

[Federal Register: October 31, 2005 (Volume 70, Number 209)]
[Notices]               
[Page 62361-62362]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31oc05-82]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52654; File No. SR-FICC-2005-16]

 
Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Clarify Maturity Periods Set Forth in Margin Factor Tables

October 21, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 19, 2005, the 
Fixed Income Clearing Corporation (``FICC'') filed with the Securities 
and Exchange Commission (``Commission'') the proposed rule change 
described in Items I, II, and III below, which items have been prepared 
primarily by FICC. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested parties.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FICC is making a technical change to the rules of its Government 
Securities Division (``GSD'') to clarify the remaining maturity periods 
set forth in its margin factor tables.\2\
---------------------------------------------------------------------------

    \2\ This clarification also necessitates a similar technical 
change to Appendix B in each of FICC's cross-margining agreements.
---------------------------------------------------------------------------

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.\3\
---------------------------------------------------------------------------

    \3\ The Commission has modified the text of the summaries 
prepared by FICC.
---------------------------------------------------------------------------

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The GSD uses its margin factor tables to assign haircuts and 
offsets on member net settlement positions based on a security's 
remaining maturity period. The GSD's current clearing fund application 
properly takes into account the when-issued period of each security 
with respect to remaining maturity periods. However, this is not 
clearly reflected in the margin factor tables in the rules.\4\ GSD is 
amending its margin

[[Page 62362]]

factor tables by adding 15 days to each remaining maturity category to 
reflect current practice and avoid confusion to members.\5\ GSD also is 
making the same technical changes to its cross-margining agreements.\6\
---------------------------------------------------------------------------

    \4\ During the one to two week period between the time a new 
Treasury note or bond issue is auctioned and the time the securities 
sold are issued, securities that have been auctioned but not yet 
issued trade actively on a when-issued basis. They also trade when-
issued during the period between the announcement and the auction. 
The changes to the margin factor tables are designed to account for 
the when-issued period. For example, on July 24 the Treasury may 
announce the issuance of a two-year note to be issued on July 31. 
FICC members may trade the security during the time period between 
July 24 and July 31. Though the appropriate maturity period for 
assigning haircuts and offsets for this two-year note should be ``1 
year + 1 day to 2 years,'' the note would fall into the ``2 years + 
1 day to 4 years'' category if the remaining maturity were measured 
from the beginning of when-issued trading. A footnote in the current 
margin factor tables, which reads ``As regards a Forward Net 
Settlement Position, remaining maturity is measured from the date of 
issuance of the Eligible Netting Securities that underlie the 
Position,'' clarifies that remaining maturity periods are to be 
measured from the date of issuance. The GSD is proposing to delete 
this footnote and reflect the proper starting point for measuring 
remaining maturity periods in each margin factor table.
    \5\ FICC has vetted the length of time between announcement and 
issue date and has determined that no when-issued period lasted 
longer than 15 days.
    \6\ The amendment to Appendix B of the FICC--The Clearing 
Corporation cross-margining agreement also requires a technical 
change to the maturity ranges of Offset classes ``e'' and ``f'' to 
reflect actual practice.
---------------------------------------------------------------------------

    FICC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act \7\ and the rules and 
regulations thereunder applicable to FICC because it enables FICC to 
amend its margin factor tables to reflect the current practice of 
factoring in the when-issued date of securities with respect to 
assigning remaining maturity periods. As such, the rule facilitates the 
prompt and accurate clearance and settlement of securities 
transactions.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

(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)(iii) of the Act \8\ and Rule 19b-
4(f)(4) \9\ thereunder because the rule effects a change in an existing 
service that: (i) Does not adversely affect the safeguarding of 
securities or funds in the custody or control of the clearing agency or 
for which it is responsible; and (ii) does not significantly affect the 
respective rights or obligations of the clearing agency or persons 
using the service. At any time within sixty days of the filing of the 
proposed rule change, 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-FICC-2005-16 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

All submissions should refer to File Number SR-FICC-2005-16. 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-2005-16 and should be submitted on 
or before November 21, 2005.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
[FR Doc. E5-6001 Filed 10-28-05; 8:45 am]

BILLING CODE 8010-01-P
