Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Remove a Requirement That Sponsoring Members Report Certain Events Impacting Their Sponsored Members

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<title>Federal Register, Volume 91 Issue 215 (Monday, November 9, 2026)</title>
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[Federal Register Volume 91, Number 215 (Monday, November 9, 2026)]
[Notices]
[Pages 70909-70912]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-22755]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-106815; File No. SR-FICC-2026-011]


Self-Regulatory Organizations; Fixed Income Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Remove a Requirement That Sponsoring Members Report Certain Events 
Impacting Their Sponsored Members

November 4, 2026.
    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 October 29, 2026, Fixed Income Clearing Corporation (``FICC'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared by the clearing agency. FICC filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder.\4\ The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change consists of modifications to FICC's 
Government Securities Division (``GSD'') Rulebook (``Rules'') \5\ to 
remove the requirement that Sponsoring Members provide FICC with 
written notice of certain events impacting their Sponsored Members.
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    \5\ 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>.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. The clearing agency has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    FICC is proposing changes to Rule 3A, which describes GSD's 
sponsored membership service (``Sponsored Service''). Specifically, the 
proposed rule change would remove the requirement that a Sponsoring 
Member provide FICC with written notice (i) when it becomes aware that 
its Sponsored Member is no longer in compliance with applicable 
requirements of Rule 3A, and (ii) before the effective date of any 
``Reportable Event'' applicable to a Sponsored Member.\6\ As described 
below, FICC has implemented changes to the requirements applicable to 
Sponsored Members and has enhanced its monitoring of Sponsored Members. 
As a result of such previously implemented changes, FICC believes these 
reporting requirements for Sponsoring Members are no longer necessary.
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    \6\ ``Reportable Event'' is defined in Rule 1 as ``an event that 
would effect a change in control of a Netting Member or could have a 
substantial impact on such Member's business and/or financial 
condition, including, but not limited to: (a) material 
organizational changes including mergers, acquisitions, changes in 
corporate form, name changes, changes in the ownership of a Netting 
Member or its Affiliates, and material changes in management, (b) 
material changes in business lines, including new business lines 
undertaken, and (c) status as a defendant in litigation which could 
reasonably impact the Netting Member's financial condition or 
ability to conduct business.'' Id.
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Overview of Sponsored Service, Sponsored Member Requirements and FICC 
Monitoring
    FICC, through GSD, serves as a central counterparty and provides 
real-time trade matching, clearing, risk management and netting for 
cash purchases and sales of U.S. Treasury securities as well as 
repurchase and reverse repurchase transactions involving U.S. Treasury 
securities (``repos'').\7\ GSD's central counterparty services are 
available directly to entities that are approved to be Netting Members 
and indirectly to other market participants through its indirect access

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models--the Sponsored Service or Agent Clearing Service.\8\
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    \7\ GSD also clears and settles certain transactions on 
securities issued or guaranteed by U.S. government agencies and 
government sponsored enterprises.
    \8\ See Rule 2 (Members) (providing that FICC shall make its 
services available to entities that are approved to be Members of 
GSD); Rule 3A (Sponsoring Members and Sponsored Members) (describing 
the Sponsored Service) and Rule 8 (Agent Clearing Service) 
(describing the Agent Clearing Service), supra note 5.
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    The Sponsored Service permits Netting Members, approved by FICC as 
``Sponsoring Members,'' to sponsor firms, referred to as ``Sponsored 
Members,'' into GSD membership.\9\ The Sponsoring Member is permitted 
to submit to FICC for comparison, novation and netting certain types of 
eligible transactions. For operational and administrative purposes, a 
Sponsored Member appoints its Sponsoring Member to act as processing 
agent with respect to the Sponsored Member's satisfaction of its 
securities and funds-only settlement obligations.
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    \9\ See Rule 3A, supra note 5.
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    A Sponsored Member is an Indirect Participant of GSD and the legal 
counterparty to FICC for any submitted transactions. However, the 
Sponsoring Member unconditionally guarantees to FICC the Sponsored 
Member's performance under a Sponsoring Member Guaranty, which 
guarantees to FICC the payment and performance of a Sponsored Member's 
obligations to FICC. Therefore, FICC relies on the financial resources 
of the Sponsoring Member in relying upon the Sponsoring Member 
Guaranty.
    FICC recently adopted enhancements to its access models designed to 
facilitate access to clearance and settlement services of all eligible 
secondary market transactions in U.S. Treasury securities in accordance 
with the Securities and Exchange Commission's final rule regarding 
Standards for Covered Clearing Agencies for U.S. Treasury Securities 
and Application of the Broker-Dealer Customer Protection Rule With 
Respect to U.S. Treasury Securities.\10\ Among these enhancements, FICC 
removed the eligibility requirement that Sponsored Members either be 
``qualified institutional buyers,'' as such term is defined by Rule 
144A under the Securities Act of 1933, or otherwise satisfy the 
financial requirements of such definition.\11\ With this change, 
Section 3(a) of Rule 3A now provides only that a Person shall be 
eligible to become a Sponsored Member if it is sponsored into 
membership by a Sponsoring Member, as provided under the Rules.
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    \10\ Securities Exchange Act Release No. 99149 (Dec. 13, 2023), 
89 FR 2714 (Jan. 16, 2024) (S7-23-22).
    \11\ See Securities Exchange Act Release No. 101694 (Nov. 21, 
2024), 89 FR 93784 (Nov. 27, 2024) (SR-FICC-2024-005).
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    FICC monitors the risks presented by its Indirect Participants in 
various ways, consistent with the requirements of Rule 17ad-22(e)(19) 
under the Act.\12\ For example, FICC may request information from 
direct clearing members periodically through its annual or ad hoc due 
diligence requests, as required by Section 2(d) of Rule 3A and Section 
2 of Rule 3.\13\ This monitoring may include the request and review of 
information related to direct clearing members' Indirect Participants, 
where applicable, and controls the direct clearing member has in place 
to monitor and manage the risk presented by those Indirect 
Participants.\14\
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    \12\ 17 CFR 240.17ad-22(e)(19).
    \13\ See supra note 5.
    \14\ See Rule 3 (Ongoing Membership Requirements), Section 2 
(requiring Netting Members to submit to FICC information that FICC 
may reasonably require); and Rule 3A (Sponsoring Members and 
Sponsored Members), Section 2(d) (requiring Sponsoring Members to 
submit reports and information within timeframes and in formats 
required by FICC) and Section 2(f) (requiring that Sponsoring 
Members' books and records, as related to Sponsored Member Trades, 
shall be open to the inspection of FICC), supra note 5.
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    FICC also maintains procedures pursuant to which it actively 
monitors adverse news events impacting Sponsored Members. FICC has 
recently enhanced these procedures to use Sponsored Members' Legal 
Entity Identifiers (``LEIs'') in that monitoring. By relying on a 
Sponsored Member's LEI, rather than its legal name, FICC can continue 
to identify adverse news events even after a Sponsored Member has 
changed its name.\15\ FICC uses a compliance tool sourced from a third-
party vendor to conduct this monitoring.
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    \15\ See Rule 3A, Section 2(d) (requiring that Sponsoring 
Members submit to FICC the LEI for each Sponsored Member, such that 
FICC has a current LEI for each Sponsored Member at all times), 
supra note 5.
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Proposed Changes To Remove Sponsored Member Reporting
    FICC is proposing to amend Section 2(g) of Rule 3A by removing the 
requirement that a Sponsoring Member submits written notice to FICC (i) 
when it becomes aware that a Sponsored Member is no longer in 
compliance with the requirements of Section 3(a) of Rule 3A, and (ii) 
prior to the effective date of any Reportable Event applicable to a 
Sponsored Member.
    First, the proposal to remove the requirement that FICC be notified 
when a Sponsoring Member becomes aware of a Sponsored Member is no 
longer in compliance with the requirements of Section 3(a) of Rule 3A 
would correct an error in the Rules. FICC has already removed the 
requirements applicable to Sponsored Members that were in Section 3(a) 
of Rule 3A.\16\ Therefore, this part of the reporting requirement is no 
longer applicable. The proposed changes would also remove a statement 
from Section 3(b) of Rule 3A that refers to the requirements that were 
previously in Section 3(a) of Rule 3A and was also left in the Rules in 
error.
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    \16\ See supra note 11.
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    Second, the proposal to remove the requirement that FICC be 
notified prior to the effective date of any Reportable Event applicable 
to a Sponsored Member could facilitate greater access to this indirect 
participation model by removing an obligation for Sponsoring Members 
that has limited value in managing the risks presented by the Sponsored 
Service.
    As noted above, FICC employs a daily monitoring tool that 
identifies instances of adverse news impacting a Sponsored Member. Such 
adverse news includes regulatory enforcement actions and when a 
Sponsored Member is named as a defendant in criminal litigation. These 
events are among the types of events that are captured in the 
definition of Reportable Event, as these events could have a 
``substantial impact'' on the Sponsored Member's business or financial 
condition and include when the Sponsored Member is named as a defendant 
in litigation. Therefore, FICC does not believe it is necessary to 
require separate reporting of these events by Sponsoring Members.
    Additionally, FICC has recently enhanced this monitoring to use 
Sponsored Members' LEIs to ensure its monitoring continues to be 
effective even if a Sponsored Member has changed its legal name. 
Therefore, notice of any changes to a Sponsored Member's name, which 
are also included in the Reportable Event reporting requirement, is no 
longer required to ensure this monitoring remains effective.
    FICC has considered the other organizational events that may be 
considered a Reportable Event and has determined that it is not 
necessary to receive reporting on these events to effectively manage 
the risks presented by its limited relationship with Sponsored Members. 
As described above, FICC risk manages the Sponsored Service primarily 
at the Sponsoring Member level, not the Sponsored Member level. For 
example, a Sponsoring Member is responsible under Section 10 of Rule 3A 
for posting to FICC the Required Fund Deposit for its sponsored 
activity and, while

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Sponsored Members are principally liable to FICC for their settlement 
obligations, the Sponsoring Member is also required under Section 2(c) 
of Rule 3A to provide a guaranty to FICC for such obligations.\17\
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    \17\ See supra note 5.
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    Further, pursuant to Sections 2(d) and 2(f) of Rule 3A and Section 
2 of Rule 3, Sponsoring Members may be required to provide to FICC 
reports or other information that FICC may require, including, for 
example, responses to annual or ad hoc due diligence requests.\18\ FICC 
utilizes these due diligence requests to identify, monitor and manage 
the risks Sponsoring Members and their Sponsored Members may present to 
it. FICC may take action where it identifies risks through this due 
diligence process, which could include, for example, outreach to the 
Sponsoring Members, additional reporting from the Sponsoring Members or 
other appropriate risk management measures permitted by the Rules.
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    \18\ See supra note 14.
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    Therefore, FICC believes its existing monitoring and risk 
management practices with respect to the Sponsored Service, which do 
not directly rely on Sponsoring Member reporting of Reportable Events 
impacting a Sponsored Member, continue to facilitate effective risk 
management of exposures created through the Sponsored Service without 
this reporting requirement.
2. Statutory Basis
    FICC believes the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a registered clearing agency. In particular, FICC 
believes the proposed rule change is consistent with Section 
17A(b)(3)(F) of the Act \19\ and Rule 17ad-22(e)(19), promulgated under 
the Act,\20\ for the reasons described below.
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    \19\ 15 U.S.C. 78q-1(b)(3)(F).
    \20\ 17 CFR 240.17ad-22(e)(19).
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    Section 17A(b)(3)(F) of the Act requires, in part, that the rules 
of a clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions.\21\ The proposed 
rule change would remove a reporting requirement from the Rules because 
that part of that requirement is no longer applicable and refers to a 
membership requirement that has already been removed from the Rules. 
The proposal would therefore ensure the Rules remain accurate and 
clear. When the Rules clearly and accurately set forth the rights and 
obligations of GSD Members, including Sponsoring Members, the Rules 
support the prompt and accurate clearance and settlement of securities 
transactions, consistent with Section 17A(b)(3)(F) of the Act.\22\
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    \21\ 15 U.S.C. 78q-1(b)(3)(F).
    \22\ Id.
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    FICC has determined that the other part of the reporting 
requirement that would be removed from the Rules has limited risk 
management value relative to FICC's existing and enhanced monitoring 
tools and in light of FICC's approach to risk manage the Sponsored 
Service primarily at the Sponsoring Member level, not the Sponsored 
Member level. In this way, the proposal would also ensure that the 
obligations of membership are reasonable and necessary. Having 
reasonable membership obligations encourages participation in central 
clearing. Therefore, FICC believes the proposed rule change would 
promote the prompt and accurate clearance and settlement of securities 
transactions, consistent with Section 17A(b)(3)(F) of the Act.\23\
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    \23\ 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.\24\ By 
eliminating requirements that are both no longer applicable and are no 
longer reasonable and necessary, the proposal would ensure that the 
Rules are reasonably designed to manage the risks arising from indirect 
participation models. FICC has evaluated its existing and enhanced risk 
management measures and believes that they adequately address the risks 
that these requirements were originally designed to mitigate. 
Therefore, FICC believes the proposed changes are consistent with Rule 
17ad-22(e)(19) under the Act.\25\
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    \24\ 17 CFR 240.17ad-22(e)(19).
    \25\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    FICC does not believe the proposed rule changes would have any 
impact on competition. The proposed changes would apply equally to all 
Sponsoring Members by removing a reporting obligation that currently 
applies to all Sponsoring Members with respect to their Sponsored 
Members. Therefore, the change does not create any disproportionate 
impact on certain firms versus other firms with the same membership 
type at FICC. As described above, the proposal to remove this reporting 
obligation is to correct an error in the Rules that continues to refer 
to a membership requirement that has been removed, and to remove a 
requirement that has limited value in managing the risks presented by 
Sponsored Members that are adequately managed through FICC's existing 
and enhanced monitoring tools. FICC does not believe such proposed 
changes would have any effect on participants' respective competitive 
positions.

(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 Exhibit 2 to this filing, as required by Form 19b-4 
and the General Instructions thereto.
    Persons submitting comments are cautioned that, according to 
Section IV (Solicitation of Comments) of the Exhibit 1A in the General 
Instructions to Form 19b-4, the Commission does not edit personal 
identifying information from comment submissions. Commenters should 
submit only information that they wish to make available publicly, 
including their name, email address, and any other identifying 
information.
    All prospective commenters should follow the Commission's 
instructions on how to submit comments, available at <a href="http://www.sec.gov/rules-regulations/how-submit-comment">www.sec.gov/rules-regulations/how-submit-comment</a>. General questions regarding the rule 
filing process or logistical questions regarding this filing should be 
directed to the Main Office of the SEC's Division of Trading and 
Markets at <a href="/cdn-cgi/l/email-protection#c8bcbaa9aca1a6afa9a6aca5a9baa3adbcbb88bbadabe6afa7be"><span class="__cf_email__" data-cfemail="03777162676a6d64626d676e627168667770437066602d646c75">[email&#160;protected]</span></a> or 202-551-5777.
    FICC reserves the right to not respond to any comments received.

III. Date of Effectiveness of the Proposed Rule Change, and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    (i) significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the

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Act \26\ and Rule 19b-4(f)(6) thereunder.\27\
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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">www.sec.gov/rules/sro.shtml</a>); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#aad8dfc6cf87c9c5c7c7cfc4ded9ead9cfc984cdc5dc"><span class="__cf_email__" data-cfemail="fe8c8b929bd39d9193939b908a8dbe8d9b9dd0999188">[email&#160;protected]</span></a>. Please include 
File Number SR-FICC-2026-011 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-2026-011. 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="http://www.sec.gov/rules/sro.shtml">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-2026-
011 and should be submitted on or before November 30, 2026.
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    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-22755 Filed 11-6-26; 8:45 am]
BILLING CODE 8011-01-P


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