[Federal Register: December 21, 2005 (Volume 70, Number 244)]
[Notices]
[Page 75851-75853]
[DOCID:fr21de05-101]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52955; File No. SR-PCX-2005-102]

Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of
Filing of a Proposed Rule Change Relating to the Elimination of
Obsolete Rules Related to the Pacific Options Exchange Trading System

December 14, 2005.
    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 November 10, 2005, the Pacific Exchange, Inc. (``PCX'' or
``Exchange'') 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 PCX. PCX filed
Amendment No. 1 to the proposed rule change on November 22, 2005.\3\
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\ See Partial Amendment, submitted by Glenn H. Gsell, Director
of Regulation, PCX (``Amendment No. 1''). In Amendment No. 1, PCX
corrected a typographical error in the rule text. Because Amendment
No. 1 is a technical amendment, it is not subject to notice and
comment.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange is proposing to amend various PCX Rules to eliminate
obsolete rules related to the Pacific Options Exchange Trading System
(``POETS'') and Order Book Officials (``OBOs''). The Exchange has also
proposed to make a number of corresponding changes to rules related
thereto.
    The text of the proposed rule change is available on the PCX's Web
site (http://www.pacificex.com), at the PCX's principal office, and at

the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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 Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.

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

1. Purpose
    The Exchange proposes to modify the PCX Rules to eliminate obsolete
rules with respect to POETS and OBOs and make corresponding changes to
related rules. As of March 2005, the Exchange completed its rollout of
the PCX Plus System.\4\ As such, options issues no longer trade on the
POETS platform at the Exchange. Therefore, the Exchange proposes to
eliminate rules related to POETS, including rules regarding OBOs, and
to generally modify the rules as applicable in the current PCX Plus
market structure.
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    \4\ See Securities Exchange Act Release No. 47838 (May 13,
2003), 68 FR 27129 (May 19, 2003) (Order Approving Proposal for PCX
Plus).
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a. Order Book Officials/Trading Officials

    The Exchange proposes to modify or delete PCX Rules 6.51 through
6.59 to eliminate the term and general functionality of OBOs.
    Currently, PCX Rule 6.51 defines OBOs as Exchange employees who are
responsible for maintaining the book with respect to the classes of
options assigned to him, effecting proper executions of orders placed
in the book, displaying bids and offers pursuant to PCX Rule 6.55, and
monitoring the market for the classes of options assigned to him. Due
to the elimination of the Order Book and full implementation of PCX
Plus (and the fully electronic Consolidated Book), the order handling
functionality of OBOs is no longer applicable. Also, many of the
administrative duties of the OBO, such as tracking market maker
appointments (as set forth in PCX Rule 6.51(b)) are now performed
within the PCX Plus system. Certain PCX personnel, however, will
continue to oversee trading crowds and otherwise assist in maintaining
a fair and orderly market, similar to the current Trading Official and
Exchange Official.\5\ Therefore, the Exchange proposes to eliminate the
definitions of OBO (as set forth in PCX Rule 6.51(a)) and Exchange
Official (as set forth in PCX Rule 6.1(b)(41)) and combine their
remaining functionality of maintaining a fair and orderly market with
the functionality of the Trading Official. The Exchange proposes to
modify the definition of Trading Official in PCX Rule 6.1(b)(34) to
provide that a Trading Official will be an Exchange employee or officer
who is appointed by the Chief Executive Officer or its designee or by
the Chief Regulatory Officer or its designee. OTP Holders will no
longer be designated as Trading Officials or involved in making
decisions on regulatory matters. The Exchange believes that by
restricting these decisions to qualified Exchange employees, the
potential for partiality or conflicts of interest is removed from the
process. An Exchange employee or officer designated as a Trading
Official will from time to time as provided in the rules have the
ability to recommend and enforce rules and regulations relating to
trading access, order, decorum, health, safety and welfare on the
Options Trading Floor.
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    \5\ See PCX Rule 6.1(b)(34) and (41).
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    In addition, the Exchange proposes to delete PCX Rule 6.52 in its
entirety. PCX Rule 6.52 sets forth the procedures for OBOs to accept
and execute orders. This provision is obsolete as the OBOs no longer
accept and execute orders on behalf of OTP Holders and OTP Firms on PCX
Plus. PCX Rule 10.13(c)(2), which deals with the issuance of a summary
sanction related to PCX Rule 6.52(a), will also be eliminated. The
Exchange proposes to reserve PCX Rule number 6.52 for future use.
    Current PCX Rule 6.53 provides for the OBO's obligation to maintain
a fair, orderly and competitive market. Specifically, the provision
allows an OBO to call upon Market Makers appointed to act as such in a
class of option contracts to make bids and/or offers if, in the OBO's
opinion, the interests of a fair and orderly market would be best
served by such action. The Exchange proposes to modify this provision
to provide that a Trading Official could call upon Market Makers for
bids and/or offers in such circumstances, as Trading Officials would
retain the responsibility to maintain a fair and orderly market.
    The Exchange proposes to delete PCX Rules 6.54 through 6.59. These
rules are related to an OBO's duty to report unusual conditions, an
OBO's duty to display bids and offers in the book, transactions outside
the OBO's last quoted range, the OBO's duty not to disclose orders,
designation of OBOs by the Exchange, and the liability of the Exchange
for actions of OBOs. The Exchange proposes to delete these rules
because they are directly related to an OBO's order handling
responsibilities (and implications of order handling responsibilities)
and therefore they are obsolete in the current PCX Plus market
structure.

b. Elimination of POETS and Auto-Ex Functions

    Current PCX Rule 6.87 sets forth the rules with respect to the
Automated Execution System (``Auto-Ex'') feature of POETS. The Exchange
proposes to delete PCX Rules 6.87(a)-(f) and (h)-(p) in order to delete
the Auto-Ex provisions due to the elimination of POETS. All options
issues are currently trading on the PCX Plus platform, therefore the
POETS and Auto-Ex rules are obsolete.
    In addition, the Exchange proposes to retain PCX Rule 6.87(g),
which relates to trade nullification and price adjustment procedures
(``Obvious Error Rule''), and renumber the rule as PCX Rule 6.87(a).
The Obvious Error Rule is an options industry-wide set of procedures
that was put into place to handle trade nullifications and price
adjustments in a fair and consistent manner. These procedures are
applicable to all trades executed on PCX Plus. The Exchange also
proposes to rename PCX Rule 6.87 ``Obvious Errors,'' as appropriate for
the modified rule.

c. Modification of Fast Markets and Unusual Market Conditions

    The Exchange proposes to modify PCX Rule 6.28, Fast Markets and
Unusual Market Conditions, as the procedures set forth therein with
respect to ``fast markets'' are inapplicable in the PCX Plus market
structure. The current rule sets forth specific procedures that are
obsolete in the current trading structure. Prior to the introduction of
the all-electronic PCX Plus trading system, when a market was declared
``fast'' due to unusual market conditions certain modifications to
standard trading practices were often needed in order to maintain a
fair and orderly market. Both systemic and physical limitations that
were commonplace in a non-automated trading environment are no longer
applicable. Therefore the procedures presently in place to deal with
these circumstances are no longer applicable (e.g., moving certain
issues or series of options to other posts, or modifying the parameters
of Auto-Ex). Market Makers will still be required to trade a minimum of
one contract based on their quoted markets pursuant to PCX Rule 6.37,
Commentary .05. With regard to the aforementioned changes, however, the
Exchange believes it would be prudent to retain a level of basic and
flexible procedures to be followed during unusual market conditions.
Therefore, the Exchange proposes to modify the provision to enable the
Exchange to respond to unusual market conditions. The proposed unusual
market condition provisions are based on the rules of the International
Securities Exchange (``ISE''),\6\ and provide for the Exchange to
determine the existence of unusual market conditions. The proposed rule
will also allow for the Exchange to employ trading rotations or take
such other actions as are deemed in the interest of maintaining a fair
and orderly market.
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    \6\ See ISE Rule 703(c).
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d. Modification of Trading Rotations

    The Exchange proposes to amend PCX Rule 6.64(a) and delete
subsections (b)-(c) and Commentary .01 in order to delete references to
opening rotations and automated opening rotations on POETS as these
provisions are no longer applicable. Prior to the PCX Plus market
structure a trading rotation was a time-consuming procedure, requiring
manual processing by OBOs, Floor Brokers and LMMs. Trading rotations
are now a fully automated process, overseen by a Trading Official. The
PCX Plus Automated Opening Rotation provision set forth in PCX Rule
6.64(d) will remain unchanged.
    The Exchange also proposes to modify the closing rotations rule as
provided in PCX Rule 6.64(e)-(f). Currently, PCX Rule 6.64(e)-(f) sets
forth time frames and parameters for conducting closing rotations.
These procedures are antiquated and inapplicable in the current PCX
Plus market structure. Therefore, the Exchange proposes to modify the
closing rotations provisions to provide that closing rotations may be
utilized when the Exchange concludes that such action is appropriate in
the interest of a fair and orderly market. The factors that may be
considered include, but are not limited to, whether there has been a
recent opening or reopening of trading in the underlying security, a
declaration of an unusual market condition pursuant to PCX Rule 6.28,
or a need for a rotation in connection with expiring individual stock
options or index options, an end of the year rotation, or the restart
of a rotation which is already in progress.
    Finally, the Exchange proposes to modify PCX Rule 6.64(h) in order
to eliminate the provision related to OBOs representing orders during
rotations. Such procedures are no longer applicable in the current PCX
Plus market structure.

e. Modification of Priority and Allocation

    Currently, PCX Rule 6.75 sets forth priority and order allocation
procedures with respect to options issues designated for trading on
POETS (including those that result in execution via open outcry). PCX
Rule 6.76 sets forth priority and order allocation procedures with
respect to options issues designated for trading on PCX Plus. Due to
the elimination of the POETS system, the Exchange proposes to modify
PCX Rule 6.75(a) and (e)-(f) to apply only to orders executed by open
outcry. In making this modification, the Exchange proposes to delete
PCX Rule 6.75(d) as it relates to opening rotations, which is no longer
applicable in the PCX Plus market structure. The Exchange also proposes
to delete Commentary .01-.03 as these commentaries relate to OBOs
handling orders for purposes of priority and order allocation, which is
no longer applicable.
    Finally, the Exchange proposes to modify PCX Rule 6.76 and retain
its provisions regarding priority and allocation procedures for orders
executed on PCX Plus only.

f. Maximum Order Size

    Currently, in addition to provisions regarding priority and
allocation procedures, PCX Rule 6.76 states that a maximum size of an
inbound order that may be eligible for execution on PCX Plus will be
initially established by the Lead Market Maker (``LMM'') in the issue,
subject to the approval of the Exchange. Further, the rule states that
any request by the LMM for changes to the Maximum Order Size must be
accompanied by a verified statement indicating the business reason for
the change and the estimated duration of such change. In addition, PCX
Rule 6.90 sets forth a prohibition against unbundling an order to
circumvent the maximum order size requirement. PCX Rules 10.12(h)(33)
and (k)(i)(33) establishes minor rule plan violations for such
prohibited actions.
    In POETS, the Exchange was unable to disseminate the size
associated with the quote. Therefore, the only way to limit the number
of contracts executed electronically was to limit the size of the order
for each options issue. As a result of the conversion to PCX Plus, the
Market Makers (including LMMs) are able to disseminate a size that they
are willing to trade on each individual series. Therefore, a maximum
order size that covers an entire issue is no longer necessary in the
current PCX Plus market structure. As such, the Exchange proposes to
delete the requirement for a maximum order size in PCX Rule 6.76. In
addition, the related provisions in PCX Rules 6.90 and 10.12 with
respect to the prohibition on unbundling an order to circumvent the
maximum order

size and the minor rule plan violation are ineffectual and should be
deleted.

g. Miscellaneous

    The Exchange also proposes to make various corresponding
modifications, including typographical and terminology changes, to its
rules in order to update the rules applicable to the current PCX Plus
market structure.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\7\ in general, and with
Section 6(b)(5) of the Act,\8\ in particular, because it is designed to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, and to remove impediments to and perfect the mechanism of a
free and open market and a national market system and to protect
investors and the public interest.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others

    The Exchange neither solicited nor received any written comments on
the proposed rule change.

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

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date 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 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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to<EMAIL_ADDRESS>Please include

File Number SR-PCX-2005-102 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-9303.

All submissions should refer to File Number SR-PCX-2005-102. 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 Room. Copies of such
filing also will be available for inspection and copying at the
principal office of the Exchange. 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-PCX-2005-102 and should be submitted on or before
January 11, 2006.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
Jonathan G. Katz,
Secretary.
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    \9\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E5-7587 Filed 12-20-05; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 82, Number 148 (Thursday, August 3, 2017)]
[Notices]
[Pages 36165-36168]
[FR Doc No: 2017-16297]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81255; File No. SR-FICC-2017-018]

Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend the Fees in the Mortgage-Backed Securities Division Clearing
Rules and the EPN Rules

July 28, 2017.
    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 July 28, 2017, 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)(2) 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)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    On July 31, 2017, FICC will implement proposed rule change SR-FICC-
2017-012 (``Rule Filing 2017-012'').\5\ Rule Filing 2017-012 will amend
the Mortgage-Backed Securities Division Clearing Rules (the ``MBSD
Rules'') to (1) move the time that FICC novates and treats itself as
the settlement counterparty for certain transactions, (2) guarantee and
novate trades with stipulations (``Stipulated Trades''), and (3)
establish new processes that promote operational efficiencies for
Clearing Members.\6\ In connection with Rule Filing 2017-012, FICC is
proposing with this filing to amend the fees in the MBSD Rules and the
EPN Rules (the ``EPN Rules'') as further described below.\7\ The
changes proposed in this filing would become effective on August 1,
2017, as described below.
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    \5\ Securities Exchange Act Release No. 81051 (June 29, 2017),
82 FR 31378 (July 6, 2017) (SR-FICC-2017-012) (``Approval Order'').
    \6\ Id. In connection with the changes in Rule Filing 2017-012,
FICC will implement new processes that promote operational
efficiencies for Clearing Members. The full text of Rule Filing
2017-012 may be obtained by visiting DTCC's Web site at http://www.dtcc.com/legal/sec-rule-filings.
    \7\ Capitalized terms not defined herein are defined in the MBSD
Rules and the EPN Rules, available at http://www.dtcc.com/legal/rules-and-procedures.
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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
    On July 31, 2017, FICC will amend the MBSD Rules to (1) move the
time that FICC novates and treats itself as the settlement counterparty
for certain transactions, (2) guarantee and novate trades with
stipulations (``Stipulated Trades''), and (3) establish new processes
that promote operational efficiencies for Clearing Members.\8\ In
connection with Rule Filing 2017-012, FICC is proposing with this
filing to amend the fees in the MBSD Rules and the EPN Rules as further
described below. The changes proposed in this filing would become
effective on August 1, 2017, as described below.
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    \8\ See Approval Order, supra note 5.
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I. Proposed Changes to the MBSD Rules
    FICC is proposing to amend the fees in the MBSD Rules' Schedule of
Charges Broker Account Group as listed below.
    1. The Account Maintenance section would be amended to eliminate
the ``Option Account'' fee. This change is being proposed because FICC
will eliminate the Broker ``give-up'' process from the MBSD Rules in
connection with Rule Filing 2017-012.\9\ Because the submission of
Broker Give-Up Trades (which includes Option Contracts) will be
eliminated, the associated account maintenance fee for Option Accounts
will be eliminated.
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    \9\ See Approval Order, 82 FR at 31382.
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    2. The Trade Processing section would be amended to change the name
of the ``Give-Up Trade Creates'' fee to the ``Trade Creates'' fee. This
change is being proposed because FICC will eliminate the Broker ``give-
up'' process from the MBSD Rules in connection with Rule Filing 2017-
012.\10\
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    \10\ Id.
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    3. The Processing Fees section would be amended to increase the
``Trade Input Non-Compliance'' fee to $1,000 a month per Account from
$500 a month per Account. This change is being proposed in order to
encourage Clearing Members to submit transactions into FICC's Real-Time
Trade Matching (``RTTM'') system in a timely manner. The timely
submission of transactions is especially important because FICC will
novate and become the settlement counterparty to all transactions
(other than Option Contracts) pursuant to Rule Filing 2017-012.\11\
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    \11\ See Approval Order, supra note 5.
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    FICC is proposing to amend the fees in the MBSD Rules' Schedule of
Charges Dealer Account Group as listed below.

    1. The Trade Processing section would be amended to modify the
tiering levels and the associated fees assigned to each tier for SBO-
Destined Trades.\12\ In connection with Rule Filing 2017-012, MBSD's
processing cost will not change; however, MBSD's operational cost will
increase because of MBSD's new allocation department.\13\ As a result,
these proposed fee changes would offset the loss of revenue attributed
to the decrease in transaction volumes processed through the Pool
Netting System and the EPN Service due to the introduction of the DNA
process and the removal of the Notification of Settlement process.
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    \12\ Pursuant to the MBSD Rules, the term ``SBO-Destined Trade''
means a TBA transaction in the Clearing System intended for TBA
Netting in accordance with the provisions of the MBSD Rules. See
MBSD Rule 1, supra note 7.
    \13\ The MBSD allocations department will monitor the
transmission of pool information that is used to satisfy to-be-
announced transactions. The team will also handle any exception
processing that occurs.

--------------------------------------------------------------------------------------------------------------------------------------------------------
        Current charge                   Total par amount traded per month           Proposed charge           Total par amount traded per month
--------------------------------------------------------------------------------------------------------------------------------------------------------
$1.93/MM......................  1,000,000-2,500,000,000...........................  $2.00/MM.........  01-2,500,000,000.
$1.77/MM......................  2,501,000,000-5,000,000,000.......................  $1.58/MM.........  2,500,000,001-7,500,000,000.
$1.60/MM......................  5,001,000,000-7,500,000,000.......................  $1.39/MM.........  7,500,000,001-12,500,000,000.
$1.49/MM......................  7,501,000,000-10,000,000,000......................  $1.19/MM.........  12,500,000,001-300,000,000,000.
$1.32/MM......................  10,001,000,000-12,500,000,000.....................  $1.16/MM.........  300,000,000,001 and over.
$1.14/MM......................  12,501 and over...................................
--------------------------------------------------------------------------------------------------------------------------------------------------------

    2. The Trade Processing section would be amended to increase the
fee for ``TBA Netting Balance Orders'' to $1.00/MM from $0.75/MM. In
connection with Rule Filing 2017-012, MBSD's processing cost will not
change; however, MBSD's operational cost will increase because of
MBSD's new allocation department. As a result, this proposed fee change
would offset the loss of revenue attributed to the decrease in
transaction volumes processed through the Pool Netting System and the
EPN Service due to the introduction of the DNA process and the removal
of the Notification of Settlement process. FICC is also proposing to
amend this section to eliminate the applicability of this fee to SBOO
Trades because this trade type will be eliminated in connection with
Rule Filing 2017-012.\14\
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    \14\ See Approval Order, 82 FR at 31380.
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    3. The Trade Processing section would be amended to establish fees
for Stipulated Trades, which will be a new trade type eligible for
processing at MBSD pursuant to Rule Filing 2017-012.\15\ The fees for
Stipulated Trades would be the same fees that are in place for the
processing of Trade-for-Trade Transactions \16\ and Specified Pool
Trades.\17\ FICC would amend the heading of this section to clarify
that the fees would be applicable to Trade-for Trade-Transactions,
Specified Pool Trades and Stipulated Trades.
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    \15\ See Approval Order, 82 FR at 31381.
    \16\ Pursuant to the MBSD Rules, the term ``Trade-for-Trade
Transaction'' means a TBA Transaction submitted to MBSD not intended
for TBA Netting in accordance with the provisions of the MBSD Rules.
See MBSD Rule 1, supra note 7.
    \17\ Pursuant to the MBSD Rules, the term ``Specified Pool
Trade'' means a trade in which all required pool data, including the
pool number to be delivered on the Contractual Settlement Date, are
agreed upon by Members at the time of execution. See MBSD Rule 1,
supra note 7.
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    4. The Trade Processing section would be amended to increase the
``Trade Creates'' fee for Trade-for-Trade Transactions and Specified
Pool Trades to $1.16/MM from $1.00/MM. This increased fee would also
apply to Stipulated Trades. In connection with Rule Filing 2017-012,
MBSD's processing cost will not change; however, MBSD's operational
cost will increase because of MBSD's new allocation department. As a
result, this proposed fee change would offset the loss of revenue
attributed to the decrease in transaction volumes processed through the
Pool Netting System and the EPN Service due to the introduction of the
DNA process and the removal of the Notification of Settlement process.
    5. FICC is proposing to include two new fees in connection with the
proposed Do Not Allocate (``DNA'') process.\18\ One fee would be in the
amount of $1.25/MM per transaction in connection with a Clearing
Member's request to include eligible trades in the DNA process (such
request would be referred to as a ``DNA Request''). The second fee
would be in the amount of $4.00 per transaction in connection with a
Clearing Member's request to cancel its DNA Request (such cancellation
would be referred to as a ``DNA Request Cancel'').
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    \18\ As described in Rule Filing 2017-012, the DNA process will
permit offsets among SBON Trades and Trade-for-Trade Transactions.
See Approval Order, 82 FR at 31381.
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    6. The Pool Netting Fees section would be amended to increase the
fee for ``Matched Pool Instructs'' to $1.00 per side from $0.60 per
side. In connection with Rule Filing 2017-012, MBSD's processing cost
will not change; however, MBSD's operational cost will increase because
of MBSD's new allocation department. As a result, this proposed fee
change would offset the loss of revenue attributed to the decrease in
transaction volumes processed through the Pool Netting System and the
EPN Service due to the introduction of the DNA process and the removal
of the Notification of Settlement process.
    7. The Processing Fees section would be amended to increase the
``Trade Input Non-Compliance'' fee to $1,000 a month per Account from
$500 a month per Account. This change is being proposed in order to
encourage Clearing Members to submit transactions into FICC's RTTM
system in a timely manner. The timely submission of transactions is
especially important because FICC will novate and become the settlement
counterparty to all transactions (other than Option Contracts) pursuant
to Rule Filing 2017-012.\19\
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    \19\ See Approval Order, supra note 5.
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    8. The Notification of Settlement fees would be eliminated because
FICC will eliminate the Notification of Settlement process from the
MBSD Rules in connection with Rule Filing 2017-012.\20\
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    \20\ See Approval Order, 82 FR at 31381.
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II. Proposed Changes to the EPN Rules
    FICC is proposing to amend the ``Message Processing Fees'' in the
EPN Schedule of Charges as listed below. In connection with Rule Filing
2017-012, MBSD's processing cost will not change; however, MBSD's
operational cost will increase because of MBSD's new allocation
department. As a result, these proposed fee changes would offset the
loss of revenue attributed to the decrease in transaction volumes
processed through the Pool Netting System and the EPN Service due to
the introduction of the DNA process and the removal of the Notification
of Settlement process.

                                                EPN Fee Schedule
----------------------------------------------------------------------------------------------------------------
                                                    Message submission                      Message submission
        Fee descriptions         Current charge           times             New charge             times
----------------------------------------------------------------------------------------------------------------
                                            Messaging Processing Fees
----------------------------------------------------------------------------------------------------------------
ON Send........................           $0.17  Per MM Current Face               $0.19  Per MM Current Face
                                                  (opening of business                     (opening of business
                                                  to 1:00 p.m.).                           to 1:00 p.m.).
                                           0.86  Per MM Current Face                0.95  Per MM Current Face
                                                  (1:00 p.m. to 2:00                       (1:00 p.m. to 2:00
                                                  p.m.).                                   p.m.).
                                           1.73  Per MM Current Face                1.90  Per MM Current Face
                                                  (2:00 p.m. to 3:00                       (2:00 p.m. to 3:00
                                                  p.m.).                                   p.m.).
                                           1.44  Per MM Current Face                1.58  Per MM Current Face
                                                  (3:00 p.m. to close of                   (3:00 p.m. to close
                                                  business).                               of business).
ON Receive.....................            0.46  Per MM Current Face                0.51  Per MM Current Face
                                                  (opening of business                     (opening of business
                                                  to 1:00 p.m.).                           to 1:00 p.m.).
                                           0.23  Per MM Current Face                0.26  Per MM Current Face
                                                  (1:00 p.m. to 2:00                       (1:00 p.m. to 2:00
                                                  p.m.).                                   p.m.).
                                           0.23  Per MM Current Face                0.26  Per MM Current Face
                                                  (2:00 p.m. to 3:00                       (2:00 p.m. to 3:00
                                                  p.m.).                                   p.m.).
Cancel/Correct Send............            0.17  Per MM Current Face                0.19  Per MM Current Face
                                                  (opening of business                     (opening of business
                                                  to 11:00 a.m.).                          to 11:00 a.m.).
                                           0.86  Per MM Current Face                0.95  Per MM Current Face
                                                  (11:00 a.m. to 12:00                     (11:00 a.m. to 12:00
                                                  p.m.).                                   p.m.).
                                           1.73  Per MM Current Face                1.90  Per MM Current Face
                                                  (12:00 p.m. to 12:15                     (12:00 p.m. to 12:15
                                                  p.m.).                                   p.m.).
                                           0.17  Per MM Current Face                0.19  Per MM Current Face
                                                  (12:15 p.m. to end of                    (12:15 p.m. to end of
                                                  day).                                    day).
----------------------------------------------------------------------------------------------------------------

III. Delayed Implementation of the Proposed Rule Change
    The proposed changes would become effective on August 1, 2017.\21\
Upon FICC's submission of this proposed rule change to the Commission,
FICC would add a legend to the MBSD Rules and the EPN Rules, as
applicable, to state that the specified changes have been filed with
the Commission for immediate effectiveness, however, such changes are
not yet implemented and to provide the date such changes would become
implemented. The legend would also include the file number of the
proposed rule change and would state that once implemented, the legend
would automatically be removed from the MBSD Rules and EPN Rules as
applicable.
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    \21\ FICC will implement Rule Filing 2017-012 on July 31, 2017,
however, the proposed fee changes would be implemented on August 1,
2017 because the billing cycle begins on the first day of each
month.
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2. Statutory Basis

    Section 17A(b)(3)(D) of the Act requires that the MBSD Rules and
the EPN Rules provide for the equitable allocation of reasonable dues,
fees, and other charges among its participants.\22\ FICC believes that
the proposed (1) changes to the MBSD Trade Processing fees, MBSD Pool
Netting fees and the EPN Message Processing fees (collectively, the
``Processing Fees''), and (2) new fees for Stipulated Trades
submissions and the DNA process (collectively, the ``New Fees'') are
equitably allocated among Clearing Members and EPN Users, as
applicable, because the fees would continue to be based on each
Clearing Member's utilization of MBSD's services. Specifically, each
Clearing Member or EPN User would be charged based on the volume of
transactions and/or messages submitted to MBSD.
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    \22\ 15 U.S.C. 78q-1(b)(3)(D).
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    FICC believes that the proposed changes to the Processing Fees and
the New Fees are reasonable because the proposed fee changes would
offset the loss of revenue attributed to the decrease in transaction
volumes processed through the Pool Netting System and the EPN Service
due to the introduction of the DNA process and the removal of the
Notification of Settlement process. Additionally, MBSD's new allocation
department will increase MBSD's operational cost. FICC believes that
the proposed fee changes are reasonable because the fees would align
with the cost of providing the benefits associated with the
implementation of Rule Filing 2017-012.\23\
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    \23\ These benefits include the following: (1) The submission of
Pool Instructs by Clearing Members will become optional because FICC
would be permitted to submit on behalf Clearing Members; (2)
Clearing Members will no longer be required to fulfill Notification
of Settlement obligations because transactions (except Option
Contracts) would settle with FICC; (3) Clearing Members will have
the ability to exclude TBA Obligations from the pool allocation
process, netting, and securities settlement through the DNA process;
(4) Clearing Members will have the ability to net their pools via
the Expanded Pool Netting process in the event that such Clearing
Members miss the established deadline for the initial Pool Netting
process; (5) Dealer Netting Members will remain anonymous with the
elimination of the ``give-up'' process for Brokered Transactions;
(6) Clearing Members will be allowed to submit SBO-Destined Trades
in all trade sizes; and (7) Clearing Members will be allowed to
submit Stipulated Trades as a new trade type. See Approval Order, 82
FR at 31378.
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    FICC believes that its proposal to increase the Trade Input Non-
Compliance fee for Brokers and Dealers are reasonable because doubling
the existing fee would be sufficient to encourage Clearing Members to
submit transactions in a timely manner. This is especially important
because FICC will novate and become the settlement counterparty to all
transactions (except Option Contracts) at trade comparison pursuant to
Rule Filing 2017-012.
    FICC believes that the proposal to increase the Trade Input Non-
Compliance fee for Brokers and Dealers are equitably allocated because
the same fee would be applicable to the Accounts of all Clearing
Members who do not submit transactions on a timely basis.
    Therefore, FICC believes the proposed fees are consistent with the
requirements of Section 17A(b)(3)(D) of the Act.

(B) Clearing Agency's Statement on Burden on Competition

    FICC believes that the proposed (1) changes to the Processing Fees
and (2) new fee for Stipulated Trades may impose a burden on
competition. However, FICC believes any burden on competition that may
result from the proposed fees increases would be

necessary and appropriate in furtherance of the purposes of the Act, as
permitted by Section 17A(b)(3)(I) of the Act.\24\
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    \24\ 15 U.S.C. 78q-1(b)(3)(I).
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    Specifically, FICC believes that the proposed (1) changes to the
Processing Fees and (2) new fee for Stipulated Trades are necessary
because the fees would provide FICC with the ability to achieve and
maintain its operating margin. FICC believes that the proposed fee
increases and the new fee for Stipulated Trades are appropriate because
the fees would provide FICC with the ability to recover the cost of
providing the services described in Rule Filing 2017-012. As discussed
above, in connection with Rule Filing 2017-012, MBSD's processing cost
will not change; however, MBSD's operational cost will increase because
of MBSD's new allocation department. As a result, these proposed fee
changes would offset the loss of revenue attributed to the decrease in
transaction volumes processed through the Pool Netting System and the
EPN Service due to the introduction of the DNA process and the removal
of the Notification of Settlement process.
    FICC believes that the proposed changes to increase the Trade Input
Non-Compliance fee for Brokers and Dealers will not impact competition
because Clearing Members could avoid these fees by submitting their
transactions on a timely basis in accordance with the MBSD Rules.
    FICC believes that the proposed change to eliminate the Option
Account fees for Brokers and the Notification of Settlement fees will
not impact competition because these fees are associated with processes
that will be eliminated pursuant to Rule Filing 2017-012.
    FICC believes that the proposed new fee for the DNA process will
not impact competition because the DNA process is voluntary and
Clearing Members could elect not to submit their transactions through
the DNA process.

(C) Clearing Agency'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 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 pursuant to Section
19(b)(3)(A) of the Act \25\ and paragraph (f) of Rule 19b-4
thereunder.\26\ 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.
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    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 17 CFR 240.19b-4(f).
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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 email to<EMAIL_ADDRESS>Please include
File Number SR-FICC-2017-018 on the subject line.

Paper Comments

     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-2017-018. 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 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of FICC and on
DTCC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). 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-2017-018 and should be
submitted on or before August 24, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2017-16297 Filed 8-2-17; 8:45 am]
BILLING CODE 8011-01-P