[Federal Register Volume 74, Number 151 (Friday, August 7, 2009)]
[Notices]
[Pages 39723-39725]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-18977]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60421; File No. SR-FICC-2009-07]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Haircuts Applied to Eligible Clearing Fund Securities and 
Eligible Participant Fund Securities

August 3, 2009.

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 13, 2009, the Fixed 
Income Clearing Corporation (``FICC'') filed with the Securities and 
Exchange Commission (``Commission'') 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 the haircuts 
applied to Eligible Clearing Fund Securities and Eligible Participant 
Fund Securities.

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.\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

    Under the Rules of the Government Securities Division (``GSD'') and 
the Mortgage-Backed Securities Division (``MBSD'') (``Rules''), GSD 
Members and MBSD Participants are required to deposit to the GSD 
Clearing Fund and MBSD Participants Fund, respectively, the amount of 
each Member's or Participant's required deposit, which is established 
by FICC in accordance with formulas specified in the Rules (``Required 
Deposit'').
    A Member or Participant may satisfy its Required Deposit with cash, 
and FICC may permit a portion of the Member's or Participant's deposit 
to be evidenced by an open account indebtedness secured by Eligible 
Clearing Fund Securities for the GSD and Eligible Participants Fund 
Securities for the MBSD. Eligible Clearing Fund Securities and Eligible 
Participants Fund Securities consist of certain Treasury, agency, and 
mortgage-backed securities.
    For reasons set forth in a companion rule filing, FICC's affiliate, 
National Securities Clearing Corporation (``NSCC''), has increased 
haircuts on Clearing Fund collateral.\3\ Given that the haircuts are 
applied by FICC and NSCC systemically and on a harmonized basis, these 
changes are also being applied by FICC.
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    \3\ Securities Exchange Act Release No. 60368 (July 22, 2009), 
74 FR 37275.
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    Therefore, FICC proposes to modify the GSD's Schedule of Haircuts 
for Eligible Clearing Fund Securities and the MBSD's Schedule of 
Haircuts for Eligible Participants Fund Securities to update the 
correlating range of haircuts applied to the types of Eligible Clearing 
Fund Securities and Eligible Participants Fund Securities. 
Specifically, FICC proposes to increase the haircut on: (i) Interest 
bearing Treasuries with terms greater than 10 years but less than 15 
years from the current 5 percent to 6 percent and (ii) zero coupon 
obligations of U.S. Treasury and Agency Securities from the current 2 
to 10 percent based on term to 5 to 12 percent based on term.
    A complete listing of the haircut schedule, showing modifications, 
is as follows (deletions are in brackets and additions are italicized):

     GSD Schedule of Haircuts for Eligible Clearing Fund Securities
------------------------------------------------------------------------
          Security type           Remaining maturity        Haircut
------------------------------------------------------------------------
1. Treasury
    Bills, Notes, Bonds, TIPS...  Zero to 1 year....  2.0%
                                  1 year to 2 years.  2.0%
                                  2 years to 5 years  3.0%
                                  5 years to 10       4.0%
                                   years.
                                  10 years to 15      [5.0%] 6.0%
                                   years.
                                  15 years or         6.0%
                                   greater.
    Zero Coupon.................  Zero to 1 year....  [2.0%] 5.0%

[[Page 39724]]

 
                                  1 year to 2 years.  [2.0%] 5.0%
                                  2 years to 5 years  [4.0%] 5.0%
                                  5 years to 10       [6.0%] 12.0%
                                   years.
                                  10 years to 15      [7.0%] 12.0%
                                   years.
                                  15 years or         [9.0%] 12.0%
                                   greater.
2. Agency
    Notes, Bonds................  Zero to 1 year....  2.0%
                                  1 year to 2 years.  3.0%
                                  2 years to 5 years  4.0%
                                  5 years to 10       5.0%
                                   years.
                                  10 years to 15      6.0%
                                   years.
                                  15 years or         7.0%
                                   greater.
    Zero Coupon.................  Zero to 1 year....  [2.0%] 5.0%
                                  1 year to 2 years.  [3.0%] 5.0%
                                  2 years to 5 years  5.0%
                                  5 years to 10       [7.0%] 12.0%
                                   years.
                                  10 years to 15      [8.0%] 12.0%
                                   years.
                                  15 years or         [10.0%] 12.0%
                                   greater.
3. MBS Pass-throughs............  Ginnie Mae........  6.0%
                                  Fannie Mae/Freddie  7.0%
                                   Mac.
4. Self-issued MBS..............  ..................  14% (or 21% if 25%
                                                       concentration
                                                       limit is
                                                       exceeded).
------------------------------------------------------------------------


   MBSD Schedule of Haircuts for Eligible Participants Fund Securities
------------------------------------------------------------------------
          Security type           Remaining maturity        Haircut
------------------------------------------------------------------------
1. Treasury
    Bills, Notes, Bonds, TIPS...  Zero to 1 year....  2.0%
                                  1 year to 2 years.  2.0%
                                  2 years to 5 years  3.0%
                                  5 years to 10       4.0%
                                   years.
                                  10 years to 15      [5.0%] 6.0%
                                   years.
                                  15 years or         6.0%
                                   greater.
    Zero Coupon.................  Zero to 1 year....  [2.0%] 5.0%
                                  1 year to 2 years.  [2.0%] 5.0%
                                  2 years to 5 years  [4.0%] 5.0%
                                  5 years to 10       [6.0%] 12.0%
                                   years.
                                  10 years to 15      [7.0%] 12.0%
                                   years.
                                  15 years or         [9.0%] 12.0%
                                   greater.
2. Agency
    Notes, Bonds................  Zero to 1 year....  2.0%
                                  1 year to 2 years.  3.0%
                                  2 years to 5 years  4.0%
                                  5 years to 10       5.0%
                                   years.
                                  10 years to 15      6.0%
                                   years.
                                  15 years or         7.0%
                                   greater.
    Zero Coupon.................  Zero to 1 year....  [2.0%] 5.0%
                                  1 year to 2 years.  [3.0%] 5.0%
                                  2 years to 5 years  5.0%
                                  5 years to 10       [7.0%] 12.0%
                                   years.
                                  10 years to 15      [8.0%] 12.0%
                                   years.
                                  15 years or         [10.0%] 12.0%
                                   greater.
3. MBS Pass-Throughs............  Ginnie Mae........  6.0%
                                  Fannie Mae/Freddie  7.0%
                                   Mac.
4. Self-issued MBS..............  ..................  14% (or 21% if 25%
                                                       concentration
                                                       limit is
                                                       exceeded).
------------------------------------------------------------------------

    These changes will become effective as of August 3, 2009.
    FICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \4\ and the rules and 
regulations thereunder applicable to FICC because the proposed rule 
change should facilitate the prompt and accurate clearance and 
settlement of securities transactions by adjusting FICC's haircut 
levels on Eligible Clearing Fund Securities and Eligible Participant 
Fund Securities and facilitating FICC's ability to ensure adequate 
collateral levels are maintained to facilitate settlement in the event 
of a Member or Participant default.
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    \4\ 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.

[[Page 39725]]

(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 \5\ and Rule 19b-4(f)(4) \6\ 
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.
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    \5\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \6\ 17 CFR 240.19b-4(f)(4).
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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-2009-07 on 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-2009-07. 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 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/2009.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-2009-07 and should be 
submitted on or before August 28, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-18977 Filed 8-6-09; 8:45 am]
BILLING CODE 8010-01-P