93784 Federal Register / Vol. 89, No. 229 / Wednesday, November 27, 2024 / Notices 

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

2 17 CFR 240.19b–4. 

3See Notice of Filing, infra note 5, at 89 FR 

21363. 

4Partial Amendment No. 1 makes clarifications 

and corrections to the description of the proposed 

rule change and Exhibit 5. Specifically, as originally 

filed, the description of the proposed rule change 

made a reference to an incorrect section of the GSD 

Rulebook. Partial Amendment No. 1 corrects that 

reference. Additionally, as originally filed, the 

description of the proposed rule change and Exhibit 

5 contained inconsistent references regarding 

whether FICC or its Board would be responsible for 

approving membership applications and related 

membership matters. Partial Amendment No. 1 

clarifies and corrects those references. 

5Securities Exchange Act Release No. 99817 

(March 21, 2024), 89 FR 21362 (March 27, 2024) 

(File No. SR–FICC–2024–005) (‘‘Notice of Filing’’). 

6 15 U.S.C. 78s(b)(2). 

7Securities Exchange Act Release No. 100031 

(Apr. 25, 2024), 89 FR 35269 (May 1, 2024) (File 

No. SR–FICC–2023–005). 

8Securities Exchange Act Release No. 100399 

(June 21, 2024), 89 FR 53681 (June 27, 2024) (SR– 

FICC–2024–005). 

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

10Securities Exchange Act Release No. 101081 

(Sept. 18, 2024), 89 FR 77949 (Sept. 24, 2024) (SR– 

FICC–2024–005). 

11Comments on the Proposed Rule Change are 

available at https://www.sec.gov/comments/sr-ficc2024-005/srficc2024005.htm. 

12See Letter from Laura Klimpel, Head of Fixed 

Income Financing Solutions, Depository Trust & 

Clearing Corporation, (Aug. 1, 2024) (‘‘FICC 

Letter’’). 

13A ‘‘covered clearing agency’’ is, among other 

things, a registered clearing agency that provides 

the services of a CCP, and a CCP is a clearing 

agency that interposes itself between the 

counterparties to securities transactions, acting 

functionally as the buyer to every seller and the 

seller to every buyer. 17 CFR 240.17ad–22(a); see 

also 15 U.S.C. 78c(a)(23) (defining a clearing 

agency). FICC is a clearing agency registered with 

the Commission under Section 17A of the Exchange 

Act (15 U.S.C. 78q–1), and it acts as a CCP. 

14 17 CFR 240.17ad–22(e)(18)(iv)(C). See 

Securities Exchange Act Release No. 99149 (Dec. 

13, 2023), 89 FR 2714 (Jan. 16, 2024) (‘‘Adopting 

Release,’’ and the rules adopted therein referred to 

herein as ‘‘Treasury Clearing Rules’’). 

15The GSD Rules are available at https://

www.dtcc.com/∼/media/Files/Downloads/legal/ 

rules/ficc_gov_rules.pdf. Terms not otherwise 

defined herein are defined in the GSD Rules. 

16See GSD Rule 2, supra note 15. 

17See GSD Rule 2A, supra note 15. 

18See GSD Rule 3, supra note 15. 

19See GSD Rule 5, supra note 15. The 

Comparison System includes the system of GSD 

services and operations in connection with the 

reporting, validating, and in some cases, matching 

of the long and short sides of a securities trade. GSD 

also has a limited membership that permits 

Comparison-Only Members to participate only in its 

Comparison System. FICC does not act as a CCP for 

activity processed through its Comparison System 

and the services offered through its Comparison 

System are not guaranteed by FICC. 

20See GSD Rule 11, supra note 15. The Netting 

System includes the system of GSD services and 

operations in connection with aggregating and 

matching offsetting obligations resulting from 

securities trades submitted by or on behalf of 

Netting Members. 

21See GSD Rule 3A, supra note 15. 

22See GSD Rule 8, supra note 15. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101694; File No. SR–FICC– 

2024–005] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Approving a Proposed Rule Change, 

as Modified by Partial Amendment No. 

1, To Modify the GSD Rules To 

Facilitate Access to Clearance and 

Settlement of All Eligible Secondary 

Market Transactions in U.S. Treasury 

Securities 

November 21, 2024. 

On March 11, 2024, Fixed Income 

Clearing Corporation (‘‘FICC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change SR–FICC–2024– 

005 pursuant to Section 19(b) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) 1 and Rule 19b–4 2

thereunder to modify FICC’s 

Government Securities Division 

(‘‘GSD’’) Rulebook (‘‘GSD Rules’’) with 

respect to facilitating access to GSD’s 

clearance and settlement services for all 

eligible secondary market transactions 

in U.S. Treasury securities.3 On March 

19, 2024, FICC filed Partial Amendment 

No. 1 to make clarifications and 

corrections 4 to the proposed rule 

change. The proposed rule change, as 

modified by Partial Amendment No. 1, 

is referred to herein as the ‘‘Proposed 

Rule Change.’’ The Proposed Rule 

Change was published for public 

comment in the Federal Register on 

March 27, 2024.5

On May 1, 2024, pursuant to Section 

19(b)(2) of the Exchange Act,6 the 

Commission designated a longer period 

within which to approve, disapprove, or 

institute proceedings to determine 

whether to approve or disapprove the 

Proposed Rule Change.7 On June 27, 

2024, the Commission instituted 

proceedings to determine whether to 

approve or disapprove the Proposed 

Rule Change.8 On September 24, 2024, 

pursuant to Section 19(b)(2) of the 

Exchange Act,9 the Commission 

extended the period for the conclusion 

of proceedings to determine whether to 

approve or disapprove the Proposed 

Rule Change.10

The Commission received several 

comment letters on the Proposed Rule 

Change.11 In addition, the Commission 

received a letter from FICC responding 

to the public comments.12 For the 

reasons discussed below, the 

Commission is approving the Proposed 

Rule Change. 

I. Description of the Proposed Rule 

Change 

A. Background and Current Access 

Models 

FICC, through GSD, serves as a central 

counterparty (‘‘CCP’’) and provides realtime trade matching, clearing, risk 

management and netting for cash 

purchases and sales of U.S. Treasury 

securities as well as repurchase and 

reverse repurchase transactions 

(‘‘repos’’) involving U.S. Treasury 

securities. Currently, FICC is the sole 

provider of clearance and settlement 

services for U.S. Treasury securities. 

On December 13, 2023, the 

Commission adopted amendments to 

the standards applicable to covered 

clearing agencies, such as FICC,13

requiring each such clearing agency for 

U.S. Treasury securities to have written 

policies and procedures reasonably 

designed to, among other things, ensure 

that it has appropriate means to 

facilitate access to clearance and 

settlement services of all eligible 

secondary market transactions in U.S. 

Treasury securities, including those of 

the clearing agency’s indirect 

participants.14

1. Direct Participation at FICC 

GSD’s CCP services are currently 

available directly to entities that are 

approved under the GSD Rules 15 to be 

Netting Members.16 Currently, there are 

different categories of Netting Member 

based upon the type of legal entity (i.e., 

Bank Netting Member, Dealer Netting 

Member, Inter-Dealer Broker Netting 

Member, etc.) and whether an entity is 

incorporated in the United States or not 

(i.e., a Foreign Netting Member). Netting 

Member applicants must meet both 

financial and operational minimum 

eligibility requirements 17 and, once 

admitted, Netting Members must adhere 

to ongoing minimum membership 

standards.18 Furthermore, both the 

minimum eligibility requirements and 

ongoing standards vary depending on 

the relevant Netting Membership 

category. However, in general, all 

Netting Member categories may access 

the services available through GSD’s 

Comparison System 19 and Netting 

System.20

2. Indirect Participation at FICC 

Market participants may also access 

GSD’s clearing services indirectly 

through a Netting Member. There are 

currently two indirect participation 

models to facilitate indirect participant 

access to GSD—the Sponsored 

Service 21 and the correspondent 

clearing/prime broker services.22 Each 

of these indirect participation models 

gives market participants different 

options to consider in accessing GSD’s 


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23See GSD Rule 3A, supra note 15. An entity that 

chooses to become a Sponsoring Member retains its 

status as a Netting Member and can continue to 

submit any non-Sponsored Member activity to FICC 

as such. 

24See GSD Rule 3A, section 7 (describing 

novation of Sponsored Member Trades) and 2 

(identifying membership types), supra note 15. 

25See GSD Rule 3A (describing the operation of 

the Sponsoring Member Guaranty) and 1 (defining 

the Sponsoring Member Guaranty), supra note 15. 

26See Notice of Filing, supra note 5, at 89 FR 

21365; see also GSD Rule 3A, Section 14; and GSD 

Rule 21, Sections 1(a), 1(b), 4(a) supra note 15. 

27See GSD Rule 8, supra note 15. 

28See id. There are no operational differences 

between the current correspondent clearing service 

and the prime broker service. The primary 

difference between the two services is that FICC 

provides a report to prime brokers that identifies 

margin calculation for their customers’ transactions 

and does not provide such report to Members using 

the correspondent clearing service. 

29See GSD Rule 1 (defining the term Executing 

Firm), supra note 15. 

30See GSD Rule 8, Section 4, and GSD Rule 15, 

Section 1, supra note 15. 

31See id. 

32See GSD Rule 8, Section 2, supra note 15. 

33For a detailed description of each proposed 

change, please refer generally to the Notice of 

Filing, supra note 5. 

34See GSD Rule 8, supra note 15. 

35See Notice of Filing, supra note 5, at 89 FR 

21365–66. 

36See id. FICC also states that these proposed 

changes would improve the transparency of the 

GSD Rules regarding the availability and operations 

of this service to both Netting Members and, 

indirectly, their customers. See id. 

37See Notice of Filing, supra note 5, at 89 FR 

21366. 

clearance and settlement services. The 

primary difference between the two 

models is that an indirect participant 

who becomes a Sponsored Member 

must establish an indirect, limited 

purpose GSD membership, whereas the 

correspondent clearing/prime broker 

services do not require an indirect 

member to establish any relationship 

with GSD. 

The Sponsored Service permits 

Netting Members, approved under the 

GSD Rules as ‘‘Sponsoring Members,’’ to 

sponsor certain institutional firms, 

referred to as ‘‘Sponsored Members,’’ 

into GSD membership. The Sponsoring 

Member is permitted to submit to FICC 

for comparison, novation, and netting 

certain types of eligible transactions 

either between itself and its Sponsored 

Members (i.e., ‘‘done-with’’), or between 

the Sponsored Members and other thirdparty Netting Members (i.e., ‘‘doneaway’’). For operational and 

administrative purposes, a Sponsored 

Member appoints its Sponsoring 

Member to act as processing agent with 

respect to the Sponsored Member’s 

satisfaction of its securities and fundsonly settlement obligations.23

A Sponsored Member is a GSD 

Member and the legal counterparty to 

FICC for any submitted transactions.24

However, the Sponsoring Member 

unconditionally guarantees to FICC the 

Sponsored Member’s performance 

under a Sponsoring Member Guaranty, 

which guarantees to FICC the payment 

and performance of a Sponsored 

Member’s obligations to FICC.25

Therefore, FICC relies on the financial 

resources of the Sponsoring Member in 

relying upon the Sponsoring Member 

Guaranty. If a Sponsoring Member fails 

to perform under the Sponsoring 

Member Guaranty, FICC may cease to 

act for the Sponsoring Member both as 

a Sponsoring Member as well as a 

Netting Member.26

Netting Members may also submit to 

FICC eligible activity on behalf of their 

customers through the correspondent 

clearing/prime broker services.27 Under 

the current GSD Rules, the Netting 

Member is referred to as the 

‘‘Submitting Member’’ and the customer 

is referred to as the ‘‘Executing Firm.’’ 28

Unlike the Sponsored Service, FICC has 

no relationship with the Executing 

Firm,29 and all obligations (i.e., margin 

and settlement) under the GSD Rules 

remain with the Submitting Member.30

Additionally, Submitting Members have 

the option of either netting Executing 

Firm activity with other activity they 

submit to FICC (i.e., Submitting Member 

proprietary activity) or segregating 

Executing Firm activity in separate 

accounts.31 In all cases, however, the 

Submitting Member must identify the 

relevant Executing Firm(s) on the FICC 

transaction submission file.32 The 

current GSD Rule does not address the 

qualifications of a Submitting Member 

(or how a Netting Member becomes a 

Submitting Member); does not specify 

the information that each Submitting 

Member must provide to FICC regarding 

the Executing Firms on whose behalf it 

submits transactions; does not require 

acknowledgments from Executing 

Firms; and does not set forth any rules 

regarding the processing of transactions 

through the correspondent clearing/ 

prime broker service or how such 

transactions are treated in the event of 

a default. 

B. Proposed Changes 33

1. Re-Naming the Correspondent 

Clearing/Prime Broker Services as the 

Agent Clearing Service and Providing 

Additional Specificity on the Agent 

Clearing Service 

FICC proposes to re-name, 

consolidate, and adopt additional 

provisions governing GSD’s existing 

correspondent clearing/prime broker 

services. Moving forward, the 

correspondent clearing/prime broker 

services would be referred to as the 

‘‘Agent Clearing Service,’’ Submitting 

Members would be referred to as ‘‘Agent 

Clearing Members,’’ and Executing 

Firms would be referred to as 

‘‘Executing Firm Customers.’’ The Agent 

Clearing Service would continue to 

allow Netting Members to submit, on 

behalf of their customers, transactions to 

FICC for novation. These proposed 

changes would primarily amend GSD 

Rule 8,34 which currently describes the 

correspondent clearing/prime broker 

services, to describe the Agent Clearing 

Service with greater specificity. 

FICC designed the proposed changes 

to the Agent Clearing Service to 

highlight the similarities between the 

Agent Clearing Service and other agent 

clearing models, such as those through 

which market participants in the cleared 

derivatives markets can execute 

commodity derivatives with third 

parties and then give them up to a 

futures commission merchant (‘‘FCM’’) 

for clearing.35 FICC states that these 

proposed changes would enhance the 

ability of indirect participants to 

identify the Agent Clearing Service as a 

workable ‘‘done-away’’ model that 

allows indirect participants to access 

clearing through multiple direct 

participants.36

While the proposed changes would 

re-name certain terms in the GSD Rules 

and otherwise expand upon the 

description of how the correspondent 

clearing/prime broker access models 

operate, most of the proposed changes 

would not alter how Netting Members 

and their customers use this model to 

access GSD’s services.37 Like the 

correspondent clearing/prime broker 

models, the Agent Clearing Service 

would continue to facilitate agent-style 

trading by allowing an Agent Clearing 

Member to act as processing agent and 

credit intermediary for its Executing 

Firm Customers. 

Specifically, the Proposed Rule 

Change would address various specific 

topics. First, the Proposed Rule Change 

would address Agent Clearing Member 

qualifications and the application 

process to become an Agent Clearing 

Member. A Netting Member, other than 

an Inter-Dealer Broker Netting Member, 

shall be eligible to become an Agent 

Clearing Member. An applicant to be an 

Agent Clearing Member would have to 

submit an application and provide 

additional information that FICC may 

request, and this application would 

include information about the 

applicant’s customers, past and/or 

projected volumes of applicant 

customer activity, and the applicant’s 


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38 In addition to the LEI, this information would 

include: the name and executing firm symbol of the 

Executing Firm Customer; written authorization 

from the Executing Firm Customer to act on its 

behalf; confirmation that the Executing Firm 

Customer and the Agent Clearing Member have 

entered into an agreement that binds the Executing 

Firm Customer to the applicable provisions of the 

GSD Rules, as would be required by Section 3, 

described below; and confirmation that the 

Executing Firm Customer understands, 

acknowledges and agrees to each of the Executing 

Firm Customer Acknowledgments set forth in, and 

as would be required by the GSD Rules. 

39See Notice of Filing, supra note 5, at 89 FR 

21365; 17 CFR 240.17ad–22(e)(18)(iii). 

40FICC states that GCF Repo Transactions and 

CCIT Transactions are currently excluded due to 

system limitations, and Brokered Transactions are 

necessarily excluded because Inter-Dealer Broker 

Netting Members are not permitted to act as Agent 

Clearing Members, as discussed above. The 

exclusion of Netting Eligible Auction Purchases is 

driven by the specific processing rules applicable 

to auctions that are external to FICC and established 

by the U.S. Department of the Treasury. See Notice 

of Filing, supra note 5, at 89 FR 21368. 

41See Notice of Filing, supra note 5, at 89 FR 

21368. 

42These acknowledgments would include that 

the Agent Clearing Service is governed by the GSD 

Rules, including Novation of Agent Clearing 

Transactions; that FICC is not obligated to deal 

directly with the Executing Firm Customer and may 

deal exclusively with the Agent Clearing Member; 

that FICC shall have no obligations to the Executing 

Firm Customer with respect to any Agent Clearing 

Transactions submitted by an Agent Clearing 

Member on behalf of the Executing Firm Customer, 

including with respect to any payment or delivery 

obligations; and that the Executing Firm Customer 

shall have no right to receive from FICC, or any 

right to assert a claim against FICC with respect to, 

nor shall FICC be liable to the Executing Firm 

Customer for, any payment or delivery obligation in 

connection with any Agent Clearing Transactions 

submitted by an Agent Clearing Member on behalf 

of the Executing Firm Customer, and FICC shall 

make any such payments or redeliveries solely to 

the Agent Clearing Member. 

43See Notice of Filing, supra note 5, 89 FR at 

21368. 

44The Proposed Rule Change would also provide 

that the Clearing Fund obligations applicable to an 

Agent Clearing Members’ Agent Clearing 

Transactions would be calculated separately from 

the obligations calculated with respect to other 

activity of the Agent Clearing Member. However, 

FICC would have the right to apply any Clearing 

Fund deposits of an Agent Clearing Member to any 

obligations of that Member (including in their 

capacity as a Netting Member). As a substantive 

matter, the above two changes do not vary from 

how FICC calculates and applies loss allocation or 

Clearing Fund requirements under the 

correspondent clearing and prime broker services 

today. See Notice of Filing, supra note 5, 89 FR at 

21369. 

45See Securities Exchange Act Release No. 85470 

(Mar. 29, 2019) 84 FR 13328 (Apr. 4, 2019) (SR– 

FICC–2018–013) (creating two categories of Netting 

Members to be eligible to be Sponsoring Members, 

expanding the eligibility of the service to other 

types of Netting Members in addition to Bank 

Netting Members). See also GSD Rule 3A, Section 

2, supra note 15. 

controls for monitoring and mitigating 

risks, including any risks posed by its 

customers. 

Second, the Proposed Rule Change 

would require certain information 

regarding an Agent Clearing Member’s 

Executing Firm Customer Relationships 

to be provided to FICC. The required 

information would include a Legal 

Entity Identifier (‘‘LEI’’) for each 

Executing Firm Customer,38 and each 

Agent Clearing Member would be 

required to indemnify FICC for any 

losses, liabilities, expenses and legal 

actions that could arise related to the 

LEI requirement. Thus, an Agent 

Clearing Member would establish a 

relationship with one or more Executing 

Firm Customers and provide FICC with 

notice confirming the Executing Firm 

relationship with each such customer. 

FICC states that this information sharing 

would better enable FICC to identify 

and manage the risks posed by such 

indirect participants and would support 

FICC’s compliance with the 

requirements of Rule 17ad–22(e)(18)(iii) 

under the Exchange Act to monitor 

compliance with its participation 

requirements on an ongoing basis.39

In addition, the Proposed Rule 

Change would require that an agreement 

between the Agent Clearing Member 

and the Executing Firm Customer bind 

the customer to the applicable 

provisions of the GSD Rules. However, 

beyond this specific requirement the 

Proposed Rule Change would also 

acknowledge such an agreement may 

otherwise be on any terms and 

conditions mutually agreed to by the 

parties and confirm that the GSD Rules 

do not prohibit any reimbursement or 

other payments sharing arrangements 

that may be established between those 

parties, away from FICC. 

Third, the Proposed Rule Change 

would define what transactions are 

eligible to be submitted through the 

Agent Clearing Service, which would 

remain the same as the transactions 

eligible for the correspondent/prime 

broker services and would continue to 

exclude Netting Eligible Auction 

Purchases, Brokered Transactions, GCF 

Repo Transactions, and CCIT 

Transactions.40

Fourth, the Proposed Rule Change 

would identify the rights and 

obligations of Agent Clearing Members. 

For example, it would define the role of 

the Agent Clearing Members as 

processing agents of Executing Firm 

Customers and establish that Agent 

Clearing Members are liable to FICC for 

all obligations arising in connection 

with their Agent Clearing Transactions 

in the same manner as if the Agent 

Clearing Member had executed those 

trades. It would also state that FICC has 

no liability or obligation to any 

Executing Firm Customer. It would also 

provide that FICC may request 

information or reports regarding Agent 

Clearing Transactions, which would 

allow FICC to continue to identify, 

monitor and manage the risks its Agent 

Clearing Members may present to it and 

the broader GSD membership.41

Fifth, the Proposed Rule Change 

would include specific Executing Firm 

Customer acknowledgements with 

respect to their participation in the 

Agent Clearing Service.42 Because 

Executing Firm Customers would 

continue to have no relationship to 

FICC, the Proposed Rule Change would 

provide that Agent Clearing Members 

are responsible for affirming that their 

Executing Firm Customers understand, 

acknowledge and agree to the provisions 

in the relevant section of the GSD Rules. 

Finally, the Proposed Rule Change 

would set forth rules regarding the 

processing of Agent Clearing 

Transactions. FICC would require Agent 

Clearing Members to process and record 

their customers’ activity in separate 

‘‘Agent Clearing Member Omnibus 

Accounts,’’ as opposed to the optional 

segregated submission approach 

provided for in the current GSD Rules, 

to facilitate FICC’s ability to monitor 

and, ultimately, risk manage that 

activity appropriately.43 It would also 

require that all Agent Clearing 

Transactions include an executing firm 

symbol that identifies the Executing 

Firm Customer. It would describe that 

Agent Clearing Transactions would 

continue to be processed in the same 

way that FICC processes other 

transactions through the GSD netting, 

clearing and settlement systems and 

would describe how Agent Clearing 

Transactions are processed when the 

optional field identifying the contraparty is either omitted or does not 

match on the transaction file. It would 

also address how a loss would be 

allocated within the Agent Clearing 

Service, that is, that the Agent Clearing 

Member, as principal, would be 

responsible for satisfying the loss 

allocation obligations that are calculated 

for its Executing Firm Customers.44

2. Changes to the Sponsored Service 

Eliminate Separate Categories of 

Sponsoring Members 

Under the current GSD Rules, there 

are two categories of Sponsoring 

Members—Category 1 Sponsoring 

Members are Bank Netting Members 

that meet the eligibility criteria 

described in Section 2(a) of Rule 3A, 

and Category 2 Sponsoring Members are 

all other eligible Netting Members.45

While Bank Netting Members are 

currently subject to certain 

capitalization requirements as 


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46Under Section 2(a) of GSD Rule 3A, Bank 

Netting Members applying to be a Sponsoring 

Member must (i) have equity capital of at least $5 

billion, (ii) be ‘‘Well-Capitalized,’’ as such term is 

defined in the GSD Rules, and (iii) have a bank 

holding company that is registered under the Bank 

Holding Company Act of 1954, as amended and that 

such bank holding company also be ‘‘Well 

Capitalized.’’ ‘‘Well Capitalized’’ is defined in GSD 

Rule 1 to have the meaning given that term in the 

capital adequacy rules and regulations of the 

Federal Deposit Insurance Corporation. Supra note 

15. 

47These increased financial requirements do not 

solely relate to an applicant’s capitalization, but 

instead are based on the applicant’s anticipated use 

of the Sponsoring Service in relation to their 

financial condition. See Section 2(b)(ii) of GSD Rule 

3A, supra note 15. 

48See Section 2(h) of GSD Rule 3A, supra note 

15. 

49The ‘‘VaR Charge’’ is a component of the 

Required Fund Deposit and defined in GSD Rule 1; 

‘‘Netting Member Capital’’ is defined in GSD Rule 

1 to mean ‘‘Net Capital, net assets or equity capital 

as applicable, to a Netting Member based on its type 

of regulation.’’ Supra note 15. 

50See Notice of Filing, supra note 5, at 89 FR 

21370. 

51See id. 

52See id. 

53See GSD Rule 3A, Section 2(b)(ii) (describing 

the factors that FICC may consider when 

determining whether to impose additional financial 

requirements on a Sponsoring Member), supra note 

5. For the purposes of illustration only, such 

financial requirements could include, without 

limitation, additional reporting requirements, 

including reporting of parent company financials, 

or a higher minimum deposit to the Clearing Fund. 

54See GSD Rule 3, Section 14 (the Excess Capital 

Premium is an additional Clearing Fund deposit 

that may be required if a Netting Member’s capital 

levels drop below a threshold relative to its other 

margin requirements), supra note 5. 

55The activity limit, which currently only applies 

to Category 2 Sponsoring Members, restricts a 

Sponsoring Member from submitting additional 

activity into its Sponsoring Member Omnibus 

Account(s) if its capital levels exceed the sum of its 

VaR Charge component of the Clearing Fund. See 

GSD Rule 3A, Section 2(h), supra note 5. 

56See Notice of Filing, supra note 5, at 89 FR 

21370. 

57 17 CFR 230.144A. 

58See Notice of Filing, supra note 5, at 89 FR 

21371; Adopting Release supra note 14, at 2716–17 

(referring to the revisions to Rule 17ad–22(e)(18) as 

being designed to ‘‘bring the benefits of central 

clearing to more transactions involving U.S. 

Treasury securities, thereby reducing the overall 

systemic risk in the market’’). 

59See Notice of Filing, supra note 5, at 89 FR 

21371. 

60See GSD Rule 3A, supra note 15. 

61See id. 

62See id. 

63See supra notes 53, 54, and 55. 

64See Notice of Filing, supra note 5, 89 FR 21371. 

Sponsoring Member applicants,46

Category 2 Sponsoring Member 

applicants are subject to financial 

requirements that are greater than the 

financial requirements applicable in 

their capacity as Netting Members.47

Thus, the current tiered category 

structure creates differing applicant 

criteria based on the type of entity 

seeking Sponsoring Member status. 

Additionally, the ongoing Sponsoring 

Member requirements in the GSD Rules 

also apply a differentiated approach for 

Category 1 and Category 2 Sponsoring 

Members. For example, a Category 1 

Sponsoring Member may be subject to 

an increase in its Required Fund 

Deposit if it fails to meet the applicable 

capitalization requirements.48

Alternatively, a Category 2 Sponsoring 

Member may be subject to a limit on the 

activity it can submit through the 

Sponsoring Service if the Sponsoring 

Member’s VaR Charges exceed its 

Netting Member Capital.49

FICC proposes to eliminate the two 

categories of Sponsoring Members and 

make all Sponsoring Members subject to 

the same eligibility and ongoing 

requirements that are currently 

applicable to Category 2 Sponsoring 

Members. FICC states that these 

proposed changes would encourage 

additional Netting Members to become 

Sponsoring Members thus facilitating 

broader access to clearance and 

settlement services for eligible 

secondary market transactions in U.S. 

Treasury securities, including those of 

indirect participants who may seek to 

use the Sponsored Service as Sponsored 

Members.50 The proposed changes 

would affect Bank Netting Members that 

are—or will apply to be—Sponsoring 

Members by removing the abovementioned capitalization requirements 

and instead applying the activity limits 

and financial condition factors used 

under the current GSD Rules for 

Category 2 Sponsoring Members. The 

proposed changes would create parity 

among all Sponsoring Members (and 

applicants), which FICC states would 

encourage additional market 

participants to become Sponsoring 

Members, which in turn should give 

indirect participants a wider range of 

Sponsoring Members to consider should 

they choose to access GSD’s central 

clearing services via the Sponsored 

Service.51 FICC states that the activity 

limits and financial condition 

monitoring will allow FICC to continue 

to manage the risks that could be 

presented by any activity cleared 

through the Sponsored Service.52 FICC 

does not believe the proposed changes 

would increase the risks presented to it 

by Bank Netting Members’ participation 

in the Sponsored Service as Sponsoring 

Members because other existing risk 

management tools (e.g., FICC’s ability to 

impose greater and additional financial 

requirements,53 the Excess Capital 

Premium,54 and activity limits 55) would 

be available for FICC to continue to 

manage those risks.56

Remove the ‘‘Qualified Institutional 

Buyer’’ Requirements for Sponsored 

Members 

FICC proposes to remove the 

requirement that Sponsored Members 

either be ‘‘qualified institutional 

buyers,’’ as such term is defined by Rule 

144A under the Securities Act of 1933,57

or satisfy the financial requirements of 

such definition (‘‘QIB Requirement’’). 

This proposed change would make the 

Sponsored Service available to 

additional market participants, thereby 

providing such firms with access to 

GSD’s clearing services. FICC states that 

expanding eligibility to become a 

Sponsored Member supports the goals 

of the Treasury Clearing Rules to 

facilitate increased central clearing of 

transactions involving U.S. Treasury 

securities.58

FICC states that this change would not 

increase the relevant risks because FICC 

risk manages the Sponsored Service 

primarily at the Sponsoring Member 

level, not the Sponsored Member 

level.59 For example, a Sponsoring 

Member is responsible for posting to 

FICC the Required Fund Deposit for its 

sponsored activity and, while 

Sponsored Members are principally 

liable to FICC for their settlement 

obligations, the Sponsoring Member is 

also required to provide a guaranty to 

FICC for such obligations.60 In the event 

a Sponsored Member does not satisfy its 

settlement obligations, FICC is able to 

invoke the Sponsoring Member 

Guaranty.61 Additionally, Sponsoring 

Members may be required to provide 

FICC with reports or other information 

that FICC may require, including, for 

example, responses to annual or ad hoc 

due diligence requests.62 FICC utilizes 

such due diligence requests to identify, 

monitor and manage the risks 

Sponsoring Members and their 

Sponsored Members may present to it. 

As discussed above, where FICC 

identifies risks (whether via the due 

diligence process or otherwise), FICC 

can impose supplemental financial 

requirements on a Sponsoring Member, 

an Excess Capital Premium charge 

(where applicable), and activity limits.63

Therefore, FICC states that that its 

existing risk management practices with 

respect to the Sponsored Service, which 

do not rely on the QIB Requirement, are 

sufficiently effective.64

3. Clarify Eligibility Criteria for NonU.S. and Other Applicants 

Changes Regarding Non-U.S. Applicants 

Currently, a Foreign Person applying 

to be a Netting Member must meet the 

eligibility criteria for the distinct 


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65See GSD Rule 2A, supra note 15. 

66See id. 

67See id. 

68See id. 

69See Notice of Filing, supra note 5, 89 FR at 

21372. 

70See Notice of Filing, supra note 5, 89 FR at 

21372. 

71See id. FICC states that such ambiguity can 

have meaningful implications; for example, a 

Registered Investment Company Netting Member is 

excluded from certain requirements under the GSD 

Rules, and, therefore, if a Registered Investment 

Company that is a Foreign Person applied, and was 

approved, to be a Foreign Netting Member, it would 

not be clear if the applicable exclusions should 

apply to this Foreign Netting Member Applicant. 

See id. 

72 In making the determination of whether a 

Foreign Person is an equivalent legal entity to one 

of the domestic legal entities that qualify for a 

category of Netting Member, FICC would consider, 

for example, the applicant’s business model and its 

regulatory framework and designated examining 

authority. See Notice of Filing, supra note 5, at 89 

FR 21372. 

73See GSD Rule 2A, Section 3(a)(v) (providing 

that a person may be eligible to apply to be a 

Foreign Netting Member if it ‘‘(i) has a home 

country regulator that has entered into a 

memorandum of understanding with the SEC 

regarding the sharing or exchange of information, 

and (ii) maintains a presence in the United States, 

either directly or through a suitable agent, that both 

has available individuals fluent in English who are 

knowledgeable in the Foreign Person’s business and 

can assist the Corporation’s representatives as 

necessary, and ensures that the Foreign Person will 

be able to meet its data submission, settlement, and 

other obligations to the Corporation as a Member in 

a timely manner.’’) and Section 4(b)(ii)(E) 

(specifying the minimum financial requirements for 

an applicant to be a Foreign Netting Member), supra 

note 15. 

74See Notice of Filing, supra note 5, 89 FR at 

21372. 

75See Notice of Filing, supra note 5, at 89 FR 

21373. 

Netting Member category of ‘‘Foreign 

Netting Members.’’ 65 In contrast with 

the eligibility criteria for other Netting 

Member categories, the eligibility 

criteria for Foreign Netting Members in 

Section 3(a)(v) of GSD Rule 2A do not 

specify or reference eligible types of 

legal entities.66 Instead, Section 

4(b)(ii)(E) of GSD Rule 2A provides 

FICC the authority to set minimum 

financial requirements for Foreign 

Netting Member applicants.67

Additionally, Section 3(b) of GSD Rule 

2A currently states that an entity can 

only be one category of Netting Member 

at a time.68 Thus, a Foreign Person that 

is the foreign equivalent of, for example 

a Registered Investment Company, 

which is a legal entity recognized in the 

GSD Rules for U.S. entities, would 

apply to be a Foreign Netting Member, 

and would be subject to the eligibility 

criteria, other membership 

qualifications, and ongoing minimum 

membership standards applicable to 

Foreign Netting Members.69 However, 

the GSD Rules also contain specific 

eligibility criteria, other membership 

qualifications, and ongoing minimum 

membership standards applicable to, in 

this example, Registered Investment 

Company Netting Members.70

Therefore, in this example, the current 

GSD Rules are unclear as to whether the 

applicant entity would only be subject 

to the Foreign Netting Member 

standards or would also be subject to 

the Registered Investment Company 

Netting Member standards.71

To avoid this ambiguity, FICC 

proposes to eliminate the category of 

‘‘Foreign Netting Member’’ and expand 

the qualifications for each category of 

Netting Member to include the foreign 

equivalent of the same legal entity 

types.72 Foreign Persons that are eligible 

to apply to be a Netting Member would 

be subject to both the minimum 

membership standards of the applicable 

Netting Member category as well as the 

eligibility criteria currently applicable 

to Foreign Netting Members, currently 

set forth in Section 3(a)(v) of GSD Rule 

2A.73 In making the determination of 

whether a Foreign Person is an 

equivalent legal entity to the domestic 

legal entities that qualify for a category 

of Netting Member, FICC would 

consider, for example, the applicant’s 

business model and its regulatory 

framework and designated examining 

authority. Therefore, the Proposed Rule 

Change would provide that a Foreign 

Person shall be eligible to become a 

Netting Member if either (1) it qualifies 

for one of the existing categories of 

Netting Member, or (2) FICC determines 

that the applicant may apply in the 

same way as an applicant that does not 

qualify under an existing category of 

Netting Member, as discussed with 

respect to ‘‘Changes Regarding Other 

Applicants’’ below. 

Foreign Persons that are eligible to 

apply to be a Netting Member would be 

subject to both the minimum 

membership standards of the applicable 

Netting Member category and the 

eligibility criteria currently applicable 

to Foreign Netting Members, currently 

set forth in Section 3(a)(v) of Rule 2A. 

Where an applicable Netting Member 

category is subject to membership 

qualifications that are inconsistent with 

the qualifications applicable to a 

Foreign Person, then the standards 

applicable to a Foreign Person would 

apply. Although this could lead to an 

approach where a Foreign Person 

applicant remains subject to home 

jurisdiction requirements that are 

different than the requirements 

applicable to other Netting Members, 

FICC states that that this is acceptable 

because, as discussed further below, the 

GSD Rules would still provide that FICC 

will continue to apply the membership 

standards that were designed 

specifically to address the risks that may 

not be present when an applicant is not 

domiciled in the U.S. and whose 

primary regulator is not U.S.-based.74

Changes Regarding Other Applicants 

Additionally, FICC proposes to clarify 

the eligibility criteria for applicants that 

do not fit into one of the existing 

Netting Member categories. In light of 

the adoption of the Treasury Clearing 

Rules, additional market participants 

will need to access FICC’s clearance and 

settlement services, either as direct 

Netting Members or as indirect 

participants. However, under the 

current GSD Rules, FICC does not have 

the authority to consider a Netting 

Member applicant that does not meet 

the eligibility criteria of one of the 

Netting Member categories enumerated 

in the GSD Rules. Therefore, FICC 

proposes amendments to the GSD Rules 

that would provide a framework for 

FICC to consider an applicant, including 

a Foreign Person, to be a Netting 

Member if that applicant does not meet 

the eligibility criteria of one of the 

existing Netting Member categories. 

Specifically, the Proposed Rule 

Change would first require that an 

applicant submit an application 

questionnaire and other initial 

application materials that demonstrate 

to FICC that the applicant’s business 

and capabilities are such that it could 

reasonably expect material benefit from 

direct access to FICC’s services. FICC 

proposes to establish minimum 

membership standards, including 

financial and other qualifications for 

membership, as it may determine are 

reasonable and appropriate based on 

information provided by or concerning 

such an applicant. FICC’s determination 

of the minimum membership standards 

to apply to that applicant would be 

based on the risk profile of the 

applicant, as determined by FICC, and 

information related to (i) the applicant’s 

business model, (ii) its regulatory 

framework and designated examining 

authority, (iii) its organizational 

structure and risk management 

framework, and (iv) its anticipated use 

of the Corporation’s services. 

FICC states that it cannot reliably 

predict which types of legal entities will 

apply for direct membership or predict 

the risk profiles of those entities.75 The 

proposed changes would provide FICC 

with the necessary flexibility to 

consider any potential applicants, 

including legal entities that do not fit 

into its current Netting Member 


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76See id. 

77See id. 

78See id. 

79For example, the GSD Rules currently contain 

a definition for Inter-Dealer Broker which is used 

only, in turn, to define an Inter-Dealer Broker 

Netting Member. The revisions would collapse the 

definition of an Inter-Dealer Broker into the 

description of an Inter-Dealer Broker Netting 

Member. 

80See Notice of Filing, supra note 5, 89 FR at 

21374–75. 

81 15 U.S.C. 78s(b)(2)(C). 

82 17 CFR 240.17ad–22(e)(18)(iii), (e)(18)(iv)(C), 

(e)(19), and (e)(23)(ii). 

83 15 U.S.C. 78q–1(b)(3)(F). 

84 15 U.S.C. 78q–1(b)(3)(I). 

85As part of the Commission’s process of 

analyzing the Proposed Rule Change for consistency 

with the Exchange Act and rules and regulations 

thereunder, the Commission carefully considered 

the public comment letters. Many of the comment 

letters were submitted in response to both the 

Proposed Rule Change and a related set of proposed 

rule changes (see Securities Exchange Act Release 

No. 99845 (Mar. 22, 2024), 89 FR 21603 (Mar. 28, 

2024) (File No. SR–FICC–2024–802) and Securities 

Exchange Act Release No. 99844 (March 22, 2024), 

89 FR 21586 (Mar. 28, 2024) (File No. SR–FICC– 

2024–007)). On October 25, 2024, FICC filed Partial 

Amendment No. 1 to the related set of proposed 

rule changes (see Securities Exchange Act Release 

No. 101455 (Oct. 28, 2024), 89 FR 87449 (Nov. 1, 

2024) (File No. SR–FICC–2024–802) and Securities 

Exchange Act Release No. 101454 (Oct. 28, 2024), 

89 FR 87441 (Nov. 1, 2024) (File No. SR–FICC– 

2024–007) (together, the ‘‘Account Segregation 

Proposals’’)). The comment letters generally did not 

specify which individual comments relate to the 

Proposed Rule Change as opposed to the Account 

Segregation Proposals. In the instant Order, the 

Commission addresses the comments related to the 

Proposed Rule Change. In a separate Order, the 

Commission addresses the comments related to the 

Account Segregation Proposals. 

86 15 U.S.C. 78q–1(b)(3)(F). 

87See DTCC White Paper, Looking to the 

Horizon: Assessing a Potential Expansion of U.S. 

Treasury Central Clearing (Sept. 2023) (‘‘2023 DTCC 

White Paper’’) at 9, available at https://

www.dtcc.com/-/media/Files/Downloads/ 

WhitePapers/Accessing-Potential-Expansion-USTreasury-Clearing-White-Paper.pdf. 

categories.76 FICC states that these 

proposed changes would facilitate 

access to GSD’s clearing services to a 

broader range of market participants.77

4. Other Proposed Changes 

FICC proposes changes to the GSD 

Rules generally designed to describe the 

criteria and related requirements 

regarding direct and indirect access to 

GSD’s clearance and settlement services. 

FICC states that these proposed changes 

should enhance the ability of market 

participants, and in particular indirect 

participants, to understand and evaluate 

the comparative tradeoffs of using GSD’s 

central clearing services depending on 

the relevant access model.78

Specifically, FICC proposes to include 

a ‘‘road map’’ in the GSD Rules 

describing the various GSD access 

models that allow for both direct and 

indirect access to GSD’s clearance and 

settlement services. In addition, to 

simplify the description of eligibility 

requirements in GSD Rule 2A, FICC 

proposes to move the definitions of the 

Netting Member Categories from GSD 

Rule 2A to the defined terms in GSD 

Rule 1. FICC further proposes to remove 

definitions which are only used once in 

the GSD Rules and replace those uses 

with the defined terms, meaning that it 

would remove stand-alone definitions 

that are used only once and instead fold 

the one-time definition into broader 

context within the GSD Rules.79 FICC 

proposes to clarify eligibility criteria for 

FCM Netting Members to require 

membership in the National Futures 

Association. Additionally, FICC 

proposes to make several grammatical 

and other non-substantive changes to 

the GSD Rules to streamline, clarify, and 

simplify the GSD access models, related 

definitions, and other relevant 

provisions.80

II. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Exchange 

Act 81 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 

Exchange Act and rules and regulations 

thereunder applicable to such 

organization. After carefully considering 

the Proposed Rule Change,82 the 

Commission finds that the Proposed 

Rule Change is consistent with the 

requirements of the Exchange Act and 

the rules and regulations thereunder 

applicable to FICC. In particular, the 

Commission finds that the Proposed 

Rule Change is consistent with Sections 

17A(b)(3)(F) 83 and (b)(3)(I) 84 of the 

Exchange Act and Rules 17ad– 

22(e)(18)(iii), (e)(18)(iv)(C), (e)(19), and 

(e)(23)(ii) thereunder.85

A. Consistency With Section 

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

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

Act 86 requires that the rules of a 

clearing agency, such as FICC, be 

designed to, among other things, 

promote the prompt and accurate 

clearance and settlement of securities 

transactions, and protect investors and 

the public interest. 

As described above in Section I.B., 

FICC proposes changes to the GSD Rules 

that are designed to encourage and 

facilitate a greater number of market 

participants to utilize GSD’s clearance 

and settlement services for transactions 

in U.S. Treasury securities, including 

for done-with and done-away 

transactions. Specifically, as described 

in Section I.B.1, FICC’s consolidation of 

the correspondent clearing/prime broker 

services into the Agent Clearing Service 

and the substantially increased level of 

detail about how this service operates 

should allow for a better understanding 

of the availability of this model at 

FICC.87 By updating and expanding the 

Agent Clearing Service to more closely 

resemble the nomenclature and 

functioning of an FCM-style model, the 

Proposed Rule Change should better 

present the Agent Clearing Service as a 

viable method for market participants to 

consider for clearing transactions in 

U.S. Treasury securities. The new 

terminology should help to show that 

the Agent Clearing Service operates 

similarly to agent clearing models in 

cleared derivatives markets, where 

market participants execute transactions 

with third parties and then give them up 

to their futures commission merchant 

for clearing. 

Further, the increased specificity 

regarding the functioning of the Agent 

Clearing Service should help market 

participants better evaluate its fitness 

for their individual needs. The current 

GSD Rules do not describe a Submitting 

Member as an agent for an Executing 

Firm or as submitting given up 

transactions to FICC for clearing, and 

the current GSD Rules present only 

limited information about how the 

service functions. By contrast, the 

expanded rules regarding the Agent 

Clearing Service makes clear how the 

Agent Clearing Service would function. 

It addresses various topics, including 

the qualifications of Agent Clearing 

Members and the application process, 

what an Executing Firm Customer is 

and what information an Agent Clearing 

Member must provide to FICC regarding 

its Executing Firm Customers (including 

confirmation that there is an agreement 

binding the Executing Firm Customer to 

the applicable GSD Rules and that the 

Executing Firm Customer agrees to the 

specified Executing Firm Customer 

Acknowledgments, what transactions 

may be submitted through the service, 

the rights and obligations of the Agent 

Clearing Member, and how transactions 

are addressed in the event of a default 

or non-default loss event. These changes 

substantially expand the description of 

how this service functions beyond the 

limited and high-level information 

currently in the GSD Rules. The 

Commission understands that, based on 

a survey conducted by FICC, a 

significant number (28 percent) of 

Netting Member survey respondents 

have already indicated that they expect 

to facilitate clearing transactions in U.S. 

Treasury securities using their existing 

prime brokerage, agency clearing, or 


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88See FICC Letter at 5–6, 11 (citing DTCC White 

Paper, The U.S. Treasury Clearing Mandate: An 

Industry Pulse Check (July 2024) (‘‘2024 DTCC 

White Paper’’) at 6, available at https://

www.dtcc.com/-/media/WhitePapers/TreasuryClearing-Mandate.pdf). 

89See Adopting Release, supra note 14, 89 FR at 

2715–17. 

90See Adopting Release, supra note 14, 89 FR at 

2716. 

91See id. (citing Covered Clearing Agency 

Standards Proposing Release, Exchange Act Release 

No. 71699 (Mar. 12, 2014), 79 FR 29507, 29587 

(May 27, 2014) (‘‘CCA Standards Proposing 

Release’’)). 

92See Adopting Release, supra note 14, 89 FR at 

2716 (citing Order Granting Temporary Exemptions 

Under the Securities Exchange Act of 1934 in 

Connection with Request of Liffe Administration 

and Management and Lch.Clearnet Ltd. Related to 

Central Clearing of Credit Default Swaps, and 

Request for Comments, Exchange Act Release No. 

59164 (Dec. 24, 2008), 74 FR 139, 140 (Jan. 2, 2009) 

(‘‘Liffe Order’’)). 

93See Adopting Release, supra note 14, 89 FR at 

2716 (citing Proposing Release, Standards for 

Covered Clearing Agencies for U.S. Treasury 

Securities and Application of the Broker-Dealer 

Customer Protection Rule With Respect to U.S. 

Treasury Securities, Exchange Act Release No. 

95763 (Sept. 14, 2022), 87 FR 64610, 64614 (Oct. 

25, 2022) (‘‘Proposing Release’’)). 

FCM business units currently used for 

clearing listed and over-the-counter 

derivatives.88

The changes regarding the Agent 

Clearing Service should help facilitate 

market participants’ ability to access 

central clearing by providing more 

detail about how the service functions 

and, potentially, allowing market 

participants to leverage existing policies 

and practices used for other agent 

clearing models to clear other types of 

products. In addition, the changes 

would provide FICC with increased 

ability to risk manage and monitor the 

Agent Clearing Transactions because it 

would require additional information on 

Executing Firm Customers and the use 

of an Agent Clearing Omnibus Account. 

These changes should therefore help 

promote prompt and accurate clearance 

and settlement and protect investors 

and the public interest. 

Additionally, FICC’s proposals to 

streamline and clarify certain aspects of 

its membership standards would 

remove entry barriers and make it easier 

for market participants to utilize the 

Sponsored Service. First, as described 

above in Section I.B.2., the Proposed 

Rule Change would enable additional 

market participants to become 

Sponsoring Members by removing 

capital requirements and eliminating 

other distinctions between the two 

existing categories of Sponsoring 

Members. Second, the Proposed Rule 

Change would enable additional market 

participants to become Sponsored 

Members by removing the QIB 

Requirement. These changes should 

allow FICC to streamline the Sponsored 

Service and improve its accessibility to 

potential Sponsoring and Sponsored 

Members, while still allowing FICC to 

appropriately risk manage transactions 

cleared through the Sponsored Service. 

Therefore, this aspect of the Proposed 

Rule Change should facilitate greater 

participation in the Sponsored Service 

and, therefore, in central clearing more 

generally, subject to appropriate risk 

management at FICC, which is 

consistent with both promoting prompt 

and accurate clearance and settlement 

and the protection of investors and the 

public interest. 

The Proposed Rule Change, as 

described in Section I.B.3, would also 

facilitate broader market participation in 

GSD by streamlining and clarifying the 

Netting Member eligibility criteria 

applicable to Foreign Persons and 

applicants that do not otherwise fit into 

one of the existing categories of Netting 

Member and would establish an 

application process for such entities that 

allows FICC to consider any applicant 

and the potential risk that it could bring 

to FICC. FICC’s membership 

requirements are part of its overall risk 

management because membership 

requirements help to guard against 

defaults of any FICC member, as well as 

to protect FICC and the financial system 

as a whole from the risk that one 

member’s default could cause others to 

default, potentially including FICC 

itself. 

Additionally, FICC’s proposals to add 

new provisions to the GSD Rules that 

more clearly describe the various direct 

and indirect GSD access models, and 

otherwise clarify the GSD Rule 

provisions regarding the GSD access 

models, would provide greater 

transparency on those subjects to market 

participants, and thereby enable market 

participants to more accurately and 

efficiently evaluate which model best 

fits their business needs. 

Finally, as described above in Section 

I.B.4., FICC proposes to make several 

grammatical and other non-substantive 

changes to the GSD Rules to streamline, 

clarify, and simplify the GSD access 

models, related definitions, and other 

relevant provisions. 

The Proposed Rule Change would 

encourage and facilitate greater 

participation in central clearing, while 

still providing sound risk management 

which would promote the prompt and 

accurate clearance and settlement of 

securities transactions, and would 

protect investors and the public interest. 

As the Commission explained when 

adopting the Treasury Clearing Rules, 

U.S. Treasury securities play a critical 

and unique role in the U.S. and global 

economy, serving as a significant 

investment instrument and hedging 

vehicle for investors, a risk-free 

benchmark for other financial 

instruments, and an important 

mechanism for the Federal Reserve’s 

implementation of monetary policy.89

Consequently, confidence in the U.S. 

Treasury market, and in its ability to 

function efficiently is critical to the 

stability of the global financial system. 

In central clearing, through novating 

transactions (i.e., becoming the 

counterparty to both sides of a 

transaction), a CCP addresses concerns 

about counterparty risk by substituting 

its own creditworthiness and liquidity 

for the creditworthiness and liquidity of 

the counterparties.90 A CCP thereby 

enables market participants to 

effectively reduce costs, increase 

operational efficiency, and manage 

risks.91 Moreover, a CCP provides a 

centralized system of default 

management that can mitigate the 

potential for a single market 

participant’s failure to destabilize other 

market participants or the financial 

system more broadly.92 The 

Commission adopted the Treasury 

Clearing Rules, in part, to help reduce 

contagion risk to the CCP and bring the 

benefits of central clearing to more 

transactions involving U.S. Treasury 

securities, thereby lowering overall 

systemic risk in the market.93

CCP rules that are clear and 

comprehensible, increase operational 

efficiency, and more effectively manage 

risks, like the Proposed Rule Change, 

should encourage a broader scope of 

market participants to utilize the CCP’s 

services, thereby promoting the prompt 

and accurate clearance and settlement of 

securities transactions, and protecting 

investors and the public interest, 

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

the Exchange Act. The Proposed Rule 

Change is consistent with those 

objectives because it encourages and 

supports greater participation in GSD’s 

central clearing services for different 

types of market participants and 

transactions. Accordingly, the Proposed 

Rule Change would promote the prompt 

and accurate clearance and settlement of 

securities transactions, and protect 

investors and the public interest, 

because by encouraging greater 

participation in central clearing, the 

proposals would extend the benefits of 

operational efficiency and risk 

management to a greater segment of the 

U.S. Treasury securities market. 

For these reasons, the Proposed Rule 

Change is consistent with the 


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94 15 U.S.C. 78q–1(b)(3)(F). 

95 15 U.S.C. 78q–1(b)(3)(I). 

96See Bradford National Clearing Corp., 590 F.2d 

1085, 1105 (D.C. Cir. 1978). 

97See Letter from William C. Thum, Managing 

Director and Assistant General Counsel, Securities 

Industry and Financial Markets Association, Asset 

Management Group (May 24, 2024) (‘‘SIFMA–AMG 

Letter’’) at 5; Letter from Joanna Mallers, Secretary, 

Futures Industry of America, Principal Traders 

Group (April 17, 2024) (‘‘FIA–PTG Letter I’’) at 2– 

3, 6–7; Letter from Sarah A. Bessin, Deputy General 

Counsel and Nhan Nguyen, Associate General 

Counsel, Investment Company Institute (June 20, 

2024) (‘‘ICI Letter’’) at 2, 4–5; Letter from Jennifer 

W. Han, Executive Vice President, Chief Counsel 

and Head of Global Regulatory Affairs, Managed 

Funds Association (April 17, 2024) (‘‘MFA Letter 

I’’) at 4–5, 7–8; Letter from Jennifer W. Han, 

Executive Vice President, Chief Counsel and Head 

of Global Regulatory Affairs, Managed Funds 

Association (Nov. 12, 2024) (‘‘MFA Letter II’’) at 3– 

4; see also Letter from Jiri Krol, Deputy Chief 

Executive Officer, Global Head of Government 

Affairs, Alternative Investment Management 

Association (April 23, 2024) (‘‘AIMA Letter’’) at 4– 

5 (stating that not addressing the done-away 

problem leaves a critical gap in access to clearing 

and settlement service and places significant 

competitive burdens on indirect participants). 

98See SIFMA–AMG Letter at 5. 

99See id. 

100See FIA–PTG Letter I at 3. 

101See id.; see also MFA Letter II at 3–4. 

102See ICI Letter at 4–5. 

103See FIA–PTG Letter I at 3–4; MFA Letter I at 

4–5, 7–8; AIMA Letter at 4–5; SIFMA–AMG Letter 

at 2; ICI Letter at 2, 4–5. Commenters also state that 

by not including a requirement on Netting Member 

intermediaries to offer done-away clearing to their 

customers, the Proposed Rule Change does not 

adequately facilitate access for such customers to 

FICC’s clearance and settlement services, consistent 

with Rule 17ad–22(e)(18)(iv)(C). See 17 CFR 

240.17ad–22(e)(18)(iv)(C). The Commission 

addresses those comments below in Section II.D. 

104See Letter from Robert Toomey, Head of 

Capital Markets, Managing Director/Associate 

General Counsel, SIFMA, at 3–4 (July 31, 2024) 

(‘‘SIFMA Letter II’’). 

105See SIFMA Letter II at 2. 

106See id. 

107See FICC Letter at 11. 

108See id. 

109See FICC Letter at 11–14. 

110See FICC Letter at 11–12. FICC also states that, 

by contrast, in a done-with transaction, the 

customer enters into the transaction with its 

clearing member, and that, if the clearing member 

then defaults, the clearing agency has the option to 

close out both the obligations to the clearing 

member and those to the customer (i.e., ‘‘both sides 

of the trade’’), with the sole resulting payment 

obligation being the mark-to-market value of the 

positions. See id. at 12. One commenter states that 

it is ‘‘inaccurate’’ that done-away transactions have 

greater liquidity risks, but the commenter does not 

disagree with FICC’s description of these liquidity 

concerns, and instead states that this distinction 

highlights a deficiency of FICC’s current default 

management framework. See Letter from Stephen 

Berger, Managing Director, Global Head of 

Government & Regulatory Policy, Citadel and 

Citadel Securities, (Oct. 21, 2024) (‘‘Citadel Letter’’) 

at 5; see also MFA Letter II at 3–4. The concerns 

regarding the default management framework are 

discussed in Section II.D.6 infra. 

requirements of Section 17A(b)(3)(F) of 

the Exchange Act.94

B. Consistency With Section 17A(b)(3)(I) 

of the Exchange Act 

Section 17A(b)(3)(I) of the Exchange 

Act requires that the rules of a clearing 

agency, such as FICC, do not impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the Exchange Act.95 Section 

17A(b)(3)(I) does not require the 

Commission to make a finding that FICC 

chose the option that imposes the least 

possible burden on competition. Rather, 

the Exchange Act requires that the 

Commission find that the Proposed Rule 

Change does not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act, which 

involves balancing the competitive 

effects of the Proposed Rule Change 

against all other relevant considerations 

under the Exchange Act.96

Several commenters suggest that the 

Proposed Rule Change’s failure to 

include a requirement that FICC’s direct 

participants offer done-away clearing 

services would not sufficiently provide 

for a workable done-away model.97 For 

example, one commenter states that it 

does not expect Netting Members to 

offer done-away trading via the Agent 

Clearing Model (which would 

effectively result in clearing members 

surrendering potentially lucrative 

commissions from trade execution to 

other brokers).98 This commenter 

further states that the Proposed Rule 

Change does not address this or 

otherwise provide any other mechanism 

to properly align Netting Members’ 

incentives with the goal of facilitating 

done-away trading.99 Another 

commenter states that the Proposed 

Rule Change ‘‘ignores the current 

reality’’ in which the commenter is not 

aware of any clearing member currently 

offering done-away clearing to its 

customers for either cash or repo 

transactions and the Proposed Rule 

Change fails to explain why done-with 

and done-away transactions continue to 

be treated differently given that a 

clearing member should be agnostic 

about with whom a trade is executed, as 

the counterparty of a cleared trade is 

FICC (i.e., not the executing 

counterparty).100 This commenter states 

that FICC has not explained the 

justification for treating done-with and 

done-away transactions differently and 

why it has elected to continue to permit 

its clearing members to require all 

customers to bundle execution and 

clearing in these models.101 Another 

commenter states that there remain 

serious questions whether Netting 

Members view offering done-away 

services as practicable from a regulatory 

net capital perspective and whether a 

sufficient number of Netting Members 

will provide clearing services on a 

standalone basis, as opposed to 

bundling execution and clearing.102

As a solution to the foregoing 

concerns, the commenters state that 

FICC should require Netting Member 

intermediaries (i.e., Sponsoring 

Members and Agent Clearing Members) 

to offer done-away clearing to their 

customers.103

In contrast to these commenters, one 

commenter states that a mandate from 

FICC is not a necessary condition for a 

viable done-away access model.104

Instead, the commenter states that a 

Netting Member’s decision to provide 

done-away services—or any services—to 

market participants is, and should 

remain, a commercial and risk decision 

of each member, and that such 

commercial arrangements should not be 

mandated by rule or otherwise.105 The 

commenter further states that mandating 

the provision of done-away services 

could compromise the goals of the 

Treasury Clearing Rules by making the 

access models less attractive from a 

business perspective to Netting 

Members and cause Netting Members to 

limit the offerings they do make to 

customers if doing so would mandate 

other commercial arrangements or 

transactions that they may not wish to 

engage in.106

In response, FICC states that requiring 

Netting Member intermediaries to offer 

done-away clearing services to 

customers could expose FICC and its 

participants to additional risks and 

other challenges that could limit the 

commercial and risk management 

choices an intermediary could consider 

in offering clearing services, which in 

turn could reduce the number of market 

participants willing to provide such 

services.107 FICC further states that such 

a contraction in the availability of direct 

participants providing clearing services 

would result in concentration of risk, 

increased costs, and reduced liquidity 

in the Treasury market.108 Additionally, 

FICC states that unlike done-with 

clearing, done-away clearing presents 

unique liquidity risks to both FICC and 

Netting Member intermediaries.109 For 

FICC, if a customer’s Netting Member 

intermediary defaults, FICC would be 

obligated to perform the one-sided 

obligations of the done-away 

transactions of the customer and would 

need liquidity to do so.110 For Netting 

Member intermediaries, done-away 

transactions would increase the 

maximum liquidity a Netting Member 

may be required to provide to FICC 

under the Capped Contingency 


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111See FICC Letter at 12, 14. The CCLF is a 

member-funded, rules-based, committed liquidity 

resource, designed to enable FICC to meet its cash 

settlement obligations in the event of a default of 

the member (including affiliates) to which FICC has 

the largest exposure in extreme but plausible 

market conditions. FICC allocates $15 billion of the 

total size of the CCLF among all members. FICC 

allocates the remainder of the total size of the CCLF 

among members depending on the amount and 

frequency with which they generate liquidity needs 

above $15 billion. See GSD Rule 22A, Section 2a, 

supra note 15. 

112See FICC Letter at 12–13. 

113See id. 

114See FICC Letter at 14. 

115See FICC Letter at 11. 

116See FICC Letter at 5–6, 11. FICC states that for 

Netting Members (both current and prospective) 

with business units already engaged in FCM-style 

derivatives clearing, the ability to leverage their 

existing systems should enable them to offer doneaway clearing for transactions in U.S. Treasury 

securities. See also FICC Letter at 7, 9 (citing 2024 

DTCC White Paper supra note 88 at 6 (noting a 

significant number (28 percent) of Netting Members 

indicated that they expect to facilitate clearing 

transactions in U.S. Treasury securities through 

business units already engaged in done-away 

clearing of other product types and citing 

statements from Netting Members and other market 

participants indicating an intent to utilize their 

existing FCM-style systems to offer done-away 

clearing for U.S. Treasury securities and citing 

statements from Netting Members and other market 

participants indicating an intent to utilize their 

existing FCM-style systems to offer done-away 

clearing for U.S. Treasury securities)). 117See Covered Clearing Agency Standards 

Proposing Release, Securities Exchange Act Release 

No. 71699 (Mar. 12, 2014), 79 FR 29507 (May 27, 

2014) (‘‘Proposing Release’’); Adopting Release at 

2756–57, supra note 14 (regarding comments 

arguing that the Commission should require FICC 

obligate its members to accept done-away 

transactions to avoid an undue burden on 

competition). 

118See Adopting Release at 2756–57, supra note 

14. 119See id. 120See FICC Letter at 8 (reporting survey results 

that 43 percent of Netting Members would likely 

clear indirect participant transactions through the 

Agent Clearing Service). See also, e.g., Bernard 

Goyder, ‘‘BNY to Launch ‘Done Away’ UST and 

Repo Clearing Service,’’ available at https://

www.risk.net/markets/7960175/bny-to-launchdone-away-ust-and-repo-clearing-service (Oct. 21, 

2024); Bernard Goyder, ‘‘RJ O’Brien Plots Expansion 

Into US Treasury Clearing,’’ available at https://

www.risk.net/markets/7959638/rj-obrien-plotsexpansion-into-us-treasury-clearing (July 1, 2024). 

121See Adopting Release at 2756–57, supra note 

14. 

122See Citadel Letter at 8. 

123See MFA Letter I at 5. 

124See id. 

125See FICC Letter at 15. 

126See FICC Letter at 15–16. One commenter 

states that FICC also relied upon Section 17A(b)(6) 

regarding a prohibition on bundling and execution. 

See Citadel Letter at 8. However, FICC’s reference 

to that statutory provision relates to a comment that 

would require done-away clearing services to any 

customer that posts margin and not to the bundling 

of execution and clearing services. 

127See Treasury Clearing Adopting Release, supra 

note 14, 89 FR at 2756–77 (including n. 415 

identifying such comments). More generally, the 

statutory authority for the CFTC provisions cited by 

one commenter differs significantly from the 

statutory authority applicable to the Commission 

for the U.S. Treasury market. 

Liquidity Facility (‘‘CCLF’’), increasing 

the cost of clearing done-away 

transactions.111

FICC also states that since done-away 

transactions are negotiated between a 

customer and its counterparty, the 

Netting Member intermediary must rely 

on external parties and/or processes to 

confirm that a transaction is consistent 

with the Netting Member’s risk limits 

and regulatory requirements.112

Therefore, FICC states that imposing a 

done-away mandate on Netting 

Members that lack the infrastructure to 

perform such confirmations could 

discourage market participants from 

providing clearing services to 

customers.113 FICC also states that doneaway clearing might subject Netting 

Member intermediaries to certain 

regulatory challenges (e.g., regarding 

trade reporting and confirmations) and/ 

or increased capital requirements (since 

it may be difficult to conclude that they 

have a well-founded basis on which 

they can exercise close-out netting 

rights upon a customer default).114 FICC 

states that in light of the foregoing risks 

and challenges, a done-away mandate 

could have the unintended consequence 

of discouraging Netting Member 

intermediaries from providing clearing 

services to customers, which would 

concentrate risk, increase costs, and 

reduce liquidity in the Treasury 

market.115 Instead of a done-away 

mandate, FICC states that Netting 

Member intermediaries should be 

allowed to decide whether and how to 

provide clearing services to customers 

after evaluating the relevant risks.116

As proposed, the GSD access models, 

including the ability to bundle 

execution and clearing, do not 

constitute a burden on competition that 

is not necessary or appropriate in 

furtherance of the Exchange Act, 

because the models continue to offer 

optionality for different types of market 

participants to access central clearing in 

different ways. After proposing the 

Treasury Clearing Rules,117 the 

Commission received similar comments 

regarding the impact that the absence of 

a done-away mandate would have on 

competition for GSD’s indirect 

participants.118 At that time, the 

Commission disagreed with those 

comments and declined to impose a 

done-away mandate and did not agree 

that FICC’s current access models 

constituted a burden on competition 

that is not necessary or appropriate in 

furtherance of the Exchange Act.119

Notably, the client clearing models that 

FICC has proposed allow for Netting 

Members to offer done-away services. 

Although the models have not been 

widely used for done-away services to 

date, market participants have indicated 

that they will provide such services 

going forward.120 In addition, as the 

Commission stated in the Treasury 

Clearing Adopting Release, in order to 

encourage Netting Member 

intermediaries to provide services that 

enable customers to access central 

clearing, it is best not to remove the 

ability of such intermediaries to 

determine which risks to take with 

respect to guaranteeing transactions to a 

CCP.121 As FICC and one commenter 

highlighted, providing done-away 

clearing services brings certain risks to 

the Netting Member, which the Netting 

Member must evaluate and manage. 

Finally, approving the Proposed Rule 

Change does not preclude further action 

by FICC to incentivize or facilitate doneaway clearing services going forward. 

In addition, commenters state that the 

Proposed Rule Change should prohibit 

bundling of clearing and execution 

services. One commenter states that this 

prohibition need not include a doneaway mandate, as it would simply 

prohibit Netting Members from 

requiring forced bundling, and the 

commenter also disagrees with FICC’s 

legal arguments regarding whether FICC 

may impose such a prohibition.122 An 

additional commenter states that there 

are economic incentives for direct 

participants to bundle their execution 

and clearing services by favoring donewith transactions.123 This commenter 

cites certain prohibitions adopted by the 

Commodity Futures Trading 

Commission (‘‘CFTC’’) and states that 

FICC should adopt the same protections 

for the U.S. Treasury market, as 

necessary to ensure a robust done-away 

clearing market.124

In response to such comments, FICC 

states that such a prohibition would 

effectively mean that a Netting Member 

could not charge lower fees for donewith clearing because that would 

amount to tying executing to clearing, 

and, as a result, could be viewed as the 

clearing agency dictating pricing 

terms.125 FICC further states that such 

setting of prices is not clearly consistent 

with Section 17A(b)(3)(E) of the 

Exchange Act, which provides that the 

rules of a clearing agency may not 

impose any schedule of prices, or fix 

rates or other fees, for services rendered 

by its participants.126

The Commission considered similar 

comments regarding a prohibition of 

bundling and clearing when it adopted 

the Treasury Clearing Rules.127

Specifically, several commenters stated 

that the Commission should require 


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128See Treasury Clearing Adopting Release, supra 

note 14, 89 FR at 2756. 

129See Treasury Clearing Adopting Release, supra 

note 14, 89 FR at 2757. 

130See Treasury Clearing Adopting Release, supra 

note 14, 89 FR at 2756–77. 

131 15 U.S.C. 78q–1(b)(3)(I). 

132 17 CFR 240.17ad–22(e)(4)(18)(iii). 

133See Letter from Katherine Darras, General 

Counsel, International Swaps and Derivatives 

Association (April 17, 2024) (‘‘ISDA Letter I’’) at 5– 

6; Letter from Katherine Darras, General Counsel, 

International Swaps and Derivatives Association 

(July 18, 2024) (‘‘ISDA Letter II’’) at 5. 

134See ISDA Letter II at 5. 

135See id. 

136See id. 

137See FICC Letter at 41. 

138See id. 

139See id. 

140See GSD Rules, Rule 3A, Section 2(d) (‘‘Each 

Sponsoring Member shall submit the Legal Entity 

Identifier for each of its Sponsored Member 

applicants as part of the application of such 

Sponsored Member applicant. Each Sponsoring 

Member shall provide the Corporation with a Legal 

Entity Identifier for each of its Sponsored Members 

such that the Corporation shall have a current Legal 

Entity Identifier for each Sponsored Member at all 

times.’’). 

141 17 CFR 240.17ad–22(e)(18)(iii). 

142 17 CFR 240.17ad–22(e)(18)(iv)(C). 

U.S. Treasury securities central clearing 

agencies to obligate their members to 

accept done-away transactions and 

prohibit their members from requiring 

clients to bundle execution and 

clearing.128 In response, the 

Commission stated that it disagrees that 

the failure to require the submission of 

done-away transactions necessarily 

constitutes ‘‘unfair discrimination,’’ as 

discussed in Section 17A(b)(3)(F).129 In 

order to encourage market participants 

to provide services to enable indirect 

access to central clearing, the 

Commission stated that it believes it is 

best not to remove the ability of FICC’s 

direct participants to determine what 

risks to take with respect to 

guaranteeing customer transactions. In 

addition, the Commission also did not 

agree that, at that time, the current 

access models offered by FICC 

constitute a burden on competition that 

is not necessary or appropriate, as 

discussed in Section 17A(b)(3)(I).130 The 

Commission’s analysis remains 

applicable to the commenters seeking 

such a prohibition from FICC. 

For these reasons, after considering 

the public comments and FICC’s 

response, the access models in the 

Proposed Rule Change, which would 

not prevent a Netting Member from 

bundling execution and clearing and do 

not require a Netting Member to provide 

done-away clearing services would not 

impose a burden on competition not 

necessary or appropriate in furtherance 

of the Exchange Act.131

C. Consistency With Rule 17ad– 

22(e)(18)(iii) 

Rule 17ad–22(e)(18)(iii) under the 

Exchange Act requires that a covered 

clearing agency, such as FICC, establish 

objective, risk-based, and publicly 

disclosed criteria for participation, 

which monitor compliance with such 

participation requirements on an 

ongoing basis.132

As described above in Section I.B.1., 

FICC proposes changes that would 

enable it to monitor activity submitted 

through the Agent Clearing Service. 

Specifically, FICC would require a 

Netting Member to submit an 

application to become an Agent Clearing 

Member and provide additional 

information regarding each Executing 

Firm Customer beyond that which is 

required for Executing Firms under the 

current GSD Rules, such as a Legal 

Entity Identifier (‘‘LEI’’). FICC would 

also require an Agent Clearing Member 

to submit activity on behalf of its 

Executing Firm Customer(s) through one 

or more separate Agent Clearing 

Member Omnibus Accounts, as opposed 

to the optional segregated submission 

approach provided for in the current 

GSD Rules. Finally, for both initial and 

ongoing membership purposes, FICC 

would require an Agent Clearing 

Member to provide FICC with 

information related to its use of the 

Agent Clearing Service. Adding these 

provisions to the GSD Rules should help 

FICC monitor the trading activity 

generated withing the Agent Clearing 

Service because they should allow FICC 

to better understand which transactions 

are attributable to which Executing Firm 

Customers submitting through an Agent 

Clearing Member, which should, in 

turn, provide better overall 

understanding of market participants’ 

activity at FICC even across multiple 

Agent Clearing Members. 

One commenter states that FICC 

should change its proposal regarding the 

requirement on Agent Clearing Members 

to indemnify FICC for any harm arising 

out of the Agent Clearing Member’s 

failure to have the current LEIs of its 

Executing Firm Customers on file with 

FICC.133 Specifically, the commenter 

states that FICC’s proposal is overly 

broad insofar as it would ostensibly 

require an Agent Clearing Member to 

halt a customer’s trading activity for 

minor lapses in LEI renewals and 

require the Agent Clearing Member to 

verify current LEIs on any number of 

LEI service provider websites.134 The 

commenter states that FICC should not 

need to maintain such strict rules 

governing LEIs when other identifying 

information accompanies each trade.135

Therefore, the commenter states that 

FICC should more narrowly tailor the 

indemnification provision to cover only 

relevant harms arising out of an Agent 

Clearing Member’s gross negligence, 

willful misconduct, or fraudulent 

conduct.136

In response, FICC states that, although 

the Agent Clearing Member has a 

contractual relationship with its 

customers, FICC does not.137 Therefore, 

the Agent Clearing Member is able to 

include contract provisions that obligate 

its customers to maintain current LEI 

information and notify the Agent 

Clearing Member of any LEI renewals or 

changes.138 FICC further states that 

although it does not generally expect the 

LEI indemnification provision to give 

rise to significant liability, neither FICC 

nor its other members should bear the 

costs of any such liability.139

The Commission agrees with FICC on 

this point. The LEI portion of the 

Proposed Rule Change is consistent 

with FICC’s existing rule regarding a 

Sponsoring Member’s obligation to 

provide an LEI for its Sponsored 

Members.140 Therefore, Sponsoring 

Members are already subject to such a 

requirement. An Agent Clearing 

Member, like a Sponsoring Member, 

should be able to contract with its 

Executing Firm Customers to ensure 

that it receives updated LEI information 

to provide to FICC. Neither FICC nor its 

other members should bear any liability 

arising out of an Agent Clearing 

Member’s failure to have the current 

LEIs of its Executing Firm Customers on 

file with FICC. 

Accordingly, the Proposed Rule 

Change would assist FICC in monitoring 

its participants’ ongoing compliance 

with the Agent Clearing Service 

participation requirements, consistent 

with Rule 17ad–22(e)(18)(iii).141

D. Consistency With Rule 17ad– 

22(e)(18)(iv)(C) 

Rule 17ad–22(e)(18)(iv)(C) under the 

Exchange Act requires that a covered 

clearing agency, such as FICC, when 

providing CCP services for transactions 

in U.S Treasury securities, establish 

objective, risk-based, and publicly 

disclosed criteria for participation, 

which ensure that it has appropriate 

means to facilitate access to clearance 

and settlement services of all eligible 

secondary market transactions in U.S. 

Treasury securities, including those of 

indirect participants.142

FICC states that the Proposed Rule 

Change is primarily designed to ensure 

that the access models in the GSD Rules 

comply with Rule 17ad–22(e)(18)(iv)(C) 

by constituting criteria for participation 


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143See Notice of Filing, supra note 5, at 89 FR 

21363. 

144See id. 

145See 17 CFR 240.17ad–22(e); Notice of Filing, 

supra note 5, at 89 FR 21363. 

146See FIA Letter at 5, 10–11; Letter from Robert 

Toomey, Head of Capital Markets, Managing 

Director/Associate General Counsel, SIFMA, at 3– 

4 (May 22, 2024) (‘‘SIFMA Letter I’’) at 2, 5; SIFMA 

Letter II at 3. One commenter further states that if 

FICC can provide clarity on this matter, it would 

negate the need for a done-away clearing mandate 

in the GSD Rules. See SIFMA Letter I at 5. 

147See FICC Letter at 14. 

148See 17 CFR 240.17ad–22(e)(18)(iv)(C). 

149See ICI Letter at 4. 

150See id. 

151See Notice of Filing, supra note 5, 89 FR at 

21364. 

152See FICC Letter at 50–51. 

153See Adopting Release, supra note 14, 89 FR at 

2758. 

154See id. 

155See FIA–PTG Letter I at 3 (stating that the 

Proposed Rule Change ‘‘raises serious questions 

regarding whether [it] appropriately facilitate[s] 

access to clearing for indirect participants as 

required by’’ Rule 17ad–22(e)(18)(iv)(C)); MFA 

Letter I at 3 (stating that the Proposed Rule change 

‘‘[does] not go far enough to satisfy’’ Rule 17ad– 

22(e)(18)(iv)(C)); AIMA Letter at 4–5 (stating that 

the changes in the Proposed Rule Change ‘‘are not 

sufficient to facilitate access to clearing for indirect 

participants’’); SIFMA–AMG Letter at 4 (stating that 

FICC must ensure that the Proposed Rule Change 

facilitates done-away trading in a manner that 

fulfills the requirements of the Treasury Clearing 

Rules); ICI Letter at 4 (stating that ‘‘it is not clear 

that the [Proposed Rule Change] fully implements 

the requirements of’’ Rule 17ad–22(e)(18)(iv)(C)). 

156See FIA–PTG Letter I at 3; MFA Letter I at 4– 

5; AIMA Letter at 4 (stating that without a doneaway model, indirect participants will face new and 

unnecessary costs in having to bundle execution 

and clearing services or establish additional 

clearing relationships so that they can engage with 

multiple execution counterparties). 

157See AIMA Letter at 4; see also SIFMA–AMGLetter at 4–5 (arguing that without changes to the 

GSD access models, many market participants may 

be shut out of the U.S. Treasury market, with 

significant negative effects on liquidity). 

158See Citadel Letter at 7–8; MFA Letter II at 4. 

that facilitate access to GSD’s clearance 

and settlement services, including for 

indirect participants.143 Specifically, 

FICC developed the Proposed Rule 

Change following FICC’s review of 

GSD’s existing direct and indirect access 

models.144 That review examined 

whether those models provide market 

participants with access to GSD’s 

clearance and settlement services in as 

flexible a means as possible, consistent 

with FICC’s responsibility to provide 

sound risk management and comply 

with its regulatory risk management 

obligations under Rule 17ad–22(e) and 

other parts of the Exchange Act.145

1. Changes to the Agent Clearing Service 

As described above in Section I.B.1., 

FICC proposes to re-name GSD’s 

existing correspondent clearing/prime 

broker services as the Agent Clearing 

Service. FICC also proposes to 

consolidate and adopt additional 

provisions governing the re-named 

Agent Clearing Service. The proposed 

changes to re-name, consolidate, and 

provide additional specificity regarding 

the operation of the Agent Clearing 

Service should improve transparency of 

the GSD Rules regarding the Agent 

Clearing Service and allow market 

participants to better evaluate and 

consider how the Agent Clearing 

Service operates, including how it 

compares to existing cleared derivatives 

systems and infrastructure. The 

refinement of the proposed Agent 

Clearing Service should help ensure that 

market participants are able to evaluate 

and, if they choose, use this service to 

access FICC, including for done-away 

transactions, as discussed above in 

Section I.A. Therefore, these proposed 

changes are consistent with Rule 17ad– 

22(e)(18)(iv)(C). 

Several commenters request that FICC 

clarify that an Agent Clearing Member 

would be permitted to treat its customer 

transactions as off-balance sheet for 

accounting purposes, otherwise the 

Agent Clearing Service may be so 

capital intensive as to disincentivize use 

of the access model.146 In response, 

FICC states that it is actively working 

with industry groups to determine the 

balance sheet impact of done-away 

transactions.147

It is ultimately the responsibility of 

each Netting Member to determine the 

accounting treatment of its own 

transactions. FICC need not opine on 

the balance sheet treatment for 

transactions within the Agent Clearing 

Service in order for the Commission to 

evaluate the Proposed Rule Change’s 

consistency with Rule 17ad– 

22(e)(18)(iv)(C).148

Another commenter is concerned that 

the rights of Executing Firm Customers 

are too limited vis-a`-vis FICC within the 

Agent Clearing Service.149 For example, 

the commenter states that under the 

Proposed Rule Change, FICC would 

have no obligations to Executing Firm 

Customers; rather, FICC’s obligations 

would be solely to the Agent Clearing 

Member.150

In the Notice of Filing, FICC states 

that within the current correspondent 

clearing/prime broker services, an 

indirect participant does not establish 

any relationship with FICC.151 FICC’s 

proposed changes regarding the Agent 

Clearing Service would not change that 

aspect of the access model. In contrast, 

within the Sponsored Service, a 

Sponsored Member must establish an 

indirect, limited purpose membership 

with FICC. FICC states that one of the 

factors that an indirect participant may 

wish to consider in choosing between 

GSD access models is whether the 

participant prefers to be in a direct 

contractual relationship with FICC.152

In the Treasury Clearing Rules 

Adopting Release, the Commission also 

recognized that certain access models 

offered by FICC may not result in a 

contractual relationship or direct 

obligation between FICC and an indirect 

participant.153 This generally would be 

the case in any agent clearing 

relationship in which an indirect 

participant relies upon a direct 

participant to submit transactions for 

clearing on its behalf.154 The 

commenter’s concern that within the 

Agent Clearing Service, indirect 

participants would not have a 

contractual relationship with FICC, does 

not render the Proposed Rule Change 

inconsistent with Rule 17ad– 

22(e)(18)(iv)(C). 

2. Comments Regarding Done-Away 

Clearing 

As discussed in more detail in Section 

II.B above, several commenters suggest 

that by not including a requirement on 

Netting Member intermediaries to 

provide done-away clearing services to 

customers, the Proposed Rule Change 

would fail to implement criteria for 

participation that facilitate access to 

GSD’s clearance and settlement services 

for indirect participants.155 Specifically, 

commenters state that if a customer is 

limited to done-with transactions, it 

would need to establish separate 

clearing relationships with each donewith counterparty with whom it wishes 

to transact, which would increase cost, 

complexity, operational risk, and limit 

the number of counterparties with 

whom to transact.156 In addition, several 

commenters state that alternatively, 

these market participants may limit 

their cash and/or repo U.S. Treasury 

transactions, thereby negatively 

impacting market liquidity.157

Commenters also state that FICC should 

prohibit the bundling of clearing and 

execution services to comply with Rule 

17ad–22(e)(18)(iv)(C). As discussed 

further in Section II.B infra, these 

commenters state that such a 

prohibition is necessary to ensure that 

market participants will provide doneaway clearing services.158

Generally, these commenters state 

that FICC should impose a mandate on 

Netting Member intermediaries to 

provide done-away clearing services to 

customers and should prohibit the 


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159See FIA–PTG Letter I at 2–3, 6–7; MFA Letter 

I at 4–5, 7–8; AIMA Letter at 4–5. 

160See FICC Letter at 8. 

161See FICC Letter at 11–13. 

162See id. 

163See id. 

164See id. 

165See id. 

166See FICC Letter at 13–15. 

167See FICC Letter at 15–16; 15 U.S.C. 78q– 

1(b)(3)(E); 15 U.S.C. 78q–1(b)(6). 

168See FICC Letter at 15–16. 

169See 15 U.S.C. 78q–1(b)(3)(E). 

170 15 U.S.C. 78q–1(b)(6). 

171See FICC Letter at 16; 15 U.S.C. 78q–1(b)(6). 

172See SIFMA Letter II at 3–4. 

173See id. 

174See SIFMA Letter II at 4. 

175See 15 U.S.C. 78s(b)(2)(C)(i). 

176See Treasury Clearing Adopting Release, supra 

note 14, 89 FR at 2755–56. 

177See Treasury Clearing Adopting Release, supra 

note 14, 89 FR at 2757. 

178See FICC Letter at 7, note 14 and 

accompanying text (highlighting that although the 

bulk of current done-away transactions are cash 

transactions cleared through the correspondent 

clearing/prime broker clearing models, nearly 10 

percent of FICC’s Sponsoring Members currently 

clear done-away repo transactions through the 

Sponsored Service). 

179See Adopting Release at 2756–57, supra note 

14. 

180See FICC Letter at 11–15; SIFMA Letter II at 

3–4. 

181See Adopting Release at 2756–57, supra note 

14. 

182See 17 CFR 240.17ad–22(e)(18)(iv)(C). 

bundling of clearing and execution 

services to address these concerns.159

As discussed in more detail in Section 

II.B above, in response, FICC states that 

the Proposed Rule Change would 

meaningfully facilitate done-away 

clearing, without imposing a done-away 

mandate or prohibiting the bundling of 

clearing and execution services.160 FICC 

also states that a done-away mandate 

could expose both FICC and its 

participants to unique risks.161 First, as 

discussed in Section II.B above, doneaway transactions present liquidity risks 

that done-with transactions do not.162

Because done-away transactions are 

entered into between a customer and a 

counterparty other than the customer’s 

Netting Member intermediary, if the 

intermediary defaults, FICC would need 

to perform the one-sided obligations of 

the customer.163 Second, because doneaway transactions are negotiated 

between the customer and its 

counterparty, the Netting Member 

intermediary must depend on outside 

processes or parties to confirm that the 

transactions do not give rise to risk or 

regulatory issues (e.g., trade reporting 

and confirmation requirements, antimoney laundering and sanctions 

regulations, etc.).164 FICC states that its 

direct participants should 

independently determine whether they 

can assume the risks associated with 

providing done-away clearing 

services.165 Otherwise, according to 

FICC, the increased risks and costs 

associated with a done-away mandate 

could stifle the ongoing and positive 

market developments toward done-away 

clearing by discouraging Netting 

Member intermediaries from providing 

clearing services altogether.166

FICC further states that a done-away 

mandate could be inconsistent with 

Section 17A(b)(3)(E) and/or Section 

17A(b)(6) of the Exchange Act.167 FICC 

states that for a done-away mandate to 

be effective, it would likely need to 

prohibit the bundling of execution and 

clearing (and thereby prevent a Netting 

Member intermediary from forcing its 

customers into done-with transactions 

through more favorable terms).168 FICC 

states that, as a result, a done-away 

mandate could be viewed as FICC 

dictating pricing terms, which could 

violate Section 17A(b)(3)(E).169

Additionally, Section 17A(b)(6) 

provides that a clearing agency may not 

‘‘prohibit or limit access by any person 

to services offered by any participant 

therein.’’ 170 FICC states that a 

requirement on Netting Member 

intermediaries to provide done-away 

clearing to customers that post margin 

could violate Section 17A(b)(6) because 

the service offered to customers who do 

not post margin could potentially be 

limited to done-with clearing.171

In addition, as stated above in Section 

II.B., one commenter also states that 

FICC should not impose a done-away 

clearing mandate.172 Rather, the 

commenter states that any decision to 

offer done-away services should be a 

commercial/business decision left to 

clearing members, driven by evaluations 

of risk.173 The commenter states that 

FICC can implement an access model, 

without a done-away clearing mandate, 

that would be reasonably designed to 

ensure that FICC has appropriate means 

to facilitate access to its clearance and 

settlement services consistent with Rule 

17ad–22(e)(18)(iv)(C).174

The Proposed Rule Change does not 

include a requirement that FICC’s 

participants offer done-away clearing or 

prohibit the bundling of clearing and 

execution services. The Commission 

shall approve a proposed rule change of 

a self-regulatory organization if it finds 

that it is consistent with the Exchange 

Act,175 and the Proposed Rule Change is 

consistent with the Exchange Act and 

the rules thereunder, even in the 

absence of a done-away mandate or a 

prohibition on the bundling of clearing 

and execution services. 

The Commission disagrees with the 

commenters arguing that FICC must 

impose a done-away clearing mandate 

on Netting Member intermediaries or 

prohibit the bundling of clearing and 

execution services to comply with Rule 

17ad–22(e)(18)(iv)(C). As discussed in 

the Adopting Release, Rule 17ad– 

22(e)(18)(iv)(C) does not prescribe a 

particular access model, but it instead 

helps ensure that FICC, and any other 

covered clearing agency serving the U.S. 

Treasury market, review their indirect 

access models and ensure that they 

facilitate access to clearance and 

settlement services in a manner suited 

to the needs and regulatory 

requirements of market participants, 

including indirect participants.176

Further, in the Adopting Release, the 

Commission stated that a requirement to 

accept done-away transactions would 

require a covered clearing agency to, in 

turn, require their direct participants to 

transact with their customers in specific 

ways and limit their ability to offer 

certain types of pricing services.177

More generally, and as stated above in 

Section II.A., both the Sponsored 

Service and the Agent Clearing Service 

(including the prime broker/ 

correspondent clearing service in place 

currently) allow (and are currently used) 

for done-away clearing.178 As stated in 

the Adopting Release, in order to 

encourage Netting Member 

intermediaries to provide services that 

enable customers to access central 

clearing, it is best not to remove the 

ability of such intermediaries to 

determine which risks to take with 

respect to guaranteeing transactions to a 

CCP such as FICC.179 This is also true 

with respect to providing done-away 

clearing services. The Commission 

agrees with the rationale articulated by 

both FICC and one commenter arguing 

that a done-away clearing mandate 

could be counterproductive and 

ultimately discourage Netting Member 

intermediaries from providing clearing 

services to customers.180 Additionally, 

it is appropriate to allow the U.S. 

Treasury market to adjust to the 

implementation of the Treasury Clearing 

Rules (e.g., the Account Segregation 

Proposals) before determining that 

additional access models are needed.181

For the foregoing reasons, FICC need not 

impose a done-away clearing mandate 

on Netting Member intermediaries in 

order to comply with Rule 17ad– 

22(e)(18)(iv)(C).182

Several commenters state that FICC 

should explain how its proposal to rebrand the Agent Clearing Service would 

actually facilitate done-away 


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183See SIFMA–AMG Letter at 2, 4–5; ICI Letter 

at 2, 4–5; MFA Letter I at 3–4. 

184See SIFMA–AMG Letter at 2, 4–5; ICI Letter 

at 2, 4–5. 

185See MFA Letter I at 3–4. 

186See id. 

187See FICC Letter at 8. 

188See id. 

189See id. 

190See FICC Letter at 4; see generally FICC’s U.S. 

Treasury Clearing information website, available at 

https://www.dtcc.com/ustclearing (e.g., the ‘‘Access 

Central Clearing’’ tab, which provides resources for 

direct and indirect participants to understand and 

evaluate each GSD access model, including 

explanations of recommended access models for 

specific types of market participants). 

191See FIA–PTG Letter I at 7–8; MFA Letter I at 

4–5; FIA–PTG II at 3; Citadel Letter at 4–5. 

192See FIA–PTG Letter I at 7–8. 

193See Citadel Letter at 4–5; see also Letter from 

Joanna Mallers, Secretary, Futures Industry of 

America, Principal Traders Group (Oct. 11, 2024) 

(‘‘FIA–PTG Letter II’’) at 3. 

194See Citadel Letter at 5. 

195See FIA–PTG Letter I at 7–8; MFA Letter I at 

4–5. 

196See FICC Letter at 16. FICC states that in other 

markets (e.g., the U.S. markets for equity securities 

and cleared derivatives), there are execution 

facilities or affirmation platforms that provide posttrade settlement market infrastructure with 

counterparty information. However, in the U.S. 

Treasury market, such facilities or platforms are not 

predominant or do not currently offer similar 

services. See id. 

197See FICC Letter at 17. 198See id. 199See id. 200See id. 

201See 17 CFR 240.17ad–22(e)(18)(iv)(C). 

202 In addition, the Commission understands that, 

to the extent that a market participant is transacting 

on an inter-dealer broker or similar platform, the 

execution counterparty to the transaction would be 

the inter-dealer broker or platform, not the other 

market participant that was brought together on the 

platform and also had a transaction with the interdealer broker or platform. 

clearing.183 Two commenters state the 

re-branding and making conforming, 

technical amendments to the Agent 

Clearing Service are non-substantive 

and ‘‘superficial’’ and would not 

increase the availability of done-away 

trading.184 One commenter states that 

there is not a significant amount of repo 

activity conducted through the current 

correspondent clearing/prime broker 

clearing services.185 The commenter 

further questions why that would 

change after the services are re-branded 

as the Agent Clearing Service.186 In 

response, FICC states that its survey 

results demonstrate that prior to 

publication of the Notice of Filing, 77 

percent of market participants were not 

very familiar with the correspondent 

clearing/prime brokerage services, and 

that lack of familiarity is likely the 

reason for the relatively low level of use 

of those GSD access models.187 FICC 

states that after publication of the Notice 

of Filing, its survey results indicate that 

43 percent of Netting Members would 

likely clear indirect participant 

transactions through the Agent Clearing 

Service.188 FICC attributes the shift 

among participants towards considering 

using the Agent Clearing Service is a 

result of the Proposed Rule Change’s 

clarifications and consolidations 

regarding the Agent Clearing Service.189

The Proposed Rule Change 

sufficiently explains how the Agent 

Clearing Service would work and how 

it could facilitate done-away clearing. 

Further explanation is unnecessary for 

purposes of considering the Proposed 

Rule Change, and each market 

participant has to determine which 

access model to use for its own business 

purposes. However, the Commission 

observes that FICC has engaged in 

market outreach to assist market 

participants in evaluating and 

understanding the operations and 

business case for each access model.190

Several commenters raise the concern 

that even if a Netting Member 

intermediary offers done-away clearing 

services, customers would be required 

to disclose the identity of their 

execution counterparties to the 

intermediary.191 One commenter states 

that requiring the disclosure of 

execution counterparties to the Netting 

Member intermediary divulges 

confidential information regarding the 

customer’s trading activities and could 

lead to limitations placed on those 

execution counterparties, directly 

undermining a key benefit of central 

clearing.192 Another commenter states 

that in a cleared market, the identity of 

a customer’s original execution 

counterparty should be irrelevant to a 

clearing member because the clearing 

member is not exposed to the 

creditworthiness of the execution 

counterparty, meaning that a clearing 

member should not be in a position to 

limit a customer’s execution 

counterparties.193 This commenter also 

states that this concern is why the 

Commodity Futures Trading 

Commission specifically prohibited ‘‘the 

type of trilateral execution agreement 

described by FICC.’’ 194 Therefore, 

commenters state, FICC should enable 

customers to avoid disclosing the 

identity of their execution 

counterparties to their Netting Member 

intermediaries and prohibit the 

restriction of execution 

counterparties.195

FICC states that it is currently not 

practically feasible to prohibit a direct 

participant from knowing the execution 

counterparty’s identity because there is 

no mechanism in the U.S. Treasury 

market available for someone other than 

a direct participant to submit 

transactions and counterparty 

information to FICC.196 Regarding the 

concerns that disclosure of the identity 

of a customer’s execution counterparty 

could result in the Netting Member 

intermediary placing limitations on the 

execution counterparty, FICC states that 

Netting Member intermediaries may, in 

certain cases, have legitimate reasons to 

know or limit a customer’s execution 

counterparties.197 For example, FICC 

states that a Netting Member may need 

to confirm that a customer’s proposed 

execution counterparty has an execution 

or similar agreement in place with the 

Netting Member and that the execution 

counterparty has performed any 

obligations set forth in that 

agreement.198 FICC also states that 

Netting Members may also need to 

know the identity of a customer’s 

execution counterparty to assess certain 

risks, such as potential CCLF 

requirements.199 FICC states that 

whether and how a Netting Member 

intermediary may restrict execution 

counterparties are matters that should 

be commercially negotiated between the 

intermediary and its customers, rather 

than dictated by FICC in the GSD 

Rules.200

The Commission acknowledges that a 

customer may not wish to disclose the 

identity of its execution counterparty to 

its Netting Member intermediary. 

Although the commenters state that 

FICC should enable anonymous 

execution, such anonymous execution is 

not yet possible considering the current 

market infrastructure. Therefore, FICC 

need not require Netting Member 

intermediaries to provide for 

anonymous execution in order for the 

Proposed Rule Change to be consistent 

with Rule 17ad–22(e)(18)(iv)(C).201

In addition, regarding the concern 

that a Netting Member intermediary 

could restrict the execution 

counterparty, FICC’s response that a 

Netting Member intermediary might 

have legitimate reasons to know the 

identity and restrict execution 

counterparties supports the suggestion 

that such matters should be negotiated 

bilaterally between customers and their 

Netting Members intermediaries.202

However, regarding potential liquidity 

risk arising from done-away 

transactions, the Commission 

understands that the existence of 

exposure arising from a done-away 

transaction, and not necessarily the 

execution counterparty to that exposure, 

could have an effect on the Netting 

Member’s liquidity obligations to FICC 

in the event of a member default. The 

Commission would not view the 


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203Such agreements incorporated optional 

annexes that make the clearing member to one or 

both of the executing parties a party to the 

agreement. These trilateral agreements contain 

provisions that would permit a customer’s FCM, in 

consultation with the swap dealer (‘‘SD’’) that is the 

customer’s counterparty, to establish specific credit 

limits for the customer’s swap transactions with the 

SD, and that the FCM will only accept for clearing 

those transactions that fall within these specific 

limits. The limits set for trades with the SD or MSP 

might be less than the overall limits set for the 

customer for all trades cleared through the FCM. 

CFTC, Customer Clearing Documentation, Timing 

of Acceptance for Clearing, and Clearing Member 

Risk Management, 77 FR 21278, 21279 (Apr. 9, 

2012). 

204See FIA–PTG Letter I at 7. 

205See FIA–PTG Letter I at 3; FIA–PTG Letter II 

at 3. 

206See FICC Letter at 22. 

207See FICC Letter at 22–23. 

208See Account Segregation Proposals, supra note 

85. 

209See Account Segregation Proposals, supra note 

85, 89 FR at 87451. 

210See GSD Rule 4, Section 6, supra note 15. 

211See Account Segregation Proposals, supra note 

85, 89 FR at 87451. 

212See Account Segregation Proposals, supra note 

85, 89 FR at 21598. 

213See id. 

214See Account Segregation Proposals, supra note 

85, 89 FR at 87451; see also FICC Letter at 22–23. 

215See Account Segregation Proposals, supra note 

85; FICC Letter at 23. 

216See Notice of Filing, supra note 5, 89 FR at 

21370. 

217One commenter expressed support for FICC’s 

proposal to eliminate the QIB Requirement. See ICI 

Letter at 5. No other commenter addressed this 

particular change or any other changes to the 

Sponsored Service. 

218See 17 CFR 240.17ad–22(e)(18)(iv)(C). 

identity of the execution counterparty as 

relevant to the potential liquidity risk 

arising from that transaction. Moreover, 

the Commission disagrees that FICC’s 

statements regarding confirming that a 

proposed execution counterparty has an 

execution or similar agreement in place 

with the Netting Member equates to the 

types of trilateral agreements prohibited 

by the CFTC.203

One commenter asked why the Agent 

Clearing Service cannot be used for 

‘‘brokered transactions’’ or GCF repo 

transactions.204 The commenter also 

states that for Treasury cash transactions 

executed by inter-dealer brokers, there 

would appear to be no way to comply 

with the Treasury Clearing Rules via 

customer clearing, as the execution 

counterparty does not offer customer 

clearing services and therefore another 

clearing member must accept these 

trades via a done-away offering.205 In 

response, FICC states that, with respect 

to general collateral repo transactions, 

FICC would not be able to clear such 

transactions through the proposed 

Agent Clearing Service, but it states that 

it is considering developing such 

capabilities based on feedback from 

market participants.206 With respect to 

brokered transactions, FICC states that it 

would not be appropriate for 

transactions cleared through the 

proposed Agent Clearing Service to be 

treated as ‘‘Brokered Transactions’’ 

under the GSD Rules because Brokered 

Transactions are designed to capture 

certain transactions that present lower 

risk than other cleared transactions.207

Moreover, the Account Segregation 

Proposals 208 would modify the GSD 

Rules regarding Brokered Transactions, 

further clarifying the unique treatment 

of Brokered Transactions due to the 

limited risk they present to FICC.209 The 

current GSD Rules cap the amount of 

loss allocation that may be applied to 

Inter-Dealer Broker Netting Members 

and Non-IDB Repo Brokers submitting 

Brokered Transactions.210 The Account 

Segregation Proposals would revise the 

definition of Brokered Transactions to 

only include the side of the transactions 

submitted to FICC for novation by an 

Inter-Dealer Broker Netting Member and 

entered into on the Inter-Dealer Broker 

Netting Member’s own trading 

platform.211 As a result, the favorable 

loss allocation treatment for Brokered 

Transactions would only apply to the 

transactions that present limited risk 

since an Inter-Dealer Broker is standing 

in between two counterparties in those 

transactions and is therefore completely 

flat.212 Since the favorable loss 

allocation treatment is only appropriate 

for Inter-Dealer Broker Netting Members 

submitting Brokered Transactions, the 

Account Segregation Proposals would 

delete the term ‘‘Non IDB Repo Broker’’ 

from the GSD Rules.213 Additionally, 

the concurrently approved Account 

Segregation Proposals would provide 

that transactions entered into on an 

Inter-Dealer Broker Netting Member’s 

trading platform or similar platform may 

be cleared using the Sponsored Service 

or the Agent Clearing Service, which 

addresses the commenter’s concern.214

In response to the comments 

regarding transactions executed on an 

inter-dealer broker or similar platform, 

the Commission agrees that, as FICC 

represented,215 such transactions could 

be submitted through the Agent Clearing 

Service. 

3. Changes to the Sponsored Service 

As described above in Section I.B.2., 

FICC also proposes to update certain 

membership standards in the GSD Rules 

regarding the Sponsored Service. First, 

FICC proposes to eliminate the two 

categories of Sponsoring Members, and 

instead, make all Sponsoring Members 

subject to the same eligibility and 

ongoing requirements that are currently 

applicable to Category 2 Sponsoring 

Members. These proposed changes 

would remove the capitalization 

requirements on Bank Netting Members 

from the current GSD Rules, and instead 

apply the activity limits and financial 

condition factors used under the current 

GSD Rules for Category 2 Sponsoring 

Members. These proposed changes 

would create parity among all 

Sponsoring Members (and applicants), 

thereby encouraging additional market 

participants to become Sponsoring 

Members, which in turn should give 

indirect participants a wider range of 

Sponsoring Members to consider should 

they choose to access GSD’s central 

clearing services via the Sponsored 

Service.216 Second, FICC proposes to 

remove the QIB Requirement for 

Sponsored Members, which would 

make the Sponsored Service available to 

additional market participants (i.e., 

those unable to meet the QIB 

Requirement).217

Therefore, the proposed changes to 

the GSD Rules to (1) consolidate the 

Sponsoring Member categories, and (2) 

eliminate the QIB Requirement for 

Sponsored Members, constitute criteria 

for participation that facilitate access to 

GSD’s clearance and settlement services, 

including for indirect participants, are 

consistent with Rule 17ad– 

22(e)(18)(iv)(C), because the proposed 

changes would expand the availability 

of the Sponsored Service to a broader 

range of market participants.218

4. Changes to Eligibility Criteria for 

Non-U.S. and Other Applicants 

As described above in Section I.B.2., 

FICC proposes to clarify the eligibility 

criteria for non-U.S. Netting Member 

applicants. Whereas the current GSD 

Rules are unclear as to whether a nonU.S. applicant entity would only be 

subject to the Foreign Netting Member 

standards or would also be subject to 

the legal entity standards, FICC 

proposes to streamline the relevant 

membership categories by eliminating 

the category of ‘‘Foreign Netting 

Member’’ and expanding the 

qualifications for each category of 

Netting Member to include the foreign 

equivalent of the same legal entity 

types. Additionally, FICC proposes to 

clarify the eligibility criteria for 

applicants (including non-U.S. entities) 

that do not fit into one of the existing 

Netting Member categories. 

Following the adoption of the 

Treasury Clearing Rules, additional 

market participants will need to access 

FICC’s clearance and settlement 

services, either as direct Netting 

Members or as indirect participants. 


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219See Notice of Filing, supra note 5, at 89 FR 

21373. 

220See 17 CFR 240.17ad–22(e)(18)(iv)(C). 

221See Notice of Filing, supra note 5, 89 FR at 

21374. 

222See Notice of Filing, supra note 5, 89 FR at 

21373–74. 

223See FIA–PTG Letter I at 6–8; ISDA Letter I at 

8; MFA Letter I at 6; AIMA Letter at 5–6; SIFMA– 

AMG Letter at 3, 11–12; ISDA Letter II at 2–3. 

224See id. 

225See MFA Letter I at 7. 

226See MFA Letter I at 6; FIA–PTG Letter I at 4. 

For example, with a greater number of access 

models, a direct participant’s service offerings and 

pricing might not be readily apparent to indirect 

participants. See id. 

227See FICC Letter at 18, 20. 

228See FICC Letter at 50–51. 

229See FICC Letter at 20, 50–51. 

230See FICC Letter at 19, 50–51. 

231See FICC Letter at 19–20, 50–51. 

232See FICC Letter at 50–51. 

233See id. 

234See FICC Letter at 20, 50–51. 

235The Commission also understands that FICC 

has engaged in outreach and education efforts to 

further explain the different features of each model. 

See generally FICC’s U.S. Treasury Clearing 

information website, available at https://

www.dtcc.com/ustclearing (e.g., the ‘‘Access Central 

Clearing’’ tab, which provides resources for direct 

and indirect participants to understand and 

evaluate each GSD access model, including 

explanations of recommended access models for 

specific types of market participants). 

236See SIFMA–AMG Letter at 11–12. 

237See FIA–PTG Letter at 4. 

238See FICC Letter at 50–51. 

Whereas the current GSD Rules do not 

provide FICC with the authority to 

consider a Netting Member applicant 

that does not meet the eligibility criteria 

of one of the Netting Member categories 

enumerated in the GSD Rules, the 

proposed changes, as described in 

Section I.B.2, would provide a 

framework for FICC to consider such 

other applicants. FICC designed the 

proposed changes regarding non-U.S. 

and other applicants to facilitate access 

to GSD’s clearing services to a broader 

range of market participants.219

The proposed changes to the GSD 

Rules to clarify the eligibility criteria for 

non-U.S. Netting Member applicants 

and applicants that do not fit into one 

of the existing Netting Member 

categories, are consistent with Rule 

17ad–22(e)(18)(iv)(C), because the 

proposed changes would expand the 

availability of GSD’s clearing services to 

a broader range of market 

participants.220

5. Changes To Clarify the GSD Access 

Models 

As described above in Section I.B.3., 

FICC proposes to include a ‘‘road map’’ 

in the GSD Rules describing the various 

GSD access models that allow for both 

direct and indirect access to GSD’s 

clearance and settlement services. FICC 

also proposes to simplify the GSD Rule 

definitions regarding the different types 

of membership and other related 

definitions.221 FICC states that these 

proposed changes would enhance the 

ability of market participants to better 

understand and evaluate the 

comparative tradeoffs between GSD’s 

different access models.222

Several commenters request that FICC 

provide further clarity regarding the 

GSD access models.223 Specifically, 

commenters request that FICC explain 

the expected use cases for each of the 

GSD access models to enable market 

participants to better evaluate the 

relative benefits of each access model by 

understanding the substantive 

differences between them.224 One 

commenter states that FICC should 

eliminate any access model that it 

cannot justify with a use case.225 One 

commenter states that although the 

availability of multiple access models 

may provide flexibility to market 

participants, it could also introduce 

unnecessary complexity and 

confusion.226

FICC states that it developed four 

indirect access models (i.e., the 

Sponsored Service and Agent Clearing 

Service, each with either segregated or 

non-segregated margin) after 

engagement with market participants to 

ensure a diverse array of models 

through which market participants can 

access central clearing.227 In response to 

the comments requesting further clarity 

and challenging the need for each of the 

proposed access models, FICC describes 

some of the possible use cases and 

advantages of each of the four access 

models.228 Specifically, FICC states that 

market participants might prefer the 

Agent Clearing Service due to its 

conceptual and operational similarity to 

an FCM-style cleared derivatives model, 

enabling market participants to leverage 

their existing legal analyses, structures, 

policies, and procedures to clear 

transactions in U.S. Treasury 

securities.229 Additionally, due to the 

greater intermediation of the Agent 

Clearing Service, a Netting Member 

intermediary would be able to utilize a 

‘‘financial asset’’ election to perfect its 

security interest in cleared transactions 

without having to file a Uniform 

Commercial Code financing statement, 

potentially reducing cost, risk, and 

publicity.230 Moreover, in comparison 

to the Sponsored Service, the Agent 

Clearing Service would involve a 

simpler onboarding process, would not 

require privity of contract between 

indirect participants and FICC, and 

would not impose the same 

jurisdictional requirements on indirect 

participants.231 On the other hand, FICC 

highlights potential advantages to the 

Sponsored Service, including being in a 

direct contractual relationship with 

FICC.232 FICC also states that Netting 

Members have existing clearing 

agreements with many customers for the 

Sponsored Service without segregation 

and could continue to utilize their 

existing agreements.233 Additionally, 

since the Sponsored Service has existed 

for nearly two decades, FICC states that 

market participants have achieved a 

certain level of confidence regarding the 

Sponsored Service’s treatment for legal, 

regulatory, accounting, and other 

purposes.234

Publication of ‘‘use cases’’ or 

justifications are not required for a 

proposed rule change to be consistent 

with Rule 17ad–22(e)(18)(iv)(C), which 

requires only that a covered clearing 

agency have written policies and 

procedures reasonably designed to 

ensure appropriate access to its clearing 

and settlement services, including for 

indirect participants. Further, the 

decision of which access model to use 

is for each individual market participant 

to determine, as each market participant 

has different regulatory obligations, 

business strategies, ownership models, 

etc. Nevertheless, FICC’s description of 

the reasons for each of its four access 

models is sound and clearly identifies 

potential advantages and disadvantages 

of each model for market participants to 

consider.235

In addition, several commenters 

questioned the decision to offer both 

segregated and non-segregated accounts 

in both the Sponsored Service and 

Agent Clearing Service. Specifically, 

one commenter requests that FICC 

explain the benefits of the access 

models insofar as they allow for 

omnibus (i.e., non-segregated) margin 

submission.236 Another commenter 

questioned whether both the Sponsored 

Service and Agent Clearing Service 

should offer segregated models.237

In response, FICC explains potential 

advantages regarding margin segregation 

options (i.e., to explain why the GSD 

access models allow for both segregated 

and non-segregated, or omnibus, margin 

submission).238 Specifically, within the 

Agent Clearing Service, if margin is not 

segregated, Clearing Fund requirements 

for customer transactions would be 

calculated on a net basis across all 

Executing Firm Customers whose 

transactions are recorded within the 

same account, resulting in aggregate 

margin obligations that are substantially 

lower than under the Sponsored 


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239See id. 

240See id. 

241See id. 

242See id. 

243See 17 CFR 240.17ad–22(e)(18)(iv)(C). 

244See MFA Letter I at 7. 

245See id. 

246See FICC Letter at 32–33; 15 U.S.C. 78q– 

1(b)(3)(E). 

247See FICC Letter at 21–22. 

248See 15 U.S.C. 78s(b)(2)(C)(i). 

249See SIFMA–AMG Letter at 12. 

250See id. 

251See FICC Letter at 22. 

252See id. 

253See https://www.dtcc.com/-/media/Files/ 

Downloads/Microsites/Treasury-Clearing/FICCTreasury-Clearing-Client-Impact-Roadmap.pdf. 

254See 17 CFR 240.17ad–22(e)(18)(iv)(C). 

255See Letter from Walt L. Lukken, President and 

Chief Executive Officer, Futures Industry of 

America (April 18, 2024) (‘‘FIA Letter’’) at 2–12. On 

July 1, 2024, FICC filed a separate proposed rule 

change that would, among other things, require 

each Netting Member to submit for central clearing 

all eligible secondary market transactions in U.S. 

Treasury securities to which it is a counterparty. 

See Securities Exchange Act Release No. 100417 

(June 25, 2024), 89 FR 54602 (July 1, 2024) (SR– 

FICC–2024–009) (‘‘Trade Submission Proposal’’). 

The Commission notes that the FIA Letter includes 

a request for relief from the clearing requirement in 

the Trade Submission Proposal. See FIA Letter at 

2–3. The commenter appropriately submitted a 

separate comment letter in response to the Trade 

Submission Proposal requesting similar relief, and 

the Commission will address the comment when 

adjudicating the Trade Submission Proposal. 

However, the commenter’s request is outside the 

scope of the instant Proposed Rule Change. 

256See FIA Letter at 4, 7–8 (citing CFTC 

Regulations regarding acceptable FCM 

counterparties, delivery-versus-payment and 

payment-versus-delivery requirements, posting 

collateral as margin for repos entered into with 

customer funds, FCM bankruptcy management, 

FCM repos with affiliates, and FCMs holding 

customer assets in customer segregated accounts). 

Service.239 If margin is segregated, 

Agent Clearing Members would not bear 

the costs of financing margin obligations 

for customer positions—a cost saving 

that could be passed on to customers 

without exposing customers to FICC, 

fellow customer, or Netting Member 

risk.240 Regarding the Sponsored 

Service, FICC states that many 

customers have clearing agreements in 

place that already provide for nonsegregated margin.241 By continuing to 

allow non-segregated margin within the 

Sponsored Service, FICC would enable 

such customers to maintain their 

existing clearing agreements and 

associated processes.242

FICC’s explanation of the potential 

reasons why a customer may want to be 

able to pursue the various options of 

segregation within both models is 

sound. Each market participant will 

have to evaluate the advantages and 

drawbacks of each option and determine 

what works best for its own business. 

The existence of both segregated and 

omnibus options for both the Agent 

Clearing and Sponsored Services is 

consistent with Rule 17ad– 

22(e)(18)(iv)(C), which requires only 

that a covered clearing agency have 

written policies and procedures 

reasonably designed to ensure 

appropriate access to its clearing and 

settlement services, including for 

indirect participants. 

For these reasons, FICC’s proposals to 

include a ‘‘road map’’ describing the 

various GSD access models and to 

simplify the definitions regarding GSD 

membership would, among other things, 

provide clarity in the GSD Rules 

regarding the models that direct and 

indirect participants may use to access 

GSD’s clearance and settlement services. 

The proposed changes would enable 

market participants to better understand 

and evaluate the various GSD access 

models for clearing transactions in U.S. 

Treasury securities. Therefore, the 

proposed changes would constitute 

criteria for participation that facilitate 

access to GSD’s clearance and 

settlement services, including for 

indirect participants, consistent with 

Rule 17ad–22(e)(18)(iv)(C).243

Additionally, one commenter states 

that FICC should require Netting 

Member intermediaries to allow their 

customers to choose whether to access 

clearing through the Sponsored Service 

or the Agent Clearing Service.244 The 

same commenter further states that that 

margin segregation should be automatic 

for any Sponsored Member that posts its 

own margin.245

In response, FICC states that the best 

way to facilitate access to clearing is to 

enable direct and indirect participants 

to select the access method and 

associated terms that are most 

consistent with their commercial, 

regulatory, risk, operational, and legal 

considerations. Moreover, FICC states 

that mandating that Netting Members 

offer a particular service or clearing 

model could be inconsistent with 

Section 17A(b)(3)(E) of the Exchange 

Act, which prohibits a clearing agency 

from imposing any schedule of prices, 

or fix rates or other fees for its 

participants’ services.246 In response to 

the comment regarding automatic 

margin segregation within the 

Sponsored Service, FICC states that 

margin segregation should not be 

automatic for Sponsored Members that 

post their own margin, because there are 

scenarios in which market participants 

may prefer the flexibility of choosing 

non-segregated margin even when a 

Sponsored Member posts its own 

margin.247

The Proposed Rule Change does not 

include a requirement that FICC’s 

Netting Members offer their customers a 

choice of what access model to use. The 

Commission shall approve a proposed 

rule change of a self-regulatory 

organization if it finds that it is 

consistent with the Act,248 and the lack 

of a requirement that each Netting 

Member give its customers the choice of 

which access model to use is not 

inconsistent with the Act. 

One commenter raises concerns as to 

whether FICC has the operational 

capability to onboard and account for 

the large number of new accounts that 

would need to be established to support 

the increased volume of clearing activity 

that would arise from FICC’s 

implementation of its requirements 

pursuant to the Treasury Clearing 

Rules.249 Specifically, the commenter 

states that that FICC would need to 

establish and maintain a large number 

of new accounts because each Agent 

Clearing Member would need to set up 

an individual account at FICC for each 

indirect participant for which the Agent 

Clearing Member would segregate 

margin.250

In response, FICC states it proposed 

each access model after confirming that 

FICC has the ability, from a legal, 

operational, risk, regulatory, and 

commercial perspective, to provide such 

a model.251 Regarding individual 

accounts, FICC states that neither the 

Sponsored Service nor the Agent 

Clearing Service would necessitate 

individual accounts for each 

customer.252

The Commission agrees that neither 

the Proposed Rule Change nor FICC’s 

implementation of its other 

requirements pursuant to the Treasury 

Clearing Rules would require FICC to 

establish and maintain accounts for 

each indirect participant.253 Moreover, 

in its supervisory capacity regarding 

FICC, the Commission routinely and 

regularly receives data, reports, and 

other information regarding FICC’s 

clearance and settlement activities, 

including FICC’s operational 

capabilities. Based on the Commission’s 

supervisory knowledge, FICC has the 

requisite operational capacity to offer 

the access models that it has 

proposed.254

One commenter raised concerns 

regarding the inability of FCMs to 

utilize the GSD access models.255

Specifically, the commenter states that 

certain regulatory requirements to 

which FCMs are subject would conflict 

with FCMs participating in both the 

Sponsored Service and Agent Clearing 

Service.256 The commenter urges FICC 


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257See FIA Letter at 8. 

258See FIA Letter at 2–3, 11. 

259See FIA Letter at 4–5; GSD Rule 11, Section 

3 and GSD Rule 18, Section 2, supra note 15. 

260See FIA Letter at 5, 8–10. 

261See FICC Letter at 23. 

262See id. 

263See id. 

264See FIA Letter at 4–5. 

265See id.; GSD Rule 11, Section 3 and GSD Rule 

18, Section 2, supra note 15. 

266See Trade Submission Proposal, supra note 

257. 

267See FIA Letter at 11. 

268See FIA Letter at 4–5. 

269See FICC Letter at 23. 

270See FICC Letter at 23–24. 

271See ISDA Letter I at 6–7; ISDA Letter II at 5. 

272See Trade Submission Proposal, supra note 

257, at 89 FR 54605. 

273See SIFMA–AMG Letter at 2, 6, 11. 

274See SIFMA–AMG Letter at 7. 

275See id. 

276See SIFMA–AMG Letter at 2, 6, 11. 

277See ICI Letter at 14. 

278FICC Letter at 27. 

279See id. 

280See id. 

to allow Netting Members to maintain 

sub-accounts for futures customer 

funds, cleared swaps customer funds, 

and foreign futures customer funds that 

comply with CFTC requirements.257

Additionally, the commenter states that 

FCMs are currently seeking relief from 

the CFTC to recognize FICC as an 

acceptable counterparty and otherwise 

align the GSD access models with CFTC 

requirements.258 In the interim, the 

commenter requests that FICC apply to 

FCMs certain GSD Rules that would 

exempt a Netting Member’s Covered 

Affiliate from submitting trades to FICC 

if the obligation to submit the trade 

would cause a violation of any 

applicable law, rule, or regulation.259

The commenter further requests that 

FICC work with FCMs and the CFTC to 

develop alternative CFTC-compliant 

access models.260

FICC states that it is open to 

considering additional access models if 

necessary to address market 

participants’ regulatory or other 

needs.261 In response to the 

commenter’s request regarding subaccounts, FICC states that the GSD Rules 

would allow Netting Members to 

instruct FICC to establish separate 

accounts for certain kinds of 

transactions and to have such accounts 

constitute separate margin portfolios.262

Thus, a Netting Member that enters into 

transactions using futures, cleared 

swaps, or foreign futures customer 

funds could have those transactions 

recorded in an account that does not net 

with the Netting Member’s other 

accounts for purposes of calculating 

margin or funds-only settlement 

amounts.263

The commenter specifically seeks 

relief from the CFTC from certain CFTC 

regulations, which are not within the 

Commission’s jurisdiction.264 The 

commenter also requests that FICC 

continue to apply certain GSD Rule 

provisions that would exempt FCMs 

from the requirement to submit trades to 

FICC if such trade submission would 

cause the FCM to be in violation of any 

applicable rule, or regulation.265 The 

Commission notes that the GSD Rule 

provisions cited by the commenter are 

currently the subject of the Trade 

Submission Proposal, a separate 

pending proposed rule change filed by 

FICC.266 Because the commenter’s 

request to be excluded from the trade 

submission requirement deals with GSD 

Rule provisions that are subject to 

change as part of a separate proposed 

rule change, the Commission is not 

addressing the comment in the instant 

Order. For the same reason, the 

Commission is not addressing the 

commenter’s request to require FICC to 

apply those GSD Rule provisions that 

are subject to change as part of a 

separate proposed rule change.267

Finally, the commenter requests that 

FICC work with FCMs and the CFTC to 

develop access models that are more 

suitable for FCMs than the Agent 

Clearing Service.268 As mentioned 

above, FICC states that it is open to 

considering additional access models if 

necessary to address market 

participants’ regulatory or other 

needs.269 Additionally, FICC states that 

it continues to actively engage with the 

FCM community to resolve outstanding 

issues regarding the GSD access 

models.270

One commenter requests that FICC 

confirm that a bank’s branches and 

Netting Member’s affiliates can establish 

a separate margin portfolio within the 

Netting Member’s account that would be 

separately netted and margined, such 

that they would not have to establish 

indirect access to FICC.271 Because the 

commenter’s request relates directly to 

GSD Rule provisions that are subject to 

change as part of the Trade Submission 

Proposal, a separate pending proposed 

rule change filed by FICC,272 the 

Commission is not addressing the 

comment in the instant Order. 

6. Comments Regarding Default Within 

the Client Clearing Models 

Commenters raised several issues 

related to how FICC should address 

certain aspects of default within the 

Agent Clearing and Sponsored Services. 

One commenter states that FICC 

should allow indirect participants to 

close out their positions with a 

defaulting Sponsoring Member or Agent 

Clearing Member.273 For example, the 

commenter states that under the current 

GSD Rules, the process for closing out 

indirect participants’ trade positions 

under the Sponsored Service is driven 

entirely by FICC, with indirect 

participants having no ‘‘say’’ in whether 

their positions are closed out, meaning 

that the customer may need to continue 

to rely on an insolvent (or near 

insolvent) Netting Member to make or 

receive payments on its behalf.274 This 

commenter also states that FICC should 

clearly address Executing Firm 

Customers close-out rights in the event 

of the default of their Agent Clearing 

Member.275 Alternatively, the 

commenter states that in the event of 

such a default, customers should be able 

to elect to receive payment directly from 

FICC, with FICC using any customer 

funds held at FICC to satisfy such 

amounts owed.276 Similarly, an 

additional commenter states that the 

GSD Rules should address the situation 

of a FICC default simultaneous with a 

Sponsoring Member default, suggesting 

that Sponsored Members should have 

the ability to promptly close out and 

manage its positions.277

In response, FICC states that it was 

not aware of any such U.S. CCP that 

provides either for customers to have 

the ability to direct the CCP to terminate 

trades or to make payments directly to 

the customer, but that, instead, CCPs 

interface directly with clearing 

members, as agents for their customers 

consistent with the framework of an 

intermediated clearing arrangement.278

FICC further states that, from a risk 

perspective, it important to FICC to 

interface with Netting Members as 

agents for their customers because 

Netting Members are subject to 

comprehensive operational 

requirements and testing that are 

designed to ensure that they have the 

capability to perform and to receive 

performance from FICC and that such 

performance will not expose FICC to 

operational risks (e.g., systems failures 

and viruses).279 FICC states that because 

customers are not subject to such 

requirements, FICC cannot establish 

interoperability without exposing itself, 

its participants, and the broader market 

to significant operational risk.280 FICC 

also states that imposition of operational 

standards to customers would be quite 

burdensome, if not infeasible, for many 

customers, and that such burdens would 

likely outweigh any benefits of 

establishing interoperability with 

customers, because in a Netting Member 

default scenario, FICC would generally 


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281See id. 

282See 15 U.S.C. 78s(b)(2)(C)(i). 

283See FIA–PTG Letter at 8. 

284See FIA–PTG Letter at 8; FIA–PTG Letter II at 

3. 

285See FICC Letter at 25–26. 

286See FICC Letter at 26. FICC further states that 

it is considering amendments to the Proposed Rule 

Change that would give FICC the option to 

effectuate such settlement, but that it would be 

more efficient to propose such changes after the 

Commission has considered the Proposed Rule 

Change, but at the very least before Dec. 31, 2025. 

See id. 

287See 15 U.S.C. 78s(b)(2)(C)(i). 

288See SIFMA Letter I at 2–3 (stating that FICC 

should revise the Agent Clearing Service to allow 

Netting Members to liquidate positions of 

defaulting indirect participants, consistent with 

what is available in the Sponsored Service); see also 

ISDA Letter I at 2–3 and ISDA Letter II at 4 

(similarly discussing the need to close-out positions 

by transferring them to the proprietary/house 

account or by transferring offsetting positions to the 

omnibus account). 

289See SIFMA Letter I at 3. 290See id. 291See ISDA Letter I at 2–3 (stating that FICC 

should provide in the GSD Rules that an Agent 

Clearing Member may liquidate an Executing Firm 

Customer’s positions by transferring the positions to 

its proprietary/house account or by transferring 

positions into the Agent Clearing Member Omnibus 

Account to flatten open positions of the Executing 

Firm Customer); ISDA Letter II at 4 (same); FIA 

Letter at 5, 10 (stating that FICC should incorporate 

a rule that authorizes an Agent Clearing Member, 

in connection with liquidating an Executing Firm 

Customer’s open positions upon its default, to cause 

the Executing Firm Customer’s open positions to be 

transferred from the applicable Agent Clearing 

Member Omnibus Account and/or transfer to the 

Agent Clearing Member Omnibus Account 

transactions that offset or flatten the Executing Firm 

Customer’s open positions); SIFMA Letter I at 2–3 

(stating that FICC’s proposed rules should permit 

Netting Members to transfer a defaulting customer’s 

positions to the Netting Member’s Proprietary 

Account or Agent Clearing Member Omnibus 

Account to flatten open positions of the defaulting 

Executing Firm Customer). 

292See ISDA Letter II at 4. 

293See FICC Letter at 26. 294See 15 U.S.C. 78s(b)(2)(C)(i). 295See FIA–PTG Letter I at 8; ISDA Letter I at 5; 

MFA Letter I at 6, 8; FIA Letter at 11; SIFMA Letter 

I at 2, 4; SIFMA–AMG Letter at 2–3; ISDA Letter 

II at 3–4; FIA–PTG Letter II at 2; MFA Letter II at 

7. 

296See ISDA Letter I at 5 (stating that many 

cleared futures clients are accustomed to their 

porting rights and use them as an important risk 

management tool); ISDA Letter II at 3–4 (stating that 

the commenting association’s members have 

already come to rely on this type of guardrail in the 

futures clearing model as an essential risk 

management tool); MFA Letter I at 6 (stating that 

porting is an important risk management tool that 

provides additional certainty to indirect 

participants, particularly during periods of market 

stress); SIFMA–AMG Letter at 8 (stating that the 

ability to port positions is an important feature of 

the cleared swaps and futures market.). 

297See Citadel Letter at 5. 

close out trades or settle through the 

trustee or receiver of the defaulting 

member and applicable insolvency law 

would likely prohibit FICC from 

engaging directly with customers.281

The Proposed Rule Change does not 

include these types of close-out 

provisions for indirect participants that 

the commenter seeks. The Commission 

shall approve a proposed rule change of 

a self-regulatory organization if it finds 

that it is consistent with the Act,282 and 

the lack of such close-out provisions is 

not inconsistent with the Act. 

One commenter requests that FICC 

clarify the differences in the GSD Rules 

between the Sponsored Service and 

Agent Clearing Service governing a 

default of the Sponsoring Member or 

Agent Clearing Member.283 The 

commenter states that the Proposed 

Rule Change suggests that customer 

positions will always be closed-out 

under the Agent Clearing Service, 

whereas FICC may elect to continue to 

settle customer positions under the 

Sponsored Service in the event of a 

Netting Member default.284 FICC agrees 

with the commenter’s suggestion that 

FICC should have the opportunity to 

settle the outstanding cleared 

transactions that a defaulting Agent 

Clearing Member has cleared through 

the Agent Clearing Service.285 FICC 

states that, as a general matter, 

settlement may in many instances be the 

most effective and customer-protective 

way to address a member default 

scenario, so long as the receiver or 

trustee of the defaulting member 

consents.286

The Proposed Rule Change does not 

include the ability for FICC to settle the 

transactions of a defaulting Agent 

Clearing Member’s customers that the 

commenter seeks. The Commission 

shall approve a proposed rule change of 

a self-regulatory organization if it finds 

that it is consistent with the Act,287 and 

the lack of such close-out provisions is 

not inconsistent with the Act. 

Some commenters question why the 

proposed Agent Clearing Service does 

not include a close-out mechanism 

regarding a defaulted customer’s open 

positions, which could pose unique 

risks to an Agent Clearing Member by 

forcing it to keep a defaulted customer’s 

positions open until the default is 

resolved.288 One commenter further 

states that FICC may have declined to 

provide a mechanism for liquidating 

customer trades because, in contrast to 

the Sponsored Service, Executing Firm 

Customers are not members of FICC and 

therefore a ‘‘close out amount’’ cannot 

be calculated as between the customer 

and FICC.289 However, this commenter 

also states that FICC could amend its 

rulebook to explicitly allow Netting 

Members to liquidate positions with 

defaulting customers, with such closeout procedure then addressed in 

account documentation between the 

Agent Clearing Member and its 

Executing Firm Customer.290 Several 

commenters also state that FICC should 

allow an Agent Clearing Member to 

liquidate the transactions of a defaulted 

customer by transferring the positions to 

its proprietary account or by transferring 

offsetting positions to its omnibus 

account.291 In addition, one commenter 

states that FICC should include similar 

trade liquidation procedures for doneaway transactions cleared through the 

Sponsored Service.292

In response, FICC states that the 

Agent Clearing Service was designed to 

closely resemble the clearing model 

used in the futures and cleared swap 

market, and that such clearing models 

do not, to FICC’s knowledge, prescribe 

a close-out mechanism for a clearing 

member to use to close out its 

customers’ trades.293 FICC further states 

that, instead, the clearing models 

generally leave it to the bilateral 

agreement between clearing members 

and their customers to address how 

such close-out should be effected. FICC 

also states that it is open to considering 

steps FICC can take to facilitate the 

ability of Netting Members to address a 

customer default situation and to 

promote legal certainty for both doneaway and done-with transactions under 

the Agent Clearing and Sponsored 

Services. 

The Proposed Rule Change does not 

include these types of close-out 

provisions that the commenter seeks. 

However, the Commission shall approve 

a proposed rule change of a selfregulatory organization if it finds that it 

is consistent with the Act,294 and the 

lack of such close-out provisions is not 

inconsistent with the Act. 

Several commenters state that the 

GSD Rules should provide for a porting 

mechanism to enable a customer to 

transfer positions to another Netting 

Member intermediary for risk 

management or business-related 

reasons.295 Some commenters highlight 

that porting mechanisms exist in the 

cleared futures market as an important 

risk management tool.296 In addition, 

one commenter states that in the event 

of a clearing member default, all nondefaulting customers will want the 

option to avoid immediately having 

their positions closed-out by FICC 

(regardless of whether their original 

execution counterparty was the clearing 

member or a third party), through either 

continuing to settle open positions or 

porting them to another clearing 

member.297

In response, FICC states that it intends 

to propose amendments to the GSD 

Rules that would add porting provisions 

similar to those adopted by other U.S. 


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298See FICC Letter at 25. 

299See id. 

300See id. 

301See id. 

302See 15 U.S.C. 78s(b)(2)(C)(i). 

303See 17 CFR 240.17ad–22(e)(18)(iv)(C). 

304 17 CFR 240.17ad–22(e)(23)(ii). 

305See FIA–PTG Letter I at 4; MFA Letter I at 8; 

AIMA Letter at 6. 

306See id. 

307See FICC Letter at 20–21. 

308See FIA–PTG Letter II at 4. 

309See 15 U.S.C. 78s(b)(2)(C)(i). 

310 17 CFR 240.17ad–22(e)(23)(ii). 

311 15 U.S.C. 78q–1. 

312 15 U.S.C. 78s(b)(2). 

313 In approving the proposed rule change, the 

Commission considered the proposals’ impact on 

efficiency, competition, and capital formation. 15 

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

314 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

CCPs, to make clear that porting is 

possible for FICC-cleared trades.298

FICC also states its belief that it will be 

more efficient to wait until the 

Commission decides whether to 

approve or disapprove the Proposed 

Rule Change before proposing a specific 

porting framework, and states that it 

will seek to facilitate porting before 

December 31, 2025.299 FICC also states 

that any porting framework would need 

to take into consideration the fact that 

many FICC-cleared customer 

transactions are overnight, and that 

porting may not be practical for such 

transactions because they will generally 

settle before the porting can be 

completed.300 FICC further states that 

the ability to settle (which is currently 

included in the GSD Rules governing 

the Sponsored Service) is therefore 

substantially more important than the 

ability to port.301

The Proposed Rule Change does not 

contain any provisions related to 

porting customer transactions at FICC. 

However, the Commission shall approve 

a proposed rule change of a selfregulatory organization if it finds that it 

is consistent with the Act,302 and the 

lack of porting provisions is not 

inconsistent with the Act. 

Accordingly, for the reasons above, 

the Proposed Rule Change is consistent 

with Rule 17ad–22(e)(18)(iv)(C).303

E. Consistency With Rule 17ad– 

22(e)(23)(ii) 

Rule 17ad–22(e)(23)(ii) under the 

Exchange Act requires a covered 

clearing agency, such as FICC, 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.304

Several commenters state that FICC 

should regularly publish statistics 

regarding the GSD access models, such 

as the volumes and proportion of 

transactions cleared through each access 

model and transactions executed on 

done-with and done-away bases.305 The 

commenters suggest that FICC’s 

publication of such data would enable 

market participants to better evaluate 

which access model best fits their 

business needs.306 FICC responds that it 

intends to collect and publish 

information regarding the GSD access 

models, including the (1) number of 

Netting Members enabled to use each 

model, (2) number of Sponsoring 

Members enabled to offer done-away 

clearing, and (3) volumes of trading 

through each access model, including 

the number of transactions and total 

notional.307 The Commission agrees that 

FICC’s regular publication of the 

foregoing data should provide 

information that would better enable 

market participants to evaluate the GSD 

access models. 

One commenter states that in addition 

to regularly publishing the data 

referenced in the immediately preceding 

paragraph, FICC should also regularly 

publish the number of clearing members 

who are in fact clearing more than de 

minimis volumes pursuant to each such 

model, and clearly separate out donewith and done-away activity.308 The 

Proposed Rule Change does not contain 

any provisions related to FICC’s 

publication of the specific data 

requested by the commenter. The 

Commission shall approve a proposed 

rule change of a self-regulatory 

organization if it finds that it is 

consistent with the Act,309 and the lack 

of provisions regarding FICC’s regular 

publication of the data requested by the 

commenter is not inconsistent with the 

Act. 

For the reasons discussed above, the 

Proposed Rule Change would enable 

FICC to establish, implement, maintain, 

and enforce written policies and 

procedures reasonably designed to 

provide sufficient information to enable 

members to identify and evaluate the 

risks, fees, and other material costs they 

incur as FICC’s members, consistent 

with Rule 17ad–22(e)(23)(ii).310

III. Conclusion 

On the basis of the foregoing, the 

Commission finds that the Proposed 

Rule Change is consistent with the 

requirements of the Exchange Act and 

in particular with the requirements of 

Section 17A of the Exchange Act 311 and 

the rules and regulations promulgated 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act 312

that proposed rule change SR–FICC– 

2024–005, be, and hereby is, 

Approved.313

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.314

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–27762 Filed 11–26–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101698; File No. SR–MIAX– 

2024–40] 

Self-Regulatory Organizations; MIAX 

Exchange LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend Exchange 

Rule 402, Criteria for Underlying 

Securities, Exchange Rule 307, 

Position Limits, and Exchange Rule 

309, Exercise Limits To Allow the 

Exchange To List and Trade Options 

on the iShares Bitcoin Trust (the 

‘‘Trust’’) 

November 21, 2024. 

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 

18, 2024, Miami International Securities 

Exchange, LLC (‘‘MIAX’’ or ‘‘Exchange’’) 

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 by the Exchange. 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 amend 

Exchange Rule 402, Criteria for 

Underlying Securities, Exchange Rule 

307, Position Limits, and Exchange Rule 

309, Exercise Limits. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://www.miaxglobal.com/markets/ 

us-options/miax-options/rule-filings, at 

MIAX’s principal office, and at the 

Commission’s Public Reference Room. 


ddrumheller on DSK120RN23PROD with NOTICES1