Document ID: SEC-2006-1665-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Fixed Income Clearing Corp.
Posted Date: 2006-12-20T05:00Z

[Federal Register: December 20, 2006 (Volume 71, Number 244)]
[Notices]               
[Page 76398-76399]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20de06-139]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54929; File No. SR-FICC-2006-05]

 
Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing of a Proposed Rule Change Relating to the Wind-Down of 
a Participant

December 13, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 28, 2006, Fixed 
Income Clearing Corporation (``FICC'') filed with the Securities and 
Exchange Commission (``Commission'') and on September 28, 2006, amended 
the proposed rule change as described in Items I, II, and III below, 
which items have been prepared primarily by FICC. 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change would add a new Rule 21A, Wind-Down of a 
Netting Member, to the Rules of FICC's Government Securities Division 
(``GSD'') and a new Rule 2A, Wind-Down of a Participant, to the Rules 
of FICC's Mortgage-Backed Securities Division (``MBSD'') \2\ to address 
a situation where a participant notifies FICC that it intends to wind 
down its activities and FICC determines, in its discretion, that it 
must take special action in order to protect itself and its 
participants.\3\
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    \2\ The text of FICC's GSD's proposed Rule 21A and MBSD's Rule 
2A can be found on FICC's Web site at http://www.ficc.com.

    \3\ Similar proposed rule changes have been filed by The 
Depository Trust Company [File No. SR-DTC-2006-07] and the National 
Securities Clearing Corporation [File No. SR-NSCC-2006-05].
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II. Self-Regulatory Organization'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.\4\
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    \4\ The Commission has modified parts of these statements.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The proposed rule would allow FICC to determine that a participant 
is a wind-down member or wind-down participant and would set forth the 
conditions FICC using its discretion could place on a wind-down 
participant and the actions FICC using its discretion could take with 
respect to a wind-down participant to protect itself and its members or 
participants. Such actions would include restricting or modifying the 
wind-down member or participant's use of any or all of FICC's services 
and requiring the wind-down member or participant to post increased 
clearing fund deposits. FICC would retain all of its other rights set 
forth in its rules and participant agreements, including the right to 
declare the wind-down participant insolvent, if applicable, and to 
cease to act for the participant.
    FICC believes that the proposed rule would ensure that it has the 
needed flexibility to appropriately manage the risks presented by an 
entity in crisis that remains a participant of FICC. This is 
particularly important to preserve orderly settlement in the 
marketplace and to minimize the risk of loss to FICC and its members 
and participants. The proposed rule summarizes in a single rule FICC's 
rights and the actions it may take in such a situation. These rights 
and actions are either permitted elsewhere in FICC's rules or are 
permitted pursuant to FICC's emergency authority. By summarizing them 
in a single rule, however, the proposed rule change is designed to 
provide clarity and a clear legal basis for FICC's rights or actions 
taken with respect to a wind-down member or participant. FICC also 
believes that the proposed rule is designed to minimize the need for 
rule waivers.
    FICC believes that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
because it will enhance the rules of both divisions of FICC regarding 
actions that FICC may take with respect to a wind-down of a participant 
that presents risk to FICC.

B. Self-Regulatory Organization's Statement on Burden on Competition

    FICC does not believe that the proposed rule change would have any 
impact or impose any burden on competition.

[[Page 76399]]

C. Self-Regulatory Organization'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 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) As the Commission may 
designate up to 90 days of such date 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 the proposed rule change or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-FICC-2006-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FICC-2006-05. This file 
number should be included on the subject line if e-mail 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 inspection and 
copying in the Commission's Public Reference Section, 100 F Street, 
NE., Washington, DC 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of FICC and on 
FICC's Web site at http://www.ficc.com. 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-2006-05 and should be submitted on 
or before January 10, 2007.

For the Commission by the Division of Market Regulation, pursuant to 
delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6-21707 Filed 12-19-06; 8:45 am]

BILLING CODE 8011-01-P