Document ID: SEC-2014-1791-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Fixed Income Clearing Corp
Posted Date: 2014-10-24T04:00Z

[Federal Register Volume 79, Number 206 (Friday, October 24, 2014)]
[Notices]
[Pages 63657-63659]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-25301]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73391; File No. SR-FICC-2014-07]

Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing of Proposed Rule Change To Amend the Clearing Rules of 
the Mortgage-Backed Securities Division To Establish a Membership 
Category and Minimum Financial Requirements for Insured Credit Unions

October 20, 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 October 15, 2014, 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 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. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The purpose of this filing is to amend the Clearing Rules (the 
``Rules'') of the Mortgage-Backed Securities Division (``MBSD'') of 
FICC in order to establish a membership category and financial minimum 
requirements for insured credit unions.

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

[[Page 63658]]

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

(1) Purpose
    The purpose of this proposed rule change is to establish a 
membership category and minimum financial requirements for ``insured 
credit unions'' as such term is defined in the Federal Credit Union Act 
(``FCUA'').\3\ The FCUA defines ``insured credit unions'' to mean ``any 
credit union the member accounts of which are insured in accordance 
with Title II of [FCUA]''.\4\ Because Title II of the FCUA requires all 
credit unions that are chartered by the National Credit Union 
Administration \5\ (``federal credit unions'') to have insured 
accounts, the term ``insured credit union'' includes all insured 
federal credit unions. Because Title II of the FCUA permits the NCUA 
Board to insure (i) State credit unions and (ii) credit unions 
operating under the jurisdiction of the Department of Defense 
(``Defense Credit Unions''), as long as such credit unions comply with 
FCUA and implementing NCUA regulations, the term ``insured credit 
unions'' also includes both federally-insured State credit unions and 
federally-insured Defense Credit Unions. It should be noted, however, 
that the proposed category for ``insured credit unions'' does not 
encompass credit unions whose accounts have private or other types of 
non-federal insurance. As a result, any such credit unions will not be 
permitted to join MBSD.
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    \3\ Federal Credit Union Act, 12 U.S.C. 1752(7)(2013).
    \4\ 12 U.S.C. 1752(7).
    \5\ The National Credit Union Administration (NCUA) is the 
independent federal agency that regulates, charters and supervises 
federal credit unions. With the backing of the full faith and credit 
of the U.S. Government, NCUA operates and manages the National 
Credit Union Share Insurance Fund (NCUSIF), insuring the deposits of 
more than 95 million account holders in all federal credit unions 
and the overwhelming majority of state-chartered credit unions. See 
www.ncua.gov.
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    FICC believes the participation of this category as guaranteed 
service members will contribute to the safety, efficiency, and 
transparency of the market by allowing FICC to capture a greater part 
of the activity of its existing members and by introducing activity of 
current non-members to FICC. FICC also believes that insured credit 
unions will benefit from the MBSD clearing service and the associated 
operational efficiencies of a central counterparty service.
    Specifically, this filing proposes to revise MBSD Rule 2A 
(``Initial Membership Requirements'') to include a category for insured 
credit unions that are in good standing with their primary regulators 
and to establish minimum financial requirements for such category. Such 
applicants will be required to have a level of equity capital as of the 
end of the month prior to the effective date of their membership of at 
least $100 million and achieve the ``well capitalized'' statutory net 
worth category classification defined by the NCUA under 12 CFR Part 
702.
    In addition to meeting the required financial resources and 
creditworthiness requirements (which are based on entity type, the 
types of services the applicant will use and the type of accounting 
principles used to prepare their audited financial statements), 
applicants in this new category will have to demonstrate that (1) they 
have an established profitable business history of a minimum of 6 
months or personnel with sufficient operational background and business 
experience for the firm to conduct its business and to be a member (as 
is required of all other membership categories) and (2) they are able 
to satisfactorily communicate with FICC, fulfill anticipated 
commitments to and meet the operational requirements of FICC with 
necessary promptness and accuracy, and conform to any condition and 
requirement that FICC reasonably deems necessary for its protection or 
that of its Members.\6\
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    \6\ MBSD Rule 2A Section 2, Mortgage-Backed Securities Division 
Clearing Rules.
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    The proposed changes to MBSD Rule 2A provide that insured credit 
unions will be designated as ``Tier One Clearing Members'' for loss 
allocation purposes.\7\
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    \7\ MBSD Rule 4 Section 7, Mortgage-Backed Securities Division 
Clearing Rules.
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(2) Statutory Basis
    The present filing is consistent with the requirements of Section 
17A(b)(3)(F) of the Securities Exchange Act of 1934, as amended, and 
the rules and regulations thereunder applicable to FICC because the 
proposed rule change permits the participation of insured credit 
unions, thereby providing these firms with the benefits of the central 
counterparty service, which includes, among other things, trade 
comparison, to-be-announced netting, electronic pool notification 
allocation, pool comparison, pool netting, settlement, and risk 
management for eligible securities. In addition, this proposal allows 
FICC to capture a greater market share of the activity of its existing 
members and non-members thus promoting the prompt and accurate 
clearance and settlement of securities transactions. Under the proposed 
rule change, existing members will be able to submit their eligible 
trading activity with entities in the proposed membership category to 
MBSD and thereby obtain the benefits of the central counterparty 
service for such trading activity.

(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.

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

    Written comments relating to the proposed rule changes 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 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The proposal shall not take effect until all regulatory actions 
required with respect to the proposal are completed.

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-2014-07 on the subject line.

[[Page 63659]]

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-2014-07. 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 20549-1090 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 
FICC's Web site: http://www.dtcc.com/~/media/Files/Downloads/legal/
rule-filings/2014/ficc/SR-FICC-2014-07.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-2014-07 
and should be submitted on or before November 14, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-25301 Filed 10-23-14; 8:45 am]
BILLING CODE 8011-01-P