[Federal Register Volume 75, Number 168 (Tuesday, August 31, 2010)]
[Notices]
[Pages 53368-53369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-21678]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62767; File No. SR-FICC-2010-04]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Proposed Rule Change To Provide Clarity With
Respect to the Close Out Netting of the Government Securities Division
in the Event of the Fixed Income Clearing Corporation's Default or
Insolvency
August 26, 2010.
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 August 12, 2010, the Fixed Income Clearing Corporation (``FICC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared primarily 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 the proposed rule change is to provide clarity with
respect to the close out netting of the Government Securities Division
(``GSD'') in the event of FICC's default or insolvency.
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
[[Page 53369]]
summaries, set forth in sections (A), (B), and (C) below, of the most
significant aspects of these statements.\3\
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\3\ The Commission has modified the text of the summaries
prepared by FICC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
FICC is proposing to add a provision to the rules of GSD to make
explicit the close out netting that would be applied to obligations
between FICC and its members in the event that FICC becomes insolvent
or defaults in its obligations to its members.\4\
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\4\ The specific language of the proposed provision can be found
at http://www.dtcc.com/downloads/legal/rule_filings/2010/ficc/2010-04.pdf.
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FICC has been approached by some of its dealer members that have
requested that FICC add a provision to the rules of GSD to make
explicit the close out netting of obligations between FICC and its
members in the event that FICC becomes insolvent or defaults in its
obligations to its members. Such members have stated that the proposed
rule change will provide clarity in their application of balance sheet
netting to their positions with FICC under U.S. GAAP in accordance with
the criteria specified in the Financial Accounting Standards Board's
Interpretation No. 39, Offsetting of Amounts Related to Certain
Contracts (FIN 39). The members have stated further that the proposed
rule change would allow them to comply with Basel Accord Standards
relating to netting. Specifically, firms are able to calculate their
capital requirements on the basis of their net credit exposure where
they have legally enforceable netting arrangements with their
counterparties, which includes a close out netting provision in the
event of the default of a counterparty (in this case, the division of
FICC acting as a CCP).
FICC believes the proposed rule change is consistent with the
requirements of Section 17A of the Act \5\ and the rules and
regulations thereunder applicable to FICC because the proposed rule
change would provide FICC members with clarity in the calculation of
their capital requirements with respect to their net credit exposure
where members have legally enforceable netting arrangements with their
counterparties. Moreover, other clearing agencies have similar
provisions in their rules for the same purpose.\6\
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\5\ 15 U.S.C. 78q-1.
\6\ The Commission has previously approved a similar provision
for another clearing agency for the same purpose of providing such
clearing agency's members with the needed clarity. Securities
Exchange Act Release No. 34-56069 (July 13, 2007), 72 FR 39869 (July
20, 2007).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
FICC does not believe that the proposed rule change would 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 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
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 e-mail to [email protected]. Please include File Number SR-FICC-2010-04 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-2010-04. This file
number should be included on the subject line if e-mail 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 Section, 100 F Street,
NE., Washington, DC 20549-1090, on official business days between the
hours of 10 am and 3 p.m. Copies of such filings will also 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/2010/ficc/2010-04.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-2010-04 and should be submitted on or before September 21,
2010.
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\7\ 17 CFR 200.30-3(a)(12).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\7\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-21678 Filed 8-30-10; 8:45 am]
BILLING CODE 8010-01-P