Document ID: SEC-2014-0957-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Fixed Income Clearing Corp.
Posted Date: 2014-06-10T04:00Z

[Federal Register Volume 79, Number 111 (Tuesday, June 10, 2014)]
[Notices]
[Pages 33244-33247]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-13450]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72305; File No. SR-FICC-2014-03]

Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify the Government Securities Division Fee Schedule, the Mortgage-
Backed Securities Division Fee Schedule for Dealers and the Mortgage-
Backed Securities Division EPN Fee Schedule

June 4, 2014.
    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 May 21, 2014, the 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 
proposal pursuant to Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 
19b-4(f)(2) thereunder \4\ 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 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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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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 amendments to the Fee Schedule 
in the Mortgage-Backed Securities Division (``MBSD'') Clearing Rules 
(the ``MBSD Clearing Rules''), the MBSD EPN Rules (the ``EPN Rules'', 
together with the MBSD Clearing Rules, the ``MBSD Rules'') and the 
Government Securities Division (``GSD'') Rulebook (the ``GSD Rules''), 
as applicable.

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

    (i) The purpose of this filing is to modify the GSD Fee Schedule, 
the MBSD Fee Schedule for dealers, and the MBSD EPN Fee Schedule. The 
fee changes are effective as of July 1, 2014.
    To guard against fluctuations in trading volume and size, FICC is 
proposing a revised GSD fee structure which reduces its fees associated 
with comparison and netting and increases the fee for obligation par, a 
revenue category deemed to be more stable. The proposed changes in 
their totality are revenue neutral.
    With respect to MBSD, over the last 18 months, FICC has experienced 
a significant decrease in the volume of transactions that MBSD 
processes. FICC believes that this decrease represents a fundamental 
shift in the MBS market. FICC's discussions with member firms indicate 
that the change in the mortgage-backed securities market will be more 
long term than originally anticipated. As a result, FICC is proposing 
to increase the MBSD fees.
    FICC has discussed the proposed fee changes with the majority of 
the GSD, MBSD and MBSD EPN members. FICC will discuss the proposed 
changes with

[[Page 33245]]

the remainder of its members over the next several weeks.
    The proposed changes to the GSD Fee Schedule, the MBSD Fee Schedule 
for dealers, and the MBSD EPN Fee Schedule are outlined below.

                                                GSD Fee Schedule
----------------------------------------------------------------------------------------------------------------
                                               Current charge                                    New charge per
                Current tiers                  per submission       New breakpoint schedule        submission
----------------------------------------------------------------------------------------------------------------
                                            TRADE SUBMISSION SCHEDULE
----------------------------------------------------------------------------------------------------------------
                                                                (Charge is applied to all
                                                                 submissions if breakpoint is
                                                                 reached).
Per submission for up to 50,000 per month...             $0.27  Per submission for total                  $0.250
                                                                 monthly submissions up to
                                                                 49,999.
Per submission for 50,001 to 100,000 per                  0.15  Per submission for total                   0.200
 month.                                                          monthly submissions between
                                                                 50,000 to 99,999.
Per submission for 100,001 or greater per                 0.01  Per submission for total                   0.150
 month.                                                          monthly submissions between
                                                                 100,000 to 249,999.
                                                                Per submission for total                   0.125
                                                                 monthly submissions between
                                                                 250,000 to 399,999.
                                                                Per submission for total                   0.100
                                                                 monthly submissions between
                                                                 400,000 to 499,999.
                                                                Per submission for total                   0.085
                                                                 monthly submissions 500,000
                                                                 and greater.
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
                                               Current charge                                    New charge per
               Current charge                     per side          New breakpoint schedule           side
----------------------------------------------------------------------------------------------------------------
                                                NETTING SCHEDULE
----------------------------------------------------------------------------------------------------------------
                                                                (Charge is applied to all
                                                                 sides if breakpoint is
                                                                 reached).
Per side that is netted.....................              0.18  Per side for total monthly                 0.150
                                                                 sides up to 49,999.
                                                                Per side for total monthly                 0.125
                                                                 sides between 50,000 to
                                                                 99,999.
                                                                Per side for total monthly                 0.125
                                                                 sides between 100,000 to
                                                                 249,999.
                                                                Per side for total monthly                 0.100
                                                                 sides between 250,000 to
                                                                 399,999.
                                                                Per side for total monthly                 0.050
                                                                 sides between 400,000 to
                                                                 999,999.
                                                                Per side for total monthly                 0.035
                                                                 sides that are 1MM and
                                                                 greater.
Current charge per 1 MM of par value that is      0.018 per MM  New charge per 1 MM of par          0.015 per MM
 Netted.                                                         value that is Netted.
----------------------------------------------------------------------------------------------------------------
                                               OBLIGATION SCHEDULE
----------------------------------------------------------------------------------------------------------------
Current charge per 1 MM of Obligation par          0.15 per MM  New charge per 1 MM of               0.17 per MM
 value.                                                          Obligation par value.
----------------------------------------------------------------------------------------------------------------

                                                              MBSD Fee Schedule for Dealers
--------------------------------------------------------------------------------------------------------------------------------------------------------
          Fee description           Current charge             Measurement                       New charge                        Measurement
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      CLEARING FEES
--------------------------------------------------------------------------------------------------------------------------------------------------------
Account Maintenance Fee (dealer)
 Primary/Secondary Account
                                           $350.00  Per account.....................  $0.00...........................  N/A.
Account Maintenance Fee (dealer)
 Investment Manager Accounts
                                            350.00  1 account.......................  0.00............................  N/A.
                                            185.00  2-3 accounts....................  0.00............................  N/A.
                                            150.00  4-7 accounts....................  0.00............................  N/A.
                                            130.00  8-10 accounts...................  0.00............................  N/A.
                                            120.00  Greater than 10 accounts........  0.00............................  N/A.
SBO Destined Processing--Trade
 Creates (dealer)
                                           1.68/MM  01-2,500........................  1.93/MM.........................  01-2,500.
                                           1.54/MM  2,501-5,000.....................  1.77/MM.........................  2,501-5,000.
                                           1.39/MM  5,001-7,500.....................  1.60/MM.........................  5,001-7,500.
                                           1.30/MM  7,501-10,000....................  1.49/MM.........................  7,501-10,000.
                                           1.15/MM  10,001-12,500...................  1.32/MM.........................  10,001-12,500.
                                           0.99/MM  12,501 and over.................  1.14/MM.........................  12,501 and over.

[[Page 33246]]

 
TBA Netting Balance Orders (SBON
 and SBOO) (dealer)
                                              0.00  N/A.............................  0.75............................  Per MM Par value.
Trade-for-Trade (including TBA and
 SPT)--Trade Creates (dealer)
                                              0.50  Per side........................  1.00............................  Per MM par value.
Option Trade Creates (dealer)
                                              2.25  Per side........................  1.00............................  Per MM par value.
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                                                                    POOL NETTING FEES
--------------------------------------------------------------------------------------------------------------------------------------------------------
Matched Pool Instructs (dealer)
                                              0.20  Per side........................  0.60............................  Per side.
Pool Obligations (dealer)
                                              0.50  Per side........................  0.00............................  N/A.
Clearance Pool vs. FICC (dealer)
                                              1.25  Per pool........................  0.00............................  N/A.
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                                                                  MBSD Bank Allocation
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              0.00  N/A.............................  Calculated monthly..............  Calculated monthly based on MBSD
                                                                                                                         bank clearance fees.
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                EPN Fee Schedule
----------------------------------------------------------------------------------------------------------------
          Fee Description           Current charge       Measurement         New charge         Measurement
----------------------------------------------------------------------------------------------------------------
Account Maintenance Fee Direct
 Account
                                           $250.00  Month (per account)..       $1,000.00  Month (per account).
Account Maintenance Fee Investment
 Manager Accounts
                                              0.00  N/A..................        1,000.00  Month/per account.
                                              0.00  N/A..................          530.00  2-3 accounts/mo./
                                                                                            each.
                                              0.00  N/A..................          430.00  4-7 accounts/mo./
                                                                                            each.
                                              0.00  N/A..................          370.00  8-10 accounts/mo./
                                                                                            each.
                                              0.00  N/A..................          340.00  Greater than 10
                                                                                            accounts/mo./each.
Message Processing Fee ON Send
                                              0.15  Per MM current face              0.17  Per MM current face
                                                     Opening of Business                    Opening of Business
                                                     to 1:00 PM.                            to 1:00 PM.
                                              0.75  Per MM current face              0.86  Per MM current face
                                                     1:00 PM to 2:00 PM.                    1:00 PM to 2:00 PM.
                                              1.50  Per MM current face              1.73  Per MM current face
                                                     2:00 PM to 3:00 PM.                    2:00 PM to 3:00 PM.
                                              1.25  Per MM current face              1.44  Per MM current face
                                                     3:00 PM to Close of                    3:00 PM to Close of
                                                     Business.                              Business.
Message Processing Fee ON Receive
                                              0.40  Per MM current face              0.46  Per MM current face
                                                     Opening of Business                    Opening of Business
                                                     to 1:00 PM.                            to 1:00 PM.
                                              0.20  Per MM current face              0.23  Per MM current face
                                                     1:00 PM to 2:00 PM.                    1:00 PM to 2:00 PM.
                                              0.20  Per MM current face              0.23  Per MM current face
                                                     2:00 PM to 3:00 PM.                    2:00 PM to 3:00 PM.
                                              0.00  Per MM current face              0.00  3:00 PM to Close of
                                                     3:00 PM to Close of                    Business.
                                                     Business.
Cancel/Correct Send
                                              0.15  Per MM current face              0.17  Per MM current face
                                                     Opening of Business                    Opening of Business
                                                     to 11:00 AM.                           to 11:00 AM.
                                              0.75  Per MM current face              0.86  Per MM current face
                                                     11:00 AM to 12:00 PM.                  11:00 AM to 12:00
                                                                                            PM.
                                              1.50  Per MM current face              1.73  Per MM current face
                                                     12:00 PM to 12:15 PM.                  12:00 PM to 12:15
                                                                                            PM.
                                              0.15  Per MM current face              0.17  Per MM current face
                                                     12:15 PM to End of                     12:15 PM to End of
                                                     Day.                                   Day.
----------------------------------------------------------------------------------------------------------------

[[Page 33247]]

    (ii) The proposed rule change will align the GSD fees and the MBSD 
fees with the costs of delivering services. Therefore, FICC believes 
the proposed rule change is consistent with the requirements of the 
Securities Exchange Act of 1934, as amended (``Act'') and the rules and 
regulations thereunder applicable to FICC, in particular Section 
17A(b)(3)(D) of the Act \5\, which requires that the GSD Rules and the 
MBSD Rules provide for the equitable allocation of reasonable dues, 
fees, and other charges among its members, respectively.
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    \5\ 5 U.S.C. 78q-1(b)(3)(D) [sic].
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(B) Clearing Agency'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. As stated above, the 
proposed changes will align the fees in the GSD Rules and the MBSD 
Rules with the costs of delivering services to its members.

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

    FICC has discussed the proposed fee changes with the majority of 
the GSD, MBSD and MBSD EPN members. FICC will discuss the proposed 
changes with the remainder of its members over the next several weeks. 
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 forgoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \6\ and Rule 19b-4(f)(2) \7\ 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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    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \7\ 17 CFR 240.19b-4(f)(2).
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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 rule-comments@sec.gov. Please include 
File Number SR-FICC-2014-03 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-2014-03. 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. 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-2014-03 and should be 
submitted on or before July 1, 2014.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
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pursuant to delegated authority.\8\

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13450 Filed 6-9-14; 8:45 am]
BILLING CODE 8011-01-P