83 FR 39143 - Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Codify the Processing of Conditional Prepayment Rate Claims in the MBSD Rules and Make Other Changes
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 153 (August 8, 2018)
Federal Register Volume 83, Issue 153 (August 8, 2018)
| Page Range | 39143-39147 | |
| FR Document | 2018-16901 |
[Federal Register Volume 83, Number 153 (Wednesday, August 8, 2018)] [Notices] [Pages 39143-39147] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-16901] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-83767; File No. SR-FICC-2018-006] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Codify the Processing of Conditional Prepayment Rate Claims in the MBSD Rules and Make Other Changes August 2, 2018. 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 26, 2018, 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. 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 change consists of amendments to the FICC Mortgage-Backed Securities Division (``MBSD'') Clearing Rules (``MBSD Rules'') in order to (i) add terms governing MBSD's [[Page 39144]] processing of conditional prepayment rate (``CPR'') claims to the MBSD Rules and (ii) make certain clarifications and corrections in the MBSD Rules, as described in greater detail below.\3\ --------------------------------------------------------------------------- \3\ Capitalized terms used herein and not otherwise defined shall have the meaning assigned to such terms in the MBSD Rules, available at http://www.dtcc.com/legal/rules-and-procedures. --------------------------------------------------------------------------- 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 is proposing to amend the MBSD Rules in order to (i) add terms governing MBSD's processing of CPR claims to the MBSD Rules and (ii) make certain clarifications and corrections in the MBSD Rules. (i) Background As discussed in more detail below, the submission of CPR claims is an established process that occurs today pursuant to FICC's procedures. FICC is proposing to add provisions to the MBSD Rules to formalize this process in the MBSD Rules. Mortgage pools \4\ are often traded in To-Be-Announced (TBA) trades, which are trades for which the actual identities of and/or the number of pools underlying each trade are unknown at the time of trade execution. MBSD guidelines provide that two business days prior to the established settlement date of the TBA settlement obligations, the Clearing Member that has an obligation to deliver pools for the TBA transaction (i.e., the ``seller'') must allocate the pools to be delivered.\5\ Pursuant to the MBSD Rules, Clearing Members may substitute an underlying pool after it has been allocated with respect to a pool deliver obligation by providing instructions to FICC.\6\ --------------------------------------------------------------------------- \4\ A pool is a collection of mortgage loans or other collateral assembled by an originator or master services as collateral for a mortgaged-back security. \5\ See Section 1 of MBSD Rule 7, supra note 3, which provides that ``[i]n order for the Corporation to process data for Pool Comparison, the Corporation must receive data from the long and short sides of the allocated pool submission in the format and within the timeframes specified in guidelines issued by the Corporation from time to time.'' \6\ Section 5 of MBSD Rule 8, supra note 3. Section 5 of MBSD Rule 8 provides that substitutions may be made pursuant to the communication links, formats, timeframes and deadlines established by FICC and that a Clearing Member with a pool receive obligation (i.e., the ``buyer'') must accept the substituted pool in accordance with FICC's procedures. Id. --------------------------------------------------------------------------- CPR is the percentage of the outstanding loan balance for a pool that is expected to be repaid over a one year period.\7\ For instance, a 10% CPR means that 10% of a pool's outstanding loan balance is expected to be repaid in the next year. A CPR claim arises when an underlying TBA pool is allocated or substituted with a pool that pays down at a faster rate (i.e., has a higher CPR) than the average pay down rate for pools of the same type as the underlying pool being replaced.\8\ The result is that the buyer is receiving a pool with less value than anticipated based on the TBA terms. --------------------------------------------------------------------------- \7\ See definition of ``CPR'' in Chapter 2 of the SIFMA Guidelines. SIFMA Guidelines refer generally to the guidelines for good delivery of mortgage-backed securities as promulgated from time to time by The Securities Industry and Financial Markets Association (``SIFMA''), an industry trade group. See definition of ``SIFMA Guidelines'' in MBSD Rule 1, supra note 3. The SIFMA Guidelines, located at https://www.sifma.org/resources/general/tba-market-governance/ under ``Uniform Practices Manual,'' are trading, clearing and settlement guidelines prepared by SIFMA intended to reflect common industry practices relating to confirming, comparing and settling mortgage-backed securities. \8\ See Section A.16 of Chapter 8 of the SIFMA Guidelines, supra note 7. --------------------------------------------------------------------------- The industry currently has a process pursuant to which a buyer may make a CPR claim against the seller as set forth in the SIFMA Guidelines.\9\ The CPR claim process is intended to compensate the buyer for the excess amount that it is paying for the pool being delivered.\10\ Pursuant to SIFMA Guidelines, an entity is entitled to make a CPR claim if (i) the allocation or substitution giving rise to the CPR claim occurred after the factor release date \11\ following the scheduled contractual settlement date relating to the trade, (ii) the pools involved in the claim meet the criteria for fast paying pools in accordance with SIFMA Guidelines, (iii) the amount of the CPR claim is $10,000 or greater, or, in the case that an entity is submitting a re- transmittal \12\ of a CPR claim, the CPR claim is $500 or greater, and (iv) 90% of the buyer's claimable unit has settled.\13\ --------------------------------------------------------------------------- \9\ See id. \10\ See Section A.16.d of Chapter 8 of the SIFMA Guidelines, supra note 7. \11\ The term ``factor release date'' means, with respect to a pool, the date on which the Federal National Mortgage Association (``Fannie Mae''), the Federal Home Loan Mortgage Corporation (``Freddie Mac'') or the Government National Mortgage Association (``Ginnie Mae''), as applicable, release the ``factor'' that represents the percentage of the agency's original balance of the pool that remains outstanding as of such date. \12\ A re-transmittal of a CPR claim occurs when a party with the pool deliver obligation passes the CPR claims it received to the entities that sent it the pools it used for delivery. \13\ See Section A.16 of Chapter 8 of the SIFMA Guidelines, supra note 7. --------------------------------------------------------------------------- FICC currently processes CPR claims that it receives from Clearing Members in a manner consistent with SIFMA Guidelines, except that (i) FICC currently uses a different definition of ``claimable unit'' as discussed below and (ii) for re-transmittals, FICC's current procedures provide a minimum threshold of $5,000 (rather than $500 as set forth in the SIFMA Guidelines). FICC is proposing to codify its existing CPR claims process in the MBSD Rules, including adding a provision providing that a Clearing Member's cash settlement obligations would include the positive or negative amount of any valid CPR claim. The proposed MBSD CPR claims process would generally follow the CPR claims process set forth in the SIFMA Guidelines and MBSD's current CPR claims process, with the following exceptions: (A) Definition of Claimable Unit FICC is proposing to add to the MBSD Rules two definitions of ``claimable unit,'' the use of which would depend on the type of transaction. Pursuant to SIFMA Guidelines and FICC's current process, CPR claims are based on a ``claimable unit'' which defines the pool or group of pools that are included in a particular CPR claim.\14\ Pursuant to SIFMA Guidelines a claimable unit is based on all pools allocated for a trade between factor release dates that have the same underlying TBA characteristics, such as product, coupon, trade date, settlement date and price.\15\ --------------------------------------------------------------------------- \14\ See Section A.16.b of Chapter 8 of the SIFMA Guidelines, supra note 7. \15\ See Section A.16.f(i)(7) of Chapter 8 of the SIFMA Guidelines, supra note 7. --------------------------------------------------------------------------- FICC currently processes CPR claims using a different definition of claimable unit than the SIFMA definition. FICC's CPR claims process currently uses a definition of claimable unit based on characteristics of pools after MBSD Pool Netting \16\ takes place rather than based on underlying TBA characteristics. The [[Page 39145]] Pool Netting process generally reduces the number of pool settlements by aggregating and matching offsetting allocated pools submitted by Clearing Members to arrive at a single net position per counterparty in a particular pool number. If a pool obligation is a result of Pool Netting, FICC is unable to track the pool obligation to an original TBA trade or trades and would be unable to group pool obligations for CPR claims based on TBA characteristics as provided in SIFMA Guidelines. --------------------------------------------------------------------------- \16\ Pursuant to the MBSD Rules, the term ``Pool Netting'' means the service provided to Clearing Members, as applicable, and the operations carried out by FICC in the course of providing such service in accordance with MBSD Rule 8. MBSD Rule 1, supra note 3. --------------------------------------------------------------------------- FICC is proposing to use the same definition of claimable unit for CPR claims as SIFMA Guidelines if the pool obligations upon which the CPR claims are based have not been through MBSD Pool Netting, as provided in subsection (1) below. FICC is proposing to use a different definition of claimable unit for CPR claims if the pool obligations upon which the CPR claims are based have been through the MBSD Pool Netting process, as described in subsection (2) below. (1) Proposed Definition of Claimable Unit Consistent With SIFMA Guidelines for CPR Claims That Are Not a Result of Pool Netting FICC is proposing to use the same definition of claimable unit used in the SIFMA Guidelines for CPR claims based on pool obligations that are not a result of Pool Netting. This definition would be used for pool allocations or substitutions for pool obligations that have been allocated after the factor release date because pool obligations allocated after the factor release date do not go through the Pool Netting process. As a result, FICC would be able to track the pool obligation to an original TBA trade, which would allow FICC to group the pool obligation with other pool obligations based on TBA characteristics. This proposed definition would be the same as the definition used in the SIFMA Guidelines but would be different from the definition used in FICC's existing CPR claims process. (2) Proposed Definition of Claimable Unit Different From SIFMA Guidelines for CPR Claims That Are a Result of Pool Netting FICC is proposing to use a different definition of a claimable unit from the SIFMA Guidelines definition for CPR claims based on pool obligations that are a result of Pool Netting. FICC is proposing to define a claimable unit for such pool obligations based on pool characteristics after Pool Netting, rather than based on the original TBA pool characteristics. This definition would be used for substitutions for pool obligations that are a result of Pool Netting because FICC would be unable to track the pool obligation to an original TBA trade and thus unable to group such pool obligation with other pool obligations based on TBA characteristics. This proposed definition would be different than the definition used in the SIFMA Guidelines but would be the same as the definition currently used in FICC's existing CPR claims process. (B) Re-Transmittal Threshold FICC is proposing to add to the MBSD Rules two minimum thresholds ($500 and $5,000) for re-transmittals \17\ of CPR claims, the use of which would depend on the type of transaction. The minimum threshold for a re-transmittal of a CPR claim under SIFMA Guidelines is $500.\18\ FICC's current process provides that the minimum threshold for re- transmittals is $5,000. FICC is proposing to use the $500 re- transmittal minimum threshold for allocations (and related substitutions) where the allocations were made after the applicable factor release date. This $500 proposed minimum threshold would be the same as the minimum threshold in the SIFMA Guidelines but different from FICC's existing CPR claims process. FICC is proposing to use a $5,000 re-transmittal threshold for substitutions relating to allocations that were made prior to the factor release date following the contractual settlement date. This $5,000 proposed minimum threshold would be different than the minimum threshold in the SIFMA Guidelines but would be the same as the minimum threshold used in FICC's existing CPR claims process. --------------------------------------------------------------------------- \17\ See supra note 10. \18\ See Section A.16.f(i)(6) of Chapter 8 of the SIFMA Guidelines, supra note 7. --------------------------------------------------------------------------- FICC is proposing to change its current practice and add a proposed $500 re-transmittal threshold for certain allocations described above in the MBSD Rules in order to be more consistent with SIFMA Guidelines and established industry practice. FICC is proposing to use a higher $5,000 threshold, which is consistent with its current process, for re- transmittals for certain substitutions described above to avoid having to process multiple smaller transactions, which FICC believes would likely be administratively burdensome. (ii) Proposed MBSD Rule Changes To codify the CPR claims process as described above, the proposed rule change would add a description of the CPR claim process in a new Section 10 of MBSD Rule 9, including a defined term for ``CPR Claim.'' In addition, the proposed rule change would specify the validation process for CPR claims, which, as described above, would codify existing FICC practices relating to CPR claims and provide that the process for CPR claims is consistent with SIFMA Guidelines, in each case, with the exceptions noted above in Items II(A)1(i)(A) and (B). Specifically, the proposed rule change would specify that CPR claims submitted would be reviewed by FICC to validate the following: (i) The claimable unit with respect to the CPR claim meets the criteria for fast paying pools as set forth in SIFMA Guidelines, (ii) the CPR claim amount is $10,000 or greater, unless the CPR claim is a re- transmittal of a CPR claim, in which case, (a) if the CPR claim relates to an allocation of a pool effected after the factor release date following the contractual settlement date and/or substitution of related pools, the amount is $500 or greater or (b) if the CPR claim relates to a substitution of a pool that was allocated prior to the factor release date following the contractual settlement date, the amount is $5,000 or greater and (iii) 90% of the Clearing Member's claimable unit has settled. Consistent with FICC's current CPR claims process, the proposed rule change would also specify that (1) FICC maintains the right to process CPR claims with no minimum denomination, (2) CPR claims may be apportioned to more than one participant, (3) CPR claims may be comprised of both debits and credits, (4) FICC would process all CPR claims on the Class ``B'' settlement date in the month following the transmittal month and (5) FICC would notify the Clearing Member that the CPR claim has been rejected if the CPR claim is determined to be invalid. In addition, the proposed rule change would specify that FICC shall not guaranty CPR claim payments, and any credit to be received with respect to a CPR claim would be reduced to the extent the corresponding debit in connection with a CPR claim is not paid. To ensure that Clearing Members understand the potential credits and debits relating to CPR claims, the proposed rule change would add credits and debits relating to CPR claims in Section 7 of MBSD Rule 11 as items for end of day cash balance computations. To further describe the CPR claims process as set forth above, a cross-reference for the defined term ``CPR Claim'' and new defined terms ``Claimable Unit'' and ``Factor Release Date'' would be added to MBSD Rule 1, which are consistent with existing FICC [[Page 39146]] practices relating to CPR claims and with SIFMA Guidelines, in each case, with the exceptions noted above in Items II(A)1(i)(A) and (B). The definitions for Fannie Mae, Freddie Mac and Ginnie Mae would be corrected in MBSD Rule 1 to be consistent with industry practice and with their usage throughout the MBSD Rules. In addition, the definition of ``SIFMA Guidelines'' would be clarified by adding a link identifying the location of the SIFMA Guidelines on the SIFMA website. 2. Statutory Basis Section 17A(b)(3)(F) of the Act \19\ requires, in part, that the MBSD Rules be designed to promote the prompt and accurate clearance and settlement of securities transactions. --------------------------------------------------------------------------- \19\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- FICC believes that the proposed changes to add the MBSD's CPR claims process to the MBSD Rules are consistent with Section 17A(b)(3)(F) of the Act.\20\ The proposed rule changes to add the CPR claims process to the MBSD Rules would provide a standard and efficient mechanism in the MBSD Rules to compensate a buyer that receives faster paying pools that is consistent with accepted industry standards as set forth in the SIFMA Guidelines. While FICC provides a process for CPR claims pursuant to its existing procedures, the proposed changes would codify such procedures in the MBSD Rules and would make MBSD's CPR claims process more consistent with SIFMA Guidelines, with the exceptions noted above in Items II(A)1(i)(A) and (B). Having the CPR claims process stated in the MBSD Rules would enable Clearing Members to understand how CPR claims would be validated and processed through FICC's facilities and how FICC's CPR claims process would differ from SIFMA Guidelines with respect to the definition of claimable unit and the re-transmittal minimum threshold as set forth above. Therefore, allowing Clearing Members to make and receive CPR claims through the use of FICC facilities in a manner that is consistent with industry standards and that is clearly stated in the MBSD Rules would promote the prompt and accurate clearance and settlement of securities transactions, consistent with the requirements of Section 17A(b)(3)(F) of the Act.\21\ --------------------------------------------------------------------------- \20\ Id. \21\ Id. --------------------------------------------------------------------------- FICC believes that the proposed changes correcting the definitions of Fannie Mae, Freddie Mac and Ginnie Mae are consistent with Section 17A(b)(3)(F) of the Act \22\ because the corrections would update such terms to reflect usage in the industry and current usage in the MBSD Rules. As such, the proposed changes would enable Clearing Members to have a better understanding of the MBSD Rules and the usage of such terms therein, and thereby assist in promoting the prompt and accurate clearance and settlement of securities transactions, consistent with the requirements of Section 17A(b)(3)(F) of the Act.\23\ --------------------------------------------------------------------------- \22\ Id. \23\ Id. --------------------------------------------------------------------------- FICC believes that the proposed change clarifying the definition of SIFMA Guidelines by adding a link identifying the location of the SIFMA Guidelines on the SIFMA website is consistent with Section 17A(b)(3)(F) of the Act \24\ because the proposed change would enhance clarity of the MBSD Rules by providing Clearing Members with an easier method of finding the SIFMA Guidelines that are referenced in the MBSD Rules. Providing clarity in the location of the SIFMA Guidelines would enable Clearing Members to more quickly locate the SIFMA Guidelines when such Clearing Members are reading MBSD Rules that reference the SIFMA Guidelines, thus making it easier for such Clearing Members to review such MBSD Rules and understand their rights and obligations thereunder. As such, the proposed change would assist in promoting the prompt and accurate clearance and settlement of securities transactions, consistent with the requirements of Section 17A(b)(3)(F) of the Act.\25\ --------------------------------------------------------------------------- \24\ Id. \25\ Id. --------------------------------------------------------------------------- Rule 17Ad-22(e)(23)(ii) under the Act \26\ requires FICC to establish, implement, maintain and enforce written policies and procedures reasonably designed to provide sufficient information to enable participants to identify and evaluate the risks, fees, and other material costs they incur by participating in the covered clearing agency. The proposed rule changes to add CPR claims and corresponding credits and debits in Section 7 of MBSD Rule 11 as items for end of day cash balance computations are consistent with this provision and would help ensure that the charges relating to CPR claims are clear to Clearing Members. Having clear provisions in this regard would enable Clearing Members to better understand the operation of the pool settlement charges by providing sufficient information for Clearing Members to identify potential debits and credits that may be incurred with respect to CPR claims. As such, FICC believes the proposed rule change is consistent with Rule 17Ad-22(e)(23)(ii) of the Act.\27\ --------------------------------------------------------------------------- \26\ 17 CFR 240.17Ad-22(e)(23)(ii). \27\ Id. --------------------------------------------------------------------------- (B) Clearing Agency's Statement on Burden on Competition FICC believes that the proposed rule changes to add the CPR claims process in the MBSD Rules as described above could have an impact on competition because the CPR claims process would result in CPR claim charges for Clearing Members against whom CPR claims are processed. Specifically, FICC believes this proposed rule change could burden competition by negatively affecting such Clearing Members' operating costs. While such Clearing Members may experience increases in their charges as a result of CPR claims processed through FICC, FICC does not believe such change would in and of itself mean that the burden on competition is significant. Regardless of whether the burden on competition is deemed significant, FICC believes any burden on competition that is created by the proposed rule changes to add the proposed CPR claims process would be necessary and appropriate in furtherance of the purposes of the Act, as permitted by Section 17A(b)(3)(I) of the Act.\28\ --------------------------------------------------------------------------- \28\ 15 U.S.C. 78q-1(b)(3)(I). --------------------------------------------------------------------------- FICC believes the proposed rule changes to include the MBSD CPR claims process in the MBSD Rules would be necessary in furtherance of the purposes of the Act.\29\ FICC believes that allocations or substitutions by sellers of TBA pool transactions with a pool that pays down at a faster rate than the average pay down rate for pools of the same type as the underlying pool being replaced can create uncertainty regarding the value of pools being received by the buyer. Persistent delivery of faster paying pools could create market inefficiencies, increase credit risk for market participants and heighten overall systemic risk. The proposed rule changes to add the CPR claims process to the MBSD Rules would mitigate against this systemic risk by (i) describing the types of CPR claims that FICC would process and thereby discouraging allocations or substitutions using faster paying pools that may give rise to CPR claims and (ii) providing a clear process in the MBSD Rules to compensate a buyer that receives such faster paying pools. Therefore, FICC believes the proposed [[Page 39147]] rule changes to add the MBSD CPR claims process to the MBSD Rules would be necessary in furtherance of the purposes of the Act, as permitted by Section 17A(b)(3)(I) of the Act.\30\ --------------------------------------------------------------------------- \29\ Id. \30\ Id. --------------------------------------------------------------------------- FICC also believes any burden on competition that is created by the proposed rule changes to add the MBSD CPR claims process in the MBSD Rules would be appropriate in furtherance of the purposes of the Act.\31\ Under the proposal, the MBSD CPR claims process would be consistent, with the exceptions noted above in Items II(A)1(i)(A) and (B), with SIFMA Guidelines, which represent the current accepted industry practice with respect to CPR claims. Therefore, the MBSD CPR claims process would provide a mechanism by which Clearing Members could make and receive CPR claims that would be consistent with accepted industry practice. In addition, CPR claims would be imposed upon Clearing Members that choose to allocate or substitute using faster paying pools and no Clearing Members would be disproportionally impacted. As such, FICC believes the proposed rule changes to add the CPR claims process that is consistent, to the extent practicable and appropriate, with SIFMA Guidelines would be appropriate in furtherance of the purposes of the Act, as permitted by Section 17A(b)(3)(I) of the Act.\32\ --------------------------------------------------------------------------- \31\ Id. \32\ Id. --------------------------------------------------------------------------- FICC does not believe there would be an impact on competition with the proposed rule changes that would update the definitions of Fannie Mae, Freddie Mac, Ginnie Mae and SIFMA Guidelines.\33\ These changes would provide enhanced clarity to the MBSD Rules and would not affect Clearing Members' rights and obligations. As such, FICC believes that these proposed rule changes would not have any impact on competition. --------------------------------------------------------------------------- \33\ Id. --------------------------------------------------------------------------- (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 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 such 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 [email protected]. Please include File Number SR-FICC-2018-006 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-2018-006. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of FICC and on DTCC's website (http://dtcc.com/legal/sec-rule-filings.aspx). All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-FICC-2018-006 and should be submitted on or before August 29, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\34\ --------------------------------------------------------------------------- \34\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-16901 Filed 8-7-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 153 / Wednesday, August 8, 2018 / Notices 39143
C. Self-Regulatory Organization’s provisions of 5 U.S.C. 552, will be disapprove the proposed rule change.5
Statement on Comments on the available for website viewing and On June 13, 2018, the Commission
Proposed Rule Change Received From printing in the Commission’s Public instituted proceedings under Section
Members, Participants, or Others Reference Room, 100 F Street NE, 19(b)(2)(B) of the Exchange Act 6 to
No written comments were solicited Washington, DC 20549, on official determine whether to approve or
or received with respect to the proposed business days between the hours of disapprove the proposed rule change.7
rule change. 10:00 a.m. and 3:00 p.m. Copies of the The Commission received one comment
filing also will be available for letter on the proposed rule change.8
III. Date of Effectiveness of the inspection and copying at the principal On July 26, 2018, the Exchange
Proposed Rule Change and Timing for office of the Exchange. All comments withdrew the proposed rule change
Commission Action received will be posted without change. (SR–CHX–2018–001).
Within 45 days of the date of Persons submitting comments are For the Commission, by the Division of
publication of this notice in the Federal cautioned that we do not redact or edit Trading and Markets, pursuant to delegated
Register or within such longer period personal identifying information from authority.9
up to 90 days (i) as the Commission may comment submissions. You should
designate if it finds such longer period submit only information that you wish Eduardo A. Aleman,
to be appropriate and publishes its to make available publicly. All Assistant Secretary.
reasons for so finding or (ii) as to which submissions should refer to File [FR Doc. 2018–16889 Filed 8–7–18; 8:45 am]
the self-regulatory organization Number SR–NYSEArca–2018–55, and BILLING CODE 8011–01–P
consents, the Commission will: should be submitted on or before
(A) By order approve or disapprove August 29, 2018.
the proposed rule change, or For the Commission, by the Division of SECURITIES AND EXCHANGE
(B) institute proceedings to determine Trading and Markets, pursuant to delegated COMMISSION
whether the proposed rule change authority.31 [Release No. 34–83767; File No. SR–FICC–
should be disapproved. Eduardo A. Aleman, 2018–006]
IV. Solicitation of Comments Assistant Secretary.
[FR Doc. 2018–16890 Filed 8–7–18; 8:45 am] Self-Regulatory Organizations; Fixed
Interested persons are invited to Income Clearing Corporation; Notice of
BILLING CODE 8011–01–P
submit written data, views, and Filing of Proposed Rule Change To
arguments concerning the foregoing, Codify the Processing of Conditional
including whether the proposed rule SECURITIES AND EXCHANGE Prepayment Rate Claims in the MBSD
change is consistent with the Act. COMMISSION Rules and Make Other Changes
Comments may be submitted by any of
the following methods: August 2, 2018.
[Release No. 34–83763; File No. SR–CHX– Pursuant to Section 19(b)(1) of the
Electronic Comments 2018–001] Securities Exchange Act of 1934
• Use the Commission’s internet (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
Self-Regulatory Organizations; notice is hereby given that on July 26,
comment form (http://www.sec.gov/
Chicago Stock Exchange, Inc.; Notice 2018, Fixed Income Clearing
rules/sro.shtml); or
of Withdrawal of a Proposed Rule
• Send an email to rule-comments@ Corporation (‘‘FICC’’) filed with the
Change To Adopt the Route QCT Securities and Exchange Commission
sec.gov. Please include File Number SR–
Cross Routing Option (‘‘Commission’’) the proposed rule
NYSEArca–2018–55 on the subject line.
August 2, 2018. change as described in Items I, II and III
Paper Comments below, which Items have been prepared
• Send paper comments in triplicate On March 6, 2018, the Chicago Stock by the clearing agency. The Commission
to Secretary, Securities and Exchange Exchange, Inc. (‘‘Exchange’’) filed with is publishing this notice to solicit
Commission, 100 F Street NE, the Securities and Exchange comments on the proposed rule change
Washington, DC 20549–1090. Commission (‘‘Commission’’), pursuant from interested persons.
to Section 19(b)(1) of the Securities
All submissions should refer to File I. Clearing Agency’s Statement of the
Exchange Act of 1934 (‘‘Exchange
Number SR–NYSEArca–2018–55. This Terms of Substance of the Proposed
Act’’) 1 and Rule 19b–4 thereunder,2 a
file number should be included on the Rule Change
proposed rule change to adopt the Route
subject line if email is used. To help the
QCT Cross routing option. The proposed The proposed rule change consists of
Commission process and review your
rule change was published for comment amendments to the FICC Mortgage-
comments more efficiently, please use
in the Federal Register on March 20, Backed Securities Division (‘‘MBSD’’)
only one method. The Commission will
2018.3 On May 1, 2018, pursuant to Clearing Rules (‘‘MBSD Rules’’) in order
post all comments on the Commission’s
Section 19(b)(2) of the Exchange Act,4 to (i) add terms governing MBSD’s
internet website (http://www.sec.gov/
the Commission designated a longer
rules/sro.shtml). Copies of the
period within which to approve the 5 See Securities Exchange Act Release No. 83143,
submission, all subsequent
proposed rule change, disapprove the 83 FR 20123 (May 7, 2018).
amendments, all written statements 6 15 U.S.C. 78s(b)(2)(B).
proposed rule change, or institute
with respect to the proposed rule
sradovich on DSK3GMQ082PROD with NOTICES
7 See Securities Exchange Act Release No. 83425,
proceedings to determine whether to
change that are filed with the 83 FR 28477 (June 19, 2018).
Commission, and all written 31 17
8 See letter from Tracy Richardson, Tribal
CFR 200.30–3(a)(12). Technology Trade Inc., dated June 14, 2018,
communications relating to the 1 15 U.S.C. 78s(b)(1). available at https://www.sec.gov/comments/sr-chx-
proposed rule change between the 2 17 CFR 240.19b–4. 2018-001/chx2018001.htm.
Commission and any person, other than 3 See Securities Exchange Act Release No. 82870 9 17 CFR 200.30–3(a)(12).
those that may be withheld from the (March 14, 2018), 83 FR 12214. 1 15 U.S.C. 78s(b)(1).
public in accordance with the 4 15 U.S.C. 78s(b)(2). 2 17 CFR 240.19b–4.
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![39144 Federal Register / Vol. 83, No. 153 / Wednesday, August 8, 2018 / Notices
processing of conditional prepayment Members may substitute an underlying the CPR claim is $10,000 or greater, or,
rate (‘‘CPR’’) claims to the MBSD Rules pool after it has been allocated with in the case that an entity is submitting
and (ii) make certain clarifications and respect to a pool deliver obligation by a re-transmittal 12 of a CPR claim, the
corrections in the MBSD Rules, as providing instructions to FICC.6 CPR claim is $500 or greater, and (iv)
described in greater detail below.3 CPR is the percentage of the 90% of the buyer’s claimable unit has
outstanding loan balance for a pool that settled.13
II. Clearing Agency’s Statement of the
is expected to be repaid over a one year FICC currently processes CPR claims
Purpose of, and Statutory Basis for, the
period.7 For instance, a 10% CPR means that it receives from Clearing Members
Proposed Rule Change
that 10% of a pool’s outstanding loan in a manner consistent with SIFMA
In its filing with the Commission, the balance is expected to be repaid in the Guidelines, except that (i) FICC
clearing agency included statements next year. A CPR claim arises when an currently uses a different definition of
concerning the purpose of and basis for underlying TBA pool is allocated or ‘‘claimable unit’’ as discussed below
the proposed rule change and discussed substituted with a pool that pays down and (ii) for re-transmittals, FICC’s
any comments it received on the at a faster rate (i.e., has a higher CPR) current procedures provide a minimum
proposed rule change. The text of these than the average pay down rate for pools threshold of $5,000 (rather than $500 as
statements may be examined at the of the same type as the underlying pool set forth in the SIFMA Guidelines).
places specified in Item IV below. The being replaced.8 The result is that the FICC is proposing to codify its existing
clearing agency has prepared buyer is receiving a pool with less value CPR claims process in the MBSD Rules,
summaries, set forth in sections A, B, than anticipated based on the TBA including adding a provision providing
and C below, of the most significant terms. that a Clearing Member’s cash
aspects of such statements. The industry currently has a process settlement obligations would include
(A) Clearing Agency’s Statement of the pursuant to which a buyer may make a the positive or negative amount of any
Purpose of, and Statutory Basis for, the CPR claim against the seller as set forth valid CPR claim. The proposed MBSD
Proposed Rule Change in the SIFMA Guidelines.9 The CPR CPR claims process would generally
claim process is intended to compensate follow the CPR claims process set forth
1. Purpose the buyer for the excess amount that it in the SIFMA Guidelines and MBSD’s
FICC is proposing to amend the is paying for the pool being delivered.10 current CPR claims process, with the
MBSD Rules in order to (i) add terms Pursuant to SIFMA Guidelines, an following exceptions:
governing MBSD’s processing of CPR entity is entitled to make a CPR claim
(A) Definition of Claimable Unit
claims to the MBSD Rules and (ii) make if (i) the allocation or substitution giving
certain clarifications and corrections in rise to the CPR claim occurred after the FICC is proposing to add to the MBSD
the MBSD Rules. factor release date 11 following the Rules two definitions of ‘‘claimable
scheduled contractual settlement date unit,’’ the use of which would depend
(i) Background relating to the trade, (ii) the pools on the type of transaction. Pursuant to
As discussed in more detail below, involved in the claim meet the criteria SIFMA Guidelines and FICC’s current
the submission of CPR claims is an for fast paying pools in accordance with process, CPR claims are based on a
established process that occurs today SIFMA Guidelines, (iii) the amount of ‘‘claimable unit’’ which defines the pool
pursuant to FICC’s procedures. FICC is or group of pools that are included in
proposing to add provisions to the 6 Section 5 of MBSD Rule 8, supra note 3. Section a particular CPR claim.14 Pursuant to
MBSD Rules to formalize this process in 5 of MBSD Rule 8 provides that substitutions may SIFMA Guidelines a claimable unit is
be made pursuant to the communication links,
the MBSD Rules. formats, timeframes and deadlines established by
based on all pools allocated for a trade
Mortgage pools 4 are often traded in FICC and that a Clearing Member with a pool between factor release dates that have
To-Be-Announced (TBA) trades, which receive obligation (i.e., the ‘‘buyer’’) must accept the the same underlying TBA
are trades for which the actual identities substituted pool in accordance with FICC’s characteristics, such as product,
procedures. Id.
of and/or the number of pools 7 See definition of ‘‘CPR’’ in Chapter 2 of the
coupon, trade date, settlement date and
underlying each trade are unknown at SIFMA Guidelines. SIFMA Guidelines refer price.15
the time of trade execution. MBSD generally to the guidelines for good delivery of FICC currently processes CPR claims
guidelines provide that two business mortgage-backed securities as promulgated from using a different definition of claimable
days prior to the established settlement time to time by The Securities Industry and unit than the SIFMA definition. FICC’s
Financial Markets Association (‘‘SIFMA’’), an
date of the TBA settlement obligations, industry trade group. See definition of ‘‘SIFMA CPR claims process currently uses a
the Clearing Member that has an Guidelines’’ in MBSD Rule 1, supra note 3. The definition of claimable unit based on
obligation to deliver pools for the TBA SIFMA Guidelines, located at https:// characteristics of pools after MBSD Pool
transaction (i.e., the ‘‘seller’’) must www.sifma.org/resources/general/tba-market- Netting 16 takes place rather than based
governance/ under ‘‘Uniform Practices Manual,’’ are
allocate the pools to be delivered.5 trading, clearing and settlement guidelines prepared on underlying TBA characteristics. The
Pursuant to the MBSD Rules, Clearing by SIFMA intended to reflect common industry
practices relating to confirming, comparing and 12 A re-transmittal of a CPR claim occurs when a
3 Capitalized terms used herein and not otherwise settling mortgage-backed securities. party with the pool deliver obligation passes the
defined shall have the meaning assigned to such 8 See Section A.16 of Chapter 8 of the SIFMA CPR claims it received to the entities that sent it the
terms in the MBSD Rules, available at http:// Guidelines, supra note 7. pools it used for delivery.
13 See Section A.16 of Chapter 8 of the SIFMA
www.dtcc.com/legal/rules-and-procedures. 9 See id.
4 A pool is a collection of mortgage loans or other 10 See Section A.16.d of Chapter 8 of the SIFMA Guidelines, supra note 7.
14 See Section A.16.b of Chapter 8 of the SIFMA
collateral assembled by an originator or master Guidelines, supra note 7.
sradovich on DSK3GMQ082PROD with NOTICES
services as collateral for a mortgaged-back security. 11 The term ‘‘factor release date’’ means, with Guidelines, supra note 7.
5 See Section 1 of MBSD Rule 7, supra note 3, 15 See Section A.16.f(i)(7) of Chapter 8 of the
respect to a pool, the date on which the Federal
which provides that ‘‘[i]n order for the Corporation National Mortgage Association (‘‘Fannie Mae’’), the SIFMA Guidelines, supra note 7.
to process data for Pool Comparison, the Federal Home Loan Mortgage Corporation (‘‘Freddie 16 Pursuant to the MBSD Rules, the term ‘‘Pool
Corporation must receive data from the long and Mac’’) or the Government National Mortgage Netting’’ means the service provided to Clearing
short sides of the allocated pool submission in the Association (‘‘Ginnie Mae’’), as applicable, release Members, as applicable, and the operations carried
format and within the timeframes specified in the ‘‘factor’’ that represents the percentage of the out by FICC in the course of providing such service
guidelines issued by the Corporation from time to agency’s original balance of the pool that remains in accordance with MBSD Rule 8. MBSD Rule 1,
time.’’ outstanding as of such date. supra note 3.
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![Federal Register / Vol. 83, No. 153 / Wednesday, August 8, 2018 / Notices 39147
rule changes to add the MBSD CPR up to 90 days (i) as the Commission may identifying information from comment
claims process to the MBSD Rules designate if it finds such longer period submissions. You should submit only
would be necessary in furtherance of the to be appropriate and publishes its information that you wish to make
purposes of the Act, as permitted by reasons for so finding or (ii) as to which available publicly. All submissions
Section 17A(b)(3)(I) of the Act.30 the self-regulatory organization should refer to File Number SR–FICC–
FICC also believes any burden on consents, the Commission will: 2018–006 and should be submitted on
competition that is created by the (A) By order approve or disapprove or before August 29, 2018.
proposed rule changes to add the MBSD such proposed rule change, or For the Commission, by the Division of
CPR claims process in the MBSD Rules (B) institute proceedings to determine Trading and Markets, pursuant to delegated
would be appropriate in furtherance of whether the proposed rule change authority.34
the purposes of the Act.31 Under the should be disapproved. Eduardo A. Aleman,
proposal, the MBSD CPR claims process IV. Solicitation of Comments Assistant Secretary.
would be consistent, with the
Interested persons are invited to [FR Doc. 2018–16901 Filed 8–7–18; 8:45 am]
exceptions noted above in Items
II(A)1(i)(A) and (B), with SIFMA submit written data, views and BILLING CODE 8011–01–P
Guidelines, which represent the current arguments concerning the foregoing,
accepted industry practice with respect including whether the proposed rule
to CPR claims. Therefore, the MBSD change is consistent with the Act. SOCIAL SECURITY ADMINISTRATION
CPR claims process would provide a Comments may be submitted by any of
[Docket No. SSA–2018–0036]
mechanism by which Clearing Members the following methods:
could make and receive CPR claims that Electronic Comments Notice of Senior Executive Service
would be consistent with accepted Performance Review Board
• Use the Commission’s internet
industry practice. In addition, CPR Membership
comment form (http://www.sec.gov/
claims would be imposed upon Clearing rules/sro.shtml); or AGENCY: Social Security Administration.
Members that choose to allocate or • Send an email to rule-comments@
substitute using faster paying pools and ACTION: Notice of Senior Executive
sec.gov. Please include File Number SR– Service Performance Review Board
no Clearing Members would be FICC–2018–006 on the subject line.
disproportionally impacted. As such, Membership.
FICC believes the proposed rule changes Paper Comments
Title 5, U.S. Code, 4314 (c)(4),
to add the CPR claims process that is • Send paper comments in triplicate requires that the appointment of
consistent, to the extent practicable and to Secretary, Securities and Exchange Performance Review Board members be
appropriate, with SIFMA Guidelines Commission, 100 F Street NE published in the Federal Register before
would be appropriate in furtherance of Washington, DC 20549. service on said Board begins.
the purposes of the Act, as permitted by All submissions should refer to File The following persons will serve on
Section 17A(b)(3)(I) of the Act.32 Number SR–FICC–2018–006. This file the Performance Review Board which
FICC does not believe there would be number should be included on the oversees the evaluation of performance
an impact on competition with the subject line if email is used. To help the appraisals of Senior Executive Service
proposed rule changes that would Commission process and review your members of the Social Security
update the definitions of Fannie Mae, comments more efficiently, please use Administration:
Freddie Mac, Ginnie Mae and SIFMA only one method. The Commission will Bonnie Doyle
Guidelines.33 These changes would post all comments on the Commission’s Stephen Evangelista *
provide enhanced clarity to the MBSD internet website (http://www.sec.gov/ Joanne Gasparini
Rules and would not affect Clearing rules/sro.shtml). Copies of the Erik Hansen
Members’ rights and obligations. As submission, all subsequent John Lee
such, FICC believes that these proposed amendments, all written statements Joseph Lytle
rule changes would not have any impact with respect to the proposed rule Dan Parry
on competition. Van Roland *
change that are filed with the
Patrice Stewart
(C) Clearing Agency’s Statement on Commission, and all written * New Member
Comments on the Proposed Rule communications relating to the
Change Received From Members, proposed rule change between the Marianna LaCanfora,
Participants, or Others Commission and any person, other than Deputy Commissioner for Human Resources.
those that may be withheld from the [FR Doc. 2018–16945 Filed 8–7–18; 8:45 am]
FICC has not received or solicited any
public in accordance with the BILLING CODE 4191–02–P
written comments relating to this
provisions of 5 U.S.C. 552, will be
proposal. FICC will notify the
available for website viewing and
Commission of any written comments
printing in the Commission’s Public DEPARTMENT OF STATE
received by FICC.
Reference Room, 100 F Street NE,
III. Date of Effectiveness of the Washington, DC 20549 on official [Public Notice: 10492]
Proposed Rule Change, and Timing for business days between the hours of
Notice of Determinations; Culturally
Commission Action 10:00 a.m. and 3:00 p.m. Copies of the
Significant Objects Imported for
filing also will be available for
sradovich on DSK3GMQ082PROD with NOTICES
Within 45 days of the date of Exhibition—Determinations: Exhibition
publication of this notice in the Federal inspection and copying at the principal
of Two Roman-Era Objects
Register or within such longer period office of FICC and on DTCC’s website
(http://dtcc.com/legal/sec-rule- SUMMARY: Notice is hereby given of the
30 Id. filings.aspx). All comments received following determinations: I hereby
31 Id. will be posted without change. Persons determine that two objects to be
32 Id. submitting comments are cautioned that
33 Id. we do not redact or edit personal 34 17 CFR 200.30–3(a)(12).
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Document Created: 2018-08-08 02:05:22
Document Modified: 2018-08-08 02:05:22
| 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 | 83 FR 39143 |
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