Document ID: SEC-2021-1684-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Fixed Income Clearing Corp.
Posted Date: 2021-11-30T05:00Z

[Federal Register Volume 86, Number 227 (Tuesday, November 30, 2021)]
[Notices]
[Pages 67999-68001]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-26070]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93670; File No. SR-FICC-2021-008]

Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Make Certain Revisions and Clarifications to the Rules

November 24, 2021.
    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 15, 2021, Fixed Income Clearing Corporation (``FICC'') 
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 the clearing agency. FICC filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(4) thereunder.\4\ 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)(4).
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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 modifications to the FICC 
Government Securities Division (``GSD'') Rulebook (``GSD Rules''), the 
FICC Mortgage-Backed Securities Division (``MBSD'') Clearing Rules 
(``MBSD Rules'') and the FICC MBSD EPN Rules (``EPN Rules,'' and 
together with the GSD Rules and the MBSD Rules, the ``Rules'') to (1) 
incorporate in the Rules the affirmative undertakings that Members 
currently make in onboarding membership agreements; (2) incorporate 
into the Rules the governing law of agreements and other documents 
provided to FICC pursuant to the Rules; (3) clarify FICC's ability to 
rely on electronic signatures on agreements and other documents 
provided to FICC pursuant to the Rules; and (4) clarify in the GSD 
Rules and MBSD Rules that Members shall appoint a duly authorized 
representative in connection with their membership, and remove the 
requirement that FICC approve the form of power of attorney or 
resolutions of the Member's board of directors that evidences such 
authorization, as described in greater detail below.\5\
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    \5\ Capitalized terms not defined herein are defined in the GSD 
Rules, MBSD Rules and EPN Rules, as applicable, available at https://www.dtcc.com/legal/rules-and-procedures. GSD and MBSD have several 
membership categories. For ease of description, unless otherwise 
indicated by the context, the term ``Member'' is used to refer to 
all membership categories.
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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, the clearing agency 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. The clearing agency 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
    FICC is proposing amendments that would clarify, simplify and 
improve the disclosures in the Rules, primarily related to onboarding 
and other membership documentation between FICC and its Members. FICC, 
along with its affiliates, The Depository Trust Company and National 
Securities Clearing Corporation, has recently completed a review of the 
templates of onboarding agreements and other documents that are 
provided to FICC in connection with a firm's application for membership 
and the templates of agreements and documents Members may provide to 
FICC during the course of their membership pursuant to the Rules. In 
connection with this review,

[[Page 68000]]

FICC is proposing to make certain revisions and clarifications to the 
Rules.
    More specifically, the proposed rule changes would (1) incorporate 
in the Rules the affirmative undertakings that Members currently make 
in onboarding membership agreements; (2) incorporate into the Rules the 
governing law of agreements and other documents provided to FICC 
pursuant to the Rules; (3) clarify FICC's ability to rely on electronic 
signatures on agreements and other documents provided to FICC pursuant 
to the Rules; and (4) clarify in the GSD Rules and MBSD Rules that 
Members shall appoint a duly authorized representative in connection 
with their membership, and remove the requirement that FICC approve the 
form of power of attorney or resolutions of the Member's board of 
directors that evidences such authorization, as described in greater 
detail below.
Proposed Revisions To Incorporate Member Undertakings Into the Rules
    FICC is proposing to revise GSD Rules 2A, 3A and 4(d), MBSD Rules 
2A and 3, and EPN Rule 1 of Article III, to incorporate affirmative 
undertakings that Members currently make in their onboarding membership 
agreements.\6\ Each of these Rules currently provide that an applicant 
for membership with FICC shall sign and deliver to FICC an agreement 
under which the applicant would agree to the affirmative undertakings 
that are listed in those Rules. These undertakings include, for 
example, to abide by the Rules and be bound by all the provisions 
thereof, and to pay any amounts that become payable by the Member to 
FICC pursuant to the Rules.\7\
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    \6\ See Section 7 of GSD Rule 2A, Section 4 of GSD Rule 3A and 
Section 13 of GSD Rule 4(d); Section 5 of MBSD Rule 2A and MBSD Rule 
3(A)(d)(i); and Section 3 of EPN Rule 1 of Article III (All 
references to ``Articles'' herein shall be referring to Articles of 
the EPN Rules.); id.
    \7\ Id.
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    To simplify and standardize the membership onboarding 
documentation, FICC is proposing to revise each of the Rules that 
includes these undertakings to state directly that Members agree to the 
undertakings listed in that Rule. In connection with this proposed 
change, FICC would remove these undertakings from the template 
membership agreements, which already provide that Members are bound by 
the Rules.
Proposed Revisions to Rules Regarding Governing Law
    FICC is proposing to revise GSD Rule 38, MBSD Rule 29 and EPN Rule 
9 of Article V, each of which currently state that the Rules are 
governed by New York law.\8\ The proposed change would revise these 
Rules to include a statement that all agreements and other documents 
that are entered into between FICC and its Members are also governed by 
New York law, unless otherwise expressly provided. Currently, 
agreements and other documents entered into between FICC and its 
Members either include a governing law provision or are governed by New 
York law through the application of both (i) GSD Rule 38, MBSD Rule 29 
and EPN Rule 9 of Article V, which provide that the rights and 
obligations under the Rules are governed by New York law, and (ii) the 
FICC membership agreements, which provide that the Rules (including the 
Rules referenced in this paragraph) govern the matters and transactions 
between FICC and its Members.
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    \8\ Id.
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    This proposed change would both clarify the governing law of the 
agreements and other documents entered into between FICC and its 
Members pursuant to the Rules, and would allow FICC to simplify those 
documents by removing the governing law provisions in such documents.
Proposed Revisions to Rules Regarding FICC's Reliance on Electronic 
Signatures
    FICC is proposing to revise GSD Rule 32, MBSD Rule 24 and EPN Rule 
15 of Article V, each of which currently lists the circumstances in 
which FICC would rely on an electronic signature.\9\ The proposed 
revisions to these Rules would clarify that FICC may rely on an 
electronic signature with respect to any and all agreements and other 
documents delivered pursuant to the Rules. FICC would also remove 
reference to the circumstances in which it would accept an electronic 
signature, to make clear that FICC would do so in any circumstances. 
The proposed revisions would clarify and modernize the language in 
these Rules, which still refer to outdated modes of electronic 
communication, such as telex, and would align the language in this Rule 
to language used in the New York Electronic Signatures and Records 
Act.\10\
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    \9\ Id.
    \10\ N.Y. State Tech. Law Sec.  304(2) (McKinney 2021).
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Proposed Revisions to Requirements Related to Members' Authorized 
Representatives
    FICC is proposing to revise Section 1 of GSD Rule 40 and Section 1 
of MBSD Rule 31, which describe Members' requirement to appoint an 
authorized representative in connection with their membership with 
FICC.\11\ Currently, these Rules provide that a Member may designate an 
authorized representative that is not either a general partner or an 
officer of the Member by either a power of attorney or resolutions of 
the Member's board of directors, and requires such power of attorney 
and resolutions be in a form approved by FICC.\12\ These Rules also 
require Members to provide FICC with the signatures of individuals who 
are authorized representatives for purposes of conducting business with 
FICC.\13\
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    \11\ Supra note 5.
    \12\ Id.
    \13\ Id.
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    In order to simplify the onboarding membership requirements, FICC 
is proposing to amend these Rules to clarify that Members must appoint 
a duly authorized representative, and to remove references to a power 
of attorney or resolutions of the Member's board of directors. The 
proposed change would also remove the requirement that FICC approve the 
form of power of attorney or resolutions of the Member's board of 
directors that evidences the due authorization of that representative. 
Finally, FICC is proposing to remove the requirement that Members 
provide FICC with the signatures of representatives who are authorized 
to conduct business with FICC.\14\
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    \14\ Id.
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2. Statutory Basis
    Section 17A(b)(3)(F) of the Act requires that the rules of FICC be 
designed to, among other things, promote the prompt and accurate 
clearance and settlement of securities transactions.\15\ FICC believes 
the proposed changes are consistent with the requirements of Section 
17A(b)(3)(F) of the Act because such changes would clarify and improve 
the transparency of the Rules and would allow FICC to simplify the 
membership agreements and other documentation provided to it by Members 
pursuant to the Rules.
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    \15\ 15 U.S.C. 78q-1(b)(3)(F).
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    More specifically, the proposed changes would make clarifications 
to the Rules regarding (i) FICC's ability to rely on electronic 
signatures on agreements and other documents provided to it pursuant to 
the Rules; and (ii) Members' duly authorized representatives in 
connection with their memberships. The proposed changes would also 
update the Rules in order to allow FICC to simplify the onboarding and 
other membership agreements and documents by incorporating in the

[[Page 68001]]

Rules (1) the governing law of agreements and other documents provided 
to FICC pursuant to the Rules; and (2) the affirmative undertakings 
that Members currently make in onboarding membership agreements.
    By enhancing the clarity and transparency of the Rules, and 
allowing FICC to simplify the membership agreements and other 
documents, the proposed changes would allow Members to more efficiently 
and effectively conduct their business in accordance with the Rules, 
which FICC believes would promote the prompt and accurate clearance and 
settlement of securities transactions. As such, FICC believes that the 
proposed changes would be consistent with Section 17A(b)(3)(F) of the 
Act.\16\
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    \16\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    FICC does not believe the proposed rule changes would impact 
competition. The proposed rule changes would merely enhance the clarity 
and transparency of the Rules and would simplify the documentation that 
is provided to FICC by Members pursuant to the Rules. Therefore, the 
proposed changes would not affect FICC's operations or the rights and 
obligations of membership. As such, FICC believes the proposed rule 
changes would not have any impact on competition.

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

    FICC has not received or solicited any written comments relating to 
this proposal. If any written comments are received, they will be 
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
    Persons submitting comments are cautioned that, according to 
Section IV (Solicitation of Comments) of the Exhibit 1A in the General 
Instructions to Form 19b-4, the Commission does not edit personal 
identifying information from comment submissions. Commenters should 
submit only information that they wish to make available publicly, 
including their name, email address, and any other identifying 
information.
    All prospective commenters should follow the Commission's 
instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/how-to-submit-comments. General 
questions regarding the rule filing process or logistical questions 
regarding this filing should be directed to the Main Office of the 
Commission's Division of Trading and Markets at 
[email protected] or 202-551-5777.
    FICC reserves the right to not respond to any comments received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \17\ of the Act and paragraph (f) \18\ of Rule 19b-4 
thereunder. 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.
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    \17\ 15 U.S.C 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f).
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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 [email protected]. Please include 
File Number SR-FICC-2021-008 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-FICC-2021-008. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of FICC and on DTCC's website 
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-FICC-2021-008 and should be submitted on 
or before December 21, 2021.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-26070 Filed 11-29-21; 8:45 am]
BILLING CODE 8011-01-P