[Federal Register Volume 79, Number 227 (Tuesday, November 25, 2014)]
[Notices]
[Pages 70258-70259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-27840]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73642; File No. SR-FICC-2014-08]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Clarify That Federal Reserve Banks, Central Counterparties, and Central 
Securities Depositories Shall Not Be Considered Either ``Mandatory 
Purchaser Participants'' or ``Voluntary Purchaser Participants'' and 
Registered Investment Companies Shall Be Considered ``Voluntary 
Purchaser Participants''

November 19, 2014.
    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 November 12, 2014, 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. FICC filed the proposed rule change 
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(1) 
thereunder.\4\ The proposed rule change was effective upon filing with 
the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of amendments to Rule 49 of the 
Rulebook of the Government Securities Division (``GSD'' and its 
Rulebook, ``GSD Rules'') of FICC, and Rule 39 of the Clearing Rules of 
the Mortgage-Backed Securities Division (``MBSD'' and its Clearing 
Rules, ``MBSD Rules'') of FICC in order to clarify that Federal Reserve 
Banks, central counterparties, and central securities depositories 
shall not be considered either ``Mandatory Purchaser Participants'' or 
``Voluntary Purchaser Participants,'' and further to clarify that 
Registered Investment Companies shall be considered ``Voluntary 
Purchaser Participants,'' as more fully described below.

II. Clearing Agency'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) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    Pursuant to the Third Amended and Restated Shareholders Agreement, 
dated as of December 7, 2005 (``Shareholders Agreement''), by and among 
The Depository Trust & Clearing Corporation (``DTCC''), The Depository 
Trust Company (``DTC''), National Securities Clearing Corporation 
(``NSCC''), FICC, and the other parties thereto, and MBSD Rule 39, 
Clearing Members (as such term is defined in the MBSD Rules \5\) other 
than non-U.S. based central securities depositories are required to be 
``Mandatory Purchaser Participants'' (as such term is defined in MBSD 
Rule 39) and be parties to the Shareholders Agreement, and all other 
users are not permitted to purchase and own shares of DTCC common stock 
(``Common Shares'') or be parties to the Shareholders Agreement. 
Further, pursuant to the Shareholders Agreement and GSD Rule 49: (1) 
Netting Members (as such term is defined in the GSD Rules \6\) other 
than non-U.S. based central securities depositories are required to be 
``Mandatory Purchaser Participants'' (as such term is defined in the 
GSD Rules) and be parties to the Shareholders Agreement; (2) 
Comparison-Only Members (as such term is defined in the GSD Rules) are 
permitted, but not required to purchase and own Common Shares and be 
parties to the Shareholders Agreement; and (3)

[[Page 70259]]

Sponsored Members (as such term is defined in the GSD Rules) are not 
permitted to purchase and own Common Shares or be parties to the 
Shareholders Agreement.
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    \5\ MBSD Rules are available at http://dtcc.com/legal/rules-and-procedures.aspx.
    \6\ GSD Rules are available at http://dtcc.com/legal/rules-and-procedures.aspx.
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    FICC is proposing to amend MBSD Rule 39 and GSD Rule 49, as marked 
on Exhibit 5 hereto, in order to make clear Federal Reserve Banks, 
central counterparties, and central securities depositories shall not 
be considered either Mandatory Purchaser Participants or Voluntary 
Purchaser Participants. FICC has interpreted MBSD Rule 39 and GSD Rule 
49 to exclude from their provisions: (1) Federal Reserve Banks, because 
it was never intended that such governmental authorities should be 
required to own shares in DTCC, notwithstanding that they may use 
certain services of FICC; and (2) central counterparties and central 
securities depositories, because link arrangements between FICC and 
these entities are for the purpose of extending clearing agency 
services across borders or among closely related activities and 
products, but not for ownership purposes.
    FICC is also proposing to amend MBSD Rule 39 and GSD Rule 49 in 
order to make clear Registered Investment Companies (as such term is 
defined in the MBSD Rules and the GSD Rules) (``RICs'') in any 
membership category shall be considered Voluntary Purchaser 
Participants. As Voluntary Purchaser Participants, RICs would be 
permitted, but not required, to purchase and own Common Shares and be 
parties to the Shareholders Agreement. Regulatory requirements 
applicable to RICs, including limitations on the amount of illiquid 
securities these entities are permitted to hold on an on-going basis 
and requirements that stock purchases receive shareholder approval, 
significantly restrict the ability of RICs to participate in a 
mandatory stock purchase. These restrictions are unique to RICs. FICC 
would consider the applicability of the requirements in MBSD Rule 39 
and GSD Rule 49 to any new members, as necessary.
2. Statutory Basis
    The proposed rule change is consistent with the Act, and the rules 
and regulations thereunder, in particular Section 17A(b)(3)(C) which 
requires that the rules of FICC ``assure a fair representation of its 
shareholders (or members) and participants in the selection of its 
directors and administration of its affairs . . . [and the Commission] 
may determine that the representation of participants is fair if they 
are afforded a reasonable opportunity to acquire voting stock of the 
clearing agency, directly or indirectly, in reasonable proportion to 
their use of such clearing agency.'' \7\ FICC implements and meets this 
requirement through MBSD Rule 39 and GSD Rule 49, which afford MBSD and 
GSD users a reasonable opportunity to acquire voting stock indirectly 
in the clearing agency in reasonable proportion to their use of the 
clearing agency.\8\ The proposed rule change constitutes a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of these existing rules.
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    \7\ 15 U.S.C. 78q-1(b)(3)(C).
    \8\ See Commission orders approving NSCC and DTC's rule filings 
which implemented the current stock ownership structure that 
satisfies the fair representation requirements. Securities Exchange 
Act Release No. 41800 (August 27, 1999), 64 FR 48694 (September 7, 
1999) (SR-NSCC-1999-10); and Securities Exchange Act Release No. 
41786 (August 24, 1999), 64 FR 47882 (September 1, 1999) (SR-DTC-
1999-17).
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(B) Clearing Agency's Statement on Burden on Competition

    The proposed rule change will not have any impact, or impose any 
burden, on competition.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    Written comments relating to the proposed rule change have not yet 
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 pursuant to Section 
19(b)(3)(A) \9\ of the Act and paragraph (f) of Rule 19b-4 \10\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f).
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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 email to [email protected]. Please include 
File Number SR-FICC-2014-08 on the subject line.

Paper Comments

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

    All submissions should refer to File Number SR-FICC-2014-08. 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 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, 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 the filing also will be available 
for inspection and copying at the principal office of FICC and on 
FICC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). 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-2014-08 and should be 
submitted on or before December 16, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-27840 Filed 11-24-14; 8:45 am]
BILLING CODE 8011-01-P