[Federal Register Volume 73, Number 100 (Thursday, May 22, 2008)]
[Notices]
[Pages 29797-29798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-11425]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57821; File No. SR-FICC-2008-03]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change, 
as Modified, To Eliminate the Coverage Component and Margin Requirement 
Differential From the Mortgage-Backed Securities Division Participants 
Fund Calculation

May 15, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 18, 2008, the Fixed 
Income Clearing Corporation (``FICC'') filed with the Securities and 
Exchange Commission (``Commission'') and on April 21, 2008, amended the 
proposed rule change 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 parties.
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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 the proposed rule change is to modify FICC's 
Mortgage-Backed Securities Division (``MBSD'') participant fund 
calculation as set forth in Article IV, Rule 1 (Total Required Fund 
Deposit) by eliminating the Coverage Component and the Margin 
Requirement Differential from the calculation.

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),

[[Page 29798]]

and (C) below, of the most significant aspects of these 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 August 31, 2007, FICC filed with the Commission and on September 
27, 2007, amended proposed rule change SR-FICC-2007-10 pursuant to 
Section 19(b)(1) of the Act. On March 31, 2008, the Commission approved 
the proposed rule change.\3\
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    \3\ Securities Exchange Act Release No. 57586 (March 31, 2008), 
73 FR 19537 (SR-FICC-2007-10).
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    The rule change modified FICC's MBSD rules, replacing the current 
participants fund methodology (which used haircuts and offsets) with a 
Value-at-Risk (``VaR'') model, which was expected to better account for 
market volatility and more thoroughly distinguish levels of risk 
presented by individual securities.\4\
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    \4\ VaR is defined to be the maximum amount of money that may be 
lost on a portfolio over a given period of time, within a given 
level of confidence.
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    As approved by the Commission, the revised participants fund 
calculation included: (1) An end-of-day charge (which is the greater of 
the VaR-based charge and a defined minimum charge), (2) a Coverage 
Component (which is an additional charge to bring the participant's 
coverage to a targeted confidence level), (3) an additional payment 
(which is called a ``Special Charge'') as determined by FICC from time 
to time, and (4) a Margin Requirement Differential (which takes into 
account intra-day portfolio variations and the potential for a late 
margin deficit satisfaction).
    FICC has determined not to implement the Coverage Component and the 
Margin Requirement Differential, while it continues to study the 
methodology. Accordingly, FICC is modifying MBSD Article I (Definitions 
and General Provisions) and Article IV (Participants Fund) to remove 
references to these components.
    FICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \5\ and the rules and 
regulations thereunder applicable to FICC because the proposed rule 
change should better enable FICC to assure the safeguarding of 
securities and funds in its custody or control or for which it is 
responsible by enabling FICC to more effectively manage the risks 
presented by participants' activities.
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    \5\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FICC does not believe that the proposed rule change will have any 
impact on 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

    No written comments relating to the proposed rule change have been 
solicited or received. FICC will notify the Commission of any written 
comments received by FICC.

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

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(4) \7\ 
thereunder because the proposed rule change effects a change in an 
existing service of FICC that (i) does not adversely affect the 
safeguarding of securities or funds in the custody or control of FICC 
or for which it is responsible and (ii) does not significantly affect 
the respective rights of the clearing agency or persons using the 
service. At any time within sixty days of the filing of such 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.\8\
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    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 240.19b-4(f)(4).
    \8\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on April 21, 2008, the date on which the last amendment 
to the proposed rule change was filed with the Commission. 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 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-2008-03 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 Number SR-FICC-2008-03. 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 changes 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, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filings also will be available for 
inspection and copying at the principal office of FICC and on FICC's 
Web site at http://www.dtcc.com/legal/rule_filings/ficc/2008.php. 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-2008-03 and should be 
submitted on or before June 12, 2008.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-11425 Filed 5-21-08; 8:45 am]
BILLING CODE 8010-01-P