[Federal Register Volume 71, Number 183 (Thursday, September 21, 2006)]
[Notices]
[Pages 55239-55243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-7844]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54457; File Nos. SR-FICC-2006-03 and SR-NSCC-2006-03]


Self-Regulatory Organizations; Fixed Income Clearing Corporation 
and National Securities Clearing Corporation; Notice of Filing and 
Order Granting Accelerated Approval of Proposed Rule Changes to 
Institute a Clearing Fund Premium Based Upon a Member's Clearing Fund 
Requirement to Excess Regulatory Capital Ratio

September 15, 2006.
    On February 22, 2006, the Fixed Income Clearing Corporation 
(``FICC'') and the National Securities Clearing Corporation (``NSCC'') 
filed with the Securities and Exchange Commission (``Commission'') 
proposed rule changes SR-FICC-2006-03 and SR-NSCC-2006-03 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 
24, 2006.\2\ Seven comment letters were received.\3\ FICC and NSCC 
amended the proposed rule changes on July 28, 2006, to address certain 
concerns raised by the commenters and others.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 53671 (April 18, 2006), 
71 FR 21060.
    \3\ Jim Nardone, Schonfeld Securities, LLC (``Schonfeld'') (May 
5, 2006); Richard Gill, Senior Vice President, and Donald Galante, 
Senior Vice President, Man Securities Inc. (``Man'') (May 15, 2006); 
L. Thomas Patterson, Chief Executive Officer, and Kathleen M. Toner, 
Chief Regulatory Officer, LaBranche & Co. Inc. (``LaBranche'') (May 
18, 2006); Peter Chepucavage, International Association of Small 
Broker-Dealers and Advisers (``IASBDA'') (May 19, 2006); Greggory A. 
Teeter, Howrey LLC, representing Wilson-Davis & Co., Inc. (``Wilson-
Davis''), Alpine Securities Corporation (``Alpine''), and IASBDA 
(June 1, 2006); Cheryl T. Lambert, Managing Director, Risk 
Management, The Depository Trust and Clearing Corporation (``DTCC'') 
(July 28, 2006); and Peter Chepucavage, IASBDA (August 9, 2006).
    Schonfeld, Wilson-Davis, Alpine, and LaBranche are members of 
NSCC. Man is a member of FICC. IASBDA is an organization created for 
the purpose of protecting the interests of small and midsize broker-
dealers and micro-cap issuers.
---------------------------------------------------------------------------

    The Commission is publishing this notice and order to solicit 
comments from interested persons and to grant accelerated approval of 
the proposals.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Changes

    FICC and NSCC are each seeking to institute a clearing fund premium 
based on a member's clearing fund requirement to excess regulatory 
capital ratio.

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

    In their filings with the Commission, FICC and NSCC included 
statements concerning the purpose of and basis for the proposed rule 
changes and discussed any comments they received on the proposed rule 
changes. The text of these statements may be examined at the places 
specified in Item VI below. FICC and NSCC have prepared summaries, set 
forth in sections (A), (B), and (C) below, of the most significant 
aspects of these statements.\4\
---------------------------------------------------------------------------

    \4\ The Commission has modified the text of the summaries 
prepared by FICC and NSCC.
---------------------------------------------------------------------------

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    FICC and NSCC are each seeking to institute a clearing fund premium 
based on a member's clearing fund requirement to excess regulatory 
capital ratio.
1. FICC Clearing Fund Premium
    The degree to which the collateral requirement of a clearing agency 
member compares to the member's excess regulatory capital is an 
important indicator of the potential risk that the member presents to a 
clearing agency. In 2002, the Government Securities Clearing 
Corporation (``GSCC''), the predecessor to the Government Securities 
Division (``GSD'') of FICC, received Commission approval to impose a 
collateral premium on netting members whose clearing fund requirements 
exceed their excess regulatory capital.\5\ Specifically, the GSD 
implemented a 25 percent collateral premium when a member's ratio of 
clearing fund requirement to its excess regulatory capital is greater 
than 1.0. The 25 percent premium is applied to the amount by which the 
member's clearing fund requirement exceeds the member's excess 
regulatory capital.
---------------------------------------------------------------------------

    \5\ Securities Exchange Act Release No. 45647 (March 26, 2002), 
67 FR 15438 (April 1, 2002) [File No. SR-GSCC-2001-15]. ``Excess 
regulatory capital'' for purposes of GSD's collateral premium 
included excess net capital, excess liquid capital, or excess 
adjusted capital.
---------------------------------------------------------------------------

    In order to more effectively manage the risk posed by a GSD member 
whose activity causes it to have a clearing fund requirement that is 
greater than its excess regulatory capital, FICC now proposes to 
strengthen the above-mentioned risk management tool by applying a 
clearing fund premium that is based on a member's ratio of clearing 
fund requirement to excess regulatory capital in place of the current 
flat premium of 25 percent.\6\ The premium would be determined by 
multiplying the amount by which a member's clearing fund requirement 
exceeds its excess regulatory capital by the member's ratio of required 
clearing fund to excess regulatory capital expressed as a percent. This 
formula would allow the premium to increase or decrease in proportion 
to changes in the ratio and should allow for risk management that is 
measured in proportion to the risk presented. For example, if a member 
has a clearing fund requirement of $11.4 million and excess net capital 
of $10 million, its clearing fund requirement would exceed its excess 
net capital by $1.4 million, its ratio of clearing fund requirement to 
excess net capital is 1.14 (or 114 percent), and the applicable 
collateral premium would be 114 percent of $1.4 million or $1,596,000. 
If the same member had a clearing fund requirement of $20 million, its 
clearing fund requirement would exceed its excess net capital by $10 
million, its ratio of clearing fund requirement to excess net capital 
would be 2.0 (or 200 percent), and the applicable collateral premium 
would be 200 percent of $10 million or $20 million.
---------------------------------------------------------------------------

    \6\ If FICC imposes this premium on a netting member, then it 
shall be considered included as part of the netting member's 
``required fund deposit'' as defined in the GSD's rules.

---------------------------------------------------------------------------

[[Page 55240]]

    Currently, FICC's collateral premium applies to members whose 
excess regulatory capital is measured as excess net capital, excess 
liquid capital, or excess adjusted net capital. The proposed rule 
change would also include excess equity capital as regulatory excess 
capital so that the premium can be applied to bank and trust company 
netting members whose capital is measured as equity capital.
    The proposed rule change would also make an additional change to 
Rule 4 (Clearing Fund, Watch List and Loss Allocation), Section 3 
(Watch List) to remove a provision that allows FICC to require a 
netting member to adjust its trading activity so that its excess 
regulatory capital ratio decreases to a satisfactory level. While this 
provision was appropriate under the fixed 25 percent premium, it would 
no longer be appropriate under the new ratio-based clearing fund 
premium because the new premium formula would impose a variable premium 
based on activity that would require members to either adjust their 
trading activity or be subject to the higher premium.
2. NSCC Clearing Fund Premium
    NSCC is proposing to impose a clearing fund premium on Rule 2 
(Members) broker/dealer and bank members whose clearing fund 
requirement exceeds their regulatory excess capital. NSCC's proposed 
excess regulatory capital premium would apply to members whose 
regulatory excess capital is measured as excess net capital or excess 
equity capital. The excess regulatory capital premium would be 
triggered when a member's ratio of clearing fund requirement to excess 
regulatory capital is greater than 1.0 and would be determined using 
the same formula as that proposed by FICC. The new premium would be 
added to NSCC's clearing fund formula in Procedure XV (Clearing Fund 
Formula and Other Matters). \7\
---------------------------------------------------------------------------

    \7\ This premium would not apply to The Canadian Depository for 
Securities Limited (``CDS'') clearing fund requirement that is 
computed pursuant to Appendix 1 of NSCC's rules.
---------------------------------------------------------------------------

3. FICC and NSCC Clearing Fund Premiums
    As a matter of practice, when a FICC or NSCC member's clearing fund 
requirement to excess regulatory capital ratio is between .50 and 1.0, 
a warning notification would be issued to put the member on notice that 
a collateral premium will be required if the ratio reaches an amount 
greater than 1.0. When a member's ratio exceeds 1.0, it would be 
notified on the business day that a collateral premium has been 
calculated and is to be collected.
    FICC and NSCC reserve the right to: (i) Apply a lesser collateral 
premium (including no premium) based on specific circumstances (such as 
a member being subject to an unexpected haircut or capital charge that 
does not fundamentally change its risk profile) and (ii) return all or 
a portion of the premium amount if it believes that the member's risk 
profile does not require the maintenance of that amount.
    FICC and NSCC believe that the proposed rule changes are consistent 
with the requirements of Section 17A of the Act \8\ and the rules and 
regulations thereunder applicable to FICC and NSCC because they should 
help FICC and NSCC assure the safeguarding of securities and funds 
which are in their custody or control or for which they are responsible 
by allowing FICC and NSCC to more effectively manage risk presented by 
certain members.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on Burden on Competition

    FICC and NSCC do not believe that the proposed rule changes would 
impose any burden on competition.

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

    Written comments relating to the proposed rule changes have been 
received and addressed by FICC and NSCC.

III. Comments

    The Commission received seven comment letters to the proposed rule 
changes. Schonfeld, Wilson-Davis, Alpine, LaBranche, Man, and IASBDA 
wrote letters opposing the proposed rule changes.\9\ DTCC submitted a 
letter responding to those letters.\10\
---------------------------------------------------------------------------

    \9\ Supra note 3.
    \10\ Id.
---------------------------------------------------------------------------

    All of the commenters in opposition to the proposed rule changes 
argued that the imposition of the clearing fund premium would place a 
disproportionate burden on smaller broker-dealers because they are 
generally less capitalized than the larger broker-dealers and are not 
in a position to meet higher capital requirements that could result 
from the proposed rule changes. FICC and NSCC responded that the 
premium calculation is based on a ratio that is applied to all members 
equally and is meant to reflect the risk a member introduces to the 
clearing agencies.
    All of the commenters opposing the proposed rule changes argued 
that the proposed rule changes would have an anticompetitive effect 
and/or place an undue burden on competition in that smaller broker-
dealers would be unable to meet the higher clearing fund obligations 
and would be forced out of business which could result in less 
competition among broker-dealers. One result of the clearing fund 
premium would be that small issuers and emerging companies would not 
have such smaller broker-dealers to assist in capital formation.
    FICC and NSCC responded that there are over 6000 broker-dealers 
registered with the Commission. FICC has 61 broker-dealer members in 
its GSD and NSCC has approximately 221 full service broker-dealer 
members. Such figures, according to FICC and NSCC indicate that the 
competition among broker-dealers is healthy. FICC and NSCC also 
responded that the proposed rule changes would not be barriers to entry 
to the brokerage business and that the Act does not provide broker-
dealers with a right to be a direct member of a registered clearing 
agency. FICC and NSCC noted that a firm that is potentially affected by 
the proposed rule changes could (1) Retain or raise additional capital 
relative to the business it clears through the clearing agency, (2) 
limit the business it clears through the clearing agency so that the 
risk to which the clearing agency and its members is exposed based upon 
such business is proportionate to the firm's excess net capital, or (3) 
seek another firm through which to clear its business.
    LaBranche and Schonfeld suggested that a general fund similar to 
the SIPC or FDIC models could be created to mitigate risks in the 
clearing system. FICC and NSCC responded that the clearing fund, like 
the SIPC or FDIC models, exists as a means to mutualize the risk that 
any given member presents as a result of its business should the member 
fail and the clearing agency be required to close the member out and 
assume the risk of loss on those operations. FICC and NSCC argued that 
the commenters seeking a general fund like SIPC or the FDIC model are 
seeking an entity other than themselves to bear the risk of their 
businesses by shifting the credit risk from the member to FICC or NSCC 
and the memberships at large.
    Howrey and Man argue that the current risk management tools used by 
FICC and NSCC are adequate. Man states that the FICC minimum net worth 
requirement of $50,000,000 and the minimum net excess capital 
requirement of $10,000,000 have provided adequate protection to FICC as

[[Page 55241]]

related to counterparty risk. FICC responded that net worth 
requirements on their own, as illustrated by the Refco Securities LLC 
(``Refco'') case, do not protect against counterparty risk, 
particularly in an environment where trading activity is not linked to 
capital levels. In addition, FICC noted that the net worth requirement 
does not address the nature of the business that the member brings to 
FICC and its members. Howrey points out that NSCC has the ability to 
collect additional clearing fund deposits pursuant to its rules should 
it deem it necessary. The lack of explanation or clarification by NSCC 
on how the current deposit requirement is calculated reveals a pattern 
of arbitrary amounts being imposed on clearing firms. This arbitrary 
amount, argued Howrey, would then be added to the arbitrary amount 
which would be calculated by the proposed rule change. NSCC responded 
that it concurs that Rule 15 (Financial Responsibility and Operational 
Capability) could perhaps be used as a basis on which to charge an 
occasional clearing fund premium to cover the perceived systemic risk 
sought to be addressed by the proposed rule change. However, FICC and 
NSCC's management and user representative boards have chosen to address 
the charge systemically and include the premium as a stated additional 
charge in an effort to be clear to members about the types of activity 
and risks they are trying to address.
    Man asserted that FICC's ability to grant exceptions based upon 
subjective judgments in undefined circumstances, however well 
intentioned, will undermine the confidence in the margin process. Thus, 
members should know what rules for granting exceptions will be applied. 
FICC and NSCC responded that such discretion would only be used to 
reduce or eliminate the premium, not to raise it, and that the 
situations where such discretion would be used are likely to be very 
fact and circumstances driven. Thus, it would be contrary to the 
principle and purpose of discretion to require that NSCC and FICC adopt 
in advance of the event, detailed criteria, circumstances, and 
procedures for exercising such discretion. However, as discussed 
further below, FICC and NSCC amended their proposed rule changes to 
alleviate this concern and others expressed by the commenters.

IV. FICC and NSCC Amendments

    To address certain concerns expressed in the comment letters and by 
others, FICC and NSCC amended the proposed rule changes as set forth 
below.

1. FICC

    FICC has amended its proposed rule change to exclude from the 
premium calculation the look back provisions of the GSD clearing fund 
formula's Receive/Deliver and Repo Volatility components (``Excess 
Capital Premium Calculation Amount'') \11\ with respect to the 
computation of the clearing fund requirement used in both the numerator 
of the ratio and in the Excess Capital Differential.\12\
---------------------------------------------------------------------------

    \11\ The adjusted clearing fund requirement is referred to in 
the amendment as the ``Excess Capital Premium Calculation Amount.'' 
It is defined by the amendment as the calculation of the member's 
Required Fund Deposit, which excludes consideration of the Average 
Offset Margin Amount and the Average Offset Repo Volatility Amount.
    Excluding these look back components, known as the Average Post 
Offset Margin Amount (``POMA'') and the Average Repo POMA (and 
defined in the GSD's Rules as the Average Offset Margin Amount and 
the Average Offset Repo Volatility Amount, respectively), from the 
calculation of the proposed premium is expected to provide relief 
from the Excess Capital Premium to members whose current portfolios 
would have a lower clearing fund requirement than their clearing 
fund requirement with the look back would suggest.
    \12\ As defined by the amendment, ``Excess Capital 
Differential'' means the amount by which a netting member's Excess 
Capital Premium Calculation Amount exceeds its excess capital.
---------------------------------------------------------------------------

    FICC has also amended its proposed rule change to clarify that it 
may at its discretion: (i) Collect an amount less than the Excess 
Capital Premium (including no premium) and (ii) return all or a portion 
of the Excess Capital Premium if it believes that the imposition or 
maintenance of the Excess Capital Premium is not necessary or 
appropriate.\13\
---------------------------------------------------------------------------

    \13\ FICC management will look to see whether the premium 
results from unusual or non-recurring circumstances where management 
believes it would not be appropriate to assess the premium. Examples 
of such circumstances are a member's late submission of trade data 
for comparison that would have otherwise reduced the margined 
position if timely submission had occurred or an unexpected haircut 
or capital charge that does not fundamentally change a member's risk 
profile. FICC has stated that these examples are intended to serve 
as guidelines and are intended to be illustrative but not limiting 
in nature as to when the premium will not be imposed.
---------------------------------------------------------------------------

    In order to allow members time to effect any necessary operational 
or systems changes, FICC's proposed rule change will become effective 
on the first Monday following the 29th day after which the Commission 
issues an order granting approval of the change.

2. NSCC

    NSCC amended its proposed rule change to clarify that the Excess 
Capital Premium will be determined by multiplying: (a) The amount by 
which a member's base clearing fund requirement (that is the amount 
determined prior to the imposition of the Excess Capital Premium) 
exceeds the member's excess regulatory capital by (b) the member's 
ratio, expressed as a percent. The calculation of the base clearing 
fund requirement for purposes of determining both the ratio and the 
Excess Capital Premium will not take into account either (i) Market-
maker domination charges or (ii) special charges, as determined 
pursuant to Procedure XV, that are imposed on a member as part of its 
base requirement. This adjusted clearing fund amount (i.e., calculated 
clearing fund amount minus any market-maker domination or other special 
charges) used for purposes of calculating the Excess Capital Premium 
would be called the ``Calculated Amount.'' These charges are not 
included in the clearing fund premium calculation because NSCC 
recognizes that these types of charges already provide an additional 
reserve in the base clearing fund requirement against the risk of that 
position.
    NSCC has also amended its proposed rule change to clarify that it 
may at its discretion: (i) Collect an amount less than the Excess 
Capital Premium (including no premium) and (ii) return all or a portion 
of the Excess Capital Premium if it believes that the imposition or 
maintenance of the Excess Capital Premium is not necessary or 
appropriate.\14\
---------------------------------------------------------------------------

    \14\ NSCC has identified the following guidelines or 
circumstances, which NSCC has stated are intended to be illustrative 
but not limiting in nature as to when the premium will not be 
imposed: (1) Where the premium results from charges applied with 
respect to municipal securities trades settling in CNS where the 
member has offsetting compared trades settling on a trade-for trade 
basis through DTC and (2) where management has determined that the 
premium results from an unusual or non-recurring circumstance where 
management believes it would not be appropriate to assess the 
premium. Examples of such circumstances are a member's late 
submission of trade data for comparison or trade recording that 
would have otherwise reduced the margined position if timely 
submission had occurred or an unexpected haircut or capital charge 
that does not fundamentally change a member's risk profile.
---------------------------------------------------------------------------

    In order to allow member's time to effect any necessary operational 
or systems changes, NSCC's proposed rule change will become effective 
on the first Monday following the 29th day after which the Commission 
issues an order granting approval of the proposed rule change.

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

    After carefully considering the proposed rule changes as amended 
and all of the written comments received, the Commission finds that the 
proposed rule changes are consistent with the

[[Page 55242]]

requirements of the Act and the rules and regulations thereunder and 
particularly with the requirements of Section 17A(b)(3)(F).\15\ Section 
17A(b)(3)(F) 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. The Commission believes that the approval of FICC and 
NSCC's rule changes is consistent with this section because it should 
help FICC and NSCC to assure the safeguarding of securities and funds 
which are in their custody or control or for which they are responsible 
by allowing FICC and NSCC to more effectively manage risk presented by 
highly leveraged members \16\ and thus avoid potential losses to FICC 
and to NSCC and their members.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78q-1(b)(3)(F).
    \16\ A highly leveraged member is identified as one whose 
regulatory and excess capital are substantially less than it's 
clearing fund requirements.
---------------------------------------------------------------------------

    When a member presents transactions for clearance and settlement 
through FICC or NSCC in an amount that is not supported by its excess 
regulatory capital, should the member fail, FICC, NSCC, or both if the 
member is a member of both FICC and NSCC would have to close out the 
failing member's open positions and assume the risk of loss. If the 
failing member's clearing fund deposit is insufficient to cover any 
such loss, the loss would be borne by FICC and/or NSCC and ultimately 
could be borne by the other members of the clearing agency(ies) from 
their collective clearing fund deposits.
    All of the commenters in opposition to the proposed rule changes 
argued that the imposition of a clearing fund premium would place a 
disproportionate burden on smaller broker-dealers because they are 
generally less capitalized than the larger broker-dealers and not in a 
position to meet higher capital requirements that could result from the 
proposed rule changes. FICC and NSCC responded that the premium 
calculation is based on a ratio that is applied to all members equally 
and is meant to reflect the risk a member introduces to the clearing 
agencies. Section 17A(b)(3)(F)\17\ provides that the rules of a 
clearing agency shall not permit unfair discrimination among 
participants in the use of the clearing agency. Because the premium 
calculation is applied to all members equally based on a ratio of each 
member's required clearing fund to its excess net capital, the 
Commission is not persuaded by the commenters' arguments. It should be 
noted that the proposed rule changes were prompted in part by the 
bankruptcy and wind-down of Refco, which was not a small broker-dealer.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    All of the commenters opposing the proposed rule changes argued 
that the proposed rule changes would have anticompetitive effect and/or 
place an undue burden on competition in that smaller broker-dealers 
would be unable to meet the higher clearing fund obligations and would 
be forced out of business, and that that could result in less 
competition among broker-dealers. FICC and NSCC responded that the 
proposed rule changes are not barriers to entry to the brokerage 
business and that the Act does not provide broker-dealers with a right 
to be a direct member of a registered clearing agency. FICC and NSCC 
noted that a firm that is potentially affected by the proposed rule 
changes could (1) Retain or raise additional capital relative to the 
business it clears through the clearing agency, (2) limit the business 
it clears through the clearing agency so that the risk to which the 
clearing agency and its other members is exposed based upon such 
business is proportionate to the firm's excess regulatory capital, or 
(3) seek another firm through which to clear its business.
    The Commission is not persuaded by the commenters' claims that the 
proposed rule changes are anticompetitive and/or will result in an 
undue burden on competition. While it is possible that the proposed 
rule changes will force some members of FICC and NSCC to discontinue 
their direct membership in FICC and/or NSCC, the Act does not provide 
broker-dealers with the right to be direct members in a clearing 
agency. Affected firms have a choice to raise excess regulatory capital 
or to limit their trading activities so that the risk to which the 
clearing agency and its other members is exposed is proportionate to 
the firm's excess regulatory capital. The Commission finds that the 
proposed rule changes should not impose any burden on competition that 
is not necessary or appropriate in furtherance of the purposes of the 
Act in accordance with Section 17A(b)(3)(I).\18\
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

    FICC and NSCC have requested that the Commission approve the 
proposed rule changes prior to the thirtieth day after publication of 
the notice of the amendment to the filing. The Commission finds good 
cause for approving the proposed rule changes prior to the thirtieth 
day after the publication of notice because implementation of the 
proposed rule changes will allow FICC and NSCC to activate the systems 
which are necessary to implement the proposed rule changes which are 
integral to assuring the safeguarding of securities and funds which are 
in their custody or control or for which they are responsible. 
Additionally, the Commission notes that FICC and NSCC's amendments were 
in large part in response to comments it received.

VI. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
changes are 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 Numbers SR-FICC-2006-03 and SR-NSCC-2006-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Numbers SR-FICC-2006-03 and 
SR-NSCC-2006-03. These file numbers 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 
changes that are filed with the Commission, and all written 
communications relating to the proposed rule changes 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 filings also will be available for inspection and copying at the 
principal offices of FICC and NSCC and on FICC's Web site at http://www.ficc.com/gov/gov.docs.jsp?NS-query and on NSCC's Web site at http:/
/

[[Page 55243]]

www.nscc.com/legal/. 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 Numbers 
SR-FICC-2006-03 and SR-NSCC-2006-03 and should be submitted on or 
before October 12, 2006.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\19\ that the proposed rule changes (File Nos. SR-FICC-2006-03 and 
SR-NSCC-2006-03) be and hereby are approved on an accelerated basis.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    For the Commission by the Division of Market Regulation, pursuant 
to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).

J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 06-7844 Filed 9-20-06; 8:45 am]
BILLING CODE 8010-01-P