[Federal Register Volume 74, Number 52 (Thursday, March 19, 2009)]
[Notices]
[Pages 11797-11800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-5978]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59569; File No. SR-FICC-2009-03]


Self-Regulatory Organizations; The Fixed Income Clearing 
Corporation; Notice of Filing of Proposed Rule To Impose a Charge on 
Members With a Fail-to-Deliver in Treasury Securities

March 12, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 25, 2009, The 
Fixed Income Clearing Corporation (``FICC'') filed with the Securities 
and Exchange Commission (``Commission'') proposed rule change No. SR-
FICC-2009-03, which is described in Items I, II, and III below and have 
been prepared primarily by the FICC. The Commission is publishing this 
notice to solicit comments from interested parties on the proposed rule 
change as.
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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 proposed rule change will impose a charge on members with a 
fail-to-deliver position in treasury securities.\2\
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    \2\ The exact text of the FICC's proposed rule change can be 
found in Attachment 1 of this filing or at http://www.dtcc.com/downloads/legal/rule_filings/2009/ficc/2009-03.pdf.
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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 these 
statements.\3\
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    \3\ The Commission has modified portions of the text of the 
summaries prepared by the FICC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Treasury Markets Practices Group (``TMPG''), a group of market 
participants active in the treasury securities market that is sponsored 
by the Federal Reserve Bank of New York (the ``FRBNY''), has been in 
the process of devising ways to address the persistent settlement fails 
in treasury securities transactions that have arisen, according to the 
TMPG, due to the recent market turbulence and low short-term interest 
rates. In order to encourage market participants to resolve fails 
promptly, the TMPG has proposed for adoption a ``best practice'' that 
would call for the market-wide assessment of a charge on fail-to-
deliver positions. As part of this implementation of this ``best 
practice,'' the TMPG has asked the Government Securities Division of 
FICC (``GSD'') to impose this charge on failed positions involving 
treasury securities within FICC.

[[Page 11798]]

    The proposed charge will be equal to the product of net money due 
on the failed position and three (3) percent per annum minus the Target 
Fed funds target rate that is effective at 5 p.m. Eastern Standard Time 
on the business day prior to the originally scheduled settlement date 
and will be capped at three (3) percent per annum. The charge will be 
applied daily and will be a debit on the member's GSD monthly bill for 
a fail-to-deliver position and a credit on the member's GSD monthly 
bill for those with fail-to-receive position.
    The following example illustrates the manner in which the proposed 
fails charge would apply:
    Member A fails to deliver today on a $50 million position on which 
he is owed $50.1 million. The Target Fed funds rate yesterday at 5 p.m. 
was one (1) percent. The fails charge will be two (2) percent per annum 
and will be applied to the funds amount of $50.1 million, thus equaling 
a charge of $2,783.33 for that day. The bill of the member failing to 
deliver will reflect a debit of $2,783.33.
    In the event that FICC is the failing party because, for example, 
it received securities too close to the close of the Fedwire for 
redelivery, the fail charge will be distributed pro rata to the netting 
members based upon usage of the GSD's services, which is the same 
methodology that is used when FICC incurs finance charges.\4\
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    \4\ FICC Rules, Section 6 of Rule 12.
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    The proposed rule change provides that the Credit and Market Risk 
Management Committee of FICC's Board of Directors will retain the right 
to revoke application of the charge if industry events or practices 
warrant such revocation.
2. Statutory Basis
    FICC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act, as amended,\5\ and the rules 
and regulations thereunder because the proposed rule change will 
promote the prompt and accurate clearance and settlement of securities 
transactions by discouraging persistent fails-to-deliver in treasury 
securities and thereby not adversely affecting the safeguarding of 
securities or funds in FICC's control or for which it is responsible.
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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 impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

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

    FICC has neither solicited nor received written comments on the 
proposed rule change. 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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period: (i) As the 
Commission may designate up to ninety 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 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-2009-03 in the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FICC-2009-03. 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 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, on official business days between the hours 
of 10 a.m. and 3:30 p.m. Copies of such filings also will be available 
for inspection and copying at the principal office of the FICC and on 
the FICC's Web site, http://www.ficc.com. 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-2009-03 and should be submitted on 
or before April 9, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
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[FR Doc. E9-5978 Filed 3-18-09; 8:45 am]
BILLING CODE