42716 Federal Register / Vol. 74, No. 162 / Monday, August 24, 2009 / Notices 

20 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Commission has modified the text of the 

summaries prepared by FICC. 

4 VaR is defined as the maximum amount of 

money that may be lost on a given portfolio over 

a given period of time within a given level of 

confidence. 

5Accordingly, GSD invoked its emergency power 

to adjust CC to IDB transactions in November 2008 

and conducted a review of the current margin 

methodology as applied to IDB activity. As a result, 

CC currently is not calculated with respect to interdealer broker repo transactions, and GSD has 

recently adjusted the CC charge with respect to 

certain cash IDB transactions on a temporary basis. 

6Margin calculated for all other activity is based 

on a three-day liquidation horizon. 

7U.S.C. 78q–1. 

for inspection and copying at the 

principal office of the Exchange and on 

its Web site at http://www.nyse.com. 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–NYSEAMEX–2009–51 and 

should be submitted on or before 

September 14, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–20198 Filed 8–21–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60510; File No. SR–FICC– 

2009–08] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Notice of 

Filing and Order Granting Accelerated 

Approval on a Temporary Basis of 

Proposed Rule Change To Modify the 

Rules of the Government Securities 

Division Regarding the Calculation of 

Clearing Fund Deposits Relating to 

Inter-Dealer Broker Positions 

August 17, 2009. 

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 August 

10, 2009, the Fixed Income Clearing 

Corporation (‘‘FICC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change described in Items I, II, and III 

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 parties and is granting 

accelerated approval of the proposal 

through August 20, 2010. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The proposed rule change seeks to 

modify the rules of FICC’s Government 

Securities Division (‘‘GSD’’) regarding 

the calculation of clearing fund deposits 

relating to inter-dealer broker positions. 

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 GSD maintains a clearing fund 

comprised of member deposits of cash 

and eligible securities to provide 

liquidity and to enable FICC to satisfy 

any losses that might otherwise be 

incurred as a result of a member’s 

default and the subsequent close-out of 

its positions. GSD uses a Value-at-Risk 

(‘‘VaR’’) methodology to calculate 

clearing fund requirements.4 The 

clearing fund methodology used by GSD 

analyzes risk by reference to three 

factors: (i) End-of-day VaR charge to 

assess market volatility for observed 

open positions at the end-of-day after 

giving effect to offsetting positions 

within the portfolio; (ii) margin 

requirement differential (‘‘MRD’’) to 

address intraday risk; and (iii) coverage 

component (‘‘CC’’) to adjust the 

calculation if necessary to reach a given 

confidence level. The margin 

calculation is predicated upon an 

assumption that the open positions of a 

defaulting member would be liquidated 

at the end of a three-day period. 

Inter-dealer brokers (‘‘IDBs’’) function 

as intermediaries trading with multiple 

counterparties and with respect to 

government securities trades, provide 

anonymity and liquidity for trading 

partners. IDBs operate on small spreads, 

handle large transactions, and perform a 

critical function in the government 

securities market in the absence of a 

centralized trading exchange. 

IDBs submit affirmed trades from 

their systems to GSD, each trade already 

matched to the counterparty that will 

ultimately deliver or receive the 

securities. Although IDBs generally do 

not maintain positions, they may have 

positions versus GSD when their 

counterparties are not GSD members. 

Because these trades are matched by the 

IDB to a counterparty prior to 

submission to the GSD, the risk to FICC 

in the case of an IDB’s default is 

different from that presented when a 

dealer member submits a trade that may 

not have been already matched to a 

counterparty. 

The clearing fund requirement 

applicable to IDBs has increased 

significantly because of recent market 

volatility to the point where FICC 

believes it is disproportionate to the risk 

that IDB activity presents to GSD. Given 

the importance of IDB transactions in 

the government securities marketplace, 

unsustainable margin requirements on 

GSD IDB activity may be harmful and 

may introduce systemic risk in the event 

members are motivated to avoid 

imposition of disproportionate changes 

by netting outside of GSD or by delaying 

trade submission until later in the day.5

To alleviate this situation, FICC is 

proposing to use a one-day liquidation 

assumption when calculating margin 

applicable to IDB activity.6 The 

assumption of a three-day liquidation 

period will continue to apply to nonIDB activity. Since IDB trades are 

matched prior to submission, FICC 

believes that the one-day liquidation 

period is a reasonable assumption. FICC 

will continue to monitor the IDB 

activity of its members and will 

periodically reassess whether the oneday liquidation period provides 

adequate coverage. In this regard, FICC 

will provide the Commission with data 

to allow the Commission to track the 

magnitudes and behaviors of the VaR for 

a one-day liquidation horizon and for a 

three-day liquidation horizon, and with 

such other information that the 

Commission may request. FICC further 

notes its ability to impose special 

charges in response to market 

circumstances or other risk factors with 

respect to a particular member. 

FICC believes that the proposed rule 

change is consistent with the 

requirements of Section 17A of the Act 7

and the rules and regulations 

thereunder because the proposed 

change will modify the calculation of 

clearing fund deposits of IDB positions 

so that the clearing fund contribution is 


erowe on DSK5CLS3C1PROD with NOTICES
Federal Register / Vol. 74, No. 162 / Monday, August 24, 2009 / Notices 42717 

8U.S.C. 78q–1(b)(3)(F). 

9 15 U.S.C. 78s(b)(2). 

10 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition, and capital formation. 15 

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

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(6). 

correlated more closely with the level of 

risk associated with IDB positions. 

(B) Self-Regulatory Organization’s 

Statement on Burden on Competition 

FICC does not believe that the 

proposed rule change will have any 

impact or impose any burden on 

competition. 

(C) Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments relating to the 

proposed rule change have not yet been 

solicited or received. FICC will notify 

the Commission of any written 

comments received by FICC. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder and 

particularly with the requirements of 

Section 17A(b)(3)(F).8 Section 

17A(b)(3)(F) requires that the rules of a 

clearing agency remove impediments to 

and perfect the mechanism of a national 

system for the prompt and accurate 

clearance and settlement of securities 

transactions and protect investors and 

the public interest. The Commission 

finds that the approval of FICC’s rule 

change is consistent with this section 

because it will allow FICC to modify its 

rules regarding the calculation of 

clearing fund deposits on inter-dealer 

broker positions to correlate more 

closely those deposits with the level of 

risk associated with such positions. 

FICC has requested that the 

Commission approve the proposed rule 

prior to the thirtieth day after 

publication of the notice of the amended 

filing. The Commission finds good 

cause for approving the proposed rule 

change prior to the thirtieth day after 

the publication of notice because such 

approval will allow FICC to better 

correlate inter-dealer broker clearing 

fund deposits with the level of risk 

associated with their positions 

immediately. 

The Commission is approving the 

proposed rule filing on a temporary 

basis through August 20, 2010, so that 

FICC will have time to evaluate the 

modified calculation of clearing fund 

deposits on inter-dealer broker positions 

and to report its findings to the 

Commission before the Commission 

decides on permanent approval. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

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–2009–08 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–2009–08. 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 inspection and copying in 

the Commission’s Public Reference 

Section, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filings also will be 

available for inspection and copying at 

the principal office of FICC and on 

FICC’s Web site at http://www.dtcc.com/ 

downloads/legal/rule_filings/2009/ficc/ 

2009-08.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– 

2009–08 and should be submitted on or 

before September 14, 2009. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,9 that the 

proposed rule change (File No. SR– 

FICC–2009–08) be and hereby is 

approved on an accelerated basis 

through August 20, 2010.10

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–20197 Filed 8–21–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60512; File No. SR–NYSE– 

2009–75] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change by New York 

Stock Exchange LLC Adopting NYSE 

Rule 406 as New Rule 3250 To 

Correspond With a Rule Change 

Recently Filed by the Financial 

Industry Regulatory Authority, Inc. 

August 17, 2009. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on July 28, 

2009, New York Stock Exchange LLC 

(‘‘NYSE’’ or the ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been substantially prepared by the selfregulatory organization. The Exchange 

has designated this proposal eligible for 

immediate effectiveness pursuant to 

Section 19(b)(3)(A) of the Act 3 and Rule 

19b–4(f)(6) thereunder.4 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 Exchange proposes to adopt 

NYSE Rule 406 (Designation of 

Accounts) as new Rule 3250 to 


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