[Federal Register Volume 72, Number 17 (Friday, January 26, 2007)]
[Notices]
[Pages 3887-3888]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-1182]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55136; File No. SR-FICC-2006-17]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Order Approving Proposed Rule Change Relating to Clearing Fund 
Deficiency Calls

January 19, 2007.

I. Introduction

    October 16, 2006, the Fixed Income Clearing Corporation (``FICC'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ to adjust the deadline for 
satisfying a clearing fund deficiency call from 10:30 a.m. to 9:30 a.m. 
in the Schedule of Timeframes in FICC's Government Securities Division 
(``GSD'') rulebook. The proposed rule change was published for comment 
in the Federal Register on December 6, 2006.\2\ No comment letters were 
received on the proposal. This order approves the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 54819 (Nov. 27, 2006), 
71 FR 70817.

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[[Page 3888]]

II. Description of the Proposal

    FICC is amending GSD's rules to change the time when payment of 
clearing fund deficiency calls is due from netting members. In 2005, 
the Commission approved a FICC rule filing that established the Federal 
Reserve's National Settlement System (``NSS'') as the method by which 
GSD netting members would satisfy their funds-only settlement 
amounts.\3\ FICC believes that that rule filing improved GSD's funds-
only settlement process because it created a more automated and 
centralized payment system for the satisfaction of funds-only 
settlement debits and credits. In NSS, the GSD funds-only settlement 
debit and credit process is completed by 10 a.m.\4\ each business day.
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    \3\ Securities Exchange Act Release No. 52853 (Nov. 29, 2005), 
70 FR 72682 (Dec. 6, 2005) [SR-FICC-2005-14].
    \4\ All times referenced herein are New York times.
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    Currently, clearing fund deficiency call payments are due from GSD 
netting members at 10:30 a.m. Clearing fund deficiencies due to FICC 
from netting members have to be satisfied prior to the release of 
funds-only settlement credits. When a netting member has not satisfied 
its clearing fund deficiency payment by approximately 9:50 a.m., GSD 
removes that member from the automated NSS process and settles with 
them manually outside the NSS system. Such manual processing results in 
administrative burdens for FICC staff and undermines the efficiencies 
FICC sought to achieve by using the NSS system.
    For this reason, FICC is changing the time when GSD clearing fund 
deficiency calls must be satisfied to 9:30 a.m. from 10:30 a.m.\5\ 
Doing so should enable GSD to resolve any unsatisfied deficiencies with 
netting members well in advance of the 10 a.m. completion of the funds-
only settlement process that takes place through NSS and should allow 
GSD to better utilize the automated NSS process.
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    \5\ This rule filing does not affect a netting member's 
obligation to make its funds-only settlement payment to FICC on 
time.
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    As is currently the case in its rules, FICC will reserve the right 
to extend this deadline on days that there are operational or systems 
difficulties that would reasonably prevent members from satisfying a 
deficiency call by 9:30 a.m.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a registered clearing agency. In particular, 
the Commission believes the proposal is consistent with the 
requirements of Section 17A(b)(3)(F),\6\ which, among other things, 
requires that FICC's rules are designed to assure the safeguarding of 
securities and funds that are in its custody or control or for which it 
is responsible. Adjusting the time when clearing fund deficiency calls 
must be satisfied by members from 10:30 a.m. to 9:30 a.m. will require 
FICC members to satisfy their clearing fund deficiency calls before the 
completion of FICC's fund-only settlement process through NSS. This 
will enable FICC to eliminate much of the burdensome manual processing 
in this area and will allow FICC to benefit from the efficiencies 
provided by a more complete use of NSS. With members satisfying their 
clearing fund deficiencies earlier and with more use of the automated 
and centralized NSS, FICC will be better able to reduce settlement 
risks to itself and to its members.
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    \6\ 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 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \7\ and the 
rules and regulations thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-FICC-2006-17) be, 
and hereby is, approved.\9\
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    \7\ 15 U.S.C. 78q-1.
    \8\ 15 U.S.C. 78s(b)(2).
    \9\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-1182 Filed 1-25-07; 8:45 am]
BILLING CODE 8011-01-P