Notice2025-11734
Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Adopt an Intraday Mark-to-Market Charge at GSD
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
June 26, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 121 (Thursday, June 26, 2025)</title>
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[Federal Register Volume 90, Number 121 (Thursday, June 26, 2025)]
[Notices]
[Pages 27354-27356]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-11734]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103299; File No. SR-FICC-2025-005]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Order Instituting Proceedings To Determine Whether To Approve or
Disapprove a Proposed Rule Change To Adopt an Intraday Mark-to-Market
Charge at GSD
June 23, 2025.
I. Introduction
On March 14, 2025, Fixed Income Clearing Corporation (``FICC,'' a
subsidiary of The Depository Trust & Clearing Corporation (``DTCC'')
and a ``Clearing Agency''), filed with the Securities and Exchange
Commission (``Commission'') proposed rule change SR-FICC-2025-005
(``Proposed Rule Change''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder.\2\ The Proposed Rule Change was published for comment in
the Federal Register on March 27, 2025.\3\ The Commission has received
comments on the changes proposed.\4\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 102705 (Mar. 21,
2025), 90 FR 13965 (Mar. 27, 2025) (File No. SR-FICC-2025-005)
(``Notice of Filing'').
\4\ Comments on the Proposed Rule Change are available at
<a href="https://www.sec.gov/comments/sr-ficc-2025-005/srficc2025005.htm">https://www.sec.gov/comments/sr-ficc-2025-005/srficc2025005.htm</a>.
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On May 5, 2025, pursuant to Section 19(b)(2) of the Act,\5\ the
Commission designated a longer period within which to approve,
disapprove or institute proceedings to determine whether to approve or
disapprove the Proposed Rule Change.\6\ The Commission is instituting
proceedings, pursuant to Section 19(b)(2)(B) of the Act,\7\ to
determine whether to approve or disapprove the Proposed Rule Change.
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\5\ 15 U.S.C. 78s(b)(2).
\6\ See Securities Exchange Act Release No. 102896 (May 5,
2025), 90 FR 19755.
\7\ 15 U.S.C. 78s(b)(2)(B).
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II. Summary of the Proposed Rule Change
A tool that FICC uses to manage its credit exposure to its members
is the daily collection of the Required Fund Deposit from each
member.\8\ The Required Fund Deposit serves as each member's margin. A
member's margin is designed to mitigate potential losses associated
with the liquidation of a member's portfolio in the event of that
member's default. The Proposed Rule Change would add the ``Intraday
Mark-to-Market Charge'' as an additional charge in calculating the
Required Fund Deposit and Segregated Customer Margin Requirement in the
Margin Component Schedule and outlines the circumstances which warrant
its collection. Specifically, the Proposed Rule Change would amend the
FICC Government Securities Division (``GSD'') Rulebook to add a
definition of ``Intraday Mark-to-Market Charge'' to GSD Rule 1
(Definitions) and to define it in the new Margin Component Schedule.
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\8\ See GSD Rule 4 (Clearing Fund and Loss Allocation). The GSD
Rules are available at https://www.dtcc.com/~/media/Files/Downloads/
legal/rules/ficc_gov_rules.pdf. Terms not otherwise defined herein
are defined in the GSD Rules.
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The Proposed Rule Change defines the Intraday Mark-to-Market Charge
as, ``an additional charge that is collected from a Member or
Segregated Indirect Participant (unless waived . . .) to mitigate
[FICC's] exposures that may arise due to intraday changes in the size,
composition and constituent security prices of such Member's Margin
Portfolio or Segregated Indirect Participant's portfolio, including
when certain risk thresholds are breached or when the products cleared
or markets serviced display elevated volatility.'' The Proposed Rule
Change also states that the Intraday Mark-to-Market Charge equals the
difference between (a) the
[[Page 27355]]
mark-to-market amount reflected either in the last Funds-Only
Settlement Amount or Intraday Mark-to-Market Charge, as applicable, for
the Margin Portfolio or Segregated Indirect Participant's portfolio and
(b) such Margin Portfolio's or Segregated Indirect Participant's
portfolio marked to the most recently observed System Price for such
positions and shall be recalculated intraday, each Business Day, at the
times and frequencies established [by FICC] for this purpose, which
times and frequencies shall be communicated to Members and Segregated
Indirect Participants on [FICC's] public website.
The Proposed Rule Change identifies risk thresholds for the
imposition of an Intraday Mark-to-Market Charge. The Proposed Rule
Change states that the Intraday Mark-to-Market Charge applies to a
Margin Portfolio or Segregated Indirect Participant's portfolio that
meets each of the following thresholds: (1) experienced an adverse
intraday mark-to-market change that equals or exceeds a certain
threshold dollar amount (not less than $1 Million) as compared to the
mark-to-market amount reflected either in the last Funds-Only
Settlement Amount, or Intraday Mark-to-Market Charge, as applicable,
for the Margin Portfolio or Segregated Indirect Participant's portfolio
(the ``Dollar Threshold''); (2) experienced an adverse intraday mark-
to-market change that equals or exceeds a certain threshold percentage
(not less than 10 percent) as compared to the last calculated VaR
Charge for the Margin Portfolio or Segregated Indirect Participant's
portfolio (the ``Percentage Threshold''); and (3) has either (a) fewer
than 100 trading days in a rolling 12-month period, or (b) 12-month
backtesting coverage below a certain threshold percentage as determined
by FICC from time to time (the ``Trading Day Threshold/Coverage
Target''). The Proposed Rule Change also states that FICC will notify
Members of changes to any of these parameters via an Important Notice.
The Proposed Rule Change also states that, if volatile market
conditions occur, FICC may: (1) reduce the Dollar Threshold (but not to
less than $250,000); (2) reduce the Percentage Threshold (but not to
less than five percent); or (3) modify or not consider the 12-month
Trading Day Threshold/Coverage Target. Examples of volatile market
conditions outlined in the Proposed Rule Change include, but are not
limited to, the occurrence of sudden swings in U.S. Treasury yields or
mortgage-backed security spreads outside of historically observed
market moves and/or conditions contributing to intraday risk exposures
that, in aggregate, materially exceed intraday risk exposures observed
under normal market conditions. FICC will provide Members with a
minimum of one business day advance notice of changes to any parameter
due to volatile market conditions via an Important Notice.
Lastly, the Proposed Rule Change states that FICC may waive the
imposition, or decrease the amount, of the Intraday Mark-to-Market
Charge. FICC may determine that the adverse intraday mark-to-market
change in the portfolio of the Member or Segregated Indirect
Participant and/or breaches of the thresholds noted in the previous
paragraph do not accurately reflect FICC's risk exposure from these
intraday mark-to-market fluctuations. The Proposed Rule Change states
that one example, though not the only, of a circumstance where a waiver
or decrease of the Intraday Mark-to-Market Charge may be appropriate is
when there are large mark-to-market fluctuations arising out of trade
errors. All waiver and/or reduction of the Intraday Mark-to-Market
Charge shall be approved, documented and reviewed on a regular basis
pursuant to FICC's procedures.
III. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act to determine whether the Proposed Rule Change
should be approved or disapproved.\9\ Institution of proceedings is
appropriate at this time in view of the legal and policy issues raised
by the Proposed Rule Change. Institution of proceedings does not
indicate that the Commission has reached any conclusion with respect to
any of the issues involved. Rather, the Commission seeks and encourages
interested persons to comment on the Proposed Rule Change, which would
provide the Commission with arguments to support the Commission's
analysis as to whether to approve or disapprove the Proposed Rule
Change.
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\9\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\10\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of, and input from commenters with respect to, the Proposed
Rule Change's consistency with Section 17A of the Act \11\ and the
rules thereunder, including the following provisions:
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\10\ Id.
\11\ 15 U.S.C. 78q-1.
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<bullet> Section 17A(b)(3)(F) of the Act,\12\ which requires, among
other things, that the rules of a clearing agency are designed to
promote the prompt and accurate clearance and settlement of securities
transactions, to assure the safeguarding of securities and funds which
are in the custody or control of the clearing agency or for which it is
responsible, as well as to foster cooperation and coordination with
persons engaged in the clearance and settlement of securities
transactions; and to protect investors and the public interest;
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\12\ 15 U.S.C. 78q-1(b)(3)(F).
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<bullet> Rule 17ad-22(e)(4)(i) under the Act,\13\ which requires
each CCA 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
arising from its payment, clearing, and settlement processes, including
by maintaining sufficient financial resources to cover its credit
exposure to each participant fully with a high degree of confidence;
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\13\ 17 CFR 240.17ad-22(e)(4)(i).
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<bullet> Rule 17ad-22(e)(6)(i) under the Act,\14\ which requires
each covered clearing agency (``CCA'') to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to cover, if the CCA provides central counterparty (``CCP'')
services, its credit exposures to its participants by establishing a
risk-based margin system that, at a minimum, considers, and produces
margin levels commensurate with, the risks and particular attributes of
each relevant product, portfolio, and market, and, if the CCA provides
CCP services for U.S. Treasury securities, calculates, collects, and
holds margin amounts from a direct participant for its proprietary
positions in Treasury securities separately and independently from
margin calculated and collected from that direct participant in
connection with U.S. Treasury securities transactions by an indirect
participant that relies on the services provided by the direct
participant to access the CCA's payment, clearing, or settlement
facilities; and.
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\14\ 17 CFR 240.17ad-22(e)(6)(i).
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<bullet> Rule 17ad-22(e)(6)(ii) under the Act,\15\ which requires
each CCA establish, implement, maintain and enforce written policies
and procedures reasonably designed to cover, if the CCA provides CCP
services, its credit
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exposures to its participants by establishing a risk-based margin
system that, at a minimum: (A) marks participant positions to market
and collects margin (including variation margin or equivalent charges
if relevant) at least daily; (B) monitors intraday exposures on an
ongoing basis; (C) includes the authority and operational capacity to
make intraday margin calls, as frequently as circumstances warrant,
including the following thresholds: (1) when risk thresholds specified
by the CCA are breached, or (2) when the products cleared or markets
served display elevated volatility; and, (D) documents when the CCA
determines not to make an intraday call pursuant to its written
policies and procedures required under Rule 17ad-22(e)(6)(ii)(C).
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\15\ 17 CFR 240.17ad-22(e)(6)(ii).
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IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the Proposed Rule Changes. In particular, the Commission invites
the written views of interested persons concerning whether the Proposed
Rule Changes are consistent with Section 17A(b)(3)(F) and Rules 17Ad-
22(e)(4)(i), 17ad-22(e)(6)(i), 17ad-22(e)(6)(ii), 17ad-22(e)(19) and
17ad-22(e)(23)(ii) of the Exchange Act, or any other provision of the
Exchange Act, or the rules and regulations thereunder. Although there
do not appear to be any issues relevant to approval or disapproval that
would be facilitated by an oral presentation of views, data, and
arguments, the Commission will consider, pursuant to Rule 19b-4(g)
under the Exchange Act, any request for an opportunity to make an oral
presentation.\16\
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\16\ Section 19(b)(2) of the Exchange Act grants to the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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The Commission asks that commenters address the sufficiency of
FICC's statements in support of the Proposed Rule Changes, which are
set forth in the Notices of Filing \17\ in addition to any other
comments they may wish to submit about the Proposed Rule Changes.
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\17\ See Notice of Filing, supra note 3.
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Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#d2a0a7beb7ffb1bdbfbfb7bca6a192a1b7b1fcb5bda4"><span class="__cf_email__" data-cfemail="9be9eef7feb6f8f4f6f6fef5efe8dbe8fef8b5fcf4ed">[email protected]</span></a>. Please include
file number SR-FICC-2025-005 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-FICC-2025-005. 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 Changes that are
filed with the Commission, and all written communications relating to
the Proposed Rule Changes 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 such filing also will be available for
inspection and copying at the principal office of FICC and on FICC's
website (<a href="https://www.dtcc.com/legal/sec-rule-filings">https://www.dtcc.com/legal/sec-rule-filings</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-2025-005 and
should be submitted on or before July 17, 2025. Rebuttal comments
should be submitted by July 31, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\ June 26, 2025
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\18\ 17 CFR 200.30-3(a)(31).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-11734 Filed 6-25-25; 8:45 am]
BILLING CODE 8011-01-P
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