[Federal Register Volume 86, Number 39 (Tuesday, March 2, 2021)]
[Notices]
[Page 12244]
[FR Doc No: 2021-04216]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91194; File No. SR-CBOE-2020-117]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Designation of a Longer Period for Commission Action on a Proposed Rule
Change To Amend Certain Rules To Accommodate the Listing and Trading of
Index Options With an Index Multiplier of One

February 24, 2021.
    On December 23, 2020, Cboe Exchange, Inc. (``Exchange'' or
``Cboe'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend certain rules to accommodate the listing
and trading of index options with an index multiplier of one. The
proposed rule change was published for comment in the Federal Register
on January 11, 2021.\3\ The Commission has received no comments on the
proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 90853 (January 5,
2021), 86 FR 2006.
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    Section 19(b)(2) of the Act \4\ provides that within 45 days of the
publication of notice of the filing of a proposed rule change, or
within such longer period up to 90 days as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding, or as to which the self-regulatory organization
consents, the Commission shall either approve the proposed rule change,
disapprove the proposed rule change, or institute proceedings to
determine whether the proposed rule change should be disapproved. The
45th day after publication of the notice for this proposed rule change
is February 25, 2021. The Commission is extending this 45-day time
period.
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    \4\ 15 U.S.C. 78s(b)(2).
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    The Commission finds it appropriate to designate a longer period
within which to take action on the proposed rule change so that it has
sufficient time to consider the proposed rule change. Accordingly, the
Commission, pursuant to Section 19(b)(2) of the Act,\5\ designates
April 11, 2021, as the date by which the Commission shall either
approve or disapprove, or institute proceedings to determine whether to
disapprove, the proposed rule change (File No. SR-CBOE-2020-117).
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    \5\ Id.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(31).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04216 Filed 3-1-21; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 77, Number 98 (Monday, May 21, 2012)]
[Notices]
[Pages 30032-30038]
[FR Doc No: 2012-12181]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66989; File No. SR-FICC-2012-03]

Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Order Approving Proposed Rule Change To Expand the One-Pot Cross-
Margining Program With New York Portfolio Clearing, LLC to Certain
``Market Professionals''

May 15, 2012.

I. Introduction

    On March 20, 2012, the Fixed Income Clearing Corporation (``FICC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-FICC-2012-03 pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 \2\
thereunder. The proposed rule change was published for comment in the
Federal Register on April 4, 2012.\3\ The Commission received one
comment letter on the proposed rule change.\4\ This order approves the
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 66679 (March 29, 2012),
77 FR 20445 (April 4, 2012).
    \4\ Letter from Adam Cooper, Senior Managing Director and Chief
Legal Officer, Citadel LLC (April 23, 2012).
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II. Description

    This rule change consists of modifications to certain rules of the
Government Securities Division (``GSD'') of FICC in order to expand
FICC's existing one-pot cross-margining program with New York Portfolio
Clearing, LLC (``NYPC'') \5\ (``Proprietary Cross-Margining Program'')
to include eligible positions held by GSD Netting Members and NYPC
Clearing Members for certain ``market professionals.'' \6\
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    \5\ See Securities Exchange Act Release No. 34-63986 (February
28, 2011), 76 FR 12144 (March 4, 2011).
    \6\ The NYPC-FICC ``market professional'' cross-margining
program aims to closely replicate the Options Clearing Corporation
(``OCC'')--Chicago Mercantile Exchange (``CME'') cross-margining
program, which was first approved in 1989 (Securities Exchange Act
Release No. 34-27296 (September 26, 1989), 54 FR 41195 (October 5,
1989)) and was expanded in 1991 to include market professionals
(Securities Exchange Act Release No. 34-29991 (November 26, 1991),
56 FR 61458 (December 3, 1991)). Since that time, the Commission has
approved several similar ``market professional'' cross-margining
programs, including most recently in 2008. They include: OCC--
Intermarket Clearing Corporation (``ICC'') Securities Exchange Act
Release No. 34-30041 (December 5, 1991), 56 FR 68424 (December 12,
1991); OCC-ICC-CME Securities Exchange Act Release No. 34-32534
(June 28,1993), 58 FR 36234 (July 6, 1993); OCC-Board of Trade
Clearing Corporation Securities Exchange Act Release No. 34-32681
(July 27, 1993), 58 FR 41302 (August 3, 1993); OCC-Kansas City Board
of Trade Clearing Corporation (``KCBOT'') Securities Exchange Act
Release No. 34-32708 (August 2, 1993), 58 FR 42586 (August 10,
1993); OCC-ICC--Commodity Clearing Corporation (``CCC'') Securities
Exchange Act Release No. 34-33272 (December 2, 1993), 58 FR 64997
(December 10, 1993); OCC-ICC, OCC-ICC-CME, OCC-KCBOT Securities
Exchange Act Release No. 34-36819 (February 7, 1996), 61 FR 5594
(February 13, 1996); OCC-CME--Securities Exchange Act Release No.
34-38584 (May 8, 1997), 62 FR 26602 (May 14, 1997); and OCC-ICE
Clear Securities Exchange Act Release No. 34-57118 (January 9,
2008), 73 FR 2970 (January 16, 2008).
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Overview

    In its present form, the Proprietary Cross-Margining Program is
limited to cross-margining of proprietary accounts.

Specifically, from NYPC's perspective, only a member's proprietary or
``house'' account is eligible for cross-margining; from GSD's
perspective, all accounts maintained by GSD for its Netting Members are
deemed proprietary.\7\ The proposed rule change expands the Proprietary
Cross-Margining Program to non-proprietary accounts carried by
participating GSD Netting Members on behalf of ``Market Professionals''
(``Market Professional Cross-Margining Program''). The proposed rule
change defines ``Market Professional'' as an entity, other than a
``non-customer,'' \8\ that is a member of a designated contract market
and that actively trades for its own account products that are eligible
under the cross-margining agreement between FICC and NYPC (``FICC-NYPC
Cross-Margining Agreement'') \9\ for cross-margining (``Eligible
Products'').\10\ Positions and collateral held for Market Professionals
will be maintained in accounts that are distinct from both proprietary
cross-margining accounts and non-cross-margining accounts.\11\
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    \7\ The GSD does not have segregated accounts for Netting
Members' customers. In contrast, NYPC currently maintains both
proprietary and segregated customer accounts for its Clearing
Members in compliance with applicable Commodity Futures Trading
Commission (``CFTC'') regulations. Only NYPC Clearing Members'
proprietary accounts at NYPC are eligible for participation in the
Proprietary Cross-Margining Program. The present proposal would
introduce a third type of account at NYPC that NYPC Clearing Members
may maintain, i.e., the Market Professional account. The present
proposal also introduces a second type of account at GSD, i.e., the
Market Professional account.
    \8\ Consistent with previously approved market professional
cross-margining programs, FICC's rules define ``Non-Customer'' as
GSD Netting Members and other persons whose accounts with GSD
Netting Members would not be the accounts of ``customers'' within
the meaning of SEC Rules 8c-1 and 15c2-1.
    \9\ The FICC-NYPC Cross-Margining Agreement was approved by the
Commission as part of FICC's Rule Filing No. SR-FICC-2010-09. See
note 5, supra.
    \10\ As defined in the FICC-NYPC Cross-Margining Agreement, the
term ``Eligible Products'' includes U.S. Government securities,
securities of U.S. federal agencies and U.S. Government-sponsored
enterprises, financing products and certain mortgage-backed
securities cleared by FICC, and futures contracts and options on
futures contracts, including U.S. dollar-denominated interest rate
and fixed income futures contracts and options on futures contracts,
cleared by NYPC. Formal inclusion of options on futures in the
program will be the subject of a separate rule filing with the
Commission.
    \11\ As described above, GSD Netting Members who wish to
participate in the Market Professional Cross-Margining Program will
need to open an additional account for their Market Professionals.
Likewise, NYPC Clearing Members wishing to participate in the
program will need to open an additional account for their Market
Professionals, which will be required to be separate and distinct
from both their proprietary and segregated customer accounts.
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    As with the current Proprietary Cross-Margining Program, the
proposed Market Professional Cross-Margining Program would be available
to GSD Netting Members that carry accounts of Market Professionals and
that are also clearing members of NYPC (``Joint Member'') or that have
an affiliate that is a clearing member of NYPC (``Affiliated Member'').
Members do not have to be participating in the Proprietary Cross-
Margining Program in order to participate in the proposed Market
Professional Cross-Margining Program (or vice versa).
    The proposed rule change necessitates revisions to the FICC-NYPC
Cross-Margining Agreement, which are described in detail below.
Additional participant agreements have been added as appendices to the
FICC-NYPC Cross-Margining Agreement for this purpose.

Segregation and Liquidation Considerations

    The proposed Market Professional Cross-Margining Program addresses
concerns regarding segregation and liquidation procedures under the
Commodity Exchange Act (``CEA''),\12\ Title 11 of the United States
Code (``Bankruptcy Code'') \13\ and the Securities Investor Protection
Act (``SIPA'').\14\ The CEA requires that the property of customers
must be segregated from the proprietary property of a futures
commission merchant. Because Market Professionals are considered
``customers'' under CFTC regulations, the cross-margined positions of
the Market Professionals and all property related thereto must be
segregated from the cross-margined positions and property of the GSD
Netting Member that carries their accounts.
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    \12\ 7 U.S.C. 1-27f as amended.
    \13\ 11 U.S.C. 101-1532 as amended.
    \14\ 15 U.S.C. 78aaa-78lll as amended.
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    Under the proposed rule change, each GSD Netting Member electing to
participate in the Market Professional Cross-Margining Program must
execute a Cross-Margining Participant Agreement for Market Professional
Accounts and must establish a separate cross-margining account for the
benefit of Market Professionals for whom it carries cross-margined
positions (``Market Professional Cross-Margining Account''). GSD
Netting Members and NYPC Clearing Members who establish Market
Professional Cross-Margining Accounts must also obtain the consent of
each Market Professional whose cross-margined positions are carried in
such account to the commingling of the Market Professional's assets
with those of other electing Market Professionals of the same GSD
Netting Member and NYPC Clearing Member (or permitted margin affiliate
at NYPC); provided, however, that consistent with the requirements of
CFTC Regulation 39.13(g)(8)(i) (gross margin for customer accounts),
the positions of a Market Professional cleared by FICC will only be
cross-margined with the derivatives positions of the same Market
Professional cleared by NYPC. Moreover, because Section 4d(a)(2) of the
CEA prohibits commingling futures and securities in the absence of a
CFTC rule, regulation or order to the contrary, it will be necessary
for NYPC to obtain from the CFTC an order stating that Eligible
Products that are cleared by FICC and property received by a
participating GSD Netting Member to margin, guarantee, or secure trades
or positions in or accruing as a result of such Eligible Products may
be commingled in a Market Professional Cross-Margining Account with
Eligible Products cleared by NYPC and with property received by a
participating NYPC Clearing Member to margin, guarantee, or secure
trades or positions in or accruing as a result of such Eligible
Products that would otherwise be required by the CFTC to be segregated
under the CEA.
    FICC has established procedures to facilitate the segregation of
the funds and securities deposited or received by GSD Netting Members
regarding their Market Professional cross-margining activity. For
example, each GSD Netting Member must establish separate bank accounts
for the purpose of making daily funds-only settlement of its
proprietary cross-margining activity and for the purpose of making
daily funds-only settlement of its Market Professional cross-margining
activity. In addition, FICC and NYPC will establish and use separate
bank accounts for paying and collecting cash margin and funds-only
settlement amounts resulting from members' proprietary cross-margining
activities and for paying and collecting such amounts resulting from
members' market professional cross-margining activity. FICC will not
permit the netting of obligations arising out of a GSD Netting Member's
proprietary cross-margining activity with those arising out of its
Market Professional cross-margining activity.
    FICC has also taken steps to assure the segregation of securities
that are deposited with FICC or its agents to satisfy Clearing Fund
requirements in Market Professional Cross-Margining Accounts and
proprietary cross-margining accounts. For example, FICC and NYPC will
establish and use

separate custody accounts to hold securities deposited as margin by
members for proprietary cross-margining activity and to hold securities
deposited as margin by members for Market Professional cross-margining
activity.
    FICC's proposal also addresses the potential for conflict between
SIPA, Subchapter IV of chapter 7 of the Bankruptcy Code,\15\ and
corresponding CFTC bankruptcy regulations,\16\ in the event of the
liquidation and distribution of the property and funds of a GSD Netting
Member that is a registered broker-dealer.\17\ To establish uniform
results in the event of the bankruptcy or liquidation of a broker-
dealer GSD Netting Member under SIPA, FICC will require each Netting
Member that chooses to participate in the Market Professional Cross-
Margining Program to require that the GSD Netting Member's
participating Market Professionals agree that in the event of the
bankruptcy or liquidation of the GSD Netting Member carrying its cross-
margined positions, the Market Professional will subordinate its cross-
margining related claims to the claims of the firm's non-cross-
margining customers.\18\ Similarly, each participating Market
Professional must acknowledge that all of the assets carried in a GSD
Netting Member's Market Professional Cross-Margining Account on the
Market Professional's behalf will not be deemed ``customer property''
for purposes of SIPA or give rise to any claim thereunder. This means
that in the event of a GSD Netting Member bankruptcy, all claims to
assets in cross-margining accounts will be determined under Subchapter
IV of chapter 7 of the Bankruptcy Code and applicable CFTC regulations.
FICC believes these measures reduce the possibility that assets in a
GSD Netting Member's Market Professional Cross-Margining Account will
be subject to two conflicting schemes of distribution.
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    \15\ 11 U.S.C. 761-767.
    \16\ 17 CFR Part 190.
    \17\ Some Market Professionals could be deemed to be
``customers'' under SIPA and Exchange Act Rule 15c3-3. Consistent
with previously approved cross-margining programs, however, Market
Professionals will be required to agree to subordinate their claims,
in the event of the bankruptcy of a GSD Netting Member or an NYPC
member, to the claims of other customers. See Securities Exchange
Act Release No. 34-29991 (November 26, 1991), 56 FR 61458 (December
3, 1991) n.23.
    \18\ Under SIPA, SIPC satisfies the claims of ``customers''
against insolvent broker-dealers up to predetermined limits. 15
U.S.C. 78fff-3. Under SIPA, however, the term ``customer'' does not
include any person to the extent that such person has a claim for
cash or securities which, by agreement, is subordinated to the
claims of any or all creditors of the debtor. 15 U.S.C.
78lll(2)(C)(ii). Because a Market Professional will be required to
subordinate its cross-margin related claims against a GSD Netting
Member to those of the GSD Netting Member's non-cross-margining
customers, it will not fall within the protections afforded by SIPA.
See Securities Exchange Act Release No. 34-29991 (November 26,
1991), 56 FR 61458 (December 3, 1991) n.24.
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    In the event of a default of a member that chooses to participate
in the Market Professional Cross-Margining Program, FICC and NYPC will
follow the remedies outlined in the FICC-NYPC Cross-Margining Agreement
to liquidate or transfer the proprietary and Market Professional Cross-
Margining Accounts. Any deficit in the Market Professional Cross-
Margining Account would, absent a deficit in any NYPC segregated
customer account of the defaulting member, be offset against any credit
in any proprietary cross-margining account of the defaulting member.
Non-cross-margining accounts at NYPC would be liquidated or transferred
pursuant to NYPC procedures as they exist today. FICC and NYPC will not
offset a credit in a Market Professional Cross-Margining Account with a
deficit in a proprietary cross-margin account or with any other account
FICC or NYPC maintains for the defaulting member. Thus, any surplus in
the Market Professional Cross-Margining Account will be returned to the
member or its representative.
    In the event of a member bankruptcy, the Bankruptcy Code exempts
FICC and NYPC from the automatic stay and permits FICC and NYPC to
liquidate any assets held for the insolvent member \19\ and offset
those assets against the member's liabilities.\20\ Assets of the member
held in the Market Professional Cross-Margining Account will only be
set-off against related Market Professional cross-margining
liabilities. Any assets remaining after such a set-off will be
transferred to the bankruptcy trustee for administration and
distribution.\21\
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    \19\ 11 U.S.C. 555, 556, 560, and 561.
    \20\ 11 U.S.C. 362(b)(6), 362(b)(17), 362(b)(27), and 561.
    \21\ In the situation where an Affiliated Member becomes
insolvent, assets in the Market Professional Cross-Margin Accounts
of FICC and NYPC will be set-off by FICC and NYPC against related
liabilities in such accounts.
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    If a member becomes insolvent, the Securities Investor Protection
Corporation (``SIPC'') may and probably will file for a protective
decree under SIPA.\22\ SIPC will then appoint a trustee charged with
liquidating the bankrupt estate, consistent with SIPA. Under SIPA, the
trustee must, to the extent not inconsistent with SIPA, administer the
assets of the member held as a commodity broker in accordance with the
Bankruptcy Code's commodity broker liquidation requirements and
applicable CFTC regulations.\23\ Even if SIPC does not exercise its
power to seek appointment of a trustee and SIPA does not apply to the
liquidation, a Market Professional's claims to assets in the Market
Professional Cross-Margining Account will be determined in accordance
with the Bankruptcy Code's commodity broker liquidation scheme
contained in Subchapter IV of chapter 7 and applicable CFTC
regulations.
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    \22\ 11 U.S.C. 742.
    \23\ 15 U.S.C. 78fff-1(b) states in part: ``To the extent
consistent with the provisions of this chapter or as otherwise
ordered by the court, a trustee shall be subject to the same duties
as a trustee in a case under chapter 7 of Title 11, including, if
the debtor is a commodity broker, as defined under section 101 of
such title, the duties specified in subchapter IV of such chapter
7.''
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    Generally, applicable sections of the Bankruptcy Code and CFTC
regulations provide for the trustee to distribute ``customer property''
\24\ pro rata among ``customers'' \25\ according to account class and
generally give priority to customer claims over all others, except
those dealing with the administration of the bankrupt estate.\26\ Also,
assuming the trustee does not transfer customer accounts to another
firm and determines to liquidate customer accounts, the trustee will
distribute customer property to the claimants.\27\ If there is a
shortfall in the Market Professional Cross-Margining Account and there
is no shortfall or a lesser shortfall in the non-cross-margining
customer account, Market Professionals will have a claim against the
Market Professional Cross-Margining Account and will be able to claim
against the non-cross-margining customer account only after all non-
cross-margining customer claims have been satisfied. If the shortfall
in the non-cross-margining customer account is equal to or greater than
the shortfall in the Market Professional Cross-Margining Account, the
two accounts will be combined and Market Professionals and non-cross-
margining customers will share on a pro rata basis.\28\
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    \24\ As defined in 11 U.S.C. 761(10) and 17 CFR 190.01(n).
    \25\ As defined in 11 U.S.C. 761(9).
    \26\ 11 U.S.C. 766(h); see 17 CFR 190.08.
    \27\ See generally 11 U.S.C. 766 and 17 CFR 190.08.
    \28\ See 17 CFR part 190, appendix B (Framework 1).
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Proposed Changes to the FICC-NYPC Cross-Margining Agreement

    In addition to certain technical corrections and conforming
changes, the FICC-NYPC Cross-Margining Agreement would be substantively
amended as described below in order to incorporate the proposed Market
Professional Cross-Margining Program.

Capitalized terms used in this section have the meanings given to them
in the FICC-NYPC Cross-Margining Agreement.
Recitals
    The Recitals to the FICC-NYPC Cross-Margining Agreement would be
amended to describe the proposed expansion of the existing FICC-NYPC
Cross-Margining Agreement to provide for the cross-margining of the
accounts of Market Professionals, and also to reflect the fact that the
current FICC-NYPC Cross-Margining Agreement was executed on March 4,
2011, after receipt of the necessary regulatory approvals by FICC and
NYPC.
Section 1. Definitions

Section 1(f) (Available Assets) and Section 1(tt) (Margin)

    The ``Available Assets'' definition would be amended to include as
assets available in the event of a default any margin posted to the
Defaulting Member's Proprietary Cross-Margining Account, as well as any
margin posted to the Defaulting Member's Market Professional Cross-
Margining Account. The ``Margin'' definition would be similarly amended
to include original margin, option premiums and other margin collateral
held by or for the account of FICC or NYPC to secure the obligations of
a Cross-Margining Participant's Proprietary Cross-Margining Account
and/or its Market Professional Cross-Margining Account.
    The ``Available Assets'' definition would be further amended to
clarify that, consistent with the distributional convention established
in Appendix B to Part 190 of the CFTC's Regulations, the NYPC Guaranty
Fund deposits of a Defaulting Member would first be applied to any
deficit in the Customer Funds Account of the Defaulting Member carried
by NYPC, and then, after any such deficit has been completely
satisfied, to any Cross-Margin Loss in the Defaulting Member's Market
Professional Cross-Margining Account carried by NYPC, and then finally
to any Cross-Margin Loss in the Defaulting Member's Proprietary Cross-
Margining Account carried by NYPC.

Section 1(t) (Cross-Margin Gain) and Section 1(u) (Cross-Margin Loss)

    For ease of reference and to facilitate understanding of the loss
allocation mechanism in the event of the liquidation of the cross-
margined positions carried for a Defaulting Member by FICC and NYPC,
the definitions of Cross-Margin Gain and Cross-Margin Loss would become
a new subsection (b) of Section 7 of the FICC-NYPC Cross-Margining
Agreement (Suspension and Liquidation of Cross-Margining Participant).

Section 1(y) (Customer Funds Account)

    The term ``Segregated Funds Account'' in the existing FICC-NYPC
Cross-Margining Agreement would be replaced by the term ``Customer
Funds Account'' and modified in order to clearly distinguish non-cross-
margining ``customer'' accounts established by NYPC from both Market
Professional Cross-Margining Accounts and Proprietary Cross-Margining
Accounts.

Section 1(ww) (Market Professional)

    As described above, consistent with previously approved cross-
margining programs, the term ``Market Professional'' would be defined
as an entity, other than a ``Non-Customer'' (described below), that is
a member of a designated contract market and that actively trades for
its own account Eligible Products that are eligible for cross-margining
under the FICC-NYPC Cross-Margining Agreement.

Section 1(bbb) (Non-Customer)

    As described above, ``Non-Customers'' would be excluded from the
definition of a Market Professional. With respect to a GSD Netting
Member, the term ``Non-Customer'' would be defined as such GSD Netting
Member or other person whose account with such GSD Netting Member would
not be the account of a ``customer'' within the meaning of SEC Rules
8c-1 and 15c2-1.

Section 1(sss) (Securities Custody Account) and 1(uuu) (Settlement
Account)

    For ease of reference, the term ``Cross-Margining Securities
Account'' would be replaced with the term ``Securities Custody
Account'' and would be expanded to include a custody account to hold
Margin in the form of securities deposited by a Cross-Margining
Participant in respect of a Proprietary Cross-Margining Account or a
Market Professional Cross-Margining Account.
    Similarly, the definition of ``Settlement Account'' would be
expanded to include a bank account established to hold cash Margin
deposited by a Cross-Margining Participant in respect of a Proprietary
Cross-Margining Account or a Market Professional Cross-Margining
Account.
Section 2. Participation
    Section 2(a) would be amended and Section 2(b) and 2(c) would be
added in order to accommodate the additional documentation required to
establish a Set of Market Professional Cross-Margining Accounts by
either a Joint Clearing Member or by a Clearing Member and its Cross-
Margining Affiliate.
Section 5. Forms of Margin; Holding Margin
    Section 5(b) would be amended to reflect the fact that separate
Settlement Accounts and Securities Custody Accounts would be maintained
for proprietary and Market Professional cross-margining activity.
    Section 5(c) would be amended to allow FICC and NYPC to hold cash
and securities posted with respect to cross-margining activity in
either separate accounts or, consistent with previously approved cross-
margining programs, joint accounts titled in the names of FICC and
NYPC.
Section 7. Suspension and Liquidation of Cross-Margining Participant
    Section 7(a) would be amended to clarify that the positions and
Margin of a Defaulting Member may be liquidated or transferred to one
or more non-defaulting Clearing Members.
    A new Section 7(b) would be added to define ``Cross-Margin Gain''
and ``Cross-Margin Loss,'' as described above. New Section 7(b) would
also make clear that in calculating its Cross-Margin Gain (or Cross-
Margin Loss) or Net Gain (or Net Loss) FICC and NYPC would be required
to make separate calculations with respect to the Defaulting Member's
Proprietary Cross-Margining Account and its Market Professional Cross-
Margining Account.
    Section 7(g) would be amended to provide that to the extent that
pursuant to the loss allocation prescribed in Section 7, both FICC and
NYPC owe payments to each other, i.e., one clearing organization owes a
payment with respect to the Proprietary Cross-Margining Account of a
Defaulting Member and the other owes a payment with respect to the
Defaulting Member's Market Professional Cross-Margining Account, those
two payments may be netted and setoff against each other.

Proposed Changes to Clearing Member Agreements

    The FICC-NYPC Cross-Margining Agreement is solely between FICC and
NYPC. Members of FICC and of NYPC that wish to participate in the
Cross-Margining Program must become party to a Clearing Member Cross-
Margining Agreement which, among other things, reflects the Clearing
Member's agreement to be bound by the Rules applicable to cross-
margining and to the provisions of the FICC-NYPC Cross-

Margining Agreement (``Clearing Member Agreements''). Capitalized terms
used in this section have the meanings given to them in the proposed
Clearing Member Agreements.
    The current FICC-NYPC Cross-Margining Agreement includes two forms
of Clearing Member Agreement--one for joint Clearing Members (i.e.,
entities that are members of both FICC and NYPC), the other for
Clearing Members that are Affiliates of each other (i.e., a Clearing
Member of either FICC or NYPC that directly or indirectly controls, is
controlled by, or under common control with a Clearing Member of the
other Clearing Organization). Those agreements, which are set forth as
Appendix A and Appendix B to the FICC-NYPC Cross-Margining Agreement,
would be renamed as Clearing Member Cross-Margining Agreement (Joint
Clearing Member--Proprietary Accounts) and Clearing Member Cross-
Margining Agreement (Affiliated Clearing Members--Proprietary
Accounts), and references in those agreements to a ``Member'' would be
replaced with references to a ``Clearing Member'' for consistency with
the terminology used in the FICC-NYPC Cross-Margining Agreement.
    The Clearing Member Agreements for Proprietary Accounts are
proposed to be further modified to make clear that a Set of Proprietary
Cross-Margining Accounts would be combined and treated as a single
account for purposes of calculating Margin. This change is reflective
of the current practice of the Clearing Organizations pursuant to the
Cross-Margining Agreement and is proposed to be set out solely for
purposes of clarity.
    The Clearing Member Agreements would additionally be modified to
reflect the practice of the Clearing Organizations regarding the use of
Clearing Data (as that term is defined in the Clearing Member Cross-
Margining Agreements). Specifically, the Clearing Member Agreements
would be modified to provide that Clearing Data may only be disclosed
(i) To an Affiliated Clearing Member, where applicable, (ii) in
accordance with the provisions of Section 10 of the Cross-Margining
Agreement, and (iii) in aggregated form, provided that such aggregated
Clearing Data does not identify of the Clearing Member or Affiliated
Clearing Members, as applicable, as the source thereof.
    The termination provisions of the Clearing Member Agreements for
Proprietary Accounts would also be modified to make clear that the
required acknowledgment of a Clearing Member's termination of the
Agreement will be given by the Clearing Organizations promptly after
the two Business Day notice period required by the Clearing Member
Agreements. The termination provisions would additionally be modified
to make explicit that a Clearing Member's continuing obligations under
the Clearing Member Agreements and the Cross-Margining Agreement
survive the termination of the Clearing Member Agreement only to the
extent those obligations arose prior to such termination.
    Finally, the Clearing Member Cross-Margining Agreement (Affiliated
Clearing Members--Proprietary Accounts) is proposed to be amended to
include a waiver of the Clearing Members' and the Clearing
Organizations' right to jury trial in any dispute arising in connection
with that agreement. A comparable provision already is included in the
Clearing Member Cross-Margining Agreement (Joint Clearing Member--
Proprietary Accounts). The remaining revisions to the Clearing Member
Agreements for Proprietary Accounts are non-substantive or conforming.
    While it is anticipated that some Clearing Members will elect to
participate in cross-margining for their Proprietary Accounts and also
act as Clearing Member for Market Professionals, a Clearing Member
could elect to act in only one of those capacities. The Clearing Member
Agreements in Appendices A and B to the FICC-NYPC Cross-Margining
Agreement, therefore, would be complemented by a Clearing Member Cross-
Margining Agreement (Joint Clearing Member--Market Professional
Accounts) and Clearing Member Cross-Margining Agreement (Affiliated
Clearing Members--Market Professional Accounts), respectively, and a
Clearing Member that elected to maintain a Set of Proprietary Cross-
Margining Accounts and a Set of Market Professional Cross-Margining
Accounts would be required to enter into Clearing Member Cross-
Margining Agreements for both its Proprietary Accounts and for its
Market Professional Accounts.
    The proposed Clearing Member Agreements for Market Professional
Accounts (Appendices C and D to the FICC-NYPC Cross-Margining
Agreement) are based upon the Clearing Member Agreements for
Proprietary Accounts, but have been modified as appropriate. For
example, the Clearing Member Agreements for Market Professional
Accounts would make explicit that the Set of Market Professional Cross-
Margining Accounts that would be established by the Clearing
Organizations for a Clearing Member are to be limited to transactions
and positions established by Market Professionals who have signed a
Market Professional Agreement for Cross-Margining in the form set forth
as Exhibit A to Appendices C and D, respectively.\29\
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    \29\ Similar to the Clearing Member Agreements for Proprietary
Accounts, the Clearing Member Agreements for Market Professional
Accounts would require the Clearing Member to pledge, for itself and
for each Market Professional on whose behalf positions are carried
in a Set of Market Professional Cross-Margining Accounts, the
positions and Margin in the Set of Market Professional Cross-
Margining Accounts. Consistent therewith and with the Clearing
Member Agreements for Proprietary Accounts, the Clearing Member
Agreements for Market Professional Accounts would include
representations and warranties by the Clearing Member to the effect
that it has the power to grant the foregoing security interest and
that it is the sole owner of or otherwise has the right to transfer
collateral to the Clearing Organizations.
---------------------------------------------------------------------------

    The Market Professional Agreements are derived from the form of
Market Professional's Agreement for Cross-Margining that has previously
been approved by the Commission.\30\ The FICC-NYPC Market Professional
Agreements differ from the forms of agreement that have previously been
approved in that they would be modified to reference the Eligible
Products that are available for cross-margining under the FICC-NYPC
Cross-Margining Agreement. The FICC-NYPC Market Professional Agreements
additionally would be modified to reference the definitions of the term
``Market Professional'' that would be set forth in the Rules of FICC
and NYPC, and to require a Market Professional to represent and warrant
that it does, in fact, qualify as such. Moreover, the FICC-NYPC Market
Professional Agreements would be amended to provide that, consistent
with the requirements of CFTC Regulation 39.13(g)(8)(i) (gross margin
for customer accounts), the positions of a Market Professional cleared
by FICC will only be cross-margined with the derivatives positions of
the same Market Professional cleared by NYPC. The only other
substantive change from the form of agreement previously approved by
the Commission would be the elimination of a provision that would have
conditioned the effectiveness of the Market Professional Agreements on
the receipt of all necessary approvals by the Commission and the CFTC.
FICC believes that a provision of this nature

is unnecessary, given that FICC and NYPC will not permit Clearing
Members to enter into Market Professional Agreements until all
necessary regulatory approvals have been obtained.
---------------------------------------------------------------------------

    \30\ See Exhibits 5F and 5G to Release No. 34-57118 (January 9,
2008) (Options Clearing Corporation--ICE Clear U.S. market
professional cross-margining); see also Securities Exchange Act
Release No. 34-29991 (November 26, 1991), 56 FR 61458 (December 3,
1991) (Options Clearing Corporation--Chicago Mercantile Exchange
market professional cross-margining).
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Proposed FICC Rule Changes

    In addition to the proposed changes to the FICC-NYPC Cross-
Margining Agreement, FICC is proposing the following GSD rule changes
to effectuate the Market Professional Cross-Margining Program.
Capitalized terms used in this section have the meanings given to them
in the GSD Rules.
Rule 1 (Definitions)
    New definitions are being added for the following terms: ``Market
Professional,'' ``Market Professional Agreement for Cross-Margining,''
``Market Professional Cross-Margining Account,'' ``Non-Customer,''
``NYPC Market Professional Account,'' and ``NYPC Proprietary Account''
(which retains the current definition of ``NYPC Account''). ``NYPC
Account,'' an existing term, is now proposed to be amended to encompass
the two new terms of ``NYPC Market Professional Account'' and ``NYPC
Proprietary Account.'' In addition, changes are proposed to the
following definitions to reference the concepts associated with the
Market Professional Cross-Margining Program: ``Account,'' ``Cross-
Margining Affiliate,'' ``Cross-Margining Agreement'' and ``Margin
Portfolio.'' A technical change is being proposed to the definition of
``Cross-Margining Payment.''
Rule 3 (On-Going Membership Requirements)
    FICC is proposing to amend Section 11 of Rule 3, which covers
additional accounts requested by Members, to provide for the opening of
market professional accounts and to make clear that such accounts must
meet the requirements of the Cross-Margining Agreement and the GSD
Rules (as with all other accounts carried by FICC for its Members).
Rule 4 (Clearing Fund and Loss Allocation)
    FICC is proposing to amend Section 1b and Section 2 of Rule 4 to
provide that the market professional account will have its own Clearing
Fund calculations separate from the main account of the Netting Member,
and that the rules applicable to the Clearing Fund calculations and the
requirements of the Required Fund Deposit also apply Clearing Fund
calculations and Required Fund Deposits associated with the market
professional accounts.
Rule 13 (Funds-Only Settlement)
    FICC is proposing to amend Section 1 and Section 5a to provide that
funds-only settlement amounts will be calculated separately for the
member's market professional account and that net-net funds only
credits/debits will also apply to the market professional accounts of a
Member (or its permitted margin affiliate) across FICC and NYPC, as is
the case currently with the proprietary accounts.
Rule 22A (Procedures for When the Corporation Ceases to Act)
    FICC is proposing to amend Section 2 of Rule 22A to provide that a
liquidation gain in a Netting Member's proprietary account will be used
to offset any resulting liquidation loss in such Member's Market
Professional Cross-Margining Account.
Rule 29 (Release of Clearing Data)
    FICC is proposing to amend Rule 29 to make clear that a Member's
Clearing Data will be released to a futures clearing organization
(``FCO'') with which FICC has a Cross-Margining Arrangement and that
such data will include data regarding the Member's market professional
customers.
Rule 43 (Cross-Margining Arrangements)
    FICC is proposing to amend Rule 43 to provide for the requirement
for Netting Members who wish to participate in the Market Professional
Cross-Margining Program to execute the appropriate participation
agreements which are appended to the FICC-NYPC Cross-Margining
Agreement as discussed above.

III. Comments

    The Commission received one comment to the proposed rule change
from Citadel, LLC.\31\ The commenter supports the proposed rule change,
stating that the proposed rule change would allow market professionals
to more effectively manage risk by recognizing the value of offsetting
positions cleared by NYPC and FICC. The commenter believes that the
proposed rule change will allow market professionals to use their
capital more efficiently and will reduce systemic risk by removing
excess interconnectedness from the marketplace and optimizing
collateral balances. Furthermore the commenter believes that the
proposed rule change will further encourage competition in the US
futures markets and provides for consumer protection in the event of
the bankruptcy of a clearing member in accordance with the CFTC's
rules.
---------------------------------------------------------------------------

    \31\ See supra note 4.
---------------------------------------------------------------------------

IV. Discussion

    Section 19(b)(2)(B) of the Act \32\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that the proposed rule change is consistent with the requirements
of the Act and the rules and regulations thereunder applicable to such
organization. In Section 17A(a)(2)(A)(ii) of the Act,\33\ Congress
directs the Commission to use its authority to facilitate the
establishment of linked or coordinated facilities for clearance and
settlement of transactions in securities, securities options, contracts
of sale for future delivery and options thereon, and commodity options.
Sections 17A(b)(3)(A) and (F) of the Act \34\ require that a clearing
agency be organized and its rules designed to facilitate the prompt and
accurate clearance and settlement of securities transactions and
derivative agreements, contracts, and transactions for which it is
responsible and to safeguard securities and funds in its custody or
control or for which it is responsible. The Commission has carefully
considered the proposed rule change and the comment thereto and the
Commission finds that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder.\35\
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78s(b)(2)(B).
    \33\ 15 U.S.C. 78a-1 (a)(2)(A)(ii).
    \34\ 15 U.S.C. 78q-1(b)(3)(A), (F)
    \35\ In approving this proposed rule change, the Commission
notes and FICC agrees that FICC will adhere to the conditions to
provide information and reports on an ongoing basis that are set
forth in the Commission's Order Granting Approval of a Proposed Rule
Change to Introduce Cross-Margining of Certain Positions Cleared at
the Fixed Income Clearing Corporation and Certain Positions Cleared
at New York Portfolio Clearing, LLC, to the extent applicable to
``Market Professionals.'' See note 5, supra.
---------------------------------------------------------------------------

    As the Commission noted in approving the FICC-NYPC Proprietary
Cross-Margining Program, the Commission has encouraged cross-margining
arrangements as a way to promote more efficient risk management across
product classes.\36\ Furthermore, cross-margining arrangements are
consistent with Section 17A(b)(3)(F) in that they may strengthen the
safeguarding of assets through effective risk controls that more
broadly take into account offsetting positions of participants in both
the cash and futures markets, and promote prompt and

accurate clearance and settlement of securities through increased
efficiencies. The Commission agrees with the commenter that the
proposed rule change will help promote effective risk management and
provides for increased efficiencies by taking into account offsetting
positions. Moreover, the Commission has repeatedly found that similar
cross-margining programs for ``Market Professionals'' are consistent
with clearing agency requirements under Section 17A of the Act.\37\
Because the Market Professional Cross-Margining Program being approved
by this Order helps further linked or coordinated facilities for
clearance and settlement of transactions while facilitating their
prompt and accurate clearance and settlement and safeguards securities
and funds in FICC's custody or control or for which it is responsible,
the Commission believes that the proposed rule change is consistent
with Section 17A of the Act and, therefore, is approving FICC's
proposed rule change.
---------------------------------------------------------------------------

    \36\ See note 5, supra.
    \37\ See note 6, supra.
---------------------------------------------------------------------------

V. Conclusion

    On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A of the Act \38\ and the
rules and regulations thereunder.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) \39\ of the
Act, that the proposed rule change (File No. SR-FICC-2012-03) be, and
hereby is, approved.\40\
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78s(b)(2).
    \40\ In approving this proposed rule change the Commission has
considered the proposed rule's impact of efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\41\
---------------------------------------------------------------------------

    \41\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-12181 Filed 5-18-12; 8:45 am]
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[Federal Register Volume 76, Number 82 (Thursday, April 28, 2011)]
[Notices]
[Pages 23823-23824]
[FR Doc No: 2011-10234]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2011-D-0287]

Guidance for Industry on Fish and Fishery Products Hazards and
Controls, Fourth Edition; Availability

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: The Food and Drug Administration (FDA) is announcing the
availability of a guidance for industry entitled ``Fish and Fishery
Products Hazards and Controls Guidance, Fourth Edition.'' The updated
guidance supports and complements FDA's regulations for the safe and
sanitary processing and importing of fish and fishery products using
hazard analysis and critical control point (HACCP) methods.

DATES: Submit either electronic or written comments on Agency guidances
at any time.

ADDRESSES: Contact the Florida Sea Grant, IFAS-Extension Bookstore,
University of Florida, P.O. Box 110011, Gainesville, FL 32611-0011, 1-
800-226-1764, for single copies of this guidance. See the SUPPLEMENTARY
INFORMATION section for electronic access to the guidance document.
    Submit electronic comments on the guidance to http://www.regulations.gov. Submit written comments to the Division of Dockets
Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane,
rm. 1061, Rockville, MD 20852.

FOR FURTHER INFORMATION CONTACT: Bruce F. Wilson, Center for Food
Safety and Applied Nutrition (HFS-325), Food and Drug Administration,
5100 Paint Branch Pkwy., College Park, MD 20740,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background

    FDA is announcing the availability of the guidance for industry
entitled ``Fish and Fishery Products Hazards and Controls Guidance,
Fourth Edition.'' This guidance is being issued consistent with FDA's
good guidance practices (GGP) regulation (Sec.  10.115 (21 CFR
10.115)). This guidance is being implemented without prior public
comment because the Agency has determined that prior public
participation is not feasible or appropriate (Sec.  10.115(g)(2)). The
Agency made this determination because the updated information in this
guidance will significantly enhance the seafood industry's ability to
protect the public health and will provide important recommendations
for conducting a hazard analysis and implementing a HACCP plan.
Although this guidance document is immediately in effect, it remains
subject to comment in accordance with the Agency's GGP regulation.
    This guidance provides industry with information that will assist
processors of seafood products in identifying the likelihood that a
food safety hazard may occur in their product and will guide them in
the preparation of appropriate HACCP plans for those hazards that are
reasonably likely to occur. A summary of the changes from the third
edition is included in the discussion section of the guidance.
    Under FDA's fish and fishery products regulations (part 123 (21 CFR
part 123)), processors of fish and fishery products are required to
operate preventive control systems under the principles of HACCP. Fish
and fishery products are adulterated under section 402(a)(4) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 342(a)(4)) if a
processor fails to have and implement a HACCP plan when one is
necessary

(Sec.  123.6(g)) or otherwise fails to meet any of the requirements of
the fish and fishery products regulations (part 123).
    FDA published the first edition of the guidance in September 1996
(about 1 year before the fish and fishery products regulations became
effective), issued the second edition in January 1998, and issued the
third edition in June 2001. In February 2008, FDA updated the third
edition to include ciguatera fish poisoning guidance for northern Gulf
of Mexico processors and seafood processors that purchase grouper,
amberjack, and related predatory reef species captured from the
northern Gulf of Mexico. On January 4, 2011, the President signed into
law the FDA Food Safety Modernization Act (FSMA) (Pub. L 111-353).
Section 103(h) of FSMA requires FDA to update the Fish and Fisheries
Products Hazard and Control Guidance within 180 days to take into
account advances in technology. This updated guidance satisfies the
requirements of section 103(h). The guidance provides current
information relating to: (1) Potential hazards associated with the
known commercial species of vertebrate and invertebrate seafood, (2)
potential hazards associated with certain processing operations, (3)
HACCP strategies that may be used to control the potential hazards, and
(4) other information related to food safety.
    There are a number of important changes to this edition of the
HACCP guidance. For example, a new chapter has been added containing
guidance for the control of pathogen survival through processes
designed to retain raw product characteristics; food safety hazards are
identified for additional species; new control recommendations are
listed for the natural toxin action level for diarrhetic shellfish
poisoning; and tolerances for additional chemical hazards are listed.
    The guidance represents the Agency's current thinking on fish and
fishery products hazards and controls. It does not create or confer any
rights for or on any person and does not operate to bind FDA or the
public. An alternate approach may be used if such approach satisfies
the requirements of the applicable statutes and regulations.

II. Paperwork Reduction Act of 1995

    The guidance refers to previously approved collections of
information found in FDA regulations. These collections of information
are subject to review by the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The
collections of information in 123.6(a), (b), (c), (c)(5), and (c)(7),
123.7(d), 123.8(a)(1), (c), and (d), 123.11(c), 123.12(a)(2),
(a)(2)(ii), and (c) have been approved under OMB control number 0910-
0354.

III. Comments

    Interested persons may submit to the Division of Dockets Management
(see ADDRESSES) either electronic or written comments regarding this
document. It is only necessary to send one set of comments. It is no
longer necessary to send two copies of mailed comments. Identify
comments with the docket number found in brackets in the heading of
this document. Received comments may be seen in the Division of Dockets
Management between 9 a.m. and 4 p.m., Monday through Friday.

IV. Electronic Access

    Persons with access to the Internet may obtain the document at
either http://www.fda.gov/downloads/Food/GuidanceComplianceRegulatoryInformation/GuidanceDocuments/Seafood/UCM251970.pdf or http://www.regulations.gov. Always access an FDA
document by using the FDA Web site listed previously to find the most
current version of the guidance.

    Dated: April 22, 2011,
Leslie Kux,
Acting Assistant Commissioner for Policy.
[FR Doc. 2011-10234 Filed 4-27-11; 8:45 am]
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