Document ID: SEC-2012-0670-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Fixed Income Clearing Corp.
Posted Date: 2012-04-30T04:00Z

[Federal Register Volume 77, Number 83 (Monday, April 30, 2012)]
[Notices]
[Pages 25522-25523]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-10308]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66856; File No. SR-FICC-2012-02]

Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Order Approving Proposed Rule Change Relating To Remove Functionality 
in the Government Securities Division's Rules That Is No Longer 
Utilized by Participants

April 25, 2012.

I. Introduction

    On February 29, 2012, the Fixed Income Clearing Corporation 
(``FICC'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change SR-FICC-2012-02 pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 \2\ thereunder. The proposed rule change was published 
for comment in the Federal Register on March 16, 2012.\3\ The 
Commission received no comment letters on the proposed rule change. 
This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 15822 (March 12, 2012), 
77 FR 15822 (March 16, 2012).
---------------------------------------------------------------------------

II. Description

    This rule change revises certain rules of the Government Securities 
Division (``GSD'') to eliminate references to functions or 
classifications that are either technologically obsolete or no longer 
utilized by GSD's participants.

[[Page 25523]]

1. ``Non-Conversion Participants''/``Conversion Participants''

    When first implemented, the DVP System required all participants 
that submitted when issued trades to resubmit those trades with final 
money calculations on the night of Auction Date, after the Treasury 
auction results were announced. Subsequent to the initial 
implementation, enhancements were incorporated such that the DVP System 
recalculated trades (repriced) based on auction results. FICC also 
incorporated an option whereby participants could decide if they wanted 
to resubmit their trades (participants who elected this option were 
known as ``Non-Conversion Participants'') or take FICC's repricing 
notification (participants who elected this option were known as 
``Conversion Participants''). With the implementation of Interactive 
Messaging in 2000, the few remaining Non-Conversion Participants agreed 
to take FICC's calculations, rather than resubmit their trades to FICC. 
As such, FICC proposed to remove references in the rules to Non-
Conversion Participants. Given that all participants who submit when-
issued transactions for matching/netting are subject to accepting 
FICC's calculations for their trades based on Treasury auction results, 
the proposed rule changes replace references to ``Conversion 
Participants'' with ``Participants.''

2. Auction Priority Delivery Requests and Customer Delivery Requests 
(``CDR''s)

    Auction Priority Delivery Requests, also known as CDRs, were 
originally built for FICC's batch file transfer, which was the initial 
proprietary method that participants used to submit trade activity to 
FICC. This functionality allowed the dealer to instruct FICC to 
withhold certain auction trades from the net to ensure that a priority 
client received its auction allotment so the trade could not be netted 
out during FICC's end of day netting process. However, when Interactive 
Messaging was implemented in 2000, this instruction type was not 
supported as it was no longer used. As a result, FICC proposed to 
remove references in the rules to Auction Priority Delivery Requests 
and CDRs.

3. Repo Substitution Criteria

    FICC initially provided optional fields for Repo Substitution 
Criteria for trade submissions. However, over the years, participants 
generally have not used these fields. Because the fields were provided 
as an informational courtesy that has not been used by participants, 
FICC is deleting references to those fields in its rules.
    In addition to the above-referenced changes, FICC proposed to make 
the following additional technical corrections to the GSD rules:

--Terminal interfaces and video display terminals are currently 
referenced in the rules. The terminals became obsolete when FICC 
replaced them with a web browser interface. Because the terminals are 
no longer in existence, FICC proposed to remove references to these 
methods from the GSD rules.
--Currently, the ``Schedule of Required and Other Data Submission Items 
from GCF Repo Transactions'' refers to ``Reverse dealer Exec. Id'' and 
a ``Repo dealer Exec Id.'' When FICC began using the GSD RTTM web 
format, these fields were eliminated because they did not have any 
significance for GCF repo trades. As a result, FICC proposed to remove 
these references from the rules.

III. Discussion

    Section 19(b)(2)(B) of the Act \4\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that such proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such organization. Section 17A(b)(3)(F) of the Act 
requires that the rules of a registered clearing agency be designed to 
promote the prompt and accurate clearance and settlement of securities 
transactions.\5\ The proposed rule change clarifies GSD's rules by 
removing references to functions or classifications that are either 
technologically obsolete or no longer utilized by GSD's participants. 
The Commission believes that these clarifications will promote the 
prompt and accurate clearance and settlement of securities transactions 
for which FICC is responsible by ensuring that GSD's rules describe 
only functions and classifications that are actually offered by GSD.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78s(b)(2)(B).
    \5\ 15 U.S.C. 78a-1(b)(3)(F).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) \7\ of the 
Act, that the proposed rule change (File No. SR-FICC-2012-02) be, and 
hereby is, approved.\8\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(2).
    \8\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact of efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-10308 Filed 4-27-12; 8:45 am]
BILLING CODE 8011-01-P