Document ID: SEC-2006-0031-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Fixed Income Clearing Corp.
Posted Date: 2006-01-12T05:00Z

[Federal Register: January 12, 2006 (Volume 71, Number 8)]
[Notices]               
[Page 2078-2080]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ja06-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53061; File No. SR-FICC-2005-20]

 
Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
to Impose a Surcharge on Participants Submitting Trade Data by Batch 
Method

January 5, 2006.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 28, 2005, the 
Fixed Income Clearing Corporation (``FICC'') filed with the Securities 
and Exchange Commission (``Commission'') and on

[[Page 2079]]

December 22, 2005, amended \2\ 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)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder \4\ 
whereby the proposal became 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\ The amendment clarified an ambiguity in the proposed rule 
text.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FICC is implementing a surcharge to be imposed on participants of 
its Mortgage-Backed Securities Division (``MBSD'') that submit trade 
data by batch submission methods.

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.\5\
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    \5\ 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

    Since the inception of FICC's Real-Time Trade Matching (``RTTM'') 
service in 2002, the interactive submission method has grown to 
encompass an increasing portion of trades being submitted to FICC's 
MBSD.\6\ The expansion of the use of the interactive trade submission 
method through RTTM for mortgage-backed securities is a FICC initiative 
because of the negative effects associated with the use of batch 
submission methods.\7\ These negative effects include:
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    \6\ As of May 2005, 35 percent of MBSD participants use the 
interactive submission method. The activity of these participants 
encompassed 80 percent of total par and 74 percent of total sides of 
transactions processed.
    \7\ See Securities Exchange Act Release No. 45563 (Mar. 14, 
2002), 67 FR 13389 (Mar. 22, 2002) [File No. SR-MBSCC-2001-02].
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    (a) Increased risk to the batch submitting participant as it 
foregoes timely achievement of trade comparison and a legally binding 
confirmation;
    (b) increased risk to the contra side of the batch submitting 
participant and creation of an operational burden for the contra side 
in accounting for differing submission methods among its 
counterparties; and
    (c) preclusion of FICC from laying the foundation to further reduce 
all participant costs through retirement of its proprietary batch trade 
submission program.
    In order to ensure that participants use the RTTM service and 
submit transaction data on a timely basis and to cover the cost of 
batch processing, FICC will impose the following fees on participants 
of MBSD:
    (a) Single-batch submitters will be subject to a 50 percent 
surcharge (with a minimum of $500) on their post discount trade 
recording fees as recorded on their monthly bill and
    (b) multi-batch submitters will be subject to a 20 percent 
surcharge (with a minimum of $500) on their post discount trade 
recording fees as recorded on their monthly bill.
    As an additional incentive for participants to switch to the 
interactive submission method, the minimum surcharge may be increased 
to $1,000 at a later date, anticipated to occur at the beginning of 
2007.\8\ FICC also plans to announce a date, anticipated to be December 
31, 2007, after which it will no longer support batch submissions.\9\
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    \8\ FICC will file a proposed rule change with the Commission 
and will notify its MBSD participants by Important Notice prior to 
implementing any such fee increase.
    \9\ FICC will file a proposed rule change with the Commission 
and will notify its MBSD participants by Important Notice prior to 
implementing this policy.
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    Surcharge revenue will be paid through to individual interactive 
messaging submitters pro rata based upon their ratio of trade recording 
fees to system-wide trade recording fees. FICC reserves the right to 
waive the surcharge for a particular MBSD participant if it determines 
in its sole discretion that the participant's classification as a 
single or multi-batch user in a particular month is due to a non-
recurring system or operational problem.
    The fees will become effective April 1, 2006.
    FICC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act \10\ and the rules and 
regulations thereunder applicable to FICC because it encourages FICC's 
participants to communicate with the clearing corporation in a manner 
that will promote the prompt and accurate clearance and settlement of 
securities transactions.
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    \10\ 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 an 
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 proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A)(ii) of the Act \11\ and Rule 19b-
4(f)(2) \12\ thereunder because the rule establishes a due, fee, or 
other charge. At any time within sixty days of the filing of the 
amended proposed rule change,\13\ 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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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
    \13\ For purposes of calculating the sixty day period within 
which the Commission may summarily abrogate the proposed rule change 
under section 19(b)(3)(C) of the Act, the Commission considers the 
period to commence on the date on which the last amendment to the 
proposed rule change was filed with the Commission. 15 U.S.C. 
78s(b)(3)(C).
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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, as amended, 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 mailto:rule-comments@sec.gov. Please 

include File Number SR-FICC-2005-20 on the subject line.

[[Page 2080]]

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-FICC-2005-20. 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 inspection 
and copying in the Commission's Public Reference Section, 100 F Street, 
NE., Washington, DC 20549. Copies of such filings also will be 
available for inspection and copying at the principal office of FICC 
and on FICC's Web site at http://www.ficc.com. 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-2005-20 and should be submitted on 
or before February 2, 2006.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-215 Filed 1-11-06; 8:45 am]

BILLING CODE 8010-01-P