[Federal Register Volume 88, Number 104 (Wednesday, May 31, 2023)]
[Notices]
[Pages 34908-34910]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-11444]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97559; File No. SR-FICC-2023-007]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Adopt Fees for a New Pair-Off Message That May Be Processed Through 
the EPN Service

May 24, 2023.
    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 May 18, 2023, 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)(2) thereunder.\4\ 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)(2).
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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 modifications to the FICC 
Mortgage-Backed Securities Division (``MBSD'') EPN Rules (``EPN 
Rules'') to adopt fees for a pair-off Message that EPN Users may 
process through the EPN Service, as described in greater detail 
below.\5\
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    \5\ Capitalized terms not defined herein are defined in the EPN 
Rules, as applicable, available at https://www.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
Overview of the Proposed Rule Change
    The purpose of this proposed rule change is to adopt fees for a new 
Message that EPN Users may process through the EPN Service relating to 
the pair-off of trades in their TBA (``to-be-announced'') contracts in 
agency mortgage-backed securities. The proposed fees are designed to 
recover the cost of providing this service and would be set at a rate 
that is lower than the rate charged for other Messages processed 
through the EPN Service to incentivize EPN Users to use this voluntary 
service.
Background
    While some trades in agency mortgage-backed securities submitted to 
FICC for processing on a TBA basis are ``specified pool trades'' 
(transactions

[[Page 34909]]

based on a particular set of underlying mortgages), most are not. For 
those trades, a critical step in the trading and settlement of the TBA 
contracts is for sellers to inform their buyer counterparties what 
pools of mortgages will be delivered to satisfy that trade. The EPN 
Service provides EPN Users with an automated way to transmit this 
information regarding their TBA contracts through Messages.
    The new pair-off Message, which will be announced to EPN Users by 
Important Notice, would allow EPN Users that are buyers in a TBA 
contract transaction to notify their seller counterparties of which 
trades in that transaction should pair-off. Currently messages 
regarding pair-offs are transmitted between buyers and sellers by 
electronic mail using spreadsheets, which creates some risk that 
information sharing is incomplete, incorrect, inconsistent and not 
timely. In connection with its ongoing dialogue with mortgage-backed 
security industry participants, FICC was asked to develop and offer 
pair-off Messages through the EPN Service to minimize these risks. By 
automating and standardizing the transmittal of this information, the 
pair-off Messages would reduce those risks to the mortgage-backed 
securities market. The new pair-off Messages will be designed similarly 
to the other Messages transmitted through the EPN Service, where buyers 
would receive an acknowledgement message verifying delivery and receipt 
of the initial pair-off Message, and sellers would have the ability to 
return a ``DK'' message if the trades or the terms of the trades in the 
pair-off Message are not known. The use of this Message will be 
voluntary and would allow users to eliminate the current manual process 
of transmitting information regarding the pair-off of transactions.
    The proposed rate for the new pair-off Message was designed to be 
consistent with the fees for other Messages currently processed through 
the EPN Service. Rates for current Messages are charged per million 
because these Messages involve pools to satisfy TBA trades and 
specified pool trades, where the proposed rate for the new pair-off 
Messages would be charged per Message because these Messages would be 
sent at the TBA trade-level.
    In this fee structure, fees are generally lower for Messages 
submitted earlier in the day to encourage submission of the initial 
Message earlier in the day to allow for a response Message to be sent 
on the same day. Therefore, the rate increases for initial Messages 
submitted later in the day. The fee is lower for Messages submitted 
after the 3:00 p.m. cut-off time for response Messages. The fee rates 
being proposed are slightly lower than the rates for processing other 
Messages through the EPN Service, which both reflects the low cost to 
FICC to build these additional Messages and incentivizes EPN Users to 
use this new, voluntary service.
Proposed Rule Change
    FICC is proposing to adopt fees for the use of the pair-off 
Messages that may be processed through the EPN Service. The proposed 
fees would be identified in the EPN Service Schedule of Charges in the 
EPN Rules, as follows: pair-off send Messages would be $0.10 per 
Message if sent from the opening of business to 1:00 p.m., $0.50 per 
Message if sent from 1:00 p.m. to 2:00 p.m., $1.00 per Message if sent 
from 2:00 p.m. to 3:00 p.m., and $0.75 per Message if sent from 3:00 
p.m. to close of business; pair-off receive Messages would be $0.50 per 
Message if received from opening of business to 1:00 p.m., $0.25 per 
Message if received from 1:00 p.m. to 3:00 p.m., and $0.15 per Message 
if received from 3:00 p.m. to close of business.
    FICC is also proposing to clarify the descriptions of other fees 
for the EPN Service to use consistent language in describing fees in 
the EPN Service Schedule of Charges. For example, these proposed 
changes would refer to the beginning of the business day as ``Opening 
of Business'' and refer to end of the business day as ``Close of 
Business'' consistently in the Schedule of Charges. These 
clarifications would avoid any confusion in the descriptions of these 
fees in the EPN Service Schedule of Charges, making them clearer to EPN 
Users.
Member Impact
    The proposed fees would impact all EPN Users who voluntarily elect 
to use the new pair-off Messages. As described above, the proposed fee 
rates are designed to be comparable to the current fee rates charged 
for Messages processed through the EPN Service and would be set at a 
rate that is lower than the rates for processing other Messages in 
order to incentivize EPN Users to use this voluntary service.
Implementation Timeframe
    FICC would implement the proposed rule change on August 31, 2023.
2. Statutory Basis
    FICC believes this proposal is consistent with the requirements of 
the Act and the rules and regulations thereunder applicable to a 
registered clearing agency. Specifically, FICC believes this proposal 
is consistent with sections 17A(b)(3)(D) and (b)(3)(F) of the Act \6\ 
and Rule 17Ad-22(e)(23)(ii), as promulgated under the Act,\7\ for the 
reasons described below.
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    \6\ 15 U.S.C. 78q-1(b)(3)(D) and (b)(3)(F).
    \7\ 17 CFR 240.17Ad-22(e)(23)(ii).
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    Section 17A(b)(3)(D) of the Act requires that the rules of a 
clearing agency provide for the equitable allocation of reasonable 
dues, fees, and other charges among its participants.\8\ FICC believes 
the proposed fees would be allocated equitably among EPN Users that use 
the new pair-off Message. FICC believes that the proposed fees are 
reasonable because they are based on the expected investment costs to 
develop pair-off Messages and such fee changes are expected to recover 
such investment and operating costs in an appropriate timeframe. As 
noted above, FICC has set these fees at a rate that is lower than the 
rate charged for other Messages processed through the EPN Service to 
incentivize EPN Users to use this voluntary service. FICC notes that 
once the proposed pair-off Message fees are implemented, the fees would 
be periodically reviewed under FICC's procedures to determine whether 
FICC is continuing to appropriately control its costs and to regularly 
review pricing levels against costs of operation.
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    \8\ 15 U.S.C. 78q-1(b)(3)(D).
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    Section 17A(b)(3)(F) of the Act requires, in part, that the rules 
of a clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions.\9\ FICC believes 
the proposed rule change is consistent with section 17A(b)(3)(F) of the 
Act because the new pair-off Message would automate and standardize the 
transmittal of information related to transaction pair-offs, minimizing 
the risks presented by the current process of transmitting this 
information through electronic mail and spreadsheets. By reducing the 
risks that information sharing is incomplete, incorrect, inconsistent 
and not timely, the new pair-off Messages would promote the prompt and 
accurate clearance and settlement of securities transactions and, 
therefore, are consistent with the requirements of the Act, in 
particular section 17A(b)(3)(F) of the Act.\10\
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    \9\ 15 U.S.C. 78q-1(b)(3)(F).
    \10\ Id.
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    Rule 17Ad-22(e)(23)(ii) under the Act requires a covered clearing 
agency to establish, implement, maintain and enforce written policies 
and procedures reasonably designed to provide sufficient information to 
enable participants to identify and evaluate the risks, fees, and other 
material costs they

[[Page 34910]]

incur by participating in the covered clearing agency.\11\ The proposed 
fees would be clearly and transparently published in the EPN Service 
Schedule of Charges in the EPN Rules, which are available on a public 
website,\12\ thereby enabling EPN Users to identify the fees associated 
with using the new pair-off Messages. Additionally, the proposed 
changes to clarify the descriptions of other fees for the EPN Service 
would make those descriptions consistent throughout the EPN Service 
Schedule of Charges, reducing the risk of any confusion in the 
descriptions of these fees and making them clearer to EPN Users. As 
such, FICC believes the proposed rule change is consistent with Rule 
17Ad-22(e)(23)(ii) under the Act.\13\
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    \11\ 17 CFR 240.17Ad-22(e)(23)(ii).
    \12\ See supra note 5.
    \13\ 17 CFR 240.17Ad-22(e)(23)(ii).
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(B) Clearing Agency's Statement on Burden on Competition

    FICC does not believe the proposed rule changes would impact 
competition. The proposed rule changes would adopt fees for the use of 
a voluntary service. Because EPN Users would not be obligated to use 
the new pair-off Messages, FICC believes the proposed rule change would 
not have any impact on competition.

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

    FICC has not received or solicited any written comments relating to 
this proposal. If any written comments are received, they will be 
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
    Persons submitting comments are cautioned that, according to 
Section IV (Solicitation of Comments) of the Exhibit 1A in the General 
Instructions to Form 19b-4, the Commission does not edit personal 
identifying information from comment submissions. Commenters should 
submit only information that they wish to make available publicly, 
including their name, email address, and any other identifying 
information.
    All prospective commenters should follow the Commission's 
instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/how-to-submit-comments. General 
questions regarding the rule filing process or logistical questions 
regarding this filing should be directed to the Main Office of the 
Commission's Division of Trading and Markets at 
[email protected] or 202-551-5777.
    FICC reserves the right to not respond to any comments received.

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 \14\ and paragraph (f) of Rule 19b-4 
thereunder.\15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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-2023-007 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FICC-2023-007. 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 DTCC's website 
(http://dtcc.com/legal/sec-rule-filings.aspx). Do not include personal 
identifiable information in submissions; you should submit only 
information that you wish to make available publicly. We may redact in 
part or withhold entirely from publication submitted material that is 
obscene or subject to copyright protection. All submissions should 
refer to File Number SR-FICC-2023-007 and should be submitted on or 
before June 21, 2023.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-11444 Filed 5-30-23; 8:45 am]
BILLING CODE 8011-01-P