Notice2025-19013
Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Modify the GSD Rulebook Relating to a New Service Offering Called the ACS Triparty Service
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 30, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 187 (Tuesday, September 30, 2025)</title>
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[Federal Register Volume 90, Number 187 (Tuesday, September 30, 2025)]
[Notices]
[Pages 47045-47055]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-19013]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104084; File No. SR-FICC-2025-021]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Proposed Rule Change To Modify the GSD Rulebook
Relating to a New Service Offering Called the ACS Triparty Service
DATES: September 26, 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 September 19, 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. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change consists of amendments to the FICC
Government Securities Division (``GSD'') Rulebook (``Rules'') \3\ to
(i) add a new service offering (the ``ACS Triparty Service'') that
would allow an Agent Clearing Member to submit to FICC for Novation
Repo Transactions on securities represented by Generic CUSIP Numbers
and held under a triparty custodial arrangement, (ii) align how the
Rules treat Initial Haircuts and Start Legs under done-with Agent
Clearing Transactions (i.e., Agent Clearing Transactions between an
Executing Firm Customer and its own Agent Clearing Member) with the
treatment applicable to done-with Sponsored Member Trades, and (iii)
make certain conforming and clarifying changes. The proposed rule
changes are designed to facilitate access to FICC's clearance and
settlement services, including by indirect participants, in accordance
with the requirements of Rule 17ad-22(e)(18) under the Act.\4\
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\3\ Capitalized terms not defined herein are defined in the
Rules, available at <a href="http://www.dtcc.com/legal/rules-and-procedures">http://www.dtcc.com/legal/rules-and-procedures</a>.
\4\ 17 CFR 240.17ad-22(e)(18).
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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 to
(i) add the ACS Triparty Service that would allow an Agent Clearing
Member to submit to FICC for Novation Repo Transactions on securities
represented by Generic CUSIP Numbers and held under a triparty
custodial arrangement, (ii) align how the Rules treat Initial Haircuts
and Start Legs under done-with Agent Clearing Transactions with the
treatment applicable to done-with Sponsored Member Trades, and (iii)
make certain conforming and clarifying changes.
(i) Background
a. The Agent Clearing Service
In 2024, FICC renamed and consolidated its existing correspondent
clearing/prime broker services into a single ``Agent Clearing
Service.'' \5\ The Agent Clearing Service allows certain Netting
Members (each, an ``Agent Clearing Member'') to submit to FICC for
comparison, Novation, and netting cash transactions and Repo
Transactions (each, an ``Agent Clearing Transaction'') entered into by
a customer (each, an ``Executing Firm Customer'') with the Agent
Clearing Member (``done-with'') or with a different Netting Member or
any Sponsored Member or Executing Firm Customer (``Indirect
Participant'') of any Netting Member (``done-away''). Under the Agent
Clearing Service, the Agent Clearing Member acts solely as agent of the
Executing Firm Customer in connection with the clearing of Agent
Clearing Transactions. However, the Agent Clearing Member remains fully
liable to FICC for the performance of all obligations, financial or
otherwise, arising in connection with Agent Clearing Transactions.
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\5\ Securities Exchange Act Release No. 101694 (Nov. 21, 2024),
89 FR 93784, 93798-99 (Nov. 27, 2024) (SR-FICC-2024-005).
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The Agent Clearing Service aims to allow indirect participants to
access FICC's clearance and settlement systems using a model that is
similar in many respects to the agent clearing model through which
market participants clear U.S. futures and cleared derivatives.\6\
Furthermore, Clearing Fund requirements for Agent Clearing Transactions
are ``calculated on a net basis across all Executing Firm Customers
whose transactions are recorded within the same Account, resulting in
aggregate margin obligations that are substantially lower than under
the GSD sponsored membership service (``Sponsored Service'').\7\
Moreover, the Agent Clearing Service allows indirect participants that
are unable to onboard directly with FICC to access FICC's clearance and
settlement services. In addition, the level of intermediation present
in the Agent Clearing Service allows Agent Clearing Members to take
steps to perfect their security interests in Agent Clearing
Transactions without the costly and time-consuming filing of a
financing statement.\8\ FICC understands that SIFMA has commissioned an
industry opinion concluding that, due to the intermediated nature of
the Agent Clearing Service, a court would give effect to an agreement
between an Agent Clearing Member and its Executing Firm Customer to
treat Agent Clearing Transactions as ``financial assets'' credited to a
``securities account'' for which the Agent Clearing Member is
``securities intermediary'' within the meaning of Article 8 of the New
York Uniform Commercial Code (``UCC''). Under Articles 8 and 9 of the
UCC, a securities intermediary's security interest is automatically
perfected.\9\ As a result, the opinion reasons, an Agent Clearing
Member that makes such election would be able to perfect its
[[Page 47046]]
security interest in the Agent Clearing Transactions without needing to
file a financing statement.\10\
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\6\ See Rule 8, supra note 3.
\7\ See supra note 5.
\8\ See Letter from Laura Klimpel, Head of Fixed Income
Financing Solutions, The Depository Trust & Clearing Corporation
(Aug. 1, 2024), at 50, available at <a href="https://www.sec.gov/comments/sr-ficc-2024-007/srficc2024007-500915-1465682.pdf">https://www.sec.gov/comments/sr-ficc-2024-007/srficc2024007-500915-1465682.pdf</a> (``Given the greater
intermediation of the [Agent Clearing Service], a Netting Member
would be able to utilize a `financial asset' election to perfect its
security interest in transactions cleared under the [Agent Clearing
Service] without having to file a UCC financing statement. Both
Netting Members and customers may find this beneficial since UCC
financing statements give rise to costs, risk, and publicity.'').
\9\ See UCC 9-309(10).
\10\ See SIFMA Confirmation Letter Related to the SIFMA
Accounting Committee's UST Clearing Working Group's Accounting
Treatment for UST Repo Transactions Cleared Through FICC White
Paper, available at <a href="https://www.sifma.org/wp-content/uploads/2025/09/Public-SIFMA-UST-Repo-Clearing-Confirming-Letter_final.pdf">https://www.sifma.org/wp-content/uploads/2025/09/Public-SIFMA-UST-Repo-Clearing-Confirming-Letter_final.pdf</a>.
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The Agent Clearing Service is one of FICC's two principal indirect
participant access models. The other is FICC's Sponsored Service. Under
that service, a Netting Member of FICC (in such capacity, a
``Sponsoring Member'') may sponsor into limited membership its customer
(a ``Sponsored Member'') and submit for comparison, Novation, and
netting certain transactions entered into by the Sponsored Member
(each, a ``Sponsored Member Trade''). Similar to the Agent Clearing
Service, the Sponsoring Member acts as processing agent for its
Sponsored Members in relation to their Sponsored Member Trades and
guarantees to FICC the Sponsored Member's obligations under such
transactions.
The Sponsored Service and Agent Clearing Service share a number of
similarities. However, there are certain aspects in which the Agent
Clearing Service and the Sponsored Service differ. These include the
scope of transactions eligible to be cleared, the treatment of
haircuts, and the Novation of Start Legs, each as further described
below.
b. Triparty Repo Transactions
While the Agent Clearing Service supports cash transactions and
Repo Transactions that settle through FICC on a delivery-versus-payment
basis (``DVP Repo Transactions''), it does not support Repo
Transactions on securities represented by Generic CUSIP Numbers that
settle through a clearing agent bank's triparty repo platform
(``Triparty Trades''). By contrast, the Sponsored Service supports not
only DVP Repo Transactions (``DVP Sponsored Member Trades'') and cash
transactions, but also Triparty Trades between a Sponsored Member and
its Sponsoring Member (``Sponsored GC Trades'').\11\ FICC clears
Sponsored GC Trades through its Sponsored GC Service.
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\11\ See Rule 3A, Section 7(b), supra note 3. FICC has filed a
separate proposed rule change to facilitate the clearing of done-
away Sponsored GC Trades. See Securities Exchange Act Release No.
103940 (Sept. 10, 2025), 90 FR 36088 (Sept. 15, 2025) (SR-FICC-2025-
019).
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The Sponsored GC Service contains a number of features that
facilitate the ability of certain indirect participants to access
FICC's clearance and settlement services and Sponsoring Members to
provide such access. Of particular note, under the Sponsored GC
Service, the securities delivery and related payment obligations under
Sponsored GC Trades settle directly between the pre-Novation
counterparties to the trades through a Sponsored GC Clearing Agent
Bank's triparty repo platform, rather than through FICC.\12\ This
feature can facilitate access for certain market participants that
``are not operationally equipped to perform the collateral management
and other functions associated with term DVP [Repo Transactions],''
\13\ as well as money market funds and other mutual funds that
``generally prefer to use the tri-party repo market because a clearing
bank administers collateral management and other functions.'' \14\ In
addition, Sponsored GC Trades involve only limited Funds-Only
Settlement Amount obligations, which FICC understands Sponsoring
Members typically assume for their Sponsored Members. By virtue of
these features, among others, the Sponsored GC Service has improved
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\12\ See Securities Exchange Act Release Nos. 92808 (Aug. 30,
2021), 86 FR 49580-81 (Sept. 3, 2021) (SR-FICC-2021-003); and 92799
(Aug. 27, 2021), 86 FR 49387-88 (Sept. 2, 2021) (SR-FICC-2021-801).
\13\ Id.
\14\ Id.
the efficiency and effectiveness of FICC's clearing and settlement
arrangements by making it more operationally efficient for
Sponsoring Members and their Sponsored Members that are money market
funds and other mutual funds to transact Repo Transactions . . .
through FICC by allowing them to settle such Repo Transactions on
the tri-party repo platform of a Sponsored GC Clearing Agent Bank in
a similar manner to the way such Sponsoring Members and Sponsored
Members settle tri-party repo transactions with each other outside
of central clearing.\15\
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\15\ Securities Exchange Act Release No. 92014 (May 25, 2021),
86 FR 29334, 29346 (June 1, 2021) (SR-FICC-2021-003).
c. Initial Haircuts
Another difference between the Sponsored Service and the Agent
Clearing Service concerns Initial Haircuts. FICC understands from its
engagement with market participants that many cash providers require
the value of the Purchased Securities to exceed the purchase price for
such securities (i.e., for the Repo Transactions to be
overcollateralized) for credit or regulatory reasons.\16\ The Rules,
therefore, contain certain provisions that are designed to support
Sponsored Member Trades with Initial Haircuts (i.e., Repo Transactions
for which the value of the securities exceeds the purchase price).
These terms provide that, for a DVP Sponsored Member Trade, FICC will
incorporate any Initial Haircut into its calculation of the Collateral
Mark of the transaction.\17\ More specifically, for such transactions,
FICC will assess the Collateral Mark based on the change in value of
the Eligible Securities relative to the Initial Haircut, rather than
based on the Contract Value.\18\ By virtue of these provisions, a
Sponsoring Member and its Sponsored Member that ``intend for one of
those two parties to remain overcollateralized for the duration of a
Sponsored Member Trade'' may ``transfer a haircut between each other
and allow such haircut to remain with the intended party until final
settlement of the Sponsored Member Trade.'' \19\ Similarly, with
respect to Sponsored GC Trades, the Rules provide for an exchange of
value (through the Sponsored GC Clearing Agent Bank's triparty repo
platform) equal to the change in value of the Purchased GC Repo
Securities, rather than the difference in value between the initial
purchase price for such transactions and the value of the Purchased GC
Repo Securities.\20\ As a result of this provision, if a GC Funds
Lender receives an Initial Haircut, it can retain that haircut through
the life of the Sponsored GC Trade.
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\16\ Cf. Securities Exchange Act Release No. 87896 (Jan. 6,
2020), 85 FR 1354, 1358 (Jan. 10, 2020) (SR-FICC-2019-007) (stating
that ``the regulations and/or investment guidelines to which a
Sponsored Member is subject may require that it receive Eligible
Securities worth more than the cash that it is due to receive at
final settlement of a FICC-cleared reverse repo, i.e., a
haircut.'').
\17\ See Rule 3A, Section 9(a), supra note 3.
\18\ Securities Exchange Act Release No. 88262 (Feb. 21, 2020),
85 FR 11401, 11404 (Feb. 27, 2020) (SR-FICC-2019-007).
\19\ See Rule 3A, Section 9(a), supra note 3.
\20\ See Rule 3A, Sections 8(b)(ii) and (iii), supra note 3.
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However, since FICC does not collect margin in relation to any
Initial Haircuts, transactions with Initial Haircuts are considered
Off-the-Market Transactions. As a result, in the event a Sponsored
Member has posted an Initial Haircut under a Sponsored Member Trade, it
would bear the risk of loss of such Initial Haircut in the event FICC
ceased to act for the Sponsored Member's pre-Novation counterparty (or
its Sponsoring Member or Agent Clearing Member, as applicable).
The Rules governing the Agent Clearing Service do not currently
address the treatment of Initial Haircuts under Agent Clearing
Transactions. As a result, the way the Collateral Mark is calculated
for Agent Clearing Transactions currently serves to cause any Initial
Haircut under such transactions to be passed back to the
[[Page 47047]]
party that posted such haircut during the first Funds-Only Settlement
cycle. Moreover, while Agent Clearing Transactions with Initial
Haircuts are Off-the-Market Transactions by virtue of the definition
thereof, that is not expressly stated in the Rules.\21\
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\21\ See Rule 1 (defining ``Off-the-Market Transaction'' as
either ``(1) [a] single transaction that is: (i) greater than $1
million in par value; and (ii) executed at a contract price that is
either higher or lower (by a percentage amount determined by the
Corporation based on factors such as market conditions) than the
System Price for the underlying Eligible Netting Security on the day
of the submission of data on the transaction to the Corporation,''
or ``(2) a pattern of transactions submitted by two Members that, if
looked at as a single transaction, would be encompassed by
subsection (1) of this definition'' and providing that an Off-the-
Market Transaction ``includes a Sponsored Member Trade in which the
Sponsored Member provided an Initial Haircut''), supra note 3.
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d. Same-Day Settling Service
Another area in respect of which the Agent Clearing Service and
Sponsored Service differ concerns FICC's Same-Day Settling Trades
service (``Same-Day Settling Service''). In 2021, FICC amended its
Rules to provide for FICC to Novate the Start Legs of many same-day
starting Repo Transactions pursuant to FICC's Same-Day Settling
Service.\22\ FICC did not include in such amendments done-with
Sponsored Member Trades. This decision, which FICC made in close
consultation with indirect and direct participants, was based on the
operational complexities that Novation and settlement of Start Legs can
present to both Sponsoring Members and Sponsored Members. It was also
driven by the legal complexities that clearing Start Legs of Sponsored
Member Trades could present to Sponsored Members. In particular, FICC
understood from market participants that Novating the Start Legs of
done-with Sponsored Member Trades could be problematic for Sponsored
Members that are cash providers since they would be faced with a new
obligation to deliver cash to FICC. These challenges could be
especially problematic since any failure to satisfy that obligation
would be grounds for FICC to deem that Sponsored Member insolvent.
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\22\ See Securities Exchange Act Release No. 90948 (Jan. 19,
2021), 86 FR 7159 (Jan. 26, 2021) (SR-FICC-2020-015).
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Unlike under the Sponsored Service, the Rules provide for FICC to
Novate the Start Legs of done-with Repo Transactions submitted via the
Agent Clearing Service. However, FICC understands from its engagement
with market participants that similar considerations to those discussed
above also apply to Executing Firm Customers and their Agent Clearing
Members.
(ii) Proposed Change To Establish ACS Triparty Service
FICC proposes to create the ACS Triparty Service as a new offering
under the Agent Clearing Service. The ACS Triparty Service would allow
an Agent Clearing Member to submit to FICC for comparison and Novation
triparty Repo Transactions entered into by an Executing Firm Customer
involving securities represented by Generic CUSIP Numbers (each, an
``ACS Triparty Trade''). The ACS Triparty Service would accommodate
both transactions between an Executing Firm Customer and its Agent
Clearing Member (i.e., done-with trades) and transactions between an
Executing Firm Customer and another Netting Member or an Indirect
Participant of any Netting Member (i.e., done-away trades).
FICC proposes that the ACS Triparty Service leverage much of the
legal and operational framework applicable to the existing Sponsored GC
Service. As a result, the terms of the ACS Triparty Service would be
substantially similar to those of the Sponsored GC Service, including
that:
<bullet> Only the End Leg of Repo Transactions would be eligible
for Novation in connection with the ACS Triparty Service;
<bullet> The Start Leg of an ACS Triparty Trade would settle on a
gross (i.e., trade-for-trade) basis between the pre-Novation
counterparties on the triparty repo platform of a Clearing Agent Bank
that has agreed to provide FICC with clearing services for ACS Triparty
Trades under mutually agreed terms (an ``ACS Triparty Clearing Agent
Bank'');
<bullet> FICC would only Novate the ACS Triparty Trade if the Start
Leg has settled and the other conditions applicable under the Sponsored
GC Service are satisfied; \23\
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\23\ Such conditions would be set out in proposed Section
8(a)(ii)(A)-(E) of Rule 8 and would mirror the conditions currently
in Section 7(b)(ii) of Rule 3A, supra note 3.
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<bullet> The schedule of eligible securities for the ACS Triparty
Service would be identical to the schedule of eligible securities for
the Sponsored GC Service;
<bullet> An ACS Triparty Trade may, but would not be required to,
have an Initial Haircut;
<bullet> Accrued repo interest on ACS Triparty Trades would be
payable by or to by FICC on a daily basis, and the repo seller (the
``ACS Triparty Funds Borrower'') would be permitted to substitute GC
Comparable Securities and/or cash for the purchased securities subject
to the ACS Triparty Trades (``Purchased ACS Triparty Repo
Securities'');
<bullet> The transfer of Purchased ACS Triparty Repo Securities in
connection with final settlement of an ACS Triparty Trade as well as
daily repo interest and any margin calls related to the mark-to-market
movement of Purchased ACS Triparty Repo Securities would be made
directly between the pre-Novation counterparties through the triparty
repo platform of an ACS Triparty Clearing Agent Bank;
<bullet> The only Funds-Only Settlement Amounts that would be
payable in respect of ACS Triparty Trades would be a Forward Mark
Adjustment Payment and Interest Rate Adjustment Payment; and
<bullet> ACS Triparty Trades would be treated as GCF Repo
Transactions for purposes of calculating initial margin requirements.
FICC would record ACS Triparty Trades in an Agent Clearing Member
Omnibus Account, alongside other Agent Clearing Transactions. As a
result, unless the Executing Firm Customer and the Agent Clearing
Member elect for the ACS Triparty Trades to be recorded in a Segregated
Indirect Participants Account, ACS Triparty Trades recorded in the same
Agent Clearing Member Omnibus Account (or Margin Portfolio of multiple
Agent Clearing Member Omnibus Accounts) would be margined in a way that
recognizes the risk offsets across all positions recorded in such
account or portfolio. In addition, consistent with recent changes FICC
has proposed to the Sponsored GC Service, the ACS Triparty Service
would accommodate not only done-with Repo Transactions, but also done-
away ones.
As described above, FICC understands that the features leveraged
from the Sponsored GC Service, including in particular the limited
Funds-Only Settlement Amounts and the settlement of securities delivery
and related payment obligations through the ACS Triparty Clearing Agent
Bank's triparty repo platform, can facilitate the ability of certain
indirect participants to engage in cleared transactions and of direct
participants to provide clearing services. In particular, these
features would make it easier for money market funds and other cash
providers that ``depend on transfers of securities to maintain required
margin, and typically rely on a tri-party repo clearing bank to
administer the collateral management'' to access FICC's clearance and
settlement services and for clearing
[[Page 47048]]
members to provide such access.\24\ FICC therefore believes that
offering the ACS Triparty Service would allow more market participants
to access FICC's Agent Clearing Service, which in turn would facilitate
greater access to FICC's clearance and settlement services for eligible
secondary market transactions.\25\
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\24\ Securities Exchange Act Release No. 92014 (May 25, 2021),
86 FR 29334, 29336 (June 1, 2021) (SR-FICC-2021-003).
\25\ 17 CFR 240.17ad-22(e)(18)(iv)(C).
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As noted above, ACS Triparty Trades would be treated as GCF Repo
Transactions for purposes of calculating initial margin requirements.
FICC is not proposing changes to the calculation of the Required Fund
Deposit or Segregated Customer Margin in connection with the proposed
ACS Triparty Service. ACS Triparty Trades that are recorded in an Agent
Clearing Member Omnibus Account or a Segregated Indirect Participants
Account would be subject to all applicable charges, pursuant to the
Margin Component Schedule of the Rules, as Agent Clearing Transactions
recorded in the same Account.
FICC would propose to exclude ACS Triparty Trades from a provision
that is being proposed to be added to Rule 8 under a separate proposed
rule change filing (the ``Default Management Proposal'').\26\
Specifically, the Default Management Proposal would amend Rule 8 to
describe mechanisms that would permit Agent Clearing Members to
liquidate the positions of an Executing Firm Customer.\27\ FICC would
exclude ACS Triparty Trades from the proposed mechanism through which
Agent Clearing Members could record an offsetting Agent Clearing
Transaction in the Agent Clearing Member Omnibus Account. ACS Triparty
Trades would be excluded from this proposed mechanism because FICC
would settle ACS Triparty Trades on a gross basis and, therefore, an
offsetting trade would not effectively liquidate an ACS Triparty Trade.
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\26\ See Securities Exchange Act Release No. 103557 (July 28,
2025), 90 FR 36088 (July 31, 2025) (SR-FICC-2025-015). FICC has also
filed Amendment No. 1 to the Default Management Proposal. See
Amendment No. 1 to SR-FICC-2025-015, available at <a href="https://www.dtcc.com/-/media/Files/Downloads/legal/rule-filings/2025/FICC/SR-FICC-2025-015-Amendment-1.pdf">https://www.dtcc.com/-/media/Files/Downloads/legal/rule-filings/2025/FICC/SR-FICC-2025-015-Amendment-1.pdf</a>.
\27\ Id.
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Further, the proposed ACS Triparty Service would not present any
additional or new liquidity risks to FICC. FICC would incorporate ACS
Triparty Trades into its liquidity risk management calculations and
into the calculation of Agent Clearing Members' obligations with
respect to the Capped Contingency Liquidity Facility (``CCLF''), as set
forth in Section 2a(b) of Rule 22A, using the same methodology, logic
and parameters that FICC uses with respect to Sponsored GC Trades.
To implement the proposed changes described above, FICC proposes to
make the following amendments to its Rules.
New defined terms. FICC proposes to revise Rule 1 by adding new
definitions for ``ACS Triparty Clearing Agent Bank,'' ``ACS Triparty
Collateral Return Entitlement,'' ``ACS Triparty Collateral Return
Obligation,'' ``ACS Triparty Funds Borrower,'' ``ACS Triparty Funds
Lender,'' ``ACS Triparty Repo Security,'' ``ACS Triparty Service,''
``ACS Triparty Trade,'' and ``Purchased ACS Triparty Repo Securities.''
Each of these terms would be defined in a manner that is substantially
similar to the comparable defined terms in connection with the
Sponsored GC Service, but with such revisions as necessary to
accommodate both done-with and done-away trades.\28\ In addition, FICC
would include language in the ACS Triparty Funds Borrower and ACS
Triparty Funds Lender definitions to make clear that, in the event an
Executing Firm Customer is the ACS Triparty Funds Borrower or ACS
Triparty Funds Lender, such terms would, following Novation of the ACS
Triparty Trade, refer to an Agent Clearing Member acting on behalf of
the Executing Firm Customer.
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\28\ FICC has filed a separate proposed rule change to
facilitate the clearing of done-away Sponsored GC Trades. See
Securities Exchange Act Release No. 103940 (Sept. 10, 2025), 90 FR
36088 (Sept. 15, 2025) (SR-FICC-2025-019).
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``ACS Triparty Clearing Agent Bank'' would mean a Clearing Agent
Bank that has agreed to provide FICC, upon request, under mutually
agreeable terms, with clearing services for ACS Triparty Trades.
``ACS Triparty Collateral Return Entitlement'' would mean the
entitlement of a Netting Member or its Indirect Participant to receive
the Purchased ACS Triparty Repo Securities in exchange for cash at the
End Leg of an ACS Triparty Trade.
``ACS Triparty Collateral Return Obligation'' would mean the
obligation of a Netting Member or its Indirect Participant to deliver
the Purchased ACS Triparty Repo Securities in exchange for cash at the
End Leg of an ACS Triparty Trade.
``ACS Triparty Funds Borrower'' would mean a Netting Member or its
Indirect Participant that has an ACS Triparty Collateral Return
Entitlement and associated cash payment obligation. If the ACS Triparty
Funds Borrower is an Executing Firm Customer, then, following Novation
of the relevant ACS Triparty Trade, the term ACS Triparty Funds
Borrower shall refer to the Agent Clearing Member on behalf of the
Executing Firm Customer.
``ACS Triparty Funds Lender'' would mean a Netting Member or its
Indirect Participant that has an ACS Triparty Collateral Return
Obligation and associated cash payment entitlement. If the ACS Triparty
Funds Lender is an Executing Firm Customer, then, following Novation of
the relevant ACS Triparty Trade, the term ACS Triparty Funds Lender
shall refer to the Agent Clearing Member on behalf of the Executing
Firm Customer.
``ACS Triparty Repo Security'' would mean an Eligible Security that
is only eligible for submission to FICC in connection with the
comparison and Novation of ACS Triparty Trades.
``ACS Triparty Service'' would mean the service offered by FICC to
clear triparty repurchase agreement transactions between an Executing
Firm Customer and either its Agent Clearing Member or another Netting
Member or Indirect Participant as described in Rule 8.
``ACS Triparty Trade'' would mean, in connection with the ACS
Triparty Service, an Agent Clearing Transaction that is a Repo
Transaction between an Executing Firm Customer and a Netting Member or
its Indirect Participant involving securities represented by a Generic
CUSIP Number the data on which are submitted to FICC by the Agent
Clearing Member pursuant to the provisions of Rule 6A, for Novation to
FICC pursuant to Section 8(a)(ii) of Rule 8.
``Purchased ACS Triparty Repo Securities'' would mean the ACS
Triparty Repo Securities transferred by the ACS Triparty Funds Borrower
in settlement of the Start Leg of an ACS Triparty Trade, plus all cash
and other ACS Triparty Repo Securities transferred by such ACS Triparty
Funds Borrower pursuant to Sections 8(b)(ii) and (v) of Rule 8, less
any ACS Triparty Repo Securities or cash received by the ACS Triparty
Funds Borrower pursuant to Sections 8(b)(iii) and (v) of Rule 8.
Revisions to defined terms. FICC proposes to revise Rule 1 to make
the following revisions to certain existing defined terms. These
revisions would serve to incorporate into such existing defined terms
provisions applicable to ACS Triparty Trades that are similar to those
applicable to Sponsored GC Trades.
FICC would revise the definition of ``Start Leg'' so that, in the
context of an ACS Triparty Trade, it refers to the initial settlement
aspects of the
[[Page 47049]]
Transaction, involving the transfer of ACS Triparty Repo Securities by
the ACS Triparty Funds Borrower and the taking in of such ACS Triparty
Repo Securities by the ACS Triparty Funds Lender.
FICC would revise the definition of ``End Leg'' so that, in the
context of an ACS Triparty Trade, it refers to the concluding
settlement aspects of the Transaction, involving the retransfer of the
Purchased ACS Triparty Repo Securities by the ACS Triparty Funds Lender
and the taking back of such Purchased ACS Triparty Repo Securities by
the ACS Triparty Funds Borrower.
FICC would revise the definitions of ``Current Net Settlement
Positions,'' ``Eligible Security,'' ``Forward Mark Adjustment
Payment,'' ``GC Comparable Securities,'' ``GC Daily Repo Interest,''
``GC Interest Rate Mark,'' ``GC Start Leg Market Value,'' ``General
Collateral Repo Transaction,'' ``Generic CUSIP Number,'' and ``Interest
Adjustment Payment'' by adding references to ACS Triparty Trades.
Terms Governing ACS Triparty Trades. FICC would make the following
amendments to Rule 8 to establish and describe the terms governing the
ACS Triparty Service.
FICC would revise Section 4 of Rule 8 to provide that an Agent
Clearing Member may submit to FICC ACS Triparty Trades on behalf of
Executing Firm Customers and that such transactions constitute Agent
Clearing Transactions for purposes of the Rules.
FICC would revise Section 7 of Rule 8 to describe the extent to
which FICC's existing processing rules for Agent Clearing Transactions
apply to ACS Triparty Trades. Specifically, FICC would revise Section
7(b) of Rule 8 to clarify that ACS Triparty Trades shall be processed
and netted in the same manner as other Agent Clearing Transactions
unless otherwise specifically stated in Rule 8. FICC would also revise
the new Section 7(e) of Rule 8 (former Section 7(d) of Rule 8),\29\
which sets out certain exceptions from FICC's netting procedures for
certain Agent Clearing Transactions, to make clear that it does not
apply to ACS Triparty Trades.
---------------------------------------------------------------------------
\29\ As described below, FICC proposes to add a new Section 7(c)
to Rule 8.
---------------------------------------------------------------------------
FICC would also revise new Section 7(i) of Rule 8 (former Section
7(g) of Rule 8) to describe how FICC would determine the initial margin
requirements for ACS Triparty Trades. By virtue of the revisions, new
Section 7(i) would provide that, for purposes of the application of
Rule 4 to an Agent Clearing Member Omnibus Account, each ACS Triparty
Trade shall be treated as a GCF Repo Transaction, each ACS Triparty
Funds Lender and ACS Triparty Funds Borrower shall be treated as a GCF
Counterparty, and each ACS Triparty Clearing Agent Bank shall be
treated as a GCF Clearing Agent Bank.
FICC would add a new Section 8 of Rule 8 to set forth the various
terms specific to ACS Triparty Trades, which would closely mirror the
rules applicable to Sponsored GC Trades set forth in Sections 7(b),
8(b), and 9(b) of Rule 3A. As described more fully below, new Section
8(a) of Rule 8 would describe how ACS Triparty Trades would be
processed through GSD's Netting System and would be Novated by FICC,
the new Section 8(b) of Rule 8 would describe securities settlement for
ACS Triparty Transactions, and the new Section 8(c) of Rule 8 would
describe funds-only settlement for the ACS Triparty Service. Each of
these new sections of Rule 8 would mirror, with no substantive
differences, Section 7(b) of Rule 3A (addressing netting and Novation
of Sponsored GC Trades), Section 8(b) of Rule 3A (addressing securities
settlement of Sponsored GC Trades), and Section 9(b) (addressing Funds-
Only Settlement Amounts applicable to Sponsored GC Trades).
Paragraph (a)(i) of the new Section 8 of Rule 8 would provide that,
as with Sponsored GC Trades,\30\ only the End Leg of an ACS Triparty
Trade may be novated to FICC and that an ACS Triparty Trade may, but
need not, have an Initial Haircut.
---------------------------------------------------------------------------
\30\ See Rule 3A, Section 7(b)(i), supra note 3.
---------------------------------------------------------------------------
Paragraph (a)(ii) of new Section 8 of Rule 8 would set forth the
requirements that would need to be satisfied in order for an ACS
Triparty Trade to be novated on a given Business Day. These
requirements, which are the same as those as apply to Sponsored GC
Trades,\31\ would be that:
---------------------------------------------------------------------------
\31\ See Rule 3A, Section 7(b)(ii), supra note 3.
---------------------------------------------------------------------------
<bullet> the trade data on the ACS Triparty Trade must have been
submitted to FICC by the Agent Clearing Member pursuant to Rule 6A by
the deadline set forth in FICC's proposed new Schedule of ACS Triparty
Trade Timeframes,
<bullet> the data on the ACS Triparty Trade must have been compared
in the Comparison System pursuant to Rule 6A,
<bullet> the Start Leg of the ACS Triparty Trade must have fully
settled at the ACS Triparty Clearing Agent Bank by the deadline set
forth in FICC's proposed new Schedule of ACS Triparty Trade Timeframes,
<bullet> the ACS Triparty Clearing Agent Bank must have, pursuant
to communications links, formats, timeframes, and deadlines established
by FICC for such purpose, provided to FICC a report containing such
data as FICC may require from time to time, including information
regarding the specific ACS Triparty Repo Securities that were delivered
in settlement of the Start Leg of the ACS Triparty Trade, and
<bullet> FICC must determine that the data contained in such report
matches the data on the ACS Triparty Trade submitted by the Agent
Clearing Member pursuant to Rule 6A.
Paragraph (a)(iii) of new Section 8 of Rule 8 would state that, as
with Sponsored GC Trades,\32\ FICC would on each Business Day provide
each Agent Clearing Member with one or more Reports setting forth (A)
each ACS Triparty Trade, the data on which has been compared in the
Comparison System and (B) each ACS Triparty Trade the End Leg of which
has been novated to FICC.
---------------------------------------------------------------------------
\32\ See Rule 3A, Section 7(b)(iii), supra note 3.
---------------------------------------------------------------------------
Paragraph (a)(iv) of new Section 8 of Rule 8 would require that
each Agent Clearing Member, on its own behalf and on behalf of each
Executing Firm Customer, acknowledges and agrees that it has authorized
each relevant ACS Triparty Clearing Agent Bank to provide FICC with all
information and data as FICC may require or request from time to time
in order to novate and process ACS Triparty Trades. This requirement is
similar to Section 7(b)(iv) of Rule 3A, which requires each relevant
Sponsoring Member and Sponsored Member to acknowledge and agree that it
has authorized each relevant Sponsored GC Clearing Agent Bank to
provide FICC with all information and data as FICC may require or
request from time to time in order to novate and process Sponsored GC
Trades.
Paragraph (b)(i) of new Section 8 of Rule 8 would state that an ACS
Triparty Funds Lender and ACS Triparty Funds Borrower must satisfy
their ACS Triparty Collateral Return Obligations and cash payment
obligations associated with ACS Triparty Collateral Return
Entitlements, respectively, within the timeframes established for such
by FICC in the proposed Schedule of ACS Triparty Trade Timeframes. In
addition, any failure by the ACS Triparty Funds Borrower to satisfy its
cash payment obligations associated with ACS Triparty Collateral Return
Entitlements within the timeframe established for such by FICC in the
Schedule of ACS Triparty Trade Timeframes would subject it to a late
fee as if such ACS
[[Page 47050]]
Triparty Funds Borrower were a Net Funds Payor within the meaning of
Section IX of the Fee Structure (Late Fee Related to GCF Repo
Transactions).
Paragraphs (b)(ii) and (iii) of new Section 8 of Rule 8 would set
forth the terms under which FICC would risk manage the mark-to-market
movement of Purchased GC Securities. These terms would be substantially
the same as those set forth in Sections 8(b)(ii) and (iii) of Rule 3A
applicable to Sponsored GC Trades. In particular, paragraph (b)(ii) of
new Section 8 of Rule 8 would state that if on any Business Day, the
market value of an ACS Triparty Funds Borrower's ACS Triparty
Collateral Return Entitlement from the previous Business Day (or the
current Business Day) is less than the GC Start Leg Market Value, then
such ACS Triparty Funds Borrower shall deliver to FICC (and FICC shall
deliver to the relevant ACS Triparty Funds Lender) additional GC
Comparable Securities and/or cash, such that the market value of the
ACS Triparty Funds Borrower's ACS Triparty Collateral Return
Entitlement (and the market value of the relevant ACS Triparty Funds
Lender's ACS Triparty Collateral Return Obligation) is at least equal
to the GC Start Leg Market Value. Such additional securities and/or
cash would need to be delivered by the ACS Triparty Funds Borrower
within the timeframe set forth in the Schedule of ACS Triparty Trade
Timeframes.
Paragraph (b)(iii) of new Section 8 of Rule 8 would state that if
on any Business Day, the market value of an ACS Triparty Funds Lender's
ACS Triparty Collateral Return Obligation from the previous Business
Day (or the current Business Day) is greater than the GC Start Leg
Market Value, then such ACS Triparty Funds Lender shall deliver to FICC
(and FICC shall deliver to the relevant ACS Triparty Funds Borrower)
some of the Purchased ACS Triparty Repo Securities, such that the
market value of the ACS Triparty Funds Lender's ACS Triparty Collateral
Return Obligation (and the market value of the relevant ACS Triparty
Funds Borrower's ACS Triparty Collateral Return Entitlement) is not
more than the GC Start Leg Market Value. Such Purchased ACS Triparty
Repo Securities must be delivered within the timeframe set forth in the
Schedule of ACS Triparty Trade Timeframes. In connection with this
proposed change, FICC is proposing to make a conforming and clarifying
change to Section 8(b)(iii) of Rule 3A, applicable to the Sponsored GC
Service.
Paragraph (b)(iv) of new Section 8 of Rule 8 would state that, as
under Sponsored GC Trades,\33\ each ACS Triparty Funds Borrower (or if
the repo rate for the relevant ACS Triparty Trade is negative, the ACS
Triparty Funds Lender) shall, within the timeframe set forth in the
Schedule of ACS Triparty Trade Timeframes, pay the daily accrued GC
Daily Repo Interest to FICC (and FICC shall pay such GC Daily Repo
Interest to the ACS Triparty Funds Lender, if the repo rate is positive
for the relevant ACS Triparty Trade, or to the ACS Triparty Funds
Borrower, if the repo rate is negative for the relevant ACS Triparty
Trade).
---------------------------------------------------------------------------
\33\ See Rule 3A, Section 8(b)(iv), supra note 3.
---------------------------------------------------------------------------
Paragraph (b)(v) of new Section 8 of Rule 8 would state that, as
under Sponsored GC Trades,\34\ an ACS Triparty Funds Borrower may
substitute cash and/or GC Comparable Securities for any Purchased ACS
Triparty Repo Securities in accordance with the timeframe set forth in
the Schedule of ACS Triparty Trade Timeframes.
---------------------------------------------------------------------------
\34\ See Rule 3A, Section 8(b)(v), supra note 3.
---------------------------------------------------------------------------
Paragraph (b)(vi) of new Section 8 of Rule 8 would provide that, as
with Sponsored GC Trades,\35\ ordinary course settlement of ACS
Triparty Trades (other than Funds-Only Settlement Amounts) shall occur
directly between the pre-Novation counterparties. In particular, that
provision would state that FICC directs each ACS Triparty Funds Lender
and ACS Triparty Funds Borrower to satisfy any payment or delivery
obligation due to FICC, except for any obligation to pay a Funds-Only
Settlement Amount, by causing the relevant payment or delivery to be
made to an account at the relevant ACS Triparty Clearing Agent Bank
specified by the pre-Novation counterparty to the ACS Triparty Funds
Lender and ACS Triparty Funds Borrower, as applicable, in accordance
with such procedures as the ACS Triparty Clearing Agent Bank may
specify from time to time. It would further provide that each ACS
Triparty Funds Lender and ACS Triparty Funds Borrower that is owed any
such payment or delivery from FICC acknowledges and agrees that, if the
pre-Novation counterparty to such ACS Triparty Trade makes the relevant
payment or delivery as described in the prior sentence, FICC's
obligation to make such payment or delivery shall be discharged and
satisfied in full.
---------------------------------------------------------------------------
\35\ See Rule 3A, Section 8(b)(vi), supra note 3.
---------------------------------------------------------------------------
Paragraph (b)(vii) of new Section 8 of Rule 8 would state that, as
under Sponsored GC Trades,\36\ the market value of all ACS Triparty
Repo Securities shall be determined by the relevant ACS Triparty
Clearing Agent Bank each Business Day.
---------------------------------------------------------------------------
\36\ See Rule 3A, Section 8(b)(vii), supra note 3.
---------------------------------------------------------------------------
Lastly, paragraph (c) of the new Section 8 of Rule 8 would set
forth the Funds-Only Settlement Amount obligations that would be
payable in respect of ACS Triparty Trades. It would provide that, as
with Sponsored GC Trades,\37\ the only Funds-Only Settlement Amounts
that shall be payable by and to FICC in respect of ACS Triparty Trades
shall be a Forward Mark Adjustment Payment and Interest Rate Adjustment
Payment.
---------------------------------------------------------------------------
\37\ See Rule 3A, Section 9(b), supra note 3.
---------------------------------------------------------------------------
FICC would amend Section 10 (``Liquidation of the Agent Clearing
Transactions of an Executing Firm Customer'') of Rule 8, which is being
proposed to be added by the Default Management Proposal as Section 9
and to be renumbered as Section 10 with this proposed rule change, to
exclude ACS Triparty Trades from the liquidation mechanism that would
be described in proposed Section 10(c)(i). Specifically, this
subsection would provide that the mechanism applies ``with respect to
the liquidation of positions resulting from Agent Clearing Transactions
other than ACS Triparty Trades.''
New Schedule and Schedule Revision. FICC proposes to add a new
Schedule of ACS Triparty Trade Timeframes that would generally mirror
the Schedule of Sponsored GC Trade Timeframes. However, 7:00 p.m.,
rather than 5:30 p.m. would be the deadline for full settlement of the
Start Leg of the ACS Triparty Trade in order for such ACS Triparty
Trade to be Novated on that day. This later deadline would align with
the close of Fedwire Funds Service at the Federal Reserve Bank of New
York, which is also currently 7:00 p.m. By shifting this timeframe
later, the proposal would permit ACS Triparty Trades for which funds
are delivered prior to the Fedwire cutoff at 7:00 p.m. to be Novated on
the same Business Day.\38\
---------------------------------------------------------------------------
\38\ FICC is proposing to shift the related deadline for the
Sponsored GC Service from 5:30 p.m. to 7:00 p.m. in a separate
proposed rule change filing for the same reason described here. See
Securities Exchange Act Release No. 103940 (Sept. 10, 2025), 90 FR
36088 (Sept. 15, 2025) (SR-FICC-2025-019).
---------------------------------------------------------------------------
The deadline would be 5:30 p.m. for (i) substitutions of Purchased
ACS Triparty Repo Securities in accordance with Section 8(b)(v) of Rule
8, and (ii) the ACS Triparty Funds Lender and ACS Triparty Funds
Borrower, respectively, to satisfy ACS Triparty Collateral Return
Obligations and cash payment obligations associated with ACS Triparty
Collateral Return
[[Page 47051]]
Entitlements in accordance with Section 8(b)(i) of Rule 8.
Under the Schedule of ACS Triparty Trade Timeframes, the time
during which reports would be made available with respect to end of day
Clearing Fund requirements and funds-only settlement requirements would
be from 10:30 p.m. to 2:00 a.m. 2:00 p.m. would be the time during
which reports would be made available with respect to the intraday
Clearing Fund requirements, and intraday funds-only settlement
requirements. At 10:00 a.m., funds-only settlement debits and credits
would be executed via the Federal Reserve's National Settlement
Service, and at 4:30 p.m., the intraday funds-only settlement debits
and credits would be executed via the Federal Reserve's National
Settlement Service.
9:00 a.m. would be the deadline for the ACS Triparty Funds Borrower
to deliver additional GC Comparable Securities and/or cash in
accordance with Sections 8(b)(ii) and (vi) of Rule 8. FICC would also
reserve the right to require an ACS Triparty Funds Borrower to satisfy
such obligation on an intraday basis based on the market value of the
applicable ACS Triparty Repo Securities as determined by the ACS
Triparty Clearing Agent Bank in accordance with Section 8(b)(vii) of
Rule 8. 12:00 p.m. would be the deadline for the ACS Triparty Funds
Borrower (or if the repo rate for the relevant ACS Triparty Trade is
negative, the ACS Triparty Funds Lender) to pay to FICC the accrued GC
Daily Repo Interest as described in Section 8(b)(iv) in accordance with
the provisions of Section 8(b)(vi) of Rule 8 (unless the End Leg of the
related ACS Triparty Trade is due to settle on the same day). Any
accrued GC Daily Repo Interest that is due on the settlement day of the
End Leg of the related ACS Triparty Trade would need to be paid in
connection with the settlement of the End Leg.
5:00 p.m. would be the deadline for final input by Agent Clearing
Members to FICC of ACS Triparty Trade data. And, finally, 7:00 p.m.
would be the deadline for full settlement of the Start Leg of the ACS
Triparty Trade in accordance with Section 8(a)(ii)(C) of Rule 8.
The Schedule of ACS Triparty Trade Timeframes would provide for the
ACS Triparty Clearing Agent Bank to determine the time by which an ACS
Triparty Funds Lender would be required to deliver any excess
securities to an ACS Triparty Funds Borrower in connection with Section
8(b)(iii) of Rule 8. It would further provide FICC with the ability to
extend timeframes as needed to (i) address operational or other delays
that would reasonably prevent members or FICC from meeting the deadline
or timeframe, as applicable, or (ii) allow FICC time to operationally
exercise its existing rights under the Rules. In addition, it would
state that times applicable to FICC are standards and not deadlines;
actual processing times may vary slightly, as necessary.
FICC proposes to revise the Schedule for the Deletion of Trade Data
to provide that, as with Sponsored GC Trades, the first paragraph
thereof relating to how long uncompared trades will pend in the
Comparison System would not apply to ACS Triparty Trades. In addition,
FICC would add language to state that trade data on ACS Triparty Trades
that remain uncompared on a given Business Day would, as with Sponsored
GC Trades, pend in the Comparison System until FICC's deadline for
final input by Agent Clearing Members of ACS Triparty Trade data (as
provided in the Schedule of ACS Triparty Trade Timeframes) on such
Business Day. FICC would also add language to state that trade data on
ACS Triparty Trades, which have been compared in the Comparison System
pursuant to Rule 6A but the Start Legs of which have not fully settled
at an ACS Triparty Clearing Agent Bank by the deadline set forth in
FICC's Schedule of ACS Triparty Trade Timeframes, would be deleted from
the Comparison System during the same processing cycle as the Repo
Start Date for such ACS Triparty Trades.
FICC proposes to revise the Schedule of Required and Accepted Data
Submission Items for a Substitution of Existing Securities Collateral,
and the Schedule of Required and Accepted Data Submission Items for a
Substitution for New Securities Collateral to state that, as with
Sponsored GC Trades, they would not apply to ACS Triparty Trades.
FICC proposes to revise the Schedule of GC Comparable Securities to
state that one could refer to the ACS Triparty Clearing Agent Bank, as
applicable, for details regarding the Fed ``tickers'' applicable to GC
Comparable Securities.
(iii) Proposed Changes To Clarify the Treatment of Initial Haircuts of
Done-With Agent Clearing Transactions
FICC understands that, like Sponsoring Members and their Sponsored
Members under the Sponsored Service, an Agent Clearing Member may
choose to post to its Executing Firm Customer a haircut in order to
address regulatory and/or investment guideline concerns.\39\ Similarly,
an Agent Clearing Member may choose to collect such haircut from its
Executing Firm Customer at the Start Leg to mitigate its potential
exposure from its full liability for the performance of all obligations
to FICC arising in connection with Agent Clearing Transactions. In both
situations, FICC understands that ``accounting considerations may favor
those postings being facilitated through FICC's systems.'' \40\
However, FICC's existing funds-only settlement process, as regards any
Agent Clearing Transaction, may frustrate the purpose of the haircuts
by requiring the party that has received a haircut at the Start Leg of
an Agent Clearing Transaction to transfer an amount of cash equal to
that haircut (plus or minus any interim mark-to-market movements) on
the next Business Day after the Start Leg has settled.\41\
---------------------------------------------------------------------------
\39\ Cf. Securities Exchange Act Release No. 87896 (Jan. 6,
2020), 85 FR 1354, 1358 (Jan. 10, 2020) (SR-FICC-2019-007).
\40\ Id.
\41\ Cf. id.
---------------------------------------------------------------------------
Therefore, to ensure that Initial Haircuts are not returned until
final settlement under done-with Agent Clearing Transactions, FICC
proposes to adopt Rules that would align the treatment of Initial
Haircuts under Agent Clearing Transactions with how FICC treats Initial
Haircuts under Sponsored Member Trades. In particular, FICC proposes to
calculate the Collateral Mark (i.e., the Funds-Only Settlement Amount
component based on the mark-to-market movement of the Eligible
Securities) for done-with Agent Clearing Transactions that have Initial
Haircuts by reference to the Initial Haircut rather than the Contract
Price. More specifically, FICC proposes to calculate the Collateral
Mark for such transactions based on the difference between the Initial
Haircut and the Current Haircut (i.e., the current market value of the
Eligible Securities minus the repurchase price of the transaction). By
virtue of these changes, if an Agent Clearing Transaction has an
Initial Haircut of $2 and the value of the Eligible Securities subject
to the transaction increases by $1, FICC would calculate a Collateral
Mark of $1, rather than $3. Such calculation would allow an Agent
Clearing Member and its Executing Firm Customer that ``intend for one
of those two parties to remain overcollateralized for the duration of
the [trade] to transfer a haircut between each other'' and allow the $2
Initial Haircut to ``remain with the intended
[[Page 47052]]
party until final settlement of the [Agent Clearing Transaction]''.\42\
---------------------------------------------------------------------------
\42\ Id. at 1359.
---------------------------------------------------------------------------
In addition, FICC proposes to make clear that an ACS Triparty
Trade, like a Sponsored GC Trade, may but need not have an Initial
Haircut.\43\ As mentioned above, any changes in the mark-to-market
value of the Purchased GC Repo Securities under such an ACS Triparty
Trade would, as in a Sponsored GC Trade, be passed between the pre-
Novation counterparties through the triparty repo platform of the ACS
Triparty Clearing Agent Bank, rather than through the Funds-Only
Settlement Amount cycle.
---------------------------------------------------------------------------
\43\ Cf. Securities Exchange Act Release No. 92014 (May 25,
2021), 86 FR 29334, 29340 (June 1, 2021) (SR-FICC-2021-003).
---------------------------------------------------------------------------
Lastly, FICC proposes to make clear that an Agent Clearing
Transaction with an Initial Haircut, just like a Sponsored Member Trade
with an Initial Haircut, would constitute an ``Off-the-Market
Transaction.'' When FICC adopted this clarification in the context of
Sponsored Member Trades, it noted that treatment of transactions with
an Initial Haircut as Off-the-Market Transactions is appropriate
``given that these additional funds payments are pass-through amounts
and do not represent risk to FICC or its members.'' \44\ The same
rationale applies in relation to Agent Clearing Transactions. As a
result, the party that posts an Initial Haircut under an Agent Clearing
Transaction would bear the risk of loss of such Initial Haircut in the
event FICC ceases to act for the pre-Novation counterparty (or its
Sponsoring Member or Agent Clearing Member, as applicable).
---------------------------------------------------------------------------
\44\ Securities Exchange Act Release No. 96938 (Feb. 15, 2023),
88 FR 10954, 10956 (Feb. 22, 2023) (SR-FICC-2023-002).
---------------------------------------------------------------------------
To implement the proposed changes described above, FICC proposes to
make the following amendments to its Rules.
Revisions to defined terms. FICC proposes to amend Rule 1 to make
the following revisions to certain existing defined terms.
FICC would revise the definitions of ``Current Haircut'', ``Haircut
Deficit'', and ``Haircut Surplus'' to provide that these terms apply to
Agent Clearing Transactions between the Agent Clearing Member and the
Executing Firm Customer.
FICC would also revise the definition of ``Initial Haircut'' to
mean, as regards any Agent Clearing Transaction that is not an ACS
Triparty Trade, the absolute value of the dollar difference, if any,
between the Market Value of the Agent Clearing Transaction, as of the
settlement date of the Start Leg, and the Contract Value of the Start
Leg of the Agent Clearing Transaction, and as regards any ACS Triparty
Trade, any difference between (x) the Contract Value of the Start Leg
of the ACS Triparty Trade and (y) the GC Start Leg Market Value. These
changes correspond to how Initial Haircut is defined in relation to
Sponsored Member Trades.
Lastly, FICC would revise the definition of ``Off-the-Market
Transaction'' to state that an Off-the-Market Transaction includes a
Sponsored Member Trade and an Agent Clearing Transaction with an
Initial Haircut.
Funds-Only Settlement and Loss Allocation Rules for Agent Clearing
Transactions with Initial Haircuts. FICC would amend Rule 8 to add a
new Section 7(g) addressing how Funds-Only Settlement Amounts are
calculated in relation to Agent Clearing Transactions. That provision
would make clear that Agent Clearing Transactions are subject to the
Funds-Only Settlement provisions in Rule 13 to the same extent as other
transactions entered into by a Netting Member. However, as mentioned
above, the only Funds-Only Settlement Amounts that would be payable in
relation to ACS Triparty Trades are the Forward Mark Adjustment Payment
and Interest Rate Adjustment Payment. Moreover, if a done-with Agent
Clearing Transaction (other than ACS Triparty Trade) has an Initial
Haircut, any Funds-Only Settlement Amount that is applicable to such
Agent Clearing Transaction and that includes a Collateral Mark would,
in lieu of such Collateral Mark, include any Haircut Deficit or Haircut
Surplus. For such purpose, any Haircut Deficit would be a negative
amount for the Member with a Net Long Position, and a positive amount
for the Member with a Net Short Position, and any Haircut Surplus would
be a negative amount for the Member with a Net Short Position, and a
positive amount for the Member with a Net Long Position. As with
Sponsored Member Trades, the Rules would provide that FICC would not be
under any obligation to verify the parties' agreement in respect of an
Initial Haircut, and its calculation of any Initial Haircut would be
conclusive and binding on the parties. This approach is ``consistent
with the long-standing view that Initial Haircuts be treated as `off
market' under the Rules.'' \45\
---------------------------------------------------------------------------
\45\ Id. at 10955.
---------------------------------------------------------------------------
In addition, FICC would revise Section 7(h) of Rule 8 (former
Section 7(f) of Rule 8) to state that except as expressly set forth in
Rule 8, if a loss or liability of FICC is determined to arise in
connection with the close-out or liquidation of an Agent Clearing
Transaction of an Executing Firm Customer that is an Off-the-Market
Transaction because the Executing Firm Customer has provided an Initial
Haircut, FICC would allocate such loss or liability attributable to the
Initial Haircut to such Executing Firm Customer in accordance with the
provisions of Section 7 of Rule 4. This allocation of losses arising
from Initial Haircuts to the Executing Firm Customer that posted such
haircuts would align with the treatment of such haircuts under
Sponsored Member Trades and thus be ``consistent with FICC's practice
to facilitate Initial Haircuts as payments but [not otherwise include
them as] part of FICC's risk management processes.'' \46\
---------------------------------------------------------------------------
\46\ Id. at 10956.
---------------------------------------------------------------------------
(iv) Proposed Change To Clarify That FICC Does Not Novate the Start
Legs of Same-Day Settling Done-With Agent Clearing Transactions
As discussed above, FICC does not Novate the Start Legs of same-day
starting done-with Sponsored Member Trades considering the operational
and legal complexities for Sponsored Members and Sponsoring Members of
doing so. Since FICC understands similar complexities apply to
Executing Firm Customers and their Agent Clearing Members, FICC
proposes amendments to the Rules to provide that FICC would similarly
not Novate the Start Leg of any done-with same-day starting Agent
Clearing Transactions. As mentioned above, FICC also proposes that FICC
would not Novate the Start Leg of any ACS Triparty Trade.
To implement this proposed change, FICC proposes to revise the
definition of ``Same-Day Settling Trade'' in Rule 1 to make clear that
the only Agent Clearing Transaction that constitutes a Same-Day
Settling Trade is one that (1) is not an ACS Triparty Trade, (2) is
executed between an Executing Firm Customer and a Netting Member or
Indirect Participant other than its Agent Clearing Member and (3) meets
the requirements of clause (i) and (ii) of that definition. This
revision would align the way the Same-Day Settling Trade definition
applies to Agent Clearing Transactions with how it applies to Sponsored
Member Trades. Accordingly, by virtue of this change, a same-day
settling done-with Agent Clearing Transaction or any ACS Triparty Trade
would not be a Same-Day Settling Trade and therefore would not be
subject to FICC's Same-Day Settling Service through which
[[Page 47053]]
FICC Novates the Start Legs of same-day starting Repo Transactions.
FICC also proposes to revise Section 7(e) of Rule 8 (to be
renumbered Section 7(f) pursuant to these proposed rule changes) which
currently provides that, notwithstanding the provisions of Rule 12
(which addresses securities settlement), Agent Clearing Transactions
that are Same-Day Settling Trades are not settled at FICC through its
Comparison System if the Agent Clearing Member delivers a notice to
FICC that it does not wish to have such transactions settle at FICC.
The proposed changes would simplify and clarify this section to align
with the proposed changes to the definition of Same-Day Settling Trade
to simply provide that Agent Clearing Transactions that are Same-Day
Settling Trades do not settle at FICC, and would remove the need for an
Agent Clearing Member to provide a notice.
(v) Proposed Technical and Conforming Changes
Finally, FICC proposes to make a number of clarifying, conforming,
and technical changes in connection with the proposed rule changes
described above.
FICC proposes to revise the definitions of ``Current Haircut,''
``Haircut Deficit,'' and ``Haircut Surplus'' to make clear that those
definitions only apply to done-with DVP Repo Transactions. This is
because FICC does not support Initial Haircuts for done-away DVP Repo
Transactions. It only supports Initial Haircuts in the context of done-
with DVP Repo Transactions. For similar reasons, FICC proposes to amend
Section 9 of Rule 3A to clarify that FICC only incorporates Initial
Haircuts into its calculation of Funds-Only Settlement Amounts in
relation to done-with Sponsored Member Trades.
FICC would revise Section 4 of Rule 5 to require ACS Triparty
Trades be submitted exactly as executed. Section 7(h) of Rule 8 would
be relocated as a new sentence at the end of new Section 7(d).
FICC proposes to add a new Section 7(c) to Rule 8 to state that ACS
Triparty Trades would not be subject to the Schedule of Timeframes
applicable to Agent Clearing Transactions generally, but instead to the
Schedule of ACS Triparty Trade Timeframes.
FICC proposes to renumber Section 7(e) of Rule 8 as Section 7(f).
Implementation Timeframe
Subject to approval by the Commission, FICC would implement the
proposed rule change by no later than 6 months after approval. FICC
would announce the effective date of the proposed changes by an
Important Notice posted to its website.
2. Statutory Basis
FICC believes these proposed changes are consistent with the
requirements of the Act, and the rules and regulations thereunder
applicable to FICC. Specifically, FICC believes that the proposed
changes are consistent with Section 17A(b)(3)(F) of the Act \47\ and
Rule 17ad-22(e)(4)(i),\48\ Rule 17ad-22(e)(18)(iv)(C),\49\ Rule 17ad-
22(e)(19),\50\ and Rule 17ad-22(e)(23)(ii),\51\ as promulgated under
the Act, for the reasons stated below.
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\47\ 15 U.S.C. 78q-1(b)(3)(F).
\48\ 17 CFR 240.17ad-22(e)(4)(i).
\49\ 17 CFR 240.17ad-22(e)(18)(iv)(C).
\50\ 17 CFR 240.17ad-22(e)(19).
\51\ 17 CFR 240.17ad-22(e)(23)(ii).
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Section 17A(b)(3)(F) of the Act requires, in part, that the Rules
be designed to foster cooperation and coordination with persons engaged
in the clearance and settlement of securities transactions, to remove
impediments to and perfect the mechanism of a national system for the
prompt and accurate clearance and settlement of securities
transactions, and, in general, to protect investors and the public
interest.\52\ FICC believes that the proposed changes are designed to
meet these goals. In particular, by establishing the ACS Triparty
Service, the proposed changes would facilitate the ability of indirect
participants to access FICC's clearance and settlement services and
direct participants to provide such access.
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\52\ 15 U.S.C. 78q-1(b)(3)(F).
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As described above, the Agent Clearing Service contains certain
features, including net margining of positions across Executing Firm
Customers, a legal framework similar to the U.S. futures clearing
model, a more streamlined onboarding process, and intermediation
sufficient to allow perfection of security interests without financing
statements, that can make it easier and less expensive for direct
participants to submit their customers' transactions, including done-
away transactions, to FICC for clearance and settlement.\53\ Similarly,
FICC's Sponsored GC Service contains a number of components, including
settlement of securities delivery and related cash payment obligations
through the Sponsored GC Clearing Agent Bank's triparty repo platform
and very limited Funds-Only Settlement Amount obligations, that serve
to eliminate or mitigate operational, regulatory, legal, and other
hurdles to clearing Repo Transactions through FICC.\54\ The ACS
Triparty Service would combine the benefits of the ACS Triparty Service
with the benefits of the Sponsored GC Service and thereby allow market
participants to access FICC's clearance and settlement services at
lower costs and with fewer regulatory, operational, and legal
impediments or challenges.
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\53\ See generally Securities Exchange Act Release No. 101694
(Nov. 21, 2024), 89 FR 93784 (Nov. 27, 2024) (SR-FICC-2024-005).
\54\ See generally Securities Exchange Act Release No. 92808
(Aug. 30, 2021), 86 FR 49580 (Sept. 3, 2021) (SR-FICC-2021-003).
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In addition, by aligning the treatment of haircuts and Start Legs
under Agent Clearing Transactions with the treatment applicable to
Sponsored Member Trades, the proposed changes would facilitate access
to FICC's clearing and settlement services for market participants that
require Initial Haircuts and/or face challenges in relation to the
Novation of Start Legs. By facilitating greater access to FICC's
clearance and settlement services, the proposed rule changes would
remove impediments to and perfect the mechanism of a national system
for the prompt and accurate clearance and settlement of securities
transactions.
Rule 17ad-22(e)(4)(i) under the Act requires that FICC 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 by maintaining sufficient
financial resources to cover its credit exposure to each participant
fully with a high degree of confidence.\55\ FICC believes the proposed
changes are consistent with this requirement. As discussed above, the
proposed ACS Triparty Service is modeled on the existing Sponsored GC
Service. Under the proposed changes, the ACS Triparty Trades would
present similar credit and market risk profiles as Sponsored GC Trades
and would be risk managed in substantially the same manner as Sponsored
GC Trades. Moreover, on a portfolio basis, ACS Triparty Trades would
form part of the same Margin Portfolio as other Agent Clearing
Transactions in accordance with a Margin Portfolio framework the
Commission recently approved. Furthermore, by clarifying that Agent
Clearing Transactions with Initial Haircuts are Off-the-Market
Transactions, the proposed rules would make clear that market
participants that
[[Page 47054]]
post a haircut are responsible for losses arising from such haircut
(and thus the risk of such loss). Therefore, collectively, these
changes would enhance the ability of FICC to manage the risk of the
transactions it clears and settles and cover its credit exposure to its
participants with a high degree of confidence.
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\55\ 17 CFR 240.17ad-22(e)(4)(i).
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Rule 17ad-22(e)(18)(iv)(C) requires, in part, FICC to ensure that
it has appropriate means to facilitate access to clearance and
settlement services of all eligible secondary market transactions in
U.S. Treasury securities, including those of indirect participants.\56\
FICC believes that the proposed changes would very much facilitate
access to its clearing and settlement services for eligible secondary
market transactions by providing an additional model of clearing
services for market participants. In particular, as described above,
the ACS Triparty Service would combine many of the benefits of the
Sponsored GC Service and the Agent Clearing Service and thus provide
market participants with a way to access (or provide access to) FICC's
clearance and settlement services that may be less expensive and
present fewer legal, operational, regulatory, or other challenges.
Moreover, by supporting Initial Haircuts for Agent Clearing
Transactions, the proposed rule changes would facilitate the ability of
parties that need to collect (and retain) such haircuts to access
FICC's clearance and settlement services. Likewise, by providing for
FICC not to Novate the Start Leg of same-day-starting done-with Agent
Clearing Transactions, the proposed change would make FICC's clearance
and settlement services more accessible for those market participants
for whom Novation of a Start Leg presents liquidity, operational, or
legal challenges. Accordingly, FICC believes that the proposed rule
changes would facilitate access to clearance and settlement services of
all eligible secondary market transactions in U.S. Treasury
securities.\57\
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\56\ 17 CFR 240.17ad-22(e)(18)(iv)(C).
\57\ Id.
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Rule 17ad-22(e)(19) under the Act requires that FICC 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.\58\ The
proposed ACS Triparty Service would leverage FICC's existing Agent
Clearing Service and Sponsored GC Service. As a result, FICC would
continue to have the ability to require Agent Clearing Members to
identify their Executing Firm Customers, provide FICC with a current
LEI for those Executing Firm Customers, and confirm those Executing
Firm Customers' agent clearing relationship with the Agent Clearing
Member before the Agent Clearing Member is permitted to submit to FICC
trades on their behalf.\59\ FICC would also retain the authority to
request reports and other information from Agent Clearing Members
through annual and ongoing due diligence requests. This information
would continue to be available for FICC to identify and monitor the
risks that arise from the ACS Triparty Service. Accordingly, the
proposed changes would promote FICC's ability to identify, monitor, and
manage the material risks arising from indirect participants' access to
FICC's payment, clearing, or settlement facilities.
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\58\ 17 CFR 240.17ad-22(e)(19).
\59\ See Securities Exchange Act Release No. 101694 (Nov. 21,
2024), 89 FR 93784, 93793 (Nov. 27, 2024) (SR-FICC-2024-005)
(agreeing that ``[a]n Agent Clearing Member, like a Sponsoring
Member, should be able to contract with its Executing Firm Customers
to ensure that it receives updated LEI information to provide to
FICC.'').
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Rule 17ad-22(e)(23)(ii) under the Act requires that a covered
clearing agency establish, implement, maintain, and enforce written
policies and procedures reasonably designed to provide sufficient
information to enable participants to identify and evaluate the risks,
fees, and other material costs they incur by participating in the
covered clearing agency.\60\ The proposed clarifications regarding
FICC's treatment of Initial Haircuts would allow market participants to
understand that they would be able to retain haircuts received in done-
with DVP Repo Transactions and triparty Repo Transactions and that the
poster of any such haircut would be responsible for any losses arising
therefrom. Similarly, the proposed rule changes related to the Start
Legs of done-with same-day-starting Agent Clearing Transactions would
allow market participants to understand that such Start Legs are the
responsibility of the pre-Novation counterparties on a bilateral basis.
Accordingly, the proposed rule changes would enable market participants
to evaluate the risks and costs of participating in the Agent Clearing
Service, in accordance with Rule 17ad-22(e)(23)(ii).
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\60\ 17 CFR 240.17ad-22(e)(23)(ii).
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(B) Clearing Agency's Statement on Burden on Competition
FICC believes that the proposed changes would promote competition
by providing market participants with another way to access FICC's
clearance and settlement services. As mentioned above, the ACS Triparty
Service would combine the benefits of the existing Sponsored GC Service
and Agent Clearing Service. Accordingly, it would further allow market
participants to access FICC's clearance and settlement services (or
provide access) in a way that meets their regulatory, cost, legal,
operational and other needs. As a result, the proposed rule changes
would limit the extent to which certain market participants are placed
at a disadvantage due to regulatory, operational, legal, size, or other
challenges that limit their ability to access clearing. Moreover, the
proposed changes would place those unable to onboard directly with
FICC, e.g., due to jurisdictional reasons, on a more level playing
field with Sponsored Members by allowing both groups of market
participants to access FICC's triparty repo clearing services.
Similarly, the proposed changes related to Initial Haircuts and Start
Legs of done-with same-day-starting Agent Clearing Transactions would
ensure that those firms that require haircuts or are unable to handle
the Novation of the Start Leg of a done-with trade are able to compete
with other firms that do not face similar limitations or requirements.
As such, the proposed changes would promote competition.
(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
[[Page 47055]]
how to submit comments, available at <a href="http://www.sec.gov/rules-regulations/how-submit-comments">www.sec.gov/rules-regulations/how-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#4d393f2c2924232a2c2329202c3f2628393e0d3e282e632a223b"><span class="__cf_email__" data-cfemail="f084829194999e97919e949d91829b958483b0839593de979f86">[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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
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="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#790b0c151c541a1614141c170d0a390a1c1a571e160f"><span class="__cf_email__" data-cfemail="7301061f165e101c1e1e161d0700330016105d141c05">[email protected]</span></a>. Please include
File Number SR-FICC-2025-021 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-2025-021. 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 filing will be available for inspection and
copying at the principal office of FICC and on DTCC's website
(<a href="http://www.dtcc.com/legal/sec-rule-filings">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-2025-021 and should be submitted on or
before October 21, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\61\
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\61\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-19013 Filed 9-29-25; 8:45 am]
BILLING CODE 8011-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.