82 FR 23913 - Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish Fees for Government Securities Division CCIT Members, and Netting Members That Engage in CCIT Transactions

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 99 (May 24, 2017)

[Federal Register Volume 82, Number 99 (Wednesday, May 24, 2017)]
[Notices]
[Pages 23913-23915]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-10585]



[[Page 23913]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80717; File No. SR-FICC-2017-013]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Establish Fees for Government Securities Division CCIT Members, and 
Netting Members That Engage in CCIT Transactions

May 18, 2017.
    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 16, 2017, 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 Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of modifications to the Fee 
Structure in the Government Securities Division (``GSD'') Rulebook 
(``GSD Rules'') \5\ in order to establish fees for (i) CCIT Members, 
including those that participate through a Joint Account, and (ii) 
Netting Members that engage in CCIT Transactions.
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    \5\ Capitalized terms used herein and not otherwise defined 
shall have the meaning assigned to such terms in the GSD Rules, 
available at www.dtcc.com/~/media/Files/Downloads/legal/rules/
ficc_gov_rules.pdf.
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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
    FICC has established the CCITTM Service, which enables 
Netting Members that participate in the GCF Repo Service to engage in 
CCIT Transactions with CCIT Members and submit those transactions to 
FICC for clearing.\6\ Accordingly, FICC is proposing rule changes to 
amend the Fee Structure in the GSD Rules in order to establish fees for 
(1) CCIT Members, including those that participate through a Joint 
Account,\7\ and (2) Netting Members that engage in CCIT Transactions, 
as further described below.
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    \6\ See Securities Exchange Act Release Nos. 80574 (May 2, 
2017), 82 FR 21439 (May 8, 2017) (SR-FICC-2017-005) and 80546 (April 
27, 2017), 82 FR 20652 (May 3, 2017) (SR-FICC-2017-803).
    \7\ With respect to CCIT Members participating through a Joint 
Account, the proposed fees that are the subject of this filing would 
be applied at the Joint Account level.
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Section I.D (Trade Comparison Fees, Modifications and Cancellations)
    Section I.D of the Fee Structure (Trade Comparison Fees, 
Modifications and Cancellations) would be amended to exclude CCIT 
Transactions from the 25 cents per request charge for modification or 
cancellation of either side of a trade or Repo Transaction, consistent 
with the treatment of GCF Repo Transactions. This section also would be 
amended to provide that the charge to a Member for the entry of a 
request by such Member to modify or cancel a side of a CCIT Transaction 
would be 5 cents per 50 million of par value, consistent with the 
treatment of GCF Repo Transactions.
Section I.E (Trade Comparison Fees, Locked-In Trade Data)
    Section I.E of the Fee Structure (Trade Comparison Fees, Locked-In 
Trade Data) would be amended to provide that the ``Trade Submission'' 
fee associated with the submission of trade data to FICC on a Locked-In 
Trade basis would not apply to CCIT Transactions, consistent with the 
treatment of GCF Repo Transactions. This section also would be amended 
to provide that, consistent with the treatment of GCF Repo 
Transactions, non-Inter-Dealer Broker Members would be subject to a 
onetime recording fee for the processing and reporting by FICC of a 
CCIT Transaction submitted to FICC on a Locked-In Trade basis in the 
amount of 7 cents per million gross dollar amount of such CCIT 
Transaction (with a minimum charge of $2.50).
Section I.F (Trade Comparison Fees, CCIT Transactions Submitted for 
Bilateral Comparison)
    A new Section I.F of the Fee Structure (Trade Comparison Fees, CCIT 
Transactions Submitted for Bilateral Comparison) would be added by this 
filing to provide that, consistent with the treatment of GCF Repo 
Transactions and CCIT Transactions submitted to FICC on a Locked-In 
Trade basis, CCIT Members and Netting Members would be subject to a 
onetime recording fee for the processing and reporting by FICC of a 
CCIT Transaction submitted to FICC on a bilateral basis in the amount 
of 7 cents per million gross dollar amount of such CCIT Transaction 
(with a minimum charge of $2.50).
Section III.A.1 (Netting Fee and Charges, Netting Fee)
    Section III.A.1 of the Fee Structure (Netting Fee and Charges, 
Netting Fee) would be amended to provide that the fees applied to 
netted Compared Trades, Start Legs of Repo Transactions, Close Legs of 
Repo Transactions, Fail Deliver Obligations and Fail Receive 
Obligations on a per side and par value basis would not apply to CCIT 
Transactions, consistent with the treatment of GCF Repo Transactions.
Section III.D.4 (Netting Fee and Charges, Clearance Charges)
    Section III.D.4 of the Fee Structure (Netting Fee and Charges, 
Clearance Charges) describes clearing bank fees and charges incurred by 
FICC for the services FICC performs in connection with Netting Members' 
activity. Subsection (c) of this Section III.D.4, which describes The 
Bank of New York Mellon (``BNY'') fee on each GCF Repo Deliver 
Obligation that FICC creates from its BNY account, would be amended to 
provide that, when this BNY fee is assessed on FICC's GCF Repo Deliver 
Obligations at BNY that are created versus CCIT Members at BNY, the fee 
would be calculated as 1 basis point per annum on a dollar amount of 
the underlying CCIT Transactions, and the fee would be passed through 
to the Dealer Account at BNY of the Netting Member that is the Repo 
Party to such CCIT Transactions. In addition, in order to distinguish 
it from the treatment of CCIT Transactions, FICC is proposing to amend 
this section to state that the fees assessed on FICC's GCF Repo Deliver 
Obligations that are created versus Netting Members would be allocated 
to

[[Page 23914]]

Dealer Accounts at BNY and to Dealer Accounts at J.P. Morgan Chase 
(``JPM'').
Section III.E (Netting Fee and Charges, Repo Transaction Processing 
Fee)
    Section III.E of the Fee Structure (Netting Fee and Charges, Repo 
Transaction Processing Fee) would be amended to exclude CCIT 
Transactions from the fee imposed on term Repo Transactions that have 
been compared and netted, but which have not yet settled, consistent 
with the treatment of GCF Repo Transactions. This section also would be 
amended to provide that, consistent with the treatment of a GCF Repo 
Transaction, for a CCIT Transaction that has been compared and netted, 
but which has not yet settled, a processing fee would be calculated as 
follows:
    (1) For all Netting Members and CCIT Members, a 0.04 basis point 
charge (i.e., four hundredths of a basis point) would be applied to the 
gross dollar amount of such CCIT Transaction; and
    (2) a 0.08 basis point charge (i.e., 8 hundredths of a basis point) 
would be applied to the net dollar amount of a Netting Member's or CCIT 
Member's Collateral Allocation Entitlements and Collateral Allocation 
Obligations.
    These fees would be applied each calendar day, but calculated on an 
annualized basis, as currently provided in this section.
Section III.G (Netting Fee and Charges, Repo Collateral Substitution 
Fees)
    Section III.G of the Fee Structure (Netting Fee and Charges, Repo 
Collateral Substitution Fees) would be amended to exclude CCIT 
Transactions from the processing charge associated with repo collateral 
substitution requests. To be consistent with the treatment of GCF Repo 
Transactions, FICC is amending this section to state that GCF Repo 
Transactions would also be excluded from the processing charge 
associated with repo collateral substitution requests.
Section IV (Minimum Monthly Fee) and Section V (Fees Applicable to 
Additional Accounts)
    Under Sections IV and V of the Fee Structure (Minimum Monthly Fee 
and Fees Applicable to Additional Accounts), CCIT Members would be 
excluded from the minimum monthly account fees charged to Comparison-
Only Members and Netting Members for their primary GSD accounts and 
fees for any additional accounts they maintain with GSD.
Section VIII (Definition)
    Section VIII of the Fee Structure (Definition) would be amended to 
exclude CCIT Transactions from the requirement that, for purposes of 
the Fee Structure, a ``side'' of a trade or transaction, and a Start 
Leg or a Close Leg of a Repo Transaction, be limited to $50 million 
increments, consistent with the treatment of GCF Repo Transactions.
Member Impact
    Participation in the CCIT Service is voluntary. Institutional cash 
lenders that wish to become CCIT Members, and Netting Members that wish 
to participate in the CCIT Service, have an opportunity to review the 
terms of the CCIT Service and determine if they would like to 
participate. Choosing to participate in the CCIT Service would subject 
these entities to all of the rules applicable to the CCIT Service, 
including the fees reflected in GSD's Fee Structure as proposed by this 
filing.
2. Statutory Basis
    Section 17A(b)(3)(D) of the Act requires that the GSD Rules 
``provide for the equitable allocation of reasonable dues, fees, and 
other charges among its participants.'' \8\ FICC believes the proposed 
fees are equitably allocated among GSD Members because these fees would 
only be imposed upon those GSD Members that chose to utilize the CCIT 
Service. FICC also believes the proposed fees are reasonable because 
these fees would allow FICC to recover the costs (including pass-
through costs from certain third parties) of providing the CCIT Service 
from those GSD Members that enjoy its benefits. Therefore, FICC 
believes the proposed fees are consistent with the requirements of 
Section 17A(b)(3)(D) of the Act.
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    \8\ 15 U.S.C. 78q-1(b)(3)(D).
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(B) Clearing Agency's Statement on Burden on Competition

    FICC believes the proposed fees may impose a burden on competition 
by limiting participation in the CCIT Service to institutional cash 
lenders and Netting Members that are willing to pay the fees associated 
with their participation in the CCIT Service. However, FICC believes 
any burden on competition that may result from the proposed fees would 
be necessary and appropriate in furtherance of the purposes of the Act, 
as permitted by Section 17A(b)(3)(I) of the Act,\9\ for the reason 
described below.
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    \9\ 15 U.S.C. 78q-1(b)(3)(I).
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    Although the proposal would impose fees on CCIT Members and Netting 
Members for their use of the CCIT Service, FICC believes that any 
burden on competition that may result from the proposal would be 
necessary and appropriate because the proposed fees would provide FICC 
with the ability to achieve and maintain its operating margin, recover 
the cost of providing the CCIT Service and also pass through certain 
third-party fees that FICC would incur in connection with the CCIT 
Service. Moreover, as described in Section II.(A)1. above, 
participation in the CCIT Service is entirely voluntary, and, if 
Netting Members and their institutional counterparties do not wish to 
pay the fees associated with the service, they would be able to enter 
into non-cleared tri-party repo transactions in GCF Repo eligible asset 
classes outside of GSD.

(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 change have not been 
solicited or received. FICC will notify the Commission of any written 
comments received by FICC.

III. Date of Effectiveness of the Proposed Rule Change, and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and paragraph (f) of Rule 19b-4 
thereunder.\11\ 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-FICC-2017-013 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange

[[Page 23915]]

Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-FICC-2017-013. 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 available publicly. All 
submissions should refer to File Number SR-FICC-2017-013 and should be 
submitted on or before June 14, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-10585 Filed 5-23-17; 8:45 am]
 BILLING CODE 8011-01-P