29150 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Notices 

rule’s impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

14 15 U.S.C. 78s(b)(2)(B). 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 83222 

(May 11, 2018), 83 FR 23032 (May 17, 2018) (SR– 

FICC–2018–004) (‘‘Notice’’). 

4The GSD Rules and the MBSD Rules are 

available at http://www.dtcc.com/legal/rules-andprocedures. 

5Notice, 83 FR at 23032–34. 

6 Id. 

7See Notice, 83 FR at 23033. See also Frequently 

Asked Questions: TMPG Fails Charges (April 23, 

2018) at 1, available at https://

www.newyorkfed.org/medialibrary/microsites/ 

tmpg/files/TMPG-Fails-Charge-FAQ-04-23-2018.pdf 

(‘‘FAQ’’). 

8 GSD Rule 11; MBSD Rule 12, supra note 4. 

9 Id.; Notice, 83 FR at 23034. 

10 Id. 

11 Id. 

12 Id. 

13The TMPG was formed in 2007, under the 

sponsorship of the Federal Reserve Bank of New 

York, to help address settlement fails and other 

issues affecting the U.S. Government debt and 

mortgage-backed securities markets. The Treasury 

Market Practices Group: Creation and Early 

Initiatives (August 2017) at 3, available at https:// 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) of the Act 14 to 

determine whether the proposed rule 

change should be approved or 

disapproved. 

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 email to rule-comments@

sec.gov. Please include File Number SR– 

Phlx–2018–47 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2018–47. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (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 website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–Phlx–2018–47, and should 

be submitted on or before July 13, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–13380 Filed 6–21–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83457; File No. SR–FICC– 

2018–004] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Approving Proposed Rule Change To 

Introduce a Floor to the Calculation of 

the Fails Charges and Make Other 

Changes 

June 18, 2018. 

On May 8, 2018, Fixed Income 

Clearing Corporation (‘‘FICC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–FICC–2018–004, 

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

Securities Exchange Act of 1934 

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

The proposed rule change was 

published for comment in the Federal 

Register on May 17, 2018.3 The 

Commission did not receive any 

comment letters on the proposed rule 

change. For the reasons discussed 

below, the Commission approves the 

proposed rule change. 

I. Description of the Proposed Rule 

Change 

The proposed rule change would 

update FICC’s Government Securities 

Division (‘‘GSD’’) Rulebook (‘‘GSD 

Rules’’) and FICC’s Mortgage-Backed 

Securities Division (‘‘MBSD’’) Clearing 

Rules (‘‘MBSD Rules’’) 4 to (i) introduce 

a floor of one percent to the calculation 

of the existing fails charge rules, (ii) 

clarify the target rate that may be used 

in the fails charge calculations under 

certain circumstances, and (iii) make 

certain technical changes to the fails 

charge provisions to ensure consistent 

use of defined terms.5 The proposed 

rule change would also update the 

MBSD Rules to clarify that a cap applies 

to the MBSD fails charge.6 Each of these 

proposed changes are described below. 

A. Proposed One Percent Floor 

In a securities transaction, a 

settlement fail occurs when the seller 

does not deliver the securities to the 

buyer on the agreed upon settlement 

date. FICC states that although 

settlement fails are generally not treated 

as contractual default events, provided 

that the failing seller delivers the 

securities soon after the settlement date, 

persistent elevated levels of settlement 

fails create market inefficiencies and 

increase credit risk for market 

participants.7

To help mitigate settlement fails, FICC 

maintains a fails charge in both the GSD 

Rules and the MBSD Rules.8 However, 

FICC states that under the current GSD 

Rules and MBSD Rules, the respective 

fails charge calculations could result in 

a zero charge.9 Specifically, under the 

GSD version of the current fails charge, 

if the federal funds target rate would 

rise to three percent, then the 

calculation of the charge would result in 

a zero charge.10 Similarly, under the 

MBSD version of the current fails 

charge, if the federal funds target rate 

would rise to two percent, then the 

calculation of the charge would result in 

a zero charge.11 To address this issue, 

FICC proposes to amend the GSD Rules 

and the MBSD Rules to add a one 

percent floor to the respective GSD and 

MBSD fails charge calculations.12

FICC’s proposal comes in response to 

a recent announcement by the Treasury 

Market Practices Group (‘‘TMPG’’),13 in 


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Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Notices 29151 

www.newyorkfed.org/medialibrary/media/research/ 

staff_reports/sr822.pdf. The TMPG is a group of 

market professionals that periodically issues 

recommended trading practices for market 

participants. Id. 

14See Press Release, Federal Reserve Bank of New 

York, Treasury Market Practices Group Seeks Public 

Comment on Proposed Updates to its Fails Charge 

Practice Recommendation (February 28, 2018), 

available at https://www.newyorkfed.org/media

library/Microsites/tmpg/files/PressRelease_022818. 

15 Id. 

16 Id. 

17Notice, 83 FR at 23034. 

18U.S. Treasury Securities: Fails Charge Trading 

Practice (July 13, 2016) at 3, available at https://

www.newyorkfed.org/medialibrary/microsites/ 

tmpg/files/Fails-Charge-Trading-Practice-2016-07- 

13.pdf (‘‘Fails Charge Trading Practice’’). 

19 Id. 

20Notice, 83 FR at 23034. 

21 Id. 

22 Id. 

23 Id. 

24 Id. 

25 Id. 

26 Id. 

27 Id. 

28 Id. 

29 GSD Rule 11; MBSD Rule 12, supra note 4. 

30 Id. 

31MBSD Rule 12, supra note 4. 

32Notice, 83 FR at 23034. 

33 Id. 

34 Id. 

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)(23)(ii). 

38 15 U.S.C. 78q–1(b)(3)(F). 

which the TMPG proposed the same 

change to its recommended best 

practices to help ensure that there is 

always a minimum fails charge 

amount.14 The TMPG states that its 

recommendation of a one percent floor 

is driven by the concern that market 

participants would discontinue their 

fails charge operational processes in a 

prolonged zero charge scenario.15

Adding the one percent floor would 

help maintain a fails charge during 

elevated federal funds target rate levels, 

and thereby help ensure that market 

participants do not discontinue their 

fails charge operational processes.16

FICC states that as one of the largest 

participants in U.S. Government 

securities market, it is imperative that 

FICC implement the TMPG’s 

recommendation to help maintain 

consistency and symmetry within the 

market.17

B. Federal Funds Level Target Range 

Clarification 

Pursuant to TMPG guidelines, if the 

Federal Open Market Committee 

(‘‘FOMC’’) specifies a target range in 

lieu of a target level, the lower limit of 

the target range announced by the 

FOMC would be used in the calculation 

of the fails charge.18 Further, if the 

FOMC were to terminate its policy of 

specifying or announcing a federal 

funds rate target level or range, then the 

rate used to calculate the fails charge 

would be a successor rate and source 

recommended by the TMPG.19

While FICC states that it would follow 

the TMPG guidelines in this regard,20

this practice is currently not stated in 

the fails charge rule provisions in each 

of the GSD Rules and the MBSD Rules. 

Therefore, FICC proposes to update the 

relevant provisions to reflect that FICC 

would follow this practice if those 

circumstances arose.21 Additionally, 

FICC proposes to add defined terms for 

‘‘FOMC’’ and ‘‘TMPG’’ in each of GSD 

Rule 1 and MBSD Rule 1.22

C. Technical Changes 

FICC proposes to make a technical 

change regarding references to the 

federal funds rate in the fails charge 

calculation in both the GSD Rules and 

the MBSD Rules. Specifically, FICC 

would replace current term ‘‘Target Fed 

funds target rate’’ in Section 14 of GSD 

Rule 11 and the current term ‘‘fed funds 

target rate’’ in MBSD Rule 12 with the 

new term ‘‘target level for the federal 

funds rate,’’ which is the term used by 

the TMPG in its guidance.23 FICC states 

that this non-substantive change would 

enhance clarity across the GSD Rules 

and MBSD Rules and enhance 

consistency with the TMPG guidance.24

FICC also proposes to amend certain 

terms in the fails charge provisions of 

both the GSD Rules and MBSD Rules in 

order to use defined terms and to 

enhance clarity and consistency within 

the rules. Specifically, in GSD Rule 11, 

Section 14, and in MBSD Rule 12, FICC 

would replace the term ‘‘Fedwire’’ with 

the defined term ‘‘FedWire.’’ 25 In MBSD 

Rule 12, FICC would replace each 

reference to the terms ‘‘pool delivery 

obligation’’ and ‘‘pool deliver 

obligation’’ with the defined term ‘‘Pool 

Deliver Obligation.’’ 26 In MBSD Rule 

12, FICC would capitalize the word 

‘‘contractual’’ in the term ‘‘contractual 

Settlement Date.’’ 27 Finally, FICC 

would replace the term ‘‘business day’’ 

with the capitalized and defined term 

‘‘Business Day.’’ 28

D. MBSD Fails Charge Cap Clarification 

While the GSD Rules expressly set 

forth the fails charge cap (i.e., three 

percent per annum), the MBSD Rules 

currently do not.29 The MBSD fails 

charge cap follows the same convention 

as the GSD fails charge cap, which is the 

percentage that is applied to the target 

federal funds rate.30 For MBSD, this cap 

is two percent per annum.31 FICC 

proposes to clarify the MBSD fails 

charge provision by adding language 

regarding the two percent per annum 

cap on the fails charge.32

E. Implementation Timeframe 

FICC proposes to implement the 

proposed changes on July 2, 2018.33

FICC states that it would announce such 

implementation date by Important 

Notice.34

II. Discussion and Commission 

Findings 

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

the Commission to approve a proposed 

rule change of a self-regulatory 

organization if it finds that such 

proposed rule change is consistent with 

the requirements of the Act and rules 

and regulations thereunder applicable to 

such organization.35 The Commission 

believes the proposal is consistent with 

Act, specifically Section 17A(b)(3)(F) of 

the Act 36 and Rule 17Ad–22(e)(23)(ii) 37

under the Act. 

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

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

requires, in part, that the rules of a 

clearing agency, such as FICC, be 

designed to promote the prompt and 

accurate clearance and settlement of 

securities transactions.38

As discussed above, the proposed rule 

change would update both the GSD 

Rules and the MBSD Rules of FICC to 

add a one percent floor to the respective 

GSD and MBSD fails charge 

calculations. In the absence of such a 

floor, during periods of elevated target 

levels for the federal funds rate, the 

current GSD and MBSD fails charge 

calculations could result in a zero 

charge to a seller that fails to deliver 

securities to a buyer promptly. 

As discussed above, persistent 

elevated levels of settlement fails can 

create market inefficiencies and increase 

credit risk for market participants, 

which could negatively affect the 

prompt and accurate clearance and 

settlement of securities transactions. 

Fails charges are designed to address 

such negative effects by encouraging 

market participants to complete their 

securities settlement obligations 

promptly. 

FICC’s proposal to implement a one 

percent floor to the fails charge 

calculations would advance FICC’s 

efforts to discourage settlement fails by 

ensuring that the fails charge calculation 

would not produce a zero charge, 

particularly during periods of elevated 

target levels for the federal funds rate. 

In turn, ensuring that the respective 


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29152 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Notices 

39 Id. 

40A ‘‘covered clearing agency’’ means, among 

other things, a clearing agency registered with the 

Commission under Section 17A of the Act (15 

U.S.C. 78q–1 et seq.) that is designated systemically 

important by the Financial Stability Oversight 

Committee (‘‘FSOC’’) pursuant to the Payment, 

Clearing, and Settlement Supervision Act of 2010 

(12 U.S.C. 5461 et seq.). See 17 CFR 240.17Ad– 

22(a)(5)–(6). Because FICC is a registered clearing 

agency with the Commission that has been 

designated systemically important by FSOC, FICC 

is a covered clearing agency. 

41 17 CFR 240.17Ad–22(e)(23)(ii). 

42 Id. 

43 15 U.S.C. 78q–1. 

44 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). 

45 17 CFR 200.30–3(a)(12). 

GSD and MBSD fails charge calculations 

do not produce a zero charge would 

encourage market participants to 

maintain their fails charge operational 

processes. Accordingly, the Commission 

finds that the proposed rule change is 

designed to help ensure that settlement 

in the applicable markets covered by 

FICC’s processes occurs on a timely 

basis, and thereby promotes the prompt 

and accurate clearance and settlement of 

securities transactions, consistent with 

Section 17A(b)(3)(F) of the Act.39

B. Rule 17Ad–22(e)(23)(ii) Under the Act 

Rule 17Ad–22(e)(23)(ii) under the Act 

requires each covered clearing agency 40

to establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to provide 

sufficient information to enable 

participants to identify and evaluate the 

risks, fees, and other material costs they 

incur by participating in the covered 

clearing agency.41

As discussed above, the proposed rule 

change would update both the GSD 

Rules and the MBSD Rules to clarify the 

target rate that may be used in the fails 

charge calculations under certain 

circumstances and make certain 

technical changes to the fails charge 

provisions to ensure consistent use of 

defined terms. The proposed rule 

change also would update the MBSD 

Rules to clarify that a cap applies to the 

MBSD fails charge. 

These clarifications are designed help 

ensure that the GSD and MBSD fails 

charges are transparent and clear to 

market participants. Increasing 

transparency and clarity around these 

charges would help market participants 

better understand the operation of the 

fails charges, and thereby provide 

market participants with increased 

predictability and certainty regarding 

their obligations to FICC. Accordingly, 

the Commission finds that the proposed 

rule change would help establish, 

implement, and maintain FICC’s rules 

in a manner reasonably designed to 

provide sufficient information to enable 

participants to identify and evaluate the 

risks, fees, and other material costs they 

incur by participating in FICC, 

consistent with Rule 17Ad–22(e)(23)(ii) 

under the Act.42

III. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposal is 

consistent with the requirements of the 

Act, in particular the requirements of 

Section 17A of the Act 43 and the rules 

and regulations thereunder. 

It is therefore ordered, pursuant to 

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

proposed rule change SR–FICC–2018– 

004 be, and hereby is, approved.44

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.45

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–13379 Filed 6–21–18; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF TRANSPORTATION 

Pipeline and Hazardous Materials 

Safety Administration 

[Docket No. PHMSA–2016–0128] 

Pipeline Safety: Meeting of the 

Voluntary Information-Sharing System 

Working Group 

AGENCY: Pipeline and Hazardous 

Materials Safety Administration 

(PHMSA), DOT. 

ACTION: Notice. 

SUMMARY: This notice announces a 

public meeting of the Voluntary 

Information-sharing System (VIS) 

Working Group. The VIS Working 

Group will convene to discuss and 

identify recommendations to establish a 

voluntary information-sharing system. 

DATES: The public meeting will be held 

on August 23, 2018, from 8:30 a.m. to 

5:00 p.m. ET. Members of the public 

who wish to attend in person should 

register no later than August 16, 2018. 

Individuals requiring accommodations, 

such as sign language interpretation or 

other ancillary aids, may notify PHMSA 

by August 16, 2018. For additional 

information, see the ADDRESSES section. 

ADDRESSES: The meeting will be held at 

the U.S. Department of Transportation, 

1200 New Jersey Ave. SE, Washington, 

DC 20590. The meeting agenda and 

additional information will be 

published on the following VIS Working 

Group registration page at: https://

primis.phmsa.dot.gov/meetings/ 

MtgHome.mtg?mtg=135. 

The meetings will not be webcast; 

however, presentations will be available 

on the meeting website and posted on 

the E-Gov website, https://

www.regulations.gov/, under docket 

number PHMSA–2016–0128 within 30 

days following the meeting. 

Public Participation: This meeting 

will be open to the public. Members of 

the public who attend in person will 

also be provided an opportunity to make 

a statement during the meetings. 

Written comments: Persons who wish 

to submit written comments on the 

meetings may submit them to the docket 

in the following ways: 

E-Gov website: https://

www.regulations.gov. This site allows 

the public to enter comments on any 

Federal Register notice issued by any 

agency. 

Fax: 1–202–493–2251. 

Mail: Docket Management Facility; 

U.S. Department of Transportation 

(DOT), 1200 New Jersey Avenue SE, 

West Building, Room W12–140, 

Washington, DC 20590–0001. 

Hand Delivery: Room W12–140 on the 

ground level of the DOT West Building, 

1200 New Jersey Avenue SE, 

Washington, DC, between 9:00 a.m. and 

5:00 p.m., Monday through Friday, 

except on Federal holidays. 

Instructions: Identify the docket 

number PHMSA–2016–0128 at the 

beginning of your comments. Note that 

all comments received will be posted 

without change to https://

www.regulations.gov, including any 

personal information provided. 

Anyone can search the electronic 

form of all comments received into any 

of our dockets by the name of the 

individual submitting the comment (or 

signing the comment, if submitted on 

behalf of an association, business, labor 

union, etc.). Therefore, consider 

reviewing DOT’s complete Privacy Act 

Statement in the Federal Register 

published on April 11, 2000, (65 FR 

19477), or view the Privacy Notice at 

https://www.regulations.gov before 

submitting comments. 

Docket: For docket access or to read 

background documents or comments, go 

to https://www.regulations.gov at any 

time or to Room W12–140 on the 

ground level of the DOT West Building, 

1200 New Jersey Avenue SE, 

Washington, DC, between 9:00 a.m. and 

5:00 p.m., Monday through Friday, 

except Federal holidays. 

If you wish to receive confirmation of 

receipt of your written comments, 

please include a self-addressed, 

stamped postcard with the following 


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