Notice2025-08698
Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Immediate Effectiveness of Proposed Rule Change To Permit Inter-Dealer Broker Netting Members To Use the Same Deposit ID
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 16, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 94 (Friday, May 16, 2025)</title>
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[Federal Register Volume 90, Number 94 (Friday, May 16, 2025)]
[Notices]
[Pages 21092-21094]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-08698]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103023; File No. SR-FICC-2025-013]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Immediate Effectiveness of Proposed Rule Change To
Permit Inter-Dealer Broker Netting Members To Use the Same Deposit ID
May 12, 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 30, 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 modifications to FICC's
Government Securities Division (``GSD'') Rulebook (``GSD Rules'' and
``Rules'') in order to permit Inter-Dealer Broker Netting Members who
maintain both Dealer Account(s) and Broker Account(s) at FICC to use
the same Deposit ID when making the Required Fund Deposit Portions for
those Accounts.\5\
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\5\ Capitalized terms not defined herein are defined in the GSD
Rules, as applicable, 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
FICC is proposing to amend the GSD Rules to permit Inter-Dealer
Broker Netting Members to use the same Deposit ID when making the
Required Fund Deposit Portions for its Broker Account(s) and Dealer
Account(s), which are both Proprietary Accounts. The proposed rule
change would not affect the requirements that (i) Brokered Transactions
be recorded in Broker Accounts, separate from other Proprietary
Transactions that are recorded in Dealer Accounts, pursuant to Rule 2B;
and (ii) margin for Brokered Transactions that are recorded in Broker
Accounts be calculated separately, through separate Margin Portfolios,
from other Proprietary Transactions recorded in Dealer Accounts and
from activity of indirect participants recorded in Indirect
Participants Accounts, pursuant to Rule 4.\6\
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\6\ See Rule 2B (Accounts) and Rule 4 (Clearing Fund and Loss
Allocation), id.
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Background
The GSD Rules include provisions that operate to separately record
and margin different types of activity. These provisions are primarily
designed to ensure margin for Proprietary Transactions is calculated,
collected and held separately and independently of margin for indirect
participant transactions, in compliance with the requirements of Rule
17ad-22(e)(6)(i) under the Act.\7\ The provisions in the GSD Rules that
accomplish this separate margining include requirements that (i)
Proprietary Transactions and Indirect Participant Transactions be
recorded in different Types of Accounts pursuant to Rule 2B; (ii) each
Margin Portfolio established by Netting Members shall not contain more
than one Type of Account, pursuant to Section 1b(a) of Rule 4; (iii)
FICC calculates each Member's Required Fund Deposit to the Clearing
Fund with reference to the Margin Portfolios established by that
Member, pursuant to Section 1b(b) of Rule 4; and (iv) each Member's
Required Fund Deposit consists of separate Required Fund Deposit
Portions, each of which are calculated with respect to a separate
Margin Portfolio, pursuant to Section 2(a) of Rule 4.\8\
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\7\ 17 CFR 240.17Ad-22(e)(6)(i).
\8\ See Rule 2B (Accounts) and Rule 4 (Clearing Fund and Loss
Allocation), supra note 5.
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In addition, to ensure separate collection and holding of margin
deposited for Proprietary Transactions and indirect participant
transactions, Section 2a(a) of Rule 4 requires that a Netting Member
identify the different Account types for which a deposit is made on its
wire instructions. Specifically, this Rule provides that each Required
Fund Deposit Portion be made to FICC through a separate Deposit ID
established by the Netting Member.\9\
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\9\ See Rule 1 (Definitions), where ``Deposit ID'' is defined as
``an operational mechanism used by [FICC] to identify the Account
for which a deposit is being made with [FICC] pursuant to Rule 4 and
to facilitate the separate holding of such deposits on [FICC]'s
books and records.'' Id.
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The GSD Rules also require that brokered activity be recorded
separately from other Proprietary Transactions. Specifically, Brokered
Transactions can only be submitted to FICC by Netting Members that have
qualified to be Inter-Dealer Broker Netting Members and must be
recorded in Broker Accounts, separately from other Proprietary
Transactions that are recorded in Dealer Accounts. Inter-Dealer Broker
Netting Members receive favorable treatment under the loss allocation
provisions with respect to their brokered activity.\10\
[[Page 21093]]
FICC believes this favorable treatment is appropriate because Inter-
Dealer Broker Netting Members do not undertake a directional position
with respect to the transactions. Instead, each transaction has a
counterparty other than the Inter-Dealer Broker Netting Member that
will ultimately deliver the securities or pay the cash. Therefore, the
Rules require that Brokered Transactions be recorded in separate Broker
Accounts by Inter-Dealer Broker Netting Members ensuring that this
favorable treatment be applied only with respect to those Members'
Brokered Transactions.
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\10\ See Rule 4 (Clearing Fund and Loss Allocation) (providing
that Inter-Dealer Broker Netting Members are subject to a cap on the
application of FICC's loss allocation procedure of no greater than
$5 million if they meet a set of conditions), id.
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Proposed Rule Change
As noted above, the requirements that operate to separately record
and margin different types of activity serve important goals--FICC's
maintenance of compliance with the requirements of Rule 17Ad-
22(e)(6)(i) under the Act \11\ and FICC's ability to apply favorable
loss allocation treatment to only the brokered activity of Inter-Dealer
Broker Netting Members (and not to other activity submitted by these
Members). However, FICC believes that one of these requirements--that
Inter-Dealer Broker Netting Members use separate Deposit IDs for their
Broker Accounts and Dealer Accounts--is not necessary to meet either of
these goals. Further, because Inter-Dealer Broker Netting Members may
maintain both Broker Accounts and Dealer Accounts, this requirement
limits those Members from the operational convenience of making their
separate Required Fund Deposit Portions for their proprietary activity
through one Deposit ID.
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\11\ See supra note 7.
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Therefore, FICC is proposing to amend Rule 4 to provide that an
Inter-Dealer Netting Member that maintains both Broker Account(s) and
Dealer Account(s) may utilize the same Deposit ID for amounts deposited
with respect to the Required Fund Deposit Portions calculated for each
of these separate Accounts. As noted above, FICC would not amend the
requirements that Brokered Transactions be recorded in Broker Accounts,
separately from other Proprietary Transactions recorded in Dealer
Accounts, and that separate Required Fund Deposit Portions be
calculated for the activity recorded in these separate Accounts. As
such, the proposed change would not impact FICC's ability to maintain
compliance with the requirements of Rule 17Ad-22(e)(6)(i) \12\ under
the Act or its ability to identify the brokered activity of Inter-
Dealer Broker Netting Members from those Members' other proprietary
activity.
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\12\ See supra note 7.
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2. Statutory Basis
FICC believes that the proposed rule change is consistent with
Section 17A of the Act and the rules thereunder applicable to FICC.
Specifically, FICC believes that the proposed rule change is consistent
with Section 17A(b)(3)(F) \13\ of the Act and Rule 17ad-22(e)(21),\14\
as promulgated under the Act, for the reasons described below.
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\13\ 15 U.S.C. 78q-1(b)(3)(F).
\14\ 17 CFR 240.17ad-22(e)(21).
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Section 17A(b)(3)(F) of the Act requires that the Rules be designed
to promote the prompt and accurate clearance and settlement of
securities transactions and to assure the safeguarding of securities
and funds which are in the custody or control of FICC or for which it
is responsible.\15\ FICC is proposing to revise a requirement in the
GSD Rules to no longer restrict Inter-Dealer Broker Netting Members
from using the same Deposit ID for the Required Fund Deposit Portions
for their proprietary activity. The proposed change would permit these
Netting Members to more efficiently make their required deposits to the
Clearing Fund. By removing an unnecessary restriction and facilitating
more efficient payments of margin requirements, FICC believes the
proposed change would promote the prompt and accurate clearance and
settlement of securities transactions and would assure the safeguarding
of securities and funds which are in the custody or control of FICC or
for which it is responsible, consistent with the requirements of
Section 17A(b)(3)(F) of the Act.\16\
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\15\ 15 U.S.C. 78q-1(b)(3)(F).
\16\ Id.
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Rule 17ad-22(e)(21) under the Act requires FICC to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to be efficient in meeting the requirements of its
participants.\17\ As described above, the proposed changes would
clarify that an existing requirement would not apply to Inter-Dealer
Broker Netting Members with respect to the two Types of Accounts that
such Members may maintain for their proprietary activity. By removing
an unnecessary restriction and facilitating more efficient payments of
margin requirements, FICC believes the proposed change is consistent
with the requirements of Rule 17ad-22(e)(21) under the Act.\18\
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\17\ 17 CFR 240.17ad-22(e)(21).
\18\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
FICC does not believe that the proposed rule change would have an
impact on competition among its Members.\19\ Inter-Dealer Broker
Netting Members are the only types of Netting Members that are
permitted to maintain both Broker Accounts and Dealer Accounts where
their proprietary activity can be recorded. The proposed change would
clarify an existing requirement that unnecessarily restricts these
Members from making their Required Fund Deposit Portions for these
Accounts using the same Deposit ID. The proposed change would not
impact other Netting Members.
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\19\ 15 U.S.C. 78q-1(b)(3)(D).
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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/rules-regulations/how-submit-comment">www.sec.gov/rules-regulations/how-submit-comment</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#6b1f190a0f02050c0a050f060a19000e1f182b180e08450c041d"><span class="__cf_email__" data-cfemail="c1b5b3a0a5a8afa6a0afa5aca0b3aaa4b5b281b2a4a2efa6aeb7">[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
[[Page 21094]]
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#cfbdbaa3aae2aca0a2a2aaa1bbbc8fbcaaace1a8a0b9"><span class="__cf_email__" data-cfemail="b4c6c1d8d199d7dbd9d9d1dac0c7f4c7d1d79ad3dbc2">[email protected]</span></a>. Please include
file number SR-FICC-2025-013 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-2025-013. 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 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-2025-013 and should be submitted on
or before June 6, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-08698 Filed 5-15-25; 8:45 am]
BILLING CODE 8011-01-P
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