74110 Federal Register / Vol. 75, No. 229 / Tuesday, November 30, 2010 / Notices 

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

2 17 CFR 240.19b–4. 

of one or more of those issues. The 

deadline for the Postal Service to file the 

administrative record with the 

Commission is December 7, 2010. See 

39 CFR 3001.113. 

Availability; Web site posting. The 

Commission has posted the appeal and 

supporting material on its Web site at 

http://www.prc.gov. Additional filings 

in this case and participants’ 

submissions also will be posted on the 

Web site, if provided in electronic 

format or amenable to conversion, and 

not subject to a valid protective order. 

Information on how to use the 

Commission’s Web site is available 

online or by contacting the 

Commission’s webmaster via telephone 

at 202–789–6873 or via electronic mail 

at prc-webmaster@prc.gov. 

The appeal and all related documents 

are also available for public inspection 

in the Commission’s docket section. 

Docket section hours are 8 a.m. to 4:30 

p.m., Monday through Friday, except on 

Federal government holidays. Docket 

section personnel may be contacted via 

electronic mail at prc-dockets@prc.gov 

or via telephone at 202–789–6846. 

Filing of documents. All filings of 

documents in this case shall be made 

using the Internet (Filing Online) 

pursuant to Commission rules 9(a) and 

10(a) at the Commission’s Web site, 

http://www.prc.gov, unless a waiver is 

obtained. See 39 CFR 3001.9(a) and 

10(a). Instructions for obtaining an 

account to file documents online may be 

found on the Commission’s Web site, 

http://www.prc.gov, or by contacting the 

Commission’s docket section at prcdockets@prc.gov or via telephone at 

202–789–6846. 

Intervention. Those, other than the 

Petitioner and respondent, wishing to be 

heard in this matter are directed to file 

a notice of intervention. See 39 CFR 

3001.111. Notices of intervention in this 

case are to be filed on or before 

December 20, 2010. A notice of 

intervention shall be filed using the 

Internet (Filing Online) at the 

Commission’s Web site, http:// 

www.prc.gov, unless a waiver is 

obtained for hardcopy filing. See 39 CFR 

3001.9(a) and 10(a). 

Further procedures. By statute, the 

Commission is required to issue its 

decision within 120 days from the date 

it receives the appeal. See 39 U.S.C. 

404(d)(5). A procedural schedule has 

been developed to accommodate this 

statutory deadline. In the interest of 

expedition, in light of the 120-day 

decision schedule, the Commission may 

request the Postal Service or other 

participants to submit information or 

memoranda of law on any appropriate 

issue. As required by the Commission 

rules, if any motions are filed, responses 

are due 7 days after any such motion is 

filed. See 39 CFR 3001.21. 

It is ordered: 

1. The Postal Service shall file the 

administrative record in this appeal, or 

otherwise file a responsive pleading to 

the appeal, by December 7, 2010. 

2. The procedural schedule listed 

below is hereby adopted. 

3. Pursuant to 39 U.S.C. 505, Katrina 

Martinez is designated officer of the 

Commission (Public Representative) to 

represent the interests of the general 

public. 

4. The Secretary shall arrange for 

publication of this Notice and Order and 

Procedural Schedule in the Federal 

Register. 

PROCEDURAL SCHEDULE

November 22, 2010 ............................................ Filing of Appeal. 

December 7, 2010 .............................................. Deadline for Postal Service to file administrative record in this appeal or responsive pleading. 

December 20, 2010 ............................................ Deadline for petitions to intervene (see 39 CFR 3001.111(b)). 

December 27, 2010 ............................................ Deadline for petitions to intervene (see 39 CFR 3001.111(b)). 

December 13, 2010 ............................................ Deadline for Petitioner’s Form 61 or initial brief in support of petition (see 39 CFR 3001.115(a), 

(b) and (e)). 

January 18, 2011 ................................................ Deadline for answering brief in support of Postal Service (see 39 CFR 3001.115(c)). 

February 2, 2011 ................................................ Deadline for reply briefs in response to answering briefs (see 39 CFR 3001.115(d)). 

February 9, 2011 ................................................ Deadline for motions requesting oral argument; the Commission will schedule oral argument 

only when it is a necessary addition to the written filings (see 39 CFR 3001.116). 

March 15, 2011 ................................................... Expiration of the Commission 120-day decisional schedule (see 39 U.S.C. 404(d)(5)). 

By the Commission. 

Shoshana M. Grove, 

Secretary. 

[FR Doc. 2010–30046 Filed 11–29–10; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63361; File No. SR–FICC– 

2010–09] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Notice of 

Filing of a Proposed Rule Change To 

Introduce Cross-Margining of Certain 

Positions Cleared at the Fixed Income 

Clearing Corporation and Certain 

Positions Cleared at New York 

Portfolio Clearing, LLC 

November 23, 2010. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder 2

notice is hereby given that on November 

12, 2010, the Fixed Income Clearing 

Corporation (‘‘FICC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

primarily by FICC. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The proposed rule change would 

allow FICC to offer cross-margining of 

certain positions cleared at its 

Government Securities Division (‘‘GSD’’) 

and certain positions cleared at New 

York Portfolio Clearing, LLC (‘‘NYPC’’). 

The proposed rule change also would 

make certain other related changes to 

GSD’s rules. 


jdjones on DSK8KYBLC1PROD with NOTICES
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3The Commission has modified the text of the 

summaries prepared by FICC. 

4The specific language of the proposed provision 

can be found at http://www.dtcc.com/downloads/ 

legal/rule_filings/2010/ficc/2010-09.pdf. 

5NYPC’s DCO application may be viewed on the 

CFTC’s Web site: http://www.cftc.gov/ 

IndustryOversight/IndustryFilings/index.htm. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FICC included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FICC has prepared 

summaries, set forth in sections (A), (B) 

and (C) below, of the most significant 

aspects of these statements.3

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

The purpose of the proposed rule 

change is to: (i) Introduce crossmargining of certain positions cleared at 

the GSD and of certain positions cleared 

at NYPC and (ii) make certain other 

changes to the GSD Rules as set forth 

below.4

NYPC has applied for registration 

with the Commodity Futures Trading 

Commission (‘‘CFTC’’) as a derivatives 

clearing organization (‘‘DCO’’) pursuant 

to Section 5b of the Commodity 

Exchange Act and Part 39 of the 

Regulations of the CFTC.5 FICC would 

not implement the proposed rule change 

until NYPC obtains such registration. 

Upon registration as a DCO, NYPC 

proposes initially to clear U.S. dollardenominated interest rate futures 

contracts. 

The proposed rule change would 

allow certain GSD Members to combine 

their positions at the GSD with their 

positions or those of certain permitted 

affiliates cleared at NYPC, within a 

single margin portfolio (‘‘Margin 

Portfolio’’). 

1. Cross-Margining With NYPC 

Background 

Currently, the GSD maintains a 

clearing fund (‘‘Clearing Fund’’) 

comprised of deposits of cash and 

eligible securities from its members 

(each a ‘‘GSD Member’’) to provide 

liquidity and satisfy any losses that 

might otherwise be incurred as a result 

of a GSD Member’s default and the 

subsequent close out of its positions. 

The amount of a GSD Member’s 

required deposit to the Clearing Fund 

(‘‘Required Fund Deposit’’) is calculated 

with reference to several factors relating 

to an analysis of the possible losses 

associated with the GSD Member’s 

positions. Currently, this analysis is 

performed with respect to the GSD 

Member’s positions in a particular 

account. 

Proposed Cross-Margining With NYPC 

The cross-margining arrangement 

with NYPC contemplated herein 

(‘‘NYPC Arrangement’’) is to be 

distinguished from the cross-margining 

arrangement currently conducted 

between the Chicago Mercantile 

Exchange (‘‘CME’’) and FICC (‘‘CME 

Arrangement’’). In the CME 

Arrangement, each of FICC and CME 

holds and manages its own positions 

and collateral, and independently 

determines the amount of margin that it 

will make available for cross-margining, 

referred to as the ‘‘residual margin 

amount,’’ that remains after each of FICC 

and CME conducts its own internal 

offsets. FICC then computes the amount 

by which the cross-margining 

participant’s margin requirement can be 

reduced at each clearing organization 

(‘‘cross-margining reduction’’) by 

comparing the participant’s positions 

and the related margin requirements at 

FICC as against those at CME. FICC 

offsets each cross-margining 

participant’s residual margin amount 

based on related positions at FICC 

against the offsetting residual margin 

amounts of the participant or its affiliate 

at CME. FICC and CME may then reduce 

the amount of collateral that they collect 

to reflect the offsets between the crossmargining participant’s positions at 

FICC and its or its affiliate’s positions at 

CME. 

Under the proposed NYPC 

Arrangement, a member of FICC that is 

also an NYPC clearing member (‘‘Joint 

Clearing Member’’) could, at the 

discretion of NYPC and FICC, and in 

accordance with the provisions of the 

GSD and NYPC Rules, elect to have its 

margin requirement with respect to 

eligible positions in its proprietary 

account at NYPC and its margin 

requirement with respect to eligible 

positions at FICC calculated by taking 

into consideration the net risk of such 

eligible positions at both clearing 

organizations. In addition, an affiliate of 

a member of FICC that is a clearing 

member of NYPC (‘‘Permitted Margin 

Affiliate’’) could agree to have its 

positions and margin at NYPC margined 

together with eligible positions of the 

FICC member. 

The NYPC Arrangement would allow 

(i) Joint Clearing Members and (ii) 

members of FICC and their Permitted 

Margin Affiliates to have their margin 

requirements for FICC and NYPC 

positions determined on a combined 

basis, with FICC and NYPC each having 

a security interest in such members’ 

margin deposits and other collateral to 

secure such members’ obligations to 

FICC and NYPC. 

The following types of FICC members 

would not be eligible to participate in 

the NYPC Arrangement in order to 

allow FICC to maintain segregation of 

certain business or member types that 

are treated differently for purposes of 

loss allocation: (i) GSD Sponsored 

Members, (ii) Inter-Dealer Broker 

Netting Members and (iii) Dealer 

Netting Members with respect to their 

segregated brokered accounts. In 

addition, in order for a Banking Netting 

Member to combine its accounts into a 

Margin Portfolio with any other 

accounts, it would have to demonstrate 

to the satisfaction of FICC and NYPC 

that doing so would comply with the 

regulatory requirements applicable to 

the Bank Netting Member. 

In order to distinguish between the 

CME Arrangement and the NYPC 

Arrangement, FICC is proposing to 

amend the definition of ‘‘CrossMargining Agreement’’ in the GSD 

Rules, which would be defined as an 

agreement entered into between FICC 

and one or more FCOs (as defined in 

GSD Rule 1) pursuant to which a CrossMargining Participant, at the discretion 

of FICC and in accordance with the 

provisions of the GSD Rules, could elect 

to have its Required Fund Deposit with 

respect to Eligible Positions at FICC, and 

its or its Permitted Margin Affiliate’s, if 

applicable, margin requirements with 

respect to Eligible Positions at such 

FCO(s), calculated either (i) by taking 

into consideration the net risk of such 

Eligible Positions at each of the clearing 

organizations or (ii) as if such positions 

were in a single portfolio. Therefore, the 

CME Arrangement would fall into 

clause (i) of the definition whereas the 

NYPC Arrangement would fall into 

clause (ii). Conforming changes would 

be made to GSD Rule 1, Definitions, 

relating to cross-margining. GSD Rule 

43, Cross-Margining Arrangements, also 

would be amended to add provisions 

regarding single-portfolio margining 

(i.e., the proposed NYPC Arrangement). 

To implement this proposal, FICC and 

NYPC would enter into a crossmargining agreement (‘‘NYPC 

Agreement’’), which would be appended 

to the GSD Rules and made a part 

thereof. 

Pursuant to the NYPC Agreement, and 

consistent with previous approvals of 

cross-margining arrangements involving 


jdjones on DSK8KYBLC1PROD with NOTICES
74112 Federal Register / Vol. 75, No. 229 / Tuesday, November 30, 2010 / Notices 

6Original Margin is the NYPC equivalent of the 

Clearing Fund. 

DCOs, cross-margining with certain 

NYPC positions would be limited to 

positions carried in proprietary 

accounts of clearing members of NYPC. 

Customers of NYPC clearing members 

would not be permitted to participate in 

the cross-margining arrangement. 

Participation in the NYPC Arrangement 

would be voluntary. Participants and 

their Permitted Margin Affiliates would 

be required to execute the requisite 

cross-margining participant agreements 

(the Joint Member or Affiliated Member 

version, as applicable), which are 

exhibits to the NYPC Agreement. 

FICC would be responsible for 

performing the margin calculations in 

its capacity as the Administrator under 

the terms of the NYPC Agreement. 

Specifically, FICC would determine the 

combined FICC Clearing Fund and 

NYPC Original Margin 6 requirement for 

each participant. FICC would calculate 

those requirements using a Value-atRisk (‘‘VaR’’) methodology, with a 99 

percent confidence level and a 3-day 

liquidation period for cash positions 

and a 1-day liquidation period for 

futures positions. In addition, each 

cross-margining participant’s one-pot 

margin requirement would be subject to 

a daily back test, and a ‘‘coverage 

component’’ would be applied and 

charged to the participant in the event 

that the back test reflects insufficient 

coverage. The one-pot margin 

requirement for each participant would 

then be allocated between FICC and 

NYPC in proportion to the clearing 

organizations’ respective ‘‘stand-alone’’ 

margin requirements—in other words, 

an amount reflecting the ratio of what 

each clearing organization would have 

required from that participant if it was 

not participating in the cross-margining 

program (‘‘Constituent Margin Ratio’’). 

The NYPC Agreement provides that 

either FICC or NYPC could, at any time, 

require additional margin to be 

deposited by a participant above what is 

calculated under the NYPC Agreement 

based upon the financial condition of 

the participant, unusual market 

conditions or other special 

circumstances. The standards that FICC 

proposes to use for these purposes are 

the standards currently contained in the 

GSD Rules, so that notwithstanding the 

calculation of a member’s Clearing Fund 

requirement pursuant to the NYPC 

Agreement, FICC would still retain the 

rights contained within the GSD Rules 

to charge additional Clearing Fund 

under the circumstances specified in the 

GSD Rules. For example, the GSD Rules 

currently contain a provision providing 

that if a Dealer Netting Member falls 

below its minimum financial 

requirement it shall be required to post 

additional Clearing Fund equal to the 

greater of (i) $1 million or (ii) 25 percent 

of its Required Fund Deposit. 

FICC would utilize the same VaR 

engine for futures and cash positions. 

Under this method, the prior 250 days 

of historical information for futures 

positions and the prior 252 days of 

historical information for cash 

positions, including prices, spreads and 

market variables such as Treasury zerocoupon yields and London Interbank 

Offered Rate curves, are used to 

simulate the market environments in the 

forthcoming 1 day for futures positions 

and the forthcoming 3 days for cash 

positions. Projected portfolio profits and 

losses are calculated assuming these 

simulated environments will actually be 

realized. These simulations would be 

used to calculate VaR. Historical 

simulation is a continuation of the FICC 

margin methodology. 

With respect to the confidence level, 

FICC currently utilizes extreme value 

theory to determine the 99th percentile 

of loss distribution. Upon 

implementation of the FICC–NYPC onepot margining, FICC would utilize a 

front-weighting mechanism to 

determine the 99th percentile of loss 

distribution. This front-weighting 

mechanism would place more emphasis 

on more recent observations. 

Additionally, FICC’s VaR engine would 

be enhanced to accommodate more 

securities; this means that certain 

CUSIPs which are now considered to be 

‘‘non-priceable’’ (because, for example, 

of a lack of historical information 

regarding the security) and subject to a 

‘‘haircut’’ requirement (i.e., fixed 

percentage charge) where offsets are not 

permitted, would be treated as 

‘‘priceable’’ and therefore included in 

the core VaR calculation. 

Based on preliminary analyses, FICC 

expects that the FICC VaR component of 

the Clearing Fund requirement may be 

reduced by as much as approximately 

20 percent for common FICC–NYPC 

members as a result of the NYPC 

Arrangement. FICC has performed 

backtesting analysis to verify that there 

will be sufficient coverage after the 

FICC–NYPC cross-margining reductions 

are applied. Moreover, an independent 

firm has performed backtesting analysis 

of the FICC–NYPC one-pot 

methodology, as well as FICC’s and 

NYPC’s stand-alone methodologies. 

Both such analyses demonstrated that 

the VaR methodologies provide 

coverage at the 99th confidence level. 

In the event of the insolvency or 

default of a member that participates in 

the NYPC Arrangement, the positions in 

such participant’s one-pot portfolio 

including, where applicable, the 

positions of its Permitted Margin 

Affiliate at NYPC, would be liquidated 

by FICC and NYPC as a single portfolio 

and the liquidation proceeds would be 

applied to the defaulting participant’s 

obligations to FICC and NYPC in 

accordance with the provisions of the 

NYPC Agreement. 

The NYPC Agreement provides for the 

sharing of losses by FICC and NYPC in 

the event that the one-pot portfolio 

margin deposits of a defaulting 

participant would not be sufficient to 

cover the losses resulting from the 

liquidation of that participant’s trades 

and positions: 

• If either clearing organization had a 

net loss (‘‘worse-off party’’), and the 

other had a net gain (‘‘better-off party’’) 

that is equal to or exceeds the worse-off 

party’s net loss, then the better-off party 

pays the worse-off party the amount of 

the latter’s net loss. In this scenario, one 

clearing organization’s gain would 

extinguish the entire loss of the other 

clearing organization. 

• If either clearing organization had a 

net loss (‘‘worse-off party’’) and the other 

clearing organization had a net gain 

(‘‘better-off party’’) that is less than or 

equal to the worse-off party’s net loss, 

then the better-off party would pay the 

worse-off party an amount equal to the 

net gain. Thereafter, if such payment 

did not extinguish the net loss of the 

worse-off party, the better-off party 

would pay the worse-off party an 

amount equal to the lesser of: (i) The 

amount necessary to ensure that the net 

loss of each clearing organization is in 

proportion to the Constituent Margin 

Ratio or (ii) the better-off party’s 

‘‘Maximum Transfer Payment’’ less the 

better-off party’s net gain. The 

‘‘Maximum Transfer Payment’’ would be 

defined with respect to each clearing 

organization to mean an amount equal 

to the product of (i) the sum of the 

margin reductions of the clearing 

organizations and (ii) the other clearing 

organization’s Constituent Margin 

Ratio—in other words, the amount by 

which the other clearing organization 

reduced its margin requirements in 

reliance on the cross-margining 

arrangement. In this scenario, one 

clearing organization’s gain does not 

completely extinguish the entire loss of 

the other clearing organization, and the 

better-off clearing organization would be 

required to make an additional payment 

to the worse-off clearing organization. 

This potential additional payment 

would be capped as described in this 

paragraph. 


jdjones on DSK8KYBLC1PROD with NOTICES
Federal Register / Vol. 75, No. 229 / Tuesday, November 30, 2010 / Notices 74113 

7The other parties to the Cross-Guaranty 

Agreement are The Depository Trust Company, 

National Securities Clearing Corporation and The 

Options Clearing Corporation. 

• If either clearing organization had a 

net loss, and the other had the same net 

loss, a smaller net loss, or no net loss, 

then: 

Æ In the event that the net losses of 

the clearing organizations were in 

proportion to the Constituent Margin 

Ratio, no payment would be made. 

Æ In the event that the net losses of 

the clearing organizations were not in 

proportion to the Constituent Margin 

Ratio, then the clearing organization 

that had a net loss which was less than 

its proportionate share of the total net 

losses incurred by the clearing 

organizations (‘‘better-off party’’) would 

pay the other clearing organization 

(‘‘worse-off party’’) an amount equal to 

the lesser of: (i) The better-off party’s 

Maximum Transfer Payment or (ii) the 

amount necessary to ensure that the 

clearing organizations’ respective net 

losses were allocated between them in 

proportion to the Constituent Margin 

Ratio. 

• If FICC had a net gain after making 

a payment as described above, FICC 

would pay to NYPC the amount of any 

deficiency in the defaulting member’s 

customer segregated funds accounts or, 

if applicable, such defaulting member’s 

Permitted Margin Affiliate held at NYPC 

up to the amount of FICC’s net gain. 

• If FICC received a payment under 

the Netting Contract and Limited CrossGuaranty (‘‘Cross-Guaranty Agreement’’) 

to which it is a party (i.e., because FICC 

had a net loss), and NYPC had a net 

loss, FICC would share the crossguaranty payment with NYPC pro rata, 

where such pro rata share is determined 

by comparing the ratio of NYPC’s net 

loss to the sum of FICC’s and NYPC’s 

net losses.7 This allocation is 

appropriate because the ‘‘single pot’’ 

combines FICC and NYPC proprietary 

positions into a unified portfolio that 

would be margined and liquidated as a 

single unit. This requirement would not 

apply after NYPC becomes a party to the 

Cross-Guaranty Agreement. The GSD 

Rules would further provide that in the 

event of a close out of a cross-margining 

participant under the NYPC Agreement, 

FICC would offset its liquidation results 

first with NYPC because the liquidation 

will essentially be of a single portfolio 

and then present its results for purposes 

of the Cross-Guaranty Agreement. 

The GSD Rules would further provide 

that FICC would offset its liquidation 

results in the event of a close out of a 

cross-margining participant in the NYPC 

Agreement first with NYPC because the 

liquidation would essentially be of a 

single Margin Portfolio and then would 

present its results for purposes of the 

multilateral Cross-Guaranty Agreement. 

2. Other GSD Proposed Rule Changes 

The proposed rule filing would allow 

FICC to permit margining of positions 

held in accounts of an affiliate of a 

member within GSD, akin to the interaffiliate margining in the CME 

Arrangement and the proposed NYPC 

Arrangement. Thus, as in those 

arrangements, if a GSD member 

defaults, its GSD Clearing Fund 

deposits, cash settlement amounts and 

other available collateral would be 

available to FICC to cover the member’s 

default, as would the GSD Clearing 

Fund deposits and available collateral of 

any Permitted Margin Affiliate with 

which it cross-margins. 

Loss Allocation 

Under the current loss allocation 

methodology in GSD Rule 4, Clearing 

Fund and Loss Allocation, GSD 

allocates losses first to the most recent 

counterparties of a defaulting member. 

The proposed changes to GSD Rule 4 

would delete this step in the loss 

allocation methodology in order to 

achieve a more equitable result. Instead, 

any loss allocation would first be made 

against the retained earnings of FICC 

attributable to GSD in an amount up to 

25 percent of FICC’s retained earnings 

or such higher amount as may be 

approved by the Board of Directors of 

FICC. 

If a loss still remained, GSD would 

divide the loss between the FICC Tier 1 

Netting Members and the FICC Tier 2 

Netting Members. ‘‘Tier One Netting 

Member’’ and ‘‘Tier Two Netting 

Member’’ have been introduced in the 

GSD Rules to reflect two different 

categories which have been designated 

as such by FICC for loss allocation 

purposes. Currently, only investment 

companies registered under the 

Investment Company Act of 1940, as 

amended, would qualify as Tier 2 

Netting Members. Tier 2 Netting 

Members would only be subject to loss 

to the extent they traded with the 

defaulting members, due to regulatory 

requirements applicable to them. 

Tier 1 Netting Members would be 

allocated the loss applicable to them 

first by assessing the Clearing Fund 

deposit of each such member in the 

amount of up to $50,000, equally. If a 

loss remains, Tier 1 Netting Members 

would be assessed ratably in accordance 

with the respective amounts of their 

Required Fund Deposits based on the 

average daily amount of the member’s 

Required Fund Deposit over the prior 

twelve months. Consistent with the 

current Rules, GSD members that are 

acting as Inter-Dealer Brokers would be 

limited to a loss allocation of $5 million 

in respect of their inter-dealer broker 

activity. 

Margin Calculation—Intraday Margin 

Calls 

In order to facilitate the NYPC 

Arrangement, GSD is proposing to adopt 

the futures clearing house convention of 

calculating Clearing Fund requirements 

twice per day. GSD would retain its 

regular calculation and call as set out in 

the GSD Rules. An additional daily 

intra-day calculation and call (‘‘Intraday 

Supplemental Clearing Fund Deposit’’) 

would be made subject to a threshold 

that would be identified in FICC’s risk 

management procedures. In addition, 

the GSD would process a mark-tomarket pass-through twice per day, 

instead of the current practice of once 

daily. The second collection and passthrough of mark-to-market amounts 

would include a limited set of 

components to be defined in FICC’s risk 

management procedures. All mark-tomarket debits would be collected in full. 

FICC would pay out mark-to-market 

credits only after any intra-day Clearing 

Fund deficit is met. 

Since GSD would be recalculating and 

margining a GSD Member’s exposure 

intra-day, the margin calculation 

methodology set forth in GSD Rule 4, 

Clearing Fund and Loss Allocation, 

would be revised to eliminate the 

Margin Requirement Differential 

component of the FICC Clearing Fund 

calculation. In addition, GSD Rule 4 

would be revised to provide that in the 

case of a Margin Portfolio that contains 

accounts of a Permitted Margin Affiliate, 

FICC would apply the highest VaR 

confidence level applicable to the GSD 

Member or the Permitted Margin 

Affiliate. Application of a higher VaR 

confidence levels would result in a 

higher margin rate. Consistent with 

current GSD Rules, a minimum 

Required Fund Deposit of $5 million 

would apply to a member that maintains 

broker accounts. 

Consolidated Funds-Only Settlement 

The funds-only settlement process at 

GSD currently requires a member to 

appoint a settling bank that will settle 

the member’s net debit or net credit 

amount due to or from the division by 

way of the National Settlement Service 

of the Board of Governors of the Federal 

Reserve System (‘‘NSS’’). Any fundsonly settling bank that would settle for 

a member that is also an NYPC member 

or that would settle for a member and 

a Permitted Margin Affiliate that is an 


jdjones on DSK8KYBLC1PROD with NOTICES
74114 Federal Register / Vol. 75, No. 229 / Tuesday, November 30, 2010 / Notices 

NYPC member would have its net-net 

credit or debit balances at each clearing 

corporation, other than balances with 

respect to futures positions of a 

‘‘customer’’ as such term is defined in 

CFTC Regulation 1.3(k), aggregated and 

netted for operational convenience and 

would pay or be paid such netted 

amount. The proposed rule change 

makes clear that, notwithstanding the 

consolidated settlement, the member 

would remain obligated to GSD for the 

full amount of its funds-only settlement 

amount. 

Submission of Locked-in Trades From 

NYPC 

The current GSD Rules allow for 

submission of ‘‘locked-in trades’’ (i.e., 

trades that are deemed compared when 

the data on the trade is received from a 

single source) submitted by a locked-in 

trade source on behalf of a GSD 

Member. Currently, designated lockedin trade sources are Federal Reserve 

Banks on behalf of the Treasury 

Department, Freddie Mac and GCFAuthorized Inter-Dealer Brokers for GCF 

Repo transactions. Under the proposed 

rule change, GSD Rule 6C, Locked-In 

Comparison, would be amended to 

include NYPC as an additional lockedin trade source. This would be 

necessary because there would be 

futures transactions cleared by NYPC 

that would proceed to physical delivery. 

NYPC would submit the trade data as a 

locked-in trade source for processing 

through FICC, identifying the GSD 

Member that had authorized FICC to 

accept the locked-in trade from NYPC. 

Once these transactions are submitted to 

FICC, they would no longer be futures 

but rather would be in the form of buysells eligible for processing by GSD. As 

would be the case with other locked-in 

trade submissions accepted by FICC, the 

GSD Member designated in the trade 

information would have executed FICC 

documentation evidencing to FICC its 

authorization of NYPC. 

Deletion of Category 1/Category 2 

Distinction 

The proposed rule change would 

delete the legacy characterization of 

certain types of members as either 

‘‘Category 1’’ or ‘‘Category 2’’, a 

distinction that currently applies to 

Dealer Netting Members, Futures 

Commission Merchant Netting Members 

and Inter-Dealer Broker Netting 

Members at GSD. Historically, the two 

categories were used to margin lower 

capitalized members (i.e., Category 2) at 

a higher rate. With the adoption of the 

VaR margin methodology, this 

distinction is no longer necessary. 

Rather than margin Netting Members at 

higher rates solely due to a single static 

capitalization threshold, FICC is able, by 

use of the VaR margin methodology, to 

margin Netting Members at a higher rate 

by applying a higher confidence level 

against any Netting Member which, 

regardless of size, FICC believes may 

pose a higher risk. 

With the deletion of the Category 1/ 

Category 2 distinction, Section 1 of GSD 

Rule 13, Funds-Only Settlement, is 

proposed to be changed to provide that 

all Netting Members could receive 

forward mark adjustment payments, 

subject to FICC’s general discretion to 

withhold credits that would be 

otherwise due to a distressed Netting 

Member. 

Amendment of CME Agreement 

The proposed NYPC Arrangement 

would necessitate an amendment to the 

CME Agreement to clarify that the 

NYPC Arrangement would take priority 

over the CME Arrangement when 

determining residual FICC positions 

that would be available for crossmargining with the CME. In addition, 

when calculating and presenting 

liquidation results under the CME 

Agreement, the amendment would 

provide that FICC’s liquidation results 

would include FICC’s liquidation 

results in combination with NYPC’s 

liquidation results because the NYPC 

Agreement would provide for a right of 

first offset between FICC and NYPC. The 

CME Agreement showing the proposed 

changes was filed as an attachment to 

the proposed rule change as part of 

Exhibit 5. 

3. Summary of Other Proposed Changes 

to Rule Text 

In GSD Rule 1, Definitions, the 

following definitions are proposed to be 

added, revised or deleted: 

The terms ‘‘Broker Account’’ and 

‘‘Dealer Account’’ would be added to the 

text of the GSD Rules. A ‘‘Broker 

Account’’ is an account that is 

maintained by an inter-dealer broker 

netting member, or a segregated broker 

account of a netting member that is a 

not an inter-dealer broker netting 

member. An account that is not a Broker 

Account is referred to as a Dealer 

Account. 

‘‘Coverage Charge’’ would be revised 

to refer to the additional charge with 

respect to the member’s Required Fund 

Deposit (rather that its VaR Charge) 

which brings the member’s coverage to 

a targeted confidence level. 

‘‘Current Net Settlement Positions’’ 

would be corrected to clarify its current 

intent, that it is calculated with respect 

to a certain Business Day and not 

necessarily on that day, since it may be 

calculated after market close on the day 

prior to its application (i.e., before or 

after midnight between the close of 

business one day and the open of 

business on the next day). 

‘‘Excess Capital Differential’’ would be 

corrected to refer to the amount by 

which a member’s VaR Charge exceeds 

its Excess Capital, instead of by 

reference to the amount by which its 

required Clearing Fund deposit exceeds 

its Excess Capital. 

‘‘Excess Capital Premium Calculation 

Amount’’ would be deleted because, 

with the introduction of VaR 

methodology, the calculation is no 

longer applicable. The terms ‘‘Excess 

Capital Differential’’ and ‘‘Excess Capital 

Ratio’’ would be amended to delete 

archaic references to ‘‘Excess Capital 

Premium Calculation Amount’’ and to 

refer instead to the comparison of a 

member’s capital calculation to its VaR 

Charge. In addition, the text of Section 

14 of GSD Rule 3 would be amended to 

provide that the Excess Capital 

Premium charge applies to any type of 

entity that is a GSD Netting Member 

rather than limiting its applicability to 

only the specified types formerly 

identified in the text. 

‘‘Excess Capital Ratio’’ would be 

amended to mean the quotient resulting 

from dividing the amount of a member’s 

VaR Charge by its Excess Net Capital. 

‘‘GSD Margin Group’’ would be added 

to refer to the GSD Accounts within a 

Margin Portfolio. 

‘‘Margin Portfolio’’ would be added to 

refer to the positions designated by the 

member as grouped for cross-margining, 

subject to the rules set forth in GSD Rule 

4. Dealer Accounts and Broker Accounts 

could not be combined in a common 

Margin Portfolio. A Sponsoring Member 

Omnibus Account could not be 

combined with any other Accounts. 

‘‘Unadjusted GSD Margin Portfolio 

Amount’’ would be added to define the 

amount calculated by GSD with regard 

to a Margin Portfolio, before application 

of premiums, maximums or minimums. 

It includes the VaR Charge and the 

Coverage Charge for GSD. In the case of 

a cross-margining participant of GSD, 

the Unadjusted GSD Margin Portfolio 

Amount also would include the crossmargining reduction, if any. 

The terms ‘‘Category 2 Gross Margin 

Amount’’, ‘‘Margin Adjustment 

Amount’’, ‘‘Repo Volatility Factor’’ and 

‘‘Revised Gross Margin Amount’’ would 

be deleted from GSD Rule 1 since they 

are no longer used elsewhere in the GSD 

Rules. The Schedule of Repo Volatility 

Factors would be deleted because it is 

no longer applicable. 

In Section 2 of GSD Rule 3, Ongoing 

Membership Requirements, the 


jdjones on DSK8KYBLC1PROD with NOTICES
Federal Register / Vol. 75, No. 229 / Tuesday, November 30, 2010 / Notices 74115 

8Section 16 of the NYPC Agreement provides that 

FICC covenants and agrees that, during the term of 

the NYPC Agreement: (i) NYPC-cleared contracts 

shall have priority for margin offset purposes over 

any other cross-margining agreement; (ii) FICC will 

not enter into any other cross-margining agreement 

if such agreement would adversely affect the 

priority of NYPC and FICC under the NYPC 

Agreement with respect to available assets; and (iii) 

FICC will not, without the prior written consent of 

NYPC, amend the CME Agreement, if such further 

amendment would adversely affect NYPC’s right to 

cross-margin positions in eligible products prior to 

any cross-margining of CME positions with FICCcleared contracts or adversely affect the priority of 

NYPC and FICC under the NYPC Agreement with 

respect to available assets. 

9See NYPC Agreement, Section 14. 

10NYPC’s rules can be viewed as part of NYPC’s 

DCO registration application on the CFTC’s Web 

site (http://www.cftc.gov), as well as on NYPC’s 

Web site (http://www.nypclear.com). 

11See NYPC Rule 801(b)(1). 

12See NYPC Rule 801(b)(2). 

13Pursuant to NYPC Rule 801(b)(3), limited 

purpose participants will be required to make a 

contribution to the NYPC guaranty fund in form 

and substance similar to and in an amount not less 

than the NYSE guaranty, which will initially 

consist of a $50,000,000 guaranty secured by 

$25,000,000 in cash during the first year of NYPC’s 

operations. 

14See NYPC Rule 801(c)(1)(i). 

15See NYPC Rule 801(c)(1)(ii). 

requirement that GCF counterparties 

submit information relating to the 

composition of their NFE-related 

accounts, would be amended to require 

the submission of such information 

periodically, rather than on a quarterly 

basis. GSD currently requires this 

information every other month and by 

this change, FICC could institute 

periodic reporting on a schedule that is 

appropriate at such time, in response to 

current conditions. 

In Section 9 of GSD Rule 4, Clearing 

Fund and Loss Allocation, concerning 

the return of excess deposits and 

payments, FICC’s discretion to withhold 

the return of excess Clearing Fund to a 

member that has an outstanding 

payment obligation to FICC would be 

changed to refer to FICC’s determination 

that the member’s anticipated 

transactions or obligations in the near 

future (rather than specifying over the 

next 90 calendar days, as in the current 

text) may reasonably be expected to be 

materially different than those of the 

recent past rather than the 90 prior 

calendar days, as in the current text. 

In addition, technical and clarifying 

changes are proposed to be made to the 

rules and cross-references to rule 

sections contained throughout. The 

rules have been reviewed by FICC and 

proposed to be corrected as needed to 

reflect the correct rule section references 

as originally intended. 

The proposed rule change to permit 

cross-margining of positions held at 

FICC and NYPC may increase the 

available offsets among positions held at 

FICC and NYPC, thereby allowing a 

more efficient use of participant 

collateral and promoting efficiencies in 

the fixed income securities marketplace. 

The proposed rule change is therefore 

consistent with the Securities Exchange 

Act of 1934, as amended, and the rules 

and regulations promulgated thereunder 

because it supports the prompt and 

accurate clearance and settlement of 

securities transactions. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FICC does not believe that the 

proposed rule change would have any 

negative impact, or impose any burden, 

on competition. To the contrary, FICC 

believes NYPC would be a powerful 

catalyst for competition by offering all 

FICC members as well as other futures 

exchanges and DCOs an equal 

opportunity to benefit from the 

innovative efficiencies of ‘‘one-pot’’ 

portfolio margining. FICC states that, 

because of these unique and 

groundbreaking open access policies, 

NYPC would set a new industry 

standard as the most fair, open and 

accessible DCO in the market. 

The NYPC Arrangement has been 

structured in a way that access to, and 

the benefits of, the ‘‘single pot’’ are 

provided to other futures exchanges and 

DCOs on fair and reasonable terms as 

described below. The proposed single 

pot is required to be accessed by other 

futures exchanges and DCOs via NYPC.8

As described below, this is done to 

ensure the uniformity and consistency 

of risk methodologies and risk 

management, to simplify and 

standardize operational requirements 

for new participants and to maximize 

the effectiveness of the one-pot 

arrangement. 

The proposed one-pot crossmargining method would allow 

members to post margin based on the 

net risk of their aggregate positions 

across asset classes, thereby releasing 

excess capital into the economy for 

more efficient use. By linking positions 

in fixed income securities held at FICC 

with interest rate products traded on 

NYSE Liffe U.S. and other designated 

contract markets (‘‘DCMs’’), the proposal 

between FICC and NYPC has the 

potential to create a substantial pool of 

highly correlated assets that are capable 

of being cross-margined. This pool will 

deepen as more DCOs and DCMs join 

NYPC, creating the potential for even 

greater margin and risk offsets. 

NYPC will initially clear certain 

contracts transacted on NYSE Liffe U.S. 

NYPC will clear for additional DCMs 

that are interested in clearing through 

NYPC as soon as it is feasible for NYPC 

do so. Such additional DCMs will be 

treated in the same way as NYSE Liffe 

US, i.e., they must: (i) Be eligible under 

the rules of NYPC, (ii) contribute to 

NYPC’s guaranty fund, (iii) demonstrate 

that they have the operational and 

technical ability to clear through NYPC 

and (iv) enter into a clearing services 

agreement with NYPC. 

Moreover, NYPC has also committed 

to admit other DCOs as limited purpose 

participants as soon as it is feasible, 

thereby allowing such DCOs to 

participate in the one-pot margining 

arrangement with FICC through their 

limited purpose membership in NYPC.9

Such DCOs will be required to satisfy 

pre-defined, objective criteria set forth 

in NYPC’s rules.10 In particular, such 

DCOs must: (i) Submit trades subject to 

the limited purpose participant 

agreement between NYPC and each 

DCO that would otherwise be cleared by 

the DCO to NYPC, with NYPC acting as 

central counterparty and DCO with 

respect to such trades,11 (ii) be eligible 

under the rules of NYPC and agree to be 

bound by the NYPC rules,12 (iii) 

contribute to NYPC’s guaranty fund,13

(iv) provide clearing services to 

unaffiliated markets on a ‘‘horizontal’’ 

basis (i.e., not limit their provision of 

clearing services on a vertical basis to a 

single market or limited number of 

markets) 14 and (v) agree to participate 

using the uniform risk methodology and 

risk management policies, systems and 

procedures that have been adopted by 

FICC and NYPC for implementation and 

administration of the NYPC 

Arrangement.15 Reasonable clearing fees 

will be allocated between NYPC and the 

limited purpose participant DCO as may 

be agreed by NYPC and the DCO, taking 

into account factors such as the cost of 

services (including capital expenditures 

incurred by NYPC), technology that may 

be contributed by the limited purpose 

participant, the volume of transactions, 

and such other factors as may be 

relevant. 

As a basic structure, FICC and NYPC 

anticipate that the limited purpose 

participant agreement will encompass 

the foregoing requirements for limited 

purpose membership contained in 

NYPC’s rules. Because each DCO could 

present different operational issues, 

terms beyond the basic rules provisions 

will be discussed on a case-by-case basis 

and reflected in the respective limited 

purpose participant agreement 

accordingly. FICC and NYPC envision 

that a possible structure for DCO limited 

purpose participation could be an 

omnibus account, with the DCO limited 


jdjones on DSK8KYBLC1PROD with NOTICES
74116 Federal Register / Vol. 75, No. 229 / Tuesday, November 30, 2010 / Notices 

16Public Law 111–203 (July 21, 2010). See DoddFrank Wall Street Reform and Consumer Protection 

Act § 725(h). 

17See Section 725(h) of the Dodd-Frank Act. 

purpose participant essentially acting as 

a processing agent for its clearing 

members vis-a-vis NYPC with respect to 

the submission of eligible positions of 

the DCO’s clearing members to NYPC 

for purposes of inclusion in the one-pot 

arrangement with FICC. In order for 

their eligible positions to be included in 

the single pot, clearing members of the 

DCO limited purpose participant would 

need to authorize the DCO to submit 

their positions to NYPC. Under such a 

structure, the DCO would be responsible 

for fulfilling all margin and guaranty 

fund requirements associated with the 

activity in the omnibus account. 

With respect to both the clearance of 

trades for unaffiliated DCMs and the 

admission of DCOs as limited purpose 

participants, NYPC has committed that 

it will complete the substantial 

operational effort of admitting and 

integrating another DCM or DCO as soon 

as feasible, but no later than 24 months 

from the start of operations. FICC states 

that this provision is necessary to the 

effective implementation of the one-pot 

cross-margining methodology and that 

this narrow window of time is required 

to allow for refinement and 

enhancement of certain systems post golive, to allow time for the possible 

simultaneous integration with multiple 

major clearing members so that fair 

market access is assured, and to allow 

time for the completion of the material 

operational challenge of connecting and 

integrating with the separate 

technologies of other DCMs and/or 

DCOs. However, this period does not 

preclude NYPC from engaging in 

discussions with other DCMs and DCOs 

immediately, and NYPC is currently, in 

fact, having such discussions with 

interested parties. NYPC anticipates that 

it will be able to complete the 

integration of additional DCMs and/or 

DCOs in advance of that two-year 

period. 

DCMs and DCOs will be required to 

contribute to the NYPC guaranty fund in 

the same manner as NYSE Euronext has 

done. This provision is designed to 

ensure that the financial resources 

supporting NYPC remain robust as the 

risks of new DCMs and/or DCOs are 

introduced. As NYPC’s business grows 

over time and more participants join 

NYPC and contribute to the guaranty 

fund, FICC would expect that the 

contribution from DCMs (including 

NYSE Euronext) and DCOs could be 

reduced across these entities on a pro 

rata basis as concentration risk is 

reduced. It should be noted that 

exchange contribution to clearing 

organization default resources is 

standard practice both in the U.S. and 

in Europe. 

FICC further believes that the NYPC 

Arrangement meets the competition 

standard of Section 17A of the Exchange 

Act, which provides that the rules of a 

clearing agency may not impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. The 

proposed one-pot method of crossmargining will allow NYPC to compete 

in the market for clearing U.S. dollar 

denominated interest rate futures 

products. NYPC, in turn, will commit to 

provide fair access to all DCMs and 

DCOs that are interested in participating 

as described above. FICC members and 

other market participants will benefit 

greatly from the entry of NYPC as a 

competitor in the U.S. futures market 

via greater competition, increased 

capital and operational efficiencies, and 

enhanced transparency. 

FICC’s cross-margining arrangement 

with NYPC will enable NYPC to provide 

an innovative and highly efficient 

clearing solution to the U.S. futures 

market, while, at the same time, 

providing enhanced cross-margining 

benefits to FICC members. By their 

terms, the rules and provisions 

governing the FICC–NYPC proposal 

would not affect the ability of another 

clearing organization to access NYPC, 

only the means of such access. As stated 

above, any qualified DCO may access 

the single pot and NYPC will offer the 

service on non-discriminatory terms to 

all qualified participants. FICC states 

that these unprecedented open access 

provisions are far superior to the crossmargining arrangements offered by any 

of NYPC’s competitors and that there is 

no other clearinghouse in the global 

futures market that is similarly obligated 

by charter to inter-operate with other 

DCMs and/or DCOs, including, 

potentially, direct competitors. 

With the recent passage of the DoddFrank Wall Street Reform and Consumer 

Protection Act (the ‘‘Dodd-Frank Act’’),16

which states that ‘‘under no 

circumstances shall a derivatives 

clearing organization be compelled to 

accept the counterparty credit risk of 

another clearing organization’’,17 this 

type of open access clearing for futures 

becomes even more difficult to achieve 

unless accomplished through industryled initiative. NYPC’s unprecedented 

admission policy sets such a new 

industry standard by both providing 

market participants with a real 

alternative from the dominant vertical 

clearing model and creating a level 

playing field that will enable multiple 

new entrants to compete in the U.S. 

futures market. 

FICC strongly believes that the ability 

to deliver one-pot margin efficiencies 

depends on FICC’s ability to 

appropriately manage its risk, which 

FICC believes can best be achieved by 

requiring other DCOs to link into NYPC 

to join the one-pot arrangement. 

Utilizing NYPC as a standardized portal 

for the one-pot arrangement provides 

FICC with needed assurance, in light of 

NYPC’s contractual obligations to FICC, 

that operational issues and risk 

methodologies and management are 

understood, uniform and consistent for 

all participants in the one-pot 

arrangement. Without such a 

mechanism, this transformative 

innovation could not be delivered to the 

marketplace in a manner that minimizes 

systemic risk, thereby depriving the U.S. 

futures market of the most promising 

opportunity it has seen to-date for true 

competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Prior to submitting this rule filing to 

the Commission, FICC received a letter 

in 2009 from the ELX Futures Exchange 

which encouraged FICC to reconsider its 

plan to enter into a relationship with 

NYSE. FICC has also received two 

letters from NASDAQ OMX in 2010 

questioning the manner in which DTCC 

determined to enter into the joint 

venture with NYSE to form NYPC, 

arguing that the venture is contrary to 

DTCC’s mission and suggesting that 

DTCC consider instead an enhanced 

form of ‘‘two-pot’’ cross-margining. FICC 

will notify the Commission of any 

additional written comments. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 


jdjones on DSK8KYBLC1PROD with NOTICES
Federal Register / Vol. 75, No. 229 / Tuesday, November 30, 2010 / Notices 74117 

18 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act and 

with respect to the following: 

• The Commission requests comment 

on all aspects of the proposed single pot 

margining arrangement, including the 

risk management of the combined 

positions cleared by GSD and NYPC. 

What unique risk management issues 

does a single pot cross margining 

arrangement raise in comparison with 

the two pot arrangements previously 

approved by the Commission? Would 

the VaR margining methodology 

proposed to be used by FICC as the 

administrator of the single-pot 

margining arrangement adequately 

measure the risk exposures of the 

positions? Are there other risk 

management standards or requirements 

that should be established regarding a 

single-pot margining methodology? 

• The Commission requests comment 

on the proposed loss allocation between 

FICC and NYPC. Does the loss 

allocation arrangement, in all scenarios, 

fairly reflect the risks presented by each 

clearing entity? Does it pose any undue 

risks to either FICC or NYPC or to any 

of their participants? If so, how would 

those risks be remediated? 

• The Commission requests comment 

on the burden on competition, if any, 

that the proposed single pot cross 

margining arrangement may have. Does 

the proposal to admit other DCOs as 

limited purpose participants of NYPC 

mitigate any perceived burden on 

competition? If not, why not? Is there a 

more effective means of address 

concerns related to competition? 

• The Commission requests comment 

on the implementation timeframe for 

the single pot margining arrangement 

and on the potential 24 month time 

period before unaffiliated DCOs or 

DCMs are admitted to the crossmargining arrangement. What are 

commenters’ views on the proposed 

time period? Is a shorter or longer time 

period justified based on the operational 

issues associated with starting the new 

cross-margining arrangement? 

• The Commission requests comment 

on the proposed guarantee fund 

contribution required of all DCOs 

(including NYPC) and DCMs. Is a 

sizable guarantee fund contribution 

needed to assure the safeguarding of 

securities and funds within the crossmargining arrangement? Is a higher or 

lower contribution justified? What is the 

impact on competition of such a 

requirement? 

Comments may be submitted by any 

of the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml) or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–FICC–2010–09 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–FICC–2010–09. This file 

number should be included on the 

subject line if e-mail 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 Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Section, 100 F Street, NE., 

Washington, DC 20549–1090, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filings 

will also be available for inspection and 

copying at the principal office of FICC 

and on FICC’s Web site at http:// 

dtcc.com/downloads/legal/rule_filings/ 

2010/ficc/2010-09.pdf. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–FICC– 

2010–09 and should be submitted on or 

before December 21, 2010. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–30034 Filed 11–29–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63368; File No. SR–NSCC– 

2010–15] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing of 

Proposed Rule Change Relating to 

Establishing an Automated Service for 

the Processing of Transfers, 

Replacements, and Exchanges of 

Insurance and Retirement Products 

November 23, 2010. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 notice is hereby given that on 

November 18, 2010, the National 

Securities Clearing Corporation 

(‘‘NSCC’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change as described 

in Items I and II below, which Items 

have been prepared primarily by NSCC. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The proposed rule change would 

allow NSCC to add a new automated 

service to process transfers, 

replacements, and exchanges of 

insurance and retirement products 

through NSCC’s Insurance and 

Retirement Processing Service (‘‘IPS’’). 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NSCC included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. NSCC has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of these statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

The purpose of the proposed rule 

change is to allow NSCC to offer a new 

automated service to transfer, replace, or 

exchange (collectively referred to as a 

‘‘Replacement’’) an existing insurance 

contract that is eligible for NSCC’s IPS. 


jdjones on DSK8KYBLC1PROD with NOTICES