[Federal Register Volume 83, Number 204 (Monday, October 22, 2018)]
[Notices]
[Pages 53339-53341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22906]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84435; File No. SR-FICC-2018-011]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Allow CCIT Members To Elect To Pay Their Funds-Only Settlement 
Amount Debits Using a Different Process

October 16, 2018.
    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 15, 2018, 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 the clearing agency. FICC filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(4) thereunder \4\ so that the proposal 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)(4).
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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 proposed modifications to the 
FICC Government Securities Division (``GSD'') Rulebook (``Rules'') \5\ 
that would to allow CCIT Members to elect to pay their Funds-Only 
Settlement Amount debits using a process for debit payments that is 
different than the current required process described in Section 5 of 
Rule 13. Under this

[[Page 53340]]

proposal, CCIT Members' Funds-Only Settlement Amount credits would 
continue to be processed pursuant to Section 5 of Rule 13.
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    \5\ Capitalized terms not defined herein are defined in the 
Rules, available at http://dtcc.com/legal/rules-and-procedures.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency 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. The clearing agency 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
(i) Background on the CCIT Service
    FICC received approval from the Commission to implement its CCIT 
Service in May 2017.\6\ The CCIT Service enables tri-party repurchase 
agreement transactions in GCF Repo Securities between Netting Members 
that participate in the GCF Repo Service and institutional cash lenders 
(other than investment companies registered under the Investment 
Company Act of 1940, as amended) (called ``CCIT Members'').\7\ The CCIT 
Service is governed by Rule 3B, which includes provisions on the 
processing of Funds-Only Settlement Amount obligations of CCIT Members, 
which are the subject of the present filing.\8\ Under Section 13 of 
Rule 3B, CCIT Members are subject to the Invoice Amount,\9\ the 
Miscellaneous Adjustment Amount,\10\ and CCIT Repo Daily Interest.\11\
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    \6\ See Securities Exchange Act Release No. 80574 (May 2, 2017), 
82 FR 21439 (May 8, 2017) (SR-FICC-2017-005) (``CCIT Approval 
Order''). See Rule 3B, Section 13(a), supra note 5.
    \7\ See CCIT Approval Order, supra note 2. See Rule 3B, Section 
13(a), supra note 5.
    \8\ See Rule 3B, supra note 5.
    \9\ See id. ``Invoice Amount'' means all fee amounts due and 
owing from a Netting Member or CCIT Member, as applicable, to FICC 
on a particular Business Day. See Rule 1, supra note 5.
    \10\ See Rule 3B, supra note 5. ``Miscellaneous Adjustment 
Amount'' means the net total of all miscellaneous funds-only amounts 
that, on a particular Business Day, are required to be paid by a 
Netting Member or CCIT Member, as applicable, to FICC and/or are 
entitled to be collected by a Member (including a CCIT Member, as 
applicable) from FICC. See Rule 1, supra note 5.
    \11\ See Rule 3B, supra note 5. The term ``CCIT Daily Repo 
Interest'' means the interest amount that is collected from or paid 
to a Netting Member, as applicable, and collected from or paid to a 
CCIT Member, as applicable, on a daily basis resulting from a CCIT 
Transaction. See Rule 1, supra note 5.
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(ii) Proposed Change to Rule 3B, Section 13 (Funds-Only Settlement)
    Currently, CCIT Members are required to satisfy their Funds-Only 
Settlement Amount obligations (both debits and credits) using the same 
process that Netting Members are required to use for the same 
purpose.\12\ This process is described in Rule 13.\13\ CCIT Members are 
required to appoint a Funds-Only Settling Bank to process their Funds-
Only Settlement Amount obligations.
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    \12\ See Rule 3B, Section 13, supra note 5.
    \13\ See Rule 13, supra note 5.
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    FICC understands that some prospective CCIT Members do not have 
business relationships established with Funds-Only Settling Banks that 
would permit the Funds-Only Settling Banks to settle such prospective 
CCIT Members' Funds-Only Settlement Amount debits. Therefore, such 
prospective CCIT Members are currently unable to participate in the 
CCIT Service unless an alternative mechanism for them to satisfy their 
Funds-Only Settlement Amount debits directly with FICC, rather than 
through a Funds-Only Settling Bank, is permitted by FICC. Specifically, 
FICC is proposing to allow prospective CCIT Members to satisfy their 
Funds-Only Settlement Amount debits with FICC through the invoicing 
process applicable to Comparison-Only Members under Rule 25 (the 
``invoicing process'').\14\ Prospective CCIT Members would elect, as 
part of their onboarding process, to settle their Funds-Only Settlement 
Amount debits through the Funds-Only Settling Banks or the invoicing 
process. Furthermore, CCIT Members would also be permitted to change 
their initial election with respect to Funds-Only Settlement Amount 
debits after the onboarding process is completed. The proposal would 
not affect the calculation of the Funds-Only Settlement Amount 
obligations of CCIT Members, and all other requirements set forth in 
Rule 13 would remain. In addition, Funds-Only Settlement Amount credits 
would continue to be processed through Funds-Only Settling Banks and 
the current process described in Rule 13.\15\
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    \14\ See Rule 25, supra note 5.
    \15\ See Rules 3B and 13, supra note 5.
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    In order to effectuate the proposed rule change, FICC proposes to 
revise Rule 3B, Section 13 to describe that a CCIT Member may elect to 
pay its Funds-Only Settlement Amount debits using the invoicing process 
applicable to Comparison-Only Members under Rule 25 in lieu of the 
process described in Section 5 of Rule 13. In addition, Rule 3B, 
Section 13 would be revised to state that, if the CCIT Member elects 
the invoicing process, the CCIT Member's Funds-Only Settling Bank shall 
no longer be responsible for processing Funds-Only Settlement Amounts 
that are debits for such CCIT Member.

2. Statutory Basis

    FICC believes that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a registered clearing agency. In particular, FICC 
believes that the proposed rule change is consistent with Section 
17A(b)(3)(F) of the Act.\16\ Section 17A(b)(3)(F) of the Act requires, 
in part, that the Rules be designed to remove impediments to and 
perfect the mechanism of a national system for the prompt and accurate 
clearance and settlement of securities transactions.\17\ FICC believes 
that the proposed rule change described above to allow CCIT Members to 
elect to use the invoicing process to pay their Funds-Only Settlement 
Amount debits would remove an impediment for prospective CCIT Members 
to join the CCIT Service. Specifically, some prospective CCIT Members 
cannot join because they are unable to settle Funds-Only Settlement 
Amount debits under the current process because they do not have 
business relationships established with Funds-Only Settling Banks that 
would permit the Funds-Only Settling Banks to settle such prospective 
CCIT Members' Funds-Only Settlement Amount debits. The proposed rule 
change would remove this impediment by allowing CCIT Members to elect 
the invoicing process for settling their Funds-Only Settlement Amount 
debits and thereby would enable more entities to become CCIT Members 
and use the CCIT Service. As such, the proposed rule change would 
remove impediments to and perfect the mechanism of a national system 
for the prompt and accurate clearance and settlement of securities 
transactions, consistent with Section 17A(b)(3)(F) of the Act.\18\
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    \16\ 15 U.S.C. 78q-1(b)(3)(F).
    \17\ Id.
    \18\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    FICC believes this proposed rule change to enable CCIT Members to 
elect the invoicing process to pay their Funds-Only Settlement Amount 
debits in connection with their CCIT Transactions could have an impact 
on competition. FICC believes that the proposed rule change could 
promote competition. At this time, there are entities that have 
expressed an interest

[[Page 53341]]

in becoming CCIT Members but cannot do so, as discussed above. The 
proposed rule change would allow such entities to join the CCIT 
Service. By enabling more entities to join the CCIT Service, the 
proposed rule change would promote competition by having more entities 
in central clearing.
    FICC does not believe that not providing the alternative mechanism 
to Netting Members would create a burden on competition. Netting 
Members, as full-service Members, are able to avail themselves of the 
existing Funds-Only Settling Bank process for Funds-Only Settlement 
Amount debits and credits. This existing process is automated and 
efficient, and FICC does not believe that Netting Members would desire 
to switch to an invoicing process nor would FICC allow them do so given 
their ability to participate in the current Funds-Only Settling Bank 
process.

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

    Written comments relating to this proposed rule change 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \19\ and paragraph (f) of Rule 19b-4 
thereunder.\20\ 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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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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-2018-011 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-2018-011. 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 website (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 website 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 website 
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-FICC-2018-011 and should be submitted on 
or before November 13, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Eduardo A. Aleman,
Assistant Secretary.
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    \21\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2018-22906 Filed 10-19-18; 8:45 am]
 BILLING CODE 8011-01-P