Federal Register / Vol. 86, No. 15 / Tuesday, January 26, 2021 / Notices 7159 

1See Securities Exchange Act Release No. 98 

(February 12, 1935). 

2See Securities Exchange Act Release No. 7011 

(February 5, 1963), 28 FR 1506 (February 16, 1963). 

3See Securities Exchange Act Release No. 52029 

(July 14, 2005), 70 FR 42456 (July 22, 2005). 

4The staff notes that a few of these 24 registered 

national securities exchanges only have rules to 

permit the listing of standardized options, which 

are exempt from Rule 12d2–2 under the Act. 

Nevertheless, the staff counted national securities 

exchanges that can only list options as potential 

respondents because these exchanges could 

potentially adopt new rules, subject to Commission 

approval under Section 19(b) of the Act, to list and 

trade equity and other securities that have to 

comply with Rule 12d2–2 under the Act. Notice 

registrants that are registered as national securities 

exchanges solely for the purposes of trading 

securities futures products have not been counted 

since, as noted above, securities futures products 

are exempt from complying with Rule 12d–2–2 

under the Act and therefore do not have to file 

Form 25. 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3On November 19, 2020, FICC also filed the 

proposals contained in the Proposed Rule Change 

as advance notice SR–FICC–2020–803 (the 

‘‘Advance Notice’’) with the Commission pursuant 

to Section 806(e)(1) of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act entitled the 

Payment, Clearing, and Settlement Supervision Act 

of 2010 (‘‘Clearing Supervision Act’’), 12 U.S.C. 

5465(e)(1), and Rule 19b–4(n)(1)(i) of the Act, 17 

CFR 240.19b–4(n)(1)(i). Notice of filing of the 

Advance Notice was published in the Federal 

Register on December 29, 2020. Securities Exchange 

Act Release No. 90736 (December 21, 2020), 85 FR 

85743 (December 29, 2020) (File No. SR–FICC– 

2020–803) (‘‘Notice of Filing’’). The Commission 

received no comment letters in response to the 

Notice of Filing. 

extension of the existing collection of 

information provided for in Rule 12d2– 

2 (17 CFR 240.12d2–2) and Form 25 (17 

CFR 249.25) under the Securities 

Exchange Act of 1934 (15 U.S.C. 78a et 

seq.). 

On February 12, 1935, the 

Commission adopted Rule 12d2–2 1 and 

Form 25, under the Securities Exchange 

Act of 1934 (‘‘Act’’), to establish the 

conditions and procedures under which 

a security may be delisted from an 

exchange and withdrawn from 

registration under Section 12(b) of the 

Act.2 The Commission adopted 

amendments to Rule 12d2–2 and Form 

25 in 2005.3 Under the adopted Rule 

12d2–2, all issuers and national 

securities exchanges seeking to delist 

and deregister a security in accordance 

with the rules of an exchange must file 

the adopted version of Form 25 with the 

Commission. The Commission also 

adopted amendments to Rule 19d–1 

under the Act to require exchanges to 

file the adopted version of Form 25 as 

notice to the Commission under Section 

19(d) of the Act. Finally, the 

Commission adopted amendments to 

exempt standardized options and 

security futures products from Section 

12(d) of the Act. These amendments are 

intended to simplify the paperwork and 

procedure associated with a delisting 

and to unify general rules and 

procedures relating to the delisting 

process. 

Form 25 is useful because it informs 

the Commission that a security 

previously traded on an exchange is no 

longer traded. In addition, Form 25 

enables the Commission to verify that 

the delisting and/or deregistration has 

occurred in accordance with the rules of 

the exchange. Further, Form 25 helps to 

focus the attention of delisting issuers to 

make sure that they abide by the proper 

procedural and notice requirements 

associated with a delisting and/or 

deregistration. Without Rule 12d2–2 

and Form 25, as applicable, the 

Commission would be unable to fulfill 

its statutory responsibilities. 

There are 24 national securities 

exchanges that could possibly be 

respondents complying with the 

requirements of the Rule and Form 25.4

The burden of complying with Rule 

12d2–2 and Form 25 is not evenly 

distributed among the exchanges, 

however, since there are many more 

securities listed on the New York Stock 

Exchange, the NASDAQ Stock Market, 

and NYSE American than on the other 

exchanges. However, for purposes of 

this filing, the Commission staff has 

assumed that the number of responses is 

evenly divided among the exchanges. 

Since approximately 830 responses 

under Rule 12d2–2 and Form 25 for the 

purpose of delisting and/or 

deregistration of equity securities are 

received annually by the Commission 

from the national securities exchanges, 

the resultant aggregate annual reporting 

hour burden would be, assuming on 

average one hour per response, 830 

annual burden hours for all exchanges 

(24 exchanges × an average of 34.6 

responses per exchange × 1 hour per 

response). In addition, since 

approximately 110 responses are 

received by the Commission annually 

from issuers wishing to remove their 

securities from listing and registration 

on exchanges, the Commission staff 

estimates that the aggregate annual 

reporting hour burden on issuers would 

be, assuming on average one reporting 

hour per response, 110 annual burden 

hours for all issuers (110 issuers × 1 

response per issuer × 1 hour per 

response). Accordingly, the total annual 

hour burden for all respondents to 

comply with Rule 12d2–2 is 940 hours 

(830 hours for exchanges + 110 hours 

for issuers). The total related internal 

compliance cost associated with these 

burden hours is $201,615 ($166,415 for 

exchanges plus $35,200 for issuers). 

The collection of information 

obligations imposed by Rule 12d2–2 

and Form 25 are mandatory. The 

response will be available to the public 

and will not be kept confidential. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

under the PRA unless it displays a 

currently valid OMB control number. 

The public may view background 

documentation for this information 

collection at the following website: 

www.reginfo.gov. Find this particular 

information collection by selecting 

‘‘Currently under 30-day Review—Open 

for Public Comments’’ or by using the 

search function. Written comments and 

recommendations for the proposed 

information collection should be sent 

within 30 days of publication of this 

notice to (i) www.reginfo.gov/public/do/ 

PRAMain and (ii) David Bottom, 

Director/Chief Information Officer, 

Securities and Exchange Commission, c/ 

o Cynthia Roscoe, 100 F Street NE, 

Washington, DC 20549, or by sending an 

email to: PRA_Mailbox@sec.gov. 

Dated: Janaury 21, 2021. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–01663 Filed 1–25–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90948; File No. SR–FICC– 

2020–015] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Approving Proposed Rule Change To 

Include Same-Day Settling Trades in 

the Risk Management, Novation, 

Guarantee, and Settlement Services of 

the Government Securities Division’s 

Delivery-Versus-Payment Service, and 

Make Other Changes 

January 19, 2021. 

On November 19, 2020, Fixed Income 

Clearing Corporation (‘‘FICC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 proposed rule 

change SR–FICC–2020–015 (the 

‘‘Proposed Rule Change’’) to (1) expand 

FICC’s provision of central counterparty 

services to include the start leg of 

certain repurchase agreement (‘‘repo’’) 

transactions, and (2) enable 

participating FICC members to pair-off 

and settle certain offsetting obligations, 

as described more fully below.3 The 

7160 Federal Register / Vol. 86, No. 15 / Tuesday, January 26, 2021 / Notices 

4Securities Exchange Act Release No. 90551 

(December 2, 2020), 85 FR 79051 (December 8, 

2020) (File No. SR–FICC–2020–015) (‘‘Notice’’). 

5FICC is composed of two divisions: GSD and the 

Mortgage-Backed Securities Division (‘‘MBSD’’). 

GSD provides real-time trade matching, clearing, 

risk management, and netting for trades in U.S. 

government debt issues. MBSD provides real-time 

automated trade matching, trade confirmation, risk 

management, netting, and electronic pool 

notification to the mortgage-backed securities 

(‘‘MBS’’) market. The Proposed Rule Change deals 

solely with proposed changes to the GSD Rulebook 

(‘‘Rules’’), which are available at http://

www.dtcc.com/legal/rules-and-procedures. 

6 In addition to the DVP Service, FICC also 

facilitates trading other types of repos. FICC’s 

General Collateral Finance (‘‘GCF’’) Repo® Service 

enables members to trade general collateral finance 

repos based on rate, term, and underlying product 

throughout the day on a blind basis. See Rule 20— 

Special Provisions for GCF Repo Transactions, 

supra note 5. FICC’s Centrally Cleared Institutional 

Triparty (‘‘CCIT’’) Service enables trading of triparty repos between members that participate in the 

GCF Repo Service and members that are 

institutional cash lenders (other than investment 

companies registered under the Investment 

Company Act of 1940, as amended). See Rule 3B— 

CCIT Service, supra note 5. Unlike the DVP Service, 

the GCF Repo and CCIT Services settle via the 

triparty platform of a clearing bank. The Proposed 

Rule Change proposes changes specific to the DVP 

Service. 

7There is one limited scenario in which FICC 

currently acts as CCP for the Start Leg of a brokered 

same-day starting repo. Specifically, if the Start Leg 

fails to settle on its original scheduled settlement 

date, FICC currently assumes responsibility for 

settlement of the Start Leg on the evening of the 

original scheduled settlement date. See Notice, 

supra note 4 at 79052. 

8See Notice, supra note 4 at 79052, 58. 

9Trade details may be submitted to FICC by, or 

on behalf of, a member in a form, manner, and 

timeframe prescribed by FICC’s Rules. See Rule 5— 

Comparison System, supra note 5. 

10 Id. 

11See Rule 6A—Bilateral Comparison, supra note 

5. 

12For purposes of the Proposed Rule Change, 

both IDBs and non-IDB repo brokers are FICC 

members. A qualifying non-IDB repo broker is one 

that FICC has determined: (1) Operates as a broker 

with regard to activity in a segregated repo account, 

and (2) agrees and participates in FICC’s repo 

netting service in the same manner as an IDB that 

participates in the service. See Rule 1—Definitions, 

supra note 5. 

13See Rule 6B—Demand Comparison, supra note 

5. 

14See Rule 5—Comparison System, supra note 5. 

15See Rule 11—Netting System, supra note 5. 

16See Notice, supra note 4 at 79054–55. 

17There are several risk factors inherent to trades 

that clear bilaterally as opposed to trades that clear 

through a CCP. For example, the credit risk 

associated with bilaterally cleared trades remains 

with the original counterparties, who might not 

utilize robust and transparent margin requirements, 

multilateral netting, emergency liquidity and loss 

sharing arrangements, or other risk mitigation 

measures. See U.S. Department of the Treasury 

Report, A Financial System That Creates Economic 

Opportunities: Capital Markets at 78, 81 (October 

2017), available at https://www.treasury.gov/presscenter/press-releases/documents/a-financialsystem-capital-markets-final-final.pdf; Joint Staff 

Report: The U.S. Treasury Market at 55 (October 15, 

2014), available at https://www.treasury.gov/presscenter/press-releases/Documents/Joint_Staff_

Report_Treasury_10-15-2014.pdf; Treasury Market 

Practices Group, White Paper on Clearing and 

Settlement in the Secondary Market for U.S. 

Treasury Securities at 2–4 (July 11, 2019), available 

at https://www.newyorkfed.org/medialibrary/ 

Microsites/tmpg/files/CS_FinalPaper_071119.pdf. 

18See Section 5, Rule 19—Special Provisions for 

Brokered Repo Transactions, supra note 5. 

Proposed Rule Change was published 

for public comment in the Federal 

Register on December 8, 2020,4 and the 

Commission received no comment 

letters regarding the changes proposed 

therein. For the reasons discussed 

below, the Commission is approving the 

Proposed Rule Change. 

I. Description of the Proposed Rule 

Change 

A. Background 

FICC, through its Government 

Securities Division (‘‘GSD’’), serves as a 

central counterparty (‘‘CCP’’) and 

provider of clearance and settlement 

services for cash-settled U.S. Treasury 

securities.5 Among its services, FICC 

provides real-time trade matching, 

clearing, risk management, and netting 

for repo transactions in U.S. Treasury 

securities in which all securities 

delivery obligations are made against 

full payment (‘‘delivery-versuspayment’’ or ‘‘DVP’’) (the ‘‘DVP 

Service’’).6

DVP repos involve a pair of 

transactions between two parties. The 

first transaction (the ‘‘Start Leg’’) 

consists of the sale of securities, in 

which one party delivers securities in 

exchange for the other party’s delivery 

of cash. The second transaction (the 

‘‘End Leg’’) occurs on a date after that 

of the Start Leg and consists of the 

repurchase of securities, in which the 

obligations to deliver cash and 

securities are the reverse of the Start 

Leg. The parties agree to the terms of the 

trade, including the specific securities, 

principal amount, interest rate, haircut, 

and date of maturity (i.e., either 

overnight or term). 

A DVP repo that is scheduled to start 

one or more business days after the 

submission of trade details to FICC is a 

‘‘forward starting’’ repo. A DVP repo 

that is scheduled to start on the same 

business day as trade details are 

submitted to FICC is a ‘‘same-day 

starting’’ repo. For forward starting 

repos, FICC acts as CCP for both the 

Start Leg and the End Leg. However, 

since the inception of the DVP Service, 

for same-day starting repos, FICC 

generally has acted as CCP for the End 

Leg only.7 Although FICC does not 

currently novate the Start Leg of sameday starting repos, FICC collects margin 

from the parties for the End Leg on the 

scheduled settlement date of the Start 

Leg.8 Currently, the parties to a sameday starting repo settle the Start Leg 

bilaterally outside of FICC. 

The first step in the clearance and 

settlement process of a DVP repo is for 

the parties to submit the trade details to 

FICC.9 Upon receipt, FICC validates the 

trade details in a procedure referred to 

in FICC’s Rules as ‘‘Trade Comparison,’’ 

which culminates in the legally binding 

and enforceable contract between FICC 

and the parties to the trade.10 There are 

different types of Trade Comparisons, 

depending on which entity submits the 

trade details to FICC, and the 

procedures, timing, and other applicable 

operational arrangements vary 

depending on the type. For example, a 

Bilateral Comparison occurs when the 

individual FICC members that are the 

parties to a trade each submit trade 

details to FICC.11 A Demand 

Comparison occurs when an InterDealer Broker (‘‘IDB’’) or qualifying nonIDB repo broker 12 (each, a ‘‘Repo 

Broker’’) submits trade details to FICC 

on behalf of both parties to a trade.13

FICC generally novates and 

guarantees settlement of a trade upon 

Trade Comparison.14 Additionally, on a 

daily basis, FICC aggregates and 

matches a member’s offsetting 

obligations resulting from the member’s 

trades, thereby netting the member’s 

total daily settlement obligations.15 In 

the DVP Service, such netting takes 

place the night before the scheduled 

settlement date of whichever leg of the 

repo would settle on the following 

business day.16

Trades that settle bilaterally outside of 

FICC do not have the benefit of FICC’s 

CCP services, and therefore, such trades 

can be subject to greater risk of 

settlement fails.17 Moreover, trades 

facilitated by a Repo Broker that settle 

outside of FICC require multiple 

bilateral securities movements between 

the parties to the trade and the Repo 

Broker. The greater the number of 

bilateral securities movements involved 

in trade settlement, the greater the 

potential for operational risk resulting 

in settlement fails. If the Start Leg of a 

DVP repo submitted by a Repo Broker 

fails to settle on the original scheduled 

settlement date, FICC currently steps in 

that evening as CCP and assumes 

responsibility for settling the trade.18

This process may involve FICC 

receiving securities from the failing 

party or netting the settlement 

obligations arising from the Start Leg 

against those of the End Leg of the same 

or another repo. FICC states that 

although its current process of 

centralizing the settlement of such 

failed Start Legs decreases further 

Federal Register / Vol. 86, No. 15 / Tuesday, January 26, 2021 / Notices 7161 

19See Notice, supra note 4 at 79052–53. 

20See Notice, supra note 4 at 79052. 

21See Notice, supra note 4 at 79052–53, 58. 

22See Notice, supra note 4 at 79054, 58. 

23 Id. 

24See Rule 6A—Bilateral Comparison, supra note 

5. 

25See Rule 1, supra note 5. 

26See Notice, supra note 4 at 79053. 

27 Id. 

28The Start Leg of same-day starting repos would 

be netted in the limited scenario of a brokered repo 

settlement fail on the scheduled settlement date. 

See supra note 7; Notice, supra note 4 at 79052. 

29See Rule 1—Definitions, supra note 5. 

30For example, for an overnight repo that is an 

As-Of Trade, both legs would settle at Contract 

Value because both would settle on the date of 

Trade Comparison and therefore would not be 

netted. For an overnight repo that is a same-day 

starting repo, the Start Leg would settle on the date 

of Trade Comparison at Contract Value, whereas the 

End Leg would be netted that evening and settle the 

following business day at System Value. For an 

overnight repo that is forward starting (i.e., both 

legs would settle on dates in the future), both legs 

would be subject to netting and settle at System 

Value. Notice, supra note 4 at 79054. 

31The Fedwire is a service provided by the 

Federal Reserve Banks that includes settlement and 

transfer of DVP securities transactions. The Fedwire 

operates daily from 8:30 a.m. to 3:30 p.m. (All times 

herein are Eastern Time.) See Fedwire and National 

Continued 

settlement risk, the current process is 

operationally inefficient because it does 

not eliminate the multiple securities 

movements that give rise to the risk of 

settlement fails.19

B. Proposed Same-Day Settling Service 

FICC states that its members have 

expressed an interest in FICC acting as 

CCP for the Start Leg of same-day 

starting repos.20 FICC proposes to 

modify its Rules to include the Start Leg 

of same-day starting repos in the risk 

management, novation, guarantee, and 

settlement services of the DVP Service 

(the ‘‘Same-Day Settling Service’’). 

Upon Trade Comparison, FICC would 

act as CCP for the Start Leg of same-day 

starting repos, which would settle on 

the same business day. FICC’s margin 

collection with respect to the trade 

would not change from the current 

process. After FICC’s novation, if the 

Start Leg were to fail, the parties’ 

obligations to and from FICC would go 

through the netting process that 

evening, and FICC would continue to 

apply the margin amounts collected 

with respect to the trade towards FICC’s 

risk management of the End Leg. 

FICC believes that the Same-Day 

Starting Service could increase 

settlement efficiencies and decrease 

settlement risk because it would 

eliminate the movement of securities 

between members by centralizing the 

settlement of the Start Leg of same-day 

starting repos with FICC.21 Moreover, 

for same-day starting repos submitted by 

Repo Brokers, the Same-Day Settling 

Service would remove the Repo Broker 

from the settlement process by 

eliminating the multiple bilateral 

securities movements involved in the 

settlement of the Start Leg. 

1. Voluntary for Repo Brokers; 

Mandatory for Other Members 

FICC proposes to make participation 

in the proposed Same-Day Settling 

Service voluntary for Repo Brokers. 

Repo Brokers often provide a suite of 

services to their clients, including 

facilitating the bilateral settlement of the 

Start Leg of same-day starting repos. 

FICC states that a requirement on Repo 

Brokers to participate in the Same-Day 

Settling Service could disrupt the 

current service offerings from Repo 

Brokers to their clients.22 Since Repo 

Brokers submit trade details to FICC on 

behalf of both parties to a trade, a Repo 

Broker opting out of the Same-Day 

Settling Service would simply result in 

settlement of the Start Leg bilaterally 

outside of FICC, as is done currently. 

FICC believes that providing optionality 

would allow Repo Brokers and their 

clients to determine whether a Repo 

Broker should participate in the SameDay Settling Service.23 For participating 

Repo Brokers, FICC would no longer 

assume responsibility for a failed Start 

Leg because FICC would already be 

acting as CCP for the Start Leg upon 

Trade Comparison. 

For FICC’s members that are not Repo 

Brokers, participation in the Same-Day 

Settling Service would be mandatory. 

Unlike Repo Brokers, FICC’s individual 

members submit trade details with 

respect to their own side of a trade only, 

such that Trade Comparison only occurs 

after FICC validates the trade details 

submitted by both parties to the trade.24

Accordingly, if one party to a same-day 

starting repo could choose to opt out of 

the Same-Day Settling Service, FICC 

would not be able to act as CCP with 

equal and opposite settlement 

obligations between the two parties. 

Such trades would, therefore, need to 

settle outside of FICC as they do 

currently. However, unlike the clients of 

a Repo Broker, such members would not 

know in advance whether any given 

Start Leg would settle with FICC as CCP 

or bilaterally outside of FICC. By 

requiring such members to participate 

in the Same-Day Settling Service, 

members would have certainty that their 

Compared Trades would settle with 

FICC acting as CCP. 

2. As-Of Trades 

For purposes of the Proposed Rule 

Change, same-day starting repos would 

include As-Of Trades,25 in which a 

member submits a DVP repo for 

comparison on the business day after 

the scheduled settlement date for the 

Start Leg, and the End Leg is the current 

business day or thereafter. FICC states 

that members occasionally submit As-Of 

Trades due to human or operational 

errors.26 FICC further states that it 

included As-Of Trades in the Proposed 

Rule Change in order to reasonably 

include as many variations of same-day 

starting repos as possible to ensure that 

FICC would provide consistent 

settlement processing for all same-day 

starting repos.27

Currently, the Start Leg of an As-Of 

Trade settles outside of FICC. An End 

Leg scheduled to settle on the current 

business day also settles outside of 

FICC. However, an End Leg scheduled 

to settle on a date after the current 

business day settles with FICC acting as 

CCP. FICC proposes to act as CCP with 

respect to both the Start and End Legs 

of a same-day starting repo, regardless of 

the timing of the respective scheduled 

settlement dates. 

3. Settlement at Contract Value or 

System Value 

As mentioned above, netting in the 

DVP Service occurs the night before the 

scheduled settlement date. Because 

settlement of Start Legs within the 

Same-Day Settling Service would occur 

on the same business day as Trade 

Comparison, such transactions would 

generally not be netted.28 Instead, FICC 

would settle such transactions on a 

trade-for-trade basis. Transactions that 

FICC settles on a trade-for-trade basis 

(i.e., transactions that are not netted) 

settle at ‘‘Contract Value,’’ which means 

the dollar value at which the transaction 

is to be settled on the scheduled 

settlement date.29 Transactions that 

settle on a future date (i.e., transactions 

that are netted) settle at ‘‘System 

Value,’’ which includes accrued 

interest. For consistency with the 

foregoing, FICC proposes to clarify the 

Rules with respect to the Same-Day 

Settling Service to reflect that any leg of 

a DVP repo to be settled on a trade-fortrade basis would settle at Contract 

Value, whereas any leg to be settled on 

a future date would settle at System 

Value.30

4. Late-Day Compared Trades 

FICC states that members occasionally 

execute same-day starting repos after the 

close of the Fedwire Securities Service 

(‘‘Fedwire’’), which is the service that 

members generally use for settling 

bilateral securities obligations.31

7162 Federal Register / Vol. 86, No. 15 / Tuesday, January 26, 2021 / Notices 

Securities Service, Federal Reserve Bank of New 

York (March 2015), available at https://

www.newyorkfed.org/aboutthefed/fedpoint/ 

fed43.html; Fedwire Securities Service, Board of 

Governors of the Federal Reserve System (July 31, 

2014), available at https://www.federalreserve.gov/ 

paymentsystems/fedsecs_about.htm. 

32See Notice, supra note 4 at 79056. 

33See Section 14, Rule 11—Netting System, supra 

note 5. 

34See Notice, supra note 4 at 79058. 

35 15 U.S.C. 78s(b)(2)(C). 

36 15 U.S.C. 78q–1(b)(3)(F). 

37 17 CFR 240.17Ad–22(e)(21)(i), (ii), and (iii). 

38 15 U.S.C. 78q–1(b)(3)(F). 

Currently, such trades settle bilaterally 

between the parties outside of FICC, 

provided that both parties use the same 

clearing bank for settlement. FICC 

proposes to include such late-day trades 

in the Same-Day Settling Service (i.e., 

FICC proposes to act as CCP for the Start 

Leg) on a reasonable efforts basis, 

meaning that FICC would attempt to 

contact the parties to the trade and 

FICC’s clearing bank to confirm 

agreement to settle the trade.32

Specifically, for members that clear at 

FICC’s clearing bank, FICC would 

attempt to settle any same-day starting 

repos that are compared between 3:01 

p.m. and 5:00 p.m., provided that (1) 

FICC is able to contact the parties to the 

trade and FICC’s clearing bank, and (2) 

the parties and FICC’s clearing bank 

agree to settle the trade. For members 

that do not clear at FICC’s clearing bank, 

FICC proposes to attempt to settle, on a 

reasonable efforts basis, same-day 

starting repos that are compared during 

the Fedwire reversal period between 

3:01 p.m. and 3:30 p.m., provided that 

(1) FICC is able to contact FICC’s 

clearing bank and the parties to the 

trade, (2) FICC’s clearing bank and the 

parties to the trade confirm agreement to 

settle the trade, and (3) FICC’s clearing 

bank, the member’s clearing bank, and 

the Federal Reserve Bank of New York 

each permit settlement of the trade. 

5. Other Changes to FICC’s Rules To 

Incorporate the Same-Day Settling 

Service 

FICC proposes changes to several Rule 

provisions to ensure the relevant 

applicability of such provisions to the 

Same-Day Settling Service. FICC 

proposes to add a newly defined term 

‘‘Same-Day Settling Trade’’ to capture 

the universe of DVP repos that would be 

covered by the Same-Day Settling 

Service. FICC proposes to modify the 

definitions of ‘‘Deliver Obligation’’ and 

‘‘Receive Obligation’’ to include 

references to Same-Day Settling Trades. 

FICC proposes to modify the definitions 

of ‘‘Settlement Value’’ and ‘‘System 

Value’’ to contemplate that Same-Day 

Settling Trades could settle at Contract 

Value or System Value, depending on 

the circumstances of the trade, as 

described above. 

FICC proposes to incorporate SameDay Settling Trades into the existing 

Rule provisions governing the 

Comparison System and Netting 

System. FICC proposes to add Rule 

provisions addressing eligibility 

requirements for Same-Day Settling 

Trades to qualify for FICC’s novation 

and settlement guarantee. FICC 

proposes to incorporate Same-Day 

Settling Trades into the Rule provisions 

governing how parties satisfy their 

obligations to FICC, including trades 

that become uncompared or canceled. 

FICC proposes to incorporate Same-Day 

Settling Trades into the Rule provisions 

dealing with settlement fails. Finally, 

FICC proposes to include appropriate 

cross-references to ensure that various 

Rule provisions related to general 

securities settlement apply to Same-Day 

Settling Trades. 

C. Proposed Pair-Off Service 

Settlement fails occur because one 

party does not have inventory to settle 

with the other party on the scheduled 

settlement date. Currently, a member’s 

obligations that remain unsettled when 

the Fedwire closes go through FICC’s 

overnight netting system for settlement 

the following business day, and the 

member is subject to FICC’s fails 

charge.33 In a scenario where a member 

has offsetting unsettled failed 

obligations in the same security (i.e., 

separate failed obligations to both 

deliver and receive the same security) 

after the close of the Fedwire, those 

obligations currently go through the 

overnight netting system for settlement 

the following day. 

FICC proposes an optional service for 

members whereby FICC would pair-off 

a member’s offsetting failed securities 

settlement obligations each day, 

beginning at 3:32 p.m. (shortly after the 

Fedwire closes) until 4:00 p.m. (the 

‘‘Pair-Off Service’’). Additionally, the 

member would receive either a debit or 

credit, as applicable, to account for any 

difference in the settlement value of its 

deliver and receive obligations as part of 

FICC’s intraday funds-only settlement 

(‘‘FOS’’) process. Therefore, the 

proposed Pair-Off Service would enable 

participating members to settle their 

obligations on the day they arise, rather 

than continuing to the next day as 

unsettled failed obligations, as they 

would under the current practice. Failed 

obligations that remain unsettled 

overnight present market risk exposure 

to both FICC and the parties to such 

trades. FICC believes that by enabling 

the earlier settlement of a member’s 

offsetting obligations, the proposed PairOff Service could reduce such overnight 

market risk.34

FICC proposes to start the Pair-Off 

Service at approximately 3:32 p.m., and 

provide FOS banks with their intraday 

net FOS figures by 4:00 p.m. for 

acknowledgement by 4:30 p.m. 

Accordingly, FICC proposes to change 

the timing of FOS processing from the 

current time of 3:15 p.m. to 4:30 p.m. to 

enable FICC to settle any net money 

differences that would arise from the 

proposed Pair-Off Service. 

II. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Act 35

directs the Commission to approve a 

proposed rule change of a selfregulatory organization if it finds that 

such proposed rule change is consistent 

with the requirements of the Act and the 

rules and regulations thereunder 

applicable to such organization. After 

careful consideration, the Commission 

finds that the Proposed Rule Change is 

consistent with the requirements of the 

Act and the rules and regulations 

applicable to FICC. In particular, the 

Commission finds that the Proposed 

Rule Change is consistent with Section 

17A(b)(3)(F) 36 of the Act and Rule 

17Ad–22(e)(21) 37 thereunder. 

A. Consistency With Section 

17A(b)(3)(F) of the Act 

Section 17A(b)(3)(F) 38 of the Act 

requires, in part, that the rules of a 

clearing agency, such as FICC, be 

designed to (1) promote the prompt and 

accurate clearance and settlement of 

securities transactions, (2) 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 (3) remove 

impediments to and perfect the 

mechanism of a national system for the 

prompt and accurate clearance and 

settlement of securities transactions. 

The Commission believes that the 

Proposed Rule Change is consistent 

with Section 17A(b)(3)(F) of the Act for 

the reasons stated below. 

1. Prompt and Accurate Clearance and 

Settlement; Remove Impediments and 

Perfect the Mechanism 

As described above in Section I.A., 

FICC currently acts as CCP for only the 

End Leg of a same-day starting DVP repo 

transaction. The Start Leg currently 

settles bilaterally outside of FICC 

Federal Register / Vol. 86, No. 15 / Tuesday, January 26, 2021 / Notices 7163 

39See supra note 17. 

40 15 U.S.C. 78q–1(b)(3)(F). 

41 Id. 

42See, eg., Securities Exchange Act Release No. 

78962 (September 28, 2016), 81 FR 69240 at 69250 

(October 5, 2016) (S7–22–16). 

43See supra note 17. 

44 15 U.S.C. 78q–1(b)(3)(F). 

45 17 CFR 240.17Ad–22(e)(21). 

between the parties to the trade. Trades 

that settle bilaterally outside of FICC are 

generally exposed to more operational 

risk and consequently may result in 

more settlement fails than trades which 

are novated and risk-managed by FICC 

in its role as CCP.39 By centralizing 

settlement of the Start Leg of same-day 

starting repos, the Same-Day Settling 

Service would eliminate the current 

bilateral settlement of securities 

between the parties. 

Additionally, as discussed above in 

Section I.A., trades facilitated by a Repo 

Broker that settle outside of FICC 

require multiple bilateral securities 

movements between the parties to the 

trade and the Repo Broker. The greater 

the number of bilateral securities 

movements involved in trade 

settlement, the greater the potential for 

operational risk resulting in settlement 

fails. FICC currently manages the risk of 

a failed Start Leg for a brokered repo by 

assuming responsibility for trade 

settlement on the evening of the original 

scheduled settlement date. While this 

approach decreases further settlement 

risk, it neither prevents the original 

settlement fail nor does it eliminate the 

multiple bilateral securities movements 

for settling the Start Leg until after a 

settlement fail. For participating Repo 

Brokers, the Same-Day Settling Service 

would eliminate the bilateral securities 

movements and the associated risk of 

settlement fails because FICC would 

novate and guarantee settlement of the 

Start Leg upon Trade Comparison. As a 

result, the Commission believes that the 

Same-Day Settling Service is designed 

to improve efficiency in the settlement 

process for brokered DVP repos and 

thereby reduce the risk of settlement 

fails. 

The Commission believes that the 

proposed Same-Day Settling Service 

should increase efficiency in FICC’s 

settlement process for DVP repos and 

reduce the operational risk associated 

with bilateral settlement that can lead to 

settlement fails. Streamlining the 

settlement process for DVP repos and 

reducing the operational risk that can 

lead to settlement fails should, in turn, 

(i) promote the prompt and accurate 

clearance and settlement of securities 

transactions, and (ii) remove 

impediments to and perfect the 

mechanism of a national system for the 

prompt and accurate clearance and 

settlement of securities transactions. 

Accordingly, the Commission believes 

that the proposed Same-Day Settling 

Service is consistent with Section 

17A(b)(3)(F) of the Act.40

Finally, as discussed above in Section 

I.C., the proposed Pair-Off Service 

would enable participating members to 

settle their offsetting failed securities 

settlement obligations each day after the 

Fedwire closes. FICC’s current process 

is for such failed obligations to go 

through the evening netting system, 

with settlement rescheduled for the 

following business day. The 

Commission believes that the proposed 

Pair-Off Service represents a more 

efficient process for resolving failed 

settlement obligations because 

settlement would occur on the day they 

arise, rather than continuing as 

settlement fails to the next business day. 

Streamlining the process for resolving 

failed securities settlement obligations 

to enable earlier settlement and 

minimize settlement fails should, in 

turn, (i) promote the prompt and 

accurate clearance and settlement of 

securities transactions, and (ii) remove 

impediments to and perfect the 

mechanism of a national system for the 

prompt and accurate clearance and 

settlement of securities transactions. 

Accordingly, the Commission finds that 

the proposed Pair-Off Service is 

consistent with Section 17A(b)(3)(F) of 

the Act.41

2. Safeguarding of Securities and Funds 

When a CCP novates a trade and takes 

offsetting and guaranteed positions 

between the two original parties to the 

trade, the length of time from novation 

to trade settlement may affect the CCP’s 

exposure to credit, market, and liquidity 

risk.42 For example, settlement fails 

extend the time to settlement and can 

thereby present risk to the CCP that a 

member’s positions and other resources 

that the CCP holds (generally, the 

member’s margin) decline in market 

value as the CCP considers whether and 

how it might liquidate, transfer, or 

otherwise dispose of such assets to 

minimize losses. Settlement fails can 

also affect the amount of liquidity risk 

a CCP may need to bear for purposes of 

settling an unsettled trade because CCPs 

may rely on incoming payments from 

some members to facilitate payments to 

other members. 

As described above, the Proposed 

Rule Change is designed to reduce 

settlement fails in the DVP repo market. 

Specifically, as described above in 

Section I.A., FICC currently acts as CCP 

for only the End Leg of a same-day 

starting DVP repo. Trades that settle 

bilaterally outside of FICC are generally 

exposed to more operational risk and 

consequently may result in more 

settlement fails than trades which are 

novated and risk-managed by FICC in its 

role as CCP.43 Additionally, as 

discussed above in Section I.A., trades 

facilitated by a Repo Broker that settle 

outside of FICC require multiple 

bilateral securities movements between 

the parties to the trade and the Repo 

Broker. The Same-Day Settling Service 

would eliminate the current bilateral 

settlement of securities between the 

parties and thereby reduce the risk of 

settlement fails. 

Finally, as discussed above in Section 

I.C., the proposed Pair-Off Service 

would enable participating members to 

settle their offsetting failed securities 

settlement obligations each day after the 

Fedwire closes as opposed to allowing 

such failed obligations to go through the 

evening netting system, with settlement 

rescheduled for the following business 

day. Failed obligations that remain 

unsettled overnight present market risk 

exposure to both FICC and the parties to 

such trades. By enabling the earlier 

settlement of a member’s offsetting 

obligations, the proposed Pair-Off 

Service could reduce such overnight 

market risk. 

For the reasons stated above, the 

Commission believes that FICC 

designed the proposed Same-Day 

Settling Service and Pair-Off Service to 

limit the occurrence and effects of 

settlement fails, and thereby, reduce 

FICC’s exposure to the associated credit, 

market, and liquidity risks. Reducing 

such risks would help FICC assure the 

safeguarding of securities and funds 

which are in its custody or control. 

Accordingly, the Commision believes 

the Proposed Rule Change is consistent 

with Section 17A(b)(3)(F) of the Act.44

B. Consistency With Rule 17Ad– 

22(e)(21) 

Rule 17Ad–22(e)(21) under the Act 

requires each covered clearing agency to 

establish, implement, maintain, and 

enforce written policies and procedures 

reasonably designed to be efficient and 

effective in meeting the requirements of 

its participants and the markets it 

serves, and have the covered clearing 

agency’s management regularly review 

the efficiency and effectiveness of its (i) 

clearing and settlement arrangements, 

(ii) operating structure, including risk 

management policies, procedures and 

systems, and (iii) scope of products 

cleared or settled.45

7164 Federal Register / Vol. 86, No. 15 / Tuesday, January 26, 2021 / Notices 

46Additionally, when a FICC member fails to 

meet its settlement obligations, the member incurs 

FICC’s fails charge, which could further impact the 

member’s liquidity. See Section 14, Rule 11— 

Netting System, supra note 5. 47 17 CFR 240.17Ad–22(e)(21). 

48 Id. 

49 15 U.S.C. 78q–1. 

50 15 U.S.C. 78s(b)(2). 

51 In approving the Proposed Rule Change, the 

Commission considered the proposals’ impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

52 17 CFR 200.30–3(a)(12). 

As discussed above in Section I.B, the 

proposed Same-Day Settling Service 

would eliminate bilateral settlements 

between the parties to the Start Leg of 

a DVP repo and allow FICC to settle 

both the Start and End Legs of a DVP 

Repo. In that regard, the proposed 

Same-Day Settling Service represents a 

more efficient and effective settlement 

process than FICC’s current process, 

which generally includes bilateral 

settlement of the Start Leg. FICC 

designed the Same-Day Settling Service 

in response to requests from its 

members, to mitigate the operational 

risk that can result in settlement fails. 

As discussed above, if not contained, 

settlement fails can spread to other 

market participants and undermine the 

liquidity of a well-functioning market.46

In contrast, reducing the occurrence of 

settlement fails (and their resultant 

effects) would strengthen broader 

market liquidity. Therefore, by reducing 

the risk of settlement fails, the proposal 

would benefit FICC’s members when it 

results in transactions that settle on time 

that might have otherwise failed, with 

lower overall transaction costs. 

Accordingly, the Commission believes 

that adopting the proposed Same-Day 

Settling Service would be consistent 

with Rule 17Ad–22(e)(21) 47 because the 

proposal would broaden the scope of 

the DVP Service to include the Start Leg 

of same-day starting repos in a manner 

designed to be efficient and effective in 

reducing settlement fails to the benefit 

of FICC’s members and the broader DVP 

repo market. 

Moreover, as discussed above in 

Section I.C, the proposed Pair-Off 

Service would enable participating 

members to settle their offsetting failed 

securities settlement obligations each 

day, shortly after the Fedwire closes. 

Under FICC’s current process, such 

failed obligations go through the 

evening netting system, with settlement 

rescheduled for the following business 

day. The proposed Pair-Off Service 

represents a more efficient process for 

resolving failed settlement obligations 

because settlement would occur on the 

day the obligations arise, rather than 

continuing as settlement fails to the next 

business day. As discussed above, failed 

obligations that remain unsettled 

overnight present market risk exposure 

to both FICC and the parties to such 

trades. By enabling earlier settlement of 

a member’s offsetting obligations, the 

proposed Pair-Off Service could reduce 

such overnight market risk. 

Accordingly, the Commission believes 

that adopting the proposed Pair-Off 

Service would be consistent with Rule 

17Ad–22(e)(21) 48 because the proposal 

would enable the earlier settlement of a 

member’s offsetting failed obligations in 

a manner designed to be efficient and 

effective in reducing overnight market 

risk to the benefit of FICC’s members. 

III. Conclusion 

On the basis of the foregoing, the 

Commission finds that the Proposed 

Rule Change is consistent with the 

requirements of the Act and in 

particular with the requirements of 

Section 17A of the Act 49 and the rules 

and regulations promulgated 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act 50 that 

Proposed Rule Change SR–FICC–2020– 

015, be, and hereby is, Approved.51

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.52

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–01587 Filed 1–25–21; 8:45 am] 

BILLING CODE 8011–01–P 

SMALL BUSINESS ADMINISTRATION 

Information Collection; Improving 

Customer Experience (OMB Circular 

A–11, Section 280 Implementation) 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Notice; request for comment. 

SUMMARY: The Small Business 

Administration has submitted the 

following information collection: 

Improving Customer Experience (OMB 

Circular A–11, Section 280 

Implementation), to the Office of 

Management and Budget (OMB) for 

approval under the Paperwork 

Reduction Act (PRA). 

DATES: Submit comments on or before: 

February 25, 2021. 

ADDRESSES: Submit comments by the 

deadline stated in the DATES section 

above to: 

• www.reginfo.gov/public/do/ 

PRAMain. Find this particular 

information collection by selecting 

‘‘Currently under Review—Open for 

Public Comments’’ and searching for 

this information collection by title or 

OMB Control Number 3245–0404; and 

• Amber Chaudhry, Customer 

Experience Lead, amber.chaudhry@

sba.gov; 202 657 9722. 

FOR FURTHER INFORMATION CONTACT: 

Submit requests for additional 

information, including requests for 

copies of the collection instrument and 

supporting documents to Amber 

Chaudhry, Customer Experience Lead, 

amber.chaudhry@sba.gov; 202-657- 

9722, or Curtis B. Rich, Management 

Analyst, curtis.rich@sba.gov; 202–205– 

7030. 

SUPPLEMENTARY INFORMATION: 

Title: Improving Customer Experience 

(OMB Circular A–11, Section 280 

Implementation). 

OMB Control Number: 3245–0404. 

Abstract: A modern, streamlined and 

responsive customer experience means: 

Raising government-wide customer 

experience to the average of the private 

sector service industry; developing 

indicators for high-impact Federal 

programs to monitor progress towards 

excellent customer experience and 

mature digital services; and providing 

the structure (including increasing 

transparency) and resources to ensure 

customer experience is a focal point for 

agency leadership. 

This proposed information collection 

activity provides a means to garner 

customer and stakeholder feedback in 

an efficient, timely manner in 

accordance with the Administration’s 

commitment to improving customer 

service delivery as discussed in Section 

280 of OMB Circular A–11 at https://

www.performance.gov/cx/a11-280.pdf. 

As discussed in OMB guidance, 

agencies should identify their highestimpact customer journeys (using 

customer volume, annual program cost, 

and/or knowledge of customer priority 

as weighting factors) and select 

touchpoints/transactions within those 

journeys to collect feedback. 

These results will be used to improve 

the delivery of Federal services and 

programs. It will also provide 

government-wide data on customer 

experience that can be displayed on 

www.performance.gov to help build 

transparency and accountability of 

Federal programs to the customers they 

serve. 

As a general matter, these information 

collections will not result in any new 

system of records containing privacy 

information and will not ask questions 

of a sensitive nature, such as sexual 

behavior and attitudes, religious beliefs, 

and other matters that are commonly