83 FR 48675 - Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Granting Approval 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 187 (September 26, 2018)
Federal Register Volume 83, Issue 187 (September 26, 2018)
| Page Range | 48675-48678 | |
| FR Document | 2018-20885 |
[Federal Register Volume 83, Number 187 (Wednesday, September 26, 2018)] [Notices] [Pages 48675-48678] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-20885] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-84236; File No. SR-FICC-2018-006] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Granting Approval of Proposed Rule Change To Codify the Processing of Conditional Prepayment Rate Claims in the MBSD Rules and Make Other Changes September 20, 2018. On July 26, 2018, Fixed Income Clearing Corporation (``FICC'') filed with the U.S. Securities and Exchange Commission (``Commission'') proposed rule change SR-FICC-2018-006 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The proposed rule change was published for comment in the Federal Register on August 8, 2018.\3\ The Commission did not receive any comment letters on the proposed rule change. For the reasons discussed below, the Commission approves the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ Securities Exchange Act Release No. 83767 (August 2, 2018), 83 FR 39143 (August 8, 2018) (SR-FICC-2018-006) (``Notice''). --------------------------------------------------------------------------- I. Description of the Proposed Rule Change The proposed rule change would make amendments to FICC's Mortgage- Backed Securities Division (``MBSD'') Clearing Rules (``MBSD Rules'') \4\ in order to (i) add terms governing MBSD's current processing of conditional prepayment rate (``CPR'') claims to the MBSD Rules, and (ii) make certain clarifications and corrections in the MBSD Rules, as described below.\5\ --------------------------------------------------------------------------- \4\ Available at http://www.dtcc.com/legal/rules-and-procedures. \5\ Notice, 83 FR, at 39144. --------------------------------------------------------------------------- A. CPR Claims Mortgage pools \6\ 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.\7\ MBSD guidelines provide that two business days prior to the established settlement date of the TBA settlement obligations, the FICC MBSD clearing member (``Clearing Member'') that has an obligation to deliver pools for the TBA transaction (i.e., the ``seller'') must allocate the pools to be delivered.\8\ FICC states that 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.\9\ --------------------------------------------------------------------------- \6\ A mortgage pool is a collection of mortgage loans or other collateral assembled by an originator or master services as collateral for a mortgaged-back security. Id. \7\ Notice, 83 FR, at 39144. \8\ Id. \9\ Id. --------------------------------------------------------------------------- CPR is the percentage of the outstanding loan balance for a pool that is expected to be repaid over a one-year period.\10\ 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.\11\ The result is that the buyer is receiving a pool with less value than anticipated based on the TBA terms. --------------------------------------------------------------------------- \10\ Id. \11\ Notice, 83 FR, at 39144. --------------------------------------------------------------------------- As provided in the SIFMA Guidelines,\12\ the industry currently has a process pursuant to which a buyer may make a CPR claim against the seller. The CPR claim process is intended to compensate the buyer for the excess amount that it is paying for the pool being delivered.\13\ 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 \14\ 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 [[Page 48676]] case that an entity is submitting a re-transmittal \15\ of a CPR claim, the CPR claim is $500 or greater; and (iv) 90 percent of the buyer's claimable unit has settled.\16\ --------------------------------------------------------------------------- \12\ Available at https://www.sifma.org/resources/general/tba-market-governance/ under ``Uniform Practices Manual.'' The SIFMA Guidelines are trading, clearing and settlement guidelines prepared by SIFMA intended to reflect common industry practices relating to confirming, comparing and settling mortgage-backed securities. \13\ Notice, 83 FR, at 39144. \14\ 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. Id. \15\ 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. Id. \16\ Notice, 83 FR, at 39144. --------------------------------------------------------------------------- The proposed rule change would codify FICC's 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.\17\ FICC states that 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: --------------------------------------------------------------------------- \17\ Id. --------------------------------------------------------------------------- 1. Definition of Claimable Unit The proposed rule change would add to the MBSD Rules two definitions of ``claimable unit,'' the use of which would depend on the type of transaction.\18\ According 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.\19\ Also according 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.\20\ --------------------------------------------------------------------------- \18\ Id. \19\ Id. \20\ Id. --------------------------------------------------------------------------- FICC states that it currently processes CPR claims using a different definition of claimable unit than the SIFMA definition. FICC states that its CPR claims process currently uses a definition of claimable unit based on characteristics of pools after MBSD Pool Netting \21\ takes place rather than based on underlying TBA characteristics. The 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.\22\ FICC states that 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.\23\ --------------------------------------------------------------------------- \21\ 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. \22\ Notice, 83 FR, at 39145. \23\ Id. --------------------------------------------------------------------------- FICC proposes 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. FICC states that 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.\24\ As a result, FICC states that it 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.\25\ --------------------------------------------------------------------------- \24\ Id. \25\ Id. --------------------------------------------------------------------------- FICC proposes 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.\26\ FICC proposes 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.\27\ FICC states that 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.\28\ --------------------------------------------------------------------------- \26\ Id. \27\ Id. \28\ Id. --------------------------------------------------------------------------- 2. Re-Transmittal Threshold The minimum threshold for a re-transmittal of a CPR claim under SIFMA Guidelines is $500.\29\ FICC's current process provides that the minimum threshold for re-transmittals is $5,000.\30\ FICC proposes to use the $500 re-transmittal minimum threshold for allocations (and related substitutions), where the allocations were made after the applicable factor release date, in order to be more consistent with SIFMA Guidelines and established industry practice.\31\ Meanwhile, FICC proposes 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 to avoid having to process multiple smaller transactions, which FICC believes would likely be administratively burdensome.\32\ --------------------------------------------------------------------------- \29\ Id. \30\ Id. \31\ Id. \32\ Id. --------------------------------------------------------------------------- B. 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.'' \33\ 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.\34\ --------------------------------------------------------------------------- \33\ Id. \34\ Id. --------------------------------------------------------------------------- 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 percent 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, that 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 [[Page 48677]] connection with a CPR claim is not paid.\35\ --------------------------------------------------------------------------- \35\ Id. --------------------------------------------------------------------------- FICC states that 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.\36\ --------------------------------------------------------------------------- \36\ Id. --------------------------------------------------------------------------- FICC states that 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 practices relating to CPR claims and with SIFMA Guidelines, in each case, with the exceptions noted above.\37\ --------------------------------------------------------------------------- \37\ Id. --------------------------------------------------------------------------- FICC states that 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.\38\ 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.\39\ --------------------------------------------------------------------------- \38\ Id. \39\ Id. --------------------------------------------------------------------------- II. Discussion and Commission Findings Section 19(b)(2)(C) of the Act \40\ directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and rules and regulations thereunder applicable to such organization. The Commission believes the proposal is consistent with the Act, specifically Section 17A(b)(3)(F) of the Act and Rule 17Ad-22(e)(23)(i) under the Act, as discussed below.\41\ --------------------------------------------------------------------------- \40\ 15 U.S.C. 78s(b)(2)(C). \41\ 15 U.S.C. 78q-1(b)(3)(F); 17 CFR 240.17Ad-22(20). --------------------------------------------------------------------------- A. Consistency With Section 17A(b)(3)(F) of the Act Section 17A(b)(3)(F) of the Act \42\ requires, inter alia, that the rules of the clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions. --------------------------------------------------------------------------- \42\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- As described above, FICC proposes to codify its existing CPR claims process and to specify the validation process for CPR claims. First, FICC proposes to specify that CPR claims submitted would be reviewed by FICC to validate (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 percent of the Clearing Member's claimable unit has settled. Consistent with FICC's current CPR claims process, FICC also proposes to 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, FICC proposes to 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. These proposed changes would codify FICC's existing processes surrounding CPR claims and make the CPR claims process more consistent with SIFMA Guidelines. The Commission believes that the codification would enable Clearing Members to better 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. By enabling Clearing Members to better understand the CPR claims process, the proposal is designed to help ensure that CPR claims are submitted and processed correctly and thus promote the prompt and accurate clearance and settlement of such securities transactions. Additionally, FICC proposes to make several clarifying changes. First, as described above, 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. In Second, 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 practices relating to CPR claims and with SIFMA Guidelines, in each case, with the exceptions noted above. Third, the proposed rule change would correct the definitions for Fannie Mae, Freddie Mac and Ginnie Mae in MBSD Rule 1 to be consistent with industry practice and with their usage throughout the MBSD Rules. Fourth, FICC proposes to add a description of the CPR claim process in a new Section 10 of MBSD Rule 9, including a defined term for ``CPR Claim.'' Finally, the definition of ``SIFMA Guidelines'' would be clarified by adding a link identifying the location of the SIFMA Guidelines on the SIFMA website. By proposing these clarifying changes to the CPR claims rules, the Commission believes that the proposed changes are designed to help Clearing Members better understand and remain compliant with the CPR claims rules to help ensure that CPR claims are submitted and processed correctly, and thus promoting the prompt and accurate clearance and settlement of such securities transactions. As each of the aforementioned changes are designed to promote the prompt and accurate clearance and settlement of securities transactions, the Commission finds that the proposal is consistent with the requirements of Section 17A(b)(3)(F). B. Consistency with Rule 17Ad-22(e)(23)(i) Rule 17Ad-22(e)(23)(i) under the Act requires a covered clearing agency \43\ to establish, implement, maintain and enforce written policies and procedures reasonably designed to provide for publicly disclosing all relevant rules and material procedures.\44\ --------------------------------------------------------------------------- \43\ A ``covered clearing agency'' means, among other things, a clearing agency registered with the Commission under Section 17A of the Exchange Act (15 U.S.C. 78q-1 et seq.) that is designated systemically important by the Financial Stability Oversight Counsel (``FSOC'') pursuant to the Clearing Supervision Act (12 U.S.C. 5461 et seq.). See 17 CFR 240.17Ad-22(a)(5)-(6). On July 18, 2012, FSOC designated FICC as systemically important. U.S. Department of the Treasury, ``FSOC Makes First Designations in Effort to Protect Against Future Financial Crises,'' available at https://www.treasury.gov/press-center/press-releases/Pages/tg1645.aspx. Therefore, FICC is a covered clearing agency. \44\ 17 CFR 240.17Ad-22(e)(23)(i). --------------------------------------------------------------------------- As described above, the proposed rule changes would (1) codify FICC's existing CPR claims process and (2) make clarifications to the existing CPR claims process. The Commission [[Page 48678]] believes these proposed changes to codify and clarify FICC's existing practices in regards to the CPR claims process would assist in publicly disclosing all relevant and material procedures regarding the CPR claims process. Therefore, the Commission finds that the proposal is consistent Rule 17Ad-22(e)(23)(i) under the Act. III. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act, in particular the requirements of Section 17A of the Act \45\ and the rules and regulations thereunder. --------------------------------------------------------------------------- \45\ 15 U.S.C. 78q-1. --------------------------------------------------------------------------- It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that proposed rule change SR-FICC-2018-006 be, and hereby is, approved.\46\ --------------------------------------------------------------------------- \46\ In approving the proposed rule change, the Commission considered the proposal's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\47\ --------------------------------------------------------------------------- \47\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2018-20885 Filed 9-25-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 187 / Wednesday, September 26, 2018 / Notices 48675
investors, or otherwise in furtherance of For the Commission, by the Division of identities of and/or the number of pools
the purposes of the Act. Trading and Markets, pursuant to delegated underlying each trade are unknown at
authority.16 the time of trade execution.7 MBSD
IV. Solicitation of Comments Brent J. Fields, guidelines provide that two business
Secretary. days prior to the established settlement
Interested persons are invited to
submit written data, views and [FR Doc. 2018–20878 Filed 9–25–18; 8:45 am] date of the TBA settlement obligations,
arguments concerning the foregoing, BILLING CODE 8011–01–P the FICC MBSD clearing member
including whether the proposal is (‘‘Clearing Member’’) that has an
consistent with the Act. Comments may obligation to deliver pools for the TBA
SECURITIES AND EXCHANGE transaction (i.e., the ‘‘seller’’) must
be submitted by any of the following COMMISSION allocate the pools to be delivered.8 FICC
methods:
[Release No. 34–84236; File No. SR–FICC– states that pursuant to the MBSD Rules,
Electronic Comments 2018–006] Clearing Members may substitute an
underlying pool after it has been
• Use the Commission’s internet Self-Regulatory Organizations; Fixed allocated with respect to a pool deliver
comment form (http://www.sec.gov/ Income Clearing Corporation; Order obligation by providing instructions to
rules/sro.shtml); or Granting Approval of Proposed Rule FICC.9
• Send an email to rule-comments@ Change To Codify the Processing of CPR is the percentage of the
sec.gov. Please include File No. SR– Conditional Prepayment Rate Claims in outstanding loan balance for a pool that
CboeBYX–2018–019 on the subject line. the MBSD Rules and Make Other is expected to be repaid over a one-year
Changes period.10 A CPR claim arises when an
Paper Comments underlying TBA pool is allocated or
September 20, 2018. substituted with a pool that pays down
• Send paper comments in triplicate On July 26, 2018, Fixed Income at a faster rate (i.e., has a higher CPR)
to Secretary, Securities and Exchange Clearing Corporation (‘‘FICC’’) filed than the average pay down rate for pools
Commission, 100 F Street NE, with the U.S. Securities and Exchange of the same type as the underlying pool
Washington, DC 20549–1090. Commission (‘‘Commission’’) proposed being replaced.11 The result is that the
All submissions should refer to File No. rule change SR–FICC–2018–006 buyer is receiving a pool with less value
SR–CboeBYX–2018–019. This file pursuant to Section 19(b)(1) of the than anticipated based on the TBA
number should be included on the Securities Exchange Act of 1934 terms.
(‘‘Act’’) 1 and Rule 19b–4 thereunder.2 As provided in the SIFMA
subject line if email is used. To help the
The proposed rule change was Guidelines,12 the industry currently has
Commission process and review your
published for comment in the Federal a process pursuant to which a buyer
comments more efficiently, please use
Register on August 8, 2018.3 The may make a CPR claim against the
only one method. The Commission will
Commission did not receive any seller. The CPR claim process is
post all comments on the Commission’s
comment letters on the proposed rule intended to compensate the buyer for
internet website (http://www.sec.gov/
change. For the reasons discussed the excess amount that it is paying for
rules/sro.shtml). Copies of the
below, the Commission approves the the pool being delivered.13 Pursuant to
submission, all subsequent
proposed rule change. SIFMA Guidelines, an entity is entitled
amendments, all written statements
with respect to the proposed rule I. Description of the Proposed Rule to make a CPR claim if (i) the allocation
change that are filed with the Change or substitution giving rise to the CPR
Commission, and all written claim occurred after the factor release
The proposed rule change would
communications relating to the date 14 following the scheduled
make amendments to FICC’s Mortgage-
proposed rule change between the contractual settlement date relating to
Backed Securities Division (‘‘MBSD’’)
Commission and any person, other than the trade; (ii) the pools involved in the
Clearing Rules (‘‘MBSD Rules’’) 4 in
those that may be withheld from the claim meet the criteria for fast paying
order to (i) add terms governing MBSD’s
public in accordance with the pools in accordance with SIFMA
current processing of conditional
provisions of 5 U.S.C. 552, will be Guidelines; (iii) the amount of the CPR
prepayment rate (‘‘CPR’’) claims to the
available for website viewing and claim is $10,000 or greater, or, in the
MBSD Rules, and (ii) make certain
printing in the Commission’s Public clarifications and corrections in the 7 Notice, 83 FR, at 39144.
Reference Room, 100 F Street NE, MBSD Rules, as described below.5 8 Id.
Washington, DC 20549, on official 9 Id.
business days between the hours of A. CPR Claims
10 Id.
10:00 a.m. and 3:00 p.m. Copies of the Mortgage pools 6 are often traded in 11 Notice, 83 FR, at 39144.
filing also will be available for To-Be-Announced (‘‘TBA’’) trades, 12 Available at https://www.sifma.org/resources/
inspection and copying at the principal which are trades for which the actual general/tba-market-governance/ under ‘‘Uniform
office of the Exchange. All comments Practices Manual.’’ The SIFMA Guidelines are
trading, clearing and settlement guidelines prepared
received will be posted without change. 16 17 CFR 200.30–3(a)(12).
by SIFMA intended to reflect common industry
Persons submitting comments are 1 15 U.S.C. 78s(b)(1). practices relating to confirming, comparing and
2 17 CFR 240.19b–4.
cautioned that we do not redact or edit settling mortgage-backed securities.
3 Securities Exchange Act Release No. 83767
personal identifying information from 13 Notice, 83 FR, at 39144.
(August 2, 2018), 83 FR 39143 (August 8, 2018)
daltland on DSKBBV9HB2PROD with NOTICES
14 The term ‘‘factor release date’’ means, with
comment submissions. You should (SR–FICC–2018–006) (‘‘Notice’’). respect to a pool, the date on which the Federal
submit only information that you wish 4 Available at http://www.dtcc.com/legal/rules-
National Mortgage Association (‘‘Fannie Mae’’), the
to make available publicly. All and-procedures. Federal Home Loan Mortgage Corporation (‘‘Freddie
submissions should refer to File No. 5 Notice, 83 FR, at 39144.
Mac’’) or the Government National Mortgage
6 A mortgage pool is a collection of mortgage Association (‘‘Ginnie Mae’’), as applicable, release
SR–CboeBYX–2018–019 and should be
loans or other collateral assembled by an originator the ‘‘factor’’ that represents the percentage of the
submitted on or before October 17, or master services as collateral for a mortgaged-back agency’s original balance of the pool that remains
2018. security. Id. outstanding as of such date. Id.
VerDate Sep<11>2014 19:21 Sep 25, 2018 Jkt 244001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 E:\FR\FM\26SEN1.SGM 26SEN1](https://thefederalregister.org/doc/83_FR_48862/page/1.svg)
![48678 Federal Register / Vol. 83, No. 187 / Wednesday, September 26, 2018 / Notices
believes these proposed changes to I. Self-Regulatory Organization’s The Exchange proposes to add the
codify and clarify FICC’s existing Statement of the Terms of Substance of following to proposed Rule 714(b)(1),
practices in regards to the CPR claims the Proposed Rule Change ‘‘The following are order risk
process would assist in publicly The Exchange proposes to amend protections on GEMX:’’ The Exchange
disclosing all relevant and material GEMX Rules 100(a)(5) which contains proposes to list all order protections
procedures regarding the CPR claims definitions, Rule 711, ‘‘Acceptance of within Rule 714(b)(1). The Exchange
process. Therefore, the Commission Quotes and Orders’’ and Rule 714, proposes to relocate Limit Order Price
finds that the proposal is consistent ‘‘Automatic Execution of Orders.’’ Protection from Rule 714(b)(2) to
Rule 17Ad–22(e)(23)(i) under the Act. The text of the proposed rule change proposed Rule 714(b)(1)(A). The
is available on the Exchange’s website at Exchange also proposes to add a new
III. Conclusion http://nasdaqgemx.cchwallstreet.com/, sentence to the end of proposed Rule
at the principal office of the Exchange, 714(b)(1)(A) which provides, ‘‘Limit
On the basis of the foregoing, the Order Price Protection shall not apply to
and at the Commission’s Public
Commission finds that the proposal is the Opening Process or during a trading
Reference Room.
consistent with the requirements of the halt.’’ The Exchange is adding this
Act, in particular the requirements of II. Self-Regulatory Organization’s sentence, which was not contained in
Section 17A of the Act 45 and the rules Statement of the Purpose of, and the initial rule change, to make clear the
and regulations thereunder. Statutory Basis for, the Proposed Rule limitations as to when this protection is
Change available on GEMX. The Exchange notes
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that In its filing with the Commission, the the Limit Order Price Protection rejects
proposed rule change SR–FICC–2018– Exchange included statements orders to buy (sell) as the greater of the
006 be, and hereby is, approved.46 concerning the purpose of and basis for Exchange’s best offer (bid) plus (minus)
the proposed rule change and discussed either an absolute dollar or a percentage.
For the Commission, by the Division of any comments it received on the The Exchange notes that the bid or offer
Trading and Markets, pursuant to delegated proposed rule change. The text of these is not established until after an option
authority.47 series options for trading. Applying this
statements may be examined at the
Brent J. Fields, places specified in Item IV below. The protection during the Opening Process
Secretary. Exchange has prepared summaries, set is not necessary as the quote width
[FR Doc. 2018–20885 Filed 9–25–18; 8:45 am] forth in sections A, B, and C below, of allowance is tighter during the Opening
BILLING CODE 8011–01–P the most significant aspects of such Process.3 With respect to trading halts,
statements. Opening Process procedures will be
used to reopen an option series after a
A. Self-Regulatory Organization’s
SECURITIES AND EXCHANGE trading halt, therefore, the same
Statement of the Purpose of, and
COMMISSION protections noted for the Opening
Statutory Basis for, the Proposed Rule
Process will apply for a trading halt and
Change
[Release No. 34–84238; File No. SR–GEMX–
the same restrictive boundaries would
2018–32]
1. Purpose apply.4 This sentence memorializes the
GEMX proposes to amend Rule 714, Exchange’s current practice. The
Self-Regulatory Organizations; Nasdaq Automatic Execution of Orders, by Exchange believes that this rule text will
GEMX, LLC; Notice of Filing and placing all risk protections within this bring greater clarity to the Limit Order
Immediate Effectiveness of Proposed rule and further creating sections to Price Protection functionality.
Rule Change Relating to Risk distinguish order protections, order and The Exchange proposes to relocate
Protections quote protections and quote protections. and re-number Market Order Spread
The Exchange believes that providing Protection from Rule 711(c) to proposed
September 20, 2018. Members with a single rule with all risk Rule 714(b)(1)(B). The Exchange also
Pursuant to Section 19(b)(1) of the protections will provide an easy proposes to add a sentence which
Securities Exchange Act of 1934 reference to the mandatory single leg provides, ‘‘Market Order Spread
(‘‘Act’’),1 and Rule 19b-4 thereunder,2 risk protections on GEMX. Protection shall not apply to the
The Exchange is amending Rule Opening Process or during a trading
notice is hereby given that on
714(b) to rename the caption from halt.’’ The Exchange believes that the
September 11, 2018, Nasdaq GEMX,
‘‘Other Order Protections’’ to ‘‘Other Market Order Spread Protection is
LLC (‘‘GEMX’’ or ‘‘Exchange’’) filed Risk Protections.’’ The Exchange is unnecessary during the Opening Process
with the Securities and Exchange amending references to ‘‘order and during a trading halt because
Commission (‘‘Commission’’) the protections’’ to ‘‘risk protections’’ protections are in place during the
proposed rule change as described in within that rule to more broadly Opening Process to ensure that the best
Items I and II below, which Items have describe the type of protections offered bid and offer displayed on the Exchange
been prepared by the Exchange. The on GEMX. Finally, the Exchange is are within a reasonable range.5 The
Commission is publishing this notice to relocating rule text from Rule 714(c) to
solicit comments on the proposed rule the end of proposed Rule 714(b), which 3 With respect to the Opening Process, a Quality
change from interested persons. states, ‘‘In the event of unusual market Opening Market is required. A Quality Opening
Market a bid/ask differential applicable to the best
conditions and in the interest of a fair
daltland on DSKBBV9HB2PROD with NOTICES
bid and offer from all Valid Width Quotes defined
45 15 U.S.C. 78q–1. and orderly market, the Exchange may in a table to be determined by the Exchange and
46 In approving the proposed rule change, the temporarily establish the levels at which published on the Exchange’s website. See GEMX
Commission considered the proposal’s impact on the order protections contained in this Rule 701(a)(7).
efficiency, competition, and capital formation. 15 4 See GEMX Rule 701(d).
U.S.C. 78c(f). paragraph are triggered as necessary and 5 See note 3 above. With respect to trading halts,
47 17 CFR 200.30–3(a)(12). appropriate.’’ These non-substantive Opening Process procedures will be used to reopen
1 15 U.S.C. 78s(b)(1). rule changes are intended to bring an option series after a trading halt, therefore, the
2 17 CFR 240.19b–4. greater clarity to the rule. same protections noted for the Opening Process will
VerDate Sep<11>2014 19:21 Sep 25, 2018 Jkt 244001 PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 E:\FR\FM\26SEN1.SGM 26SEN1](https://thefederalregister.org/doc/83_FR_48862/page/4.svg)
Document Created: 2018-09-26 00:46:40
Document Modified: 2018-09-26 00:46:40
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 83 FR 48675 |
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