[Federal Register Volume 70, Number 93 (Monday, May 16, 2005)]
[Notices]
[Page 25869]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2408]



[[Page 25869]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51673; File No. SR-FICC-2005-06]


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

May 9, 2005.

I. Introduction

    On March 11, 2005, the Fixed Income Clearing Corporation (``FICC'') 
filed with the Securities and Exchange Commission (``Commission'') 
proposed rule change SR-FICC-2005-06 pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'').\1\ Notice of the 
proposal was published in the Federal Register on April 4, 2005.\2\ No 
comment letters were received. For the reasons discussed below, the 
Commission is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 51441 (March 28, 2005), 
70 FR 17133 (April 4, 2005).
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II. Description

    FICC is amending the minimum margin deficiency call amount for 
participants in its Mortgage-Backed Securities Division (``MBSD'') 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 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 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 will be the lesser of $250,000 or 25 
percent of the value of a participant's margin deposit. FICC believes 
this will eliminate the operational burdens associated with the 
collection of de minimis margin amounts and will 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 will not apply to deficiency calls where the subject 
participant is on the ``watch list.''
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III. Discussion

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in the custody or control of the clearing agency or 
for which it is responsible.\5\ The Commission finds that FICC's 
proposed rule change is consistent with this requirement because it 
will allow for a less burdensome application of its margin call process 
without presenting material risk to FICC or its participants. This 
should allow FICC to reallocate resources formerly associated with the 
collection of de minimis margin amounts, which will better enable FICC 
to safeguard the securities and funds in its custody or control or for 
which it is responsible.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A of the Act and the rules and regulations 
thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-FICC-2005-06) be and hereby 
is approved.

    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-2408 Filed 5-13-05; 8:45 am]
BILLING CODE 8010-01-P