[Federal Register: May 22, 2008 (Volume 73, Number 100)]
[Notices]
[Page 29797-29798]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22my08-93]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57821; File No. SR-FICC-2008-03]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change,
as Modified, To Eliminate the Coverage Component and Margin Requirement
Differential From the Mortgage-Backed Securities Division Participants
Fund Calculation
May 15, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on April 18, 2008, the Fixed
Income Clearing Corporation (``FICC'') filed with the Securities and
Exchange Commission (``Commission'') and on April 21, 2008, amended the
proposed rule change described in Items I, II, and III below, which
items have been prepared primarily by FICC. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested parties.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of the proposed rule change is to modify FICC's
Mortgage-Backed Securities Division (``MBSD'') participant fund
calculation as set forth in Article IV, Rule 1 (Total Required Fund
Deposit) by eliminating the Coverage Component and the Margin
Requirement Differential from the calculation.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FICC 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. FICC has prepared summaries, set forth in sections (A),
(B),
[[Page 29798]]
and (C) below, of the most significant aspects of these statements.\2\
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\2\ The Commission has modified the text of the summaries
prepared by FICC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
On August 31, 2007, FICC filed with the Commission and on September
27, 2007, amended proposed rule change SR-FICC-2007-10 pursuant to
Section 19(b)(1) of the Act. On March 31, 2008, the Commission approved
the proposed rule change.\3\
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\3\ Securities Exchange Act Release No. 57586 (March 31, 2008),
73 FR 19537 (SR-FICC-2007-10).
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The rule change modified FICC's MBSD rules, replacing the current
participants fund methodology (which used haircuts and offsets) with a
Value-at-Risk (``VaR'') model, which was expected to better account for
market volatility and more thoroughly distinguish levels of risk
presented by individual securities.\4\
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\4\ VaR is defined to be the maximum amount of money that may be
lost on a portfolio over a given period of time, within a given
level of confidence.
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As approved by the Commission, the revised participants fund
calculation included: (1) An end-of-day charge (which is the greater of
the VaR-based charge and a defined minimum charge), (2) a Coverage
Component (which is an additional charge to bring the participant's
coverage to a targeted confidence level), (3) an additional payment
(which is called a ``Special Charge'') as determined by FICC from time
to time, and (4) a Margin Requirement Differential (which takes into
account intra-day portfolio variations and the potential for a late
margin deficit satisfaction).
FICC has determined not to implement the Coverage Component and the
Margin Requirement Differential, while it continues to study the
methodology. Accordingly, FICC is modifying MBSD Article I (Definitions
and General Provisions) and Article IV (Participants Fund) to remove
references to these components.
FICC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \5\ and the rules and
regulations thereunder applicable to FICC because the proposed rule
change should better enable FICC to assure the safeguarding of
securities and funds in its custody or control or for which it is
responsible by enabling FICC to more effectively manage the risks
presented by participants' activities.
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\5\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition
FICC does not believe that the proposed rule change will have any
impact on or impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments relating to the proposed rule change have been
solicited or received. FICC will notify the Commission of any written
comments received by FICC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(4) \7\
thereunder because the proposed rule change effects a change in an
existing service of FICC that (i) does not adversely affect the
safeguarding of securities or funds in the custody or control of FICC
or for which it is responsible and (ii) does not significantly affect
the respective rights of the clearing agency or persons using the
service. At any time within sixty days of the filing of such rule
change, the Commission may summarily abrogate 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.\8\
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\6\ 15 U.S.C. 78s(b)(3)(A)(iii).
\7\ 17 CFR 240.19b-4(f)(4).
\8\ For purposes of calculating the 60-day period within which
the Commission may summarily abrogate the proposed rule change under
Section 19(b)(3)(C) of the Act, the Commission considers the period
to commence on April 21, 2008, the date on which the last amendment
to the proposed rule change was filed with the Commission. 15 U.S.C.
78s(b)(3)(C).
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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
Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml) or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-FICC-2008-03 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FICC-2008-03. This file
number should be included on the subject line if e-mail 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 Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule changes that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Section, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filings also will be available for
inspection and copying at the principal office of FICC and on FICC's
Web site at http://www.dtcc.com/legal/rule_filings/ficc/2008.php. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-FICC-2008-03 and should be
submitted on or before June 12, 2008.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-11425 Filed 5-21-08; 8:45 am]
BILLING CODE 8010-01-P