Document ID: SEC-2015-1784-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Fixed Income Clearing Corp.
Posted Date: 2015-11-02T05:00Z

[Federal Register Volume 80, Number 211 (Monday, November 2, 2015)]
[Notices]
[Pages 67450-67452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27797]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76278; File No. SR-FICC-2015-004]

Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Provide Additional Details Regarding the Requirement That Members 
Participate in Annual Testing of Business Continuity and Disaster 
Recovery Plans

October 27, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on October 26, 2015, Fixed Income Clearing Corporation (``FICC'') 
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 FICC. FICC filed the proposed rule change 
pursuant to Section 19(b)(3)(A) \3\ of the Act and Rule 19b-4(f)(6) \4\ 
thereunder. The proposed rule change was effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of a change to Rule 3 of the 
Clearing Rules of the Mortgage-Backed Securities Division (``MBSD,'' 
and its Clearing Rules, ``MBSD Rules'') of FICC and Rule 3 of the 
Rulebook of the Government Securities Division (``GSD,'' and its 
Rulebook, ``GSD Rules'') of FICC to provide additional details 
regarding the requirement that MBSD and GSD Members participate in 
annual testing of FICC's business continuity and disaster recovery 
plans (``BCP Testing'').\5\
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    \5\ Terms not otherwise defined herein have the meaning set 
forth in the MBSD Rules and GSD Rules available at http://www.dtcc.com/legal/rules-and-procedures.aspx.
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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 proposed rule change would amend Rule 3 (Ongoing Membership 
Requirements) of the MBSD Rules and Rule 3 (Ongoing Membership 
Requirements) of the GSD Rules to provide additional details regarding 
the requirement that MBSD and GSD Members participate in FICC's annual 
BCP Testing. Currently, pursuant to Rule 2A (Initial Membership 
Requirements) of the MBSD Rules and Rule 2A (Initial Membership 
Requirements) of the GSD Rules, each applicant for membership of either 
MBSD or GSD must fulfill operational testing requirements, as 
established by FICC, that may be imposed to ensure the operational 
capability of the applicant.'' \6\ Once a firm becomes a Member of GSD 
or MBSD, MBSD Rule 3 and GSD Rule 3 each of their respective [sic] 
provides that Members may be required to fulfill certain operational 
testing requirements that may be imposed by FICC to test and monitor 
the continuing operational capability of the Members.\7\
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    \6\ Rule 2A, Section 2 of MBSD Rules and Rule 2A, Section 5 of 
GSD Rules, supra, note 5.
    \7\ Rule 3, Section 6 of MBSD Rules and Rule 3 Section 5 of GSD 
Rules, supra, note 5.
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    Recently, the Commission promulgated Regulation Systems Compliance 
and Integrity (``Reg. SCI''), which requires FICC to establish 
standards to designate members \8\ and requires participation by such 
designated members in scheduled BCP Testing with FICC on an annual 
basis.\9\ Although FICC already conducts annual BCP Testing with 
certain MBSD and GSD Members,\10\ FICC is proposing to amend Rule 3 of 
the MBSD Rules and Rule 3 of the GSD Rules to further

[[Page 67451]]

describe the requirement with respect to BCP Testing.
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    \8\ 17 CFR 242.1004(a). In adopting Reg. SCI, the Commission 
determined not to require covered entities to notify the Commission 
of its designations or the standards that will be used in 
designating members, recognizing instead that each entity's 
standards, designations, and updates, if applicable, would be part 
of its records and, therefore, available to the Commission and its 
staff upon request. See Securities and Exchange Act Release No. 
73639 (November 19, 2014), 79 FR 72252 (December 5, 2014) (File No. 
S7-01-13).
    \9\ 17 CFR 242.1004(a) and (b).
    \10\ Rule 3, Section 6 of MBSD Rules and Rule 3 Section 5 of GSD 
Rules, supra, note 5.
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    The proposed amendments to Rule 3 of the MBSD Rules and Rule 3 of 
the GSD Rules would increase transparency regarding BCP Testing, and 
ensure FICC's practice with respect to such testing is consistent with 
Reg. SCI by setting forth FICC's rights to: (i) Designate MBSD and GSD 
Members required to participate in BCP Testing using established 
standards; (ii) determine the scope and reporting of such BCP Testing; 
and (iii) require MBSD and GSD Members to comply with such BCP Testing 
within specified timeframes. In connection with these proposed 
amendments, FICC would refine the factors that it currently uses to 
designate MBSD and GSD Members for BCP Testing. For example, while FICC 
would continue to rely on activity-based thresholds to mandate 
participation with annual BCP Testing, FICC would also take into 
account additional factors when designating firms for BCP Testing, 
including, but not limited to: (i) Significant operational issues of 
the MBSD or GSD Member during the past twelve months; and (ii) past 
performance of the MBSD or GSD Member with respect to BCP Testing. MBSD 
and GSD Members would be informed of the specific standards that would 
be used by FICC, along with any updates or changes to these standards, 
which would be applied on a prospective basis, through established 
methods of communication between FICC and the Members of MBSD and GSD. 
Likewise, MBSD and GSD Members would be notified in advance that they 
have been designated to participate in BCP Testing for the upcoming 
year, and would be provided details concerning the nature of such 
testing as the particular test plans are determined.
    FICC believes the proposed rule change would have no impact on MBSD 
and GSD Members relative to what those Members are currently required 
to do. As described above, FICC already requires certain MBSD and GSD 
Members to participate in BCP Testing on an annual basis. The proposed 
rule change provides further clarity with respect to these requirements 
for consistency with Reg. SCI.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act requires, in part, that the MBSD 
Rules and GSD Rules be designed to promote the prompt and accurate 
clearance and settlement of securities transactions and to protect 
investors and the public interest.\11\
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    \11\ 15 U.S.C. 78q-1(b)(3)(F).
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    Rule 17Ad-22(d)(2), promulgated under the Act, requires FICC to 
require that MBSD and GSD Members have robust operational capacity to 
meet obligations arising from participation in the clearing agency, to 
monitory that its participation requirements are met on an ongoing 
basis, and to have participation requirements that are objective and 
publicly disclosed.\12\ Rule 17-22(d)(4), promulgated under the Act, 
requires FICC to identify sources of operational risk and minimize them 
through the development of appropriate systems, controls, and 
procedures, and have business continuity plans that allow for timely 
recovery of operations and fulfillment of the clearing agency's 
obligations.\13\
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    \12\ 17 CFR 240.17Ad-22(d)(2).
    \13\ 17 CFR 240.17Ad-22(d)(4).
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    Rule 1004(a) and (b) of Reg. SCI requires FICC to establish 
standards for the designation of those MBSD and GSD Members that FICC 
reasonably determines are, taken as a whole, the minimum necessary for 
the maintenance of fair and orderly markets in the event of the 
activation of its business continuity and disaster recovery plans, and 
to designate MBSD and GSD Members pursuant to those standards and 
require participation by such designated firms in scheduled BCP Testing 
annually.\14\
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    \14\ 17 CFR 242.1004(a) and (b).
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    By facilitating the testing of how business continuity and disaster 
recovery plans function between FICC and the MBSD and GSD Members 
during an emergency, the proposed rule change would facilitate the 
prompt and accurate clearance and settlement of securities transactions 
and protect investors and the public interest consistent with of the 
Act. The proposed rule change would provide additional details to the 
MBSD Rules and GSD Rules regarding the requirement for MBSD and GSD 
Members to take part in its BCP Testing annually, strengthening its 
compliance with Rule 17Ad-22(d)(2) and (4).\15\ Further, the proposed 
rule change would foster the objectives of the Commission under Reg. 
SCI by helping to ensure resilient and available markets.\16\
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    \15\ 17 CFR 240.17Ad-22(d)(2) and (4).
    \16\ 17 CFR 242.1004(a) and (b).
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    As such, FICC believes that the proposed rule change is consistent 
with Section 17A(b)(3)(F) of the Act, Rule 17Ad-22(d)(2) and (d)(4), 
promulgated under the Act, and Rule 1004(a) and (b) of Reg. SCI, cited 
above.

 (B) Clearing Agency's Statement on Burden on Competition

    FICC does not believe that the proposed rule change would impose 
any burden on competition because the proposed rule change would apply 
to all MBSD and GSD Members and only provides additional details 
regarding an existing requirement.

 (C) Clearing Agency's Statement on Comments on the Proposed Rule 
Change Received From Members, Participants, or Others

    Written comments were not and are not intended to be solicited with 
respect to the proposed rule change, and none have been received.

III. Date of Effectiveness of the Proposed Rule Change, and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) \17\ of the Act and 
Rule 19b-4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the FICC to give the Commission written notice of the its 
intent to file the proposed rule change, along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Commission deems this requirement to have been met.
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    A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii) \20\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
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    FICC has asked the Commission to waive the 30-day operative delay 
so that the proposal may become operative immediately upon filing. 
According to FICC, the proposed rule change does not present any novel 
or controversial issues. Rather, FICC is merely providing additional 
details regarding BCP Testing requirements or adding provisions that 
are consistent with or required by Reg. SCI. Accordingly, the 
Commission believes that waiving the 30-day operative delay is 
consistent with the

[[Page 67452]]

protection of investors and the public interest as it will allow FICC 
to incorporate changes required under Reg. SCI prior to the November 3, 
2015 compliance date. Therefore, the Commission designates the proposed 
rule change to be operative upon filing.\21\
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    \21\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

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-2015-004 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-2015-004. 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 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 
DTCC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). 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-2015-004 and 
should be submitted on or before November 23, 2015.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-27797 Filed 10-30-15; 8:45 am]
BILLING CODE 8011-01-P