[Federal Register Volume 69, Number 56 (Tuesday, March 23, 2004)]
[Notices]
[Pages 13604-13605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-6408]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49421; File No. SR-FICC-2003-14]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing of a Proposed Rule Change Relating to Amending 
Impractical or Inconsistent Rules, Eliminating the Need for Routine 
Waivers of Various Rules Provisions, and Adding Rules to Protect the 
Clearing Corporation and Its Members

March 16, 2004.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on November 17, 2003, the 
Fixed Income Clearing Corporation (``FICC'') filed with the Securities 
and Exchange Commission (``Commission'') and on January 15, 2004, and 
March 3, 2004, amended the proposed rule change as described in items 
I, II, and III below, which items have been prepared primarily by FICC. 
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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change will eliminate and amend certain of FICC's 
Government Securities Division (``GSD'') and Mortgage-Backed Securities 
Division (``MBSD'') rules that (i) require routine waivers, (ii) are 
inconsistent with current practice, and (iii) are impractical.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FICC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
item IV below. FICC has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by FICC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The proposed rule change would eliminate and amend certain of GSD's 
and MBSD's rules that (i) require routine waivers, (ii) are 
inconsistent with current practice, and (iii) are impractical. 
Specifically, the proposed rule changes would:
1. Remove the Term ``Clearing Agent Bank Member'' and Corresponding 
References to It in GSD's Rules
    This category of GSD membership no longer has any practical meaning 
and is not used. Entities that are clearing agent banks that wish to 
join the netting service currently become bank netting members.\3\
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    \3\ GSD Rule 1.
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2. Amend GSD's Rules To Remove Outdated Eligibility Qualifications for 
Comparison-Only Members
    Currently, GSD's rules allow the following types of entities to be 
eligible to apply to become a comparison-only member: (i) a registered 
government securities broker or dealer, (ii) a clearing agent bank, or 
(iii) if neither (i) nor (ii), an entity that has demonstrated to FICC

[[Page 13605]]

that its business and capabilities are such that it could reasonably 
expect material benefit from direct access to FICC's services.\4\
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    \4\ GSD Rule 2, section 1.
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    FICC believes that GSD's comparison system provides a riskless 
service that any entity, regardless of its legal or regulatory 
structure, that is an active market participant can and should take 
advantage of. Accordingly, FICC believes that a better approach to the 
eligibility criteria for comparison-only entities, which would also be 
consistent with the way that FICC's management views the purpose of 
comparison-only membership, would be to replace (i) and (ii) with the 
requirement that the comparison-only applicant be a legal entity that 
is eligible to apply to be a GSD netting member and maintain the 
current (iii).
3. Clarify GSD's Rule on Voluntary Termination of Membership
    The proposed change would modify the language in GSD Rule 2, 
section 11, to provide that: (i) A member must provide 10 days written 
notice of terminating its membership but GSD can accept such notice of 
termination within a shorter period, (ii) the requested termination of 
membership would not be effective until accepted by GSD, and (iii) 
GSD's acceptance would be evidenced by a notice to all members 
announcing the termination date of such member.
4. Add a Provision to GSD's Rules To Permit It To Have Access to the 
Books and Records of Members
    GSD's rules currently permit GSD to access an applicant's books and 
records but not a member's books and records. Extending GSD's authority 
to review member's books and records is consistent with other clearing 
agencies' rules such as those of the National Securities Clearing 
Corporation.\5\
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    \5\ Proposed new section 13 of GSD rule 2.
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5. Add a Provision to MBSD's Rules To Provide for the Confidential 
Treatment of Documents Submitted by Applicants as Part of the 
Application Process
    This rule change would provide appropriate comfort to applicants 
and would make MBSD's rules consistent with GSD's rules.\6\
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    \6\ Proposed new section 11 of MBSD rules, Article III, Rule 1.
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6. Add a New Provision to MBSD's Rules That Provides That at the 
Request of FICC a Non-Domestic Participant Must Provide an Update of 
the Legal Opinion Submitted by the Foreign Member or a Written Status 
Report on FICC's Rights Under the Relevant Non-Domestic Law and Add a 
Similar New Provision to GSD Rules \7\
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    \7\ Proposed new language to subsection (g) of GSD Rule 2, 
section 3; proposed new subsection (iii) of MBSD Article III, Rule 
1, section 14.
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    FICC believes that the current language of this MBSD rule is 
ambiguous and potentially burdensome for members. FICC believes that a 
better approach would be to provide that, if FICC is alerted to a 
change in circumstances or to an issue of law that brings into question 
the reliability of the legal opinion submitted by a non-domestic 
participant, FICC would have the right to require the participant to 
revisit its legal opinion and provide an update as to the status of 
FICC's rights under the relevant non-domestic law. FICC proposes to add 
this provision to GSD's rules as well.
    FICC believes that the proposed rule change is consistent with the 
requirements of section 17A of the Act \8\ and the rules and 
regulations thereunder because it will eliminate impractical rules, 
clarify unclear rules, and add necessary rule provisions to protect 
FICC and its members.
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    \8\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FICC does not believe that the proposed rule change will have any 
impact or impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    FICC has not solicited or received written comments relating to the 
proposed rule change. FICC will notify the Commission of any written 
comments it receives.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or such longer period (i) as the Commission may 
delegate up to ninety days of such date if it finds such longer period 
to be appropriate and published its reasons for so finding or (ii) as 
to which the self-regulatory organization consents, the Commission 
will:
    (a) By order approve 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 5th Street, NW., Washington, DC 20549-0069. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-FICC-2003-14. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your comments more efficiently, comments should be sent either 
in hardcopy or by e-mail but not by both methods. Copies of the 
submission, all subsequent amendments, all written statements with 
respect to the rule filing that are filed with the Commission, and all 
written communications relating to the rule filing between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with provisions of 5 U.S.C. 552, will be 
available for inspection and copying in the Commission's Public 
Reference Room in Washington, DC. Copies of such filing will also be 
available for inspection and copying at FICC's principal office and on 
FICC's Web site at http://www.ficc.com/gov/gov.docs.jsp?NS-query= and 
http://www.ficc.com/mbs/mbs.docs.jsp?NS-query=. All submissions should 
refer to File No. SR-FICC-2003-14 and should be submitted by April 13, 
2004.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-6408 Filed 3-22-04; 8:45 am]
BILLING CODE 8010-01-P