87 FR 61 pgs. 18409-18410 - Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Enhance Capital Requirements and Make Other Changes
Type: NOTICEVolume: 87Number: 61Pages: 18409 - 18410
Pages: 18409, 18410Docket number: [Release No. 34-94497; File No. SR-FICC-2021-009]
FR document: [FR Doc. 2022-06515 Filed 3-29-22; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94497; File No. SR-FICC-2021-009]
Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Enhance Capital Requirements and Make Other Changes
March 23, 2022.
I. Introduction
On December 13, 2021, Fixed Income Clearing Corporation ("FICC") filed with the Securities and Exchange Commission ("Commission") proposed rule change SR-FICC-2021-009 (the "Proposed Rule Change") 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 December 29, 2021, 3 and the Commission received no comment letters regarding the changes proposed in the Proposed Rule Change.
Footnotes:
1 ?15 U.S.C. 78s(b)(1).
2 ?17 CFR 240.19b-4.
3 ?Securities Exchange Act Release No. 93857 (December 22, 2021), 86 FR 74130 (December 29, 2021) (SR-FICC-2021-009) ("Notice").
On January 26, 2022, pursuant to Section 19(b)(2) of the Act, 4 the Commission designated a longer period within which to approve, disapprove, or institute proceedings to determine whether to approve or disapprove the Proposed Rule Change. 5 This order institutes proceedings, pursuant to Section 19(b)(2)(B) of the Act, 6 to determine whether to approve or disapprove the Proposed Rule Change.
Footnotes:
4 ?15 U.S.C. 78s(b)(2).
5 ?Securities Exchange Act Release No. 94066 (January 26, 2022), 87 FR 5523 (February 1, 2022) (SR-FICC-2021-009).
6 ?15 U.S.C. 78s(b)(2)(B).
II. Summary of the Proposed Rule Change
As described in the Notice, FICC proposes to amend the Government Securities Division ("GSD") Rulebook (the "GSD Rules") and the Mortgage-Backed Securities Division ("MBSD") Clearing Rules (the "MBSD Rules," and together with the GSD Rules, the "Rules") of FICC in order to (1) revise its capital requirements for GSD members and MBSD members (collectively, "members"), (2) streamline its two credit risk monitoring systems, Watch List and enhanced surveillance list, and (3) make certain other clarifying, technical, and supplementary changes to implement items (1) and (2). 7
Footnotes:
7 ?The description of the Proposed Rule Change is based on the statements prepared by FICC in the Notice. See Notice, supra note 3. Capitalized terms used herein and not otherwise defined herein are defined in the Rules, available at https://www.dtcc.com/legal/rules-and-procedures.
First, FICC proposes to revise various aspects of its capital requirements for several types of members. FICC proposes to increase minimum capital requirements for certain members. FICC also proposes to revise how it measures certain members' capital by incorporating common equity tier 1 capital and the standards established in the capital adequacy rules and regulations of the Federal Deposit Insurance Corporation. FICC would revise the reporting requirements concerning the capital requirements for certain members. In addition, for certain types of members who currently do not have specific amounts for their minimum capital requirements, the proposal would establish such a requirement.
Second, FICC proposes to revise its Watch List and enhanced surveillance list, which are both currently used to identify participants who would receive additional or enhanced credit risk monitoring. FICC proposes to revise its Watch List and delete its enhanced surveillance list. FICC also proposes to clarify that members on the Watch List are reported to FICC's management committees and regularly reviewed by FICC's senior management.
Third, FICC proposes to (1) revise or add headings and sub-headings and renumbering sections as appropriate, (2) revise defined terms and add appropriate defined terms to facilitate the proposed changes, (3) rearrange and consolidate paragraphs to promote readability, (4) fix typographical and other errors, and (5) other changes in order to improve the accessibility and transparency of the Rules.
III. Proceedings To Determine Whether To Approve or Disapprove the Proposed Rule Change and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act? 8 to determine whether the Proposed Rule Change should be approved or disapproved. Institution of proceedings is appropriate at this time in view of the legal and policy issues raised by the Proposed Rule Change. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, the Commission seeks and encourages interested persons to comment on the Proposed Rule Change, providing the Commission with arguments to support the Commission's analysis as to whether to approve or disapprove the Proposed Rule Change.
Footnotes:
8 ?15 U.S.C. 78s(b)(2)(B).
Pursuant to Section 19(b)(2)(B) of the Act, 9 the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of, and input from commenters with respect to, the Proposed Rule Change's consistency with Section 17A of the Act, 10 and the rules thereunder, including the following provisions:
Footnotes:
9 ? Id.
10 ?15 U.S.C. 78q-1.
• Section 17A(b)(3)(F) of the Act, 11 which requires, among other things, that the rules of a clearing agency must be designed to promote the prompt and accurate clearance and settlement of securities transactions, to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible, and to protect investors and the public interest;
Footnotes:
11 ?15 U.S.C. 78q-1(b)(3)(F).
• Section 17A(b)(3)(I) of the Act, 12 which requires that the rules of a clearing agency do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act;
Footnotes:
12 ?15 U.S.C. 78q-1(b)(3)(I).
[top] • Rule 17Ad-22(e)(18) under the Act, 13 which requires that a covered clearing agency establish, implement, maintain, and enforce written policies and procedures reasonably designed to establish objective, risk-based, and publicly disclosed criteria for participation, which permit fair and
Footnotes:
13 ?17 CFR 240.17Ad-22(e)(18).
IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the Proposed Rule Change. In particular, the Commission invites the written views of interested persons concerning whether the Proposed Rule Change is consistent with Section 17A(b)(3)(F) of the Act, 14 Section 17A(b)(3)(I) of the Act, 15 Rule 17Ad-22(e)(18) under the Act, 16 or any other provision of the Act, or the rules and regulations thereunder.
Footnotes:
14 ?15 U.S.C. 78q-1(b)(3)(F).
15 ?15 U.S.C. 78q-1(b)(3)(I).
16 ?17 CFR 240.17Ad-22(e)(18).
Interested persons are invited to submit written data, views, and arguments regarding whether the Proposed Rule Change should be approved or disapproved by April 20, 2022. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by May 4, 2022.
The Commission asks that commenters address the sufficiency of FICC's statements in support of the Proposed Rule Change, which are set forth in the Notice, 17 in addition to any other comments they may wish to submit about the Proposed Rule Change.
Footnotes:
17 ? See Notice, supra note 3.
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 rule-comments@sec.gov. Please include File Number SR-FICC-2021-009 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-2021-009. 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 ). 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-2021-009 and should be submitted on or before April 20, 2022. Rebuttal comments should be submitted by May 4, 2022.
Footnotes:
18 ?17 CFR 200.30-3(a)(31).
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 18
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06515 Filed 3-29-22; 8:45 am]
BILLING CODE 8011-01-P