[Federal Register Volume 70, Number 143 (Wednesday, July 27, 2005)]
[Notices]
[Pages 43478-43479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3989]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52065; File No. SR-FICC-2005-12]


Self Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to an Interpretation of a Rule Change Submission and Making 
Certain Technical Changes

July 20, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 20, 2005, the Fixed 
Income Clearing Corporation (``FICC'') filed with the Securities and 
Exchange Commission (``Commission'') a proposed rule change and on July 
13, 2005, 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

    FICC proposes to clarify the meaning of the narrative of a prior 
FICC rule change submission and to make technical rule changes to the 
rules of its Government Securities Division (``GSD'') and the Mortgage-
Backed Securities Division (``MBSD'').

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

    On March 16, 2005, the Commission approved an FICC rule filing 
that, among other things, established new minimum financial 
requirements for netting and clearing members in both Divisions.\3\ 
Specifically, members that use U.S. generally accepted accounting 
principles (``GAAP'') to prepare their financial statements continue to 
be required to meet the minimum financial requirements that were in the 
rules prior to the rule change. Members that use a different kind of 
GAAP must meet minimum financial requirements that are 1\1/2\, 5, or 7 
times greater than the financial requirements for users of U.S. GAAP, 
depending on the type of GAAP used by the member.
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    \3\ Securities Exchange Act Release No. 51385, 70 FR 14736 (Mar. 
23, 2005) [File No. SR-FICC-2004-14].
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    FICC is concerned that the narrative of FICC's rule filing 
submission was phrased in a way that might be confusing. For example, 
the rule filing narrative stated that a member that uses UK GAAP would 
have to meet a minimum financial requirement of ``a premium of 1\1/2\ 
times the existing requirement.'' FICC is concerned that the use of the 
term ``premium'' could be misinterpreted to mean that the minimum 
financial requirement of such a member would be the total of the 
requirement for a user of U.S. GAAP plus 1\1/2\ times that requirement. 
FICC wishes to clarify that the new financial requirement for such 
members is 1\1/2\ times the U.S. GAAP requirement, as was correctly and 
accurately worded in the text of each Division's rules and the 
narrative of the Commission's order approving the rule change.
    In addition, FICC believes that the fine schedule for failure to 
timely provide required information to FICC does not adequately reflect 
the fact that members will be fined by FICC for not meeting the 
information requirements contained in GSD Rule 2, Sections 5 and 6 and 
MBSD Rule 1, Article II, Sections 10 and 12. While the fine schedule 
refers to the correct rule sections, it only refers to financial and 
regulatory reports, whereas those sections contain requirements to 
submit other types of information such as certain notifications, legal 
opinions, and updates to legal opinions. Members have been notified 
both in the relevant rule filings and in important notices that they 
will be fined if they do not timely submit this other type of required 
information as well. FICC proposes to change the fine schedule of each 
division to clearly reflect this.
    FICC is also deleting provisions in GSD's rules relating to DK 
functionality for bilateral comparison because this functionality was 
never implemented. Lastly, FICC is correcting certain alpha-numerical 
references within GSD's rules.
    FICC believes that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
because it clarifies FICC's rules and makes necessary technical 
corrections.

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 if it receives 
any written comments.

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)(i) of the Act \4\ and Rule 19b-4(f)(1) \5\ thereunder 
because it constitutes a stated policy, practice, or interpretation 
with respect to the meaning, administration, or

[[Page 43479]]

enforcement of an existing rule. At any time within sixty days of the 
filing of such proposed rule change, the Commission may summarily 
abrogate 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.\6\
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    \4\ 15 U.S.C. 78s(b)(3)(A)(i).
    \5\ 17 CFR 240.19b-4(f)(1).
    \6\ The date of the original proposed rule change is May 20, 
2005, and the date of the amendment is July 13, 2005. For purposes 
of calculating the 60-day period within which the Commission may 
summarily abrogate the proposed rule change, as amended, under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on July 13, 2005, the date on which FICC submitted 
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2005-12 on the subject line.

Paper Comments

    Send paper comments in triplicate to Jonathan G. Katz, Secretary, 
Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-9303. All submissions should refer to File Number SR-FICC-2005-
12. 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, 100 F Street, 
NE., Washington, DC 20549. Copies of such filing also will 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=. 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-2005-12 and should be 
submitted on or before August 17, 2005.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. E5-3989 Filed 7-26-05; 8:45 am]
BILLING CODE 8010-01-P