Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Amend the Government Securities Division Rulebook Relating to the Legal Entity Identifier Requirement, 19979-19982 [2020-07437]
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Federal Register / Vol. 85, No. 69 / Thursday, April 9, 2020 / Notices
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 the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeBZX–2020–029, and
should be submitted on or before April
30, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–07444 Filed 4–8–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88557; File No. SR–FICC–
2020–002]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing of Proposed Rule Change To
Amend the Government Securities
Division Rulebook Relating to the
Legal Entity Identifier Requirement
khammond on DSKJM1Z7X2PROD with NOTICES
April 3, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 25,
2020, 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
26 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
a proposal to amend the FICC
Government Securities Division
(‘‘GSD’’) Rulebook (‘‘GSD Rules’’) 3 to
require: (i) Each applicant to become a
Netting Member and CCIT Member to
obtain and provide a ‘‘Legal Entity
Identifier’’ 4 to FICC as part of its
membership application, (ii) each
Netting Member and CCIT Member to
have a current Legal Entity Identifier on
file with FICC at all times and to
indemnify FICC for any losses and Legal
Actions 5 that arise due to the failure of
a Netting Member or CCIT Member to
do so, as further described below, and
(iii) each Sponsoring Member to provide
FICC with a Legal Entity Identifier for
each of their current Sponsored
Members and for each newly added
Sponsored Member going forward and
to indemnify FICC for any losses and
Legal Actions that arise due to the
failure of a Sponsoring Member to do so,
as further described below.
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.
3 Capitalized terms not defined herein are defined
in the GSD Rules, available at https://
www.dtcc.com/legal/rules-and-procedures.
4 A ‘‘Legal Entity Identifier’’ is a 20-character
reference code to uniquely identify legally distinct
entities that engage in financial transactions. The
Legal Entity Identifier is based on the ISO 17442
standard developed by the International
Organization for Standardization and satisfies the
standards implemented by the Global Legal Entity
Identifier Foundation. See https://www.gleif.org/en/
about-lei/introducing-the-legal-entity-identifier-lei.
FICC is proposing to add a new definition for the
term ‘‘Legal Entity Identifier’’ in the GSD Rules, as
further discussed below.
5 ‘‘Legal Action’’ (as defined below and in the
proposed rule change) means and includes any
claim, counterclaim, demand, action, suit,
countersuit, arbitration, inquiry, proceeding or
investigation before any federal, state or foreign
court or other tribunal, or any investigative or
regulatory agency or self-regulatory organization.
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19979
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The purpose of the proposed rule
change is to amend the GSD Rules to
require: (i) Each applicant to become a
Netting Member and CCIT Member to
obtain and provide a Legal Entity
Identifier to FICC as part of its
membership application, (ii) each
Netting Member and CCIT Member to
have a current Legal Entity Identifier on
file with FICC at all times and to
indemnify FICC for any losses and Legal
Actions that arise due to the failure of
a Netting Member or CCIT Member to
do so, as further described below, and
(iii) each Sponsoring Member to provide
FICC with a Legal Entity Identifier for
each of their current Sponsored
Members and for each newly added
Sponsored Member going forward and
to indemnify FICC for any losses and
Legal Actions that arise due to the
failure of a Sponsoring Member to do so,
as further described below.
Background
The Office of Financial Research
(‘‘OFR’’) of the U.S. Department of the
Treasury has adopted a rule (‘‘OFR
Regulation’’) establishing a data
collection requirement covering
centrally cleared transactions in the U.S.
repurchase agreement (‘‘repo’’) market.6
This collection requires daily reporting
to the OFR by ‘‘covered reporters,’’
which is defined to include central
counterparties meeting certain criteria
(i.e., clearing repurchase agreement
transactions), such as FICC.
The OFR Regulation requires covered
reporters, such as FICC, to submit the
Legal Entity Identifier of each clearing
member involved in a reportable repo
transaction. A Legal Entity Identifier is
a 20-character, alpha-numeric code
based on the ISO 17442 standard
developed by the International
Organization for Standardization.7 Each
Legal Entity Identifier contains
information about an entity’s ownership
structure.8
In the OFR Release, the OFR stated
that the submission of Legal Entity
Identifiers by covered reporters would
enhance the ability of the Financial
Stability Oversight Council
(‘‘Council’’),9 Council member
6 84 FR 4975 (February 20, 2019) (hereinafter the
‘‘OFR Release’’). The OFR Regulation is codified at
12 CFR part 1610.
7 See supra note 4.
8 See id.
9 The Council was established by the Dodd-Frank
Wall Street Reform and Consumer Protection Act.
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Federal Register / Vol. 85, No. 69 / Thursday, April 9, 2020 / Notices
agencies 10 and the OFR to identify
potential risks to U.S. financial stability
by facilitating an understanding of repo
market participants’ exposures,
concentrations and network
structures.11 The OFR stated that it
expects that covered reporters (such as
FICC) will take all feasible steps to
require that their platform participants
obtain Legal Entity Identifiers so that
covered reporters are in compliance
with the Legal Entity Identifier
requirements of the OFR’s final rule.12
The implementation timeframe for the
OFR Regulation is as follows:
• Subject to the third bullet point
below, covered reporters were required
to begin reporting all required data
elements associated with specific
security trades 180 days after April 22,
2019.13
• Subject to the bullet immediately
below, covered reporters were required
to begin reporting all required data
elements associated with general
collateral trades within 240 days after
April 22, 2019.14
• If a covered reporter is able to
effectuate a rulemaking through the
Securities and Exchange Commission
requiring each direct clearing member,
counterparty and broker associated with
a repurchase agreement transaction to
obtain a Legal Entity Identifier and
provide it to the covered reporter, the
covered reporter shall begin reporting
all data elements requiring a Legal
Entity Identifier by the later date of its
rulemaking, or 420 days after April 22,
2019.15
khammond on DSKJM1Z7X2PROD with NOTICES
Proposed Rule Changes
In order to comply with the Legal
Entity Identifier submission
requirement in the OFR Regulation,
FICC is proposing to require: (i) Each
applicant to become a Netting Member
and CCIT Member to obtain and provide
a Legal Entity Identifier to FICC as part
of its membership application, (ii) each
The Council is charged with identifying risks to the
financial stability of the United States, among other
things. See https://home.treasury.gov/policy-issues/
financial-markets-financial-institutions-and-fiscalservice/fsoc.
10 The Council member agencies are the Board of
Governors of the Federal Reserve System,
Commodity Futures Trading Commission, Federal
Deposit Insurance Corporation, Federal Housing
Finance Agency, National Credit Union
Administration, Office of the Comptroller of the
Currency, Securities and Exchange Commission,
Treasury Department and Consumer Financial
Protection Bureau. See https://www.treasury.gov/
initiatives/fsoc/about/Pages/FSOC-MemberAgencies.aspx.
11 See OFR Release, supra note 6, at 4980.
12 Id.
13 12 CFR 1610.10(e)(1)(i).
14 12 CFR 1610.10(e)(1)(ii).
15 12 CFR 1610.10(e)(1)(iii).
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Netting Member and CCIT Member to
have a current Legal Entity Identifier on
file with FICC at all times and to
indemnify FICC for any losses and Legal
Actions that arise due to the failure of
a Netting Member or CCIT Member to
do so, as further described below, and
(iii) each Sponsoring Member to provide
FICC with a Legal Entity Identifier for
each of their current Sponsored
Members and for each newly added
Sponsored Member going forward and
to indemnify FICC for any losses and
Legal Actions that arise due to the
failure of a Sponsoring Member to do so,
as further described below.
FICC proposes to add a new defined
term, Legal Entity Identifier, to GSD
Rule 1. FICC proposes to use the
terminology of the Global Legal Entity
Identifier Foundation for the
definition.16
(i) Netting Member and CCIT Member
Applicants
FICC is proposing to amend Section 5
of GSD Rule 2A to require each Netting
Member applicant to obtain and provide
a Legal Entity Identifier to FICC as part
of its membership application. The
same change would be made regarding
CCIT Member applicants in Section 3 of
GSD Rule 3B. The proposed change
would entail a re-lettering of
subsections (d) and (e) of Section 3 of
GSD Rule 3B. FICC is proposing to
implement the changes discussed in this
paragraph upon approval of this filing
from the Commission.
(ii) Netting Members and CCIT Members
FICC is proposing to amend Section 2
of GSD Rule 3 to add language that
would require each Netting Member to
have a current Legal Entity Identifier on
file with FICC at all times. The same
change would be made to Section 5 of
GSD Rule 3B for CCIT Members. For
existing Netting Members and CCIT
Members, FICC is proposing to add a
footnote in each case that states such
members shall have 60 calendar days
from the date of the Commission’s
approval of this filing to submit their
Legal Entity Identifiers to FICC.17
FICC is also proposing to add
language to Section 2 of GSD Rule 3 and
Section 5 of GSD Rule 3B to provide
that a Netting Member/CCIT Member
16 See supra note 4. The Global Legal Entity
Identifier Foundation was established by the
Financial Stability Board in June 2014 to support
the implementation and use of Legal Entity
Identifiers. The Financial Stability Board is an
international body that monitors and makes
recommendations about the global financial system.
www.fsb.org
17 The proposed footnote in each case would also
state that the footnote will sunset at the end of the
60-calendar day period.
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shall indemnify FICC, and its
employees, officers, directors,
shareholders, agents, and Members
(collectively, the ‘‘LEI Indemnified
Parties’’), for any and all losses,
liabilities, expenses and Legal Actions
suffered or incurred by the LEI
Indemnified Parties arising from a
Netting Member’s or CCIT Member’s
failure to have its current Legal Entity
Identifier on file with FICC. ‘‘Legal
Action’’ would mean and include any
claim, counterclaim, demand, action,
suit, countersuit, arbitration, inquiry,
proceeding or investigation before any
federal, state or foreign court or other
tribunal, or any investigative or
regulatory agency or self-regulatory
organization. FICC is proposing this
indemnity because in fulfilling its
regulatory obligations under the OFR
Regulation, FICC would be relying upon
Netting Members and CCIT Members to
keep their Legal Entity Identifiers on file
with FICC current.
(iii) Sponsoring Members and
Sponsored Members
FICC is proposing to amend Section 2
of GSD Rule 3A to require that each
Sponsoring Member submit the Legal
Entity Identifiers of its Sponsored
Member applicants. FICC would
implement this change regarding
applicants upon the Commission’s
approval of this filing. The proposed
rule change would also add language to
Section 2 of GSD Rule 3A to require that
each Sponsoring Member provide FICC
with a Legal Entity Identifier for each of
its existing Sponsored Members such
that FICC has a current Legal Entity
Identifier for each such Sponsored
Member at all times. For existing
Sponsored Members, FICC is proposing
to add a footnote that states the
Sponsoring Members shall have 60
calendar days from the date of the
Commission’s approval of this filing to
submit the Legal Entity Identifiers of
their Sponsored Members to FICC.18 In
order to cover new Sponsored Members,
FICC is proposing to amend Section 3 of
GSD Rule 3A to add that the Sponsoring
Member must provide the Legal Entity
Identifier of each entity it wishes to
sponsor into membership as a
Sponsored Member. FICC is proposing
to implement the change to Section 3 of
GSD Rule 3A upon the Commission’s
approval of this filing.
FICC is also proposing to amend
Section 2 of GSD Rule 3A to include an
indemnity, described above, with
respect to Sponsoring Members because,
18 The proposed footnote would also state that the
footnote will sunset at the end of the 60-calendar
day period.
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akin to the Netting Members and CCIT
Members, FICC would be relying on the
Sponsoring Members to keep the Legal
Entity Identifiers of their Sponsored
Members on file with FICC current.
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2. Statutory Basis
Section 17A(b)(3)(F) of the Act
requires, inter alia, that the GSD Rules
be designed to foster cooperation and
coordination with persons engaged in
the clearance and settlement of
securities transactions.19 FICC
understands that the Council and its
member agencies have a significant
interest in the clearance and settlement
of the securities transactions cleared by
FICC. As explained in the OFR Release,
these parties wish to identify risks to
U.S. financial stability; 20 monitoring of
the repo market is important for
financial stability monitoring because
the repo market plays a crucial role in
providing short-term funding and
performing other functions for U.S.
markets.21 The OFR Regulation (which
includes the Legal Entity Identifier
requirement) is expected to help fulfill
the Council’s purposes and duties in the
monitoring of the repo market.22 FICC
believes that the proposed rule changes
(which would add the defined term
‘‘Legal Entity Identifier’’ to the GSD
Rules and would further amend the GSD
Rules to require: (i) Each applicant to
become a Netting Member and CCIT
Member to obtain and provide a Legal
Entity Identifier to FICC as part of its
membership application, (ii) each
Netting Member and CCIT Member to
have a current Legal Entity Identifier on
file with FICC at all times and to
provide the indemnity described in Item
II(A)1(ii) above, and (iii) each
Sponsoring Member to provide FICC
with a Legal Entity Identifier for each of
their current Sponsored Members and
for each newly added Sponsored
Member going forward and to indemnify
FICC as described in Item II(A)1(iii)
above) would facilitate FICC’s
compliance with the OFR Regulation.
Therefore, given the purposes of the
OFR Regulation described here, FICC
believes that the proposed rule changes
would foster cooperation and
coordination with persons engaged in
the clearance and settlement of
securities transactions.23
In addition, Section 17A(b)(3)(F) of
the Act requires, inter alia, that the GSD
Rules be designed to protect the public
19 15
U.S.C. 78q–1(b)(3)(F).
20 See OFR Release, supra note 6, at 4975.
21 Id.
22 Id.
23 15 U.S.C. 78q–1(b)(3)(F).
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19981
interest.24 The purpose of the OFR
Regulation is to assist the Council and
its member agencies to monitor the
stability of the repo market. The
stability of the repo market serves the
public interest because the repo market
plays a crucial role in the U.S. markets.
Because the proposed rule changes
would facilitate FICC’s compliance with
the OFR Regulation, which, in turn,
serves the public interest, FICC believes
that the proposed rule changes would
serve to protect the public interest.25
ultimately would foster cooperation and
coordination with persons engaged in
the clearance and settlement of
securities transactions by allowing the
OFR to identify risks to U.S. financial
stability. FICC also believes that any
burden that is created by the proposed
rule change would be appropriate in
furtherance of the purposes of the Act 28
because the proposed changes would be
limited to information that FICC is
required to provide pursuant to the OFR
Regulation.
(B) Clearing Agency’s Statement on
Burden on Competition
FICC believes that the proposed
changes to add the defined term ‘‘Legal
Entity Identifier’’ to the GSD Rules and
to further amend the GSD Rules to
require: (i) Each applicant to become a
Netting Member and CCIT Member to
obtain and provide a Legal Entity
Identifier to FICC as part of its
membership application, (ii) each
Netting Member and CCIT Member to
have a current Legal Entity Identifier on
file with FICC at all times and to
provide the indemnity described above
in Item II(A)1(ii), and (iii) each
Sponsoring Member to provide FICC
with a Legal Entity Identifier for each of
their current Sponsored Members and
for each newly added Sponsored
Member going forward and to indemnify
FICC as described above in Item
II(A)1(iii) could impose a burden on
competition because these changes
would impose a cost on firms that
currently do not have Legal Entity
Identifiers to obtain and maintain them.
FICC does not believe that any burden
on competition imposed by the
proposed rule change would be
significant because the cost to obtain
and maintain a Legal Entity Identifier is
relatively small,26 and FICC
understands that many of its members
already maintain Legal Entity Identifiers
for other purposes. Regardless of
whether the potential burden on
competition is deemed significant, FICC
believes the proposed rule change is
both necessary and appropriate in
furtherance of the purposes of the Act.
Specifically, FICC believes that any
burden on competition that is created by
the proposed changes would be
necessary in furtherance of the purposes
of the Act 27 because the proposed rule
change would permit FICC to comply
with the OFR Regulation, which
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
Written comments relating to the
proposed rule changes have not been
solicited or received. FICC will notify
the Commission of any written
comments received by FICC.
24 Id.
25 Id.
26 For example, the cost to obtain a Legal Entity
Identifier is $100 from Business Entity Data BV, and
the cost to renew (which is required annually) is
$80. See www.gmeiutility.org.
27 15 U.S.C. 78q–1(b)(3)(I).
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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
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–2020–002 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–2020–002. This file
number should be included on the
28 Id.
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Federal Register / Vol. 85, No. 69 / Thursday, April 9, 2020 / Notices
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–
2020–002 and should be submitted on
or before April 30, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–07437 Filed 4–8–20; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–88555; File No. SR–
CboeEDGA–2020–010]
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Self-Regulatory Organizations; Cboe
EDGA Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Expand the
Trading Hours Applicable to Managed
Portfolio Shares To Include All Trading
Sessions
April 3, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) proposes to
expand the trading hours applicable to
Managed Portfolio Shares to include all
trading sessions instead of just Regular
Trading Hours.3 The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/edga/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange 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
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
29 17
notice is hereby given that on March 31,
2020, Cboe EDGA Exchange, Inc.
(‘‘Exchange’’ or ‘‘EDGA’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
1. Purpose
The Exchange adopted new Rule
14.11 for the purpose of permitting
trading, pursuant to unlisted trading
privileges,4 of Managed Portfolio
Shares, which are securities issued by
an actively managed open-end
3 As defined in Rule 1.5(y), the term ‘‘Regular
Trading Hours’’ means the time between 9:30 a.m.
and 4:00 p.m. Eastern Time.
4 As noted in Exchange Rule 14.1(a), the
Exchange does not list any Equity Securities, as
defined in Rule 14.1(a). Therefore, the provisions of
Rules 14.2 through 14.11 only allow the trading of
such Equity Securities pursuant to unlisted trading
privileges.
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management investment company,5 on
January 21, 2020.6 Rule 14.11(b)(2)
currently provides that transactions in
Managed Portfolio Shares will occur
only during Regular Trading Hours. On
March 23, 2020, Cboe BZX Exchange,
Inc. (‘‘BZX’’), the listing market for
Managed Portfolio Shares, amended its
rules to allow Managed Portfolio Shares
to trade during all sessions.7
Accordingly, the Exchange is now
proposing to change rule 14.11(b)(2) in
order to allow for trading in Managed
Portfolio Shares during all trading
sessions on the Exchange.
The proposed amendment would
allow trading in Managed Portfolio
Shares during all sessions including the
Early Trading Session,8 the Pre-Opening
Session,9 Regular Trading Hours, and
the Post-Closing Session.10 The
Exchange notes that Managed Portfolio
Shares are currently the only producttype that is not available for trading
during all trading sessions on the
Exchange. As such, this proposal would
allow Managed Portfolio Shares to be
traded, pursuant to unlisted trading
privileges, on the Exchange in a manner
identical to all other products traded on
the Exchange.
5 As defined in Rule 14.11(c)(1), the term
‘‘Managed Portfolio Share’’ means a security that (a)
represents an interest in an investment company
registered under the Investment Company Act of
1940 (‘‘Investment Company’’) organized as an
open-end management investment company, that
invests in a portfolio of securities selected by the
Investment Company’s investment adviser
consistent with the Investment Company’s
investment objectives and policies; (b) is issued in
a Creation Unit (as defined in Rule 14.11(c)(6)), or
multiples thereof, in return for a designated
portfolio of instruments (and/or an amount of cash)
with a value equal to the next determined net asset
value and delivered to the Authorized Participant
(as defined in the Investment Company’s Form N–
1A filed with the Commission) through a
Confidential Account; (c) when aggregated into a
Redemption Unit (as defined in Rule 14.11(c)(7)), or
multiples thereof, may be redeemed for a
designated portfolio of instruments (and/or an
amount of cash) with a value equal to the next
determined net asset value delivered to the
Confidential Account (as defined in Rule
14.11(c)(4))for the benefit of the Authorized
Participant; and (d) the portfolio holdings for which
are disclosed within at least 60 days following the
end of every fiscal quarter.
6 See Securities Exchange Act Release No. 88111
(February 3, 2020), 85 FR 7364 (February 7, 2020)
(SR–CboeEDGA–2020–001).
7 See Securities Exchange Act Release No. 88468
(March 25, 2020) 85 FR 17908 (March 31, 2020)
(SR–CboeBZX–2020–028).
8 As defined in Rule 1.5(ii), the term ‘‘Early
Trading Session’’ shall mean the time between 7:00
a.m. and 8:00 a.m. Eastern Time.
9 As defined in Rule 1.5(s), the term ‘‘Pre-Opening
Session’’ shall mean the time between 8:00 a.m. and
9:30 a.m. Eastern Time.
10 As defined in Rule 1.5(r), the term ‘‘PostClosing Session’’ shall mean the time between 4:00
p.m. and 8:00 p.m. Eastern Time.
E:\FR\FM\09APN1.SGM
09APN1
]]>Agencies
[Federal Register Volume 85, Number 69 (Thursday, April 9, 2020)]
[Notices]
[Pages 19979-19982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07437]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88557; File No. SR-FICC-2020-002]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Proposed Rule Change To Amend the Government
Securities Division Rulebook Relating to the Legal Entity Identifier
Requirement
April 3, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 25, 2020, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of a proposal to amend the FICC
Government Securities Division (``GSD'') Rulebook (``GSD Rules'') \3\
to require: (i) Each applicant to become a Netting Member and CCIT
Member to obtain and provide a ``Legal Entity Identifier'' \4\ to FICC
as part of its membership application, (ii) each Netting Member and
CCIT Member to have a current Legal Entity Identifier on file with FICC
at all times and to indemnify FICC for any losses and Legal Actions \5\
that arise due to the failure of a Netting Member or CCIT Member to do
so, as further described below, and (iii) each Sponsoring Member to
provide FICC with a Legal Entity Identifier for each of their current
Sponsored Members and for each newly added Sponsored Member going
forward and to indemnify FICC for any losses and Legal Actions that
arise due to the failure of a Sponsoring Member to do so, as further
described below.
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\3\ Capitalized terms not defined herein are defined in the GSD
Rules, available at https://www.dtcc.com/legal/rules-and-procedures.
\4\ A ``Legal Entity Identifier'' is a 20-character reference
code to uniquely identify legally distinct entities that engage in
financial transactions. The Legal Entity Identifier is based on the
ISO 17442 standard developed by the International Organization for
Standardization and satisfies the standards implemented by the
Global Legal Entity Identifier Foundation. See https://www.gleif.org/en/about-lei/introducing-the-legal-entity-identifier-lei. FICC is proposing to add a new definition for the term ``Legal
Entity Identifier'' in the GSD Rules, as further discussed below.
\5\ ``Legal Action'' (as defined below and in the proposed rule
change) means and includes any claim, counterclaim, demand, action,
suit, countersuit, arbitration, inquiry, proceeding or investigation
before any federal, state or foreign court or other tribunal, or any
investigative or regulatory agency or self-regulatory organization.
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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
The purpose of the proposed rule change is to amend the GSD Rules
to require: (i) Each applicant to become a Netting Member and CCIT
Member to obtain and provide a Legal Entity Identifier to FICC as part
of its membership application, (ii) each Netting Member and CCIT Member
to have a current Legal Entity Identifier on file with FICC at all
times and to indemnify FICC for any losses and Legal Actions that arise
due to the failure of a Netting Member or CCIT Member to do so, as
further described below, and (iii) each Sponsoring Member to provide
FICC with a Legal Entity Identifier for each of their current Sponsored
Members and for each newly added Sponsored Member going forward and to
indemnify FICC for any losses and Legal Actions that arise due to the
failure of a Sponsoring Member to do so, as further described below.
Background
The Office of Financial Research (``OFR'') of the U.S. Department
of the Treasury has adopted a rule (``OFR Regulation'') establishing a
data collection requirement covering centrally cleared transactions in
the U.S. repurchase agreement (``repo'') market.\6\ This collection
requires daily reporting to the OFR by ``covered reporters,'' which is
defined to include central counterparties meeting certain criteria
(i.e., clearing repurchase agreement transactions), such as FICC.
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\6\ 84 FR 4975 (February 20, 2019) (hereinafter the ``OFR
Release''). The OFR Regulation is codified at 12 CFR part 1610.
---------------------------------------------------------------------------
The OFR Regulation requires covered reporters, such as FICC, to
submit the Legal Entity Identifier of each clearing member involved in
a reportable repo transaction. A Legal Entity Identifier is a 20-
character, alpha-numeric code based on the ISO 17442 standard developed
by the International Organization for Standardization.\7\ Each Legal
Entity Identifier contains information about an entity's ownership
structure.\8\
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\7\ See supra note 4.
\8\ See id.
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In the OFR Release, the OFR stated that the submission of Legal
Entity Identifiers by covered reporters would enhance the ability of
the Financial Stability Oversight Council (``Council''),\9\ Council
member
[[Page 19980]]
agencies \10\ and the OFR to identify potential risks to U.S. financial
stability by facilitating an understanding of repo market participants'
exposures, concentrations and network structures.\11\ The OFR stated
that it expects that covered reporters (such as FICC) will take all
feasible steps to require that their platform participants obtain Legal
Entity Identifiers so that covered reporters are in compliance with the
Legal Entity Identifier requirements of the OFR's final rule.\12\
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\9\ The Council was established by the Dodd-Frank Wall Street
Reform and Consumer Protection Act. The Council is charged with
identifying risks to the financial stability of the United States,
among other things. See https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/fsoc.
\10\ The Council member agencies are the Board of Governors of
the Federal Reserve System, Commodity Futures Trading Commission,
Federal Deposit Insurance Corporation, Federal Housing Finance
Agency, National Credit Union Administration, Office of the
Comptroller of the Currency, Securities and Exchange Commission,
Treasury Department and Consumer Financial Protection Bureau. See
https://www.treasury.gov/initiatives/fsoc/about/Pages/FSOC-Member-Agencies.aspx.
\11\ See OFR Release, supra note 6, at 4980.
\12\ Id.
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The implementation timeframe for the OFR Regulation is as follows:
Subject to the third bullet point below, covered reporters
were required to begin reporting all required data elements associated
with specific security trades 180 days after April 22, 2019.\13\
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\13\ 12 CFR 1610.10(e)(1)(i).
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Subject to the bullet immediately below, covered reporters
were required to begin reporting all required data elements associated
with general collateral trades within 240 days after April 22,
2019.\14\
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\14\ 12 CFR 1610.10(e)(1)(ii).
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If a covered reporter is able to effectuate a rulemaking
through the Securities and Exchange Commission requiring each direct
clearing member, counterparty and broker associated with a repurchase
agreement transaction to obtain a Legal Entity Identifier and provide
it to the covered reporter, the covered reporter shall begin reporting
all data elements requiring a Legal Entity Identifier by the later date
of its rulemaking, or 420 days after April 22, 2019.\15\
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\15\ 12 CFR 1610.10(e)(1)(iii).
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Proposed Rule Changes
In order to comply with the Legal Entity Identifier submission
requirement in the OFR Regulation, FICC is proposing to require: (i)
Each applicant to become a Netting Member and CCIT Member to obtain and
provide a Legal Entity Identifier to FICC as part of its membership
application, (ii) each Netting Member and CCIT Member to have a current
Legal Entity Identifier on file with FICC at all times and to indemnify
FICC for any losses and Legal Actions that arise due to the failure of
a Netting Member or CCIT Member to do so, as further described below,
and (iii) each Sponsoring Member to provide FICC with a Legal Entity
Identifier for each of their current Sponsored Members and for each
newly added Sponsored Member going forward and to indemnify FICC for
any losses and Legal Actions that arise due to the failure of a
Sponsoring Member to do so, as further described below.
FICC proposes to add a new defined term, Legal Entity Identifier,
to GSD Rule 1. FICC proposes to use the terminology of the Global Legal
Entity Identifier Foundation for the definition.\16\
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\16\ See supra note 4. The Global Legal Entity Identifier
Foundation was established by the Financial Stability Board in June
2014 to support the implementation and use of Legal Entity
Identifiers. The Financial Stability Board is an international body
that monitors and makes recommendations about the global financial
system. www.fsb.org
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(i) Netting Member and CCIT Member Applicants
FICC is proposing to amend Section 5 of GSD Rule 2A to require each
Netting Member applicant to obtain and provide a Legal Entity
Identifier to FICC as part of its membership application. The same
change would be made regarding CCIT Member applicants in Section 3 of
GSD Rule 3B. The proposed change would entail a re-lettering of
subsections (d) and (e) of Section 3 of GSD Rule 3B. FICC is proposing
to implement the changes discussed in this paragraph upon approval of
this filing from the Commission.
(ii) Netting Members and CCIT Members
FICC is proposing to amend Section 2 of GSD Rule 3 to add language
that would require each Netting Member to have a current Legal Entity
Identifier on file with FICC at all times. The same change would be
made to Section 5 of GSD Rule 3B for CCIT Members. For existing Netting
Members and CCIT Members, FICC is proposing to add a footnote in each
case that states such members shall have 60 calendar days from the date
of the Commission's approval of this filing to submit their Legal
Entity Identifiers to FICC.\17\
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\17\ The proposed footnote in each case would also state that
the footnote will sunset at the end of the 60-calendar day period.
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FICC is also proposing to add language to Section 2 of GSD Rule 3
and Section 5 of GSD Rule 3B to provide that a Netting Member/CCIT
Member shall indemnify FICC, and its employees, officers, directors,
shareholders, agents, and Members (collectively, the ``LEI Indemnified
Parties''), for any and all losses, liabilities, expenses and Legal
Actions suffered or incurred by the LEI Indemnified Parties arising
from a Netting Member's or CCIT Member's failure to have its current
Legal Entity Identifier on file with FICC. ``Legal Action'' would mean
and include any claim, counterclaim, demand, action, suit, countersuit,
arbitration, inquiry, proceeding or investigation before any federal,
state or foreign court or other tribunal, or any investigative or
regulatory agency or self-regulatory organization. FICC is proposing
this indemnity because in fulfilling its regulatory obligations under
the OFR Regulation, FICC would be relying upon Netting Members and CCIT
Members to keep their Legal Entity Identifiers on file with FICC
current.
(iii) Sponsoring Members and Sponsored Members
FICC is proposing to amend Section 2 of GSD Rule 3A to require that
each Sponsoring Member submit the Legal Entity Identifiers of its
Sponsored Member applicants. FICC would implement this change regarding
applicants upon the Commission's approval of this filing. The proposed
rule change would also add language to Section 2 of GSD Rule 3A to
require that each Sponsoring Member provide FICC with a Legal Entity
Identifier for each of its existing Sponsored Members such that FICC
has a current Legal Entity Identifier for each such Sponsored Member at
all times. For existing Sponsored Members, FICC is proposing to add a
footnote that states the Sponsoring Members shall have 60 calendar days
from the date of the Commission's approval of this filing to submit the
Legal Entity Identifiers of their Sponsored Members to FICC.\18\ In
order to cover new Sponsored Members, FICC is proposing to amend
Section 3 of GSD Rule 3A to add that the Sponsoring Member must provide
the Legal Entity Identifier of each entity it wishes to sponsor into
membership as a Sponsored Member. FICC is proposing to implement the
change to Section 3 of GSD Rule 3A upon the Commission's approval of
this filing.
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\18\ The proposed footnote would also state that the footnote
will sunset at the end of the 60-calendar day period.
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FICC is also proposing to amend Section 2 of GSD Rule 3A to include
an indemnity, described above, with respect to Sponsoring Members
because,
[[Page 19981]]
akin to the Netting Members and CCIT Members, FICC would be relying on
the Sponsoring Members to keep the Legal Entity Identifiers of their
Sponsored Members on file with FICC current.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act requires, inter alia, that the GSD
Rules be designed to foster cooperation and coordination with persons
engaged in the clearance and settlement of securities transactions.\19\
FICC understands that the Council and its member agencies have a
significant interest in the clearance and settlement of the securities
transactions cleared by FICC. As explained in the OFR Release, these
parties wish to identify risks to U.S. financial stability; \20\
monitoring of the repo market is important for financial stability
monitoring because the repo market plays a crucial role in providing
short-term funding and performing other functions for U.S. markets.\21\
The OFR Regulation (which includes the Legal Entity Identifier
requirement) is expected to help fulfill the Council's purposes and
duties in the monitoring of the repo market.\22\ FICC believes that the
proposed rule changes (which would add the defined term ``Legal Entity
Identifier'' to the GSD Rules and would further amend the GSD Rules to
require: (i) Each applicant to become a Netting Member and CCIT Member
to obtain and provide a Legal Entity Identifier to FICC as part of its
membership application, (ii) each Netting Member and CCIT Member to
have a current Legal Entity Identifier on file with FICC at all times
and to provide the indemnity described in Item II(A)1(ii) above, and
(iii) each Sponsoring Member to provide FICC with a Legal Entity
Identifier for each of their current Sponsored Members and for each
newly added Sponsored Member going forward and to indemnify FICC as
described in Item II(A)1(iii) above) would facilitate FICC's compliance
with the OFR Regulation. Therefore, given the purposes of the OFR
Regulation described here, FICC believes that the proposed rule changes
would foster cooperation and coordination with persons engaged in the
clearance and settlement of securities transactions.\23\
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\19\ 15 U.S.C. 78q-1(b)(3)(F).
\20\ See OFR Release, supra note 6, at 4975.
\21\ Id.
\22\ Id.
\23\ 15 U.S.C. 78q-1(b)(3)(F).
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In addition, Section 17A(b)(3)(F) of the Act requires, inter alia,
that the GSD Rules be designed to protect the public interest.\24\ The
purpose of the OFR Regulation is to assist the Council and its member
agencies to monitor the stability of the repo market. The stability of
the repo market serves the public interest because the repo market
plays a crucial role in the U.S. markets. Because the proposed rule
changes would facilitate FICC's compliance with the OFR Regulation,
which, in turn, serves the public interest, FICC believes that the
proposed rule changes would serve to protect the public interest.\25\
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\24\ Id.
\25\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
FICC believes that the proposed changes to add the defined term
``Legal Entity Identifier'' to the GSD Rules and to further amend the
GSD Rules to require: (i) Each applicant to become a Netting Member and
CCIT Member to obtain and provide a Legal Entity Identifier to FICC as
part of its membership application, (ii) each Netting Member and CCIT
Member to have a current Legal Entity Identifier on file with FICC at
all times and to provide the indemnity described above in Item
II(A)1(ii), and (iii) each Sponsoring Member to provide FICC with a
Legal Entity Identifier for each of their current Sponsored Members and
for each newly added Sponsored Member going forward and to indemnify
FICC as described above in Item II(A)1(iii) could impose a burden on
competition because these changes would impose a cost on firms that
currently do not have Legal Entity Identifiers to obtain and maintain
them. FICC does not believe that any burden on competition imposed by
the proposed rule change would be significant because the cost to
obtain and maintain a Legal Entity Identifier is relatively small,\26\
and FICC understands that many of its members already maintain Legal
Entity Identifiers for other purposes. Regardless of whether the
potential burden on competition is deemed significant, FICC believes
the proposed rule change is both necessary and appropriate in
furtherance of the purposes of the Act. Specifically, FICC believes
that any burden on competition that is created by the proposed changes
would be necessary in furtherance of the purposes of the Act \27\
because the proposed rule change would permit FICC to comply with the
OFR Regulation, which ultimately would foster cooperation and
coordination with persons engaged in the clearance and settlement of
securities transactions by allowing the OFR to identify risks to U.S.
financial stability. FICC also believes that any burden that is created
by the proposed rule change would be appropriate in furtherance of the
purposes of the Act \28\ because the proposed changes would be limited
to information that FICC is required to provide pursuant to the OFR
Regulation.
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\26\ For example, the cost to obtain a Legal Entity Identifier
is $100 from Business Entity Data BV, and the cost to renew (which
is required annually) is $80. See www.gmeiutility.org.
\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
Written comments relating to the proposed rule changes have not
been solicited or received. 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
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-2020-002 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-2020-002. This file
number should be included on the
[[Page 19982]]
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-2020-002
and should be submitted on or before April 30, 2020.
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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07437 Filed 4-8-20; 8:45 am]
BILLING CODE 8011-01-P
