Notice2025-18363
Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Amendment No. 1, and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To Modify the GSD Rulebook Relating to Default Management and Porting With Respect to Indirect Participant Activity
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
September 23, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 182 (Tuesday, September 23, 2025)</title>
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[Federal Register Volume 90, Number 182 (Tuesday, September 23, 2025)]
[Notices]
[Pages 45850-45855]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-18363]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104001; File No. SR-FICC-2025-015]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Amendment No. 1, and Order Instituting Proceedings
To Determine Whether To Approve or Disapprove a Proposed Rule Change,
as Modified by Amendment No. 1, To Modify the GSD Rulebook Relating to
Default Management and Porting With Respect to Indirect Participant
Activity
September 18, 2025.
On June 6, 2025, Fixed Income Clearing Corporation (``FICC'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-FICC-2025-015 pursuant to Section 19(b) of the
Securities Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
\2\ thereunder to modify FICC's Government Securities Division
(``GSD'') Rulebook to enhance and clarify FICC's default management
rules as they apply to the Sponsored Service and Agent Clearing
Service, and to facilitate the porting of indirect participant activity
from one intermediary Netting Member to another intermediary Netting
Member (``Proposed Rule Change''). The Proposed Rule Change was
published for public comment in the Federal Register on June 23,
2025.\3\ The Commission has received comments regarding the substance
of the changes proposed in the Proposed Rule Change.\4\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 103282 (June 17, 2025),
90 FR 26656 (June 23, 2025) (File No. SR-FICC-2025-015) (``Notice of
Filing'').
\4\ Comments on the Proposed Rule Change are available at
<a href="https://www.sec.gov/comments/sr-ficc-2025-015/srficc2025015.htm">https://www.sec.gov/comments/sr-ficc-2025-015/srficc2025015.htm</a>.
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On July 31, 2025, pursuant to Section 19(b)(2) of the Exchange
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\ On September 16,
2025, FICC filed Amendment No. 1 to the Proposed Rule Change, as
described in Items I and II below, which Items have been prepared
primarily by FICC.
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\5\ 15 U.S.C. 78s(b)(2).
\6\ Securities Exchange Act Release No. 103557 (July 28, 2025),
90 FR 36088 (July 31, 2025) (File No. SR-FICC-2025-015).
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The Commission is publishing notice to solicit comments on the
Proposed Rule Change, as modified by Amendment No. 1, and is
instituting proceedings pursuant to Section 19(b)(2)(B) of the Exchange
Act,\7\ to determine whether to approve or disapprove the Proposed Rule
Change, as modified by Amendment No. 1.
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\7\ 15 U.S.C. 78s(b)(2)(B).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change, as Modified by Amendment No. 1
On June 6, 2025, FICC filed with the Commission a proposal \8\ to
modify the rulebook of its Government Securities Division (``Rules'')
\9\ relating to default management and porting with respect to Indirect
Participant Activity. On July 14, 2025, the Futures Industry
Association (``FIA'') and the International Swaps and Derivatives
Association, Inc. (``ISDA'') each submitted comment letters to the
Proposed Rule Change.\10\
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\8\ Supra note 3.
\9\ Terms not defined herein are defined in the Rules, available
at <a href="http://www.dtcc.com/legal/rulesand-procedures.aspx">www.dtcc.com/legal/rulesand-procedures.aspx</a>, or in the Proposed
Rule Change, id.
\10\ Letter from Allison Lurton, General Counsel and Chief Legal
Officer, The Futures Industry Association (July 14, 2025) (``FIA
Letter''); Letter from Katherine Darras, General Counsel,
International Swaps and Derivatives Association (July 14, 2025)
(`ISDA Letter'', together with the FIA Letter, ``Comment Letters'').
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Based on comments made in the Comment Letters and following further
review of the Proposed Rule Change, FICC is now filing this Amendment
No. 1. As described in greater detail below, this Amendment No. 1 would
modify the Proposed Rule Change to (1) describe in the Rules two
additional mechanisms available to Sponsoring Members and Agent
Clearing Members to liquidate done-with and done-away Sponsored Member
Trades and Agent Clearing Transactions, respectively, of their Indirect
Participants: (i) recording an offsetting trade in its Indirect
Participants Account, or (ii) instructing FICC to transfer Sponsored
Member Trades or Agent Clearing Transactions to a Proprietary Account;
(2) amend the existing liquidation mechanism available to Sponsoring
Members, which, as described in Section 18 of Rule 3A (which would be
re-numbered Section 16 under the Proposed Rule Change), currently
allows a Sponsoring Member to liquidate all, but not fewer than all, of
the Sponsored Member's done-with Sponsored Member Trades, to permit
Sponsoring Members to liquidate some or all of the Sponsored Member's
done-with Sponsored Member Trades; (3) revise proposed Section
14(d)(ii) of Rule 3A, which would expand the disclosures regarding the
close-out of Sponsored Member Trades after FICC ceases to act for a
Sponsoring Member, to clarify that, with respect to any amount due to a
Sponsored Member, FICC would make such payment to or directed by the
Sponsoring Member or its trustee or received, rather than limit such
statement to only amounts due to Segregated Indirect Participants; (4)
remove the ability for FICC to liquidate done-with Agent Clearing
Transactions under the liquidation mechanism proposed to be added to
Section 9 of Rule 8 in the Proposed Rule Change; (5) clarify that the
transfer of transactions of a Defaulting Member's Indirect Participants
by FICC to alternate Sponsoring Member(s) or Agent Clearing Member(s)
would occur only in the event FICC ceases to act for a Sponsoring
Member or Agent Clearing Member and, further, that the alternate
Sponsoring Member(s) or Agent Clearing Member(s) would need to consent
to any such transfer; and (6) further expand the disclosures proposed
to be added by the Proposed Rule Change to Rule 22A regarding any
market action that an Indirect Participant may take following the
default of a Sponsoring Member or Agent Clearing Member.
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change, as Modified by Amendment No. 1
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
[[Page 45851]]
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
On June 6, 2025, FICC filed with the Commission a proposal \11\ to
modify the Rules relating to default management and porting with
respect to Indirect Participant Activity. On July 14, 2025, FIA and
ISDA each submitted comment letters to the Proposed Rule Change.\12\
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\11\ Supra note 3.
\12\ Supra note 10.
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Based on comments made in the Comment Letters and following further
review of the Proposed Rule Change, FICC is now filing this Amendment
No. 1. As described in greater detail below, this Amendment No. 1 would
modify the Proposed Rule Change to (1) describe in the Rules two
additional mechanisms available to Sponsoring Members and Agent
Clearing Members to liquidate done-with and done-away Sponsored Member
Trades and Agent Clearing Transactions, respectively, of their Indirect
Participants: (i) recording an offsetting trade in its Indirect
Participants Account, or (ii) instructing FICC to transfer Sponsored
Member Trades or Agent Clearing Transactions to a Proprietary Account;
(2) amend the existing liquidation mechanism available to Sponsoring
Members, which, as described in Section 18 of Rule 3A (which would be
re-numbered Section 16 under the Proposed Rule Change), currently
allows a Sponsoring Member to liquidate all, but not fewer than all, of
the Sponsored Member's done-with Sponsored Member Trades, to permit
Sponsoring Members to liquidate some or all of the Sponsored Member's
done-with Sponsored Member Trades; (3) revise proposed Section
14(d)(ii) of Rule 3A, which would expand the disclosures regarding the
close-out of Sponsored Member Trades after FICC ceases to act for a
Sponsoring Member, to clarify that, with respect to any amount due to a
Sponsored Member, FICC would make such payment to or directed by the
Sponsoring Member or its trustee or received, rather than limit such
statement to only amounts due to Segregated Indirect Participants; (4)
remove the ability for FICC to liquidate done-with Agent Clearing
Transactions under the liquidation mechanism proposed to be added to
Section 9 of Rule 8 in the Proposed Rule Change; (5) clarify that the
transfer of transactions of a Defaulting Member's Indirect Participants
by FICC to alternate Sponsoring Member(s) or Agent Clearing Member(s)
would occur only in the event FICC ceases to act for a Sponsoring
Member or Agent Clearing Member and, further, that the alternate
Sponsoring Member(s) or Agent Clearing Member(s) would need to consent
to any such transfer; and (6) further expand the disclosures proposed
to be added by the Proposed Rule Change to Rule 22A regarding any
market action that an Indirect Participant may take following the
default of a Sponsoring Member or Agent Clearing Member.
Proposed Rule Change
The primary purpose of the Proposed Rule Change, as described more
fully therein, is to improve market participants' understanding of, and
to enhance, the rules that govern a default that may occur within one
of GSD's indirect access models--the Sponsored Service \13\ and the
Agent Clearing Service.\14\ The Proposed Rule Change also proposes to
adopt rules that would permit the porting of indirect participant
positions and margin between intermediaries, both in the regular course
of business and following the default of an intermediary firm.\15\
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\13\ Rule 3A (Sponsoring Members and Sponsored Members), supra
note 9.
\14\ Rule 8 (Agent Clearing Service), id.
\15\ Supra note 3.
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More specifically, the Proposed Rule Change consists of
modifications to the Rules that would (1) enhance the ability of market
participants to understand FICC's default management rules as they
apply to the default of a Sponsoring Member or Sponsored Member; (2)
adopt rules that would govern the default management and related
matters applicable to the Agent Clearing Service that are consistent,
as appropriate, with the default management rules of the sponsored
membership service; (3) enhance the provisions that govern a default of
FICC by addressing the application of those provisions to indirect
participant activity; (4) adopt rules that facilitate the porting of
indirect participant activity from one intermediary Netting Member to
another intermediary Netting Member; and (5) make other technical
updates and corrections to the Rules, as described in the Proposed Rule
Change.\16\
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\16\ Id.
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Proposed Amendments
In consideration of the comments made in the Comment Letters, as
described below, and following further review of the Proposed Rule
Change, FICC has determined to amend the Proposed Rule Change. The
proposed amendments described in this Amendment No. 1 would address a
number of comments made in the Comment Letters. Other than the proposed
amendments described herein, the remainder of the Proposed Rule Change
remains unchanged.
1. Description of Additional Liquidation Mechanisms
Currently, the Rules include a provision that governs the voluntary
liquidation of done-with Sponsored Member Trades by either the
Sponsoring Member or FICC.\17\ The Proposed Rule Change proposed to
adopt an identical provision that would provide Agent Clearing Members
with the ability to liquidate done-with Agent Clearing
Transactions.\18\
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\17\ See Section 18 (which would be re-numbered Section 16 in
the Proposed Rule Change) of Rule 3A, supra note 9.
\18\ Supra note 3.
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In consideration of comments made in both Comment Letters,\19\ and
following further review of the Proposed Rule Change, FICC is proposing
to amend both Section 18 of Rule 3A (which would be re-numbered Section
16 under the Proposed Rule Change) and the proposed Section 9 of Rule 8
to describe additional mechanisms through which Sponsoring Members and
Agent Clearing Members could liquidate both done-with and done-away
transactions of Indirect Participants. The proposed amendments would
enhance the Rules by describing these two mechanisms, which are
operationally available to Sponsoring Members and Agent Clearing Member
today.
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\19\ FIA Letter, at 4-7; ISDA Letter, at 1, supra note 10.
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First, FICC would amend the Proposed Rule Change to include in
Section 18 of Rule 3A (which would be re-numbered Section 16 under the
Proposed Rule Change) a provision that would describe two additional
liquidation mechanisms available to Sponsoring Members to liquidate
both done-with and done-away Sponsored Member Trades of a Sponsored
Member. Both liquidation mechanisms are operationally available to
Sponsoring Members today. The proposed amendments would provide for
them explicitly in the Rules, improving market participants'
understanding of the actions available to Sponsoring Members to
liquidate done-with and done-away Sponsored Member Trades.
The proposed amendments would define the two mechanisms that
Sponsoring Members may use to
[[Page 45852]]
liquidate done-with and done-away Sponsored Member Trades as ``SMP
Liquidation Actions''. In Section 18(c)(i) of Rule 3A (which would be
re-numbered Section 16 in the Proposed Rule Change), the proposed
amendments would provide that, with respect to the liquidation of
positions resulting from Sponsored Member Trades other than Sponsored
GC Trades, the Sponsoring Member may submit to FICC to be recorded in
the Sponsoring Member Omnibus Account another Sponsored Member Trade
that offsets, in whole or in part, any Net Settlement Position or
Forward Net Settlement Position established in such Sponsoring Member
Omnibus Account. This mechanism would not be available for Sponsored GC
Trades because FICC settles Sponsored GC Trades on a gross basis and,
therefore, an offsetting trade would not effectively liquidate a
Sponsored GC Trade.
In Section 18(c)(ii) of Rule 3A (which would be re-numbered Section
16 in the Proposed Rule Change), the proposed changes would provide
that, with respect to any Sponsored Member Trades, the Sponsoring
Member may instruct FICC to transfer to a Proprietary Account of the
Sponsoring Member any Net Settlement Position or Forward Net Settlement
Position established in a Sponsoring Member Omnibus Account. As a
result of such instruction, the positions would become the proprietary
positions of the Sponsoring Member.
The proposed amendments would also provide that any SMP Liquidation
Action taken by a Sponsoring Member shall constitute a representation
by the Sponsoring Member to FICC that the Sponsoring Member is
permitted to take such actions under all applicable laws and any
agreements with the Sponsored Member. Finally, the proposed amendments
would provide that the Sponsoring Member shall indemnify the SMP
Indemnified Parties (as such term is defined in the Rules) from any and
all losses, liabilities, or expenses of an SMP Indemnified Party
arising from or related to any Liquidation Action.
In connection with adopting these additional provisions, FICC would
re-number the subsections in Section 18 of Rule 3A (which would be re-
numbered Section 16 under the Proposed Rule Change). These revisions
would move the limitation that the provisions of Section 18 (which
would be re-numbered Section 16) only apply to done-with Sponsored
Member Trades out of subsection (a) and into a new subsection (b)(i).
This proposed amendment would make clear that the limitation only
applies to the existing liquidation provision, and that the additional
liquidation mechanisms proposed to be added to the Rules by this
Amendment No. 1 are available for both done-with and done-away
Sponsored Member Trades. The description of the existing liquidation
mechanism would move from subsections (b), (c), (d) and (e) to
subsections (b)(i), (ii), (iii) and (iv). The proposed provisions to
describe Sponsoring Members' ability to take SMP Liquidation Actions,
as described above, would be added to a new Section 18(c) of Rule 3A
(which would be re-numbered Section 16(c) under the Proposed Rule
Change).
Second, the proposed amendments would include a new Section 9(c) in
Rule 8 to include in the rules governing the Agent Clearing Service the
same two additional liquidation mechanisms that FICC is proposing to
add to Rule 3A. These mechanisms, which would be defined as ``ACM
Liquidation Actions'', would similarly permit an Agent Clearing Member
to liquidate the done-with and done-away Agent Clearing Transactions of
an Executing Firm Customer by (i) recording an offsetting Agent
Clearing Transaction in the Agent Clearing Member Omnibus Account, or
(ii) instructing FICC to transfer a position established in the Agent
Clearing Member Omnibus Account to a Proprietary Account, causing that
position to become a proprietary position of the Agent Clearing Member.
The proposed amendments would provide that an ACM Liquidation Action
would constitute a representation by the Agent Clearing Member to FICC
that the Agent Clearing Member is permitted to take such action and
would include the same indemnification language that is proposed to be
added to Rule 3A by this Amendment No. 1, as described above.
2. Permit Sponsoring Members To Liquidate Some or All Sponsored Member
Trades
The existing liquidation provision in Section 18 of Rule 3A (which
would be re-numbered Section 16(b) under the Proposed Rule Change)
permits Sponsoring Members to liquidate all, but not fewer than all, of
the Sponsored Member's done-with Sponsored Member Trades.\20\ In
consideration of comments made in the FIA Letter,\21\ and following
further review of the Proposed Rule Change, FICC is proposing to amend
Section 18 of Rule 3A (which would be re-numbered Section 16(b) under
the Proposed Rule Change) to replace the references therein to ``all,
but not fewer than all'' with ``some or all.''
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\20\ See Section 18 (which would be re-numbered Section 16 in
the Proposed Rule Change) of Rule 3A, supra note 9.
\21\ FIA Letter, at 14, supra note 10.
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This proposed amendment would permit a Sponsoring Member, subject
to the terms of any agreement with its Sponsored Member, to use this
existing liquidation mechanism in Rule 3A to liquidate some or all of
the Sponsored Member's done-with Sponsored Member Trades. FICC believes
providing such flexibility would facilitate the ability of Sponsoring
Members to provide clearing services to Sponsored Members. This
proposed change to Rule 3A would also align with the proposed changes
to Rule 8, applicable to Agent Clearing Members, which would also
permit the same flexibility under the Proposed Rule Change.
3. Clarify That FICC May Make Payments to Any Sponsored Member
Following the Close-Out of Sponsored Member Trades
Currently, the default management provisions in Rule 3A provide
that, in the event FICC ceases to act for a Sponsoring Member, FICC
would either settle or close out the Sponsored Member Trades that were
Novated to FICC before it ceased to act for the Sponsoring Member.\22\
The Proposed Rule Change would include new subsections to Section 14 of
Rule 3A that would describe further how Sponsored Member Trades would
be settled or closed out following the default of a Sponsoring
Member.\23\ Proposed Section 14(d)(ii), which would expand the
disclosures regarding the close-out of Sponsored Member Trades, would
also provide that, with respect to any amount due to a Segregated
Indirect Participant that is a Sponsored Member, FICC would make such
payment to or as directed by the Sponsoring Member or its trustee or
receiver.
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\22\ See Section 14 of Rule 3A, supra note 9.
\23\ Supra note 1.
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In consideration of comments made in the FIA Letter,\24\ and
following further review of the Proposed Rule Change, FICC is proposing
to amend proposed Section 14(d)(ii) of Rule 3A to clarify that, with
respect to any amount due to a Sponsored Member following the close out
of Sponsored Member Trades, FICC would make such payment to or directed
by the Sponsoring Member or its trustee or received, rather than limit
such statement to only amounts due to Segregated Indirect Participants.
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\24\ FIA Letter, at 15, supra note 10.
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[[Page 45853]]
4. Remove the Ability for FICC To Liquidate Agent Clearing Transactions
The Proposed Rule Change would adopt a provision in Section 9 of
Rule 8 to provide both Agent Clearing Members and FICC with the ability
to liquidate done-with Agent Clearing Transactions, similar to the
existing provision in Section 18 of Rule 3A (which would be re-numbered
Section 16(b) under the Proposed Rule Change) that governs the
liquidation of done-with Sponsored Member Trades.\25\
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\25\ Supra note 3.
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In consideration of comments made in the FIA Letter,\26\ and
following further review of the Proposed Rule Change, FICC is proposing
to amend the proposed Section 9 of Rule 8 to remove the ability for
FICC to liquidate Agent Clearing Transactions under this provision.
Unlike Sponsored Members, Executing Firm Customers are not limited
members of FICC. Therefore, under this proposed amendment, FICC would
only have the ability to settle or close out (or, if the Proposed Rule
Change is approved, transfer to another Agent Clearing Member) Agent
Clearing Transactions in the event FICC has ceased to act for an Agent
Clearing Member.
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\26\ FIA Letter, at 13-14, supra note 10.
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5. Expand Disclosures Regarding Market Action Indirect Participants May
Take Following the Default of a Sponsoring Member or Agent Clearing
Member
Rule 22A describes the procedures that govern a cease to act for a
Defaulting Member, including actions FICC may take in such an
event.\27\ The Proposed Rule Change would expand the disclosures in
Rule 22A to provide that the Indirect Participants of a Defaulting
Member may, but are not obligated to, take market action to close out
any outstanding positions that FICC determines to close out pursuant to
Rules 3A and 8, respectively.\28\
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\27\ See Rule 22A (Procedures for When the Corporation Ceases to
Act), supra note 9.
\28\ Supra note 3.
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In consideration of comments made in the FIA Letter,\29\ and
following further review of the Proposed Rule Change, FICC is proposing
to further expand these disclosures by providing that, with respect to
any market action taken by an Indirect Participant in the circumstances
described in this section of Rule 22A, such Indirect Participant shall
not, except to the extent otherwise set forth in the Rules, be required
to report the data on any such market action to FICC. The proposed
amendments would further provide that FICC shall not incorporate such
data into its calculation of any amount owing by or to the Defaulting
Member or Indirect Participant to any greater extent than it would have
done so in the absence of the statement proposed to be added to Rule
22A by the Proposed Rule Change. These proposed amendments would
clarify the intent of the statement proposed to be added to Rule 22A by
the Proposed Rule Change.
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\29\ FIA Letter, at 8-9, supra note 10.
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6. Clarify the Conditions for FICC To Transfer Indirect Participant
Activity Following Default of Sponsoring Member or Agent Clearing
Member
The Proposed Rule Change proposed to adopt a new Rule 26 to
describe the process by which an Indirect Participant's activity and,
when applicable, Segregated Customer Margin could be ported between
Sponsoring Members or Agent Clearing Members.\30\ Section 2 of proposed
Rule 26 would provide for transfers of Indirect Participant activity
following the default of a Sponsoring Member or Agent Clearing
Member.\31\
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\30\ Supra note 3.
\31\ Id.
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In consideration of comments made in the FIA Letter,\32\ and
following further review of the Proposed Rule Change, FICC is proposing
to amend Section 2 of proposed Rule 26 to clarify that the provision
would apply in the event FICC ceases to act for a Sponsoring Member or
Agent Clearing Member under the Rules. The proposed amendment would
also clarify that any transfer under this provision would require the
consent of the alternative, or receiving, Sponsoring Member or Agent
Clearing Member.
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\32\ FIA Letter, at 10 and 12-13, supra note 10.
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2. Statutory Basis
FICC believes that the proposed amendments in this Amendment No. 1
are consistent with the requirements of the Act and the rules and
regulations thereunder applicable to FICC. In particular, FICC believes
that the proposed amendments are consistent with Section 17A(b)(3)(F)
of the Act \33\ and Rules 17ad-22(e)(13) and (23)(i) promulgated under
the Act,\34\ as described below.
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\33\ 15 U.S.C. 78q-1(b)(3)(F).
\34\ 17 CFR 240.17ad-22(e)(13), (23)(i).
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Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of FICC 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.\35\ The proposed amendments would expand
upon the changes proposed in the Proposed Rule Change, by, for example,
describing in the Rule additional liquidation mechanisms available to
Sponsoring Members and Agent Clearing Members. By expanding the Rules
governing default management and the proposed Rules that would govern
porting Indirect Participant activity, the proposed amendments would
improve market participants' understanding of the operation of FICC's
default management procedures applicable to the GSD indirect access
models. As a result, FICC believes that market participants would be
better prepared in the event of a Member default, which would result in
a more orderly management of such an event. The proposed amendments
would, therefore, minimize default losses and, thereby, reduce
potential risk to FICC and non-defaulting Members. As such, FICC
believes the proposed amendments would assure the safeguarding of
securities and funds which are in the custody and control of FICC or
for which it is responsible, consistent with Section 17A(b)(3)(F) of
the Act.\36\
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\35\ 15 U.S.C. 78q-1(b)(3)(F).
\36\ Id.
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Rule 17ad-22(e)(13) promulgated under the Act requires that FICC
establish, implement, maintain, and enforce written policies and
procedures reasonably designed to ensure FICC has the authority and
operational capacity to take timely action to contain losses and
continue to meet its obligations.\37\ As described above, the proposed
amendments would expand the descriptions in the Rules of FICC's default
management procedures by, for example, describing additional
liquidation mechanisms available under the Sponsored Service and Agent
Clearing Service and making clarifications to the existing liquidation
provisions in the Rules and in the Proposed Rule Change. Having clear
and comprehensive rules governing the default management process would
facilitate a more effective and orderly administration of those rules,
providing FICC with the authority and operational capacity to take
timely action to contain losses and liquidity demands in the event of a
default. This, in turn, would help FICC continue to meet its clearance
and settlement obligations as a central counterparty in such an event.
Therefore, FICC believes that the proposed amendments to enhance the
transparency and consistency of FICC's default management process with
respect to indirect participant activity
[[Page 45854]]
are consistent with Rule 17ad-22(e)(13) under the Act.\38\
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\37\ 17 CFR 240.17ad-22(e)(13).
\38\ Id.
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Rule 17ad-22(e)(23)(i) promulgated under the Act requires that FICC
establish, implement, maintain, and enforce written policies and
procedures reasonably designed to publicly disclose all relevant rules
and material procedures, including key aspects of FICC's default rules
and procedures.\39\ The proposed amendments would expand the
description of FICC's default management procedures in the Rules,
principally by describing additional liquidation mechanisms available
to Sponsoring Members and Agent Clearing Members and clarifying the
operation of the existing liquidation provisions in the Rules and the
Proposed Rule Change. As such, these proposed amendments would further
improve the public disclosures in the Rules regarding FICC's default
rules and procedures as such matters apply to the indirect access
models. Therefore, FICC believes that the proposed amendments are
consistent with Rule 17ad-22(e)(23)(i) under the Act.\40\
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\39\ 17 CFR 240.17ad-22(e)(23)(i).
\40\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
FICC does not believe the proposed amendments would have any impact
on competition because, similar to the changes set forth in the
Proposed Rule Change, the proposed amendments would apply equally to
all Members and Indirect Participants. Further, like the changes set
forth in the Proposed Rule Change, the proposed amendments would expand
the disclosures in the Rules regarding how FICC's default management
procedures apply to the GSD indirect access models, and make updates
primarily designed to improve market participants' understanding of
those Rules. As such, FICC does not believe such proposed amendments
would have any effect on participants' respective competitive position.
(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 Amendment No. 1. If any written comments are received, FICC will
amend this filing to publicly file such comments as an Exhibit 2
hereto, 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 Comments, available at <a href="https://www.sec.gov/regulatory-actions/how-to-submit-comments">https://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#dbafa9babfb2b5bcbab5bfb6baa9b0beafa89ba8beb8f5bcb4ad"><span class="__cf_email__" data-cfemail="2d595f4c4944434a4c4349404c5f4648595e6d5e484e034a425b">[email protected]</span></a> or 202-551-5777.
FICC reserves the right to not respond to any comments received.
III. Proceedings To Determine Whether To Approve or Disapprove SR-FICC-
2025-015, as Modified by Amendment No. 1, and Grounds for Disapproval
Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Exchange Act \41\ to determine whether the Proposed
Rule Change, as modified by Amendment No. 1, should be approved or
disapproved. Institution of such 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 conclusions with respect to any of the
issues involved. Rather, as described below, the Commission seeks and
encourages interested persons to provide comments on the Proposed Rule
Change.
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\41\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Exchange Act,\42\ 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 Exchange Act
\43\ and the rules thereunder, including the following provisions:
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\42\ Id.
\43\ 15 U.S.C. 78q-1.
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<bullet> Section 17A(b)(3)(F) of the Exchange Act,\44\ 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; to foster cooperation and coordination with
persons engaged in the clearance and settlement of securities
transactions; and, in general, to protect investors and the public
interest;
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\44\ 15 U.S.C. 78q-1(b)(3)(F).
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<bullet> Rule 17ad-22(e)(13) under the Exchange Act,\45\ which
requires that a covered clearing agency establish, implement, maintain
and enforce written policies and procedures reasonably designed to
ensure the covered clearing agency has the authority and operational
capacity to take timely action to contain losses and liquidity demands
and continue to meet its obligations by, at a minimum, requiring the
covered clearing agency's participants and, when practicable, other
stakeholders to participate in the testing and review of its default
procedures, including any close-out procedures, at least annually and
following material changes thereto; and
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\45\ 17 CFR 240.17ad-22(e)(13).
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<bullet> Rule 17ad-22(e)(19) under the Exchange Act,\46\ which
requires that a covered clearing agency establish, implement, maintain,
and enforce written policies and procedures reasonably designed to
identify, monitor, and manage the material risks to the covered
clearing agency arising from arrangements in which firms that are
indirect participants in the covered clearing agency rely on the
services provided by direct participants to access the covered clearing
agency's payment, clearing, or settlement facilities;
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\46\ 17 CFR 240.17ad-22(e)(19).
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<bullet> Rule 17ad-22(e)(23)(i) under the Exchange Act,\47\ which
requires that a covered clearing agency establish, implement, maintain,
and enforce written policies and procedures reasonably designed to
provide for publicly disclosing all relevant and material procedures,
including key aspects of its default rules and procedures.
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\47\ 17 CFR 240.17ad-22(e)(23)(i).
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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 proposal, as modified by Amendment No. 1. In particular, the
Commission invites the written views of interested persons concerning
whether the
[[Page 45855]]
proposal is consistent with Section 17A(b)(3)(F) \48\ of the Exchange
Act and Rules 17ad-22(e)(13), (e)(19), and (e)(23)(i) \49\ under the
Exchange Act, or any other provision of the Exchange Act, and 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, any request for an opportunity to
make an oral presentation.\50\
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\48\ 15 U.S.C. 78q-1(b)(3)(F).
\49\ 17 CFR 240.17ad-22(e)(13), (e)(19), and (e)(23)(i).
\50\ Section 19(b)(2) of the Exchange Act, as amended by the
Securities Acts Amendments of 1975, Public Law 94-29 (June 4, 1975),
grants 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 Acts Amendments of
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the Proposed Rule Change, as modified by
Amendment No. 1, should be approved or disapproved by October 14, 2025.
Any person who wishes to file a rebuttal to any other person's
submission must file that rebuttal by October 28, 2025.
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#3c4e495059115f5351515952484f7c4f595f125b534a"><span class="__cf_email__" data-cfemail="2f5d5a434a024c4042424a415b5c6f5c4a4c01484059">[email protected]</span></a>. Please include
file number SR-FICC-2025-015 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-2025-015. 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-2025-015 and
should be submitted on or before October 14, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\51\
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\51\ 17 CFR 200.30-3(a)(12) and (a)(57).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-18363 Filed 9-22-25; 8:45 am]
BILLING CODE 8011-01-P
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