Justia Agencies And Commissions Securities And Exchange Commission Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Partial Amendment No. 1 to Proposed Rule Change To Modify the GSD Rules (i) Regarding the Separate Calculation, Collection and Holding of Margin for Proprietary Transactions and That for Indirect Participant Transactions, and (ii) To Address the Conditions of Note H to Rule 15c3-3a, 87441-87444 [2024-25429]

Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Partial Amendment No. 1 to Proposed Rule Change To Modify the GSD Rules (i) Regarding the Separate Calculation, Collection and Holding of Margin for Proprietary Transactions and That for Indirect Participant Transactions, and (ii) To Address the Conditions of Note H to Rule 15c3-3a, 87441-87444 [2024-25429]

Download as PDF Federal Register / Vol. 89, No. 212 / Friday, November 1, 2024 / Notices khammond on DSKJM1Z7X2PROD with NOTICES Depth Reports. Further, the proposed discount is intended to promote increased use of the Exchange’s Historical Depth Reports by defraying some of the costs a purchaser would ordinarily have to expend before using the data product. The Exchange believes that the proposed discount is equitable and not unfairly discriminatory because it will apply equally to all Members and non-Members who purchase Historical Depth Reports. Lastly, the purchase of this data product is discretionary and not compulsory. Indeed, no market participant is required to purchase the Historical Depth Reports, and the Exchange is not required to make Historical Depth Reports available to all investors. Potential purchasers may request the data at any time if they believe it to be valuable or may decline to purchase such data. As noted above, the Exchange previously adopted similar discount programs for other historical data products offered by the Exchange.15 B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange operates in a highly competitive environment in which the Exchange must continually adjust its fees to remain competitive. Because competitors are free to modify their own fees in response, including the adoption of similar discounts to those fees, the Exchange believes that the degree to which fee changes (including discounts and rebates) in this market may impose any burden on competition is extremely limited. As discussed above, the Exchange’s Historical Depth Reports offering is subject to direct competition from several other options exchanges that offer similar data products. Moreover, purchase of Historical Depth Reports is optional. It is designed to help investors understand underlying market trends to improve the quality of investment decisions, but is not necessary to execute a trade. The proposed rule changes are grounded in the Exchange’s efforts to compete more effectively. In this competitive environment, potential purchasers are free to choose which, if any, similar product to purchase to satisfy their need for market 15 See Securities Exchange Act Release No. 99182 (December 14, 2023), 88 FR 88173 (December 20, 2023) (SR–CboeBZX–2023–093) and Securities Exchange Act Release No. 100330 June 13, 2024), 89 FR 51931 (June 20, 2024) (SR–CboeBZX–2024– 048). VerDate Sep<11>2014 16:47 Oct 31, 2024 Jkt 265001 information. As a result, the Exchange believes this proposed rule change permits fair competition among national securities exchanges. Further, the Exchange believes that these changes will not cause any unnecessary or inappropriate burden on intermarket competition, as the proposed incentive program applies uniformly to any purchaser of Historical Depth Reports. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 16 and paragraph (f) of Rule 19b–4 17 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number SR– CboeBZX–2024–103 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR–CboeBZX–2024–103. This file number should be included on the subject line if email is used. To help the 16 15 17 17 PO 00000 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). Frm 00118 Fmt 4703 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–CboeBZX–2024–103 and should be submitted on or before November 22, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–25428 Filed 10–31–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–101454; File No. SR–FICC– 2024–007] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Partial Amendment No. 1 to Proposed Rule Change To Modify the GSD Rules (i) Regarding the Separate Calculation, Collection and Holding of Margin for Proprietary Transactions and That for Indirect Participant Transactions, and (ii) To Address the Conditions of Note H to Rule 15c3–3a October 28, 2024. On March 14, 2024, Fixed Income Clearing Corporation (‘‘FICC’’) filed with the Securities and Exchange 18 17 Sfmt 4703 87441 E:\FR\FM\01NON1.SGM CFR 200.30–3(a)(12). 01NON1 87442 Federal Register / Vol. 89, No. 212 / Friday, November 1, 2024 / Notices Commission (‘‘Commission’’) the proposed rule change SR–FICC–2024– 007 pursuant to Section 19(b) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) 1 and Rule 19b–4 2 thereunder to modify FICC’s Government Securities Division (‘‘GSD’’) Rulebook (‘‘GSD Rules’’) to calculate, collect, and hold margin for proprietary transactions of a direct participant separately from margin submitted to FICC by a direct participant on behalf of indirect participants and to address conditions of Note H to Rule 15c3–3a under the Exchange Act (the ‘‘Proposed Rule Change’’).3 The Proposed Rule Change was published for public comment in the Federal Register on March 28, 2024.4 The Commission has received comments regarding the substance of the Proposed Rule Change.5 The Commission also received a letter from FICC responding to the comments.6 On April 24, 2024, pursuant to Section 19(b)(2) of the Exchange Act,7 the Commission designated a longer period within which to approve, disapprove, or institute proceedings to determine whether to approve or disapprove the Proposed Rule Change.8 On June 21, 2024, pursuant to Section 19(b)(2)(B) of the Exchange Act,9 the 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 99149 (Dec. 13, 2023), 89 FR 2714 (Jan. 16, 2024) (S7–23– 22) (‘‘Adopting Release,’’ and the rules adopted therein as ‘‘Treasury Clearing Rules’’). See also 17 CFR 240.15c3–3a. 4 Securities Exchange Act Release No. 99844 (March 22, 2024), 89 FR 21603 (Mar. 28, 2024) (File No. SR–FICC–2024–007) (‘‘Notice of Filing’’). FICC also filed a related Advance Notice with the Commission pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, entitled the Payment, Clearing, and Settlement Supervision Act of 2010 and Rule 19b–4(n)(1)(i) under the Exchange Act. 12 U.S.C. 5465(e)(1). 15 U.S.C. 78s(b)(1) and 17 CFR 240.19b–4, respectively. The Advance Notice was published in the Federal Register on March 28, 2024. Securities Exchange Act Release No. 99845 (Mar. 22, 2024), 89 FR 21586 (Mar. 28, 2024) (File No. SR–FICC–2024–802). 5 Comments on the Proposed Rule Change are available at https://www.sec.gov/comments/sr-ficc2024-007/srficc2024007.htm. Comments on the Advance Notice are available at https:// www.sec.gov/comments/sr-ficc-2024-802/ srficc2024802.htm. Because the proposals contained in the Proposed Rule Change and the Advance Notice are the same, the Commission considers all comments received on the proposal, regardless of whether the comments are submitted with respect to the Advance Notice or the Proposed Rule Change. 6 See Letter from Laura Klimpel, Managing Director, Head of Fixed Income and Financing Solutions, Depository Trust & Clearing Corporation, (Aug. 1, 2024) (‘‘FICC Letter’’). 7 15 U.S.C. 78s(b)(2). 8 Securities Exchange Act Release No. 100022 (Apr. 24, 2024), 89 FR 34289 (Apr. 30, 2024) (File No. SR–FICC–2024–007). 9 15 U.S.C. 78s(b)(2)(B). khammond on DSKJM1Z7X2PROD with NOTICES 2 17 VerDate Sep<11>2014 16:47 Oct 31, 2024 Jkt 265001 Commission instituted proceedings to determine whether to approve or disapprove the Proposed Rule Change.10 On September 18, 2024, the Commission extended the time period for Commission action on the proceedings to determine whether to disapprove the Proposed Rule Change.11 On October 25, 2024, FICC filed Partial Amendment No. 1 to the Proposed Rule Change.12 Pursuant to Section 19(b)(1) of the Act 13 and Rule 19b–4 thereunder,14 the Commission is publishing notice of this Partial Amendment No.1 to the Proposed Rule Change as described in Item I below. The Commission is publishing this notice to solicit comments on Partial Amendment No. 1 from interested persons. I. Summary of the Terms of Substance of Partial Amendment No. 1 to the Proposed Rule Change FICC filed Partial Amendment No. 1 to its previously submitted Proposed Rule Change, which would make several changes to FICC’s GSD Rules to (1) provide for FICC to calculate, collect, and hold margin for the proprietary transactions of a Netting Member separately and independently from the margin for transactions that the Netting Member submits to FICC on behalf of indirect participants; (2) simplify and revise the account types through which Members may record transactions at FICC and adopt a new Rule 2B to provide clearer public disclosures through the Rules regarding the GSD account structure; (3) allow Netting Members to elect for margin for indirect participant transactions to be calculated on a gross basis (i.e., an indirect participant-by-indirect participant basis) and legally segregated from the margin for the Netting Member’s proprietary transactions (as well as those of other indirect participants); (4) align FICC’s margin calculation methodology with the expanded account types and enhance public disclosure through the Rules of that calculation methodology; and (5) simplify the requirements for 10 Securities Exchange Act Release No. 100401 (Jun. 21, 2024), 89 FR 53690 (Jun. 27, 2024) (File No. SR–FICC–2024–007). 11 Securities Exchange Act Release No. 101082 (Sep. 18, 2024), 89 FR 77949 (Sep. 24, 2024) (File No. SR–FICC–2024–007). 12 Text of the proposed changes made by the Partial Amendment No. 1 to the Proposed Rule Change is available at https://www.sec.gov/rulesregulations/self-regulatory-organizationrulemaking. The GSD Rules are available at https:// www.dtcc.com/∼/media/Files/Downloads/legal/ rules/ficc_gov_rules.pdf. Terms not otherwise defined herein are defined in the GSD Rules or in the Proposed Rule Change. 13 15 U.S.C. 78s(b)(1). 14 17 CFR 240.19b–4. PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 brokered transactions so that they only apply to transactions executed by an Inter-Dealer Broker Netting Member on the trading platform offered by that Inter-Dealer Broker Netting Member. Regarding the changes described in (3) above, Partial Amendment No. 1 makes several changes to the requirements regarding Segregated Customer Margin. First, as originally proposed, the Proposed Rule Change requires FICC to establish and maintain on its books and records a Segregated Customer Margin Custody Account corresponding to each Segregated Indirect Participants Account.15 Partial Amendment No. 1 deletes and replaces language in Rule 4, Section 1a, requiring Segregated Customer Margin credited to a Segregated Customer Margin Custody Account to be used exclusively to settle and margin Transactions in U.S. Treasury securities recorded in the corresponding Segregated Indirect Participants Account, with language requiring Segregated Customer Margin credited to a Segregated Customer Margin Custody Account to secure Transactions recorded in the corresponding Segregated Indirect Participants Account and satisfy payment and delivery obligations owning to the Corporation (including liquidating or otherwise using such Segregated Customer Margin to obtain relevant cash or securities) in connection with a default in respect of such Transactions. Similarly, Partial Amendment No. 1 deletes and replaces language in Rule 4, Section 5 regarding the use of Clearing Fund and Segregated Customer Margin requiring FICC to only use the portion of Segregated Customer Margin that supports each Segregated Indirect Participant’s Transactions. The Proposed Rule Change stated that FICC could use that portion to secure or settle the obligations of that Segregated Indirect Participant, and of the Sponsoring Member or Agent Clearing Member with respect to the obligations of that Segregated Indirect Participant, whereas Partial Amendment No. 1 replaces this language to state that FICC may only use that portion of Segregated Customer Margin to secure the Transactions of that Segregated Indirect Participant recorded in the corresponding Segregated Indirect Participants Account and satisfy payment and delivery obligations owing to FICC (including liquidating or otherwise using such Segregated Customer Margin to obtain relevant cash or securities) in connection with a default in respect of such Transactions. 15 Notice E:\FR\FM\01NON1.SGM of Filing supra note 4. 01NON1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 89, No. 212 / Friday, November 1, 2024 / Notices Additionally, Partial Amendment No 1. clarifies language in that portion of Rule 4 regarding FICC’s prohibition on using Segregated Customer Margin from one Segregated Indirect Participant’s Transactions to secure or settle another Segregated Indirect Participant’s Transaction by deleting reference to the term ‘‘settle’’ and replacing with satisfying payment or delivery obligations in connection with another Segregated Indirect Participant’s Transaction. Second, as originally proposed, the Proposed Rule Change requires FICC to hold all Segregated Customer Margin in an account at a bank within the meaning of the Exchange Act that is insured by the Federal Deposit Insurance Corporation or at the Federal Reserve Bank of New York, which account shall be segregated from any other account of the Corporation and used exclusively to hold Segregated Customer Margin.16 Additionally, the Proposed Rule Change requires Segregated Customer Margin to be subject to a written notice of the bank or Federal Reserve Bank provided to and retained by the Corporation that the Segregated Customer Margin in the account is being held by the bank or Federal Reserve Bank pursuant to SEC Rule 15c3–3 and is being kept separate from any other accounts maintained by the Corporation or any other person at the bank or Federal Reserve Bank.17 Partial Amendment No. 1 revises the Proposed Rule Change to insert text that clarifies that FICC shall not only hold Segregated Customer Margin in an account of FICC at a bank within the meaning of the Exchange Act that is insured by the Federal Deposit Insurance Corporation, but shall also hold Segregated Customer Margin in an account at a bank that is also a qualified custodian under the Investment Company Act of 1940,18 as amended.19 Additionally, the Proposed Rule Change inserts text that clarifies that not only is each account holding Segregated Customer Margin being held by a bank or Federal Reserve Bank pursuant to SEC Rule 15c3–3 is being kept separate from any other accounts maintained by FICC or any other person at the bank or Federal Reserve Bank, but also requires these accounts to not be commingled with any other accounts maintained by FICC or any other persona at the bank or Federal Reserve Bank. Third, as originally proposed, the Proposed Rule Change requires any interest earned on Segregated Customer Margin to be paid by FICC to the Netting Member.20 Partial Amendment No. 1 inserts language to clarify that any interest earned on Segregated Customer Margin consisting of cash shall be paid to the Netting Member for the benefit of, and as agent for, its Segregated Indirect Participants. Fourth, as originally proposed, the Proposed Rule Change would apply three requirements to each Segregated Customer Margin Requirement for a particular Segregated Indirect Participants Account: (1) A minimum of 40 percent of the Segregated Customer Margin Requirement for such Account shall be satisfied with cash and/or Eligible Clearing Fund Treasury Securities; (2) the lesser of $5,000,000 or 10 percent of the Segregated Customer Margin Requirement for the Account must be made and maintained in cash; and (3) a minimum of the product of $1 million and the number of Segregated Indirect Participants whose Transactions are recorded in such Segregated Indirect Participants Account must be made and maintained in cash.21 Partial Amendment No. 1 would revise the Proposed Rule Change by deleting the second requirement regarding the lesser of $5,000,000 or 10 percent of the Segregated Customer Margin Requirement for the Account must be made and maintained in cash. Fifth, as originally proposed, FICC had the discretion to retain some or all of the Excess Segregated Customer Margin if the Member had an outstanding payment or margin obligation to FICC with respect to the Transactions of any Segregated Indirect Participant.22 Partial Amendment No. 1 would revise the Proposed Rule Change by adding text that clarifies the FICC shall not retain the Excess Segregated Customer Margin with respect to the Transactions of a Segregated Indirect Participant when they have determined, in their sole discretion, that such outstanding payment or margin obligation is unrelated to the Transactions of that Segregated Indirect Participant. Sixth, Partial Amendment No. 1 would make the following change to the Margin Component Schedule in the Proposed Rule Change regarding Segregated Customer Margin Requirement Calculations.23 As originally proposed, each Segregated Indirect Participant would be required to deposit in the Segregated Indirect Participants Account Required Fund 16 Id. 20 Id. 17 Id. 21 Id. 18 15 22 Id. U.S.C. 80a–1 et seq. 19 Notice of Filing, supra note 4. VerDate Sep<11>2014 16:47 Oct 31, 2024 PO 00000 Frm 00120 Deposit the greater of the (i) the sum of the Unadjusted GSD Margin Portfolio Amount and all applicable additional charges; and (ii) a minimum charge of $1 million. Partial Amendment No. 1 would revise the Proposed Rule Change by inserting text to clarify that FICC may, in its sole discretion, adjust the minimum charge of $1 million in the Segregated Indirect Participants Account Required Fund Deposit if FICC determines that a different minimum charge would be appropriate and consistent with achieving its backtesting coverage target and that Members would be notified of any such adjustment by an Important Notice. Seventh, Partial Amendment No. 1 would add text to Rule 3A, Section 3, as proposed to be amended by SR– FICC–2024–005,24 to state that a Sponsored Member may be a series of a limited liability company, statutory trust, or other legal entity. Regarding the changes described in (4) above, Partial Amendment No. 1 would add language to clarify how the definition of Current Net Settlement Position relates to Sponsored GC Trades and that the definition does not refer to calculating the Net Settlement Position under Rule 11. As originally proposed, the definition stated that, if a Current Net Settlement Position recorded in a Sponsoring Member Omnibus Account or Segregated Indirect Participants Account is not clearly allocable to an individual Sponsored Member or Segregated Indirect Participant, including because one or more transactions recorded in the Account did not settle on its original Scheduled Settlement Date, then, for purposes of calculating the relevant Netting Member’s Sponsoring Member Omnibus Account Required Fund Deposit or Segregated Customer Margin Requirement for such Account, FICC shall allocate the positions in the manner specified. In Partial Amendment No. 1, the definition states if a Current Net Settlement Position recorded in a Sponsoring Member Omnibus Account or Segregated Indirect Participants Account is not clearly allocable to an individual Sponsored Member or Segregated Indirect Participant, including because one or more transactions (other than Sponsored GC Trades) recorded in the Account did not settle on its original Scheduled Settlement Date (such failure to settle would not occur with respect to Sponsored GC Trades), then, for purposes of calculating the relevant 24 Securities Exchange Act Release No. 99817 (March 21, 2024), 89 FR 21362 (March 27, 2024) (File No. SR–FICC–2024–005). 23 Id. Jkt 265001 87443 Fmt 4703 Sfmt 4703 E:\FR\FM\01NON1.SGM 01NON1 khammond on DSKJM1Z7X2PROD with NOTICES 87444 Federal Register / Vol. 89, No. 212 / Friday, November 1, 2024 / Notices Netting Member’s Sponsoring Member Omnibus Account Required Fund Deposit or Segregated Customer Margin Requirement for such Account and not for purposes of calculating the Net Settlement Position under Rule 11, FICC shall allocate the positions in the manner specified.25 Regarding the changes described in (5) above, Partial Amendment No. 1 makes several changes to the Proposed Rule Change and existing rules regarding the use of the term Brokered Transactions, including changes to its definition. Specifically, Partial Amendment No. 1 would delete and add text to the definition of Brokered Transaction to clarify that a Brokered Transaction means the side of a transaction, including a Repo Transaction, that is submitted to the Corporation for Novation by an InterDealer Broker Netting Member calling for the delivery of an Eligible Netting Security, or the posting of cash or an Eligible Netting Security as collateral, that such Inter-Dealer Broker Netting Member enters into with another Netting Member or a Sponsored Member or Executing Firm Customer through the Inter-Dealer Broker Netting Member’s own trading platform. As initially proposed, the definition of Brokered Transaction referred only to any transaction, including a Repo Transaction, calling for the delivery of an Eligible Netting Security, or the posting of cash or an Eligible Netting Security as collateral. Partial Amendment No. 1 also revises text proposed in SR–FICC–2024–005 regarding the treatment of Agent Clearing Transactions and deletes reference to the term Brokered Transactions, such that Brokered Transactions would not be excluded from being an Agent Clearing Transaction. Additionally, Partial Amendment No. 1 makes the following changes to delete references to the term Brokered Transactions: (i) amends text from the Proposed Rule Change regarding Rule 1, to remove the term Brokered Transactions from the definition of Dealer Account; (ii) revises Rule 4, Section 7 regarding loss allocation for Inter-Dealer Broker Netting Members, to replace a reference to a Segregated Repo Account, with a reference to a Broker Account, and to remove a reference to a Non-IDB Repo Broker, as the Proposed Rule Change deletes the use of that term from the Rules; and (iii) amends existing Rule 3A Section 5 regarding Sponsored 25 Partial Amendment No. 1 would also amend the definition of Netting Member Capital to use the defined terms Net Assets and Equity Capital. VerDate Sep<11>2014 16:47 Oct 31, 2024 Jkt 265001 Member Trades and deletes reference to the term Brokered Transactions, such that the text now states that Sponsored Member Trades (other than Sponsored GC Trades) may be any type of transaction eligible for submission to FICC for netting with the exception of Netting Eligible Auction Purchases and GCF Repo Transactions. Finally, Partial Amendment No. 1 makes several technical and conforming changes throughout the Proposed Rule Change, such as renumbering section numbers to reflect the addition of new sections. Partial Amendment No. 1 would not change the purpose of, or statutory basis for the proposed rule change. All other representations in the Proposed Rule Change remain as stated therein and no other changes are being made. II. 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-regulations/self-regulatoryorganization-rulemaking); or • Send an email to rule-comments@ sec.gov. Please include file number SR– FICC–2024–007 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–2024–007. 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-regulations/self-regulatoryorganization-rulemaking). 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 PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FICC and on DTCC’s website at (https://dtcc.com/legal/sec-rulefilings.aspx). Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to File Number SR–FICC–2024–007 and should be submitted on or before November 18, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–25429 Filed 10–31–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–101452; File No. SR– NYSEAMER–2024–62] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Modify Rule 971.2NYP October 28, 2024. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’),2 and Rule 19b–4 thereunder,3 notice is hereby given that, on October 22, 2024, NYSE American LLC (‘‘NYSE American’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to modify Rule 971.2NYP regarding the Customer Best Execution Auction for Complex Orders. The proposed rule change is available on the Exchange’s website at 26 17 CFR 200.30–3(a)(31). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 E:\FR\FM\01NON1.SGM 01NON1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 89, Number 212 (Friday, November 1, 2024)]
[Notices]
[Pages 87441-87444]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25429]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101454; File No. SR-FICC-2024-007]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing of Partial Amendment No. 1 to Proposed Rule Change To 
Modify the GSD Rules (i) Regarding the Separate Calculation, Collection 
and Holding of Margin for Proprietary Transactions and That for 
Indirect Participant Transactions, and (ii) To Address the Conditions 
of Note H to Rule 15c3-3a

October 28, 2024.
    On March 14, 2024, Fixed Income Clearing Corporation (``FICC'') 
filed with the Securities and Exchange

[[Page 87442]]

Commission (``Commission'') the proposed rule change SR-FICC-2024-007 
pursuant to Section 19(b) of the Securities Exchange Act of 1934 
(``Exchange Act'') \1\ and Rule 19b-4 \2\ thereunder to modify FICC's 
Government Securities Division (``GSD'') Rulebook (``GSD Rules'') to 
calculate, collect, and hold margin for proprietary transactions of a 
direct participant separately from margin submitted to FICC by a direct 
participant on behalf of indirect participants and to address 
conditions of Note H to Rule 15c3-3a under the Exchange Act (the 
``Proposed Rule Change'').\3\ The Proposed Rule Change was published 
for public comment in the Federal Register on March 28, 2024.\4\ The 
Commission has received comments regarding the substance of the 
Proposed Rule Change.\5\ The Commission also received a letter from 
FICC responding to the comments.\6\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 99149 (Dec. 13, 
2023), 89 FR 2714 (Jan. 16, 2024) (S7-23-22) (``Adopting Release,'' 
and the rules adopted therein as ``Treasury Clearing Rules''). See 
also 17 CFR 240.15c3-3a.
    \4\ Securities Exchange Act Release No. 99844 (March 22, 2024), 
89 FR 21603 (Mar. 28, 2024) (File No. SR-FICC-2024-007) (``Notice of 
Filing''). FICC also filed a related Advance Notice with the 
Commission pursuant to Section 806(e)(1) of Title VIII of the Dodd-
Frank Wall Street Reform and Consumer Protection Act, entitled the 
Payment, Clearing, and Settlement Supervision Act of 2010 and Rule 
19b-4(n)(1)(i) under the Exchange Act. 12 U.S.C. 5465(e)(1). 15 
U.S.C. 78s(b)(1) and 17 CFR 240.19b-4, respectively. The Advance 
Notice was published in the Federal Register on March 28, 2024. 
Securities Exchange Act Release No. 99845 (Mar. 22, 2024), 89 FR 
21586 (Mar. 28, 2024) (File No. SR-FICC-2024-802).
    \5\ Comments on the Proposed Rule Change are available at 
https://www.sec.gov/comments/sr-ficc-2024-007/srficc2024007.htm. 
Comments on the Advance Notice are available at https://www.sec.gov/comments/sr-ficc-2024-802/srficc2024802.htm. Because the proposals 
contained in the Proposed Rule Change and the Advance Notice are the 
same, the Commission considers all comments received on the 
proposal, regardless of whether the comments are submitted with 
respect to the Advance Notice or the Proposed Rule Change.
    \6\ See Letter from Laura Klimpel, Managing Director, Head of 
Fixed Income and Financing Solutions, Depository Trust & Clearing 
Corporation, (Aug. 1, 2024) (``FICC Letter'').
---------------------------------------------------------------------------

    On April 24, 2024, pursuant to Section 19(b)(2) of the Exchange 
Act,\7\ the Commission designated a longer period within which to 
approve, disapprove, or institute proceedings to determine whether to 
approve or disapprove the Proposed Rule Change.\8\ On June 21, 2024, 
pursuant to Section 19(b)(2)(B) of the Exchange Act,\9\ the Commission 
instituted proceedings to determine whether to approve or disapprove 
the Proposed Rule Change.\10\ On September 18, 2024, the Commission 
extended the time period for Commission action on the proceedings to 
determine whether to disapprove the Proposed Rule Change.\11\
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ Securities Exchange Act Release No. 100022 (Apr. 24, 2024), 
89 FR 34289 (Apr. 30, 2024) (File No. SR-FICC-2024-007).
    \9\ 15 U.S.C. 78s(b)(2)(B).
    \10\ Securities Exchange Act Release No. 100401 (Jun. 21, 2024), 
89 FR 53690 (Jun. 27, 2024) (File No. SR-FICC-2024-007).
    \11\ Securities Exchange Act Release No. 101082 (Sep. 18, 2024), 
89 FR 77949 (Sep. 24, 2024) (File No. SR-FICC-2024-007).
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    On October 25, 2024, FICC filed Partial Amendment No. 1 to the 
Proposed Rule Change.\12\ Pursuant to Section 19(b)(1) of the Act \13\ 
and Rule 19b-4 thereunder,\14\ the Commission is publishing notice of 
this Partial Amendment No.1 to the Proposed Rule Change as described in 
Item I below. The Commission is publishing this notice to solicit 
comments on Partial Amendment No. 1 from interested persons.
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    \12\ Text of the proposed changes made by the Partial Amendment 
No. 1 to the Proposed Rule Change is available at https://www.sec.gov/rules-regulations/self-regulatory-organization-rulemaking. The GSD Rules are available at https://www.dtcc.com/~/
media/Files/Downloads/legal/rules/ficc_gov_rules.pdf. Terms not 
otherwise defined herein are defined in the GSD Rules or in the 
Proposed Rule Change.
    \13\ 15 U.S.C. 78s(b)(1).
    \14\ 17 CFR 240.19b-4.
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I. Summary of the Terms of Substance of Partial Amendment No. 1 to the 
Proposed Rule Change

    FICC filed Partial Amendment No. 1 to its previously submitted 
Proposed Rule Change, which would make several changes to FICC's GSD 
Rules to (1) provide for FICC to calculate, collect, and hold margin 
for the proprietary transactions of a Netting Member separately and 
independently from the margin for transactions that the Netting Member 
submits to FICC on behalf of indirect participants; (2) simplify and 
revise the account types through which Members may record transactions 
at FICC and adopt a new Rule 2B to provide clearer public disclosures 
through the Rules regarding the GSD account structure; (3) allow 
Netting Members to elect for margin for indirect participant 
transactions to be calculated on a gross basis (i.e., an indirect 
participant-by-indirect participant basis) and legally segregated from 
the margin for the Netting Member's proprietary transactions (as well 
as those of other indirect participants); (4) align FICC's margin 
calculation methodology with the expanded account types and enhance 
public disclosure through the Rules of that calculation methodology; 
and (5) simplify the requirements for brokered transactions so that 
they only apply to transactions executed by an Inter-Dealer Broker 
Netting Member on the trading platform offered by that Inter-Dealer 
Broker Netting Member.
    Regarding the changes described in (3) above, Partial Amendment No. 
1 makes several changes to the requirements regarding Segregated 
Customer Margin. First, as originally proposed, the Proposed Rule 
Change requires FICC to establish and maintain on its books and records 
a Segregated Customer Margin Custody Account corresponding to each 
Segregated Indirect Participants Account.\15\ Partial Amendment No. 1 
deletes and replaces language in Rule 4, Section 1a, requiring 
Segregated Customer Margin credited to a Segregated Customer Margin 
Custody Account to be used exclusively to settle and margin 
Transactions in U.S. Treasury securities recorded in the corresponding 
Segregated Indirect Participants Account, with language requiring 
Segregated Customer Margin credited to a Segregated Customer Margin 
Custody Account to secure Transactions recorded in the corresponding 
Segregated Indirect Participants Account and satisfy payment and 
delivery obligations owning to the Corporation (including liquidating 
or otherwise using such Segregated Customer Margin to obtain relevant 
cash or securities) in connection with a default in respect of such 
Transactions.
---------------------------------------------------------------------------

    \15\ Notice of Filing supra note 4.
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    Similarly, Partial Amendment No. 1 deletes and replaces language in 
Rule 4, Section 5 regarding the use of Clearing Fund and Segregated 
Customer Margin requiring FICC to only use the portion of Segregated 
Customer Margin that supports each Segregated Indirect Participant's 
Transactions. The Proposed Rule Change stated that FICC could use that 
portion to secure or settle the obligations of that Segregated Indirect 
Participant, and of the Sponsoring Member or Agent Clearing Member with 
respect to the obligations of that Segregated Indirect Participant, 
whereas Partial Amendment No. 1 replaces this language to state that 
FICC may only use that portion of Segregated Customer Margin to secure 
the Transactions of that Segregated Indirect Participant recorded in 
the corresponding Segregated Indirect Participants Account and satisfy 
payment and delivery obligations owing to FICC (including liquidating 
or otherwise using such Segregated Customer Margin to obtain relevant 
cash or securities) in connection with a default in respect of such 
Transactions.

[[Page 87443]]

Additionally, Partial Amendment No 1. clarifies language in that 
portion of Rule 4 regarding FICC's prohibition on using Segregated 
Customer Margin from one Segregated Indirect Participant's Transactions 
to secure or settle another Segregated Indirect Participant's 
Transaction by deleting reference to the term ``settle'' and replacing 
with satisfying payment or delivery obligations in connection with 
another Segregated Indirect Participant's Transaction.
    Second, as originally proposed, the Proposed Rule Change requires 
FICC to hold all Segregated Customer Margin in an account at a bank 
within the meaning of the Exchange Act that is insured by the Federal 
Deposit Insurance Corporation or at the Federal Reserve Bank of New 
York, which account shall be segregated from any other account of the 
Corporation and used exclusively to hold Segregated Customer 
Margin.\16\ Additionally, the Proposed Rule Change requires Segregated 
Customer Margin to be subject to a written notice of the bank or 
Federal Reserve Bank provided to and retained by the Corporation that 
the Segregated Customer Margin in the account is being held by the bank 
or Federal Reserve Bank pursuant to SEC Rule 15c3-3 and is being kept 
separate from any other accounts maintained by the Corporation or any 
other person at the bank or Federal Reserve Bank.\17\ Partial Amendment 
No. 1 revises the Proposed Rule Change to insert text that clarifies 
that FICC shall not only hold Segregated Customer Margin in an account 
of FICC at a bank within the meaning of the Exchange Act that is 
insured by the Federal Deposit Insurance Corporation, but shall also 
hold Segregated Customer Margin in an account at a bank that is also a 
qualified custodian under the Investment Company Act of 1940,\18\ as 
amended.\19\ Additionally, the Proposed Rule Change inserts text that 
clarifies that not only is each account holding Segregated Customer 
Margin being held by a bank or Federal Reserve Bank pursuant to SEC 
Rule 15c3-3 is being kept separate from any other accounts maintained 
by FICC or any other person at the bank or Federal Reserve Bank, but 
also requires these accounts to not be commingled with any other 
accounts maintained by FICC or any other persona at the bank or Federal 
Reserve Bank.
---------------------------------------------------------------------------

    \16\ Id.
    \17\ Id.
    \18\ 15 U.S.C. 80a-1 et seq.
    \19\ Notice of Filing, supra note 4.
---------------------------------------------------------------------------

    Third, as originally proposed, the Proposed Rule Change requires 
any interest earned on Segregated Customer Margin to be paid by FICC to 
the Netting Member.\20\ Partial Amendment No. 1 inserts language to 
clarify that any interest earned on Segregated Customer Margin 
consisting of cash shall be paid to the Netting Member for the benefit 
of, and as agent for, its Segregated Indirect Participants.
---------------------------------------------------------------------------

    \20\ Id.
---------------------------------------------------------------------------

    Fourth, as originally proposed, the Proposed Rule Change would 
apply three requirements to each Segregated Customer Margin Requirement 
for a particular Segregated Indirect Participants Account: (1) A 
minimum of 40 percent of the Segregated Customer Margin Requirement for 
such Account shall be satisfied with cash and/or Eligible Clearing Fund 
Treasury Securities; (2) the lesser of $5,000,000 or 10 percent of the 
Segregated Customer Margin Requirement for the Account must be made and 
maintained in cash; and (3) a minimum of the product of $1 million and 
the number of Segregated Indirect Participants whose Transactions are 
recorded in such Segregated Indirect Participants Account must be made 
and maintained in cash.\21\ Partial Amendment No. 1 would revise the 
Proposed Rule Change by deleting the second requirement regarding the 
lesser of $5,000,000 or 10 percent of the Segregated Customer Margin 
Requirement for the Account must be made and maintained in cash.
---------------------------------------------------------------------------

    \21\ Id.
---------------------------------------------------------------------------

    Fifth, as originally proposed, FICC had the discretion to retain 
some or all of the Excess Segregated Customer Margin if the Member had 
an outstanding payment or margin obligation to FICC with respect to the 
Transactions of any Segregated Indirect Participant.\22\ Partial 
Amendment No. 1 would revise the Proposed Rule Change by adding text 
that clarifies the FICC shall not retain the Excess Segregated Customer 
Margin with respect to the Transactions of a Segregated Indirect 
Participant when they have determined, in their sole discretion, that 
such outstanding payment or margin obligation is unrelated to the 
Transactions of that Segregated Indirect Participant.
---------------------------------------------------------------------------

    \22\ Id.
---------------------------------------------------------------------------

    Sixth, Partial Amendment No. 1 would make the following change to 
the Margin Component Schedule in the Proposed Rule Change regarding 
Segregated Customer Margin Requirement Calculations.\23\ As originally 
proposed, each Segregated Indirect Participant would be required to 
deposit in the Segregated Indirect Participants Account Required Fund 
Deposit the greater of the (i) the sum of the Unadjusted GSD Margin 
Portfolio Amount and all applicable additional charges; and (ii) a 
minimum charge of $1 million. Partial Amendment No. 1 would revise the 
Proposed Rule Change by inserting text to clarify that FICC may, in its 
sole discretion, adjust the minimum charge of $1 million in the 
Segregated Indirect Participants Account Required Fund Deposit if FICC 
determines that a different minimum charge would be appropriate and 
consistent with achieving its backtesting coverage target and that 
Members would be notified of any such adjustment by an Important 
Notice.
---------------------------------------------------------------------------

    \23\ Id.
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    Seventh, Partial Amendment No. 1 would add text to Rule 3A, Section 
3, as proposed to be amended by SR-FICC-2024-005,\24\ to state that a 
Sponsored Member may be a series of a limited liability company, 
statutory trust, or other legal entity.
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    \24\ Securities Exchange Act Release No. 99817 (March 21, 2024), 
89 FR 21362 (March 27, 2024) (File No. SR-FICC-2024-005).
---------------------------------------------------------------------------

    Regarding the changes described in (4) above, Partial Amendment No. 
1 would add language to clarify how the definition of Current Net 
Settlement Position relates to Sponsored GC Trades and that the 
definition does not refer to calculating the Net Settlement Position 
under Rule 11. As originally proposed, the definition stated that, if a 
Current Net Settlement Position recorded in a Sponsoring Member Omnibus 
Account or Segregated Indirect Participants Account is not clearly 
allocable to an individual Sponsored Member or Segregated Indirect 
Participant, including because one or more transactions recorded in the 
Account did not settle on its original Scheduled Settlement Date, then, 
for purposes of calculating the relevant Netting Member's Sponsoring 
Member Omnibus Account Required Fund Deposit or Segregated Customer 
Margin Requirement for such Account, FICC shall allocate the positions 
in the manner specified. In Partial Amendment No. 1, the definition 
states if a Current Net Settlement Position recorded in a Sponsoring 
Member Omnibus Account or Segregated Indirect Participants Account is 
not clearly allocable to an individual Sponsored Member or Segregated 
Indirect Participant, including because one or more transactions (other 
than Sponsored GC Trades) recorded in the Account did not settle on its 
original Scheduled Settlement Date (such failure to settle would not 
occur with respect to Sponsored GC Trades), then, for purposes of 
calculating the relevant

[[Page 87444]]

Netting Member's Sponsoring Member Omnibus Account Required Fund 
Deposit or Segregated Customer Margin Requirement for such Account and 
not for purposes of calculating the Net Settlement Position under Rule 
11, FICC shall allocate the positions in the manner specified.\25\
---------------------------------------------------------------------------

    \25\ Partial Amendment No. 1 would also amend the definition of 
Netting Member Capital to use the defined terms Net Assets and 
Equity Capital.
---------------------------------------------------------------------------

    Regarding the changes described in (5) above, Partial Amendment No. 
1 makes several changes to the Proposed Rule Change and existing rules 
regarding the use of the term Brokered Transactions, including changes 
to its definition. Specifically, Partial Amendment No. 1 would delete 
and add text to the definition of Brokered Transaction to clarify that 
a Brokered Transaction means the side of a transaction, including a 
Repo Transaction, that is submitted to the Corporation for Novation by 
an Inter-Dealer Broker Netting Member calling for the delivery of an 
Eligible Netting Security, or the posting of cash or an Eligible 
Netting Security as collateral, that such Inter-Dealer Broker Netting 
Member enters into with another Netting Member or a Sponsored Member or 
Executing Firm Customer through the Inter-Dealer Broker Netting 
Member's own trading platform. As initially proposed, the definition of 
Brokered Transaction referred only to any transaction, including a Repo 
Transaction, calling for the delivery of an Eligible Netting Security, 
or the posting of cash or an Eligible Netting Security as collateral.
    Partial Amendment No. 1 also revises text proposed in SR-FICC-2024-
005 regarding the treatment of Agent Clearing Transactions and deletes 
reference to the term Brokered Transactions, such that Brokered 
Transactions would not be excluded from being an Agent Clearing 
Transaction.
    Additionally, Partial Amendment No. 1 makes the following changes 
to delete references to the term Brokered Transactions: (i) amends text 
from the Proposed Rule Change regarding Rule 1, to remove the term 
Brokered Transactions from the definition of Dealer Account; (ii) 
revises Rule 4, Section 7 regarding loss allocation for Inter-Dealer 
Broker Netting Members, to replace a reference to a Segregated Repo 
Account, with a reference to a Broker Account, and to remove a 
reference to a Non-IDB Repo Broker, as the Proposed Rule Change deletes 
the use of that term from the Rules; and (iii) amends existing Rule 3A 
Section 5 regarding Sponsored Member Trades and deletes reference to 
the term Brokered Transactions, such that the text now states that 
Sponsored Member Trades (other than Sponsored GC Trades) may be any 
type of transaction eligible for submission to FICC for netting with 
the exception of Netting Eligible Auction Purchases and GCF Repo 
Transactions.
    Finally, Partial Amendment No. 1 makes several technical and 
conforming changes throughout the Proposed Rule Change, such as 
renumbering section numbers to reflect the addition of new sections.
    Partial Amendment No. 1 would not change the purpose of, or 
statutory basis for the proposed rule change. All other representations 
in the Proposed Rule Change remain as stated therein and no other 
changes are being made.

II. 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-regulations/self-regulatory-organization-rulemaking); 
or
     Send an email to [email protected]. Please include 
file number SR-FICC-2024-007 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-2024-007. 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-regulations/self-regulatory-organization-rulemaking). 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 such filing also will be available for inspection 
and copying at the principal office of FICC and on DTCC's website at 
(https://dtcc.com/legal/sec-rule-filings.aspx). Do not include personal 
identifiable information in submissions; you should submit only 
information that you wish to make available publicly. We may redact in 
part or withhold entirely from publication submitted material that is 
obscene or subject to copyright protection. All submissions should 
refer to File Number SR-FICC-2024-007 and should be submitted on or 
before November 18, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(31).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-25429 Filed 10-31-24; 8:45 am]
BILLING CODE 8011-01-P

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