Document ID: SEC-2022-1689-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Fixed Income Clearing Corp.
Posted Date: 2022-12-29T05:00Z

[Federal Register Volume 87, Number 249 (Thursday, December 29, 2022)]
[Notices]
[Pages 80219-80225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-28304]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96575; File No. SR-FICC-2022-009]

Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Certain MBSD Fees

December 22, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 80220]]

(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 20, 2022, 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 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(2) thereunder.\4\ 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).
    \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 modifications to FICC's 
Mortgage-Backed Securities Division (``MBSD'') Clearing Rules (``MBSD 
Rules'') and the MBSD EPN Rules (``EPN Rules'' and together with the 
MBSD Rules, the ``Rules'') in order to amend (i) certain Trade Creates 
and Trade Processing fees, (ii) the DNA Request fee, (iii) the Matched 
Pool Instruct fee, (iv) an Account Maintenance fee, and (v) the Message 
Processing fees, as described further below.\5\
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    \5\ Capitalized terms not otherwise defined herein are defined 
in the MBSD Rules and the EPN Rules, as applicable, available at 
http://www.dtcc.com/legal/rules-and-procedures.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency 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. The clearing agency 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
    FICC is proposing to amend the MBSD Rules and the EPN Rules in 
order to amend (i) certain Trade Creates and Trade Processing fees; 
(ii) the DNA Request fee, (iii) the Matched Pool Instruct fee, (iv) an 
Account Maintenance fee, and (v) the Message Processing fees, as 
described in greater detail below.
    FICC operates a cost plus low-margin pricing model and has in place 
procedures to control costs and to regularly review pricing levels 
against costs of operation. FICC reviews pricing levels against its 
costs of operation typically during the annual budget process. The 
budget is approved annually by the Board. FICC's fees are cost-based 
plus a markup as approved by the Board or management (pursuant to 
authority delegated by the Board), as applicable. This markup or ``low 
margin'' is applied to recover development costs and operating expenses 
and to accumulate capital sufficient to meet regulatory and economic 
requirements.
    FICC expects the rising interest rate environment to be a long-term 
structural change which will continue to negatively impact MBSD 
revenue. Specifically, as a result of the rising interest rate 
environment, FICC expects the decrease in transaction volumes for MBSD, 
and therefore, the decrease in revenues for MBSD, to continue in 2023. 
FICC expects inflationary pressures, and technology and infrastructure 
investments related to IT risk mitigation and resiliency initiatives to 
contribute to costs in 2023. While overall costs in 2023 are expected 
to be lower than forecasted for 2022, FICC believes the proposed 
increases in fees, as further described below, would enable FICC to 
offset the above-described expected decrease in MBSD revenue due to the 
expected decrease in transaction volumes for MBSD because of rising 
interest rate environment and would enable FICC to generate sufficient 
revenues to cover its operating costs plus generate a low net income 
margin (i.e., to be consistent with its pricing model). The net income 
margin forecasted for 2022 is lower than the net income margin range 
that FICC typically aims to achieve. Transaction volumes for MBSD were 
lower than expected in 2022 and as such, revenues for MBSD were lower 
than expected in 2022 while technology and infrastructure investments 
contributed to increased costs in 2022. As described above, FICC 
believes that the rising interest rate environment is a long-term 
structural change, which will continue to negatively impact revenues 
for MBSD in 2023. As such, the proposed increases in fees described in 
detail below are necessary to enable FICC to cover operating costs 
while generating a low net income margin. Specifically, these proposed 
fee increases would enable FICC to generate a low net income margin 
that would be in a range that FICC typically aims to achieve. As 
described above, this low margin is applied to recover development 
costs and operating expenses and to accumulate capital sufficient to 
meet regulatory and economic requirements.
(i) Certain Trade Creates and Trade Processing Fees
(a) Trade Creates Fees
    A trade create is a type of transaction used to identify the 
submission and/or subsequent processing of trades as opposed to cancels 
or notifications.
Current Fees
    In the MBSD Rules Schedule of Charges Broker Account Group and the 
MBSD Rules Schedule of Charges Dealer Account Group, there are fees for 
Trade Creates relating to Trade Processing. In the MBSD Rules Schedule 
of Charges Dealer Account Group, there are also fees for (i) Trade 
Creates relating to Trade-for-Trade Transactions, Specified Pool 
Trades, and Stipulated Trades, and (ii) Trade Creates relating to 
Options Trades.
    The current fee charged to brokers in the MBSD Rules Schedule of 
Charges Broker Account Group for Trade Creates relating to Trade 
Processing is $0.20/side.
    In the MBSD Rules Schedule of Charges Dealer Account Group, the 
current fee for Trade Creates relating to Trade Processing are as 
follows: \6\
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    \6\ Certain fees are based on the par value per million per 
month (``MM'').

------------------------------------------------------------------------
                                                            Current fee
            Total par amount traded per month               (par value
                                                          Millions/Mon.)
------------------------------------------------------------------------
01-2,500,000,000........................................           $2.00
2,500,000,001-7,500,000,000.............................            1.58
7,500,000,001-12,500,000,000............................            1.39
12,500,000,001-300,000,000,000..........................            1.19

[[Page 80221]]

 
300,000,000,001 and over................................            1.16
------------------------------------------------------------------------

    In the MBSD Rules Schedule of Charges Dealer Account Group, the 
current fees for (i) Trade Creates relating to Trade-for-Trade 
Transactions, Specified Pool Trades, and Stipulated Trades is $1.16/MM 
and (ii) Trade Creates relating to Option Trades is $1.00/MM.
Proposed Changes
    In the MBSD Rules Schedule of Charges Broker Account Group, FICC is 
proposing to revise the fee for Trade Creates relating to Trade 
Processing from $0.20/side to $.40/side.
    In the MSBD Rules Schedule of Charges Dealer Account Group, FICC is 
proposing to revise the fee for Trade Creates relating to Trade 
Processing as follows:

------------------------------------------------------------------------
                                                             Proposed
                                            Current fee     changes to
    Total par amount traded per month       (par value       fees (par
                                          Millions/Mon.)  value Millions/
                                                               Mon.)
------------------------------------------------------------------------
01-2,500,000,000........................            2.00            2.36
2,500,000,001-7,500,000,000.............            1.58            1.86
7,500,000,001-12,500,000,000............            1.39            1.64
12,500,000,001-300,000,000,000..........            1.19            1.40
300,000,000,001 and over................            1.16            1.37
------------------------------------------------------------------------

    In addition, in the MBSD Rules Schedule of Charges Dealer Account 
Group, FICC is proposing to revise the fees for (i) Trade Creates 
relating to Trade-for-Trade Transactions, Specified Pool Trades, and 
Stipulated Trades from $1.16/MM to $1.37/MM, and (ii) Trade Creates 
relating to Options Trades from $1.00/MM to $1.18/MM.
    FICC believes that the proposed increases to the above-described 
fees for Trade Creates would be consistent with FICC's cost plus low-
margin pricing model and would enable FICC to offset the expected 
decrease in MBSD revenue. As described above, FICC regularly reviews 
pricing levels against its costs of operation typically during the 
annual budget process. FICC determined during the 2023 annual budget 
process that the proposed increase in the above-described fees for 
Trade Creates would help better align costs to revenue and generate 
sufficient revenues to cover its operating costs plus generate a low 
net income margin (i.e., to be consistent with its cost plus low-margin 
pricing model). As described above, due to the rising interest rate 
environment, FICC anticipates that transaction volumes will continue to 
decrease, and therefore, MBSD revenue will also continue to decrease in 
2023. As such, FICC believes the proposed increases to the above-
described fees for Trade Creates would enable FICC to offset the 
expected decrease in MBSD revenue, and enable FICC to continue to 
generate sufficient revenues to cover its operating costs plus generate 
a low net income margin.
(b) TBA Netting Balance Order (SBON)
    In the Trade Processing section of the Schedule of Charges Dealer 
Account Group in the MBSD Rules, there is also a TBA Netting Balance 
Order (SBON) fee of $1.00/MM.\7\ The TBA Netting Balance Order (SBON) 
fee is the fee for SBON Trades that are generated from the TBA Netting 
System.\8\ Pursuant to MBSD Rule 6, Section 1, each Clearing Member's 
SBO-Destined Trades in each Account in the TBA Netting System (other 
than SBO-Destined Trades that have been converted to Trade-for-Trade 
Transactions as provided in the MBSD Rules) will be netted by CUSIP on 
a monthly basis, and the TBA Netting System will generate SBON 
Trades.\9\
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    \7\ The term ``TBA'' or ``To-Be-Announced'' means a contract for 
the purchase or sale of a mortgage-backed security to be delivered 
at an agreed-upon future date because as of the transaction date, 
the seller has not yet identified certain terms of the contract, 
such as the pool number and number of pools, to the buyer. MBSD Rule 
1, supra note 5.
    \8\ The term ``SBO'' means the settlement balance orders that 
constitute the net positions of a Clearing Member as a result of the 
TBA Netting process. The resulting transactions from this TBA 
Netting process are identified as SBON Trades. MBSD Rule 1, supra 
note 5.
    \9\ Supra note 5.
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    FICC is proposing to revise this trade processing fee from $1.00/MM 
to $1.20/MM.
    FICC believes that this proposed increase in the TBA Netting 
Balance Order (SBON) fee would be consistent with FICC's cost plus low-
margin pricing model and enable FICC to offset the expected decrease in 
MBSD revenue. As described above, FICC regularly reviews pricing levels 
against its costs of operation typically during the annual budget 
process. FICC determined during the 2023 annual budget process that the 
proposed increase in the TBA Netting Balance Order (SBON) fee would 
help better align costs to revenue and generate sufficient revenues to 
cover its operating costs plus generate a low net income margin (i.e., 
to be consistent with its cost plus low-margin pricing model). As 
described above, due to the rising interest rate environment, FICC 
anticipates that transaction volumes for MBSD will continue to 
decrease, and therefore, MBSD revenue will also continue to decrease in 
2023. As such, FICC believes the proposed increase in the TBA Netting 
Balance Order (SBON) fee would enable FICC to offset the expected 
decrease in MBSD revenue, and enable FICC to continue to generate 
sufficient revenues to cover its operating costs plus generate a low 
net income margin.
(ii) DNA Request Fee
    The Do Not Allocate (``DNA'') process is the process by which 
Clearing Members that have two or more TBA Obligations with the same 
Par Amount, CUSIP Number and established date in the settlement cycle, 
may offset such transactions against one another.\10\ In order to 
initiate the offset, Clearing Members are required to submit a request 
(``DNA Request'') to MBSD. Upon FICC's receipt and verification of this 
request, the Clearing Member's designated TBA Obligations will be

[[Page 80222]]

offset, and as a result, a Clearing Member's overall number of open TBA 
Obligations will be reduced.\11\
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    \10\ MBSD Rule 7, Section 3, supra note 5.
    \11\ Id.
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    FICC charges a fee in connection with a Clearing Member's request 
to include eligible trades in the above-described DNA process (such 
request is referred to as a ``DNA Request''). Currently, in the MBSD 
Rules Schedule of Charges Dealer Account Group, the DNA Request fee is 
listed as $1.25/MM.
    FICC is proposing to revise this DNA Request fee from $1.25/MM to 
$1.50/MM.
    FICC believes that this proposed increase in the DNA Request fee 
would be consistent with FICC's cost plus low-margin pricing model and 
enable FICC to offset the expected decrease in MBSD revenues. As 
described above, FICC regularly reviews pricing levels against its 
costs of operation typically during the annual budget process. FICC 
determined during the 2023 annual budget process that the proposed 
increase in the DNA Request fee would help better align costs to 
revenue and enable FICC to generate sufficient revenue to cover its 
operating costs plus generate a low net income margin (i.e., to be 
consistent with its cost plus low-margin pricing model). As described 
above, due to the rising interest rate environment, FICC anticipates 
that transaction volumes for MBSD will continue to decrease, and 
therefore, MBSD revenue will also continue to decrease in 2023. As 
such, FICC believes the proposed increase in the DNA Request fee would 
enable FICC to offset the expected decrease in MBSD revenue, and enable 
FICC to continue to generate sufficient revenues to cover its operating 
costs plus generate a low net income margin.
(iii) Matched Pool Instruct Fee
    Pursuant to MBSD Rule 8, Section 1, Pool Netting is a system for 
aggregating and matching offsetting allocated pools submitted by 
Clearing Members to satisfy: (i) settlement obligations associated with 
Trade-for-Trade Transactions and (ii) settlement obligations resulting 
from the TBA Netting system. Each Business Day, FICC will calculate and 
report to each Clearing Member each Pool Net Settlement Position of 
such Member. With respect to each such Pool Net Settlement Position, 
FICC will report to the Member the extent to which the Member is 
obligated to deliver Eligible Securities to FICC and/or to receive 
Eligible Securities from FICC in accordance with each such Pool Net 
Settlement Position.\12\
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    \12\ MBSD Rule 8, supra note 5.
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    In the Pool Netting fees section of the MBSD Rules Schedule of 
Charges Dealer Account Group, there is a fee for Matched Pool Instructs 
of $1.00 per side. The fee for Matched Pool Instructs is the fee for 
pools that are submitted into Pool Netting.
    FICC is proposing to increase this fee for Matched Pool Instructs 
from $1.00 per side to $1.20 per side.
    FICC believes that this proposed increase in the Matched Pool 
Instruct fee would be consistent with FICC's cost plus low-margin 
pricing model and enable FICC to offset the expected decrease in MBSD 
revenue. As described above, FICC regularly reviews pricing levels 
against its costs of operation typically during the annual budget 
process. FICC determined during the 2023 annual budget process that the 
proposed increase in the Matched Pool Instruct fee would help better 
align costs to revenue and enable FICC to generate sufficient revenue 
to cover its operating costs plus generate a low net income margin 
(i.e., to be consistent with its cost plus low-margin pricing model). 
As described above, due to the rising interest rate environment, FICC 
anticipates that transaction volumes for MBSD will continue to 
decrease, and therefore, MBSD revenue will also continue to decrease in 
2023. As such, FICC believes the proposed increase in the Matched Pool 
Instruct fee would enable FICC to offset the expected decrease in MBSD 
revenue, and enable FICC to continue to generate sufficient revenues to 
cover its operating costs plus generate a low net income margin.
(iv) Account Maintenance Fee
    In the Account Maintenance fees section of the EPN Service Schedule 
of Charges in the EPN Rules, the current fee for Direct Accounts is 
$1,000.00 per month (per account). FICC is proposing to revise this 
Account Maintenance fee for Direct Accounts from $1,000.00 per month 
(per account) to $1,200.00 per month (per account). FICC has not 
increased the Account Maintenance fee for Direct Accounts since 
2014.\13\
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    \13\ See Securities Exchange Act Release No. 72305 (June 4, 
2014), 79 FR 33244 (June 10, 2014) (SR-FICC-2014-03).
---------------------------------------------------------------------------

    FICC believes that this proposed increase in the Account 
Maintenance fee for Direct Accounts would be consistent with FICC's 
cost plus low-margin pricing model and enable FICC to offset the 
expected decrease in MBSD revenue. As described above, FICC regularly 
reviews pricing levels against its costs of operation typically during 
the annual budget process. FICC determined during the 2023 annual 
budget process that the proposed increase in the Account Maintenance 
fee would help better align costs to revenue and enable FICC to 
generate sufficient revenue to cover its operating costs plus generate 
a low net income margin (i.e., to be consistent with its cost plus low-
margin pricing model). As described above, FICC has not increased the 
Account Maintenance fee for Direct Accounts since 2014, and this 
proposed increase would enable FICC to offset the expected decrease in 
MBSD revenue, and enable FICC to continue to generate sufficient 
revenues to cover its operating costs plus generate a low net income 
margin.\14\
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    \14\ Id.
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(v) Message Processing Fees
    FICC's electronic pool notification service (the ``EPN Service'') 
provides Clearing Members and EPN Users with the ability to 
electronically communicate pool information to other EPN Users or FICC.
    In connection with the EPN Service, certain message processing fees 
are charged. Specifically, there are fees for the following EPN message 
types: (i) Notification Send, (ii) Notification Receive, (iii) Pool 
Substitution Cancel/Correct. The Notification Send fee is a fee for 
sending an EPN message type that provides MBS pool information and the 
Notification Receive fee is the fee for receiving an EPN message type 
that contains MBS pool information. Pool Substitution Cancel/Correct is 
an EPN message type that supports the simultaneous ``cancel'' of 
previously allocated pools and the ``correct'' notification of 
substituted pools; this EPN message type provides Clearing Members and 
EPN Users with a method of transmitting pool substitutions to their 
allocation counterparties. FICC charges a fee for this EPN message 
type.
    FICC is also proposing to amend the ``Message Processing Fees'' in 
the EPN Service Schedule of Charges in the EPN Rules as described 
below:

[[Page 80223]]

------------------------------------------------------------------------
                                                     Proposed changes to
   Message processing fees        Current fees              fees
------------------------------------------------------------------------
ON Send:
    Opening of Business to    $.19/million Current  $.20/million Current
     1:00 p.m.                 Face.                 Face.
    1:00 p.m. to 2:00 p.m...  $.95/million Current  $1.00/million
                               Face.                 Current Face.
    2:00 p.m. to 3:00 p.m...  $1.90/million         $2.00/million
                               Current Face.         Current Face.
    3:00 p.m. to Close of     $1.58/million         $1.67/million
     Business.                 Current Face.         Current Face.
ON Receive:
    Opening of Business to    $.51/million Current  $.54/million Current
     1:00 p.m.                 Face.                 Face.
    1:00 p.m. to 2:00 p.m...  $.26/million Current  $.28/million Current
                               Face.                 Face.
    2:00 p.m. to 3:00 p.m...  $.26/million Current  $.28/million Current
                               Face.                 Face.
Pool Substitution Cancel/
 Correct
Cancel/Correct Send:
    Open of Business up to    $0.19/million         $0.20/million
     11:00 a.m.                Current Face.         Current Face.
    11:00 a.m. up to 12:00    $0.95/million         $1.00/million
     p.m.                      Current Face.         Current Face.
    12:00 p.m. up to 12:15    $1.90/million         $2.00/million
     p.m.                      Current Face.         Current Face.
    12:15 p.m. to End of Day  $0.19/million         $0.20/million
                               Current Face.         Current Face.
------------------------------------------------------------------------

    FICC believes that the proposed increases in the above-described 
Message Processing fees would be consistent with FICC's cost plus low-
margin pricing model and enable FICC to offset the expected decrease in 
MBSD revenue. As described above, FICC regularly reviews pricing levels 
against its costs of operation typically during the annual budget 
process. FICC determined during the 2023 annual budget process that the 
proposed increases in the Message Processing fees would help better 
align costs to revenue and enable FICC to generate sufficient revenue 
to cover its operating costs plus generate a low net income margin 
(i.e., to be consistent with its cost plus low-margin pricing model). 
As described above, due to the rising interest rate environment, FICC 
anticipates that transaction volumes for MBSD will continue to 
decrease, and therefore, MBSD revenue will also continue to decrease in 
2023. As such, FICC believes the proposed increases in the Message 
Processing fees would enable FICC to offset the expected decrease in 
MBSD revenue, and enable FICC to continue to generate sufficient 
revenues to cover its operating costs plus generate a low net income 
margin.
(vi) Expected Member Impact
    The proposed rule change is expected to increase FICC's annual 
revenue by approximately $16.5 million.
    In general, FICC anticipates that the proposal would result in fee 
increases for all MBSD Clearing Members and EPN Users. FICC anticipates 
that the proposal would result in a fee increase of (i) less than 
$10,000 per year for approximately 53% of impacted affiliated MBSD 
Clearing Members and EPN Users, (ii) between $10,000 and $100,000 for 
approximately 30% of impacted affiliated MSBD Clearing Members and EPN 
Users, and (iii) more than $100,000 for approximately 17% of impacted 
affiliated MBSD Clearing Members and EPN Users.
(vii) Member Outreach
    FICC has conducted ongoing outreach to each Clearing Member and EPN 
User in order to provide them with notice of the proposed changes and 
the anticipated impact for the Clearing Members and EPN Users. As of 
the date of this filing, no written comments relating to the proposed 
changes have been received in response to this outreach. The Commission 
will be notified of any written comments received.
Implementation Timeframe
    FICC would implement this proposal on January 1, 2023. As proposed, 
a legend would be added to the Schedule of Charges Broker Account Group 
in the MBSD Rules, the Schedule of Charges Dealer Account Group in the 
MBSD Rules, and the EPN Service Schedule of Charges in the EPN Rules, 
as appropriate, stating there are changes that became effective upon 
filing with the Commission but have not yet been implemented. The 
proposed legend would include the date on which such changes would be 
implemented and the file number of this proposal, and state that once 
this proposal is implemented, the legend would automatically be 
removed.
2. Statutory Basis
    Section 17A(b)(3)(D) of the Act requires that the rules of a 
clearing agency, such as FICC, provide for the equitable allocation of 
reasonable dues, fees, and other charges among its participants.\15\ 
FICC believes that the proposed changes to increase (i) certain Trade 
Creates and Trade Processing fees, (ii) the DNA Request fee, (iii) the 
Matched Pool Instruct fee, (iv) an Account Maintenance fee, and (v) the 
Message Processing fees are consistent with this provision of the 
Act.\16\
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    \15\ 15 U.S.C. 78q-1(b)(3)(D).
    \16\ Id.
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    FICC believes the proposed changes to increase (i) certain Trade 
Creates and Trade Processing fees, (ii) the DNA Request fee, (iii) the 
Matched Pool Instruct Fee, and (iv) the Message Processing fees, as 
described above, are consistent with Section 17A(b)(3)(D).\17\ The 
proposal would provide for the equitable allocation of fees among 
participants because the proposal would apply to all participants, such 
that all Clearing Members and EPN Users, as applicable, would be 
subject to these proposed increases in these fees following the 
implementation of the proposed changes. The above-described fees are 
and would continue to be charged to all Clearing Members and EPN Users, 
as applicable, and are and would continue to be based on each Clearing 
Member's and each EPN User's utilization of MBSD's services. 
Specifically, each Clearing Member and EPN User would be charged based 
on the volume of transactions and/or messages submitted to MBSD.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78q-1(b)(3)(D).
---------------------------------------------------------------------------

    Similarly, FICC believes the above-described (i) Trade Create and 
Trade Processing fees, (ii) DNA Request fee, (iii) Matched Pool 
Instruct Fee, and (iv) Message Processing fees would continue to be 
reasonable fees under the proposed changes described above. The 
proposed changes to increase (i) certain Trade Creates and Trade 
Processing fees, (ii) the DNA Request fee, (iii) the Matched Pool 
Instruct Fee, and (iv) the Message Processing fees, as described above, 
would be consistent with FICC's cost plus low-margin pricing model. 
With the proposed changes to these fees, FICC believes it would still 
be able to continue to generate sufficient revenues to cover its 
operating costs plus generate a low net income margin. Furthermore, the 
proposed changes to these fees

[[Page 80224]]

would enable FICC to offset the expected decrease in MBSD revenue 
attributed to the long-term structural change due to the rising 
interest rate environment. As described above, FICC expects the rising 
interest rate environment to be a long-term structural change which 
will continue to negatively impact MBSD revenue. Specifically, as a 
result of the rising interest rate market, FICC expects the decrease in 
transaction volumes for MBSD, and therefore, the decrease in revenues 
for MBSD, to continue in 2023. As such, FICC believes the proposed 
changes to increase (i) certain Trade Creates and Trade Processing 
fees, (ii) the DNA Request fee, (iii) the Matched Pool Instruct Fee, 
and (iv) the Message Processing fees would enable FICC to offset the 
above-described expected decrease in MBSD revenue due to the expected 
decrease in transaction volumes for MBSD because of rising interest 
rate environment.
    FICC also believes the proposed change to increase the Account 
Maintenance fee for Direct Accounts is consistent with Section 
17A(b)(3)(D) of the Act.\18\ The proposal would provide for the 
equitable allocation of fees among participants because the proposal 
would apply to all participants, such that all Clearing Members and EPN 
Users with Direct Accounts would be subject to the proposed increase in 
the Account Maintenance fee for Direct Accounts.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78q-1(b)(3)(D).
---------------------------------------------------------------------------

    In addition, FICC believes the Account Maintenance fee for Direct 
Accounts would continue to be a reasonable fee under the proposed 
change described above. The proposed change to increase the Account 
Maintenance fee for Direct Accounts would be consistent with FICC's 
cost plus low-margin pricing model, and as described above, FICC has 
not increased this fee since 2014. With the proposed change to this 
fee, FICC believes it would still be able to continue to generate 
sufficient revenues to cover its operating costs plus generate a low 
net income margin. FICC believes the proposed increase in the Account 
Maintenance fee for Direct Accounts would enable FICC to offset the 
expected decrease in MBSD revenue due to the expected decrease in 
transaction volumes for MBSD because of the rising interest rate 
environment.
    Based on the foregoing, FICC believes the proposed rule change is 
consistent with Section 17A(b)(3)(D) of the Act.\19\
---------------------------------------------------------------------------

    \19\ Id.
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Burden on Competition

    FICC believes that the proposed changes to increase (i) certain 
Trade Creates and Trade Processing fees, (ii) the DNA Request fee, 
(iii) the Matched Pool Instruct fee, (iv) an Account Maintenance fee, 
and (v) the Message Processing fees may impose a burden on competition. 
However, FICC believes any burden on competition that may result from 
the proposed fee increases would be necessary and appropriate in 
furtherance of the purposes of the Act, as permitted by Section 
17A(b)(3)(I) of the Act.\20\
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

    FICC believes the proposed changes to increase (i) certain Trade 
Creates and Trade Processing fees, (ii) the DNA Request fee, (iii) the 
Matched Pool Instruct fee, (iv) an Account Maintenance fee, and (v) the 
Message Processing fees are necessary because these proposed fee 
increases would provide FICC with the ability to achieve and maintain 
its net income margin. In addition, FICC believes these proposed fee 
increases are appropriate because these proposed fee increases would 
enable FICC to offset the expected decrease in revenue in MBSD due to 
the expected decrease in transaction volumes for MBSD because of the 
rising interest rate environment (which FICC believes is a long-term 
structural change).

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

    FICC reviewed the proposed rule change with Clearing Members and 
EPN Users. FICC has not received any written comments relating to this 
proposal. If any additional written comments are received, they will be 
publicly filed as an Exhibit 2 to this filing, as required by Form 19b-
4 and the General Instructions thereto.
    Persons submitting comments are cautioned that, according to 
Section IV (Solicitation of Comments) of the Exhibit 1A in the General 
Instructions to Form 19b-4, the Commission does not edit personal 
identifying information from comment submissions. Commenters should 
submit only information that they wish to make available publicly, 
including their name, email address, and any other identifying 
information.
    All prospective commenters should follow the Commission's 
instructions on how to submit comments, available at https://www.sec.gov/regulatory-actions/how-to-submit-comments. General 
questions regarding the rule filing process or logistical questions 
regarding this filing should be directed to the Main Office of the 
SEC's Division of Trading and Markets at [email protected] or 
202-551-5777.

III. Date of Effectiveness of the Proposed Rule Change, and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \21\ of the Act and paragraph (f) \22\ of Rule 19b-4 
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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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 17 CFR 240.19b-4(f).
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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 [email protected]. Please include 
File Number SR-FICC-2022-009 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FICC-2022-009. 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 website (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

[[Page 80225]]

those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website 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 and on 
DTCC's website (http://dtcc.com/legal/sec-rule-filings.aspx). All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-FICC-2022-009 and should be 
submitted on or before January 19, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-28304 Filed 12-28-22; 8:45 am]
BILLING CODE 8011-01-P