[Federal Register Volume 71, Number 227 (Monday, November 27, 2006)]
[Notices]
[Pages 68664-68665]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-19984]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54787; File No. SR-FICC-2006-14]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing of a Proposed Rule Change Relating To Returning Excess 
Clearing Fund Collateral

 November 20, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 22, 2006, the 
Fixed Income Clearing Corporation (``FICC'') filed with the Securities 
and Exchange Commission (``Commission'') 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 purpose of this rule filing is to amend FICC's Government 
Securities Division's (``GSD'') rules to permit GSD members to request 
the return of their excess clearing fund collateral held on deposit 
with FICC on a more frequent basis than is currently allowed under 
GSD's rules.

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

    Currently, GSD members generally are permitted to request the 
return of excess clearing fund collateral once per month.\3\ In 
addition, on any business day, if a GSD member has an excess clearing 
fund deposit in the amount of $5 million or more, the member may 
request the return of the excess deposit provided, among other 
requirements, that the member retain on deposit with GSD the greater of 
at least 110 percent of its calculated required clearing fund deposit 
or $1 million more than its calculated required clearing fund deposit.
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    \3\ Excess clearing fund is the amount of collateral held on 
deposit at GSD that is greater than a member's required clearing 
fund deposit as set forth in GSD Rule 4 (Clearing Fund, Watch List 
and Loss Allocation).
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    In an effort to harmonize GSD's process with respect to the return 
of excess collateral with the processes of other Depository Trust & 
Clearing Corporation (``DTCC'') subsidiary clearing agencies, FICC 
proposes to change GSD's rules to give GSD the discretion to return 
excess clearing fund more frequently whether or not the excess reaches 
110 percent of the required clearing fund deposit or $5 million.\4\ 
Under the proposal, GSD members would be able to request the return of 
excess clearing fund on a daily basis. GSD would retain the right, 
however, to deny the return of some or all of a member's excess 
collateral in the following instances: (i) If, the member has an 
outstanding payment obligation to FICC; (ii) if a member's funds-only 
settlement amounts or net settlement positions over the upcoming 90 
days may reasonably be expected to be materially different than those 
of the preceding 90 days; (iii) if the member is on the watch list; or 
(iv) when the return of excess clearing fund will cause the member to 
be in violation of another GSD rule. In addition, excess clearing fund 
would not be returned to a member if doing so would reduce a member's 
cross-guaranty repayment deposit or cross-margining repayment deposit 
to the clearing fund below the required amount.\5\
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    \4\ The rules of the National Securities Clearing Corporation 
(``NSCC'') and FICC's Mortgage Backed Securities Division (``MBSD'') 
permit their respective members to request (under normal 
circumstances) the return of their excess clearing fund more 
frequently than once per month. Currently, NSCC's and MBSD's 
procedures allow members to request the return of excess collateral 
on a daily basis.
    \5\ Under GSD's rules, a ``cross-guaranty repayment deposit'' is 
a deposit to the clearing fund required to be made by a cross-
guaranty beneficiary member pursuant to Rule 41, Section 4 of GSD's 
rules. A ``cross-margining repayment deposit'' is a deposit to the 
clearing fund required to be made by a cross-margining beneficiary 
participant pursuant to Rule 43, Section 6 of GSD's rules.
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    FICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act and the rules thereunder because 
by enabling FICC members to request and receive an earlier return of 
excess clearing fund collateral held on deposit at FICC while 
maintaining the GSD's ability to deny the return of excess collateral 
in order to protect FICC from undue risk, the proposed rule change 
should not adversely affect FICC's ability to safeguard securities and 
funds in its possession or control or for which it is responsible and 
at the same time should enhance member liquidity.

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 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

[[Page 68665]]

Register or within such longer period (i) as the Commission may 
designate up to 90 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, 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 No. SR-FICC-2006-14 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 No. SR-FICC-2006-14. 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, 
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://ficc.com/gov/gov.docs.jsp?NS-query=#rf>. 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 
submission should refer to File No. SR-FICC-2006-14 and should be 
submitted on or before December 18, 2006.

    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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Nancy M. Morris,
Secretary.
[FR Doc. E6-19984 Filed 11-24-06; 8:45 am]
BILLING CODE 8011-01-P