Notice2025-07990
Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Rules Relating to the Legal Entity Identifier Requirement
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Published
May 8, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 88 (Thursday, May 8, 2025)</title>
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[Federal Register Volume 90, Number 88 (Thursday, May 8, 2025)]
[Notices]
[Pages 19568-19571]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-07990]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102983; File No. SR-FICC-2025-012]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Rules Relating to the Legal Entity Identifier Requirement
May 2, 2025.
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 April 25, 2025, 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)(4) 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)(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 Rules in
order to require (i) each applicant applying to become an MBSD Clearing
Member or MBSD Cash Settling Bank Member to obtain and provide a Legal
Entity Identifier (``LEI'') to FICC as part of its membership
application and (ii) each GSD Funds-Only Settling Bank Member, MBSD
Clearing Member and MBSD Cash Settling Bank Member to have a current
LEI on file with FICC at all times. FICC is also proposing to revise
the defined term used in the GSD Rules relating to LEIs to conform to
the proposed defined term being added to the MBSD Rules.\5\
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\5\ Terms not defined herein are defined in the FICC Government
Securities Division (``GSD'') Rulebook (``GSD Rules'') and the FICC
Mortgage-Backed Securities Division (``MBSD'') Clearing Rules
(``MBSD Rules'' and together with the GSD Rules and the MBSD Rules,
the ``Rules''), available at <a href="http://www.dtcc.com/legal/rules-and-procedures">www.dtcc.com/legal/rules-and-procedures</a>.
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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
The purpose of the proposed rule change is to amend the Rules in
order to require (i) each applicant applying to become an MBSD Clearing
Member or MBSD Cash Settling Bank Member to obtain and provide a LEI to
FICC as part of its membership application and (ii) each GSD Funds-Only
Settling Bank Member, MBSD Clearing Member and MBSD Cash Settling Bank
Member to have a current LEI on file with FICC at all times. FICC is
also proposing to revise the defined term used in the GSD Rules
relating to LEIs to conform to the proposed defined term being added to
the MBSD Rules.
Background
LEI Background
An LEI is a 20-character reference code to uniquely identify
legally distinct entities that engage in financial transactions.\6\ The
LEI system was developed by the Financial Stability Board \7\ together
with finance ministers and central bank governors represented in the
Group of 20 in the wake of the 2008 financial crisis.\8\ The Financial
Stability Board established GLEIF in June 2014 to support the
implementation and use of LEIs.\9\ The Regulatory Oversight Committee
(``ROC''), a group of public authorities from around the globe,
oversees GLEIF and the global LEI system.\10\
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\6\ See <a href="http://www.gleif.org/en/about-lei/introducing-the-legal-entity-identifier-lei">www.gleif.org/en/about-lei/introducing-the-legal-entity-identifier-lei</a>. The LEI is based on the ISO 17442 standard developed
by the International Organization for Standardization and satisfies
the standards implemented by the Global Legal Entity Identifier
Foundation (``GLEIF''). See <a href="http://www.gleif.org/en/about-lei/introducing-the-legal-entity-identifier-lei">www.gleif.org/en/about-lei/introducing-the-legal-entity-identifier-lei</a>.
\7\ The Financial Stability Board is an international body that
monitors and makes recommendations about the global financial
system. See <a href="http://www.fsb.org">www.fsb.org</a>.
\8\ See <a href="http://www.gleif.org/en/about/history">www.gleif.org/en/about/history</a>.
\9\ See supra note 6. See also <a href="http://www.gleif.org/en/about/this-is-gleif">www.gleif.org/en/about/this-is-gleif</a>.
\10\ The ROC is a group of public authorities from around the
globe established in January 2013 to coordinate and oversee the
global LEI system. See <a href="http://www.gleif.org/en/about/governance/regulatory-oversight-committee-roc">www.gleif.org/en/about/governance/regulatory-oversight-committee-roc</a>.
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LEIs are issued by entities called Local Operating Units (``LOUs'')
that are accredited by GLEIF to issue LEIs within certain
jurisdictions.\11\ LOUs validate information about an entity and issue
a unique LEI for that entity. An LEI provides information about legal
entities, including the official legal name, registered address,
country of incorporation, registration authority and the entities'
ownership structure, including parent and child organizations.
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\11\ See <a href="http://www.gleif.org/en/about-lei/get-an-lei-find-lei-issuing-organizations">www.gleif.org/en/about-lei/get-an-lei-find-lei-issuing-organizations</a>.
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Adding the LEI Requirement for FICC
FICC's parent entity, The Depository Trust & Clearing Corporation
(``DTCC''),\12\ provides technology resources and support services to
FICC and DTCC's other subsidiaries, including providing support for
onboarding, lifecycle management and risk management of the
subsidiaries' applicants and members. Certain of DTCC's subsidiaries,
including FICC with respect to GSD,\13\ currently require that its
applicants and members obtain and provide an LEI. However, this
requirement is not consistent across DTCC's subsidiaries and services,
including MBSD.
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\12\ DTCC is a non-public holding company that owns three
registered clearing agencies and related businesses. In addition to
FICC, DTCC also owns the following registered clearing agencies: The
Depository Trust Company and the National Securities Clearing
Corporation.
\13\ FICC implemented LEI requirements for GSD in compliance
with a rule adopted by the Office of Financial Research of the U.S.
Department of Treasury establishing a data collection requirement
covering centrally cleared transactions in the U.S. repurchase
market. See Securities Exchange Act Release No. 88557 (Apr. 3,
2020), 85 FR 19979 (Apr. 9, 2020) (SR-FICC-2020-002).
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FICC is proposing to add a requirement that its applicants and
members of MBSD and GSD Funds-Only
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Settling Bank Members obtain and provide an LEI to FICC similar to the
requirement currently in place for GSD.\14\ FICC believes that
requiring such applicants and members to obtain and provide an LEI to
FICC would improve the quality of data that is collected from its
participants as well as the process for collecting that data, including
providing the following benefits:
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\14\ Id.
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<bullet> Simplify Operational Processes--LEIs would help simplify
and expedite due diligence and know your customer (``KYC'')
verification of participants enabling FICC to do business with
participants faster and safer.
<bullet> Enhance Risk Management--LEIs provide information about
counterparty relationships and hierarchies within and between financial
entities, improving counterparty risk assessment and management.
<bullet> Leverage Existing Capabilities--The use of LEIs would
allow FICC to leverage existing DTCC technology and data to create
automatic upfront validations to support participant onboarding and
lifecycle management for FICC and DTCC's other subsidiaries.
<bullet> Reliable Data Source--The LEI system is supported by a
trusted method of verifying the identity of the legal entity in
question and would provide a reliable data source. This is supported by
the LOUs maintenance of all respective reference and identification
data and the overall global LEI system which is coordinated and
overseen by ROC.
<bullet> Reduction in Record Duplication--The use of LEIs would
reduce overlap and duplication of data within databases, helps
streamline data reconciliations and reduce data errors by decreasing
the requirements for manual comparison of different databases.
Implementing an LEI requirement is also intended to improve DTCC's
ability to manage data across its subsidiaries, including FICC. Many
participants are shared among FICC and its affiliates. Currently, there
is no consistent requirement for submission of an industry identifier
by FICC and DTCC's other subsidiaries. This has impacted DTCC's ability
to profile its subsidiaries' participants quickly and efficiently
across all the subsidiaries' products and services. DTCC's other
subsidiaries are also implementing an LEI requirement consistent with
the LEI requirements being proposed for FICC.
Member Impact
Based on an analysis by FICC, approximately 97% of MBSD Members
currently have an LEI. Adding the LEI requirement would require the
MBSD Members and GSD Funds-Only Settling Bank Members that have not
obtained an LEI to select an LOU,\15\ apply for an LEI, and once
obtained provide the LEI to FICC. The MBSD Members and GSD Funds-Only
Settling Bank Members would also need to renew the LEI periodically.
The expense of obtaining and renewing an LEI is minimal, and it can
usually be obtained within a few days once the entity provides the
necessary information to the LOU.\16\
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\15\ Only entities that are accredited by GLEIF may issue LEIs.
A list of accredited LOUs can be found on the GLEIF website:
<a href="http://www.gleif.org/en/about-lei/get-an-lei-find-lei-issuing-organizations">www.gleif.org/en/about-lei/get-an-lei-find-lei-issuing-organizations</a>.
\16\ Based on a review by DTCC, the average cost for registering
a new LEI is approximately $71, the average cost for maintenance is
approximately $62, and the application processing time is typically
24-48 business hours.
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Failure to adhere to the LEI requirement could result in a fine in
accordance with the Rules.\17\
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\17\ See GSD Rule 48 and MBSD Rule 38, supra note 5 (provide
that FICC may discipline any Member or Limited Member for violations
of the Rules, including but not limited to a fine).
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Rule Changes
In order to add the requirement that participants obtain and
provide an LEI, FICC is proposing to make the following changes.
GSD Rules
(i) Defined Term
FICC would amend GSD Rule 1 to change the defined term ``Legal
Entity Identifier'' to ``LEI'' to conform the proposed defined term
being added to the MBSD Rules. FICC is not proposing to substantively
change the current defined term. FICC would replace the term Legal
Entity Identifier with LEI in each place that it is used in the GSD
Rules.
(ii) Funds-Only Settling Bank Members
FICC would amend Section 4(d) of GSD Rule 13 to require that each
Funds-Only Settling Bank Member always has a current LEI on file with
FICC. FICC is proposing to add a footnote in that section that states
such members shall have 60 calendar days from the date they are
notified by Important Notice to submit their LEIs. The footnote would
provide that it would sunset at the end of the 60-calendar day period.
MBSD Rules
(i) Defined Term
FICC would add a new defined term, LEI, to MBSD Rule 1. FICC would
use the terminology of the GLEIF for the definition.\18\
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\18\ See supra note 6.
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(ii) MBSD Applicants
FICC would amend Section 3 of MBSD Rule 2A to require each FICC
applicant who becomes a Clearing Member to obtain and provide an LEI to
FICC as part of its membership application.
(iii) Clearing Members
FICC would amend Section 2 of MBSD Rule 3 to require that each
Member always have a current LEI on file with FICC. FICC is proposing
to add a footnote in that section which states such members shall have
60 calendar days from the date they are notified by Important Notice to
submit their LEIs. The footnote would provide that it would sunset at
the end of the 60-calendar day period.
(iv) Cash Settling Bank Members
FICC would amend Section (b)(iv) of MBSD Rule 3A to require that
each applicant to become a Cash Settling Bank Member shall obtain and
provide to FICC an LEI. FICC would amend Section (d) of Rule 3A to
require that each Cash Settling Bank Member always have a current LEI
on file with FICC. FICC is proposing to add a footnote in that section
which states such Cash Settling Bank Members shall have 60 calendar
days from the date they are notified by Important Notice to submit LEIs
for each of their Sponsored Members. The footnote would provide that it
would sunset at the end of the 60-calendar day period.
Implementation Timeframe
DTCC is determining a framework relating to the adoption of the
selected LEI option across all DTCC subsidiaries and product lines,
including an approach to managing the implementation of the LEI
requirement for both existing and new clients of FICC. FICC would
provide notice to existing GSD Funds-Only Settling Bank Members, MBSD
Clearing Members, and MBSD Cash Settling Bank Members, including by
Important Notice, advising them of the LEI requirements for FICC and
notifying them of the dates by which they are expected to have obtained
and provided an LEI to FICC. FICC would give such members that do not
currently have an LEI, 60-calendar
[[Page 19570]]
days from the date of the notice to obtain and provide an LEI to FICC.
FICC considers 60-calendar days to be sufficient for obtaining an LEI,
as it can typically be acquired within a few days once the entity
provides the necessary entity information to the LOU.
2. Statutory Basis
Section 17A(b)(3)(F) of the Act, requires, that the Rules be
designed to, among other things, promote the prompt and accurate
clearance and settlement of securities transactions.\19\
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\19\ 15 U.S.C. 78q-1(b)(3)(F).
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FICC believes that the proposed changes to add an LEI requirement
are consistent with this provision because the proposed revisions would
improve the quality of data that is collected from FICC's participants
as well as the process for collecting that data including (i)
simplifying and expediting certain operational processes, including due
diligence and KYC, by utilizing an efficient and accurate method to
verify identity of FICC participants, (ii) enhancing counterparty risk
assessment and management of participants by improving information
about counterparty relationships and hierarchies within and between
participants, (iii) creating efficiencies relating to onboarding and
lifecycle management for FICC and DTCC's other subsidiaries that share
participants, (iv) obtaining reliable data from the standardized global
LEI system, a dependable source of verified data, and (v) reducing
overlap and duplication of data within databases and helping to
streamline data reconciliations and reduce data errors. FICC believes
that creating efficiencies in operational processes, onboarding and
lifecycle management and improving risk management by improving the
quality of verified data that is collected from FICC's participants as
well as the process for collecting that data would promote the prompt
and accurate clearance and settlement of securities transactions by
FICC. As such, FICC believes the proposed rule changes are consistent
with Section 17A(b)(3)(F) of the Act.\20\
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\20\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
FICC believes that the proposed changes to add an LEI requirement
could impose a burden on competition because these changes would impose
a cost on firms that currently do not have an LEI to obtain and
maintain them. FICC does not believe that any burden on competition
imposed by the proposed rule change would be significant because the
cost to obtain and maintain an LEI is relatively small,\21\ and FICC
understands that many of its members already maintain LEIs for other
purposes. Regardless of whether the potential burden on competition is
deemed significant, FICC believes the proposed rule change is both
necessary and appropriate in furtherance of the purposes of the Act.
Specifically, FICC believes that any burden on competition that is
created by the proposed changes would be necessary in furtherance of
the purposes of the Act \22\ because creating efficiencies in
operational processes, onboarding and lifecycle management and
improving risk management by improving the quality of verified data
that is collected from FICC's participants as well as the process for
collecting that data would promote the prompt and accurate clearance
and settlement of securities transactions by FICC. FICC also believes
that any burden that is created by the proposed rule change would be
appropriate in furtherance of the purposes of the Act \23\ because the
proposed changes would be limited to requiring an LEI that is easily
obtained through the established global LEI system at a relatively
minor cost.
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\21\ As noted above, based on a review by DTCC, the average cost
for registering a new LEI is approximately $71 and the average cost
for maintenance is approximately $62.
\22\ 15 U.S.C. 78q-1(b)(3)(I).
\23\ Id.
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
FICC has not received or solicited any written comments relating to
this proposal. If any 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 a Comment, available at <a href="http://www.sec.gov/regulatory-actions/how-to-submit-comments">www.sec.gov/regulatory-actions/how-to-submit-comments</a>. General questions regarding
the rule filing process or logistical questions regarding this filing
should be directed to the Main Office of the Commission's Division of
Trading and Markets at <a href="/cdn-cgi/l/email-protection#ed999f8c8984838a8c8389808c9f8688999ead9e888ec38a829b"><span class="__cf_email__" data-cfemail="27535546434e49404649434a46554c4253546754424409404851">[email protected]</span></a> or 202-551-5777.
FICC reserves the right not to respond to any 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#1f6d6a737a327c7072727a716b6c5f6c7a7c31787069"><span class="__cf_email__" data-cfemail="1062657c753d737f7d7d757e6463506375733e777f66">[email protected]</span></a>. Please include
file number SR-FICC-2025-012 on the subject line.
Paper Comments
<bullet> 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-2025-012. 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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 website viewing and
printing in the Commission's Public
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Reference Room, 100 F Street NE, Washington, DC 20549 on official
business days between the hours of 10 a.m. and 3 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 (<a href="https://dtcc.com/legal/sec-rule-filings.aspx">https://dtcc.com/legal/sec-rule-filings.aspx</a>). Do not include personal identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. All submissions should refer to file number
SR-FICC-2025-012 and should be submitted on or before May 29, 2025.
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\24\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-07990 Filed 5-7-25; 8:45 am]
BILLING CODE 8011-01-P
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