
[Federal Register Volume 82, Number 53 (Tuesday, March 21, 2017)]
[Notices]
[Pages 14581-14586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05502]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80253; File No. SR-FICC-2017-004]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Describe the Intraday Mark-to-Market Charge

March 15, 2017.
    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 March 7, 2017, 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. 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.
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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 Mortgage-
Backed

[[Page 14582]]

Securities Division (``MBSD'') Clearing Rules (``MBSD Rules'') \3\ in 
order to provide transparency in the MBSD Rules with respect to the 
existing intraday Mark-to-Market charge by codifying FICC's current 
practices with respect to the assessment and collection of the intraday 
Mark-to-Market charge.\4\ This charge is imposed on certain Clearing 
Members that experience an adverse intraday Mark-to-Market change that 
meets certain criteria described below. The charge is designed to 
mitigate FICC's exposure resulting from large intraday Mark-to-Market 
fluctuations to Clearing Members' portfolios that are not otherwise 
covered by Clearing Members' Required Fund Deposits.
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    \3\ The MBSD Rules are available at http://www.dtcc.com/legal/rules-and-procedures. Capitalized terms used herein and not 
otherwise defined shall have the meaning assigned to such terms in 
the MBSD Rules.
    \4\ The intraday Mark-to-Market charge is currently described in 
Section 2(a) of Rule 4 of the MBSD Rules.
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    In order to provide transparency with respect to the existing 
intraday Mark-to-Market charge by codifying FICC's existing practices 
with respect to the charge, FICC is proposing to amend MBSD Rule 1 
(Definitions) to add the defined term ``Intraday Mark-to-Market 
Charge'' and to amend Section 2(c) of MBSD Rule 4 (Clearing Fund and 
Loss Allocation) to include the Intraday Mark-to-Market Charge.
    In addition, the proposed rule change would delete the term ``End 
of Day Charge'' from the MBSD Rules because it is no longer used, as 
further discussed below. To effectuate this change, the proposed rule 
change would delete the definition of End of Day Charge from Rule 1 
(Definitions) and would amend Section 2 of MBSD Rule 4 (Clearing Fund 
and Loss Allocation) to delete the reference to the End of Day Charge.

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
    The proposed rule change would provide transparency in the MBSD 
Rules with respect to the assessment and collection of the existing 
Intraday Mark-to-Market Charge, which FICC currently may impose on a 
Clearing Member on an intraday basis under certain circumstances 
described below. Once imposed, payment of this charge is due within one 
hour after notice from FICC to an affected Clearing Member.\5\ The 
proposed rule change would also eliminate references to the End of Day 
Charge from the MBSD Rules.
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    \5\ MBSD Rule 4, Section 2.
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(i) Background--The Required Fund Deposit and Mark-to-Market
    The Required Fund Deposit serves as each Clearing Member's margin. 
The objective of the Required Fund Deposit is to mitigate potential 
losses to FICC associated with liquidation of the Clearing Member's 
portfolio in the event that FICC ceases to act for a Clearing Member 
(hereinafter referred to as a ``default''). FICC determines Required 
Fund Deposit amounts using a number of component charges calculated and 
assessed daily, the largest of which is the VaR Charge that is a risk-
based margin methodology intended to capture market price risk. The 
methodology uses historical market moves to project or forecast the 
potential gains or losses on the liquidation of a defaulting Clearing 
Member's portfolio, assuming that a portfolio would take three days to 
liquidate or hedge in normal market conditions. The projected 
liquidation gains or losses are used to determine the Clearing Member's 
VaR Charge, which is calculated to cover projected liquidation losses 
at a 99 percent confidence level. The aggregate of all Clearing 
Members' Required Fund Deposits constitutes the Clearing Fund of MBSD, 
which FICC would be able to access in the event a defaulting Clearing 
Member's own Required Fund Deposit is insufficient to satisfy losses to 
FICC caused by the liquidation of that Clearing Member's portfolio.
    MBSD calculates the full suite of components that comprise the 
Required Fund Deposit and imposes the Required Fund Deposit once per 
day, at the start of the day, based on a Clearing Member's prior end-
of-day positions. Generally, the second largest component of the daily 
Required Fund Deposit is a start-of-day Mark-to-Market amount, which is 
designed to mitigate the risk arising out of the value change between 
the contract/settlement value of a Clearing Member's open positions and 
the market value at the end of the prior day.
(ii) Overview--The Intraday Mark-to-Market Charge
    During each trading day, a Clearing Member's exposure may change 
due to the settlement of existing transactions and new trade 
activities. In addition, the value of the Clearing Member's portfolio 
may change due to market influences. Normally, the start-of-day Mark-
to-Market component of the daily Required Fund Deposit covers FICC's 
exposure to a Clearing Member due to market moves and/or trading and 
settlement activity because it brings the portfolio of outstanding 
positions up to the market value at the end of the prior day. However, 
because the start-of-day Mark-to-Market component of the Required Fund 
Deposit is calculated only once daily using the prior end-of-day 
positions and prices, it does not cover a Clearing Member's exposure 
arising out of intraday changes to position and market value in the 
Clearing Member's portfolio that result in an adverse change to the 
Clearing Member's Mark-to-Market (``MTM Exposure''). FICC manages this 
intraday risk exposure by observing snapshots of Clearing Members' 
portfolios and monitoring intraday changes to each Clearing Member's 
Mark-to-Market versus the Mark-to-Market that was part of the Required 
Fund Deposit at the start of the day or, if applicable, any 
subsequently collected Mark-to-Market amount. FICC then collects an 
Intraday Mark-to-Market Charge from Clearing Members to cover 
significant risk exposures that warrant the collection of intraday 
margin, as further described below.
(iii) The Parameter Breaks
    FICC's current practice with respect to the assessment of the 
Intraday Mark-to-Market Charge entails tracking three criteria (each, a 
``Parameter Break'') for each Clearing Member. The Parameter Breaks 
help FICC determine whether a Clearing Member's MTM Exposure poses a 
risk to FICC that is significant enough to warrant an Intraday Mark-to-
Market Charge. The objective of the Parameter Breaks is to ensure that 
FICC is able to limit exposure to intraday Mark-to-Market fluctuations 
that (a) are of a large dollar amount (the ``Dollar Threshold''), (b) 
exhaust a significant portion of a Clearing Member's VaR Charge (the 
``Percentage Threshold'') and (c) are experienced by Clearing Members 
with backtesting deficiencies

[[Page 14583]]

that bring backtesting results for that Clearing Member below the 99 
percent confidence target (the ``Coverage Target''), indicating that a 
Clearing Member's activity was not sufficiently covered by margin.
1. The Dollar Threshold
    The purpose of the Dollar Threshold is to identify those Clearing 
Members whose MTM Exposures represent a large portion of the Clearing 
Fund. FICC believes that such Clearing Members pose an increased risk 
of loss to FICC because the coverage provided by the Clearing Fund, 
which is designed to cover the aggregate losses of all Clearing 
Members' portfolios, would be substantially impacted by large MTM 
Exposures. More specifically, if a Clearing Member were to default and 
the Clearing Member's Required Fund Deposit was not sufficient to 
satisfy losses to FICC caused by the liquidation of the Clearing 
Member's portfolio, FICC would be able to access the funds held by it 
in the Clearing Fund to satisfy such losses. However, because the 
Clearing Fund must be available to satisfy potential losses to FICC 
that may arise from any Clearing Member defaults, FICC would be exposed 
to a significant risk of loss if Clearing Members' MTM Exposures 
accounted for a substantial portion of the Clearing Fund. The Dollar 
Threshold is set to an amount that would ensure that the aggregate MTM 
Exposures of all of its Clearing Members at such threshold would not 
exceed 5 percent of the Clearing Fund. FICC believes that the 
availability of 95 percent of the Clearing Fund to satisfy all other 
liquidation losses arising out of a Clearing Member's default is 
sufficient to mitigate the risks posed to FICC by such losses. FICC 
assesses the sufficiency of the Dollar Threshold on an annual basis and 
may adjust the Dollar Threshold if it determines that such an 
adjustment is necessary to provide reasonable coverage. Currently, the 
Dollar Threshold is an adverse intraday Mark-to-Market change in a 
Clearing Member's portfolio that equals or exceeds $1,000,000 when 
compared to the Clearing Member's start-of-day Mark-to-Market 
requirement including, if applicable, any subsequently collected Mark-
to-Market amount.
2. The Percentage Threshold
    The purpose of the Percentage Threshold is to identify those 
Clearing Members whose MTM Exposures deplete a significant portion of 
such Clearing Members' daily VaR Charge. FICC believes that Clearing 
Members that experience such MTM Exposures pose an increased risk of 
loss to FICC because the coverage provided by the VaR Charge, which is 
designed to cover estimated losses to a portfolio over a specified time 
period at least 99 percent of the time, would be depleted by a 
significant MTM Exposure that could cause the Clearing Member's 
Required Fund Deposit to be unable to absorb further intraday losses to 
the Clearing Member's portfolio. The Percentage Threshold is designed 
to provide FICC with a reasonable cushion to allow the VaR Charge 
collected at the start of day to function as expected. More 
specifically, the VaR Charge is designed to cover potential losses over 
a three-day time period for a Clearing Member at least 99 percent of 
the time, assuming normal market conditions. When a Clearing Member's 
MTM Exposure meets or exceeds a certain percentage as compared to its 
daily VaR Charge, the value of the Clearing Member's portfolio is 
trending towards a loss outside of the expected value as determined by 
such VaR Charge. The Percentage Threshold is calculated to equal a 
percentage of the daily VaR Charge that FICC has determined would leave 
it with a sufficient amount of a Clearing Member's remaining VaR Charge 
after accounting for potential losses arising from the Clearing 
Member's MTM Exposure. FICC assesses the sufficiency of the Percentage 
Threshold on an annual basis and may adjust the Percentage Threshold if 
it determines that such an adjustment is necessary to provide 
reasonable coverage.\6\ Currently, the Percentage Threshold is an 
adverse intraday Mark-to-Market change in a Clearing Member's portfolio 
that equals or exceeds 30 percent of the VaR Charge collected as part 
of the Clearing Member's daily Required Fund Deposit.
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    \6\ In 2014, FICC lowered the Percentage Threshold from 40 
percent to 30 percent of the VaR Charge after conducting a study 
that determined that a Percentage Threshold of 40 percent did not 
provide a sufficient cushion against potential losses.
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3. The Coverage Target
    The purpose of the Coverage Target is to identify those Clearing 
Members that have experienced backtesting deficiencies that bring the 
results for that Clearing Member below the 99 percent confidence target 
(i.e., greater than two deficiency days in a rolling 12-month period) 
as reported in the most current month. FICC believes that such Clearing 
Members pose an increased risk of loss to FICC because such backtesting 
deficiencies demonstrate that FICC's risk-based margin model did not 
perform as expected for the Clearing Member. More specifically, FICC 
employs daily backtesting to determine the adequacy of each Clearing 
Member's Required Fund Deposit. FICC compares the Required Fund Deposit 
for each Clearing Member with the simulated liquidation gains/losses 
using the actual positions in the Clearing Member's portfolio and the 
actual historical security returns. FICC investigates the cause(s) of 
any deficiencies. As a part of this process, FICC pays particular 
attention to deficiencies that cause a Clearing Member's backtesting 
coverage to fall below the Coverage Target. Such deficiencies are 
evidence that the model used to calculate the Clearing Member's 
Required Fund Deposit did not calculate an amount sufficient to cover 
the Clearing Member's risk to FICC, as would otherwise be expected of 
the Required Fund Deposit. The Coverage Target is designed to provide 
coverage to FICC for intraday Mark-to-Market fluctuations in the 
portfolio of a Clearing Member for whom the Required Fund Deposit model 
is not performing as expected. FICC believes that a MTM Exposure for 
Clearing Members that fall below the Coverage Target may expose FICC to 
heightened risk, requiring an Intraday Mark-to-Market Charge to cover 
that risk.
(iv) Assessment and Collection of the Intraday Mark-to-Market Charge
    FICC's current practice is to review intraday snapshots of each 
Clearing Member's portfolios to determine whether the Clearing Member 
has experienced a MTM Exposure that warrants FICC assessing an Intraday 
Mark-to-Market Charge. More specifically, if a Clearing Member's MTM 
Exposure breaches all three Parameter Breaks, the Clearing Member will 
be subject to the Intraday Mark-to-Market Charge and FICC will collect 
the charge subject to waivers or changes to the amount of the 
calculated charge, as described below. However, where FICC determines 
that certain market conditions exist, including but not limited to (i) 
sudden swings in an equity index in either direction that exceed 
certain threshold amounts determined by FICC and (ii) moves in U.S. 
Treasury yields and mortgage-backed security spreads outside of 
historically observed market moves, FICC does not require that the 
Coverage Target be breached; rather, FICC imposes the Intraday Mark-to-
Market Charge if only the Dollar Threshold and Percentage Threshold are 
breached,\7\ subject to waivers and

[[Page 14584]]

changes to the amount of the calculated charge, as described below. 
Moreover, during such market conditions, the Dollar Threshold and 
Percentage Threshold may be reduced if FICC determines that such 
reduction is appropriate in order to accelerate collection of 
anticipated additional margin from Clearing Members whose portfolios 
may present relatively greater risks to FICC on an overnight basis. Any 
such reduction would not cause the Dollar Threshold to be less than 
$250,000 and the Percentage Threshold to be less than 5 percent.
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    \7\ FICC has determined that, because a Clearing Member's 
backtesting coverage may not accurately reflect the risks posed by a 
Clearing Member under certain market conditions, Clearing Members 
with backtesting coverage that meets or exceeds the Coverage Target 
may nonetheless pose increased risk to FICC. Therefore, FICC imposes 
the Intraday Mark-to-Market Charge on Clearing Members that breach 
the Dollar Threshold and Percentage Threshold, despite the fact that 
such Members may not have breached the Coverage Target during 
certain market conditions.
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    Irrespective of market conditions, FICC may impose the Intraday 
Mark-to-Market Charge on Clearing Members that (i) are approaching but 
have not yet breached the Percentage Threshold (but are at 20 percent 
or greater of the daily VaR Charge) and (ii) have a MTM Exposure that 
exceeds a certain dollar amount (``Surveillance Threshold'') that is 
set by FICC per Clearing Member based on the Clearing Member's internal 
Credit Risk Rating Matrix (``CRRM'') rating and/or the Clearing 
Member's Watch List status, if the Corporation determines that the size 
of such Clearing Member's Mark-to-Market change exposes the Corporation 
to increased risk. FICC links the Surveillance Thresholds to a Clearing 
Member's CRRM rating and Watch List status because a Clearing Member 
with a weaker internal rating is likely to pose a greater risk of 
default. Clearing Members with weaker internal credit ratings are 
assigned lower Surveillance Thresholds than Clearing Members with 
stronger internal credit ratings. The Surveillance Thresholds are 
intended as a tool to aid FICC in identifying Clearing Members whose 
MTM Exposures may necessitate the collection of an Intraday Mark-to-
Market Charge. The current Surveillance Thresholds are: (a) $50 million 
for Clearing Members with a CRRM rating of ``1'' or ``2'' and for non-
rated Clearing Members that are not on the Watch List; (b) $25 million 
for Clearing Members with a CRRM rating of ``3''; (c) $15 million for 
Clearing Members with a CRRM rating of ``4''; (d) $10 million for 
Clearing Members with a CRRM rating of ``5'' or ``6'' and for non-rated 
Clearing Members that are on the Watch List; and (e) $5 million for 
Clearing Members with a CRRM rating of ``7.''
    Although FICC generally collects the Intraday Mark-to-Market Charge 
under the conditions described above, FICC retains the discretion to 
waive or alter such Intraday Mark-to-Market Charge in circumstances 
where it determines that the MTM Exposure and/or the breaches of the 
Parameter Breaks do not accurately reflect FICC's risk exposure to the 
Clearing Member's intraday Mark-to-Market fluctuation (e.g., a Clearing 
Member's breach of the Coverage Target Parameter Break is based on a 
shortened backtesting look-back period and large Mark-to-Market 
fluctuations arising out of trade errors). Based on FICC's assessment 
of the impact of these circumstances and FICC's actual risk exposure to 
a Clearing Member, FICC may, in its discretion, waive or alter 
(decrease or increase) an Intraday Mark-to-Market Charge for a Clearing 
Member. Given the variability of the factors that result in breaches of 
the Parameter Breaks, FICC believes that it is important to maintain 
such discretion in order to limit the imposition of the Intraday Mark-
to-Market Charge to those Clearing Members with MTM Exposures that pose 
a significant level of risk to FICC. Such Intraday Mark-to-Market 
Charge would not reduce a Clearing Member's Required Fund Deposit below 
the amount reported at the start of day. Any increase to the Intraday 
Mark-to-Market Charge would not cause the Intraday Mark-to-Market 
Charge to be greater than two times its calculated amount.
(v) Communication With Clearing Members and Imposition of the Intraday 
Mark-to-Market Charge
    If FICC determines that FICC should collect an Intraday Mark-to-
Market Charge from a Clearing Member, FICC notifies the Clearing Member 
during the trading day of its requirement to pay the Intraday Mark-to-
Market Charge and the amount due. Affected Clearing Members are 
required to pay the amount due within one hour after FICC has provided 
the Clearing Member with notification that such payment is due (as long 
as notification is provided at least one hour prior to the close of the 
cash Fedwire operated by the Federal Reserve Bank of New York).
(vi) Proposal To Delete the End of Day Charge
    Currently, MBSD Rule 4 states that the Required Fund Deposit is 
equal to the greater of: (i) The Minimum Charge, or (ii) the End of Day 
Charge,\8\ plus the VaR Charge, the Deterministic Risk Component,\9\ 
and the special charge, if applicable. The End of Day Charge is 
comprised of the VaR Charge plus components that are identical to the 
components in the Deterministic Risk Component and is therefore 
duplicative and unnecessary. Therefore, FICC is proposing to delete the 
term and the reference to the End of Day Charge in order to help ensure 
that the MBSD Rules are accurate and clear.
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    \8\ The ``End of Day Charge'' means with respect to each 
Clearing Member, the calculation equaling: (i) The VaR Charge; plus 
(ii) the Mark-to-Market Debit; minus (iii) the Mark-to-Market 
Credit; plus (iv) a cash obligation item debit; minus (v) a cash 
obligation item credit; plus or minus (vi) accrued principal and 
interest. See MBSD Rule 1, supra note 3.
    \9\ The ``Deterministic Risk Component'' means with respect to 
the margin portfolio of a Clearing Member, the calculation equaling: 
(i) The Mark-to-Market Debit; minus (ii) the Mark-to-Market Credit; 
plus (iii) a cash obligation item debit; minus (iv) a cash 
obligation item credit; plus or minus (v) accrued principal and 
interest. See MBSD Rule 1, supra note 3.
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2. Statutory Basis
    Section 17A(b)(3)(F) of the Securities Exchange Act of 1934, as 
amended (the ``Act''), requires, in part, that the MBSD Rules promote 
the prompt and accurate clearance and settlement of securities 
transactions.\10\ The proposed rule changes with respect to the 
Intraday Mark-to-Market Charge would provide transparency in the MBSD 
Rules regarding the existing Intraday Mark-to-Market Charge by 
codifying FICC's current practices with respect to the assessment and 
collection of the charge. In addition, the proposed rule change 
associated with the deletion of the End of Day Charge would delete 
provisions that are not used to ensure that the MBSD Rules remain 
accurate and clear. Collectively, the proposed changes would ensure 
that the MBSD Rules remain transparent, accurate and clear, which would 
enable all stakeholders to readily understand their rights and 
obligations in connection with MBSD's clearance and settlement of 
securities transactions. Therefore, FICC believes that the proposed 
rule changes would promote the prompt and accurate clearance and 
settlement of securities transactions, consistent with Section 
17A(b)(3)(F) of the Act.
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    \10\ 15 U.S.C. 78q-1(b)(3)(F).
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    Rule 17Ad-22(b)(1) under the Act requires a clearing agency to 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to measure its credit exposures to its 
participants at least once a day and limit its exposures to potential 
losses from defaults by its participants under normal market 
conditions, so that the operations of the clearing agency would not be 
disrupted and non-defaulting participants would not be exposed to 
losses that they

[[Page 14585]]

cannot anticipate or control.\11\ FICC's Intraday Mark-to-Market Charge 
is calculated and imposed to cover credit exposures estimated by FICC 
based on significant intraday Mark-to-Market changes to a Clearing 
Member's portfolio, as well as the Clearing Member's trailing 12-month 
backtesting results, with the goal of ensuring that FICC is not exposed 
to increased risk from large intraday Mark-to-Market changes to the 
Clearing Member's portfolio. Therefore, FICC believes that management 
of its credit exposures to Clearing Members through this charge is 
consistent with Rule 17Ad-22(b)(1) under the Act.
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    \11\ 17 CFR 240.17Ad-22(b)(1).
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    Rule 17Ad-22(b)(2) under the Act requires a clearing agency to 
maintain and enforce written policies and procedures reasonably 
designed to use margin requirements to limit its credit exposures to 
participants under normal market conditions.\12\ When applicable, the 
Intraday Mark-to-Market Charge is a component of a Clearing Member's 
Required Fund Deposit, or margin, and is intended to maintain coverage 
of FICC's credit exposures to such Clearing Member at a confidence 
level of at least 99 percent. The Intraday Mark-to-Market Charge 
therefore limits FICC's exposures to Clearing Members under normal 
market conditions. Moreover, by incorporating the Intraday Mark-to-
Market Charge into the MBSD Rules more clearly, the proposed change 
demonstrates that FICC has rule provisions that are reasonably designed 
to use margin requirements to limit its credit exposures to its 
Clearing Members under normal market conditions. Therefore, FICC 
believes that the proposed rule change is also consistent with Rule 
17Ad-22(b)(2) under the Act.
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    \12\ 17 CFR 240.17Ad-22(b)(2).
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    The proposed rule changes with respect to the Intraday Mark-to-
Market Charge have also been designed to be consistent with Rules 17Ad-
22(e)(4) and (e)(6) under the Act, which were recently adopted by the 
U.S. Securities and Exchange Commission (``Commission'').\13\ Rule 
17Ad-22(e)(4) will require FICC to establish, implement, maintain and 
enforce written policies and procedures reasonably designed to 
effectively identify, measure, monitor, and manage its credit exposures 
to participants and those exposures arising from its payment, clearing, 
and settlement processes.\14\ The proposed rule change codifies MBSD's 
practices associated with the Intraday Mark-to-Market Charge, which 
address the identification, measurement, monitoring and management of 
credit exposures that may arise from intraday changes that occur to a 
Clearing Member's portfolio because of settlement of existing 
transactions and new trade activities. Moreover, by incorporating the 
Intraday Mark-to-Market Charge into the MBSD Rules more clearly, the 
proposed change would enable FICC to have rule provisions that are 
reasonably designed to effectively identify, measure, monitor, and 
manage its credit exposures to Clearing Members and those exposures 
arising from its payment, clearing, and settlement processes, which 
FICC believes is consistent with Rule 17Ad-22(e)(4).
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    \13\ 17 CFR 240.17Ad-22(e)(4) and (6). The Commission adopted 
amendments to Rule 17Ad-22, including the addition of new section 
17Ad-22(e), on September 28, 2016. See Exchange Act Release No. 34-
78961 (September 28, 2016), 81 FR 70786 (October 13, 2016) (S7-03-
14). FICC is a ``covered clearing agency'' as defined in Rule 17Ad-
22(a)(5) and must comply with new section (e) of Rule 17Ad-22 by 
April 11, 2017. Id.
    \14\ 17 CFR 240.17Ad-22(e)(4).
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    Rule 17Ad-22(e)(6) will require FICC to establish, implement, 
maintain and enforce written policies and procedures reasonably 
designed to cover its credit exposures to its participants by 
establishing a risk-based margin system that is monitored by management 
on an ongoing basis and regularly reviewed, tested, and verified.\15\ 
The Intraday Mark-to-Market Charge is a risk-based margining system 
with parameters that are regularly reviewed by FICC. Therefore, FICC 
believes the proposed rule change is consistent with Rule 17Ad-
22(e)(6).
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    \15\ 17 CFR 240.17Ad-22(e)(6).
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(B) Clearing Agency's Statement on Burden on Competition

    FICC does not believe that the proposed rule change associated with 
the Intraday Mark-to-Market Charge would impact competition.\16\ The 
proposed rule change would increase the transparency of the MBSD Rules 
with respect to this existing charge by codifying FICC's current 
practices with respect to the assessment and imposition of the charge. 
As such, FICC believes that the proposed rule change will not impact 
Clearing Members or have any impact on competition.
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    \16\ 15 U.S.C. 78q-1(b)(3)(I).
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    FICC does not believe that the proposed rule change to delete the 
End of Day Charge would impact competition. Changes to the applicable 
provisions would not impact Clearing Members because the End of Day 
Charge is not used by MBSD in the calculation of a Clearing Member's 
Required Fund Deposit. As such, FICC believes that the deletion of 
these provisions will not impact competition.

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

    FICC has not received any written comments relating to this 
proposal. FICC will notify the Commission of any written comments 
received.

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 
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-2017-004 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-2017-004. 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

[[Page 14586]]

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 and on DTCC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). 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-2017-004 and should be submitted on or before April 11, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-05502 Filed 3-20-17; 8:45 am]
BILLING CODE 8011-01-P


