[Federal Register Volume 78, Number 220 (Thursday, November 14, 2013)]
[Notices]
[Pages 68496-68497]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-27206]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70831; File No. SR-FICC-2013-09]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing of Proposed Rule Change To Make the U.S. Department of 
the Treasury's Floating Rate Notes Eligible for Netting Service and GCF 
Repo[supreg] at FICC's Government Securities Division

November 7, 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 October 28, 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 this rule filing is to make the U.S. Treasury 
Department's floating rate notes eligible for the netting service and 
GCF Repo[supreg] service at the Government Securities Division 
(``GSD'').

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 such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    (i) The purpose of this rule filing is to make the U.S. Treasury 
Department's floating rate notes eligible for the netting service and 
GCF Repo[supreg] service at the GSD.
    Last year, the U.S. Department of the Treasury (the ``Treasury 
Department'') announced its plan to issue Treasury notes with a 
floating rate coupon (the ``Floating Rate Notes'').
    During the May 1, 2013 Refunding Meeting, the Treasury Department 
stated that it plans to develop a Floating Rate Notes securities 
program to complement the existing suite of securities it issues and to 
support its broader debt management objective. The Floating Rate Notes 
will be the first added U.S. Treasury debt security since the Treasury 
Inflation-Protected Securities, known as TIPS, were introduced in 1997. 
The Treasury Department anticipates that the first auction will occur 
in January 2014.\3\
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    \3\ See Press Release, U.S. Department of the Treasury August 
2013 Quarterly Refunding Statement of Assistant Secretary Rutherford 
(July 31, 2013), available at www.treasury.gov.
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    From a trading perspective and to ensure that the introduction of 
the Floating Rate Notes does not result in any increased clearance and 
settlement risk to the marketplace, FICC believes that these securities 
should be eligible for comparison, netting, and settlement by GSD. With 
this in mind, GSD is planning to make Floating Rate Notes eligible for 
its netting service starting with the January 2014 auction of the two-
year Floating Rate Notes (other maturities will be issued later).
    With respect to the GCF Repo[supreg] service, Floating Rate Notes 
will be included in GSD's existing Treasury Generic CUSIP Numbers.\4\ 
The inclusion of Floating Rate Notes in the GCF Repo[supreg] service 
necessities a change to the GSD Rulebook in connection with the 
collateral allocation provisions which are covered in GSD Rule 20 
Section 3. Because of their adjustable coupon, Floating Rate Notes will 
not be eligible for collateral allocation obligations or substitutions 
with respect to the GCF Repo Generic CUSIPs representing Treasury 
inflation-protected securities (``TIPS''), separate trading of 
registered interest and principal securities (``STRIPS''), or fixed-
rate mortgage-backed securities issued by Federal National Mortgage 
Association (``Fannie Mae''), Federal Home Loan Mortgage Corporation 
(``Freddie Mac'') and Government National Mortgage Association 
(``Ginnie Mae''). As a result, GSD Rule 20 Section 3 has been revised 
to reflect this change.
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    \4\ Pursuant to the GSD Rules, the term ``Generic CUSIP Number'' 
means a Committee on Uniform Securities Identification Procedures 
identifying number established for a category of securities, as 
opposed to a specific security. The Corporation shall use separate 
Generic CUSIP Numbers for General Collateral Repo Transactions and 
GCF Repo Transactions. GSD Rulebook, Definitions.
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    In order for GSD to process Floating Rate Notes, various 
enhancements to FICC's systems and member output have been made in the 
following areas:
     Creation and maintenance of a historical database of 
reference indices. This data is necessary for determining coupon, which 
is used in valuing positions for settlement purposes and for forward 
margin and clearing fund calculations.
     Modification of the security database in order for it to 
work in conjunction with the floating rate, reset date, reset rate 
basis and spread.
     Modifications to member output formats for both messaging 
and end of day machine readable output in order to accommodate the 
additional fields.
    GSD will test with its membership before the launch of the Floating 
Rate Notes. This will ensure that members can properly submit and 
receive transaction data in connection with the Floating Rate Notes. 
GSD has provided information to member firms about GSD's proposed 
processing of the

[[Page 68497]]

Floating Rate Notes and will continue to do so prior to allowing 
Floating Rate Notes eligible for processing.\5\
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    \5\ GSD issued Important Notice GOV012.13 on February 23, 2013 
and Important Notice GOV056.13 on August 19, 2013. Both Important 
Notices provide members with data output guidelines and trade 
messaging changes. The notices are available at www.dtcc.com.
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    (ii) The proposed rule changes are consistent with the requirements 
of Section 17A(b)(3)(F) of the Act and the rules and regulations 
thereunder, because the processing of Floating Rate Notes allows GSD to 
provide its beneficial clearance and settlement services to a new set 
of Government securities transactions in which the GSD members will be 
engaged. This expansion facilitates the prompt and accurate clearance 
and settlement of securities transaction and assures the safeguarding 
of securities and funds which are in the custody or control of FICC or 
for which it is responsible.

B. Self-Regulatory Organization's Statement on Burden on Competition

    FICC does not believe that the proposed rule change will have any 
negative 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 yet 
been solicited or received. FICC will notify the Commission of any 
written comments received by FICC.

D. Advance Notices Filed Pursuant to Section 806(e) of the Payment, 
Clearing and Settlement Supervision Act

    (a) Not applicable.
    (b) Not applicable.
    (c) Not applicable.
    (d) Not applicable.
    (e) Not applicable.

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-2013-09 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-2013-09. 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 of submission. 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 Web site 
viewing and printing in the Commission's Public Reference Room Section 
located at 100 F Street NE., Washington, DC 20549-1090 on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
such filing 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/downloads/legal/rule_filings/2013/ficc/SR_FICC_2013_09.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-2013-09 
and should be submitted on or before December 5, 2013.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-27206 Filed 11-13-13; 8:45 am]
BILLING CODE 8011-01-P