2758 Federal Register / Vol. 80, No. 12 / Tuesday, January 20, 2015 / Notices 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 73787 

(December 8, 2014), 79 FR 73927 (December 12, 

2014) (SR–FICC–2014–06). 

4Letter from ‘‘Anonymous,’’ Office of the 

Secretary, U.S. Securities and Exchange 

Commission (Jan. 1, 2015). 

5FICC, Government Securities Division Rulebook 

(‘‘GSD Rulebook’’), Rule 22; Fixed Income Clearing 

Corporation, Mortgage-Backed Securities Division 

Rulebook (‘‘MBSD Rulebook’’), Rule 16. 

6 GSD Rulebook, Rule 22A; MBSD Rulebook, Rule 

17. 

7 GSD Rulebook, Rule 22A; MBSD Rulebook, Rule 

17. 

8 In addition to simplifying FICC’s rules relating 

to the insolvency of a member and ceasing to act, 

the rule change more closely aligns the GSD rules 

and the MBSD rules with the rules of FICC’s 

affiliate, National Securities Clearing Corporation 

(‘‘NSCC’’). Under its Rule 18 (Procedures for When 

the Corporation Declines or Ceases to Act), NSCC 

relies on the time it declines or ceases to act for a 

member when determining which transactions 

involving such member will be excluded from its 

operations, rather than on a separate ‘‘Time of 

Insolvency’’ or ‘‘Cut-Off Time,’’ as applicable. 

9 GSD Rulebook, Rule 22A; MBSD Rulebook, Rule 

17. 

7. Other information: The notice we 

are giving here is in addition to any 

individual notice. We will file a report 

with the Committee on Homeland 

Security and Governmental Affairs of 

the Senate, the Committee on Oversight 

and Government Reform of the House of 

Representatives, and the Office of 

Information and Regulatory Affairs, 

Office of Management and Budget 

(OMB). 

Dated: January 13, 2015. 

By authority of the Board. 

Martha P. Rico, 

Secretary to the Board. 

[FR Doc. 2015–00663 Filed 1–16–15; 8:45 am] 

BILLING CODE P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74046; File No. SR–FICC– 

2014–06] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Approving Proposed Rule Change To 

Amend the Rules of the Government 

Securities Division and the MortgageBacked Securities Division on 

Insolvency and Ceasing To Act 

January 13, 2015. 

I. Introduction 

On November 25, 2014, the Fixed 

Income Clearing Corporation (‘‘FICC’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–FICC–2014–06 pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder.2 The proposed 

change was published for comment in 

the Federal Register on December 12, 

2014.3 The Commission received one 

comment supporting the proposed rule 

change.4 For the reasons discussed 

below, the Commission is approving the 

proposed rule change. 

II. Description 

The rule change, as proposed, amends 

the rulebooks of FICC’s Government 

Securities Division (‘‘GSD’’) and FICC’s 

Mortgage-Backed Securities Division 

(‘‘MBSD’’) to simplify those rules 

relating to the insolvency of a member 

and ceasing to act, in order to simplify 

certain aspects of FICC’s process in a 

cease to act situation and provide 

greater legal certainty for FICC and its 

members, particularly in an intra-day 

cease to act situation. 

A. Background 

In connection with lessons learned 

from a recent close-out simulation 

exercise conducted by FICC’s parent 

company, The Depository Trust & 

Clearing Corporation, in which FICC 

participated, and a related review of the 

GSD and MBSD rules, specific 

challenges were identified relating to 

the administration of certain aspects of 

GSD and MBSD insolvency and ceasing 

to act rule provisions, particularly in an 

intra-day cease to act situation. 

B. ‘‘Time of Insolvency’’ and ‘‘Cut-Off 

Time’’ 

GSD and MBSD include in their 

current insolvency rules 5 and cease to 

act rules 6 the concept of a ‘‘Time of 

Insolvency,’’ which is defined to mean 

the time at which FICC determines to its 

reasonable satisfaction that a member is 

‘‘insolvent’’ within the meaning of GSD 

Rule 22 or MBSD Rule 16, respectively. 

This ‘‘Time of Insolvency’’ concept is 

distinguished from the time at which 

FICC ceases to act for a member. The 

GSD and MBSD rules currently use 

‘‘Time of Insolvency’’ as a line of 

demarcation when determining FICC’s 

obligations with respect to pending 

transactions involving the insolvent 

member. Specifically, transactions with 

the insolvent member that are not 

compared or deemed compared in 

accordance with the GSD or MBSD 

rules, respectively, prior to the ‘‘Time of 

Insolvency’’ are not eligible to be part of 

the close-out process, unless otherwise 

determined by FICC’s Board of Directors 

in order to promote orderly settlement. 

For a non-insolvency cease to act 

situation, the GSD rules and the MBSD 

rules on ceasing to act 7 currently 

include the concept of a ‘‘Cut-Off 

Time,’’ which is defined to mean a time 

specified in advance by FICC in a notice 

to its members at which it will cease to 

act for a member. Like the ‘‘Time of 

Insolvency’’ concept, ‘‘Cut-Off Time’’ is 

currently used in the GSD rules and the 

MBSD rules when determining FICC’s 

obligations with respect to pending 

transactions involving the defaulted 

member. 

Identifying an exact time at which a 

member has become ‘‘insolvent’’ for 

purposes of establishing a ‘‘Time of 

Insolvency’’ may pose potential 

challenges for FICC in circumstances 

where the member is deemed 

‘‘insolvent’’ based upon the 

determination or action of a third party, 

such as the member’s regulator, 

supervisory authority or a court of 

competent jurisdiction. In an intra-day 

cease to act situation where transaction 

data is being submitted to FICC in realtime, such potential challenges may 

create a lack of legal certainty for FICC 

and its members regarding FICC’s 

obligations with respect to pending 

transactions involving the insolvent 

member. The rule change removes the 

‘‘Time of Insolvency’’ concept from the 

GSD rules and the MBSD rules and 

instead simply relies on the single time 

FICC ceases to act for an insolvent 

member for purposes of determining its 

obligations with respect to pending 

transactions involving such insolvent 

member. 

In order to also simplify its process in 

non-insolvency cease to act situations, 

the rule change removes the separate 

‘‘Cut-Off Time’’ concept from the GSD 

rules and the MBSD rules, and instead 

relies on the single time FICC ceases to 

act for a defaulted member for purposes 

of determining its obligations with 

respect to pending transactions 

involving such defaulted member.8

C. Transactions Deemed Compared 

Based Solely on Non-Defaulting Member 

Data 

Currently, the provisions of the GSD’s 

rules and the MBSD’s rules on ceasing 

to act,9 and the related prongs of the 

‘‘Compared Trade’’ definition in Rule 1 

of the each of GSD’s rules and MBSD’s 

rules provide that, in the context of 

FICC ceasing to act for a member, a 

transaction involving such member that 

would not otherwise be compared or 

deemed compared under the GSD rules 

or the MBSD rules, respectively, may, in 

certain circumstances, be deemed a 

compared trade based solely on data 

submitted by a non-defaulting member. 

The determination of whether such a 


rljohnson on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 12 / Tuesday, January 20, 2015 / Notices 2759 

10MBSD Rulebook, Rule 5 and Rule 7. 

transaction should be deemed a 

compared trade is currently based on a 

multi-pronged facts-and-circumstancesbased test, including determinations as 

to whether the transaction was executed 

prior to FICC ceasing to act for the 

defaulted member, whether the 

transaction was entered into in good 

faith and not primarily in order to take 

advantage of the defaulted member’s 

financial condition and whether the 

transaction is an ‘‘Off-the-Market 

Transaction’’ as defined in Rule 1 of 

each of GSD’s rules and MBSD’s rules. 

Administering such a multi-pronged 

facts-and-circumstances-based test for 

individual transactions in a cease to act 

situation, particularly an intra-day cease 

to act situation where transaction data is 

being submitted to FICC in real-time, 

may pose potential challenges to FICC 

and create a lack of legal certainty for 

FICC and its members regarding FICC’s 

obligations with respect to individual 

pending transactions involving the 

insolvent or otherwise defaulted 

member. In order to simplify FICC’s 

process in a cease to act situation and 

provide FICC and its members with 

greater ex ante legal certainty regarding 

the rules applicable to pending 

transactions involving an insolvent or 

otherwise defaulted member, the rule 

change removes the multi-pronged facts 

and circumstances-based test and the 

related provisions of each of GSD’s rules 

and MBSD’s rules, and instead simply 

relies on the compared trade definitions 

under each of GSD’s and MBSD’s rules, 

subject to the discretion of FICC’s Board 

of Directors to determine otherwise in 

order to promote orderly settlement 

with respect to transactions the data on 

which have been submitted only by 

non-defaulting members. 

D. GSD Rule Changes 

The rule change, as approved, amends 

the GSD rules as follows: 

In Rule 1—‘‘Definitions,’’ the 

following definitions have been revised: 

The term ‘‘Compared Trade’’ is 

revised to remove the prong of the 

definition which provides that, in the 

context of FICC ceasing to act for a 

member under GSD Rule 22A, a 

transaction involving such member that 

would not otherwise be a Compared 

Trade under the GSD rules may, in 

certain circumstances, be deemed a 

Compared Trade based solely on data 

submitted by a non-defaulting member. 

The term ‘‘Off-the-Market 

Transaction’’ is revised to conform the 

text and the numbering of the definition 

with the text and numbering of the 

parallel ‘‘Off-the-Market Transaction’’ 

definition in the MBSD rules. 

In Rule 3A—‘‘Sponsoring Members 

and Sponsored Members,’’ Sections 

15(a) and 16(a) of Rule 3A are revised 

to remove references to Rule 22, current 

Section 3 (Notification of Insolvency) 

and related conforming changes to the 

text of such sections are made. Section 

15(b) of Rule 3A is revised to remove 

the reference to the ‘‘Time of 

Insolvency’’ concept and to align the 

text regarding the actions taken by FICC 

in connection with the insolvency of a 

Sponsored Member with the parallel 

text included in Section 16 of Rule 3A 

relating to the actions taken by FICC in 

connection with the insolvency of a 

Sponsoring Member. Consistent with 

the numbering of Section 15 of Rule 3A, 

Section 16(a) of Rule 3A is revised to 

make the second paragraph a new 

subsection (b). New Section 16(b) is also 

revised to align the text regarding the 

actions taken by FICC in connection 

with the insolvency of a Sponsoring 

Member with the parallel text included 

in Section 15(b) relating to the actions 

taken by FICC in connection with the 

insolvency of a Sponsored Member. 

In Rule 22—‘‘Insolvency of a 

Member,’’ current Section 3, which 

provides for FICC to notice its 

membership and the Commission 

regarding the insolvency of a GSD 

member, is removed in order to clarify 

that GSD members and the Commission 

will only receive one notice from FICC 

at the time it ceases to act for a GSD 

member in accordance with the 

provisions of Section 1 of Rule 22A 

(Procedures for When the Corporation 

Ceases to Act), whether FICC ceases to 

act for the member for insolvency or 

non-insolvency related reasons. Section 

4 of Rule 22 (Ceasing to Act for the 

Member) is renumbered as new Section 

3 and revised to remove the reference to 

the ‘‘Time of Insolvency’’ concept. 

In Rule 22A—‘‘Procedures for When 

the Corporation Ceases to Act,’’ Section 

1 (Notification) is revised to clarify that 

FICC will notice the Commission and 

GSD members of every decision to cease 

to act for a member. Section 1 is further 

revised to remove the requirement that 

FICC establish a separate ‘‘Time of 

Insolvency,’’ in the event it ceases to act 

because of a member’s insolvency, or 

‘‘Cut-Off Time,’’ in the event it ceases to 

act for a member for non-insolvency 

related reasons. 

Sections 2, 2(a) and 2(b) of Rule 22A 

are revised remove the ‘‘Time of 

Insolvency’’ and ‘‘Cut-Off Time’’ 

concepts, and instead rely on the time 

FICC ceases to act for a member for 

purposes of determining its obligations 

with respect to pending transactions 

involving such member. Section 2(a) is 

further revised to use the defined term 

‘‘Compared Trade’’ for purposes of 

clarifying which transactions are 

eligible to be part of the close-out 

process as of the time FICC ceases to act 

for a member, subject to the discretion 

of FICC’s Board of Directors to 

determine otherwise in order to promote 

orderly settlement. 

Section 2(c) of Rule 22A, which 

provides that, in the context of FICC 

ceasing to act for a member, a 

transaction involving such member that 

would not otherwise be compared or 

deemed compared under the GSD rules 

may, in certain circumstances, be 

deemed compared based solely on data 

submitted by a non-defaulting member, 

based on a multi-pronged facts and 

circumstances-based test, is removed. 

FICC will instead rely on the 

‘‘Compared Trade’’ definition in GSD 

Rule 1 when determining its obligations 

with respect to pending transactions 

involving an insolvent or otherwise 

defaulted member, subject to the 

discretion of FICC’s Board of Directors 

to determine otherwise in order to 

promote orderly settlement with respect 

to transactions the data on which have 

been submitted only by non-defaulting 

members. 

E. MBSD Rule Changes 

The rule change, as approved, amends 

the MBSD rules as follows: 

In Rule 1—‘‘Definitions,’’ the 

following definitions have been revised: 

The term ‘‘Compared Trade’’ is 

revised to remove the prong of the 

definition which provides that, in the 

context of FICC ceasing to act for a 

member under MBSD Rule 17, a 

transaction involving such member that 

would not otherwise be compared or 

deemed compared under the MBSD 

rules may, in certain circumstances, be 

deemed a Compared Trade based solely 

on data submitted by a non-defaulting 

member. The ‘‘Compared Trade’’ 

definition is further clarified to 

reference the specific MBSD rules 10

pursuant to which a transaction would 

be compared or deemed compared by 

MBSD. 

In Rule 16—‘‘Insolvency of a 

Member,’’ current Section 3 of Rule 16, 

which provides for FICC to notice its 

membership and the Commission 

regarding the insolvency of a member, is 

removed in order to clarify that MBSD 

members and the Commission will only 

receive one notice from FICC at the time 

FICC ceases to act for a MBSD member 

in accordance with the provisions of 

Section 1 of Rule 17 (Procedures for 

When the Corporation Ceases to Act), 

whether FICC ceases to act for a MBSD 


rljohnson on DSK3VPTVN1PROD with NOTICES
2760 Federal Register / Vol. 80, No. 12 / Tuesday, January 20, 2015 / Notices 

11 15 U.S.C. 78s(b)(2)(C). 

12 15 U.S.C. 78q–1(b)(3)(F). 

13 15 U.S.C. 78q–1(b)(3)(F). 

14 15 U.S.C. 78q–1. 

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

16 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition, and capital formation. See 

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

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(3). 

member for insolvency or noninsolvency related reasons. Section 4 of 

Rule 16 (Ceasing to Act for the Member) 

is renumbered as new Section 3 and 

revised to remove the reference to the 

‘‘Time of Insolvency’’ concept. 

In Rule 17—‘‘Procedures for When the 

Corporation Ceases to Act,’’ Section 1 

(Notification) is revised to clarify that 

FICC will notice the Commission as 

well as MBSD’s members of every 

decision to cease to act for a MBSD 

member. Section 1 of Rule 17 is further 

revised to remove the requirement that 

FICC establish a separate ‘‘Time of 

Insolvency,’’ in the event it ceases to act 

because of a member’s insolvency, or 

‘‘Cut-Off Time,’’ in the event it ceases to 

act for a member for non-insolvency 

related reasons. 

Sections 2, 2(a), 2(d) and 2(e) of Rule 

17 are revised to remove the ‘‘Time of 

Insolvency’’ and ‘‘Cut-Off Time’’ 

concepts, and instead rely on the time 

FICC ceases to act for a member for 

purposes of determining its obligations 

with respect to pending transactions 

involving such member. 

Section 2(g) of Rule 17, which 

provides that, in the context of FICC 

ceasing to act for a MBSD member, a 

transaction involving such member that 

would not otherwise be compared or 

deemed compared under the MBSD 

rules may, in certain circumstances, be 

deemed compared based solely on data 

submitted by a non-defaulting member, 

based on a multi-pronged facts and 

circumstances-based test, is removed. 

FICC will instead rely on the compared 

trade definitions in the MBSD rules 

when determining its obligations with 

respect to pending transactions 

involving an insolvent or otherwise 

defaulted member, subject to the 

discretion of FICC’s Board of Directors 

to determine otherwise in order to 

promote orderly settlement with respect 

to transactions the data on which have 

been submitted only by non-defaulting 

members. 

III. Discussion 

Section 19(b)(2)(C) of the Act 11

directs the Commission to approve a 

proposed rule change of a selfregulatory organization if it finds that 

such proposed rule change is consistent 

with the requirements of the Act and the 

rules and regulations thereunder 

applicable to such organization. Section 

17A(b)(3)(F) of the Act 12 requires, 

among other things, that the rules of a 

clearing agency be designed to achieve 

several goals, including promoting the 

prompt and accurate clearance and 

settlement of securities transactions 

and, to the extent applicable, derivative 

agreements, contracts, and transactions. 

The Commission concludes that the 

proposed rule change is consistent with 

Section 17A(b)(3)(F) 13 of the Securities 

and Exchange Act of 1934, as amended, 

and the rules and regulations 

promulgated thereunder because it will 

promote the prompt and accurate 

clearance and settlement of securities 

transactions and remove impediments 

to and perfect the mechanism of a 

national system for the prompt and 

accurate clearance and settlement of 

securities transactions. In particular, the 

rule change simplifies FICC’s process in 

a cease to act situation and provide 

greater legal certainty for FICC and its 

members as to FICC’s obligations with 

respect to pending transactions 

involving an insolvent or otherwise 

defaulted member, particularly in an 

intra-day cease to act situation. 

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act, particularly 

those set forth in Section 17A,14 and the 

rules and regulations thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,15 that the 

proposed rule change (SR–FICC–2014– 

06) be, and hereby is, approved.16

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–00704 Filed 1–16–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Thursday, January 22, 2015 at 2:00 

p.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or her designee, has 

certified that, in her opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) 

and 17 CFR 200.402(a)(3), (5), (7), 9(ii) 

and (10), permit consideration of the 

scheduled matter at the Closed Meeting. 

Commissioner Stein, as duty officer, 

voted to consider the items listed for the 

Closed Meeting in closed session. 

The subject matter of the Closed 

Meeting will be: 

Institution and settlement of 

injunctive actions; 

Institution and settlement of 

administrative proceedings 

Consideration of amicus participation; 

and 

Other matters relating to enforcement 

proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact the Office of the Secretary at 

(202) 551–5400. 

Dated: January 15, 2015. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–00926 Filed 1–15–15; 4:15 pm] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74042; File No. SR–OCC– 

2015–01] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Proposed Rule Change 

Concerning the Date of the Annual 

Meeting of The Options Clearing 

Corporation’s Stockholders 

January 13, 2015. 

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 January 

7, 2015, The Options Clearing 

Corporation (‘‘OCC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change described in I Items I, II and III 

below, which Items have been prepared 

by OCC. OCC filed the proposed rule 

change pursuant to Section 19(b)(3)(A) 3

of the Act and Rule 19b–4(f)(3) 4


rljohnson on DSK3VPTVN1PROD with NOTICES