[Federal Register Volume 75, Number 221 (Wednesday, November 17, 2010)]
[Notices]
[Pages 70328-70329]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-28897]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63301; File No. SR-FICC-2010-08]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Proposed Rule Change To Eliminate Certain Cash
Adjustments Currently Processed by the MBSD
November 10, 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 October 28, 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 eliminate cash
adjustments that are currently processed by the Mortgage-Backed
Securities Division (``MBSD'').
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 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 eliminate the cash adjustments that are
currently processed by the MBSD.\4\ FICC is proposing to eliminate the
cash adjustments because they have low monetary impact and were
originally designed to address a clearance event (``significant
variance'') that no longer applies. Variance was originally established
when mortgage-backed securities were physically settled, and it was
difficult to organize physical pools into $1 million par amounts for
delivery.
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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/2010-08.pdf.
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As a result of the netting of To Be Announced (``TBA'')
transactions, a participant may have a settlement obligation to another
participant with which it did not trade (``SBON Obligations''). SBON
Obligations are created in multiples of $1 million par amounts and are
assigned a uniform delivery price. Since the delivery price will differ
from the participant's original trade price, an adjustment is
calculated for the difference between the delivery price and the trade
price. This adjustment is referred to as the Settlement Balance Order
Market Differential (``SBOMD'').
Participants notify the MBSD when they have settled their SBON
Obligations with their assigned counterparties through the Notification
of Settlement (``NOS'') process. From the information supplied by both
the delivering and receiving participants in their respective NOS, the
MBSD determines whether the securities delivered were in $1 million par
amounts or in a par amount within acceptable variance (plus or minus
$100 per million). In instances where the delivery was completed in $1
million par amounts, the MBSD takes no additional steps.
If the delivery was cleared for a par amount within acceptable
variance, the MBSD will calculate a cash adjustment to reconcile the
difference between the original SBOMD (based on a $1 million par
amount) and what the SBOMD should have been (based on the par amount
delivered). As mortgage-backed securities migrated from physical to
electronic settlement, acceptable variance has been reduced from an
initial $50,000 per million to the current amount of $100 per million.
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 it is a deletion of a
rule that covers a process that is no longer needed and as such it
provides certainty and clarity of the clearance process at MBSD to
members.
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\5\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
FICC does not believe that the proposed rule change will have any
impact or 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.
[[Page 70329]]
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 Commissions Internet comment form (http://www.sec.gov/rules/sro.shtml) or send an e-mail to [email protected]. Please include File Number SR-FICC-2010-08 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-2010-08. 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 a.m. 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://dtcc.com/downloads/legal/rule_filings/2010/ficc/2010-08.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-2010-08 and should be submitted on or before
December 8, 2010.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-28897 Filed 11-16-10; 8:45 am]
BILLING CODE 8011-01-P