Document ID: SEC-2010-1086-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Fixed Income Clearing Corp.
Posted Date: 2010-07-19T04:00Z

[Federal Register: July 19, 2010 (Volume 75, Number 137)]
[Notices]               
[Page 41908-41909]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19jy10-123]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62478; File No. SR-FICC-2010-02]

 
Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing of Proposed Rule Change To Amend the Rules of the 
Government Securities Division and the Mortgage-Backed Securities 
Division To Change the Classification of U.S. Branches or Agencies of 
Non-U.S. Banks From Foreign to U.S. Members

July 9, 2010.
    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 June 24, 2010, 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 substantially prepared 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).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The purpose of this proposed rule change is to amend the rules of 
FICC's Government Securities Division (``GSD'') and the Mortgage-Backed 
Securities Division (``MBSD'') to change the classification of U.S. 
branches or agencies of non-U.S. banks from ``foreign'' to ``U.S. 
members''.

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.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    FICC currently classifies as ``foreign'' its members that are U.S. 
branches or agencies of non-U.S. banks (``U.S. Branches''). FICC is 
proposing to amend the rules of the GSD and MBSD to classify such U.S. 
Branches as U.S. members, based particularly on the rationale that such 
U.S. Branches are regulated by U.S. and or state regulators. The 
proposed rule change harmonizes FICC's rules with those of its 
affiliates, The Depository Trust Company and National Securities 
Clearing Corporation, which presently classify U.S. branches of foreign 
banks as domestic members (based on domestic regulation).\3\
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    \3\ This is reflected in Section 2 of DTC's Policy Statements on 
the Admission of Participants, and Addendum O of NSCC's Rules 
entitled ``Admission of Non-U.S. Entities as Direct NSCC Members''.
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    The proposed rule change reflects that the U.S. Branches are 
regulated by a U.S. regulator and/or state regulator so that an 
insolvency of such a member would be determined by applicable domestic 
``ring-fence'' laws.\4\ The appropriate domestic regulator treats U.S. 
Branches as U.S. entities for most significant matters. Under the 
proposed rule changes, such members will be treated as domestic members 
for all purposes under FICC's rules and procedures, unless FICC states 
otherwise in the Rules.\5\
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    \4\ In the United States, ``ring-fencing'' refers to the 
procedure for dealing with branches of agencies of insolvent foreign 
banks in the United States pursuant to which the state or federal 
regulator, as applicable, will seize and administer the local assets 
of an insolvent institution, with a preference for local creditors, 
in a liquidation that is separate from the liquidation of the parent 
foreign bank as a whole.
    \5\ For example, if this Rule change is approved such members 
will no longer be required to submit annual updates to their foreign 
legal opinions unless FICC deems it necessary to address legal risk. 
Applicants in this category will, however, continue to be required 
to submit an initial foreign legal opinion on their home country law 
with their membership application.

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[[Page 41909]]

    FICC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act \6\ and the rules and 
regulations thereunder because the proposed modifications would 
facilitate FICC's prompt and accurate clearance and settlement of 
securities transactions by providing consistent treatment to Members 
that are regulated by a U.S. and/or state regulator and that are 
subject to a domestic insolvency regime.
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    \6\ 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 would 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 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 thirty-five 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 ninety 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 Commissions 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-2010-02 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FICC-2010-02. 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 Web site viewing and 
printing in the Commission's Public Reference Section, 100 F Street, 
NE., Washington, DC 20549-1090, on official business days between the 
hours of 10 a.m. and 3 p.m. Copies of such filings will also be 
available for inspection and copying at the principal office of the 
FICC and on FICC's Web site at http://www.dtcc.com/downloads/legal/
rule_filings/2009/ficc/2009-02.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-2010-02 
and should be submitted on or before August 9, 2010.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-17489 Filed 7-16-10; 8:45 am]
BILLING CODE 8011-01-P