[Federal Register Volume 70, Number 63 (Monday, April 4, 2005)]
[Notices]
[Pages 17133-17134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1476]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51441; File No. SR-FICC-2005-06]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing of Proposed Rule Change To Change the Minimum Margin 
Deficiency Call Amount for Participants in Its Mortgage-Backed 
Securities Division

March 28, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 11, 2005, the Fixed 
Income Clearing Corporation (``FICC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change 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 parties.
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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 purpose of this proposed rule change is to change the minimum 
margin deficiency call amount for participants in the Mortgage-Backed 
Securities Division (``MBSD'') of FICC.

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 these 
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 purpose of the proposed rule change is to change the minimum 
margin deficiency call amount for MBSD participants to the lesser of 
$250,000 or 25 percent of the value of a participant's margin deposit. 
Currently, the MBSD's procedures establish a minimum margin deficiency

[[Page 17134]]

call amount of $1,000. Upon review, FICC has determined that the 
minimum margin deficiency call amount creates unnecessary operational 
burdens and allocation of resources for a collection of margin calls 
that FICC believes is insubstantial from a risk perspective. On 
average, the MBSD makes 17 margin calls per day of which approximately 
five are for amounts under $250,000.
    FICC seeks to harmonize the rules of its two divisions, the 
Government Securities Division (``GSD'') and Mortgage-Backed Securities 
Division (``MSBD''), wherever prudent and possible. The rules of the 
GSD provide for a minimum Clearing Fund deficiency call amount for 
margin requirement increases of the lesser of $250,000 or 25 percent of 
the value of the member's collateral deposits.\3\ Under the proposed 
rule, the minimum margin deficiency call amount for MBSD participants 
would be the lesser of $250,000 or 25 percent of the value of a 
participant's margin deposit. FICC believes this would eliminate the 
operational burdens associated with the collection of de minimis margin 
amounts and would harmonize the rules of FICC's two divisions.\4\
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    \3\ There is no minimum amount for deficiency calls where the 
subject member is subject to enhanced monitoring on what is known as 
the ``watch list.''
    \4\ As proposed and consistent with the applicable GSD rule, a 
minimum amount would not apply to deficiency calls where the subject 
participant is on the ``watch list.''
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    FICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \5\ and the rules and 
regulations thereunder applicable to FICC because it allows for a less 
burdensome application of its margin call process without presenting 
material risk to FICC or its participants. As such, FICC believes the 
proposed rule assures the safeguarding of securities and funds that are 
in the custody and control of FICC or for which it is responsible.
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    \5\ 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

    Written comments relating to the proposed rule change have not yet 
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 thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period: (i) As the 
Commission may designate up to ninety days of such date 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 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 (http://www.sec.gov/rules/sro.shtml) or
     Send an e-mail to [email protected]. Please include 
File Number SR-FICC-2005-06 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-FICC-2005-06. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://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 inspection 
and copying in the Commission's Public Reference Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filings also will be 
available for inspection and copying at the principal office of FICC 
and on FICC's Web site, http://www.ficc.com. All comments received will 
be posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-FICC-2005-06 and should be submitted on 
or before April 25, 2005.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1476 Filed 4-1-05; 8:45 am]
BILLING CODE 8010-01-P