Document ID: SEC-2011-1541-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Fixed Income Clearing Corp.
Posted Date: 2011-10-11T04:00Z

[Federal Register Volume 76, Number 196 (Tuesday, October 11, 2011)]
[Notices]
[Pages 62876-62877]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26136]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65479; File No. SR-FICC-2011-06]

Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Order Approving Proposed Rule Change To Eliminate Two Rules of the 
Mortgage-Backed Securities Division That FICC Believes Are No Longer 
Utilized or Necessary

October 4, 2011.

I. Introduction

    On August 17, 2011, Fixed Income Clearing Corporation (``FICC'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change SR-FICC-2011-06 pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder.\2\ The proposed rule change was published for comment in 
the Federal Register on August 31, 2011.\3\ The Commission received no 
comment letters. For the reasons discussed below, the Commission is 
granting approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-65198 (August 25, 
2011), 76 FR 54268 (August 31, 2011).
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II. Description

    This rule change will eliminate two Mortgage-Backed Securities 
Division (``MBSD'') rules which FICC believes are no longer utilized or 
necessary. The first rule that will be eliminated is Article II, Rule 
1, Section 3, which was put in place to stem certain abuses of cash 
adjustments taking place in the mid to late 1990s (specifically, 
traders were manipulating pricing on their submission of trades in 
order to maximize their cash adjustments). Because cash adjustments 
were deleted from the rules via the approved rule filing FICC 2010-
08,\4\ FICC believes the rule imposing trade restrictions between 
accounts is no longer necessary.
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    \4\ See Securities Exchange Act Release No. 34-63611 (December 
28, 2010), 76 FR 408 (January 4, 2011) (SR-FICC-2010-08).
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    The second rule that will be eliminated relates to the ``match 
modes'' currently referenced in the MBSD rules. Currently, the rules 
provide that dealers may elect to have the comparison of their 
transactions governed in either ``Exact Match Mode'' or ``Net Position 
Match Mode.'' In Exact Match Mode, trade input that matches in all 
other respects will be compared only if the par amount of the eligible 
securities reported to have been sold or purchased

[[Page 62877]]

by the dealer for a particular transaction is identical to the par 
amount for a particular transaction reported by the broker. In a Net 
Position Match Mode, trade input that matches in all other respects 
will be compared only if the aggregate par amount for one or more 
transactions in eligible securities reported to have been sold or 
purchased by the dealer equals the aggregate par amount for one or more 
transactions reported by the broker. Currently, no participants have 
elected to have their transactions governed in Exact Match Mode. FICC 
believes there is no need to provide participants with a choice of 
match mode because MBSD's system already attempts to find an exact 
match for trade input and, only if an exact match is not found, will 
the system revert to Net Position Match Mode. This change will require 
the deletion of subpart (a) of Article II, Rule 3, Section 4 and 
conforming changes to the definitions (in Article I) and in Article II, 
Rule 3, Sections 3 and 4 to reflect that Net Position Match Mode will 
be the only available match mode.
    Given that FICC believes these rules have no utility for MBSD's 
participants, MBSD proposed to eliminate these rules. FICC believes 
elimination of these rules will also promote efficiency. MBSD is 
currently undertaking a rewrite of its internal software applications 
and operating systems to promote efficiency and streamline its 
operations. Approval of the elimination of these rules will allow MBSD 
to avoid writing unnecessary coding during the rewrite process.

III. Discussion

    Section 17A(b)(3)(F) of the Act \5\ requires, among other things, 
that the rules of a clearing agency be designed to remove impediments 
to and perfect the mechanism of a national system for the prompt and 
accurate clearance and settlement of securities transactions. The 
Commission believes that because the proposed rule change removes 
outdated rules that no longer have utility for participants and 
conserves resources by avoiding the writing of unnecessary code during 
MBSD's software rewrite process, it is consistent with the requirements 
of Section 17A(b)(3)(F) of the Act.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \6\ and the 
rules and regulations thereunder.
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    \6\ 15 U.S.C. 78q-1.
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    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (File No. SR-FICC-2011-06) be, 
and hereby is, approved.\8\
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26136 Filed 10-7-11; 8:45 am]
BILLING CODE 8011-01-P