83_FR_46706 83 FR 46528 - Proposed Collection; Comment Request

83 FR 46528 - Proposed Collection; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 178 (September 13, 2018)

Page Range46528-46530
FR Document2018-19882

Federal Register, Volume 83 Issue 178 (Thursday, September 13, 2018) 
[Federal Register Volume 83, Number 178 (Thursday, September 13, 2018)]
[Notices]
[Pages 46528-46530]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-19882]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-586, OMB Control No. 3235-0647]


Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 
20549-2736

Extension:
    Rule 204

    Notice is hereby given that pursuant to the Paperwork Reduction Act 
of 1995 (``PRA'') (44 U.S.C. 3501 et seq.), the Securities and Exchange 
Commission (``Commission'') is soliciting comments on the collection of 
information provided for in Rule 204 (17 CFR 242.204) under the 
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). The Commission 
plans to submit this existing collection of information to the Office 
of Management and Budget (``OMB'') for extension and approval.
    Rule 204(a) provides that a participant of a registered clearing 
agency must deliver securities to a registered clearing agency for 
clearance and settlement on a long or short sale in any equity security 
by settlement date, or if a participant of a registered clearing agency 
has a fail to deliver position at a registered clearing agency in any 
equity security for a long or short sale transaction in the equity 
security, the participant shall, by no later than the beginning of 
regular trading hours on the applicable close-out date, immediately 
close out its fail to deliver positions by borrowing or purchasing 
securities of like kind and quantity. For a short sale transaction, the 
participant must close out a fail to deliver by no later than the 
beginning of regular trading hours on the settlement day following the 
settlement date. If a participant has a fail to deliver that the 
participant can demonstrate on its books and records resulted from a 
long sale, or that is attributable to bona-fide market making 
activities, the participant must close out the fail to deliver by no 
later than the beginning of regular trading hours on the third 
consecutive settlement day following the settlement date. Rule 204 is 
intended to help further the Commission's goal of reducing fails to 
deliver by maintaining the reductions in fails to deliver achieved by 
the adoption of temporary Rule 204T, as well as other actions taken by 
the Commission. In addition, Rule 204 is intended to help further the 
Commission's goal of addressing potentially abusive ``naked'' short 
selling in all equity securities.
    The information collected under Rule 204 will continue to be 
retained and/or provided to other entities pursuant to the specific 
rule provisions and will be available to the Commission and self-
regulatory organization (``SRO'') examiners upon request. The 
information collected will continue to aid the Commission and SROs in 
monitoring compliance with these requirements. In addition, the 
information collected will aid those subject to Rule 204 in complying 
with its requirements. These collections of information are mandatory.
    Several provisions under Rule 204 will impose a ``collection of 
information'' within the meaning of the Paperwork Reduction Act.
    I. Allocation Notification Requirement: As of December 31, 2017,

[[Page 46529]]

there were 3,893 registered broker-dealers. Each of these broker-
dealers could clear trades through a participant of a registered 
clearing agency and, therefore, become subject to the notification 
requirements of Rule 204(d). If a participant allocates a fail to 
deliver position to a broker or dealer pursuant to Rule 204(d), the 
broker or dealer that has been allocated the fail to deliver position 
in an equity security must determine whether or not such fail to 
deliver position was closed out in accordance with Rule 204(a). If such 
broker or dealer does not comply with the provisions of Rule 204(a), 
such broker or dealer must immediately notify the participant that it 
has become subject to the requirements of Rule 204(b). We estimate that 
a broker or dealer could have to make such determination and 
notification with respect to approximately 1.76 equity securities per 
day.\1\ We estimate a total of 1,719,772 potential notifications in 
accordance with Rule 204(d) across all registered broker-dealers (that 
could be allocated responsibility to close out a fail to deliver 
position) per year (3,893 registered broker-dealers notifying 
participants once per day \2\ on 1.76 equity securities, multiplied by 
251 trading days in 2017). The total estimated annual burden hours per 
year will be approximately 275,164 burden hours (1,719,772 multiplied 
by 0.16 hours/notification).
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    \1\ The Commission's Division of Economic and Risk Analysis 
(``DERA'') estimates that there were approximately 6,868 average 
daily fail to deliver positions during 2017. Across 3,893 registered 
broker-dealers, the number of securities per registered broker-
dealer per trading day is approximately 1.76 equity securities.
    \2\ Because failure to comply with the close-out requirements of 
Rule 204(a) is a violation of the rule, we believe that a broker or 
dealer would make the notification to a participant that it is 
subject to the borrowing requirements of Rule 204(b) at most once 
per day.
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    II. Demonstration Requirement for Fails to Deliver on Long Sales: 
As of December 5, 2017, there were 132 participants of NSCC that were 
registered as broker-dealers. If a participant of a registered clearing 
agency has a fail to deliver position in an equity security at a 
registered clearing agency and determined that such fail to deliver 
position resulted from a long sale, we estimate that a participant of a 
registered clearing agency will have to make such determination with 
respect to approximately 33 securities per day.\3\ We estimate a total 
of 1,093,356 potential demonstrations in accordance with Rule 204(a)(1) 
across all broker-dealer participants per year (132 participants 
checking for compliance once per day on 33 securities, multiplied by 
251 trading days in 2017). The total approximate estimated annual 
burden hour per year will be approximately 174,937 burden hours 
(1,093,356 multiplied by 0.16 hours/documentation).
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    \3\ DERA estimates that during 2017 approximately 62.93% of 
trade volume was long. DERA estimates that there were approximately 
6,868 average daily fail to deliver positions during 2017. Across 
132 broker-dealer participants of the NSCC, the number of securities 
per participant per day is approximately 52 equity securities. 
62.93% of 52 equity securities per trading day equals approximately 
33 securities per day.
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    III. Pre-Borrow Notification Requirement: As of December 5, 2017, 
there were 132 participants of NSCC that were registered as broker-
dealers. If a participant of a registered clearing agency has a fail to 
deliver position in an equity security, the participant must determine 
whether or not the fail to deliver position was closed out in 
accordance with Rule 204(a). We estimate that a participant of a 
registered clearing agency will have to make such determination with 
respect to approximately 52 equity securities per day.\4\ We estimate a 
total of 1,722,864 potential notifications in accordance with Rule 
204(c) across all participants per year (132 broker-dealer participants 
notifying broker-dealers once per day on 52 securities, multiplied by 
251 trading days in 2017). The total estimated annual burden hours per 
year will be approximately 275,658 burden hours (1,722,864 multiplied 
by 0.16 hours/documentation).
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    \4\ See supra note 3.
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    IV. Certification Requirement: As of December 31, 2017, there were 
3,893 registered broker-dealers. Each of these broker-dealers may clear 
trades through a participant of a registered clearing agency. If the 
broker-dealer determines that it has not incurred a fail to deliver 
position on settlement date for a long or short sale in an equity 
security for which the participant has a fail to deliver position at a 
registered clearing agency or has purchased or borrowed securities in 
accordance with the pre-fail credit provision of Rule 204(e), we 
estimate that a broker-dealer could have to make such determination 
with respect to approximately 1.76 securities per day.\5\ We estimate 
that registered broker-dealers could have to certify to the participant 
that it has not incurred a fail to deliver position on settlement date 
for a long or short sale in an equity security for which the 
participant has a fail to deliver position at a registered clearing 
agency or, alternatively, that it is in compliance with the 
requirements set forth in the pre-fail credit provision of Rule 204(e), 
1,719,772 times per year (3,893 registered broker-dealers certifying 
once per day on 1.76 securities, multiplied by 251 trading days in 
2017). The total approximate estimated annual burden hour per year will 
be approximately 275,164 burden hours (1,719,772 multiplied by 0.16 
hours/certification).
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    \5\ See supra note 1.
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    V. Pre-Fail Credit Demonstration Requirement: As of December 31, 
2017, there were 3,893 registered broker-dealers. If a broker-dealer 
purchased or borrowed securities in accordance with the conditions 
specified in Rule 204(e) and determined that it had a net long position 
or net flat position on the settlement day for which the broker-dealer 
is claiming pre-fail credit, we estimate that a broker-dealer could 
have to make such determination with respect to approximately 1.76 
securities per day.\6\ We estimate that registered broker-dealers could 
have to demonstrate on its books and records that it has a net long 
position or net flat position on the settlement day for which the 
broker-dealer is claiming pre-fail credit, 1,719,772 times per year 
(3,893 registered broker-dealers checking for compliance once per day 
on 1.76 equity securities, multiplied by 251 trading days in 2017). The 
total approximate estimated annual burden hours per year will be 
275,164 burden hours (1,719,772 multiplied by 0.16 hours/
demonstration).
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    \6\ See supra note 1.
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    The total aggregate annual burden for the collection of information 
undertaken pursuant to all five provisions is thus 1,276,087 hours per 
year (275,164 + 174,937 + 275,658 + 275,164 + 275,164).
    Written comments are invited on: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information 
shall have practical utility; (b) the accuracy of the Commission's 
estimates of the burden of the proposed collection of information; (c) 
ways to enhance the quality, utility, and clarity of the information to 
be collected; and (d) ways to minimize the burden of the collection of 
information on respondents, including through the use of automated 
collection techniques or other forms of information technology. 
Consideration will be given to comments and suggestions submitted in 
writing within 60 days of this publication.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information

[[Page 46530]]

under the PRA unless it displays a currently valid OMB control number.
    Please direct your written comments to: Pamela Dyson, Director/
Chief Information Officer, Securities and Exchange Commission, c/o 
Candace Kenner, 100 F Street NE, Washington DC 20549 or send an email 
to: [email protected].

    Dated: September 7, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-19882 Filed 9-12-18; 8:45 am]
 BILLING CODE 8011-01-P

46528 Federal Register / Vol. 83, No. 178 / Thursday, September 13, 2018 / Notices Commission, Office of FOIA Services, required records on an annual basis. 242.204) under the Securities Exchange 100 F Street NE, Washington, DC Assuming an average hourly rate of an Act of 1934 (15 U.S.C. 78a et seq.). The 20549–2736 independent accountant of $60, the Commission plans to submit this Extension: average total annual cost of the report is existing collection of information to the Rule 17Ad–13, SEC File No. 270–263; $7,200. The total annual cost for the Office of Management and Budget OMB Control No. 3235–0275 approximate 100 respondents is (‘‘OMB’’) for extension and approval. approximately $720,000. Rule 204(a) provides that a participant Notice is hereby given that pursuant Written comments are invited on: (a) of a registered clearing agency must to the Paperwork Reduction Act of 1995 Whether the proposed collection of deliver securities to a registered clearing (‘‘PRA’’) (44 U.S.C. 3501 et seq.) the information is necessary for the agency for clearance and settlement on Securities and Exchange Commission performance of the functions of the a long or short sale in any equity (‘‘Commission’’) is soliciting comments agency, including whether the security by settlement date, or if a on the collection of information participant of a registered clearing information will have any practical provided for in Rule 17Ad–13 (17 CFR agency has a fail to deliver position at utility; (b) the accuracy of the agency’s 240.17Ad–13). The Commission plans a registered clearing agency in any estimate of the burden imposed by the to submit this existing collection of equity security for a long or short sale collection of information; (c) ways to information to the Office of transaction in the equity security, the enhance the quality, utility, and clarity Management and Budget (‘‘OMB’’) for participant shall, by no later than the of the information collected; and (d) extension and approval. beginning of regular trading hours on ways to minimize the burden of the Rule 17Ad–13 (17 CFR 240.17Ad–13) collection of information on the applicable close-out date, requires an annual study and evaluation respondents, including through the use immediately close out its fail to deliver of internal accounting controls under positions by borrowing or purchasing of automated collection techniques or the Securities Exchange Act of 1934 (15 securities of like kind and quantity. For other forms of information technology. U.S.C. 78a et seq.). It requires a short sale transaction, the participant Consideration will be given to approximately 100 registered transfer must close out a fail to deliver by no comments and suggestions submitted in agents to obtain an annual report on the later than the beginning of regular writing within 60 days of this adequacy of their internal accounting trading hours on the settlement day publication. controls from an independent following the settlement date. If a An agency may not conduct or accountant. In addition, transfer agents participant has a fail to deliver that the sponsor, and a person is not required to must maintain copies of any reports participant can demonstrate on its books respond to, a collection of information prepared pursuant to Rule 17Ad–13 and records resulted from a long sale, or under the PRA unless it displays a plus any documents prepared to notify that is attributable to bona-fide market currently valid OMB control number. the Commission and appropriate Please direct your written comments making activities, the participant must regulatory agencies in the event that the to: Pamela Dyson, Director/Chief close out the fail to deliver by no later transfer agent is required to take any Information Officer, Securities and than the beginning of regular trading corrective action. These recordkeeping Exchange Commission, c/o Candace hours on the third consecutive requirements assist the Commission and Kenner, 100 F Street NE, Washington settlement day following the settlement other regulatory agencies with DC 20549, or send an email to: PRA_ date. Rule 204 is intended to help monitoring transfer agents and ensuring Mailbox@sec.gov. further the Commission’s goal of compliance with the rule. Small transfer reducing fails to deliver by maintaining agents are exempt from Rule 17Ad–13 Dated: September 7, 2018. the reductions in fails to deliver as are transfer agents that service only Eduardo A. Aleman, achieved by the adoption of temporary their own companies’ securities. Assistant Secretary. Rule 204T, as well as other actions Approximately 100 independent, [FR Doc. 2018–19880 Filed 9–12–18; 8:45 am] taken by the Commission. In addition, professional transfer agents must file the BILLING CODE 8011–01–P Rule 204 is intended to help further the independent accountant’s report Commission’s goal of addressing annually. We estimate that the annual potentially abusive ‘‘naked’’ short internal time burden for each transfer SECURITIES AND EXCHANGE selling in all equity securities. agent to comply with Rule 17Ad–13 by COMMISSION The information collected under Rule submitting the report prepared by the [SEC File No. 270–586, OMB Control No. 204 will continue to be retained and/or independent accountant to the 3235–0647] provided to other entities pursuant to Commission is minimal. The time the specific rule provisions and will be required for the independent accountant Proposed Collection; Comment available to the Commission and self- to prepare the accountant’s report varies Request regulatory organization (‘‘SRO’’) with each transfer agent depending on examiners upon request. The Upon Written Request, Copies Available the size and nature of the transfer information collected will continue to From: Securities and Exchange agent’s operations. The Commission aid the Commission and SROs in Commission, Office of FOIA Services, estimates that, on average, each report monitoring compliance with these 100 F Street NE, Washington, DC can be completed by the independent requirements. In addition, the 20549–2736 accountant in 120 hours, resulting in a information collected will aid those total of 12,000 external hours annually Extension: subject to Rule 204 in complying with (120 hours × 100 reports). The burden Rule 204 its requirements. These collections of daltland on DSKBBV9HB2PROD with NOTICES was estimated using Commission review Notice is hereby given that pursuant information are mandatory. of filed Rule 17Ad–13 reports and to the Paperwork Reduction Act of 1995 Several provisions under Rule 204 Commission conversations with transfer (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the will impose a ‘‘collection of agents and accountants. The Securities and Exchange Commission information’’ within the meaning of the Commission estimates that, on average, (‘‘Commission’’) is soliciting comments Paperwork Reduction Act. 120 hours are needed to perform the on the collection of information I. Allocation Notification study, prepare the report, and retain the provided for in Rule 204 (17 CFR Requirement: As of December 31, 2017, VerDate Sep<11>2014 19:20 Sep 12, 2018 Jkt 244001 PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 E:\FR\FM\13SEN1.SGM 13SEN1

Federal Register / Vol. 83, No. 178 / Thursday, September 13, 2018 / Notices 46529 there were 3,893 registered broker- We estimate a total of 1,093,356 is in compliance with the requirements dealers. Each of these broker-dealers potential demonstrations in accordance set forth in the pre-fail credit provision could clear trades through a participant with Rule 204(a)(1) across all broker- of Rule 204(e), 1,719,772 times per year of a registered clearing agency and, dealer participants per year (132 (3,893 registered broker-dealers therefore, become subject to the participants checking for compliance certifying once per day on 1.76 notification requirements of Rule once per day on 33 securities, securities, multiplied by 251 trading 204(d). If a participant allocates a fail to multiplied by 251 trading days in 2017). days in 2017). The total approximate deliver position to a broker or dealer The total approximate estimated annual estimated annual burden hour per year pursuant to Rule 204(d), the broker or burden hour per year will be will be approximately 275,164 burden dealer that has been allocated the fail to approximately 174,937 burden hours hours (1,719,772 multiplied by 0.16 deliver position in an equity security (1,093,356 multiplied by 0.16 hours/ hours/certification). must determine whether or not such fail documentation). V. Pre-Fail Credit Demonstration to deliver position was closed out in III. Pre-Borrow Notification Requirement: As of December 31, 2017, accordance with Rule 204(a). If such Requirement: As of December 5, 2017, there were 3,893 registered broker- broker or dealer does not comply with there were 132 participants of NSCC dealers. If a broker-dealer purchased or the provisions of Rule 204(a), such that were registered as broker-dealers. If borrowed securities in accordance with broker or dealer must immediately a participant of a registered clearing the conditions specified in Rule 204(e) notify the participant that it has become agency has a fail to deliver position in and determined that it had a net long subject to the requirements of Rule an equity security, the participant must position or net flat position on the 204(b). We estimate that a broker or determine whether or not the fail to settlement day for which the broker- dealer could have to make such deliver position was closed out in dealer is claiming pre-fail credit, we determination and notification with accordance with Rule 204(a). We estimate that a broker-dealer could have respect to approximately 1.76 equity estimate that a participant of a to make such determination with securities per day.1 We estimate a total registered clearing agency will have to respect to approximately 1.76 securities of 1,719,772 potential notifications in make such determination with respect per day.6 We estimate that registered accordance with Rule 204(d) across all to approximately 52 equity securities broker-dealers could have to registered broker-dealers (that could be per day.4 We estimate a total of demonstrate on its books and records allocated responsibility to close out a 1,722,864 potential notifications in that it has a net long position or net flat fail to deliver position) per year (3,893 accordance with Rule 204(c) across all position on the settlement day for which registered broker-dealers notifying participants per year (132 broker-dealer the broker-dealer is claiming pre-fail participants once per day 2 on 1.76 participants notifying broker-dealers credit, 1,719,772 times per year (3,893 equity securities, multiplied by 251 once per day on 52 securities, registered broker-dealers checking for trading days in 2017). The total multiplied by 251 trading days in 2017). compliance once per day on 1.76 equity estimated annual burden hours per year The total estimated annual burden securities, multiplied by 251 trading will be approximately 275,164 burden hours per year will be approximately days in 2017). The total approximate hours (1,719,772 multiplied by 0.16 275,658 burden hours (1,722,864 estimated annual burden hours per year hours/notification). multiplied by 0.16 hours/ will be 275,164 burden hours (1,719,772 II. Demonstration Requirement for documentation). multiplied by 0.16 hours/ Fails to Deliver on Long Sales: As of IV. Certification Requirement: As of demonstration). December 5, 2017, there were 132 December 31, 2017, there were 3,893 The total aggregate annual burden for participants of NSCC that were registered broker-dealers. Each of these the collection of information undertaken registered as broker-dealers. If a broker-dealers may clear trades through pursuant to all five provisions is thus participant of a registered clearing a participant of a registered clearing 1,276,087 hours per year (275,164 + agency has a fail to deliver position in agency. If the broker-dealer determines 174,937 + 275,658 + 275,164 + 275,164). an equity security at a registered Written comments are invited on: (a) that it has not incurred a fail to deliver clearing agency and determined that Whether the proposed collection of position on settlement date for a long or such fail to deliver position resulted information is necessary for the proper short sale in an equity security for from a long sale, we estimate that a performance of the functions of the which the participant has a fail to participant of a registered clearing Commission, including whether the deliver position at a registered clearing agency will have to make such information shall have practical utility; agency or has purchased or borrowed determination with respect to (b) the accuracy of the Commission’s securities in accordance with the pre- approximately 33 securities per day.3 estimates of the burden of the proposed fail credit provision of Rule 204(e), we collection of information; (c) ways to estimate that a broker-dealer could have 1 The Commission’s Division of Economic and enhance the quality, utility, and clarity to make such determination with Risk Analysis (‘‘DERA’’) estimates that there were of the information to be collected; and respect to approximately 1.76 securities approximately 6,868 average daily fail to deliver (d) ways to minimize the burden of the positions during 2017. Across 3,893 registered per day.5 We estimate that registered collection of information on broker-dealers, the number of securities per broker-dealers could have to certify to registered broker-dealer per trading day is respondents, including through the use the participant that it has not incurred approximately 1.76 equity securities. of automated collection techniques or a fail to deliver position on settlement 2 Because failure to comply with the close-out other forms of information technology. requirements of Rule 204(a) is a violation of the date for a long or short sale in an equity Consideration will be given to rule, we believe that a broker or dealer would make security for which the participant has a comments and suggestions submitted in daltland on DSKBBV9HB2PROD with NOTICES the notification to a participant that it is subject to fail to deliver position at a registered the borrowing requirements of Rule 204(b) at most writing within 60 days of this clearing agency or, alternatively, that it once per day. publication. 3 DERA estimates that during 2017 approximately An agency may not conduct or 62.93% of trade volume was long. DERA estimates approximately 52 equity securities. 62.93% of 52 equity securities per trading day equals sponsor, and a person is not required to that there were approximately 6,868 average daily fail to deliver positions during 2017. Across 132 approximately 33 securities per day. respond to, a collection of information 4 See supra note 3. broker-dealer participants of the NSCC, the number of securities per participant per day is 5 See supra note 1. 6 See supra note 1. VerDate Sep<11>2014 19:20 Sep 12, 2018 Jkt 244001 PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 E:\FR\FM\13SEN1.SGM 13SEN1

46530 Federal Register / Vol. 83, No. 178 / Thursday, September 13, 2018 / Notices under the PRA unless it displays a A. Background C. Proposed Changes To Amend the currently valid OMB control number. EPN Rules To Define Circumstances Please direct your written comments FICC states that the EPN Service Under Which FICC May Determine an to: Pamela Dyson, Director/Chief provides an automated manner for EPN User’s Compliance With EPN Rules Information Officer, Securities and market participants with an obligation The proposed ‘‘General Continuance Exchange Commission, c/o Candace to deliver pools of mortgages to transmit Standards’’ section would identify when Kenner, 100 F Street NE, Washington mortgage pool information efficiently FICC may review an EPN User’s access DC 20549 or send an email to: PRA_ and reliably to their counterparties in to the EPN Service. The proposed Mailbox@sec.gov. real time.5 Market participants that wish ‘‘General Continuance Standards’’ Dated: September 7, 2018. to use the EPN Service (i.e., become section also would identify when FICC Eduardo A. Aleman, ‘‘EPN Users’’) are required to submit an may seek written assurances from EPN Assistant Secretary. application to MBSD.6 The application Users. process and the use of the EPN Service First, the proposal would identify five [FR Doc. 2018–19882 Filed 9–12–18; 8:45 am] are governed by the EPN Rules.7 circumstances when FICC would assess BILLING CODE 8011–01–P MBSD’s clearing members (‘‘Clearing if an EPN User should retain access to Members’’) are required to be EPN the EPN Service: (i) If an EPN User SECURITIES AND EXCHANGE Users; however, one can be an EPN User experiences a Reportable Event; 14 (ii) if COMMISSION and not a Clearing Member.8 an EPN User fails to maintain the requirements for admission to [Release No. 34–84057; File No. SR–FICC– B. Proposed Amendments to the EPN membership; 15 (iii) if an EPN User 2018–005] Rules To Include an EPN User’s violates any EPN Rule or other Ongoing Reporting Obligations agreement with FICC; (iv) if an EPN Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order FICC proposes to amend the EPN User fails to satisfy any obligation to Granting Approval of Proposed Rule Rules by adding a ‘‘General Continuance FICC in a timely manner; or (v) if FICC Change To Correct Certain References Standards’’ section. The proposed otherwise deems it necessary or and Provide Transparency to Existing section would describe two existing advisable, in order to protect FICC, its Processes in the Mortgage-Backed MBSD practices with respect to other EPN Users, or its creditors or Securities Division Electronic Pool reporting obligations of EPN Users.9 investors, to safeguard securities and Notification Rules funds in the custody or control of FICC, First, the proposed section would state or to promote the prompt and accurate that an EPN User shall promptly inform September 7, 2018. processing, clearance or settlement of FICC, both orally and in writing, if such On July 13, 2018, Fixed Income securities transactions.16 EPN User no longer complies with any Second, the proposed ‘‘General Clearing Corporation (‘‘FICC’’) filed of the EPN Rules’ requirements for Continuance Standards’’ section would with the U.S. Securities and Exchange admission to membership.10 This state that FICC may require an EPN User Commission (‘‘Commission’’) proposed rule change SR–FICC–2018–005 notification must occur within two to provide written assurances to FICC.17 pursuant to Section 19(b)(1) of the business days from the date on which The proposal would authorize FICC to Securities Exchange Act of 1934 the EPN User first learns of its non- require written assurances from an EPN (‘‘Act’’) 1 and Rule 19b–4 thereunder.2 compliance.11 Second, the proposed User if FICC has reason to believe that The proposed rule change was section would state that an EPN User an EPN User may fail to comply with published for comment in the Federal shall notify FICC of certain any of the EPN Rules.18 Specifically, Register on July 26, 2018.3 The investigations or proceedings. FICC could require an EPN User to Commission did not receive any Specifically, an EPN User must notify comment letters on the proposed rule FICC within two business days after 14 As part of the proposal, FICC would include change. For the reasons discussed learning (i) that the EPN User is or will ‘‘Reportable Event’’ as a new defined term in the become the subject of an investigation ‘‘Definitions and General Provisions’’ section of the below, the Commission approves the EPN Rules. ‘‘Reportable Event’’ would be defined as proposed rule change. or a proceeding, and (ii) that said ‘‘an event that would effect a change in control of investigation or proceeding would cause an EPN User or could have a substantial impact on I. Description of the Proposed Rule the EPN User to fall out of compliance such EPN User’s business and/or financial Change with any of the requirements for condition, including, but not limited to: (a) Material organizational changes including mergers, The proposed rule change would membership set forth in the EPN acquisitions, changes in corporate form, name amend FICC’s Mortgage-Backed Rules.12 However, the EPN User would changes, changes in the ownership of an EPN User Securities Division (‘‘MSBD’’) electronic not be required to provide such a or its affiliates, and material changes in notification to FICC if doing so would management; and (b) status as a defendant in pool notification (‘‘EPN’’) service (‘‘EPN litigation, which could reasonably impact the EPN Service’’) rules (‘‘EPN Rules’’).4 cause the EPN User to violate an User’s financial condition or ability to conduct applicable law, rule, or regulation.13 business.’’ Id. Distinct from any other notification 1 15 U.S.C. 78s(b)(1). obligations, an EPN User would be required to 2 17 CFR 240.19b–4. 5 Notice, 83 FR at 33513. See also ‘‘EPN submit to FICC written notice of any Reportable 3 Securities Exchange Act Release No.83682 (July Event at least 90 calendar days prior to the effective Overview,’’ available at http://www.dtcc.com/ 20, 2018), 83 FR 35513 (July 26, 2018) (SR–FICC– date of such Reportable Event unless the EPN User clearing-services/ficc-mbsd/epn. 2018–005) (‘‘Notice’’). 6 Notice, 83 FR at 33513. demonstrates that (i) the EPN User could not have 4 MBSD maintains two sets of rulebooks: The EPN reasonably done so, and (ii) the EPN User provided 7 Id. written notice and oral notice to FICC as soon as daltland on DSKBBV9HB2PROD with NOTICES Rules and the MSBD rules (‘‘MBSD Rules’’). Notice, 8 Id. possible. Id. 83 FR at 35513. The EPN Rules govern MBSD’s EPN 9 Notice, 83 FR at 35514. 15 Such requirements may include, but are not Service, while the MBSD Rules govern MBSD’s 10 These membership standards are set forth in clearance and settlement service. Id. The EPN Rules limited to, operational testing and related reporting are available at http://www.dtcc.com/∼/media/Files/ EPN Rules, Article III, Rule 1, Sections 2–3, supra requirements that FICC may imposed from time to Downloads/legal/rules/ficc_mbsd_epnrules.pdf. note 4. time. Notice, 83 FR at 35514. 11 Notice, 83 FR at 35514. 16 Id. The MBSD Rules are available at http:// 12 Id. 17 Id. www.dtcc.com/∼/media/Files/Downloads/legal/ rules/ficc_mbsd_rules.pdf. 13 Id. 18 Id. VerDate Sep<11>2014 19:20 Sep 12, 2018 Jkt 244001 PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 E:\FR\FM\13SEN1.SGM 13SEN1


Document Created: 2018-09-13 01:01:53
Document Modified: 2018-09-13 01:01:53
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation83 FR 46528 
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