[Federal Register Volume 83, Number 190 (Monday, October 1, 2018)]
[Notices]
[Pages 49445-49449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21235]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84278; File No. SR-FICC-2018-007]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Order Approving Proposed Rule Change To Correct Certain References and 
Provide Transparency to Existing Processes in the Mortgage-Backed 
Securities Division Electronic Pool Notification Rules

September 25, 2018.
    On August 3, 2018, Fixed Income Clearing Corporation (``FICC'') 
filed with the Securities and Exchange Commission (``Commission'') 
proposed rule change SR-FICC-2018-007 pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder.\2\ The proposed rule change was published for comment in 
the Federal Register on August 15, 2018.\3\ The Commission did not 
receive any comment letters on the proposed rule change. For the 
reasons discussed below, the Commission approves the proposed rule 
change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 83808 (August 9, 
2018), 83 FR 40611 (August 15, 2018) (SR-FICC-2018-007) 
(``Notice'').
---------------------------------------------------------------------------

I. Description of the Proposed Rule Change

    The proposed rule change would amend FICC's Mortgage-Backed 
Securities Division's (``MSBD'') electronic pool notification (``EPN'') 
service (``EPN Service'') rules (``EPN Rules'').\4\
---------------------------------------------------------------------------

    \4\ MBSD maintains two sets of rulebooks: The EPN Rules and the 
MSBD rules (``MBSD Rules''). Notice, 83 FR at 40611. The EPN Rules 
govern MBSD's EPN Service, and the MBSD Clearing Rules (the ``MBSD 
Rules'') govern MBSD's clearance and settlement service. Id. The EPN 
Rules are available at http://www.dtcc.com/~/media/Files/Downloads/
legal/rules/ficc_mbsd_epnrules.pdf. The MBSD Rules are available at 
http://www.dtcc.com/~/media/Files/Downloads/legal/rules/
ficc_mbsd_rules.pdf.
---------------------------------------------------------------------------

A. Background

    EPN Service provides an automated manner for market participants 
with an obligation to deliver pools of mortgages to transmit mortgage 
pool information to their counterparties in real time.\5\ Market 
participants that wish to use the EPN Service (i.e., become ``EPN 
Users'') are required to submit an application to MBSD.\6\ The 
application process and the use of the EPN Service are governed by the 
EPN Rules.\7\ MBSD's clearing members (``Clearing Members'') are 
required to be EPN Users; however, one can be an EPN User and not a 
Clearing Member.\8\
---------------------------------------------------------------------------

    \5\ Notice, 83 FR at 40612.
    \6\ Id.
    \7\ Id.
    \8\ Id.
---------------------------------------------------------------------------

B. Proposed Changes To Correct the EPN Rules' Article I (``Definitions 
and General Provisions'')

    FICC proposes to delete three defined terms from Article I of the 
EPN Rules: (i) EPN Procedures, (ii) Comparison Only System, and (iii) 
Par Amount.\9\ FICC proposes to delete the term ``EPN Procedures'' 
because FICC does not maintain EPN Procedures.\10\ Relatedly, FICC 
proposes to amend the definitions of ``EPN Service'' and ``EPN User 
Profile'' in order to delete references to ``EPN Procedures'' in those 
definitions.\11\ FICC also proposes to make a grammatical correction to 
the ``EPN User Profile'' definition. Specifically, FICC would replace 
the word ``in'' with ``by'' so the definition reads, ``the EPN User 
Profile would be on a form specified `by' FICC.'' \12\
---------------------------------------------------------------------------

    \9\ Id.
    \10\ EPN Rules' Article V, Rule 11 empowers FICC to adopt EPN 
Procedures as FICC ``deems necessary or desirable.'' Supra note 4. 
FICC states that when FICC instituted the EPN Service and the 
related EPN Rules, EPN Procedures were not adopted at that time. 
Notice, 83 FR at 40612.
    \11\ Notice, 83 FR at 40612.
    \12\ Id.
---------------------------------------------------------------------------

    FICC also proposes to delete the term ``Comparison Only System'' 
from the definition of ``Interested Person'' because MBSD does not 
maintain a ``Comparison Only System.'' \13\ Similarly, FICC proposes to 
delete the term ``Par Amount'' from Article I because the term is not 
otherwise referred to in the EPN Rules.\14\ FICC states that the 
inclusion of these two terms in the EPN Rules was an error.\15\
---------------------------------------------------------------------------

    \13\ Id.
    \14\ Id.
    \15\ Id.
---------------------------------------------------------------------------

C. Proposed Changes To Correct the EPN Rules' Article III (``EPN 
Users'')

    FICC proposes revisions to Article III of the EPN Rules to remove 
references to ``EPN Procedures,'' as well as to revise the deadlines to 
process EPN message (``Messages'').
1. Proposed Changes to EPN Rules, Article III, Rule 1, Section 3 
(``Requirements Applicable to EPN Users'')
    EPN Rules, Article III, Rule 1, Section 3 lists terms required for 
application to the EPN Service.\16\ This list states, in part, that an 
applicant shall agree (i) to abide by and be bound by the EPN Rules and 
EPN Procedures, (ii) that the EPN Rules and EPN Procedures are 
incorporated into every contract or Message, (iii) that the EPN User 
shall pay fines that are imposed in accordance with the EPN Rules and 
EPN Procedures, and (iv) that the applicant is bound by any amendment 
to the EPN Rules and EPN Procedures.\17\ FICC proposes to delete all 
references to the EPN Procedures in this list, as FICC does not 
maintain such procedures.\18\
---------------------------------------------------------------------------

    \16\ Id.
    \17\ Id.
    \18\ Id.
---------------------------------------------------------------------------

    The same Section 3 also states that, in the event of an EPN Service 
disruption and an extension of the cut-off times for communicating pool 
allocation information pursuant to the Securities

[[Page 49446]]

Industry and Financial Markets Association (``SIFMA'') guidelines 
(``SIFMA Guidelines''), EPN Users ``will'' be relieved of their 
obligation to process Messages through the EPN Service until the 
beginning of the next Business Day after the EPN Service has been 
recovered.\19\ FICC proposes to amend this provision to state that EPN 
Users ``may'' be relieved of their obligation to process Messages 
through the EPN Service until ``later in the Business Day or'' the 
beginning of the next Business Day after the EPN Service has been 
recovered.\20\ FICC states that this change would accommodate the 
nature of specific EPN Service disruptions and MBSD's ability to fix 
such disruptions promptly.\21\ FICC states that the specific disruption 
determines whether the cut-off time would be extended to later in the 
Business Day or the next Business Day.\22\
---------------------------------------------------------------------------

    \19\ Notice, 83 FR at 40612-13.
    \20\ Notice, 83 FR at 40613.
    \21\ Id.
    \22\ Id.
---------------------------------------------------------------------------

2. Proposed Changes to EPN Rules, Article III, Rule 1, Section 5 (``EPN 
Users Bound by EPN Rules, EPN Procedures and Applicable Laws'')
    EPN Rules, Article III, Rule 1, Section 5 states, in part, that the 
use of FICC's facilities by an EPN User shall constitute such EPN 
User's agreement with FICC and with all other EPN Users to be bound by 
the provisions of, and by any action taken or order issued by FICC 
pursuant to the EPN Rules and any amendment thereto, and to such EPN 
Procedures that FICC from time to time may adopt.\23\ FICC proposes to 
amend the title of this section and the paragraph in this section to 
delete all references to EPN Procedures, as FICC does not maintain such 
procedures.\24\
---------------------------------------------------------------------------

    \23\ Id.
    \24\ Id.
---------------------------------------------------------------------------

3. Proposed Changes to EPN Rules, Article III, Rule 1, Section 6 (``EPN 
Rules and EPN Procedures Incorporated in EPN User Messages'')
    EPN Rules, Article III, Rule 1, Section 6 states that the EPN Rules 
and the EPN Procedures adopted from time to time by FICC shall be 
deemed to be incorporated in each Message that occurs through the EPN 
Service. This section also states that if the terms contained in any 
other agreement between EPN Users are inconsistent with the provisions 
of the EPN Rules or the EPN Procedures, the EPN Rules and the EPN 
Procedures shall be controlling.\25\ FICC proposes to amend the title 
of this section and the paragraph in this section to delete all 
references to EPN Procedures, as FICC does not maintain such 
procedures.\26\
---------------------------------------------------------------------------

    \25\ Id.
    \26\ Id.
---------------------------------------------------------------------------

4. Proposed Changes to EPN Rules' Article III, Rule 3, Section 1 
(``When the Corporation Declines To Act for an EPN User'')
    EPN Rules, Article III, Rule 3, Section 1 states that FICC may, at 
any time, cease to act for an EPN User if the EPN User has (i) failed 
to perform its obligations to FICC or other EPN Users under the EPN 
Rules or the EPN Procedures or (ii) materially violated any of the EPN 
Rules, EPN Procedures, or any agreement with FICC.\27\ FICC proposes to 
amend this section to delete all references to the EPN Procedures, as 
FICC does not maintain such procedures.\28\
---------------------------------------------------------------------------

    \27\ Id.
    \28\ Id.
---------------------------------------------------------------------------

5. Proposed Changes to EPN Rules' Article III, Rule 4 (``Admission to 
Premises of Corporation; Powers of Attorney'')
    EPN Rules, Article III, Rule 4 states that no person shall be 
permitted to enter FICC's premises as the representative of any EPN 
User unless ``he'' has first been approved by FICC.\29\ FICC proposes 
to delete the reference to ``he'' and replace it with ``such person'' 
because FICC believes that it would be more appropriate to use gender 
neutral terminology.\30\
---------------------------------------------------------------------------

    \29\ Id.
    \30\ Id.
---------------------------------------------------------------------------

D. Proposed Changes to Correct the EPN Rules' Article V 
(``Miscellaneous'')

    FICC proposes revisions to Article V of the EPN Rules to replace 
outdated references to ``Vice President,'' and to remove references to 
EPN Procedures.
1. Proposed Changes to EPN Rules' Article V, Rule 1 (``Action by the 
Corporation'')
    EPN Rules, Article V, Rule 1 states that, except where action by 
FICC's Board of Directors (``Board''), or any committee of the Board, 
is specifically required by FICC's By-Laws or the EPN Rules, FICC may 
act by its President, any Managing Director, or any Vice President or 
by such person as may be designated from time to time by the Board.\31\ 
FICC proposes to amend this sentence to delete the reference to Vice 
President and replace it with Executive Director because FICC no longer 
uses the title ``Vice President.'' \32\
---------------------------------------------------------------------------

    \31\ Id.
    \32\ Id.
---------------------------------------------------------------------------

2. Proposed Changes to EPN Rules' Article V, Rule 3 (``Fines and Other 
Sanctions'')
    EPN Rules, Article V, Rule 3 states that FICC may impose a fine on 
an EPN User for violating EPN Rules or EPN Procedures.\33\ FICC 
proposes to amend this section to delete the reference to EPN 
Procedures, as FICC does not maintain such procedures.\34\
---------------------------------------------------------------------------

    \33\ Id.
    \34\ Id.
---------------------------------------------------------------------------

3. Proposed Changes to EPN Rules' Article V, Rule 4 
(``Communications'')
    EPN Rules, Article V, Rule 4 states that each EPN User maintaining 
an account must maintain such data processing and communications 
equipment as FICC may specify in the EPN Procedures.\35\ FICC proposes 
to delete the reference to EPN Procedures, as FICC does not maintain 
such procedures, and amend this sentence to state that each EPN User 
maintaining an account shall be required to maintain such data 
processing and communications equipment as FICC may specify from time-
to-time.\36\ FICC states that this proposed change is consistent with 
FICC's existing practice of providing data processing and 
communications equipment requirements to all approved applicants during 
the membership onboarding process.\37\
---------------------------------------------------------------------------

    \35\ Id.
    \36\ Id.
    \37\ Id.
---------------------------------------------------------------------------

4. Proposed Changes to EPN Rules' Article V, Rule 7 (``Hearings'')
    EPN Rules, Article V, Rule 4, Section 1 states that if an 
individual's written statement contests FICC's determination that such 
individual has violated an EPN Rule or EPN Procedure, the statement 
must specifically admit or deny each violation alleged and detail the 
reasons why the EPN Rules or EPN Procedures alleged to have been 
violated are being contested.\38\ FICC proposes to amend this sentence 
to delete all references to the EPN Procedures, as FICC does not 
maintain such procedures.\39\
---------------------------------------------------------------------------

    \38\ Id.
    \39\ Id.
---------------------------------------------------------------------------

5. Proposed Changes to EPN Rules' Article V, Rule 11 (``EPN 
Procedures'')
    FICC proposes to delete this entire rule because FICC does not 
maintain EPN Procedures.\40\ FICC would reserve this rule for future 
use and this rule would be entitled ``Reserved for Future Use.'' \41\
---------------------------------------------------------------------------

    \40\ Id. See also supra note 10.
    \41\ Notice, 83 FR at 40614.

---------------------------------------------------------------------------

[[Page 49447]]

6. Proposed Changes to EPN Rules' Article V, Rule 12 (``Waivers, 
Etc.'')
    EPN Rules, Article V, Rule 12 states that the Board or any FICC 
officer (having a rank of Vice President or higher) may extend, waive, 
or suspend timeframes under the EPN Rules, the EPN Procedures, or any 
regulations issued by FICC whenever such extension, waiver or 
suspension is necessary or expedient.\42\ FICC proposes to amend this 
sentence to delete all references to EPN Procedures, as FICC does not 
maintain such procedures, and ``regulations issued by FICC.'' \43\ FICC 
also proposes to replace the reference to ``Vice President'' with 
``Executive Director'' because FICC no longer uses the title ``Vice 
President.'' \44\
---------------------------------------------------------------------------

    \42\ Id.
    \43\ Id.
    \44\ Id.
---------------------------------------------------------------------------

7. Proposed Changes to EPN Rules' Article V, Rule 17 (``Forms'')
    EPN Rules, Article V, Rule 17 states that any information required 
to be delivered to FICC by use of any such forms may be delivered by 
the use of any media, as shall be prescribed in the EPN Procedures or 
by FICC from time to time.\45\ FICC proposes to delete the reference to 
EPN Procedures, as FICC does not maintain such procedures.\46\
---------------------------------------------------------------------------

    \45\ Id.
    \46\ Id.
---------------------------------------------------------------------------

E. Proposed Changes to Provide Enhances Transparency to the EPN Rules

    FICC proposes to provide transparency to various provisions in the 
EPN Rules, as described below.\47\
---------------------------------------------------------------------------

    \47\ Id.
---------------------------------------------------------------------------

1. Proposed Changes to EPN Rules' Article I, Rule 1 (``Definitions'')
    FICC proposes to amend the term ``Message'' in Rule 1 to define 
this term as all electronic messages sent and received by an EPN User 
through the EPN Service, and to delete the reference to EPN Procedures, 
as FICC does not maintain such procedures.\48\
---------------------------------------------------------------------------

    \48\ Id.
---------------------------------------------------------------------------

2. Proposed Changes to EPN Rules' Article II, Rule 1 (``Accounts'')
    EPN Rules' Article II, Rule 1, Section 2 states that FICC may 
specify in the EPN Procedures that certain Messages between EPN Users 
are not eligible for the EPN Service.\49\ FICC proposes to amend this 
section to delete the reference to EPN procedures and state that 
certain Messages may be ineligible if FICC determines that such 
Messages are not submitted in a manner that is consistent with the 
communication links, formats, timeframes, and deadlines established by 
FICC.\50\
---------------------------------------------------------------------------

    \49\ Id.
    \50\ Id.
---------------------------------------------------------------------------

3. Proposed Changes to EPN Rules' Article II, Rule 2 (``Reports'')
    EPN Rules' Article II, Rule 2, Section 1 states that the Message 
detail report (``Message Detail Report'') and the Message summary 
report (``Message Summary Report'') are available at a time specified 
in the EPN Procedures.\51\ FICC proposes to amend this section to 
delete the reference to EPN procedures and state that these reports 
would be available at a time specified in the time schedule posted on 
FICC's website.\52\
---------------------------------------------------------------------------

    \51\ Id.
    \52\ Id.
---------------------------------------------------------------------------

    EPN Rules' Article II, Rule 2, Section 2 states that the Message 
Detail Report shall list the contents of each Message as described in 
the EPN Procedures.\53\ FICC proposes to delete the reference to EPN 
Procedures, as FICC does not maintain such procedures, and amend this 
section to state that for each EPN eligible security (``Eligible 
Security''), the Message Detail Report would include, but would not be 
limited to, the pool number, original face value, current face value, 
maturity date, pool factor, Committee on Uniform Securities 
Identification Procedures number (``CUSIP Number''), issue date, 
principal and interest, and total net money.\54\ In connection with 
this change, FICC proposes to amend Article I, EPN Rule 1 (Definitions) 
to include a defined term for ``CUSIP Number.'' \55\ FICC would define 
this term as the Committee on Uniform Securities Identification 
Procedures identifying number for an EPN Eligible Security.\56\ The 
proposed change to this section would be consistent with the 
information that is currently included in the Message Detail 
Report.\57\
---------------------------------------------------------------------------

    \53\ Id.
    \54\ Id.
    \55\ Id.
    \56\ Id.
    \57\ Id.
---------------------------------------------------------------------------

    EPN Rules' Article II, Rule 2, Section 3 states that the Message 
Summary Report shall list the contents of each Message as described in 
the EPN Procedures.\58\ FICC proposes to delete the reference to EPN 
Procedures, as FICC does not maintain such procedures, and amend this 
section to state that for each Eligible Security, the Message Summary 
Report would include, but would not be limited to, the total original 
face value, total net money, CUSIP Number, and summary of the number 
and type of Messages.\59\ The proposed change to this section would be 
consistent with the information that is currently included in the 
Message Summary Report.\60\
---------------------------------------------------------------------------

    \58\ Id.
    \59\ Id.
    \60\ Id.
---------------------------------------------------------------------------

    EPN Rules' Article II, Rule 2, Section 5 states that each EPN 
Message shall include one or more time stamps, one of which will 
include a good delivery time stamp as described in the EPN 
Procedures.\61\ FICC proposes to delete the reference to ``EPN'' in the 
term ``EPN Message'' because while ``EPN Message'' is not a defined 
term, ``Message'' is a defined term.\62\ FICC also proposes to delete 
the reference to EPN Procedures, as FICC does not maintain such 
procedures.\63\
---------------------------------------------------------------------------

    \61\ Id.
    \62\ Id.
    \63\ Id.
---------------------------------------------------------------------------

    FICC also proposes to amend this section to state that the good 
delivery time stamp would be referred to as ``T2'' and that the 
application of this time stamp would determine good delivery among EPN 
Users pursuant to the SIFMA Guidelines.\64\ The proposed change also 
would state that the remainder of the time stamps would be for the EPN 
Service's operational, processing, and reporting purposes.\65\
---------------------------------------------------------------------------

    \64\ Id. FICC notes that the reference to ``T2'' does not relate 
to the two business days settlement cycle for broker-deal securities 
transactions, known as ``T+2.'' See Notice 83 FR at 40611.
    \65\ Notice, 83 FR at 40614.
---------------------------------------------------------------------------

4. Proposed Changes to EPN Rules' Article III, Rule 5 (``Use of EPN 
Service'')
    EPN Rules' Article III, Rule 5 states that all EPN Users will use 
the EPN Service for EPN Eligible Securities in a manner set forth in 
the EPN Procedures and that this shall be accomplished by providing 
(for each Message that an EPN User sends or receives) the pricing and 
other descriptive information, in the manner, and by the cut-off times, 
specified in the EPN Procedures.\66\
---------------------------------------------------------------------------

    \66\ Notice, 83 FR at 40615.
---------------------------------------------------------------------------

    FICC proposes to delete the references to EPN Procedures, as FICC 
does not maintain such procedures, and amend this rule to state that 
the EPN User will use the EPN Service as set forth in the EPN Rules and 
that this shall be accomplished by providing (for each Message that an 
EPN User sends or receives) the pricing and other descriptive 
information, in the manner, and by the times, specified on FICC's 
website.\67\ FICC states that this information is communicated to all

[[Page 49448]]

approved applicants during the membership onboarding process.\68\
---------------------------------------------------------------------------

    \67\ Id.
    \68\ Id.
---------------------------------------------------------------------------

F. Proposed Changes to the EPN Service's Processing of the Good 
Delivery T2 Time Stamp for Pool Substitutions

    FICC states that, if a pool seller decides to substitute a mortgage 
pool for which pool information has already been provided, the pool 
seller must submit a cancel and correct Message by 12:15 p.m. on any 
Business Day prior to the delivery of the mortgage pool.\69\ Upon 
receipt of the pool seller's Message, the EPN Service applies a T2 time 
stamp to the Message to reflect the time that the EPN Service and the 
time the pool buyer received the pool seller's Message.\70\ The T2 time 
stamp on the pool buyer's Message establishes whether good delivery has 
occurred for purposes of the pool seller's pool substitution.\71\ In 
the event that the T2 time stamp on the pool buyer's Message reflects a 
time after 12:15 p.m., FICC is responsible for financing the mortgage 
pools that are associated with the Message until the next Business 
Day.\72\
---------------------------------------------------------------------------

    \69\ Id.
    \70\ Id.
    \71\ Id.
    \72\ Id.
---------------------------------------------------------------------------

    FICC proposes to establish a single good delivery T2 time stamp 
that reflects the same processing time on the pool seller's Message and 
the pool buyer's Message, respectively.\73\ This time stamp would 
determine whether the 12:15 p.m. cut-off time has been met for purposes 
of establishing good delivery of the pool buyer's pool 
substitution.\74\ As a result of this change, in the event that the T2 
time stamp reflects a time that does not meet the 12:15 p.m. cut-off 
time, the financing of the mortgage pools, if any, would be the 
responsibility of the counterparties to the Message, as determined by 
such parties in accordance with the SIFMA Guidelines.\75\
---------------------------------------------------------------------------

    \73\ Id.
    \74\ Id.
    \75\ Id.
---------------------------------------------------------------------------

    FICC states that it is proposing this change because it would be 
consistent with the SIFMA Guidelines, which FICC states reflects 
industry best practices.\76\ Further, FICC states that the parties to 
the Message are best positioned to ensure that the Message meets the 
good delivery requirements.\77\ FICC states that the proposed change 
would be consistent with FICC's proposal to refer to the good delivery 
time stamp as ``T2,'' as discussed above. \78\ Additionally, FICC 
states that the application of this time stamp would determine good 
delivery among EPN Users, pursuant to the SIFMA Guidelines.\79\ FICC 
states that the proposed change would not affect FICC's guarantee and 
novation of transactions submitted by Clearing Members through MBSD's 
Clearing System.\80\
---------------------------------------------------------------------------

    \76\ Notice, 83 FR at 40616.
    \77\ Notice, 83 FR at 40615. 
    \78\ Id.
    \79\ Id.
    \80\ Id.
---------------------------------------------------------------------------

II. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \81\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that such proposed rule change is consistent with the 
requirements of the Act and rules and regulations thereunder applicable 
to such organization. The Commission believes the proposal is 
consistent with the Act, specifically Section 17A(b)(3)(F) of the Act 
and Rule 17Ad-22(e)(23)(i) under the Act, as discussed below.\82\
---------------------------------------------------------------------------

    \81\ 15 U.S.C. 78s(b)(2)(C).
    \82\ 15 U.S.C. 78q-1(b)(3)(F); 17 CFR 240.17Ad-22(20).
---------------------------------------------------------------------------

A. Consistency With Section 17A(b)(3)(F)

    Section 17A(b)(3)(F) of the Act \83\ requires, inter alia, that the 
rules of the clearing agency be designed to promote the prompt and 
accurate clearance and settlement of securities transactions.
---------------------------------------------------------------------------

    \83\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    First, as described above, FICC proposes to make several clarifying 
changes to the EPN Rules. Specifically, the proposed changes would 
correct the EPN Rules by removing inaccurate or inapplicable terms from 
the Rules. The proposed changes also are designed to provide 
transparency to the EPN Rules by more accurately describing the EPN 
Service's current practices. By improving the EPN Rules in this way, 
the Commission believes the proposed changes would help clarify the EPN 
Users' rights and obligations under those practices. By better 
understand their rights and obligations regarding the EPN Service, EPN 
Users are more likely to act in accordance with the EPN Rules, which 
the Commission believes would promote the prompt and accurate clearance 
and settlement of securities transactions.
    Second, as described above, FICC proposes to establish a single 
good delivery T2 time stamp. This proposed change is designed to be 
consistent with the SIFMA Guidelines, which reflect industry best 
practices. Additionally, by making the counterparties responsible for 
the financing the mortgage pools if the 12:15 p.m. deadline is not met, 
the proposal would encourage EPN Users to adhere to the deadline for 
substitutions. By ensuring that the EPN Services comport with industry 
best practices and encouraging EPN Users to abide by processing 
deadlines, the Commission believes that the proposed changes would help 
the processing of transactions through the EPN Service, thus promoting 
the prompt and accurate clearance and settlement of such securities 
transactions.
    As each of the aforementioned changes is designed to promote the 
prompt and accurate clearance and settlement of securities 
transactions, the Commission finds that the proposal and is consistent 
with the requirements of Section 17A(b)(3)(F).

B. Consistency With Rule 17Ad-22(e)(23)(i)

    Rule 17Ad-22(e)(23)(i) under the Act requires, inter alia, a 
covered clearing agency \84\ to establish, implement, maintain and 
enforce written policies and procedures reasonably designed to provide 
for publicly disclosing all relevant rules and material procedures.\85\
---------------------------------------------------------------------------

    \84\ A ``covered clearing agency'' means, among other things, a 
clearing agency registered with the Commission under Section 17A of 
the Exchange Act (15 U.S.C. 78q-1 et seq.) that is designated 
systemically important by the Financial Stability Oversight Counsel 
(``FSOC'') pursuant to the Payment, Clearing, and Settlement 
Supervision Act of 2010 (12 U.S.C. 5461 et seq.). See 17 CFR 
240.17Ad-22(a)(5)-(6). On July 18, 2012, FSOC designated FICC as 
systemically important. U.S. Department of the Treasury, ``FSOC 
Makes First Designations in Effort to Protect Against Future 
Financial Crises,'' available at https://www.treasury.gov/press-center/press-releases/Pages/tg1645.asp. Therefore, FICC is a covered 
clearing agency.
    \85\ 17 CFR 240.17Ad-22(e)(23)(i).
---------------------------------------------------------------------------

    As described above, the proposed rule changes would (i) correct the 
EPN Rules by removing inappropriate terminology, (ii) provide 
transparency to the EPN Rules by ensuring the EPN Rules match the EPN 
Service's current practices, and (iii) amend the EPN Service's 
processing of T2 time stamps for pool substitutions. Each of these 
proposed changes would assist FICC in publicly disclosing all relevant 
and material procedures regarding the EPN Service to EPN Users. 
Therefore, the Commission finds that the proposal is consistent Rule 
17Ad-22(e)(23)(i) under the Act.

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act, in particular 
the requirements of

[[Page 49449]]

Section 17A of the Act \86\ and the rules and regulations thereunder.
---------------------------------------------------------------------------

    \86\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act, 
that proposed rule change SR-FICC-2018-007 be, and hereby is, 
APPROVED.\87\
---------------------------------------------------------------------------

    \87\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \88\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\88\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-21235 Filed 9-28-18; 8:45 am]
 BILLING CODE 8011-01-P