E7-8913. Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Clarify the Rules of Its Government Securities Division With Respect to Obligations Associated With ...

May 3, 2007

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),^[1] notice is hereby given that on March 12, 2007, the Fixed Income Clearing Corporation (“FICC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change described in Items I, II, and III below, which items have been prepared primarily by FICC. FICC filed the proposed rule change pursuant to Section 19(b)(3)(A)(i) of the Act ^[2] and Rule 19b-4(f)(1) thereunder ^[3] so that the proposal was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties.

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 add language to Section 3 to Rule 19 (Special Provisions for Brokered Repo Transactions) of FICC's Government Securities Division (“GSD”) Rules to make explicit that blind broker repo trades assumed by FICC are included in the calculation of the parties to such trades' receive and deliver obligations to FICC.

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), and (C) below, of the most significant aspects of these statements.^[4]

(A) Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In 2006, the Commission approved a clarifying change to FICC's Rules relating to a longstanding practice by FICC of assuming brokers' positions in certain blind broker repo transactions.^[5] As part of that filing, a new Section 5 was added to Rule 19 of the GSD Rules to expressly provide for this practice. FICC has determined that an additional change as set forth below is necessary to further clarify the GSD Rules with respect to obligations associated with brokered repo trades.

Section 3 of GSD Rule 19 allows FICC to deem a repo brokered trade as compared based solely upon the submission of trade data by the broker despite an untimely submission of data by the dealer and states that such a trade would be included in the calculation of the margin and mark-to-market payments of the parties to the trade. FICC is adding language to Section 3 to make it clear that such a trade is also included in the calculation of the parties' receive and deliver obligations, which is consistent with the language in Section 5 of Rule 19. The proposed change is technical in nature and does not reflect a change in the practices or policies of GSD.

The proposed rule change is consistent with the requirements of Section 17A of the Act ^[6] and the rules and regulations thereunder applicable to FICC because the proposed change is a clarification that does not adversely affect the safeguarding of securities and funds in the custody or control of the clearing agency or for which it is responsible and does not adversely affect the respective rights or obligations of the clearing agency or its members.

(B) Self-Regulatory Organization's Statement on Burden on Competition

FICC does not believe that the proposed rule change will have any impact 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

Written comments relating to the proposed rule change have not yet 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)(i) of the Act ^[7] and Rule 19b-4(f)(1) ^[8] thereunder because it constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of FICC. At any time within 60 days of the filing of the proposed 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.

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 [e-mail]. Please include File Number SR-FICC-2007-02 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-2007-02. 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 change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549. The text of the proposed rule change is available at FICC, the Commission's Public Reference Room, and http://www.ficc.com/​commondocs/​rule.filings/​rule.filing.07-02.pdf. 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-2007-02 and should be submitted on or before May 31, 2007.

For the Commission by the Division of Market Regulation, pursuant to delegated authority.^[9]

Florence E. Harmon,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  15 U.S.C. 78s(b)(3)(A)(i).

3.  17 CFR 240.19b-4(f)(1).

4.  The Commission has modified the text of the summaries prepared by FICC.

5.  Securities Exchange Act Release No. 54487 (September 22, 2006), 71 FR 58025 (October 2, 2006) [File No. SR-FICC-2005-17].

6.  15 U.S.C. 78q-1.

7.  15 U.S.C. 78s(b)(3)(A)(i).

8.  17 CFR 240.19b-4(f)(1).

9.  17 CFR 200.30-3(a)(12).