I. Introduction

On July 24, 2026, Fixed Income Clearing Corporation (“FICC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change SR-FICC-2026-008 pursuant to Section 19(b) of the Securities Exchange Act of 1934 (“Exchange Act”) ^[1] and Rule 19b-4 ^[2] thereunder to modify FICC's Government Securities Division (“GSD”) Rulebook (“GSD Rules”) ^[3] to establish a guaranty fund designed to cover losses that may arise due to a Member default or non-default loss event.^[4] On August 4, 2026, FICC filed Partial Amendment No. 1 to make clarifications and corrections to the proposed rule change (the proposed rule change, as modified by Partial Amendment No. 1, is hereinafter referred to as the “Proposed Rule Change”).^[5] The Proposed Rule Change was published for public comment in the Federal Register on August 11, 2026.^[6] The Commission has received ( printed page 72593) comments regarding the substance of the changes proposed in the Proposed Rule Change.^[7]

On September 15, 2026, pursuant to Section 19(b)(2) of the Exchange Act,^[8] the Commission designated a longer period within which to approve, disapprove, or institute proceedings to determine whether to approve or disapprove the Proposed Rule Change.^[9] The Commission is instituting proceedings, pursuant to Section 19(b)(2)(B) of the Exchange Act,^[10] to determine whether to approve or disapprove the Proposed Rule Change.

II. Summary of the Proposed Rule Change

A. Background

FICC, through GSD, serves as a central counterparty (“CCP”) and provider of clearance and settlement services for transactions in U.S. government securities, including repurchase and reverse repurchase transactions involving U.S. government securities.^[11] FICC manages its credit exposures to its Netting Members through the collection of margin to mitigate potential losses from arising from a Member default. FICC maintains financial resources in the form of its Clearing Fund, which is designed to enable FICC to cover potential losses resulting from the failure of the Member or Member family to which FICC has the largest credit exposure. FICC collects Clearing Fund deposits ( i.e., Required Fund Deposits) from its Members using a risk-based margin methodology. Required Fund Deposits operate, individually, as each Member's initial margin, and the aggregate of all such Members' deposits is referred to collectively as the Clearing Fund, which currently operates as GSD's default fund. FICC states that this risk-based methodology enables FICC to identify the risks posed by a Member's unsettled portfolio and to quickly adjust and collect additional deposits as needed to cover those risks.^[12]

B. Proposed Rule Change

FICC proposes to establish a Guaranty Fund for GSD, designed to cover losses that may arise due to a Member default or a non-default loss event and enable FICC to support bankruptcy remote treatment for its Clearing Fund deposits. The Proposed Rule Change includes, among other things:

• Adopting new GSD Rule 4A (Guaranty Fund) to set forth requirements for the Guaranty Fund, including, among other things, that: (i) FICC performs daily stress testing using historical and hypothetical scenarios for purposes of sizing the Guaranty Fund; (ii) FICC sizes the Guaranty Fund at an amount sufficient to cover the stress test deficiency (i.e., losses observed in daily stress testing over required Clearing Fund deposits) that may arise as a result of the default of the two Netting Member Affiliated Families ^[13] that would potentially cause the largest aggregate credit exposure for FICC in extreme but plausible market conditions (a “Cover 2 Standard” or “Cover 2 Requirement”); (iii) all deposits to the Guaranty Fund must be made in cash; and (iv) FICC has the authority to resize the Guaranty Fund on an intramonth basis if stress test deficiencies breach certain thresholds.
• Modifying GSD Rule 4 and the Margin Component Schedule to: (i) support bankruptcy remote treatment for Clearing Fund deposits; (ii) exclude the Clearing Fund from loss mutualization; (iii) provide FICC with the authority to require additional margin deposits from Netting Members if their stress test deficiencies exceed predetermined thresholds in relation to the total Required Fund Deposits of all other Members (excluding such Member or Affiliated Family) or would cause the Guaranty Fund to exceed upper bound parameters established for limiting the resizing of the Guaranty Fund; (iv) clarify that FICC would no longer have the authority to “borrow” Clearing Fund deposits of non-defaulting Members to provide liquidity to FICC to meet its settlement obligations; (v) provide FICC with the authority to exchange a Netting Member's Clearing Fund deposit in the form of cash for U.S. Treasury securities to provide liquidity to FICC to meet its settlement obligations; and (vi) eliminate fixed minimum Required Fund Deposit amounts and adjust the associated minimum cash composition requirements accordingly.
• Relocating the loss allocation rules in Section 7 of GSD Rule 4 to a new GSD Rule 4C (Loss Allocation) and modifying the rules to: (i) incorporate the proposed Guaranty Fund into the loss allocation rules and exclude the Clearing Fund from loss mutualization; (ii) eliminate the concept of Tier One Netting Members and Tier Two Members and exclude CCIT Members and Registered Investment Company Netting Members from loss allocation; (iii) adopt a new five-day “cooling off period” for Defaulting Member Events and Declared Non-Default Loss Events (also referred to as an “Event Period”); and (iv) impose an assessment cap on loss allocation during each cooling-off period equal to two times (or 200 percent of) the Member's Guaranty Fund requirement for each Event Period in lieu of the existing loss allocation rounds system.
• Make other conforming changes throughout the GSD Rules to reflect the adoption of the Guaranty Fund, as described more fully in the Notice of Filing.^[14]

III. Proceedings To Determine Whether To Approve or Disapprove the Proposed Rule Change and Grounds for Disapproval Under Consideration

The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Exchange Act to determine whether the Proposed Rule Change should be approved or disapproved.^[15] Institution of proceedings is appropriate at this time in view of the legal and policy issues raised by the Proposed Rule Change. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, the Commission seeks and encourages interested persons to comment on the Proposed Rule Change, which would provide the Commission with arguments to support the Commission's analysis as to whether to approve or disapprove the Proposed Rule Change.

Pursuant to Section 19(b)(2)(B) of the Exchange Act,^[16] the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings ( printed page 72594) to allow for additional analysis of, and input from commenters with respect to, the Proposed Rule Change's consistency with Section 17A of the Exchange Act ^[17] and the rules thereunder, including the following provisions:

• Section 17A(b)(3)(F) of the Exchange Act,^[18] which requires, among other things, that the rules of a clearing agency are designed to promote the prompt and accurate clearance and settlement of securities transactions; to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible; and, in general, to protect investors and the public interest;
• Section 17A(b)(3)(I) of the Exchange Act,^[19] which requires that the rules of a clearing agency do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act;
• Rule 17ad-22(e)(4) under the Exchange Act,^[20] which requires that a covered clearing agency establish, implement, maintain, and enforce written policies and procedures reasonably designed to effectively identify, measure, monitor, and manage its credit exposures to participants and those arising from its payment, clearing, and settlement processes;
• Rule 17ad-22(e)(6)(iii) under the Exchange Act,^[21] which requires that a covered clearing agency establish written policies and procedures reasonably designed to cover its credit exposures to its participants by establishing a risk-based margin system that, at a minimum, calculates margin sufficient to cover its potential future exposure to participants in the interval between the last margin collection and the close out of positions following a participant default;
• Rule 17ad-22(e)(7)(i) under the Exchange Act,^[22] which requires that a covered clearing agency effectively measure, monitor, and manage the liquidity risk that arises in or is borne by the covered clearing agency, including measuring, monitoring, and managing its settlement and funding flows on an ongoing and timely basis, and its use of intraday liquidity by, at a minimum, maintaining sufficient liquid resources at the minimum in all relevant currencies to effect same-day and, where appropriate, intraday and multiday settlement of payment obligations with a high degree of confidence under a wide range of foreseeable stress scenarios that includes, but is not limited to, the default of the participant family that would generate the largest aggregate payment obligation for the covered clearing agency in extreme but plausible market conditions;
• Rule 17ad-22(e)(7)(ix) under the Exchange Act,^[23] which requires that a covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to describe its process to replenish any liquid resources that it may employ during a stress event;
• Rule 17ad-22(e)(18)(i) under the Exchange Act,^[24] which requires that a covered clearing agency establish, implement, maintain, and enforce written policies and procedures reasonably designed to establish objective, risk-based, and publicly disclosed criteria for participation, which, permit fair and open access by direct, and where relevant, indirect participants and other financial market utilities;
• Rule 17Ad-22(e)(23) under the Exchange Act,^[25] which requires that a covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to, among other things, publicly disclose all relevant rules and material procedures, including key aspects of its default rules and procedures, and 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.

IV. Procedure: Request for Written Comments

The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the Proposed Rule Change. In particular, the Commission invites the written views of interested persons concerning whether the Proposed Rule Change is consistent with Sections 17A(b)(3)(F) and 17A(b)(3)(I) ^[26] of the Exchange Act, and Rules 17ad-22(e)(4), (e)(6)(iii), (e)(7)(i), (e)(7)(ix), (e)(18)(i), and (e)(23) ^[27] of the Exchange Act, or any other provision of the Exchange Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b-4(g) under the Exchange Act,^[28] any request for an opportunity to make an oral presentation.^[29]

Interested persons are invited to submit written data, views, and arguments regarding whether the Proposed Rule Change should be approved or disapproved by December 1, 2026. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by December 15, 2026.

Comments may be submitted by any of the following methods:

Electronic Comments

• Use the Commission's internet comment form (www.sec.gov/​rules/​sro.shtml); or
• Send an email torule-comments@sec.gov. Please include file number SR-FICC-2026-008 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-2026-008. 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 ( www.sec.gov/​rules/​sro.shtml). Copies of the filing will be available for inspection and copying at the principal office of FICC and on DTCC's website ( www.dtcc.com/​legal/​sec-rule-filings). Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR-FICC-2026-008 and should be submitted on or before December 1, 2026.