Federal Register / Vol. 79, No. 231 / Tuesday, December 2, 2014 / Notices 71481 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 34– 

63038 (October 5, 2010), 75 FR 62899 (October 13, 

2010) (SR–FICC–2010–04). 

4See Securities Exchange Act Release No. 34– 

64004 (March 2, 2011), 76 FR 12782 (March 8, 

2011) (SR–FICC–2011–02). 

5See Securities Exchange Act Release No. 34– 

66550 (March 9, 2012), 77 FR 15155 (March 14, 

2012) (SR–FICC–2008–01). 

those that may be withheld from the 

public in accordance with the 

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

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549 on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

office of OCC and on OCC’s Web site at 

http://www.theocc.com/components/

docs/legal/rules_and_bylaws/sr_occ_14_

21.pdf. All comments received will be 

posted without change; the Commission 

does not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–OCC–2014–21 and should 

be submitted on or before December 23, 

2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28353 Filed 12–1–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73682; File No. SR–FICC– 

2014–09] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Notice of 

Filing of Proposed Rule Change To 

Amend the Rules of the Government 

Securities Division and the MortgageBacked Securities Division Regarding 

the Default of Fixed Income Clearing 

Corporation 

November 25, 2014. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on November 

12, 2014, Fixed Income Clearing 

Corporation (‘‘FICC’’ or ‘‘Corporation’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by FICC. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change consists of 

amendments to the rules of the 

Government Securities Division (‘‘GSD 

Rules’’) of FICC and the rules of the 

Mortgage-Backed Securities Division 

(‘‘MBSD Rules’’) of FICC (each of GSD 

and MBSD, a ‘‘Division’’ of FICC) 

regarding a default by the Corporation. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, 

FICC included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FICC has prepared 

summaries, set forth in sections A, B 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

(1) Purpose 

The purpose of this filing is to amend 

in certain respects the GSD Rules and 

the MBSD Rules regarding a default by 

the Corporation. 

By way of background, in 2010, FICC 

received approval from the Securities 

and Exchange Commission (‘‘SEC’’) to 

amend the GSD Rules to add Rule 22B 

(the ‘‘GSD Corporation Default Rule’’).3

Certain technical clarifying changes to 

the GSD Corporation Default Rule were 

subsequently filed by FICC with the SEC 

for immediate effectiveness in 2011.4

The GSD Corporation Default Rule 

was originally added to the GSD Rules 

to make explicit the close out netting 

that would be applied to obligations 

between FICC and its members in the 

event that FICC becomes insolvent or 

otherwise defaults on its obligations to 

its members, and, in doing so, provide 

clarity to member firms in their 

application of balance sheet netting to 

their transactions at FICC under U.S. 

GAAP and in the calculation of their 

capital requirements on the basis of 

their net credit exposure to FICC under 

Basel Accord standards. A rule parallel 

to the GSD Corporation Default Rule 

was subsequently added as Rule 17A to 

the MBSD Rules 5 (the ‘‘MBSD 

Corporation Default Rule’’, and together 

with the GSD Corporation Default Rule, 

the ‘‘Corporation Default Rules’’). 

There are three general types of 

default covered by the Corporation 

Default Rules: Voluntary proceedings 

defaults, involuntary proceedings 

defaults and non-insolvency related 

defaults. 

With respect to voluntary proceedings 

defaults, FICC would be considered in 

default under the current Corporation 

Default Rules immediately upon the 

dissolution of the Corporation, the 

voluntary institution of proceedings by 

the Corporation seeking a judgment of 

insolvency or bankruptcy or other 

similar relief or the voluntary 

presentation by the Corporation of a 

petition for its winding up or 

liquidation. 

With respect to involuntary 

proceedings defaults, FICC would be 

considered in default under the current 

Corporation Default Rules on the 91st 

calendar day after the judgment of 

insolvency or bankruptcy or the entry of 

an order for relief (or similar order) for 

FICC’s winding up or liquidation, or the 

appointment of an administrator, 

provisional liquidator, conservator, 

receiver, trustee, custodian or other 

similar official for all or substantially all 

of the Corporation’s assets, where such 

judgment, order or appointment, as 

applicable, remains unstayed 

throughout the 90 calendar day grace 

period. 

With respect to non-insolvency 

related defaults, FICC would, as a 

general matter, be considered in default 

under the current Corporation Default 

Rules on the 91st calendar day after it 

receives notice from a member of its 

failure to make an undisputed payment 

or delivery to such member that is 

required under the GSD Rules or the 

MBSD Rules, respectively, where such 

failure remains unremedied throughout 

the 90 calendar day grace period. 

However, the current Corporation 

Default Rules exclude from the scope of 

what can be considered a noninsolvency related default of the 

applicable Division of FICC: (1) Failure 

to satisfy obligations to members in 

wind-down and defaulting members; (2) 

the satisfaction of obligations by 

alternate means provided for under the 

applicable Division’s Rules; (3) failure 

of the other Division of FICC to satisfy 

an obligation to a member; and (4) 

failure to satisfy obligations as a result 

of an operational, technological or 


rljohnson on DSK3VPTVN1PROD with NOTICES
71482 Federal Register / Vol. 79, No. 231 / Tuesday, December 2, 2014 / Notices 

administrative error or impediment, 

provided that the Corporation possesses 

sufficient funds or assets to satisfy the 

obligations. Moreover, the grace period 

can be extended beyond 90 calendar 

days under the current Corporation 

Default Rules in a non-insolvency 

related default situation where a 

payment or delivery deadline has been 

suspended under the applicable 

Division’s Rules, in which case the 90 

calendar day grace period would 

commence on the date the Corporation 

receives notice from a member of its 

failure to make an undisputed payment 

or delivery on the later due date 

determined pursuant to the suspension. 

In order to more closely align FICC’s 

Corporation Default Rules with those of 

its peer central counterparties and to 

facilitate the participation of market 

participants, including registered 

investment companies, in FICC’s 

services by providing members with 

further legal certainty regarding their 

rights with respect to a default by the 

Corporation, FICC is proposing to 

modify the Corporation Default Rules as 

described below. 

With respect to voluntary proceedings 

defaults, FICC is proposing to add as an 

additional type of voluntary proceeding 

default under the Corporation Default 

Rules the voluntary making by FICC of 

a general assignment for the benefit of 

creditors. 

With respect to involuntary 

proceedings defaults, FICC is proposing 

to eliminate the 90 calendar day grace 

period such that FICC would be 

considered in an involuntary 

proceedings default immediately upon 

the judgment of insolvency or 

bankruptcy or the entry of an order for 

relief (or similar order) for FICC’s 

winding-up or liquidation, or the 

appointment of a receiver, trustee or 

other similar official for FICC or 

substantially all of FICC’s assets, 

provided that such receiver, trustee or 

other similar official is appointed 

pursuant to the federal securities laws, 

particularly Section 19(i) of the Act, or 

Title II of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act. 

With respect to non-insolvency 

related defaults, FICC is proposing to 

reduce the grace period from 90 to 7 

calendar days such that FICC would, as 

a general matter, be considered in a noninsolvency related default on the 8th 

calendar day after it receives notice 

from a member of its failure to make an 

undisputed payment or delivery to such 

member that is required under the GSD 

Rules or the MBSD Rules, respectively, 

provided that such failure remains 

unremedied throughout the 7 calendar 

day grace period. FICC is also proposing 

to remove the provisions of the 

Corporation Default Rules that provide 

for a potential extension of the grace 

period in a non-insolvency default 

situation where the deadline for a 

payment or delivery obligation of the 

Corporation has been suspended by the 

Corporation under the applicable 

Division’s Rules, as well as the 

provisions of the Corporation Default 

Rules that exclude from the scope of 

what can be considered a noninsolvency related default the failure of 

the Corporation to satisfy obligations 

based on an operational, technological 

or administrative error or impediment. 

FICC is also proposing to add 

language to the definition of a 

‘‘Corporation Default’’ in order to clarify 

that no other provision of the applicable 

Division’s Rules, including FICC’s 

authority under GSD Rule 42 

(Suspension of Rules) and MBSD Rule 

33 (Suspension of Rules in Emergency 

Circumstances), respectively, can 

override the definition of ‘‘Corporation 

Default’’ included in the Corporation 

Default Rules. 

Proposed GSD Rule Changes 

FICC is proposing to amend GSD Rule 

22B—‘‘Corporation Default’’ as follows: 

Clause (b) is revised to clarify that no 

other provision of GSD’s Rules, 

including FICC’s authority under GSD 

Rule 42 (Suspension of Rules), can 

override the definition of ‘‘Corporation 

Default’’ included in GSD Rule 22B. 

Clause (b)(i) is revised to reduce the 

grace period for a non-insolvency 

Corporation Default from 90 to 7 

calendar days such that FICC would be 

considered in a non-insolvency 

Corporation Default on the 8th calendar 

day after it receives notice from a 

member of its failure to make an 

undisputed payment or delivery to such 

member that is required under the GSD 

Rules, provided that such failure 

remains unremedied throughout the 7 

calendar day grace period and that none 

of the exclusions enumerated in 

subclauses (A), (B) and (C) from the 

scope of what is considered a noninsolvency Corporation Default are 

applicable. 

Clause (b)(i) is also revised to remove 

subclause (D), which currently provides 

for a potential extension of the grace 

period in a non-insolvency Corporation 

Default where a payment or delivery 

deadline has been suspended under 

GSD Rule 42, in which case the grace 

period would commence on the date the 

Corporation receives notice from a 

member of its failure to make an 

undisputed payment or delivery on the 

later due date determined pursuant to 

the suspension. 

Clause (b)(i) is further revised to 

remove subclause (E), which currently 

excludes from the definition of a noninsolvency Corporation Default the 

failure of the Corporation to satisfy 

obligations based on an operational, 

technological or administrative error or 

impediment. 

Clause (b)(ii)(B) is revised to add the 

voluntary making by FICC of a general 

assignment for the benefit of creditors as 

a type of voluntary Corporation Default 

for purposes of the GSD Corporation 

Default Rule. 

Clause (b)(ii)(C) is revised to eliminate 

the 90 calendar day grace period for an 

involuntary Corporation Default such 

that FICC would be considered in an 

involuntary Corporation Default 

immediately upon the judgment of 

insolvency or bankruptcy or the entry of 

an order for relief (or similar order) for 

FICC’s winding-up or liquidation. 

Clause (b)(ii)(D) is similarly revised to 

eliminate the 90 calendar day grace 

period after the involuntary 

appointment of a receiver, trustee or 

other similar official for FICC or 

substantially all of FICC’s assets, but is 

also revised to eliminate the references 

to an administrator, provisional 

liquidator, conservator or custodian 

being appointed and provide that a 

receiver, trustee or other similar official 

must be appointed pursuant to the 

federal securities laws or Title II of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act in order for 

such appointment to be considered an 

involuntary Corporation Default. 

Proposed MBSD Rule Changes 

FICC is proposing to amend the 

MBSD Rule 17A—‘‘Corporation 

Default’’ as follows: 

Clause (b) is revised to clarify that no 

other provision of MBSD’s Rules, 

including FICC’s authority under MBSD 

Rule 33 (Suspension of Rules in 

Emergency Circumstances), can override 

the definition of ‘‘Corporation Default’’ 

included in MBSD Rule 17A. 

Clause (b)(i) is revised to reduce the 

grace period for a non-insolvency 

Corporation Default from 90 to 7 

calendar days such that FICC would be 

considered in a non-insolvency 

Corporation Default on the 8th calendar 

day after it receives notice from a 

member of its failure to make an 

undisputed payment or delivery to such 

member that is required under the 

MBSD Rules, provided that such failure 

remains unremedied throughout the 7 

calendar day grace period and that none 

of the exclusions enumerated in 

subclauses (A), (B) and (C) from the 

scope of what is considered a nonVerDate Sep<11>2014 15:30 Dec 01, 2014 Jkt 235001 PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 E:\FR\FM\02DEN1.SGM 02DEN1

rljohnson on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 231 / Tuesday, December 2, 2014 / Notices 71483 

6 15 U.S.C. 78q–1(b)(3)(F). 7 17 CFR 200.30–3(a)(12). 

insolvency Corporation Default are 

applicable. 

Clause (b)(i) is also revised to remove 

subclause (D), which currently provides 

for a potential extension of the grace 

period in a non-insolvency Corporation 

Default where a payment or delivery 

deadline has been suspended under 

MBSD Rule 33, in which case the grace 

period would commence on the date the 

Corporation receives notice from a 

member of its failure to make an 

undisputed payment or delivery on the 

later due date determined pursuant to 

the suspension. 

Clause (b)(i) is further revised to 

remove subclause (E), which currently 

excludes from the definition of a noninsolvency Corporation Default the 

failure of the Corporation to satisfy 

obligations based on an operational, 

technological or administrative error or 

impediment. 

Clause (b)(ii)(B) is revised to add the 

voluntary making by FICC of a general 

assignment for the benefit of creditors as 

a type of voluntary Corporation Default 

for purposes of the MBSD Corporation 

Default Rule. 

Clause (b)(ii)(C) is revised to eliminate 

the 90 calendar day grace period for an 

involuntary Corporation Default such 

that FICC would be considered in an 

involuntary Corporation Default 

immediately upon the judgment of 

insolvency or bankruptcy or the entry of 

an order for relief (or similar order) for 

FICC’s winding-up or liquidation. 

Clause (b)(ii)(D) is similarly revised to 

eliminate the 90 calendar day grace 

period after the involuntary 

appointment of a receiver, trustee or 

other similar official for FICC or 

substantially all of FICC’s assets, but is 

also revised to eliminate the references 

to an administrator, provisional 

liquidator, conservator or custodian 

being appointed and provide that a 

receiver, trustee or other similar official 

must be appointed pursuant to the 

federal securities laws or Title II of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act in order for 

such appointment to be considered an 

involuntary Corporation Default. 

(2) Statutory Basis 

The proposed rule is consistent with 

Section 17A(b)(3)(F) 6 of the Act and the 

rules and regulations promulgated 

thereunder because it will promote the 

prompt and accurate clearance and 

settlement of securities transactions in 

that it will provide FICC members with 

further legal certainty regarding their 

rights with respect to a default by the 

Corporation and, thereby, enable market 

participants, including registered 

investment companies, to avail 

themselves of the benefits of clearing 

through FICC. 

(B) Clearing Agency’s Statement on 

Burden on Competition 

FICC does not believe that the 

proposed rule change will have any 

impact, or impose any burden, on 

competition because it relates to 

changes to the Corporation Default 

Rules that would apply equally to all 

members of each Division of FICC. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

Written comments relating to the 

proposed rule change have not yet been 

solicited or received. FICC will notify 

the Commission of any written 

comments received by FICC. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) by order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

The proposal shall not take effect 

until all regulatory actions required 

with respect to the proposal are 

completed. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FICC–2014–09 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FICC–2014–09. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549–1090 on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

office of FICC and on FICC’s Web site: 

http://www.dtcc.com/∼/media/Files/

Downloads/legal/rule-filings/2014/ficc/

SR-FICC-2014-09.pdf. 

All comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–FICC–2014–09 and should 

be submitted on or before December 23, 

2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28315 Filed 12–1–14; 8:45 am] 

BILLING CODE 8011–01–P 


rljohnson on DSK3VPTVN1PROD with NOTICES