81 FR 54626 - Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Add a Clearing Fund Maintenance Fee
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 158 (August 16, 2016)
Federal Register Volume 81, Issue 158 (August 16, 2016)
| Page Range | 54626-54628 | |
| FR Document | 2016-19433 |
[Federal Register Volume 81, Number 158 (Tuesday, August 16, 2016)] [Notices] [Pages 54626-54628] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-19433] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78529; File No. SR-FICC-2016-004] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Add a Clearing Fund Maintenance Fee August 10, 2016. 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 July 29, 2016, Fixed Income Clearing Corporation (``FICC'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II and III below, which Items have been prepared by the clearing agency. FICC filed the proposed rule change pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(2) thereunder.\4\ The proposed rule change was effective upon filing with the Commission. 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. \3\ 15 U.S.C. 78s(b)(3)(A). \4\ 17 CFR 240.19b-4(f)(2). --------------------------------------------------------------------------- I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change consists of modifications to the rules of the Government Securities Division (``GSD Rules'') of FICC and the rules of the Mortgage-Backed Securities Division (``MBSD Rules'') of FICC in order to add a new fee that will be charged to GSD Netting Members and MBSD Clearing Members in connection with the maintenance of the Clearing Fund, as described in greater detail below.\5\ GSD Netting Members and MBSD Clearing Members are collectively referred to herein as ``members.'' --------------------------------------------------------------------------- \5\ Capitalized terms not defined herein are defined in the GSD Rules, available at www.dtcc.com/~/media/Files/Downloads/legal/ rules/ficc_gov_rules.pdf, and the MBSD Rules, available at www.dtcc.com/~/media/Files/Downloads/legal/rules/ ficc_mbsd_rules.pdf. --------------------------------------------------------------------------- II. Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the clearing agency included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. (A) Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The proposed rule change will add a fee that will be charged to members in connection with the maintenance of the Clearing Fund. Clearing Fund Maintenance Fee Pursuant to the proposed rule change, FICC proposes to introduce a new fee, to be known as the Clearing Fund Maintenance Fee, which will be charged to members in arrears on a monthly basis. The proposed rule change will (i) diversify FICC's revenue sources and mitigate FICC's dependence on revenues driven by trading volumes and (ii) add a stable revenue source that will contribute to FICC's operating margin by offsetting increasing costs and expenses, as further described below. Diversify Revenue Sources FICC's current revenues are highly variable due to the nature of the clearing services, which are primarily driven by trading volumes, but, as a utility, FICC's expenses are largely fixed. The combination of fixed costs and variable revenues represents a financial risk for FICC. To mitigate such financial risk, FICC is seeking to diversify its variable revenue base with the proposed new fee, which will introduce a revenue source that is not dependent on trading volumes. The Clearing Fund Maintenance Fee will be ratably based on the member's Clearing Fund average cash deposit. Offset Increasing Costs and Expenses FICC seeks to achieve a target operating margin to cover operating expenses and fund capital expenditures as well as investments in its clearing services and risk management infrastructure; however, FICC faces [[Page 54627]] continued increasing risk management costs as well as regulatory and compliance-related expenses that need to be offset by revenue growth in order to meet the target operating margin. Such increased costs and expenses, if not offset by revenue growth, could weaken FICC's financial position over time. As such, FICC is seeking to implement the Clearing Fund Maintenance Fee to add an additional revenue source to offset increasing costs and expenses. Proceeds of the Clearing Fund Maintenance Fee will be used primarily to offset risk management costs, regulatory and compliance expenses and for general operating expenses. Calculation The amount of the monthly Clearing Fund Maintenance Fee for a member will be calculated monthly, in arrears, as the product of 0.25% and the average of the member's actual cash deposit to the Clearing Fund as of the end of each day of the month, multiplied by the number of days in that month and divided by 360; provided that, the investment rate of return on investment by FICC of cash in the Clearing Fund for that month is equal to or greater than 0.25%. No fee will be charged to any member for a month in which the monthly rate of return on investment of cash in the Clearing Fund is less than 0.25%. Based on the 2015 average actual cash deposits to the Clearing Fund, the expected annual revenue to be generated by the Clearing Fund Maintenance Fee is approximately $24 million. Member Impact The proposed rule change will impose the Clearing Fund Maintenance Fee on all members that are required to make deposits to the Clearing Fund. The Clearing Fund Maintenance Fee is a monthly fee based ratably upon the amount of the member's daily actual cash deposited to the Clearing Fund; it is applicable when the monthly rate of return on investment of cash in the Clearing Fund is equal to or greater than 0.25%. Because the Clearing Fund Maintenance Fee per member is proportional to the average monthly cash deposit of the member to the Clearing Fund, members that generate higher levels of activity and make greater use of FICC's services will generally be subject to a higher fee, because such members typically maintain higher Clearing Fund deposits pursuant to the GSD Rules and the MBSD Rules. FICC views the proposed implementation of the Clearing Fund Maintenance Fee as a prudent way to minimize the magnitude of, and mitigate the need for, potential future increases in other fees. The proposed change will take effect on August 1, 2016. 2. Statutory Basis Section 17A(b)(3)(D) of the Act \6\ requires that the GSD Rules and MBSD Rules provide for the equitable allocation of reasonable dues, fees, and other charges among its participants. The proposed fee is equitably allocated among members because it is based on each member's utilization of FICC's services, as measured by their Clearing Fund deposits. In addition, FICC believes that the proposed fee is reasonable because it will enable FICC to better align its revenue with the costs and expenses required for FICC to provide services to its members with a nominal impact on members. Therefore, FICC believes the proposed rule change is consistent with section 17A(b)(3)(D).\7\ --------------------------------------------------------------------------- \6\ 15 U.S.C. 78q-1(b)(3)(D). \7\ Id. --------------------------------------------------------------------------- (B) Clearing Agency's Statement on Burden on Competition FICC does not believe that the proposed rule change will impose a burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, because the proposed fee will be equitably allocated among members based on each member's utilization of FICC's services. Members that have a higher level of activities and greater use of FICC's services will generally be subject to a higher Clearing Fund Maintenance Fee and members with lower usage will pay less. (C) Clearing Agency's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others FICC has not received or solicited any written comments relating to this proposal. 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 The foregoing rule change has become effective pursuant to section 19(b)(3)(A) \8\ of the Act and paragraph (f) of Rule 19b-4 \9\ thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78s(b)(3)(A). \9\ 17 CFR 240.19b-4(f). --------------------------------------------------------------------------- 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 [email protected]. Please include File Number SR-FICC-2016-004 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR-FICC-2016-004. 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 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 the filing also will be available for inspection and copying at the principal office of FICC and on DTCC's Web site (http://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 [[Page 54628]] available publicly. All submissions should refer to File Number SR- FICC-2016-004 and should be submitted on or before September 6, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\10\ --------------------------------------------------------------------------- \10\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-19433 Filed 8-15-16; 8:45 am] BILLING CODE 8011-01-P
![54626 Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices
IV. Solicitation of Comments For the Commission, by the Division of Members are collectively referred to
Trading and Markets, pursuant to delegated herein as ‘‘members.’’
Interested persons are invited to authority.12
submit written data, views, and II. Clearing Agency’s Statement of the
Robert W. Errett,
arguments concerning the foregoing, Purpose of, and Statutory Basis for, the
Deputy Secretary. Proposed Rule Change
including whether the proposed rule [FR Doc. 2016–19445 Filed 8–15–16; 8:45 am]
change is consistent with the Act. In its filing with the Commission, the
BILLING CODE 8011–01–P
Comments may be submitted by any of clearing agency included statements
the following methods: concerning the purpose of and basis for
the proposed rule change and discussed
Electronic Comments SECURITIES AND EXCHANGE
any comments it received on the
COMMISSION
proposed rule change. The text of these
• Use the Commission’s Internet statements may be examined at the
comment form (http://www.sec.gov/ [Release No. 34–78529; File No. SR–FICC– places specified in Item IV below. The
rules/sro.shtml); or 2016–004] clearing agency has prepared
• Send an email to rule-comments@ summaries, set forth in sections A, B,
sec.gov. Please include File Number SR– Self-Regulatory Organizations; Fixed and C below, of the most significant
Income Clearing Corporation; Notice of aspects of such statements.
BatsEDGA–2016–18 on the subject line.
Filing and Immediate Effectiveness of
Paper Comments a Proposed Rule Change To Add a (A) Clearing Agency’s Statement of the
Clearing Fund Maintenance Fee Purpose of, and Statutory Basis for, the
• Send paper comments in triplicate Proposed Rule Change
to Secretary, Securities and Exchange August 10, 2016.
1. Purpose
Commission, 100 F Street NE., Pursuant to Section 19(b)(1) of the
Washington, DC 20549–1090. Securities Exchange Act of 1934 The proposed rule change will add a
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 fee that will be charged to members in
All submissions should refer to File connection with the maintenance of the
Number SR–BatsEDGA–2016–18. This notice is hereby given that on July 29,
Clearing Fund.
file number should be included on the 2016, Fixed Income Clearing
Corporation (‘‘FICC’’) filed with the Clearing Fund Maintenance Fee
subject line if email is used. To help the
Securities and Exchange Commission Pursuant to the proposed rule change,
Commission process and review your
(‘‘Commission’’) the proposed rule FICC proposes to introduce a new fee,
comments more efficiently, please use
change as described in Items I, II and III to be known as the Clearing Fund
only one method. The Commission will below, which Items have been prepared
post all comments on the Commission’s Maintenance Fee, which will be charged
by the clearing agency. FICC filed the to members in arrears on a monthly
Internet Web site (http://www.sec.gov/ proposed rule change pursuant to
rules/sro.shtml). Copies of the basis.
section 19(b)(3)(A) of the Act 3 and Rule The proposed rule change will (i)
submission, all subsequent 19b–4(f)(2) thereunder.4 The proposed diversify FICC’s revenue sources and
amendments, all written statements rule change was effective upon filing mitigate FICC’s dependence on revenues
with respect to the proposed rule with the Commission. The Commission driven by trading volumes and (ii) add
change that are filed with the is publishing this notice to solicit a stable revenue source that will
Commission, and all written comments on the proposed rule change contribute to FICC’s operating margin by
communications relating to the from interested persons. offsetting increasing costs and expenses,
proposed rule change between the as further described below.
I. Clearing Agency’s Statement of the
Commission and any person, other than
Terms of Substance of the Proposed Diversify Revenue Sources
those that may be withheld from the
Rule Change
public in accordance with the FICC’s current revenues are highly
provisions of 5 U.S.C. 552, will be The proposed rule change consists of variable due to the nature of the clearing
available for Web site viewing and modifications to the rules of the services, which are primarily driven by
printing in the Commission’s Public Government Securities Division (‘‘GSD trading volumes, but, as a utility, FICC’s
Reference Room, 100 F Street NE., Rules’’) of FICC and the rules of the expenses are largely fixed. The
Washington, DC 20549, on official Mortgage-Backed Securities Division combination of fixed costs and variable
business days between the hours of (‘‘MBSD Rules’’) of FICC in order to add revenues represents a financial risk for
10:00 a.m. and 3:00 p.m. Copies of the a new fee that will be charged to GSD FICC. To mitigate such financial risk,
filing also will be available for Netting Members and MBSD Clearing FICC is seeking to diversify its variable
inspection and copying at the principal Members in connection with the revenue base with the proposed new
maintenance of the Clearing Fund, as fee, which will introduce a revenue
office of the Exchange. All comments
described in greater detail below.5 GSD source that is not dependent on trading
received will be posted without change;
Netting Members and MBSD Clearing volumes. The Clearing Fund
the Commission does not edit personal
Maintenance Fee will be ratably based
identifying information from on the member’s Clearing Fund average
12 17 CFR 200.30–3(a)(12).
submissions. You should submit only
asabaliauskas on DSK3SPTVN1PROD with NOTICES
1 15 U.S.C. 78s(b)(1). cash deposit.
information that you wish to make 2 17 CFR 240.19b–4.
available publicly. All submissions 3 15 U.S.C. 78s(b)(3)(A).
Offset Increasing Costs and Expenses
should refer to File Number SR– 4 17 CFR 240.19b–4(f)(2). FICC seeks to achieve a target
BatsEDGA–2016–18, and should be 5 Capitalized terms not defined herein are defined operating margin to cover operating
submitted on or before September 6, in the GSD Rules, available at www.dtcc.com/∼/ expenses and fund capital expenditures
media/Files/Downloads/legal/rules/
2016. ficc_gov_rules.pdf, and the MBSD Rules, available
as well as investments in its clearing
at www.dtcc.com/∼/media/Files/Downloads/legal/ services and risk management
rules/ficc_mbsd_rules.pdf. infrastructure; however, FICC faces
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![54628 Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices
available publicly. All submissions Exchange LLC (‘‘NYSE’’) and the the standard closing procedure is
should refer to File Number SR–FICC– Nasdaq Stock Market LLC (‘‘Nasdaq’’).5 unavailable due to technical difficulties.
2016–004 and should be submitted on The text of the proposed rule change The Exchange will employ internal
or before September 6, 2016. is available at the Exchange’s Web site testing procedures to determine the
For the Commission, by the Division of
at www.batstrading.com, at the availability of each set of operating
Trading and Markets, pursuant to delegated principal office of the Exchange, and at procedures, and thereby position itself
authority.10 the Commission’s Public Reference to make and announce such a
Robert W. Errett, Room. determination as rapidly as possible.
Deputy Secretary. II. Self-Regulatory Organization’s The Exchange would invoke the Closing
[FR Doc. 2016–19433 Filed 8–15–16; 8:45 am] Statement of the Purpose of, and Contingency Procedures by announcing
Statutory Basis for, the Proposed Rule publicly that its market is impaired and
BILLING CODE 8011–01–P
Change unable to execute a closing auction. If
the Exchange makes that announcement
In its filing with the Commission, the prior to 3:00 p.m., Eastern Standard
SECURITIES AND EXCHANGE Exchange included statements
COMMISSION Time (‘‘EST’’), the official closing price
concerning the purpose of and basis for from the Exchange’s designated back-up
the proposed rule change and discussed exchange would serve as the Exchange’s
[Release No. 34–78527; File No. SR– any comments it received on the
BatsBZX–2016–47] Official Closing Price. If the Exchange
proposed rule change. The text of these makes that announcement after 3:00
Self-Regulatory Organizations; Bats statements may be examined at the p.m., EST, the Securities Information
BZX Exchange, Inc.; Notice of Filing places specified in Item IV below. The Processor (‘‘SIP’’) would calculate a
and Immediate Effectiveness of a Exchange has prepared summaries, set Volume Weighted Average Price
Proposed Rule Change To Establish a forth in sections A, B, and C below, of
(‘‘VWAP’’), described in more detail
Closing Contingency Procedure the most significant parts of such
below. Whether the announcement is
statements.
made before or after 3:00 p.m., EST, the
August 10, 2016.
A. Self-Regulatory Organization’s SIP would publish the Exchange’s
Pursuant to section 19(b)(1) of the Statement of the Purpose of, and Official Closing Price on the Exchange’s
Securities Exchange Act of 1934 (the Statutory Basis for, the Proposed Rule behalf either: (1) Based on a message
‘‘Act’’),1 and Rule 19b–4 thereunder,2 Change from the Exchange’s back-up exchange
notice is hereby given that on August 2, or (2) based on the VWAP calculation.
2016, Bats BZX Exchange, Inc. (the 1. Purpose
‘‘Exchange’’ or ‘‘BZX’’) filed with the Background Designation of Back-Up
Securities and Exchange Commission
The Exchange has robust and resilient The Exchange proposes to designate
(‘‘Commission’’) the proposed rule
systems that are designed to ensure fair NYSE Arca as its official back-up
change as described in Items I and II
and orderly markets, including multiple exchange. The Exchange believes that
below, which Items have been prepared
redundancies and back-up systems. NYSE Arca is best positioned to serve as
by the Exchange. The Exchange has
Currently, the Exchange’s Official its back-up for two primary reasons: (1)
designated this proposal as a ‘‘non-
Closing Price is defined in Rule NYSE Arca and the Exchange’s
controversial’’ proposed rule change
11.23(a)(3) as the price disseminated to membership substantially overlaps; (2)
pursuant to section 19(b)(3)(A) of the
the consolidated tape as the market NYSE Arca already operates an effective
Act 3 and Rule 19b–4(f)(6) thereunder,4
center closing trade. In this proposal, closing cross that it can use to execute
which renders it effective upon filing
the Exchange is proposing to amend a closing transaction in the Exchange’s
with the Commission. The Commission
Rule 11.23 to establish Closing listed securities.6 In the event the
is publishing this notice to solicit
Contingency Procedures. Exchange is unable to execute a closing
comments on the proposed rule change As proposed, the Exchange, as a auction, the Exchange’s members that
from interested persons. listing market, will designate a back-up are also NYSE Arca members should be
I. Self-Regulatory Organization’s exchange to provide an official closing technically prepared to transfer
Statement of the Terms of the Substance price in the event that the Exchange’s liquidity to NYSE Arca to ensure a
of the Proposed Rule Change market is impaired and unable to deeply liquid closing transaction.
execute a closing auction for all or a The Operating Committees for the
The Exchange is proposing to
subset of listed securities under the CQ/CT and Nasdaq UTP Plans have
establish a Closing Contingency
standard closing procedures set forth in already voted to modify the SIPs to
Procedure that would enable the
Rule 11.23(c). The Exchange would support this proposal. Specifically, each
Exchange to designate a back-up
invoke the Closing Contingency exchange that is designated as a back-up
exchange to provide an official closing
Procedures only after it determines that exchange (Nasdaq and NYSE Arca), will
price in the event that the Exchange’s
market is impaired and unable to disseminate via the SIPs an official
5 See Securities Exchange Act Release Nos. 78015
execute a closing auction for all or a closing price in every listed security
(June 8, 2016), 81 FR 38747 (June 14, 2016) (SR–
subset of listed securities under the NYSE–2016–18) (‘‘Notice of Filings of Amendment marked with the .M sale condition code.
Exchange’s standard closing procedures. No. 1, and Order Granting Accelerated Approval of The SIPs will apply the following
asabaliauskas on DSK3SPTVN1PROD with NOTICES
The Commission has recently approved Proposed Rule Changes, as Modified by procedures:
Amendment No. 1, To Provide for How the
substantially similar proposals Exchanges Would Determine an Official Closing
submitted by the New York Stock Price if the Exchanges Are Unable To Conduct a 6 The Exchange notes that quotations and
Closing Transaction’’); 78014 (June 8, 2016), 81 FR executions for Exchange-listed securities are
10 17 38755 (June 14, 2016) (SR–NASDAQ–2016–035) represented on Tape B, which is also where
CFR 200.30–3(a)(12).
1 15
(‘‘Notice of Filing of Amendment No. 1, and Order information regarding NYSE Arca and NYSE MKT
U.S.C. 78s(b)(1). Granting Accelerated Approval of a Proposed Rule listed securities is represented. The Exchange also
2 17 CFR 240.19b–4.
Change, as Modified by Amendment No. 1, To notes that like the Exchange, NYSE Arca trades
3 15 U.S.C. 78s(b)(3)(A).
Establish Secondary Contingency Procedures for the securities listed on all tapes (Tapes A, B and C),
4 17 CFR 240.19b–4(f)(6). Exchange’s Closing Cross’’). including securities listed on the Exchange.
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Document Created: 2016-08-16 03:20:37
Document Modified: 2016-08-16 03:20:37
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 81 FR 54626 |
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