[Federal Register Volume 78, Number 82 (Monday, April 29, 2013)]
[Notices]
[Pages 25115-25116]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10025]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69424; File No. SR-FICC-2013-01]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing of Proposed Rule Change Amending the Mortgage-Backed 
Securities Division Fails Charge Rule To Reflect Recommendation of the 
Treasury Market Practice Group

April 22, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 12, 2013, 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 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).
    \2\ 17 CFR 240.19b-4.
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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 amend the existing 
fails charge rule in FICC's Mortgage-Backed Securities Division 
(``MBSD'') Clearing Rules in order to reflect the recent recommendation 
from the Treasury Market Practices Group (``TMPG'') relating to the 
removal of the resolution period for fails charges.\3\
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    \3\ The text of the proposed rule change is provided as Exhibit 
5 to this filing and is available at www.dtcc.com/downloads/legal/rule_filings/2013/ficc/SR_FICC_2013_01.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 section (A), 
(B) and (C) below, of the most significant aspects of such 
statements.\4\
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    \4\ 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

    To address the persistent settlement fails in agency debt and 
mortgage-backed securities (``MBS'') transactions and to encourage 
market participants to resolve such fails promptly, the TMPG 
recommended in February 2012 that the MBS market impose a fails charge 
in an effort to reduce the incidence of delivery failures and support 
liquidity in the markets.\5\ MBSD amended Rule 12 (Fails Charges) of 
MBSD's Clearing Rules in March 2012 to reflect TMPG's

[[Page 25116]]

recommendations.\6\ The fails charge for MBS transactions applies to 
certain trades settled in the MBSD central counterparty (``CCP'') 
(i.e., settlement of pools versus FICC involving failing agency MBS 
issued or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.) 
Consistent with the TMPG's initial recommendation, MBSD's Rule 12 does 
not currently impose a fails charge if delivery occurs on either of the 
two business days following the contractual settlement date. The two 
business days are sometimes referred to as the ``resolution period.''
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    \5\ The TMPG is a group of market participants active in the 
treasury securities market sponsored by the Federal Reserve Bank of 
New York.
    \6\ See Securities Exchange Act Release No. 66550 (March 9, 
2012), 77 FR 15155 (March 14, 2012) (File No. SR-FICC-2008-01).
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    However, on March 1, 2013, the TMPG issued a new recommendation to 
remove the two-day resolution period from the current practice.\7\ The 
TMPG has advised that the revised recommendation should apply to 
transactions in agency MBS transactions entered into on or after July 
1, 2013, as well as to transactions that were entered into prior to but 
remain unsettled as of July 1, 2013.
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    \7\ Press Release, Federal Reserve Bank of New York, TMPG 
Revises Agency MBS Fails Charge Trading Practice (March 1, 2013) 
(available at www.newyorkfed.org/tmpg/03_01_2013_Fails_charges_press_release.pdf).
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    The purpose of this proposed rule change is to amend the existing 
fails charge rule to reflect TMPG's most recent recommendation. In 
order to maintain symmetry with the MBS marketplace, FICC is now 
proposing to amend MBSD's Rule 12 in order to remove the two-day 
resolution period provision from the rule. Consequently, an agency MBS 
settlement fail will be subject to a fails charge for each calendar day 
that the fail is outstanding, even if the delivery occurs on either of 
the first two business days following the contractual settlement date. 
FICC is also proposing that the proposed rule change will be effective 
as of July 1, 2013, in accordance with the TMPG's recommendation. All 
other provisions of the agency MBS fails charge rule, including the 
fails charge rate and trading practices, remain unchanged.
    FICC believes the proposed rule change is consistent with Section 
17A of the Act and the rules and regulations thereunder because it 
would facilitate the prompt and accurate clearance and settlement of 
securities transactions by discouraging persistent fails of agency MBS 
transactions in the marketplace.

(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

    Written comments relating to the proposed rule changes have not 
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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove the 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 email to [email protected]. Please include 
file Number SR-FICC-2013-01 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-2013-01. This file 
number should be included on the subject line if email 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 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 Web site viewing and 
printing in the Commission's Public Reference Section, 100 F Street 
NE., Washington, DC 20549, on official business days between the hours 
of 10:00 a.m. and 3:00 p.m. Copies of such filing will also be 
available for inspection and copying at the principal office of FICC 
and on FICC's Web site at http://www.dtcc.com/downloads/legal/rule_filings/2013/ficc/SR_FICC_2013_01.pdf. 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-2013-01 and should be submitted on 
or before May 20, 2013.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-10025 Filed 4-26-13; 8:45 am]
BILLING CODE 8011-01-P