Citation: "79 FR 36856"
Document Number: "Release No. 34-72457; File No. SR-FICC-2014-02"
June 24, 2014.
FOOTNOTE 1 15 U.S.C. 78s(b)(1). END FOOTNOTE
FOOTNOTE 2 17 CFR 240.19b-4. END FOOTNOTE
FOOTNOTE 3 Securities Exchange Act Release No. 72184 (
I. Description of the Proposed Rule Change
FICC seeks the Commission's approval to extend the pilot program that is currently in effect for the GCF Repo(R) service ("2013 Pilot Program"). /4/ FICC requests that the 2013 Pilot Program be extended for one year following the Commission's approval of this filing. FICC represents that, during this extension period, the final phase of tri-party reform will be implemented. /5/
FOOTNOTE 4 See Securities Exchange Act Release No. 70068 (
FOOTNOTE 5 The final phase of tri-party reform includes the development of an interactive messaging system to facilitate the substitution of collateral between settlement banks. FICC has represented that, if it determines to change the parameters of the GCF Repo(R) service during the one-year extension period, it will file a proposed rule change with the Commission. FICC has further warranted that, if it seeks to extend the 2013 Pilot Program beyond the one-year extension period or proposes to make the program permanent, it will also file a proposed rule change with the Commission. END FOOTNOTE
A. The GCF Repo(R) Service
The GCF Repo(R) service allows dealer members of
FOOTNOTE 6 A GCF Repo is one in which the lender of funds is willing to accept any of a class of U.S. Treasuries, U.S. government agency securities, and certain mortgage-backed securities as collateral for the repurchase obligation. This is in contrast to a specific collateral repo. END FOOTNOTE
FOOTNOTE 7 Delivery-versus-payment is a settlement procedure in which the buyer's cash payment for the securities it has purchased is due at the time the securities are delivered. END FOOTNOTE
FOOTNOTE 8 See Securities Exchange Act Release No. 58696 (
B. Background of the Pilot Program
Because FICC's GCF Repo(R) service operates as a tri-party mechanism, FICC was asked to alter the service to align it with the recommendations of the
FOOTNOTE 9 The TPR was an industry group formed and sponsored in 2009 by the Federal Reserve Bank of
FOOTNOTE 10 The TPR issued preliminary and final reports setting forth its recommendations for the reform of the tri-party repo market.
FOOTNOTE 11 Securities Exchange Act Release No. 64955 (
FOOTNOTE 12 Securities Exchange Act Release No. 65213 (
FOOTNOTE 13 The 2012 Pilot Program implemented several changes which, although described in the rule filing that accompanied the 2011 Pilot Program, were not implemented during the 2011 Pilot Program's period of effectiveness. They include: (i) Moving the time for unwinding repos from
FOOTNOTE 14 Securities Exchange Release No. 67621 (
C. The 2013 Pilot Program
The 2013 Pilot Program and its predecessor, the 2012 Pilot Program, have been the subject of a number of notices and approval orders published by the Commission. /15/ These notices and orders provide extensive detail on both the GCF Repo(R) service and the pilot program itself. Under this proposed rule change, FICC is not proposing to alter the current pilot program in any way; rather, it proposes only to extend that program, as approved in 2012 and in 2013, for one additional year. /16/
FOOTNOTE 15 See Securities Exchange Act Release Nos. 67227 (
FOOTNOTE 16 FICC would be required to file a proposed rule change with the Commission pursuant to Section 19(b) of the Act if were to do any of the following: (i) Change the parameters of the GCF Repo(R) service during the one-year extension period, (ii) extend the Pilot Program beyond the one-year period extension period, or (iii) establish the 2013 Pilot Program as a permanent program. END FOOTNOTE
Section 19(b)(2)(C) of the Act /17/ directs the Commission to approve a proposed rule change of a self- regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization. Section 17A(b)(3)(F) of the Act /18/ requires, among other things, that the rules of a clearing agency be designed to achieve several goals, including (i) promoting the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions, (ii) assuring the safeguarding of securities and funds that are in the custody or control of the clearing agency or for which it is responsible, and (iii) protecting investors and the public interest.
FOOTNOTE 17 15 U.S.C. 78s(b)(2)(C). END FOOTNOTE
FOOTNOTE 18 15 U.S.C. 78q-1(b)(3)(F). END FOOTNOTE
The Commission concludes that extending the 2013 Pilot Program for one additional year is consistent with the requirements of the Act and the rules and regulations thereunder. The 2013 Pilot Program furthers the Act's goals because it helps attenuate the substantial risks confronting the tri-party repo market, particularly those risks associated with the provision of intraday credit to market participants. /19/ The Commission believes that extending the 2013 Pilot Program will ensure that these risks remain subject to more stringent controls and that this, in turn, will help promote the prompt and accurate clearance and settlement of securities transactions. The Commission further believes that, by requiring tri-party repos to remain collateralized for a longer period each day, the 2013 Pilot Program helps to assure the safety of the securities and funds within FICC's control, or for which it is responsible. /20/
FOOTNOTE 19 The TPR characterized the "practical elimination" of this intraday credit as its "first and most significant . . . recommendation."
FOOTNOTE 20 See 15 U.S.C. 78q-1(b)(3)(F). END FOOTNOTE
On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act, particularly those set forth in Section 17A, /21/ and the rules and regulations thereunder.
FOOTNOTE 21 15 U.S.C. 78q-1. END FOOTNOTE
It is therefore ordered, pursuant to Section 19(b)(2) of the Act, /22/ that the proposed rule change (SR-FICC-2014-02) be, and hereby is, approved. /23/
FOOTNOTE 22 15 U.S.C. 78s(b)(2). END FOOTNOTE
FOOTNOTE 23 In approving the proposed rule change, the Commission considered the proposal's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). END FOOTNOTE
For the Commission, by the
FOOTNOTE 24 17 CFR 200.30-3(a)(12). END FOOTNOTE
Kevin M. O'Neill,
[FR Doc. 2014-15203 Filed 6-27-14;
BILLING CODE 8011-01-P
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