80 FR 29352 - Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of a Proposed Rule Change to the Government Securities Division Rules in Connection With the Extension of the GCF Repo Service Pilot Program
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 98 (May 21, 2015)
Federal Register Volume 80, Issue 98 (May 21, 2015)
| Page Range | 29352-29357 | |
| FR Document | 2015-12281 |
[Federal Register Volume 80, Number 98 (Thursday, May 21, 2015)] [Notices] [Pages 29352-29357] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-12281] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-74973; File No. SR-FICC-2015-002] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of a Proposed Rule Change to the Government Securities Division Rules in Connection With the Extension of the GCF Repo Service Pilot Program May 15, 2015. 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 7, 2015, the Fixed Income Clearing Corporation (``FICC'' or the ``Corporation'') 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 FICC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule changes consist of modifications to the Rulebook of the Government Securities Division (``GSD'') in connection with the extension of the GCF Repo[supreg] service \3\ pilot program. --------------------------------------------------------------------------- \3\ GCF Repo is a registered trademark of FICC/DTCC. --------------------------------------------------------------------------- II. Clearing Agency'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 such statements. A. Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (i) Purpose of the Proposed Rule Change FICC is seeking the Commission's approval to extend the current pilot program (the ``2014 Pilot Program'') that is currently in effect for the GCF Repo[supreg] service. FICC is requesting that the 2014 [[Page 29353]] Pilot Program be extended for one year following the Commission's approval of the present filing.\4\ --------------------------------------------------------------------------- \4\ If FICC determines to change the parameters of the service during the one-year Pilot Program extension period, it will submit a rule filing to the Commission. If FICC seeks to extend the Pilot Program beyond the one-year period or proposes to make the Pilot Program permanent, it will also submit a rule filing to the Commission. --------------------------------------------------------------------------- By way of background, on July 12, 2011, FICC submitted a rule filing to the Commission (SR-FICC-2011-05) proposing to make certain changes to its GCF Repo service in order to comply with the recommendations that had been made by the Task Force on Triparty Reform (``TPR''), an industry group formed and sponsored by the Federal Reserve Bank of New York.\5\ Because the GCF Repo service operates as a triparty mechanism, FICC was requested to incorporate changes to the GCF Repo service to align the service with the other TPR recommended changes for the overall triparty market. --------------------------------------------------------------------------- \5\ The main purpose of the TPR was to develop recommendations to address the risk presented by triparty repo transactions due to the current morning reversal or ``unwind'' process and to move to a process by which transactions are collateralized all day. --------------------------------------------------------------------------- The rule change described in SR-FICC-2011-05 was proposed to be run as a pilot program for one year starting from the date on which the filing was approved by the Commission (the ``2011 Pilot Program'').\6\ Throughout 2011 and the earlier half of 2012, FICC implemented a portion of the rule changes that were included in SR-FICC-2011-05. As the expiration date of the 2011 Pilot Program approached, FICC elected to have certain aspects of the 2011 Pilot Program continue, however, FICC also proposed to make certain modifications to the 2011 Pilot Program. As a result, on June 8, 2012, FICC submitted a rule filing for the 2012 Pilot Program (SR-FICC-2012-05).\7\ On June 5, 2013, FICC then submitted a rule filing to extend the Pilot Program for an additional year (SR-FICC-2013-06).\8\ On May 5, 2014, FICC then submitted a rule filing to extend the Pilot Program for an additional year (SR-FICC- 2014-02).\9\ Because the latest extension is now approaching its expiry date, FICC is seeking the Commission's approval to extend the Pilot Program for an additional year while the final phase of the tri-party reform is put into place.\10\ --------------------------------------------------------------------------- \6\ Securities Exchange Act Release No. 34-65213 (August 29, 2011), 76 FR 54824 (September 2, 2011) (SR-FICC-2011-05). \7\ Securities Exchange Release No. 34-67621 (August 8, 2012), 77 FR 48572 (August 14, 2012) (SR-FICC-2012-05). \8\ Securities Exchange Act Release No. 34-70068 (July 30, 2013), 78 FR 47453 (August 5, 2013) (SR-FICC-2013-06). \9\ Securities Exchange Act Release No. 34-72457 (June 24, 2014), 79 FR 36856 (June 30, 2014) (SR-FICC-2014-02). \10\ The final phase includes the development interactive messages for the interbank collateral substitution automation. If FICC determines to change the parameters of the service during the one-year Pilot Program extension period, it will submit a rule filing to the Commission. If FICC seeks to extend the Pilot Program beyond the one-year period or proposes to make the Pilot Program permanent, it will also submit a rule filing to the Commission. --------------------------------------------------------------------------- Background: Description of the GCF Repo Service and History (1) Creation of the GCF Repo Service The GCF Repo service allows GSD dealer members to trade general collateral repos \11\ throughout the day without requiring intra- day[sic], trade-for-trade settlement on a delivery-versus-payment (``DVP'') basis. The service allows the dealers to trade such general collateral repos, based on rate and term, throughout the day with inter-dealer broker netting members on a blind basis. Standardized, generic CUSIP numbers have been established exclusively for GCF Repo processing and are used to specify the acceptable type of underlying Fedwire book-entry eligible collateral, which includes Treasuries, Agencies and certain mortgage-backed securities. --------------------------------------------------------------------------- \11\ A general collateral repo is a repo in which the underlying securities collateral is nonspecific, general collateral whose identification is at the option of the seller. This is in contrast to a specific collateral repo. --------------------------------------------------------------------------- The GCF Repo service was developed as part of a collaborative effort among GSCC (FICC's predecessor), its two clearing banks (The Bank of New York Mellon (``BNY'') and JPMorgan Chase Bank, National Association (``Chase''), and industry representatives. GSCC introduced the GCF Repo service on an intra-clearing bank basis in 1998.\12\ Under the intrabank service, dealers could only engage in GCF Repo transactions with other dealers that cleared at the same clearing bank. --------------------------------------------------------------------------- \12\ See Securities Exchange Act Release No. 34-40623 (October 30, 1998) 63 FR 59831 (November 5, 1998) (SR-GSCC-98-02). --------------------------------------------------------------------------- (2) Creation of the Interbank Version of the GCF Repo Service In 1999, GSCC expanded the GCF Repo service to permit dealer participants to engage in GCF Repo trading on an inter-clearing bank basis, meaning that dealers using different clearing banks could enter into GCF Repo transactions (on a blind brokered basis).\13\ Because dealer members that participate in the GCF Repo service do not all clear at the same clearing bank, introducing the service as an interbank service necessitated the establishment of a mechanism to permit after-hours movements of securities between the two clearing banks to deal with the fact that GSCC would likely have unbalanced net GCF securities and cash positions within each clearing bank (that is, it is likely that at the end of GCF Repo processing each business day, the dealers in one clearing bank will be net funds borrowers, while the dealers at the other clearing bank will be net funds lenders). To address this issue, GSCC and its clearing banks established, and the Commission approved, a legal mechanism by which securities would ``move'' across the clearing banks without the use of the securities Fedwire.\14\ (Movements of cash do not present the same issue because the cash Fedwire is open later than the securities Fedwire.) Therefore, at the end of the day, after the GCF net results are produced, securities are pledged via a tri-party-like mechanism and the interbank cash component is moved via Fedwire. In the morning, the pledges are unwound, that is, funds are returned to the net funds lenders and securities are returned to the net funds borrowers. --------------------------------------------------------------------------- \13\ See Securities Exchange Act Release No. 34-41303 (April 16, 1999) 64 FR 20346 (April 26, 1999) (SR-GSCC-99-01). \14\ See id. for a detailed description of the clearing bank and FICC accounts needed to effect the after-hour movement of securities. --------------------------------------------------------------------------- The following simplified example illustrates the manner in which the GCF Repo services works on an interbank basis: Assume that Dealer B clears at BNY and Dealer C clears at Chase. Further assume that: (i) Outside of FICC, Dealer B engages in a triparty repo transaction with Party X to obtain funds and seeks to invest such funds via a GCF Repo transaction, (ii) outside of FICC, Dealer C engages in a DVP repo with Party Y to buy securities and seeks to finance these securities via a GCF Repo transaction, and (iii) Dealer B and Dealer C enter into a GCF Repo transaction (on a blind basis via a GCF Repo broker) and submit the trade details to FICC. At the end of ``Day 1'', GCF Repo collateral must be allocated, i.e., Dealer B must receive the securities. However, the securities that Dealer B is to receive are at Chase and the securities Fedwire is closed. The after-hours movement mechanism permits the securities to be ``sent'' to Dealer B as follows: FICC will instruct Chase to allocate to a special FICC clearance account at Chase securities in an amount equal to the net short securities position. FICC has established on its own books and records two ``securities accounts'' as defined in Article 8 of the New York [[Page 29354]] Uniform Commercial Code, one in the name of Chase (``FICC Account for Chase'') and one in the name of BNY (``FICC Account for BNY''). The FICC Account for Chase is comprised of the securities in FICC's special clearance account maintained by BNY (``FICC Special Clearance Account at BNY for Chase''), and the FICC Account for BNY is comprised of the securities in FICC's special clearance account maintained by Chase (``FICC Special Clearance Account at Chase for BNY'').\15\ The establishment of these securities accounts by FICC in the name of the clearing banks enables the bank that is in the net long securities position to ``receive'' securities by pledge after the close of the securities Fedwire. Once the clearing bank has ``received'' the securities by pledge, it can credit them by book-entry to a FICC GCF Repo account at that clearing bank and then to the dealers that clear at that bank that are net long the securities in connection with GCF Repo trades. --------------------------------------------------------------------------- \15\ FICC has appointed Chase as its agent to maintain FICC's books and records with respect to the BNY securities account, and FICC has appointed BNY as its agent to maintain FICC's books and records with respect to the Chase securities account. --------------------------------------------------------------------------- In our example, Chase, as agent for FICC, will transmit to BNY a description of the securities in the FICC Special Clearance Account at Chase for BNY. Based on this description, BNY will transfer funds equal to the funds borrowed position to the FICC GCF Repo account at Chase. Upon receipt of the funds by Chase, Chase will release any liens it may have on the FICC Special Clearance Account at Chase for BNY, and FICC will release any liens it may have on FICC Account for BNY (both of these accounts being comprised of the same securities). BNY will credit the securities in the FICC Account for BNY to FICC's GCF Repo account at BNY, and BNY will further credit these securities to Dealer B, who, as noted, is in a net long securities position. In the morning of ``Day 2,'' all securities and funds movements occurring on Day 1, are reversed (``unwind''). (3) Issues With Morning Unwind Process In 2003, FICC shifted the GCF Repo service back to intrabank status only.\16\ By that time, the service had grown significantly in participation and volume. However, with the increase in use of the interbank service, certain payments systems risk issues arose from the inter-bank[sic] funds settlements related to the service, namely, the large interbank funds movement in the morning. FICC shifted the service back to intrabank status to enable management to study the issues presented and identify a satisfactory solution for bringing the service back to interbank status. --------------------------------------------------------------------------- \16\ See Securities Exchange Act Release No. 34-48006 (June 10, 2003), 66 FR 35745 (June 16, 2003) (SR-FICC-2003-04). --------------------------------------------------------------------------- (4) The NFE Filing and Restoration of Service to Interbank Status In 2007, FICC submitted a rule filing to address the issues raised by the interbank morning funds movement and return the GCF Repo service to interbank status (the ``2007 NFE Filing'').\17\ The 2007 NFE Filing addressed these issues by using a hold against a dealer's ``net free equity'' (``NFE'') at the clearing bank to collateralize its GCF Repo cash obligation to FICC on an intraday basis.\18\ --------------------------------------------------------------------------- \17\ See Securities Exchange Act Release No. 34-57652 (April 11, 2008), 73 FR 20999 (April 17, 2008) (SR-FICC-2007-08). \18\ NFE is a methodology that clearing banks use to determine whether an account holder (such as a dealer) has sufficient collateral to enter a specific transaction. NFE allows the clearing bank to place a limit on its customer's activity by calculating a value on the customer's balances at the bank. Bank customers have the ability to monitor their NFE balance throughout the day. --------------------------------------------------------------------------- The 2007 NFE Filing replaced the Day 2 morning unwind process with an alternate process, which is currently in effect. Specifically, in lieu of making funds payments, the interbank dealers grant to FICC a security interest in their NFE-related collateral equal to their prorated share of the total interbank funds amount. FICC, in turn, grants to the other clearing bank (that was due to receive the funds) a security interest in the NFE-related collateral to support the debit in the FICC account at the clearing bank. The debit in the FICC account (``Interbank Cash Amount Debit'') occurs because the dealers who are due to receive funds in the morning must receive those funds at that time in return for their release of collateral. The debit in the FICC account at the clearing bank gets satisfied during the end of day GCF Repo settlement process. Specifically, that day's new activity yields a new interbank funds amount that will move at end of day--however, this amount gets netted with the amount that would have been due in the morning, thus further reducing the interbank funds movement. The NFE holds are released when the interbank funds movement is made at end of day. The 2007 NFE Filing did not involve any changes to the after-hours movement of securities occurring at the end of the day on Day 1. Using our simplified example: On the morning of Day 2, Dealer C who needs to return funds in the unwind, instead of returning the funds in the morning, grants to FICC a security interest in Dealer C's NFE-related collateral equal to its funds movement (we have assumed only one GCF Repo transaction took place in this simplified example). FICC, in turn, grants BNY (that was due to receive the funds) a security interest in the NFE- related collateral to support the debit in the FICC account at BNY. As noted above, the debit in FICC's account at BNY arises because, under the current processing, Dealer B must receive its funds during the morning unwind. The FICC debit is then satisfied during the end of day GCF Repo settlement process. As part of the 2007 NFE Filing, FICC imposed certain additional risk management measures with respect to the GCF Repo service. First, FICC imposed a collateral premium (called ``GCF Premium Charge'') on the GCF Repo portion of the Clearing Fund deposits of all GCF participants to further protect FICC in the event of an intra-day[sic] default of a GCF Repo participant. FICC requires GCF Repo participants to submit a quarterly ``snapshot'' of their holdings by asset type to enable Risk Management staff to determine the appropriate Clearing Fund premium. Members who do not submit this required information by the deadlines established by FICC are subject to fine and an increased Clearing Fund premium, as with all other instances of late submission of required information. Second, the 2007 NFE Filing addressed the situation where FICC becomes concerned about the volume of interbank GCF Repo activity. Such a concern might arise, for example, if market events were to cause dealers to turn to the GCF Repo service for increased funding at levels beyond normal processing. The 2007 NFE Filing provides FICC with the discretion to institute risk mitigation and appropriate disincentive measures in order to bring GCF Repo levels to a comfortable level from a risk management perspective.\19\ --------------------------------------------------------------------------- \19\ Specifically, the 2007 NFE Filing introduced the term ``GCF Repo Event'', which will be declared by FICC if either of the following occurs: (i) The GCF interbank funds amount exceeds five times the average interbank funds amount over the previous ninety days for three consecutive days; or (ii) the GCF interbank funds amount exceeds fifty percent of the amount of GCF Repo collateral pledged for three consecutive days. FICC reviews these figures on a semi-annual basis to determine whether they remain adequate. FICC also has the right to declare a GCF Repo Event in any other circumstances where it is concerned about GCF Repo volumes and believes it is necessary to declare a GCF Repo Event in order to protect itself and its members. FICC will inform its members about the declaration of the GCF Repo Event via important notice. FICC will also inform the Commission about the declaration of the GCF Repo Event. --------------------------------------------------------------------------- [[Page 29355]] 2011 Pilot Program--Proposed Changes to the GCF Repo Service To Implement the TPR's Recommendations In SR-FICC-2011-05, FICC proposed the following rule changes with respect to the GCF Repo service to address the TPR's Recommendations: (1)(a) To move the Day 2 unwind from 7:30 a.m. to 3:30 p.m., (b) to move the NFE process \20\ from morning to a time established by the Corporation as announced by notice to all members,\21\ (c) to move the cut-off time of GCF Repo submissions from 3:35 p.m. to 3:00 p.m., and (d) to move the cut-off time for dealer affirmation or disaffirmation from 3:45 p.m. to 3:00 p.m. --------------------------------------------------------------------------- \20\ No other changes are being proposed to the NFE process that was in place by the 2007 NFE Filing; the risk management measures that were put in place by the 2007 NFE Filing remain in place with the present proposal. \21\ SR-FICC-2011-05 noted that the possible time range would be 8 a.m. to 1 p.m. to coincide with the collateral substitution mechanism that was being developed between FICC and its clearing banks. In rule filing SR-FICC-2012-05, FICC clarified that the 8:00 a.m. to 1:00 p.m. proposed time range in SR-FICC-2011-05 referred to the clearing bank hold on the FICC interest in the NFE (i.e., as part of the NFE process, FICC grants to the other clearing bank (that was due to receive the funds) a security interest in the NFE-- related collateral to support the debit in the FICC account at the clearing bank). At present, given the move of the NFE process (as discussed in more detail below), this proposed time range has now moved from 8:00 a.m. to 3:30 p.m. --------------------------------------------------------------------------- (2) To establish rules for intraday GCF Repo collateral substitutions (i.e., SR-FICC-2011-05 stated that with respect to interbank GCF Repo transactions, the substitution process will only permit cash as an initial matter to accommodate current processing systems, however, as noted below, the substitution process will permit cash and/or securities). During the term of the 2011 Pilot Program, FICC implemented the proposed changes referred to in subsections 1(c) and 1(d) above and during the term of the 2012 Pilot Program, FICC implemented the proposed changes referred to in subsections 1(a), 1(b) and 2 above. (1) Proposed Change Regarding the Morning Unwind and Related Rule Changes The TPR recommended that the Day 2 unwind for all triparty transactions be moved from the morning to 3:30 p.m. The TPR made this recommendation in order to achieve the benefit of reducing the clearing banks' intraday exposure to the dealers. As stated, because the GCF Repo service is essentially a triparty mechanism, the TPR requested that FICC accommodate this time change. For the GSD rules, this necessitated a change to the GSD's ``Schedule of GCF Timeframes.'' Specifically, the 7:30 a.m. time in the Schedule was deleted and the language therein was moved to a new time of 3:30 p.m. Because the Day 2 unwind moved from the morning to 3:30 p.m. and because the NFE process established by the 2007 NFE Filing is tied to the moment of the unwind, the NFE process also was required to move. During 2012, when the systems processing for the tri-party reform effort continued on the part of the clearing banks, the unwind moved to 3:30 p.m. and the funds continued to move between the two clearing banks at 5:00 p.m.; the NFE hold which applies to dealers moved to between 3:30 p.m. and 5:00 p.m. Because the NFE process is a legal process and not an operational process, it is not reflected on the Schedule of GCF Timeframes and therefore no change to the Schedule was required to accommodate the move of the NFE process. A change was needed in Section 3 of GSD Rule 20 to delete the reference to the ``morning'' timeframe on Day 2 with respect to the NFE process and to add language referencing ``at the time established by the Corporation.'' (2) Proposed Change Regarding Intraday GCF Repo Securities Collateral Substitutions As a result of the time change of the unwind (i.e., the reversal on Day 2 of collateral allocations established by FICC for each netting member's GCF net funds borrower positions and GCF net funds lender positions on Day 1) to 3:30 p.m., the provider of GCF Repo securities collateral in a GCF Repo transaction on Day 1 no longer has possession of such securities at the beginning of Day 2. Therefore, during Day 2 prior to the unwind of the Day 1 collateral allocations, the provider of GCF Repo securities collateral (in our simple example, Dealer C) needs a substitution mechanism for the return of its posted GCF Repo securities collateral in order to make securities deliveries for utilization of such securities in its business activities. (In our example, Dealer C may need to return the securities to Party Y depending upon the terms of their transaction.) In the 2012 Pilot Program, FICC established a substitution process for this purpose in conjunction with its clearing banks. The language for the substitution mechanism was added to Section 3 of GSD Rule 20. It provides that all requests for substitution for the GCF Repo securities collateral must be submitted by the provider of the GCF Repo securities collateral (i.e., Dealer C) by the applicable deadline on Day 2 (the ``substitution deadline'').\22\ --------------------------------------------------------------------------- \22\ As noted in SR-FICC-2012-05, FICC will establish such deadline prior to the implementation of the changes to this service in conjunction with the clearing banks and the Federal Reserve in light of market circumstances. As noted in Important Notice GOV088.12, once delivery has been made to GSD on the new obligations for that business day, no substitutions will be permitted for the remainder of the day. --------------------------------------------------------------------------- Substitutions on Intrabank GCF Repos If the GCF Repo transaction is between dealer counterparties effecting the transaction through the same clearing bank (i.e., on an intra-clearing bank basis and in our example Dealer C and other dealers clearing at Chase), on Day 2 such clearing bank will process each substitution request of the provider of GCF Repo securities collateral (i.e., Dealer C) submitted prior to the substitution deadline promptly upon receipt of such request. The return of the GCF Repo securities collateral in exchange for cash and/or eligible securities of equivalent value can be effected by simple debits and credits to the accounts of the GCF Repo dealer counterparties at the clearing agent bank (i.e., in our example, Chase). Eligible securities for this purpose will be the same as what is currently permitted under the GSD rules for collateral allocations, namely, Comparable Securities,\23\ (ii) Other Acceptable Securities,\24\ or (iii) U.S. Treasury bills, notes or bonds maturing in a time frame no greater than that of the securities that have been traded (except where such traded securities are U.S. Treasury bills, substitution may be with Comparable Securities and/or cash only). --------------------------------------------------------------------------- \23\ The GSD rules define ``Comparable Securities'' as follows: The term ``Comparable Securities'' means, with respect to a security or securities that are represented by a particular Generic CUSIP Number, any other security or securities that are represented by the same Generic CUSIP Number. \24\ The GSD rules define ``Other Acceptable Securities'' as follows: The term ``Other Acceptable Securities'' means, with respect to: (an) adjustable-rate mortgage-backed security or securities issued by Ginnie Mae, any fixed-rate mortgage-backed security or securities issued by Ginnie Mae, or (an) adjustable-rate mortgage-backed security or securities issued by either Fannie Mae or Freddie Mac: (a) Any fixed-rate mortgage-backed security or securities issued by Fannie Mae and Freddie Mac, (b) any fixed-rate mortgage-backed security or securities issued by Ginnie Mae, or (c) any adjustable- rate mortgage-backed security or securities issued by Ginnie Mae. --------------------------------------------------------------------------- Substitutions on Interbank GCF Repos For a GCF Repo that was processed on an interbank basis and to accommodate a potential substitution request, FICC initiates a debit of the securities in the account of the lender through the FICC GCF Repo accounts at the clearing bank of the lender and the FICC GCF Repo [[Page 29356]] account at the clearing bank of the borrower (``Interbank Movement''). This Interbank Movement is done so that a borrower who elects to substitute collateral will have access to the collateral for which it is substituting. The Interbank Movement occurs in the morning, though the clearing banks and FICC have the capability to have the Interbank Movement occur at any point during the day up until 2:30 p.m. During the 2012 Pilot Program, FICC and the clearing banks implemented a change to unwind the intrabank GCF Repo transactions at 3:30 p.m. In the example above, the GCF Repo securities collateral will be debited from the securities account of the receiver of the collateral (i.e., Dealer B) at its clearing bank (i.e., BNY), and from the FICC Account for BNY. If a substitution request is received by the clearing bank (i.e., Chase) of the provider of GCF Repo securities collateral, prior to the substitution deadline at a time specified in FICC's procedures,\25\ that clearing bank will process the substitution request by releasing the GCF Repo securities collateral from the FICC GCF Repo account at Chase and crediting it to the account of the provider of GCF Repo securities collateral (i.e., Dealer C). All cash and/or securities substituted for the GCF Repo securities collateral being released will be credited to FICC's GCF Repo account at the clearing bank (i.e., Chase). --------------------------------------------------------------------------- \25\ Rule filing SR-FICC-2012-05 noted that this timeframe would also be established in consultation with the clearing banks and the Federal Reserve. At that time, the parties were considering whether to have the substitution process be accomplished in two batches during the day depending upon the time of submission of the notifications for substitution. The clearing banks, however, developed a real-time substitution mechanism for both tri-party and GCF collateral making batch processing unnecessary. --------------------------------------------------------------------------- Simultaneously, with the debit of the GCF Repo securities collateral from the account at the clearing bank (i.e., BNY) of the original receiver of GCF Repo securities collateral (i.e., Dealer B), for purposes of making payment to the original receiver of securities collateral (i.e., Dealer B), such clearing bank will effect a cash debit equal to the value of the securities collateral in FICC's GCF Repo account at such clearing bank and will credit the account of the original receiver of securities collateral (i.e., Dealer B) at such clearing bank with such cash amount. (This is because when Dealer B is debited the securities, Dealer B must receive the funds.) In order to secure FICC's obligation to repay the balance in FICC's GCF Repo account at such clearing bank (i.e., BNY), FICC will grant to such clearing bank a security interest in the cash and/or securities substituted for the GCF securities collateral in FICC's GCF repo account at the other clearing bank (i.e., Chase). Using the example from above, assume the Dealer C submits a substitution notification--it requires the securities collateral that has been pledged to Dealer B and will substitute cash and/or securities. BNY will debit the securities from Dealer B's account and the relevant liens will be released so that the securities are in FICC's account at Chase. Chase will credit the securities to Dealer C's account and the cash and/or securities that Dealer C uses for its collateral substitution will be credited by Chase to FICC's account at Chase. From Dealer B's perspective, when BNY debits the securities from Dealer B's account, Dealer B is supposed to receive the funds--but as noted, the funds are at Chase. BNY will credit the funds to Dealer B's account and debit FICC's account at BNY. At this point in our example, FICC is running a credit at Chase and a debit at BNY. In order to secure FICC's debit at BNY, FICC will grant a security interest in the funds in the FICC account at Chase. For substitutions that occur with respect to GCF Repo transactions that were processed on an inter-clearing bank basis, FICC and the clearing banks permit cash and/or securities for the substitutions. The proposed rule change provided FICC with flexibility in this regard by referring to FICC's procedures. As noted above, each of the above-referenced changes were approved in connection with SR-FICC-2011-05,\26\ SR-FICC-2012-05 \27\ and SR- FICC-2013-06.\28\ FICC proposes to extend the pilot program reflecting these changes for an additional one year. The changes referenced above are reflected in Exhibit 5. --------------------------------------------------------------------------- \26\ Securities Exchange Act Release No. 34-65213 (August 29, 2011) 76 FR 54824 (September 2, 2011). \27\ Securities Exchange Act Release No. 34-67277 (June 20, 2012) 77 FR 38108 (June 26, 2012). \28\ Securities Exchange Act Release No. 34-70068 (July 30, 2013) 78 FR 47453 (August 5, 2013). --------------------------------------------------------------------------- (ii) Statutory Basis for the Proposed Rule Change The proposed rule change is consistent with the Securities and Exchange Act of 1934, as amended (the ``Act'') and the rules and regulations promulgated thereunder because it will align the GCF Repo service with recommendations being made by the TPR to address risks in the triparty market overall and therefore will serve to further safeguard the securities and funds for which FICC is responsible. B. Clearing Agency's Statement on Burden on Competition FICC does not believe that the proposed rule change will have any negative impact, or impose any burden, on competition. C. Clearing Agency's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments relating to the proposed rule changes have not yet 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 CommentsUse 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-2015-002 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-2015-002. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements [[Page 29357]] 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 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 such filings also will be available for inspection and copying at the principal office of FICC and on FICC's Web site at http://www.dtcc.com/legal/sec-rule-filings.aspx. 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-2015-002 and should be submitted on or before June 11, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\29\ --------------------------------------------------------------------------- \29\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2015-12281 Filed 5-20-15; 8:45 am] BILLING CODE 8011-01-P
![29352 Federal Register / Vol. 80, No. 98 / Thursday, May 21, 2015 / Notices
The Commission invites comments on Table of Contents SECURITIES AND EXCHANGE
whether the Postal Service’s filing is I. Introduction COMMISSION
consistent with 39 U.S.C. 3632, 3633, or II. Notice of Commission Action [Release No. 34–74973; File No. SR–FICC–
3642, 39 CFR part 3015, and 39 CFR III. Ordering Paragraphs 2015–002]
part 3020, subpart B. Comments are due
no later than May 22, 2015. The public I. Introduction
Self-Regulatory Organizations; Fixed
portions of the filing can be accessed via On May 14, 2015, the Postal Service Income Clearing Corporation; Notice of
the Commission’s Web site (http:// Filing of a Proposed Rule Change to
filed notice that it has entered into an
www.prc.gov). the Government Securities Division
additional Global Plus 1C negotiated
The Commission appoints Kenneth R. Rules in Connection With the
Moeller to serve as Public service agreement (Agreement).1
Extension of the GCF Repo Service
Representative in this docket. To support its Notice, the Postal Pilot Program
Service filed a copy of the Agreement,
III. Ordering Paragraphs May 15, 2015.
a copy of the Governors’ Decision
It is ordered: authorizing the product, a certification Pursuant to Section 19(b)(1) of the
1. The Commission establishes Docket of compliance with 39 U.S.C. 3633(a), Securities Exchange Act of 1934
No. CP2015–69 for consideration of the and an application for non-public (‘‘Act’’),1 and Rule 19b–4 thereunder,2
matters raised by the Postal Service’s treatment of certain materials. It also notice is hereby given that on May 7,
Notice. filed supporting financial workpapers. 2015, the Fixed Income Clearing
2. Pursuant to 39 U.S.C. 505, Kenneth Corporation (‘‘FICC’’ or the
R. Moeller is appointed to serve as an II. Notice of Commission Action ‘‘Corporation’’) filed with the Securities
officer of the Commission to represent and Exchange Commission
the interests of the general public in this The Commission establishes Docket (‘‘Commission’’) the proposed rule
proceeding (Public Representative). No. CP2015–68 for consideration of change as described in Items I, II, and
3. Comments are due no later than matters raised by the Notice. III below, which Items have been
May 22, 2015. The Commission invites comments on prepared by FICC. The Commission is
4. The Secretary shall arrange for whether the Postal Service’s filing is publishing this notice to solicit
publication of this order in the Federal consistent with 39 U.S.C. 3632, 3633, or comments on the proposed rule change
Register. 3642, 39 CFR part 3015, and 39 CFR from interested persons.
By the Commission. part 3020, subpart B. Comments are due I. Clearing Agency’s Statement of the
Shoshana M. Grove, no later than May 22, 2015. The public Terms of Substance of the Proposed
Secretary. portions of the filing can be accessed via Rule Change
[FR Doc. 2015–12270 Filed 5–20–15; 8:45 am]
the Commission’s Web site (http:// The proposed rule changes consist of
BILLING CODE 7710–FW–P
www.prc.gov). modifications to the Rulebook of the
The Commission appoints Curtis Kidd Government Securities Division
to serve as Public Representative in this (‘‘GSD’’) in connection with the
POSTAL REGULATORY COMMISSION docket. extension of the GCF Repo® service 3
pilot program.
III. Ordering Paragraphs
[Docket No. CP2015–68; Order No. 2484] II. Clearing Agency’s Statement of the
It is ordered: Purpose of, and Statutory Basis for, the
New Postal Product
1. The Commission establishes Docket Proposed Rule Change
AGENCY: Postal Regulatory Commission. No. CP2015–68 for consideration of the In its filing with the Commission,
ACTION: Notice. matters raised by the Postal Service’s FICC included statements concerning
Notice. the purpose of and basis for the
SUMMARY: The Commission is noticing a proposed rule change and discussed any
recent Postal Service filing concerning 2. Pursuant to 39 U.S.C. 505, Curtis
Kidd is appointed to serve as an officer comments it received on the proposed
an additional Global Plus 1C negotiated rule change. The text of these statements
service agreement. This notice informs of the Commission to represent the
interests of the general public in this may be examined at the places specified
the public of the filing, invites public in Item IV below. FICC has prepared
comment, and takes other proceeding (Public Representative).
summaries, set forth in sections A, B,
administrative steps. 3. Comments are due no later than and C below, of the most significant
DATES: Comments are due: May 22, May 22, 2015. aspects of such statements.
2015. 4. The Secretary shall arrange for A. Clearing Agency’s Statement of the
ADDRESSES: Submit comments publication of this order in the Federal Purpose of, and Statutory Basis for, the
electronically via the Commission’s Register. Proposed Rule Change
Filing Online system at http:// By the Commission.
www.prc.gov. Those who cannot submit (i) Purpose of the Proposed Rule Change
Shoshana M. Grove,
comments electronically should contact FICC is seeking the Commission’s
the person identified in the FOR FURTHER Secretary. approval to extend the current pilot
INFORMATION CONTACT section by [FR Doc. 2015–12269 Filed 5–20–15; 8:45 am] program (the ‘‘2014 Pilot Program’’) that
tkelley on DSK3SPTVN1PROD with NOTICES
telephone for advice on filing BILLING CODE 7710–FW–P is currently in effect for the GCF Repo®
alternatives. service. FICC is requesting that the 2014
1 Notice of the United States Postal Service of
FOR FURTHER INFORMATION CONTACT:
Filing a Functionally Equivalent Global Plus 1C 1 15
U.S.C. 78s(b)(1).
David A. Trissell, General Counsel, at Negotiated Service Agreement and Application for 2 17
CFR 240.19b–4.
202–789–6820. Non-Public Treatment of Materials Filed Under 3 GCF Repo is a registered trademark of FICC/
SUPPLEMENTARY INFORMATION: Seal, May 14, 2015 (Notice). DTCC.
VerDate Sep<11>2014 20:28 May 20, 2015 Jkt 235001 PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 E:\FR\FM\21MYN1.SGM 21MYN1](https://thefederalregister.org/doc/80_FR_29450/page/1.svg)
![Federal Register / Vol. 80, No. 98 / Thursday, May 21, 2015 / Notices 29353
Pilot Program be extended for one year additional year while the final phase of introducing the service as an interbank
following the Commission’s approval of the tri-party reform is put into place.10 service necessitated the establishment of
the present filing.4 a mechanism to permit after-hours
By way of background, on July 12, Background: Description of the GCF
movements of securities between the
2011, FICC submitted a rule filing to the Repo Service and History
two clearing banks to deal with the fact
Commission (SR–FICC–2011–05) (1) Creation of the GCF Repo Service that GSCC would likely have
proposing to make certain changes to its The GCF Repo service allows GSD unbalanced net GCF securities and cash
GCF Repo service in order to comply dealer members to trade general positions within each clearing bank
with the recommendations that had collateral repos 11 throughout the day (that is, it is likely that at the end of GCF
been made by the Task Force on without requiring intra-day[sic], trade- Repo processing each business day, the
Triparty Reform (‘‘TPR’’), an industry for-trade settlement on a delivery- dealers in one clearing bank will be net
group formed and sponsored by the versus-payment (‘‘DVP’’) basis. The funds borrowers, while the dealers at
Federal Reserve Bank of New York.5 service allows the dealers to trade such the other clearing bank will be net funds
Because the GCF Repo service operates general collateral repos, based on rate lenders). To address this issue, GSCC
as a triparty mechanism, FICC was and term, throughout the day with inter- and its clearing banks established, and
requested to incorporate changes to the dealer broker netting members on a the Commission approved, a legal
GCF Repo service to align the service blind basis. Standardized, generic mechanism by which securities would
with the other TPR recommended CUSIP numbers have been established ‘‘move’’ across the clearing banks
changes for the overall triparty market. without the use of the securities
exclusively for GCF Repo processing
The rule change described in SR– Fedwire.14 (Movements of cash do not
and are used to specify the acceptable
FICC–2011–05 was proposed to be run present the same issue because the cash
as a pilot program for one year starting type of underlying Fedwire book-entry
eligible collateral, which includes Fedwire is open later than the securities
from the date on which the filing was Fedwire.) Therefore, at the end of the
approved by the Commission (the ‘‘2011 Treasuries, Agencies and certain
mortgage-backed securities. day, after the GCF net results are
Pilot Program’’).6 Throughout 2011 and produced, securities are pledged via a
The GCF Repo service was developed
the earlier half of 2012, FICC tri-party-like mechanism and the
as part of a collaborative effort among
implemented a portion of the rule interbank cash component is moved via
GSCC (FICC’s predecessor), its two
changes that were included in SR– Fedwire. In the morning, the pledges are
clearing banks (The Bank of New York
FICC–2011–05. As the expiration date of unwound, that is, funds are returned to
the 2011 Pilot Program approached, Mellon (‘‘BNY’’) and JPMorgan Chase
Bank, National Association (‘‘Chase’’), the net funds lenders and securities are
FICC elected to have certain aspects of returned to the net funds borrowers.
the 2011 Pilot Program continue, and industry representatives. GSCC
introduced the GCF Repo service on an The following simplified example
however, FICC also proposed to make illustrates the manner in which the GCF
certain modifications to the 2011 Pilot intra-clearing bank basis in 1998.12
Under the intrabank service, dealers Repo services works on an interbank
Program. As a result, on June 8, 2012, basis:
FICC submitted a rule filing for the 2012 could only engage in GCF Repo
transactions with other dealers that Assume that Dealer B clears at BNY
Pilot Program (SR–FICC–2012–05).7 On and Dealer C clears at Chase. Further
June 5, 2013, FICC then submitted a rule cleared at the same clearing bank.
assume that: (i) Outside of FICC, Dealer
filing to extend the Pilot Program for an (2) Creation of the Interbank Version of B engages in a triparty repo transaction
additional year (SR–FICC–2013–06).8 the GCF Repo Service with Party X to obtain funds and seeks
On May 5, 2014, FICC then submitted a In 1999, GSCC expanded the GCF to invest such funds via a GCF Repo
rule filing to extend the Pilot Program Repo service to permit dealer transaction, (ii) outside of FICC, Dealer
for an additional year (SR–FICC–2014– participants to engage in GCF Repo C engages in a DVP repo with Party Y
02).9 Because the latest extension is now trading on an inter-clearing bank basis, to buy securities and seeks to finance
approaching its expiry date, FICC is meaning that dealers using different these securities via a GCF Repo
seeking the Commission’s approval to clearing banks could enter into GCF transaction, and (iii) Dealer B and
extend the Pilot Program for an Repo transactions (on a blind brokered Dealer C enter into a GCF Repo
basis).13 Because dealer members that transaction (on a blind basis via a GCF
4 If FICC determines to change the parameters of
participate in the GCF Repo service do Repo broker) and submit the trade
the service during the one-year Pilot Program
extension period, it will submit a rule filing to the not all clear at the same clearing bank, details to FICC.
Commission. If FICC seeks to extend the Pilot At the end of ‘‘Day 1’’, GCF Repo
Program beyond the one-year period or proposes to 10 The final phase includes the development collateral must be allocated, i.e., Dealer
make the Pilot Program permanent, it will also interactive messages for the interbank collateral B must receive the securities. However,
submit a rule filing to the Commission. substitution automation. If FICC determines to
5 The main purpose of the TPR was to develop
the securities that Dealer B is to receive
change the parameters of the service during the one-
recommendations to address the risk presented by year Pilot Program extension period, it will submit
are at Chase and the securities Fedwire
triparty repo transactions due to the current a rule filing to the Commission. If FICC seeks to is closed. The after-hours movement
morning reversal or ‘‘unwind’’ process and to move extend the Pilot Program beyond the one-year mechanism permits the securities to be
to a process by which transactions are collateralized period or proposes to make the Pilot Program ‘‘sent’’ to Dealer B as follows: FICC will
all day. permanent, it will also submit a rule filing to the
6 Securities Exchange Act Release No. 34–65213 Commission.
instruct Chase to allocate to a special
(August 29, 2011), 76 FR 54824 (September 2, 2011) 11 A general collateral repo is a repo in which the FICC clearance account at Chase
(SR–FICC–2011–05). underlying securities collateral is nonspecific, securities in an amount equal to the net
7 Securities Exchange Release No. 34–67621 general collateral whose identification is at the short securities position.
tkelley on DSK3SPTVN1PROD with NOTICES
(August 8, 2012), 77 FR 48572 (August 14, 2012) option of the seller. This is in contrast to a specific FICC has established on its own books
(SR–FICC–2012–05). collateral repo.
8 Securities Exchange Act Release No. 34–70068 12 See Securities Exchange Act Release No. 34–
and records two ‘‘securities accounts’’
(July 30, 2013), 78 FR 47453 (August 5, 2013) (SR– 40623 (October 30, 1998) 63 FR 59831 (November as defined in Article 8 of the New York
FICC–2013–06). 5, 1998) (SR–GSCC–98–02).
9 Securities Exchange Act Release No. 34–72457 13 See Securities Exchange Act Release No. 34– 14 See id. for a detailed description of the clearing
(June 24, 2014), 79 FR 36856 (June 30, 2014) (SR– 41303 (April 16, 1999) 64 FR 20346 (April 26, 1999) bank and FICC accounts needed to effect the after-
FICC–2014–02). (SR–GSCC–99–01). hour movement of securities.
VerDate Sep<11>2014 20:28 May 20, 2015 Jkt 235001 PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 E:\FR\FM\21MYN1.SGM 21MYN1](https://thefederalregister.org/doc/80_FR_29450/page/2.svg)
![29354 Federal Register / Vol. 80, No. 98 / Thursday, May 21, 2015 / Notices
Uniform Commercial Code, one in the related to the service, namely, the large On the morning of Day 2, Dealer C who
name of Chase (‘‘FICC Account for interbank funds movement in the needs to return funds in the unwind, instead
Chase’’) and one in the name of BNY morning. FICC shifted the service back of returning the funds in the morning, grants
(‘‘FICC Account for BNY’’). The FICC to intrabank status to enable to FICC a security interest in Dealer C’s NFE-
related collateral equal to its funds
Account for Chase is comprised of the management to study the issues movement (we have assumed only one GCF
securities in FICC’s special clearance presented and identify a satisfactory Repo transaction took place in this simplified
account maintained by BNY (‘‘FICC solution for bringing the service back to example). FICC, in turn, grants BNY (that was
Special Clearance Account at BNY for interbank status. due to receive the funds) a security interest
Chase’’), and the FICC Account for BNY (4) The NFE Filing and Restoration of in the NFE-related collateral to support the
is comprised of the securities in FICC’s debit in the FICC account at BNY. As noted
Service to Interbank Status above, the debit in FICC’s account at BNY
special clearance account maintained by
Chase (‘‘FICC Special Clearance In 2007, FICC submitted a rule filing arises because, under the current processing,
Account at Chase for BNY’’).15 The to address the issues raised by the Dealer B must receive its funds during the
interbank morning funds movement and morning unwind. The FICC debit is then
establishment of these securities satisfied during the end of day GCF Repo
accounts by FICC in the name of the return the GCF Repo service to
interbank status (the ‘‘2007 NFE settlement process.
clearing banks enables the bank that is
in the net long securities position to Filing’’).17 The 2007 NFE Filing As part of the 2007 NFE Filing, FICC
‘‘receive’’ securities by pledge after the addressed these issues by using a hold imposed certain additional risk
close of the securities Fedwire. Once the against a dealer’s ‘‘net free equity’’ management measures with respect to
clearing bank has ‘‘received’’ the (‘‘NFE’’) at the clearing bank to the GCF Repo service. First, FICC
securities by pledge, it can credit them collateralize its GCF Repo cash imposed a collateral premium (called
by book-entry to a FICC GCF Repo obligation to FICC on an intraday ‘‘GCF Premium Charge’’) on the GCF
account at that clearing bank and then basis.18 Repo portion of the Clearing Fund
The 2007 NFE Filing replaced the Day deposits of all GCF participants to
to the dealers that clear at that bank that
2 morning unwind process with an further protect FICC in the event of an
are net long the securities in connection
alternate process, which is currently in intra-day[sic] default of a GCF Repo
with GCF Repo trades.
In our example, Chase, as agent for effect. Specifically, in lieu of making participant. FICC requires GCF Repo
FICC, will transmit to BNY a description funds payments, the interbank dealers participants to submit a quarterly
of the securities in the FICC Special grant to FICC a security interest in their ‘‘snapshot’’ of their holdings by asset
Clearance Account at Chase for BNY. NFE-related collateral equal to their type to enable Risk Management staff to
prorated share of the total interbank determine the appropriate Clearing
Based on this description, BNY will
funds amount. FICC, in turn, grants to Fund premium. Members who do not
transfer funds equal to the funds
the other clearing bank (that was due to submit this required information by the
borrowed position to the FICC GCF
receive the funds) a security interest in deadlines established by FICC are
Repo account at Chase. Upon receipt of
the NFE-related collateral to support the subject to fine and an increased Clearing
the funds by Chase, Chase will release
debit in the FICC account at the clearing Fund premium, as with all other
any liens it may have on the FICC
bank. The debit in the FICC account instances of late submission of required
Special Clearance Account at Chase for
(‘‘Interbank Cash Amount Debit’’) information.
BNY, and FICC will release any liens it
occurs because the dealers who are due Second, the 2007 NFE Filing
may have on FICC Account for BNY
to receive funds in the morning must addressed the situation where FICC
(both of these accounts being comprised receive those funds at that time in
of the same securities). BNY will credit becomes concerned about the volume of
return for their release of collateral. The interbank GCF Repo activity. Such a
the securities in the FICC Account for debit in the FICC account at the clearing
BNY to FICC’s GCF Repo account at concern might arise, for example, if
bank gets satisfied during the end of day market events were to cause dealers to
BNY, and BNY will further credit these GCF Repo settlement process.
securities to Dealer B, who, as noted, is turn to the GCF Repo service for
Specifically, that day’s new activity increased funding at levels beyond
in a net long securities position. In the yields a new interbank funds amount
morning of ‘‘Day 2,’’ all securities and normal processing. The 2007 NFE Filing
that will move at end of day—however, provides FICC with the discretion to
funds movements occurring on Day 1, this amount gets netted with the amount
are reversed (‘‘unwind’’). institute risk mitigation and appropriate
that would have been due in the disincentive measures in order to bring
(3) Issues With Morning Unwind morning, thus further reducing the GCF Repo levels to a comfortable level
Process interbank funds movement. The NFE from a risk management perspective.19
holds are released when the interbank
In 2003, FICC shifted the GCF Repo
funds movement is made at end of day.
service back to intrabank status only.16 19 Specifically, the 2007 NFE Filing introduced
The 2007 NFE Filing did not involve the term ‘‘GCF Repo Event’’, which will be declared
By that time, the service had grown
any changes to the after-hours by FICC if either of the following occurs: (i) The
significantly in participation and
movement of securities occurring at the GCF interbank funds amount exceeds five times the
volume. However, with the increase in end of the day on Day 1. Using our average interbank funds amount over the previous
use of the interbank service, certain simplified example: ninety days for three consecutive days; or (ii) the
payments systems risk issues arose from GCF interbank funds amount exceeds fifty percent
of the amount of GCF Repo collateral pledged for
the inter-bank[sic] funds settlements 17 See Securities Exchange Act Release No. 34–
three consecutive days. FICC reviews these figures
57652 (April 11, 2008), 73 FR 20999 (April 17, on a semi-annual basis to determine whether they
15 FICC has appointed Chase as its agent to 2008) (SR–FICC–2007–08). remain adequate. FICC also has the right to declare
tkelley on DSK3SPTVN1PROD with NOTICES
maintain FICC’s books and records with respect to 18 NFE is a methodology that clearing banks use a GCF Repo Event in any other circumstances
the BNY securities account, and FICC has to determine whether an account holder (such as a where it is concerned about GCF Repo volumes and
appointed BNY as its agent to maintain FICC’s dealer) has sufficient collateral to enter a specific believes it is necessary to declare a GCF Repo Event
books and records with respect to the Chase transaction. NFE allows the clearing bank to place in order to protect itself and its members. FICC will
securities account. a limit on its customer’s activity by calculating a inform its members about the declaration of the
16 See Securities Exchange Act Release No. 34– value on the customer’s balances at the bank. Bank GCF Repo Event via important notice. FICC will
48006 (June 10, 2003), 66 FR 35745 (June 16, 2003) customers have the ability to monitor their NFE also inform the Commission about the declaration
(SR–FICC–2003–04). balance throughout the day. of the GCF Repo Event.
VerDate Sep<11>2014 20:28 May 20, 2015 Jkt 235001 PO 00000 Frm 00056 Fmt 4703 Sfmt 4703 E:\FR\FM\21MYN1.SGM 21MYN1](https://thefederalregister.org/doc/80_FR_29450/page/3.svg)
![Federal Register / Vol. 80, No. 98 / Thursday, May 21, 2015 / Notices 29357
with respect to the proposed rule the Federal Register on April 14, 2015.3 agency are designed to promote the
change that are filed with the The Commission did not receive prompt and accurate clearance and
Commission, and all written comments regarding the proposed settlement of securities transactions
communications relating to the change. For the reasons discussed and, to the extent applicable, derivative
proposed rule change between the below, the Commission is granting agreements, contracts, and transactions.
Commission and any person, other than approval of the proposed rule change.
The Commission finds that the
those that may be withheld from the II. Description of the Proposed Rule proposed rule change is consistent with
public in accordance with the Change
provisions of 5 U.S.C. 552, will be Section 17A of the Act 7 and the rules
available for Web site viewing and ICC proposes revising ICC Clearing thereunder applicable to ICC. The
printing in the Commission’s Public Rule 401 (‘‘Rule 401’’) in order to proposed rule change would provide
Reference Room, 100 F Street NE., provide additional clarity regarding additional clarity and transparency
Washington, DC 20549, on official settlement finality with respect to Mark- regarding ICC’s settlement cycle,
business days between the hours of to-Market Margin (as defined in ICC specifically with regard to the time at
10:00 a.m. and 3:00 p.m. Copies of such Rule 401). Specifically, the proposed which Transfers of Mark-to-Market
filings also will be available for rule change would add new subsections Margin are final and the time at which
inspection and copying at the principal (k) and (l) to Rule 401. ICC states that the fair value of the outstanding
office of FICC and on FICC’s Web site the new subsections are not intended to exposures for relevant Contracts in a
at http://www.dtcc.com/legal/sec-rule- change any current ICC practices; rather, Mark-to-Market Margin Category is reset
filings.aspx. such changes are intended to provide to zero. The Commission therefore finds
additional clarity regarding settlement that the proposed rule change is
All comments received will be posted finality with respect to Mark-to-Market
without change; the Commission does designed to promote the prompt and
Margin. All capitalized terms not
not edit personal identifying accurate clearance and settlement of
defined herein are defined in the ICC
information from submissions. You Rules. securities transactions and, to the extent
should submit only information that ICC proposes adding language in Rule applicable, derivative agreements,
you wish to make available publicly. All 401(k) to clarify that each Transfer of contracts, and transactions in
submissions should refer to File Mark-to-Market Margin shall constitute accordance with Section 17A(b)(3)(F) of
Number SR–FICC–2015–002 and should a settlement (within the meaning of U.S. the Act.8
be submitted on or before June 11, 2015. Commodity Futures Trading IV. Conclusion
For the Commission, by the Division of Commission Rule 39.14 4) and shall be
Trading and Markets, pursuant to delegated final as of the time ICC’s accounts are On the basis of the foregoing, the
authority.29 debited or credited with the relevant Commission finds that the proposal is
Robert W. Errett,
payment. Further, ICC proposes adding consistent with the requirements of the
language in Rule 401(l) to state that once Act and in particular with the
Deputy Secretary. settlement of a Transfer of Mark-to-
[FR Doc. 2015–12281 Filed 5–20–15; 8:45 am] requirements of Section 17A of the Act 9
Market Margin in respect of the Margin and the rules and regulations
BILLING CODE 8011–01–P Requirements for a Mark-to-Market
thereunder.
Margin Category is final, the fair value
of the outstanding exposures for the It is therefore ordered, pursuant to
SECURITIES AND EXCHANGE relevant Contracts in that Mark-to- Section 19(b)(2) of the Act,10 that the
COMMISSION Market Margin Category (taking into proposed rule change (File No. SR–ICC–
account the Margin provided in respect 2015–008) be, and hereby is,
[Release No. 34–74974; File No. SR–ICC– of such Margin Requirement) will be approved.11
2015–008] reset to zero. ICC states that such For the Commission, by the Division of
additional language is consistent with Trading and Markets, pursuant to delegated
Self-Regulatory Organizations; ICE ICC’s current practices and is intended authority.12
Clear Credit LLC; Order Approving to provide further clarity regarding ICC’s
Robert W. Errett,
Proposed Rule Change Related to settlement cycle.
Settlement Finality Deputy Secretary.
III. Discussion and Commission [FR Doc. 2015–12282 Filed 5–20–15; 8:45 am]
May 15, 2015. Findings
BILLING CODE 8011–01–P
Section 19(b)(2)(C) of the Act 5 directs
I. Introduction
the Commission to approve a proposed
On April 1, 2015, ICE Clear Credit rule change of a self-regulatory
LLC (‘‘ICC’’) filed with the Securities organization if the Commission finds
and Exchange Commission that such proposed rule change is
(‘‘Commission’’) a proposed rule change consistent with the requirements of the
pursuant to Section 19(b)(1) of the Act and the rules and regulations
Securities Exchange Act of 1934 thereunder applicable to such self-
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 regulatory organization. Section
7 15 U.S.C. 78q–1.
to provide additional clarity regarding 17A(b)(3)(F) of the Act 6 requires, among
8 15 U.S.C. 78q–1(b)(3)(F).
other things, that the rules of a clearing
tkelley on DSK3SPTVN1PROD with NOTICES
settlement finality with respect to Mark- 9 15 U.S.C. 78q–1.
to-Market Margin. The proposed rule 3 Securities Exchange Act Release No. 34–74676
10 15 U.S.C. 78s(b)(2).
change was published for comment in (Apr. 8, 2015), 80 FR 20047 (Apr. 14, 2015) (SR– 11 In approving the proposed rule change, the
ICC–2015–008). Commission considered the proposal’s impact on
29 17 CFR 200.30–3(a)(12). 4 17 CFR 39.14. efficiency, competition and capital formation. 15
1 15 U.S.C. 78s(b)(1). 5 15 U.S.C. 78s(b)(2)(C). U.S.C. 78c(f).
2 17 CFR 240.19b–4. 6 15 U.S.C. 78q–1(b)(3)(F). 12 17 CFR 200.30–3(a)(12).
VerDate Sep<11>2014 20:28 May 20, 2015 Jkt 235001 PO 00000 Frm 00059 Fmt 4703 Sfmt 9990 E:\FR\FM\21MYN1.SGM 21MYN1](https://thefederalregister.org/doc/80_FR_29450/page/6.svg)
Document Created: 2018-10-24 10:25:47
Document Modified: 2018-10-24 10:25:47
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 29352 |
2024 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR