Document ID: SEC-2008-1370-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Fixed Income Clearing Corp.
Posted Date: 2008-10-07T04:00Z

[Federal Register: October 7, 2008 (Volume 73, Number 195)]
[Notices]               
[Page 58698-58700]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07oc08-125]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58696; File No. SR-FICC-2008-04]

 
Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Rules of the Government Securities Division To Expand the 
Types of Securities Eligible for the GCF Repo Service

September 30, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on

[[Page 58699]]

September 9, 2008, the Fixed Income Clearing Corporation (``FICC'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change described in Items I, II, and III below, which 
items have been prepared primarily by FICC. FICC filed the proposed 
rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \2\ and 
Rule 19b-4(f)(4) thereunder \3\ so that the proposal was effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \3\ 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of the proposed rule change is to amend the rules of 
FICC's Government Securities Division (``GSD'') to expand the types of 
securities eligible for the GCF Repo service to include Separate 
Trading of Registered Interest and Principal Securities (``STRIPS'').

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 these 
statements.\4\
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    \4\ The Commission has modified the text of the summaries 
prepared by FICC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The GCF Repo service of FICC's GSD is a significant alternative 
financing vehicle to the delivery versus payment and tri-party repo 
markets. Currently, most Treasury securities, non-mortgage-backed 
Agency securities, fixed and adjustable rate mortgage-backed 
securities, and Treasury Inflation-Protected Securities (``TIPS'') are 
eligible for this service.\5\ FICC is now proposing to expand the types 
of securities eligible for the GCF Repo service to include STRIPS. 
STRIPS are zero-coupon securities created by the U.S. Treasury by 
separating the principal and interest cash flows of Treasury notes, 
bonds, and TIPS. The principal and interest cash flows may then be 
owned and traded separately.
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    \5\ Securities Exchange Act Release Nos. 40623 (October 30, 
1998), 63 FR 59831 (November 5, 1998) [File No. SR-GSCC-98-02], 
42996 (June 30, 2000), 65 FR 42740 (July 11, 2000) [File No. SR-
GSCC-00-04], and 51579 (April 20, 2005), 70 FR 21480 (April 26, 
2005) [File No. SR-FICC-2005-08] for further information on the 
Commission's approval of the eligibility of such securities.
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    STRIPS, which are Fedwire-eligible securities, are generally 
accepted as collateral in tri-party repo arrangements. In addition, 
STRIPS are currently netting eligible for the GSD's delivery versus 
payment service.\6\ FICC has received requests from members to make 
STRIPS eligible for the GCF Repo service. FICC has determined that with 
respect to its risk management processes STRIPS will be treated the 
same as all other GCF Repo-eligible collateral.
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    \6\ FICC has obtained the Generic CUSIP Number necessary for the 
inclusion of STRIPS as a ``GCF Repo Security'' on its master file of 
eligible securities. Upon implementation of this proposal, FICC will 
effectuate the proposed change by listing this Generic CUSIP Number 
on the master file. The date of such listing will be announced to 
members by Important Notice.
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    FICC would like to clarify that for purposes of GSD Rule 20, 
``Special Provisions for GCF Repo Transactions,'' general references to 
U.S. Treasury bills, notes, or bonds do not currently and will not upon 
implementation of this proposal include STRIPS. Therefore, STRIPS could 
not be used within the GCF Repo service to satisfy obligations to post 
or return any other type of collateral. However, as is consistent with 
the existing GCF Repo provisions, U.S. Treasury bills, notes, bonds or 
cash may generally be used to satisfy obligations to post or return 
other collateral types, and therefore could be used to satisfy any such 
obligations involving STRIPS.
    The proposed rule change is consistent with the requirements of 
Section 17A of the Act \7\ and the rules and regulations thereunder 
applicable to FICC because it allows FICC to expand an important 
service that provides members with a continuing ability to engage in 
general collateral trading activity in a safe and efficient manner. As 
such, the proposed rule facilitates the prompt and accurate clearance 
and settlement of securities transactions and assures the safeguarding 
of securities and funds which are in the custody or control of FICC or 
for which it is responsible.
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    \7\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization'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.

(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

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(4) \9\ 
thereunder because the proposal effects a change in an existing service 
of FICC that does not adversely affect the safeguarding of securities 
or funds in the custody or control of FICC or for which it is 
responsible and does not significantly affect the respective rights or 
obligations of FICC or persons using the service. At any time within 
sixty days of the filing of the proposed rule change, the Commission 
may summarily abrogate 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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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(4).
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-FICC-2008-04 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-2008-04. 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

[[Page 58700]]

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 Room, 100 F Street, NE., Washington, DC 
20549, on official business days between the hours of 10 a.m. and 3 
p.m. The text of the proposed rule change is available at FICC, the 
Commission's Public Reference Room, and http://www.dtcc.com/downloads/
legal/rule_filings/2008/ficc/2008-04.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-2008-04 and should be submitted on 
or before October 28, 2008.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-23688 Filed 10-6-08; 8:45 am]

BILLING CODE 8011-01-P