
[Federal Register Volume 79, Number 119 (Friday, June 20, 2014)]
[Notices]
[Pages 35400-35402]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-14442]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72396; File No. SR-FICC-2014-04]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Remove References to New York Portfolio Clearing, LLC in the Rules of 
the Government Securities Division and in the Cross-Margining Agreement 
With the Chicago Mercantile Exchange

June 16, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 9, 2014, 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 
proposal pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(4) thereunder \4\ so that the proposal was effective upon filing 
with the Commission. 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)(4).
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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 amendments to the Government 
Securities Division (``GSD'') Rulebook (the ``GSD Rules'') to remove 
references to New York Portfolio Clearing, LLC (``NYPC'') and the 
cross-margining arrangement between NYPC and FICC (the ``NYPC 
Arrangement'') from the GSD Rules, as the NYPC Arrangement is no longer 
in effect.

II. Clearing Agency'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 such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    (i) The purpose of this filing is to remove references to NYPC and 
the NYPC Arrangement from the GSD Rules, as the NYPC Arrangement is no 
longer in effect.
Background
    On February 28, 2011, the Commission approved FICC's proposed rule 
change SR-FICC-2010-09 in order to allow FICC to offer cross-margining 
of certain cash positions cleared at GSD with certain interest rate 
futures positions cleared at NYPC and allow margin requirements with 
respect to such eligible cash and futures positions to be calculated as 
a single portfolio (the ``NYPC Order'').\5\
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    \5\ See Securities Exchange Act Release No. 63986 (Feb. 28, 
2011), 76 FR 12144 (Mar. 4, 2011) (SR-FICC-2010-09).
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    NYPC is jointly owned by NYSE Euronext (``NYSE'') and The 
Depository Trust & Clearing Corporation (``DTCC''), the parent company 
of FICC. On November 13, 2013, Intercontinental Exchange Group 
(``ICE'') completed its acquisition of NYSE.\6\ On November 29, 2013, 
ICE and DTCC announced plans to transition the clearing of interest 
rate futures contracts listed on NYSE Liffe U.S. to ICE Clear Europe 
and to wind down NYPC's operations.\7\
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    \6\ See IntercontinentalExchange. (2013). 
``IntercontinentalExchange Completes Acquisition of NYSE Euronext'' 
[Press release]. Retrieved from http://www.nyse.com/press/1385726419589.html.
    \7\ See NYSE. (2013). ``IntercontinentalExchange Group and DTCC 
Announce Plans for Interest Rate Futures Listed on NYSE Liffe U.S.'' 
[Press release]. Retrieved from http://www.nyse.com/press/1385726419589.html.
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    Now that the migration of open interest in NYSE Liffe U.S. interest 
rate futures contracts from NYPC to ICE Clear Europe has been 
completed, the cross-margining agreement between FICC and NYPC (the 
``NYPC Agreement'') will be terminated and all references to NYPC and 
the NYPC Arrangement will be removed from the GSD Rules to reflect this 
change. In addition, FICC will no longer be providing the Commission 
with the reports enumerated in Section IV.D of the NYPC Order in light 
of the termination of the NYPC Arrangement.
Removal of References to NYPC and the NYPC Arrangement
    FICC is proposing to amend the GSD Rules as follows:
    In Rule 1--``Definitions'', the following definitions have been 
revised or deleted:
    The term ``Cross-Margining Agreement'' is revised to remove the 
provision permitting an eligible GSD Member to elect to have its 
Required Fund Deposit in respect of Eligible Positions at FICC and its 
(or its Permitted Margin Affiliate's, if applicable) margin 
requirements in respect of Eligible Positions at an FCO calculated as 
if such positions were in a single portfolio, as such provision relates 
only to the NYPC Arrangement.
    The term ``FCO'' is revised to remove the reference to NYPC.
    The term ``Margin Portfolio'' is revised to remove the reference to 
NYPC Accounts.
    The term ``Market Professional Agreement for Cross-Margining'' is 
revised to replace the reference to NYPC with a reference to the 
relevant FCO with whom FICC may, in the future, enter into a cross-
margining arrangement for Market Professional customers.
    The term ``NYPC'' is removed.
    The term ``NYPC Account'' is removed.
    The term ``NYPC Market Professional Account'' is removed.
    The term ``NYPC Member'' is removed.

[[Page 35401]]

    The term ``NYPC Original Margin'' is removed.
    The term ``NYPC Proprietary Account'' is removed.
    The term ``NYPC-Submitted Trade'' is removed.
    The term ``Permitted Margin Affiliate'' is revised to remove the 
provision allowing an affiliate of a GSD Member that is a member of an 
FCO, but not itself a GSD Member, to be considered a Permitted Margin 
Affiliate for purposing of margining positions between FICC and the FCO 
as if such positions were in a single portfolio, as such provision 
relates only to the NYPC Arrangement.
    The term ``VaR Charge'' is revised to remove language relating to 
any positions in a GSD Member's NYPC Accounts being grouped into a 
Margin Portfolio.
    In Rule 3--``Ongoing Membership Requirements'', the reference to 
NYPC acting as a designated Locked-In Trade Source is removed from 
Section 11 and related conforming changes to the numbering of Section 
11 are made.
    In Rule 4--``Clearing Fund and Loss Allocation'', Sections 1a and 
1b are revised to remove language related to designated NYPC Accounts 
being considered part of a GSD Member's Margin Portfolio. Sections 2, 3 
and 3b are revised to remove language related to NYPC Original Margin 
in connection with provisions pertaining to the required form of a GSD 
Member's Required Fund Deposit. The provision of Section 7(a) 
pertaining to loss allocation if a Margin Portfolio of a Defaulting 
Member contains NYPC Accounts is removed and related conforming changes 
to the numbering of Section 7(a) are made.
    In Rule 6C--``Locked-In Comparison'', Sections 2, 2a, 4 and 8 are 
revised to remove references to NYPC acting as a designated Locked-In 
Trade Source, as well as references to NYPC-Submitted Trades.
    In Rule 13--``Funds-Only Settlement'', Section 5a pertaining to 
Funds-Only Settlement Bank arrangements for GSD Members that are also 
NYPC Members or that have Permitted Margin Affiliates that are NYPC 
Members is removed.
    In Rule 22--``Insolvency of a Member'', the reference in Section 
2(d) to a Permitted Margin Affiliate defaulting on its obligations to 
an FCO with which FICC has a Cross-Margining Agreement is removed, as 
such provision of the Permitted Margin Affiliate definition relates 
only to the NYPC Arrangement as described above. Similarly, the 
reference in Section 2(e) to a Cross-Margining Affiliate defaulting on 
its obligations to FICC is removed.
    In Rule 22A--``Procedures for When the Corporation Ceases to Act'', 
language in Section 2(b) is removed that relates to close-out 
procedures for a GSD Member that has NYPC Accounts included within a 
Margin Portfolio.
    In Rule 43--``Cross-Margining Arrangements'', the first paragraph 
of Section 1 is revised to remove the provision permitting an eligible 
GSD Member to elect to have its Required Fund Deposit in respect of 
Eligible Positions at FICC and its (or its Permitted Margin 
Affiliate's, if applicable) margin requirements in respect of Eligible 
Positions at an FCO calculated as if such positions were in a single 
portfolio, as such provision relates only to the NYPC Arrangement. The 
third paragraph of Section 1 is removed, as it relates to the right of 
first offset between NYPC and FICC vis a vis Cross-Margining 
Arrangements with other FCOs. In Section 2(b), the provision permitting 
an affiliate of an eligible GSD Member to become a Permitted Margin 
Affiliate for purposes of participating in a Cross-Margining 
Arrangement is removed, as such language relates only to the NYPC 
Arrangement. Similarly, in Section 4, the provision permitting, in 
certain circumstances, an eligible GSD Member that is a Cross-Margining 
Participant in a Cross-Margining Arrangement between FICC and one or 
more FCOs to be treated as insolvent by FICC in the event that its 
Permitted Margin Affiliate is deemed insolvent by an FCO is removed, as 
such language relates only to the NYPC Arrangement.
    In the ``Schedule of Timeframes'', references to computation of 
NYPC margin and reports related to NYPC margin requirements are 
removed.
    In the ``Designated Locked-In Trade Sources'' schedule, NYPC is 
removed as a designated Locked-In Trade Source.
    In the ``Cross-Margining Agreements'' schedule, the NYPC Agreement 
is removed.
Removal of the NYPC Agreement
    FICC is proposing to remove the NYPC Agreement from the GSD Rules, 
as the NYPC Agreement is no longer in effect.
Amendment of CME Agreement
    Removal of the references to NYPC and the NYPC Arrangement from the 
GSD Rules will necessitate certain amendments to the agreement between 
the Chicago Mercantile Exchange (``CME'') and FICC (the ``CME 
Agreement'') regarding the cross-margining arrangement currently 
conducted between CME and FICC (the ``CME Arrangement''). Specifically, 
the CME Agreement will be amended to delete references to the NYPC 
Arrangement and the priority it held over the CME Arrangement when 
determining residual FICC positions that are available for cross-
margining with the CME, as well as the right of first offset between 
NYPC and FICC when calculating and presenting liquidation results under 
the CME Agreement. The CME Agreement showing the proposed changes is 
attached hereto as part of Exhibit 5.
    (ii) The proposed rule is consistent with Section 17A(b)(3)(F) \8\ 
of the Securities and Exchange Act of 1934, as amended, and the rules 
and regulations promulgated thereunder because it will make certain 
rule corrections that will support the prompt and accurate clearance 
and settlement of securities transactions in that such rule corrections 
will remove references in the GSD Rules to a cross-margining 
arrangement that is no longer in effect.
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Clearing Agency's Statement on Burden on Competition

    FICC does not believe that the proposed rule change will have any 
impact, or impose any burden, on competition because it relates to the 
removal of references in the GSD Rules to a cross-margining arrangement 
that is no longer in effect.

(C) Clearing Agency'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 rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and paragraph (f) 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and

[[Page 35402]]

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 rule-comments@sec.gov. Please include 
File Number SR-FICC-2014-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FICC-2014-04. 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 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 Web site 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. 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-2014-04 and should be 
submitted on or before July 11, 2014.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14442 Filed 6-19-14; 8:45 am]
BILLING CODE 8011-01-P


