message, respectively. The proposed change would not affect
FICC's guarantee and novation of transactions submitted by Clearing
Members through MBSD's Clearing System.\6\
---------------------------------------------------------------------------
\4\ See Article II, EPN Rule 2, Sec. 5, supra note 3.
\5\ The reference to ``T2'' does not relate to the two business
days settlement cycle for broker-dealer securities transactions,
known as ``T+2.''
\6\ MBSD maintains two sets of rulebooks. The EPN Rules govern
MBSD's EPN Service, and the MBSD Clearing Rules (the ``MBSD Rules'')
govern MBSD's clearance and settlement service. The MBSD Rules are
available at https://www.dtcc.com/legal/rules-and-procedures.
Pursuant to the MBSD Rules, the term ``Clearing System'' means the
(i) system of services provided by MBSD to persons that are Clearing
Members thereof, including trade comparison, to-be-announced
netting, pool comparison, pool netting, and settlement, as
applicable, and (ii) operations carried out by MBSD in the course of
providing such services, as provided in the MBSD Rules. See MBSD
Rule 1, Definitions.
---------------------------------------------------------------------------
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, the clearing agency 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. The clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
FICC is proposing to correct the EPN Rules by (i) deleting
references to the term ``EPN Procedures'' because FICC does not
maintain EPN Procedures, (ii) amending the definition of the term
``Interested Person'' to delete the reference to ``Comparison Only
System'' because MBSD does not maintain a Comparison Only System, (iii)
deleting the defined term for ``Par Amount'' because this term is not
used in the EPN Rules, (iv) replacing references to the term ``Vice
President'' with the term ``Executive Director'' because FICC no longer
utilizes the Vice President title, (v) amending Sec. 3 (Agreements of
EPN User) in EPN Rule 1 (Requirements Applicable to EPN Users) of
Article III (EPN Users) to clarify an EPN User's obligation to process
Messages through the EPN system during a system disruption because this
change would be an accurate reflection of FICC's existing practice, and
(vi) amending EPN Rule 4 (Admission to Premises of Corporation; Power
of Attorney) of Article III (EPN User) to replace a reference to ``he''
with ``such person'' because the reference to ``such person'' would be
gender neutral.
[[Page 40612]]
FICC is proposing to amend various sections in the EPN Rules to
provide transparency to FICC's existing processes. Specifically, FICC
is proposing to amend EPN Rule 1 (Definitions) of Article 1
(Definitions and General Provisions); Section 2 (Limitations) in EPN
Rule 1 (Accounts) and Section 1 (Availability of Reports), Section 2
(Message Detail Report), Section 3 (Message Summary Report), and
Section 5 (Good Delivery; Time Stamps) in EPN Rule 2 (Reports) of
Article II (Messages Processed by the Corporation); and EPN Rule 5 (Use
of EPN Service) of Article III (EPN Users).
FICC is also proposing to amend its existing practice in connection
with an EPN User's submission of a cancel and correct Message.\7\
Specifically, FICC is proposing to establish one good delivery T2 time
stamp \8\ that reflects the same processing time on the pool seller's
and the pool buyer's cancel and correct Message, respectively. As a
result of this change, in the event that the T2 time stamp reflects a
time that does not meet the good delivery requirements in accordance
with the Securities Industry and Financial Markets Association's
(``SIFMA'') Uniform Practices Manual for the Clearance and Settlement
of Mortgage-Backed Securities and Other Related Securities (referred to
in the EPN Rules as the ``SIFMA Guidelines''),\9\ the financing of the
mortgage pools associated with the Message, if any, would be the
responsibility of the counterparties to such Message, as determined by
such parties, in accordance with the SIFMA Guidelines. FICC is
proposing this change because it would be consistent with the SIFMA
Guidelines, and FICC believes that the parties to the Message are best
positioned to ensure that a cancel and correct Message meets the good
delivery requirements. The proposed change would not affect FICC's
guarantee and novation of transactions submitted by Clearing Members
through MBSD's Clearing System.
---------------------------------------------------------------------------
\7\ See supra note 4.
\8\ The good delivery T2 time stamp indicates whether good
delivery has occurred with respect to a Message--meaning, if the T2
time stamp reflects a time that is at or before the established
deadline, then good delivery has been established and the pool buyer
will accept the Message with respect to the allocated securities.
\9\ The SIFMA Guidelines are available at https://www.sifma.org/resources/general/tba-market-governance/.
---------------------------------------------------------------------------
The proposed changes are described in detail below.
(1) MBSD's EPN Service
MBSD's electronic pool notification service (referred to in the EPN
Rules as the ``EPN Service'') enables users to reduce risk and
streamline their operations by providing an automated manner for market
participants that have an obligation to deliver pools (``pool
sellers'') to transmit pool information efficiently and reliably to
their counterparties (``pool buyers'') in real time. Market
participants that wish to utilize the EPN Service are required to
submit an application to MBSD. The application process and the use of
the EPN Service are governed by the EPN Rules.\10\ The EPN Rules are
designed to be consistent with the SIFMA Guidelines, which reflect
common industry practices for the trading, clearance and settlement of
mortgage-backed securities transactions. MBSD's Clearing Members are
required to be EPN Users; however, one can be an EPN User and not a
Clearing Member.\11\
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\10\ See Article III, EPN Rule 1, supra note 3.
\11\ Pursuant to the MBSD Rules, the term ``Clearing Member''
means any entity admitted into membership pursuant to MBSD Rule 2A.
See MBSD Rule 1, Definitions, supra note 6.
---------------------------------------------------------------------------
(2) Proposed Changes To Correct the EPN Rules
FICC is proposing to amend the EPN Rules in order to correct
various provisions in the EPN Rules. The proposed changes would help
ensure that the EPN Rules are clear and accurate. The proposed changes
reflect MBSD's existing practices and FICC believes that these changes
would help EPN Users better understand their rights and obligations
under the EPN Rules. The proposed changes are described in detail
below.
a. Article I--Definitions and General Provisions
Proposed Changes to EPN Rule 1--Definitions
FICC is proposing to delete the term ``EPN Procedures.'' EPN Rule
11 of Article V empowers FICC to adopt EPN Procedures as FICC ``deems
necessary or desirable.'' \12\ It appears that when FICC instituted the
EPN Service and the related EPN Rules, EPN Procedures were not adopted
at that time.\13\ Since FICC does not currently maintain EPN
Procedures, FICC has decided to conform the EPN Rules to its practices
by deleting this definition and the related references throughout the
EPN Rules because this inchoate power is itself not necessary.
---------------------------------------------------------------------------
\12\ See supra note 3.
\13\ FICC instituted the EPN Service and the related EPN Rules
on a pilot basis in February 1995. The Commission's temporary
approval order notes that Amendment No. 2 to the proposed rule
change clarified that ``the only MBS rules and procedures applicable
to EPN users are the rules and procedures located in Articles VI,
VII, VIII, IX, and X of MBS's rules.'' See Release No. 35009
(November 25, 1994) 59 FR 61913 (December 2, 1994) (SR-MBS-94-02).
The Commission granted permanent approval of the EPN Service and the
related EPN Rules in November 1995. See Release No. 36540 (November
30, 1995) 60 FR 63089 (December 8, 1995) (SR-MBS-95-09). It should
be noted FICC submitted a proposed rule change in June 2017 which,
among other things, renumbered the references of Articles VI, VII,
VIII, IX, and X to refer to Articles I, II, III, IV and V,
respectively. See Release No. 81002 (June 22, 2017) 82 FR 29355
(June 28, 2017) (SR-FICC-2017-015).
---------------------------------------------------------------------------
FICC is proposing to amend the term ``EPN Service'' to delete the
reference to EPN Procedures.
FICC is proposing to amend the term ``EPN User Profile'' to delete
the reference to EPN Procedures. In connection with this change, FICC
is proposing to make a grammatical correction to this definition by
replacing the word ``in'' with ``by'' so that the definition would
state that ``the EPN User Profile would be on a form specified `by'
FICC.''
FICC is proposing to amend the term ``Interested Person'' to delete
the reference to Comparison Only System because MBSD does not maintain
a Comparison Only System. FICC believes that the inclusion of this term
in the EPN Rules was an error.
FICC is proposing to delete the term ``Par Amount'' because this
term is not otherwise referred to in the EPN Rules. FICC believes that
the inclusion of this term in the EPN Rules was an error and that it
has no practical effect because this term is not used in the EPN Rules.
FICC notes that this term was included and not defined in a version of
the EPN Rules that was filed with the Commission on October 20,
1999.\14\
---------------------------------------------------------------------------
\14\ Release No. 42721 (April 25, 2000) 65 FR 25778 (May 3,
2000) (SR-MBSCC-99-8).
---------------------------------------------------------------------------
b. Article III--EPN Users
i. Proposed Changes to EPN Rule 1--Requirements Applicable to EPN Users
Section 3 (Agreements of EPN Users) sets forth a list of terms that
an applicant is required to agree to, as specified in the EPN User
Agreement. This list states, in part, that an applicant shall agree (i)
to abide by and be bound by the EPN Rules and EPN Procedures, (ii) that
the EPN Rules and EPN Procedures are incorporated into every contract
or Message, (iii) that the EPN User shall pay fines that are imposed in
accordance with the EPN Rules and EPN Procedures, and (iv) that it is
bound by any amendment to the EPN Rules and EPN Procedures. FICC is
proposing to delete all references in this section to the EPN
Procedures.
Section 3 also includes a paragraph that states that in the event
of an EPN
[[Page 40613]]
system disruption and an extension of the cut-off times for
communicating pool allocation information pursuant to the SIFMA
Guidelines, EPN Users ``will'' be relieved of their obligation to
process Messages through the EPN Service until the beginning of the
next Business Day after the EPN system has been recovered. FICC is
proposing to amend this provision to state that EPN Users ``may'' be
relieved of their obligation to process Messages through the EPN
Service until ``later in the Business Day or'' the beginning of the
next Business Day after the EPN system has been recovered.
FICC is proposing this change because the nature of the EPN system
disruption and MBSD's ability to promptly fix such disruption
determines whether the cut-off time would be extended to later in the
Business Day or the next Business Day. In the event that FICC has the
ability to promptly fix the EPN system disruption, EPN Users may be
required to process their Messages in accordance with the applicable
timeframes for the remainder of the Business Day. However, if FICC
cannot promptly fix the EPN system disruption, MBSD would relieve EPN
Users of their obligation to process Messages through the EPN Service
until the beginning of the next Business Day. In all cases, FICC
coordinates with EPN Users and, to the extent necessary, SIFMA to
communicate whether an extension of the cut-off time is necessary.
Though EPN system disruptions are rare, the proposed change is
consistent with MBSD's existing practice of handling system disruptions
that impact the EPN Service.
Section 5 (EPN Users Bound by EPN Rules, EPN Procedures and
Applicable Laws) states, in part, that the use of FICC's facilities by
an EPN User shall constitute such EPN User's agreement with FICC and
with all other EPN Users to be bound by the provisions of, and by any
action taken or order issued by FICC pursuant to the EPN Rules and any
amendment thereto, and to such EPN Procedures that FICC from time to
time may adopt. FICC is proposing to amend the title of this section
and the paragraph in this section to delete all references to EPN
Procedures.
Section 6 (EPN Rules and EPN Procedures Incorporated in EPN User
Messages) states that the EPN Rules and the EPN Procedures adopted from
time to time by FICC shall be deemed incorporated in each Message that
occurs through the EPN Service. It also states that if the terms
contained in any other agreement between EPN Users are inconsistent
with the provisions of the EPN Rules or the EPN Procedures, the EPN
Rules and the EPN Procedures shall be controlling. FICC is proposing to
amend the title of this section and the paragraph in this section to
delete all references to EPN Procedures.
ii. Proposed Changes to EPN Rule 3--When the Corporation Declines To
Act for an EPN User
Section 1 (Ceasing to Act for an EPN User) in EPN Rule 3 states, in
part, that FICC may at any time cease to act for an EPN User if the EPN
User has (i) failed to perform its obligations to FICC or other EPN
Users under the EPN Rules or the EPN Procedures or (ii) materially
violated any of the EPN Rules, EPN Procedures or any agreement with
FICC. FICC is proposing to amend this section to delete all references
to the EPN Procedures.
iii. Proposed Changes to EPN Rule 4--Admission to Premises of
Corporation; Powers of Attorney
EPN Rule 4 states, in part, that no person shall be permitted to
enter FICC's premises as the representative of any EPN User unless
``he'' has first been approved by FICC. FICC is proposing to delete the
reference to ``he'' and replace it with ``such person'' because FICC
believes that it would be more appropriate to use gender neutral
terminology.
c. Article V--Miscellaneous
i. Proposed Changes to EPN Rule 1--Action by the Corporation
EPN Rule 1 states that except where action by the Board, or any
committee of the Board, is specifically required by the By-Laws or the
EPN Rules, FICC may act by its President, any Managing Director or any
Vice President or by such person as may be designated from time to time
by the Board. FICC is proposing to amend this sentence to delete the
reference to Vice President and replace it with Executive Director.
FICC is proposing this change because FICC no longer utilizes the Vice
President title. This category of officers is currently referred to as
Executive Directors.
ii. Proposed Changes to EPN Rule 3--Fines and Other Sanctions
EPN Rule 3 states that FICC may impose a fine on an EPN User for a
violation of the EPN Rules or EPN Procedures. FICC is proposing to
amend this paragraph to delete the reference to EPN Procedures.
iii. Proposed Changes to EPN Rule 4--Communications
Section 1 (Communications) states, in part, that each EPN User
maintaining an Account shall be required to maintain such data
processing and communications equipment as FICC may specify in the EPN
Procedures. FICC is proposing to delete the reference to EPN Procedures
and amend this sentence to state that each EPN User maintaining an
Account shall be required to maintain such data processing and
communications equipment as FICC may specify from time to time. The
proposed change is consistent with FICC's existing practice of
providing data processing and communications equipment requirements to
all approved applicants during the membership onboarding process. In
the event that FICC changes or updates its data processing and
communications equipment requirements, FICC partners with applicants
and EPN Users to help ensure that their equipment is adequate and that
such EPN Users are operationally ready. EPN Users are made aware of all
changes or updates to FICC's data processing and communications
equipment requirements because FICC communicates such changes through
various forms of communication including but not limited to important
notices, electronic mail and phone.
iv. Proposed Changes to EPN Rule 7--Hearings
Section 1 (Requests for a Hearing) states, in part, that if an
Interested Person's written statement contests FICC's determination
that such Interested Person has violated an EPN Rule or EPN Procedure,
the statement must specifically admit or deny each violation alleged
and detail the reasons why the EPN Rules or EPN Procedures alleged to
have been violated are being contested. FICC is proposing to amend this
sentence to delete all references to the EPN Procedures.
v. Proposed Changes to EPN Rule 11--EPN Procedures
FICC is proposing to delete this rule its entirety because FICC
does not maintain EPN Procedures. EPN Rule 11 of Article V empowers
FICC to adopt EPN Procedures as FICC ``deems necessary or desirable.''
\15\ It appears that when FICC instituted the EPN Service and the
related EPN Rules, EPN Procedures were not adopted at that time.\16\
Since FICC does not currently maintain EPN Procedures, FICC has decided
to conform the EPN Rules to its practices by deleting this Rule, the
defined term from EPN Rule 1 of Article
[[Page 40614]]
I (as stated above), and related references throughout the EPN Rules
because this inchoate power is itself not necessary. FICC would reserve
this rule for future use and this rule would be entitled ``Reserved for
Future Use.''
---------------------------------------------------------------------------
\15\ See supra note 3.
\16\ See supra note 13.
---------------------------------------------------------------------------
vi. Proposed Changes to EPN Rule 12--Waivers, Etc.
EPN Rule 12 states, in part, that the time fixed by the EPN Rules,
the EPN Procedures or any regulations issued by FICC for the doing of
any act may be extended, waived or suspended by the Board or by any
officer of FICC having a rank of Vice President or higher whenever such
extension, waiver or suspension is necessary or expedient. FICC is
proposing to amend this sentence to delete all references to EPN
Procedures and delete all references to regulations issued by FICC.
FICC is also proposing to delete the reference to ``Vice President''
and replace it with ``Executive Director'' because FICC no longer
utilizes the Vice President title. This category of officers is
currently referred to as Executive Directors.
vii. Proposed Changes to EPN Rule 17--Forms
EPN Rule 17 states, in part, that any information required to be
delivered to FICC by use of any such forms may be delivered by the use
of any media, as shall be prescribed in the EPN Procedures or by FICC
from time to time. FICC is proposing to delete the reference to EPN
Procedures. In the event that FICC requires that a particular form
should be delivered by use of any media, it is FICC's existing practice
to provide this information directly to the affected EPN User. To the
extent that such requirement is applicable to a group or category of
EPN Users, such EPN Users are made aware of FICC's requirements because
FICC announces such information through important notices, available at
https://www.dtcc.com/legal/important-notices.
(3) Proposed Changes To Provide Enhanced Transparency to the EPN Rules
FICC is proposing to amend the EPN Rules to provide transparency to
various provisions in the EPN Rules. The proposed changes would help
ensure that the EPN Rules are clear and accurate. The proposed changes
reflect MBSD's existing practices and FICC believes that these changes
would help EPN Users better understand their rights and obligations
under the EPN Rules. The proposed changes are described in detail
below.
a. Article I--Definitions and General Provisions
Proposed Changes to EPN Rule 1--Definitions
FICC is proposing to amend the term ``Message'' to delete the
reference to EPN Procedures. FICC would define this term as all
electronic messages sent and received by an EPN User through the EPN
Service.
b. Article II--Messages Processed by the Corporation
i. Proposed Changes to EPN Rule 1--Accounts
Section 2 (Limitations) states that FICC may specify in the EPN
Procedures that certain Messages between EPN Users are not eligible for
the EPN Service. FICC is proposing to delete the reference to EPN
Procedures and amend this section to state that certain Messages may be
ineligible if FICC determines that such Messages are not submitted in a
manner that is consistent with the communication links, formats,
timeframes, and deadlines established by FICC.
Currently, an EPN User is informed of the requisite communication
links, formats, timeframes, and deadlines when such EPN User's
application has been approved by MBSD. This information is communicated
to all approved applicants during the membership onboarding process.
The communication links and formats are also available in MBSD's
implementation guidelines at https://www.dtcc.com/clearing-services/ficc-mbsd/ficc-mbsd-user-documentation. The timeframes and deadlines
are available at https://www.dtcc.com/~/media/Files/Downloads/Clearing-
Services/FICC/MBSD/MBSD-Clearing-Schedules-and-Timeframes.pdf.
ii. Proposed Changes to EPN Rule 2--Reports
Section 1 (Availability of Reports) states that the Message Detail
Report and the Message Summary Report are available at a time specified
in the EPN Procedures. FICC is proposing to delete the reference to EPN
Procedures and amend this section to state that these reports would be
available at a time specified in the time schedule posted on FICC's
website. This proposed change refers to the timeframes available at
https://www.dtcc.com/~/media/Files/Downloads/Clearing-Services/FICC/
MBSD/MBSD-Clearing-Schedules-and-Timeframes.pdf.
Section 2 (Message Detail Report) states that the Message Detail
Report shall list the contents of each Message as described in the EPN
Procedures. FICC is proposing to delete the reference to EPN Procedures
and amend this section to state that for each Eligible Security, the
Message Detail Report would include, but would not be limited to, the
pool number, original face value, current face value, maturity date,
pool factor, CUSIP Number, issue date, principal and interest, and
total net money. In connection with this change, FICC is proposing to
amend Article I, EPN Rule 1 (Definitions) to include a defined term for
``CUSIP Number.'' This term would be defined as the Committee on
Uniform Securities Identification Procedures identifying number for an
EPN Eligible Security. The proposed change to this section would be
consistent with the information that is currently included in the
Message Detail Report.
Section 3 (Message Summary Report) states that the Message Summary
Report shall list the contents of each Message as described in the EPN
Procedures. FICC is proposing to delete the reference to EPN Procedures
and amend this section to state that for each Eligible Security, the
Message Summary Report would include, but would not be limited to, the
total original face value, total net money, CUSIP Number, and summary
of the number and type of Messages. The proposed change to this section
would be consistent with the information that is currently included in
the Message Summary Report.
Section 5 (Good Delivery; Time Stamps) states that each EPN Message
shall include one or more time stamps, one of which will include a good
delivery time stamp as described in the EPN Procedures. FICC is
proposing to delete the reference to ``EPN'' in the term ``EPN
Message'' because ``EPN Message'' is not a defined term, however,
``Message'' is a defined term. FICC is also proposing to delete the
reference to EPN Procedures. FICC is also proposing to amend this
section to state that the good delivery time stamp would be referred to
as ``T2'' and that the application of this time stamp would determine
good delivery among EPN Users pursuant to the SIFMA Guidelines. The
proposed change would also state that the remainder of the time stamps
would be for the EPN Service's operational, processing, and reporting
purposes.\17\
---------------------------------------------------------------------------
\17\ Each Message reflects additional time stamps (e.g., T1, T3,
T4, and T5) that are solely for FICC's operational, processing and
reporting purposes. T1 represents the time when the Message is
received by the EPN Service for processing; T3 represents the time
when the EPN Service's Message Processor sends the Message to the
Outbound Table; T4 represents the time when the Message Processor
archives the Message; and T5 represents the time when the EPN
Service's Output Formatter writes the Message to the Outbound Table.
The Message Processor, Outbound Table and the Output Formatter are
operational components of the EPN Service.
---------------------------------------------------------------------------
[[Page 40615]]
In accordance with the SIFMA Guidelines, pool sellers use the EPN
Service to transmit pool information in real-time to their pool buyer
counterparties. Two Business Days prior to the established settlement
date of to-be-announced settlement obligations (known as ``48-Hour
Day''), pool sellers that have an obligation to deliver pools to pool
buyers must submit pool information that such pool sellers intend to
allocate in satisfaction of their settlement obligation. This
notification must occur by 3:00 p.m. on 48-Hour Day.\18\ The 3:00 p.m.
cut-off time establishes that good delivery has occurred for purposes
of the established settlement date--meaning that, if a pool seller
submits its pool information in a Message by the 3:00 p.m. cut-off time
on 48-Hour Day, then the pool buyer is obligated to accept the mortgage
pools on the settlement date. In the event that the pool seller's
notification does not meet the 3:00 p.m. deadline, the pool buyer will
determine whether it is willing to accept the pools subsequent to the
settlement date, and either the pool seller or the pool buyer will
finance the mortgage pools until the delivery date. The delivery of the
mortgage pools and any financing arrangement occur outside of the EPN
Service.
---------------------------------------------------------------------------
\18\ See MBSD's timeframes, available at https://www.dtcc.com/~/
media/Files/Downloads/Clearing-Services/FICC/MBSD/MBSD-Clearing-
Schedules-and-Timeframes.pdf; and see the SIFMA Guidelines, Chapter
7, supra note 9.
---------------------------------------------------------------------------
Because the timing of each Message is important, the EPN system
applies time stamps to each Message that is processed through the EPN
Service. The time stamp designated as T2 establishes whether the pool
seller has met good delivery--meaning, the 3:00 p.m. cut-off time on
48-Hour Day.\19\
---------------------------------------------------------------------------
\19\ In the event that a pool seller fails to submit its pool
information, such pool seller's obligation to submit the pool
information remains ongoing until the pool information is submitted.
---------------------------------------------------------------------------
In the event that the pool seller decides to substitute a mortgage
pool for which pool information has already been provided, the pool
seller must submit a cancel and correct Message by 12:15 p.m. on any
Business Day prior to the delivery of the mortgage pool.\20\ Upon
receipt of the pool seller's Message, the EPN system transmits the
Message to the pool buyer. The T2 time stamp on the Message received by
the pool buyer establishes whether good delivery has occurred for
purposes of the pool seller's pool substitution. In the event that the
T2 time stamp on the pool buyer's Message is after 12:15 p.m., FICC is
responsible for financing the mortgage pools associated with the
Message until the delivery date so long as the T2 time stamp on the
pool seller's Message reflects a time that is at or before 12:15 p.m.
As set forth in subsection (4) below, FICC is proposing to establish
one good delivery T2 time stamp that reflects the same processing time
on the pool seller's Message and the pool buyer's Message,
respectively. This T2 time stamp would determine whether the pool
seller's cancel and correct Message has met the good delivery
requirement.
---------------------------------------------------------------------------
\20\ Supra note 18.
---------------------------------------------------------------------------
c. Article III--EPN Users
Proposed Changes to EPN Rule 5--Use of EPN Service
EPN Rule 5 states, in part, that all EPN Users will use the EPN
Service for EPN Eligible Securities in a manner set forth in the EPN
Procedures and that this shall be accomplished by providing (for each
Message that an EPN User sends or receives) the pricing and other
descriptive information, in the manner, and by the cut-off times,
specified in the EPN Procedures. FICC is proposing to delete the
references to EPN Procedures and amend this rule to state that the EPN
User will use the EPN Service in a manner set forth in the EPN Rules
and that this shall be accomplished by providing (for each Message that
an EPN User sends or receives) the pricing and other descriptive
information, in the manner, and by the times, specified on FICC's
website. This information is communicated to all approved applicants
during the membership onboarding process. The information that an EPN
User is required to include in a Message is available at https://www.dtcc.com/clearing-services/ficc-mbsd/ficc-mbsd-user-documentation.aspx, and the timeframes are available at https://
www.dtcc.com/~/media/Files/Downloads/Clearing-Services/FICC/MBSD/MBSD-
Clearing-Schedules-and-Timeframes.pdf.
(4) Proposed Change to the EPN System's Processing of the Good Delivery
T2 Time Stamp for Pool Substitutions
As described above in subsection (3)b.ii., if a pool seller decides
to substitute a mortgage pool for which pool information has already
been provided, the pool seller must submit a cancel and correct Message
by 12:15 p.m. on any Business Day prior to the delivery of the mortgage
pool. Upon receipt of the pool seller's Message, the EPN system applies
a T2 time stamp to the pool seller's Message to reflect the time that
the EPN system received the pool seller's Message. The EPN system also
applies a T2 time stamp to the pool buyer's Message to reflect the time
that the pool buyer received the pool seller's Message. The T2 time
stamp on the pool buyer's Message establishes whether good delivery has
occurred for purposes of the pool seller's pool substitution. In the
event that the T2 time stamp on the pool buyer's Message reflects a
time that is after 12:15 p.m., FICC is responsible for financing the
mortgage pools that are associated with the Message until the next
Business Day.\21\
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\21\ To date, all Messages have met the established good
delivery requirements, and as a result, FICC has not had to finance
any mortgage pools.
---------------------------------------------------------------------------
FICC is proposing to establish one good delivery T2 time stamp that
reflects the same processing time on the pool seller's Message and the
pool buyer's Message, respectively. This time stamp would determine
whether the 12:15 p.m. cut-off time has been met for purposes of
establishing good delivery of the pool buyer's pool substitution. As a
result of this change, in the event that the T2 time stamp reflects a
time that does not meet the 12:15 p.m. cut-off time, the financing of
the mortgage pools, if any, would be the responsibility of the
counterparties to the Message as determined by such parties in
accordance with the SIFMA Guidelines. FICC is proposing this change
because it would be consistent with the SIFMA Guidelines and FICC
believes that the parties to the Message are best positioned to ensure
that the Message meets the good delivery requirements.
The proposed change would be consistent with FICC's proposal to
amend Section 5 (Good Delivery; Time Stamps) in EPN Rule 2 (Reports) of
Article II (Messages Processed by the Corporation) (as referenced above
in subsection (3)b.ii.) to state that the good delivery time stamp
would be referred to as ``T2'' and the application of this time stamp
would determine good delivery among EPN Users pursuant to the SIFMA
Guidelines.
The proposed change would not affect FICC's guarantee and novation
of transactions submitted by Clearing Members through MBSD's Clearing
System.
(5) Implementation of the Proposed Rule Changes
The proposed changes to (i) correct the EPN Rules (as described
above in
[[Page 40616]]
subsection (2)) and (ii) provide transparency to the EPN Rules (as
described above in subsection (3)) would become operative on the date
of the Commission's approval of this proposed rule change.
The proposed change to the EPN system's processing of the good
delivery T2 time stamp for pool substitutions (as described above in
subsection (4)) would become operative within 45 Business Days after
the date of the Commission's approval of this proposed rule change.
FICC would add a legend to Article II (Messages Processed by the
Corporation) that identifies the implementation date of the proposed
change to Section 5 of EPN Rule 2.
2. Statutory Basis
Section 17A(b)(3)(F) of the Securities Exchange Act of 1934
(``Act'') requires, in part, that the EPN Rules be designed to promote
the prompt and accurate clearance and settlement of securities
transactions.\22\
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\22\ 15 U.S.C. 78q-1(b)(3)(F).
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The proposed changes to (i) correct the EPN Rules (as described
above in subsection (2) of Item II.(A)1) and (ii) provide transparency
to the EPN Rules (as described above in subsection (3) of Item II (A)1)
would help to ensure that the EPN Rules are accurate and clear to EPN
Users. When EPN Users better understand their rights and obligations
regarding the EPN Service, such EPN Users are more likely to act in
accordance with the EPN Rules, which FICC believes would promote the
prompt and accurate clearance and settlement of securities
transactions. As such, FICC believes that the proposed changes to
correct and provide transparency to the EPN Rules would be consistent
with Section 17A(b)(3)(F) of the Act.\23\
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\23\ Id.
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The proposed change to established one good delivery T2 time stamp
(as described above in subsection (4) of Item II (A)1) would be
consistent with the SIFMA Guidelines and would further encourage EPN
Users to adhere to the 12:15 p.m. deadline for substitutions. Because
the proposed change would be consistent with the SIFMA Guidelines,
which reflect industry best practices, FICC believes that the proposed
change would help the seamless processing of transactions through the
EPN Service. As a result, FICC believes the proposed change further
promotes the prompt and accurate clearance and settlement of securities
transactions. As such, FICC believes that the proposed change would be
consistent with Section 17A(b)(3)(F) of the Act.\24\
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\24\ Id.
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Rule 17Ad-22(e)(23)(i) under the Act requires, in part, that FICC
establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide for publicly disclosing all
relevant rules and material procedures.\25\ As described above, the
proposed rule changes to (i) correct the EPN Rules (as described above
in subsection (2) of Item II (A)1), (ii) provide transparency to the
EPN Rules (as described above in subsection (3) Item II (A)1) and (iii)
amend the EPN system's processing of T2 time stamps for pool
substitutions would better disclose all relevant and material aspects
of the EPN Service. Therefore, FICC believes the proposed changes to
correct and provide transparency to the EPN Rules are consistent with
Rule 17Ad-22(e)(23)(i).\26\
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\25\ 17 CFR 240.17Ad-22(e)(23)(i).
\26\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
FICC does not believe the proposed rule changes to (i) correct the
EPN Rules (as described above in subsection (2) of Item II(A)1) and
(ii) provide transparency to the EPN Rules (as described above in
subsection (3) of Item II(A)1) would impact competition. The proposed
rule changes would help to ensure that the EPN Rules remain clear and
accurate. In addition, the changes would facilitate EPN Users'
understanding of the EPN Rules and their obligations thereunder. These
changes would apply equally to all EPN Users and would not affect
FICC's operations or the rights and obligations of EPN membership. As
such, FICC believes the proposed rule changes to correct and provide
transparency to the EPN Rules would not have any impact on competition.
FICC believes that the proposed change to establish one good
delivery T2 time stamp (as described above in subsection (4) of Item
II(A)1) could have an impact on competition among the parties to the
Message because either the pool seller or the pool buyer (as determined
by the parties in accordance with the SIFMA Guidelines) would be
responsible for financing the substituted mortgage pools associated
with a Message that does not meet the good delivery requirements. FICC
does not believe that the burden on competition would be significant
because it would similarly affect both counterparties to a cancel and
correct Message that does not meet the good delivery requirements in
accordance with the SIFMA Guidelines.
FICC believes that any burden on competition that is created by the
proposed change would be necessary and appropriate in furtherance of
the purposes of the Act, as permitted by Section 17A(b)(3)(I) of the
Act.\27\ FICC believes that the proposed change would be necessary in
furtherance of the Act because it would be consistent with the SIFMA
Guidelines, which reflect best practices. The SIFMA Guidelines require
either the pool seller or the pool buyer to take responsibility of the
mortgage pools in the event that a cancel and correct Message does not
meet good delivery requirements. FICC believes the proposed change
would be appropriate in furtherance of the Act because EPN Users are
parties to each Message, aware of the good delivery requirements and
best positioned to ensure that cancel and correct Messages meet the
good delivery requirements. As a result, FICC believes any burden on
competition that is created by the proposed rule change would be
necessary and appropriate in furtherance of the purposes of the Act, as
permitted by Section 17A(b)(3)(I) of the Act.\28\
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\27\ 15 U.S.C. 78q-1(b)(3)(I).
\28\ Id.
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
FICC has not received or solicited any written comments relating to
this proposal. FICC will notify the Commission of any written comments
received by FICC.
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 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 such 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
[[Page 40617]]
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 [email protected]. Please include
File Number SR-FICC-2018-007 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-FICC-2018-007. 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 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 the filing also will be available for inspection
and copying at the principal office of FICC and on DTCC's website
(https://dtcc.com/legal/sec-rule-filings.aspx). 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-FICC-2018-007 and should be submitted on
or before September 5, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-17489 Filed 8-14-18; 8:45 am]
BILLING CODE 8011-01-P
