[Federal Register Volume 85, Number 249 (Tuesday, December 29, 2020)]
[Notices]
[Pages 85743-85751]
[FR Doc No: 2020-28652]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90736; File No. SR-FICC-2020-803]

Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing of Advance Notice To Include Same-Day Settling Trades
in the Risk Management, Novation, Guarantee, and Settlement Services of
the Government Securities Division's Delivery-Versus-Payment Service,
and Make Other Changes

December 21, 2020.
    Pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act entitled the Payment,
Clearing, and Settlement Supervision Act of 2010 (``Clearing
Supervision Act'') \1\ and Rule 19b-4(n)(1)(i) under the Securities
Exchange Act of 1934 (``Act''),\2\ notice is hereby given that on
November 19, 2020, Fixed Income Clearing Corporation (``FICC'') filed
with the Securities and Exchange Commission (``Commission'') the
advance notice as described in Items I, II and III below, which Items
have been prepared by the clearing agency.\3\ The Commission is
publishing this notice to solicit comments on the advance notice from
interested persons.
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    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
    \3\ On November 19, 2020, FICC filed this advance notice as a
proposed rule change (SR-FICC-2020-015) with the Commission pursuant
to Section 19(b)(1) of the Act, 15 U.S.C. 78s(b)(1), and Rule 19b-4
thereunder, 17 CFR 240.19b-4. A copy of the proposed rule change is
available at http://www.dtcc.com/legal/sec-rule-filings.aspx.
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I. Clearing Agency's Statement of the Terms of Substance of the Advance
Notice

    This advance notice consists of amendments to the FICC Government
Securities Division (``GSD'') Rulebook (the ``Rules'') \4\ in order to
(i) include Same-Day Settling Trades (as defined below) in the risk
management, Novation, guarantee, and settlement services of GSD's
delivery-versus-payment service (``DVP Service''), (ii) provide that
FICC would attempt to settle, on a reasonable efforts basis, any Same-
Day Settling Trades that are compared in the timeframe specified by
FICC in notices made available to Members from time to time \5\ to the

extent described below, (iii) introduce an optional service that would
allow GSD to systematically pair-off certain Members' failed Securities
Settlement Obligations between approximately 3:32 p.m. and 4:00 p.m.,
(iv) change the time of intraday funds-only settlement (``FOS'')
processing from 3:15 p.m. to 4:30 p.m., and (v) make certain technical
changes, as described in further detail below.
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    \4\ Capitalized terms not defined herein are defined in the
Rules, available at http://www.dtcc.com/legal/rules-and-procedures.
    \5\ The initial timeframe would be after 3:01 p.m. If the FRB
announces an extension of the Fedwire Securities Service, FICC would
match the duration of the extension. All times herein are ET.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Advance Notice

    In its filing with the Commission, the clearing agency included
statements concerning the purpose of and basis for the advance notice
and discussed any comments it received on the advance notice. 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 and B below, of the most significant aspects of such
statements.

(A) Clearing Agency's Statement on Comments on the Advance Notice
Received From Members, Participants, or Others

    FICC has not received or solicited any written comments relating to
this proposal. FICC will notify the Commission of any written comments
received by FICC.

(B) Advance Notice Filed Pursuant to Section 806(e) of the Clearing
Supervision Act

Nature of the Proposed Change
    The proposed rule change would amend the Rules in order to (i)
include Same-Day Settling Trades (as defined below) in the risk
management, Novation, guarantee, and settlement services of GSD's DVP
Service, (ii) provide that FICC would attempt to settle, on a
reasonable efforts basis, any Same-Day Settling Trades that are
compared in the timeframe specified by FICC in notices made available
to Members from time to time to the extent described below, (iii)
introduce an optional service that would allow GSD to systematically
pair-off certain Members' failed Securities Settlement Obligations
between approximately 3:32 p.m. and 4:00 p.m., (iv) change the time of
intraday FOS processing from 3:15 p.m. to 4:30 p.m., and (v) make
certain technical changes, as described in further detail below.
(i) Proposed Change To Include Same-Day Settling Trades in the Risk
Management, Novation, Guarantee, and Settlement Services of GSD's DVP
Service
    GSD provides comparison, risk management, Novation, netting,
guarantee, and settlement of netting-eligible trades executed by its
Netting Members and Sponsored Members in the U.S. government securities
market. In GSD's DVP Service, GSD provides these services for Repo
Transactions.\6\ The DVP Service encompasses all non-GCF Repo activity
(both repo and buy-sell activity). All delivery obligations are made
against full payment.
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    \6\ In addition to the DVP Service, GSD also provides such
services in its GCF Repo[supreg] Service and CCIT Service. The GCF
Repo Service and the CCIT Service are not part of this proposal. The
GCF Repo Service is primarily governed by Rule 20 and enables
Netting Members to trade general collateral finance repurchase
agreement transactions based on rate, term, and underlying product
throughout the day with Repo Brokers on a blind basis. The CCIT
Service is governed by Rule 3B and enables tri-party repurchase
agreement transactions in GCF Repo Securities between Netting
Members that participate in the GCF Repo Service and institutional
cash lenders (other than investment companies registered under the
Investment Company Act of 1940, as amended). Rule 20 and Rule 3B,
supra note 4.
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    Currently, with respect to same-day starting Repo Transactions, GSD
only risk manages, novates, nets, and settles the End Leg, except in
instances where GSD assumes the fail on the Start Leg of a Brokered
Repo Transaction.\7\ If a same-day starting Repo Transaction is a
Brokered Repo Transaction and the Start Leg of such transaction fails
to settle on its original Scheduled Settlement Date, FICC will assume
responsibility for settlement of such Start Leg from the Repo Broker on
the evening of the day the Start Leg was due to settle. This may
involve the receipt of securities from the repo dealer for redelivery
to the reverse dealer, or the settlement of the Start Leg may be
effected by netting of the settlement obligations arising from the
Start Leg against the settlement obligations arising from the End Leg
of the same or another repo. FICC does so in these instances (and has
been doing so since the inception of its blind brokered repo service)
in order to decrease settlement risk by centralizing the settlement of
these failed Start Legs and including them in the netting process with
the End Legs (which already settle at FICC). The Repo Broker acts as an
intermediary and expects to net out of every transaction and not have a
settlement position from the settlement process. By assuming the fail,
FICC replaces the Repo Broker so that FICC becomes the central
counterparty for settlement of these transactions and thereby, FICC
decreases settlement risk. In all cases where FICC assumes a fail from
a Repo Broker, the counterparty remains responsible to FICC for its
obligations with respect to the transaction.
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    \7\ See Rule 19, Section 5, supra note 4. A same-day starting
Repo Transaction consists of a Start Leg and End Leg where the
initial Scheduled Settlement Date of the Start Leg is scheduled to
settle on the Business Day on which it is submitted to GSD
(typically referred to in the industry as a same-day settling start
leg).
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    The DVP Service did not include settlement of the Start Leg of
same-day starting Repo Transactions at its inception, and these
transactions have always been settled between the parties (i.e.,
outside of FICC). Recently, participants have expressed an interest in
being able to settle the Start Leg of their same-day starting Repo
Transactions through GSD. FICC believes that expanding its DVP Service
in this way (hereinafter, ``Same-Day Settling Service'') could reduce
market risk because the Start Legs as well as the End Legs of eligible
Repo Transactions would be risk managed, novated, guaranteed, and
settled through FICC. FICC also believes that the expansion of its DVP
Service in this way could potentially reduce fails in the market by
centralizing the settlement of the applicable Start Legs with FICC.
FICC believes that this expansion of its DVP Service could increase
settlement efficiencies and decrease settlement risk in the market and
decrease operational risk with respect to Members. FICC believes that
the Same-Day Settling Service could increase settlement efficiencies
and decrease settlement risk because it would reduce the number of
securities movements between Members by centralizing the settlement of
the Start Legs with FICC even though the Start Legs are not netted. It
would eliminate the number of bilateral movements because the Start
Legs would settle through FICC. FICC also believes that the Same-Day
Settling Service could decrease operational risk because FICC believes
it could decrease the number of fails of the Start Legs as there would
be fewer counterparties involved in the settlement of the Start Legs.
    For example, assuming the following two Brokered Repo Transactions
are executed on the same day: (i) Broker 1 executes an overnight same-
day starting repo transaction with Dealer A and Dealer B (``Brokered
Repo 1'') and (ii) Broker 2 executes an overnight same-day starting
repo transaction with Dealer A and Dealer B (``Brokered Repo 2'').
     Brokered Repo 1 involves: (a) A repo transaction in CUSIP
XYZ with a

par and principal of $50 million with Dealer A and (b) a reverse repo
transaction in the same CUSIP with a par and principal of $50 million
with Dealer B.
     Brokered Repo 2 involves: (a) A repo transaction in CUSIP
XYZ with a par of $50 million and principal of $51 million with Dealer
B and (b) a reverse repo transaction in CUSIP XYZ with a par of $50
million and principal of $51 million with Dealer A.
    Today, the Start Leg of both Transactions would settle away from
FICC. Specifically, with respect to Brokered Repo 1, today, Dealer A
would deliver securities with a par of $50 million to Broker 1, and
Dealer A would receive $50 million in principal (cash) from the Broker
1. Broker 1 would then deliver securities with a par of $50 million to
Dealer B, and Broker 1 would receive from Dealer B $50 million in
principal (cash). With respect to Brokered Repo 2, today, Dealer B
would deliver to Broker 2 securities with a par of $50 million and
Dealer B would receive $51 million in principal (cash). Broker 2 would
then deliver securities with a par of $50 million to Dealer A, and
Broker 2 would receive $51 million in principal (cash) from Dealer A.
    Today, Brokered Repo 1 and Brokered Repo 2 are submitted to FICC
upon execution. The Start Leg and the End Leg of each of Brokered Repo
1 and Brokered Repo 2 are submitted for Demand Comparison to FICC by
the Repo Brokers, who are considered Demand Trade Sources. Upon receipt
of the trade data from the Demand Trade Source, FICC deems the trades
compared. The dealer counterparties also submit matching trade data to
FICC.
    Today, on the Start Date, settlement of the Start Leg would occur
over Fedwire (or on the books of the Clearing Bank(s) between the four
counterparties referenced above). This has the potential to cause fails
in the marketplace if one or more counterparties fail to meet their
settlement obligations at any point in the process. As previously
stated, on the evening of the day the Start Leg was due to settle, FICC
would assume the Start Leg(s) if they failed versus the Repo Broker.
These broker fails would go into that night's netting cycle and be
marked-to-market. Because both Brokered Repo Transactions are overnight
trades, the Close Leg of each trade would also be included in that
night's netting cycle.
    With this proposed expansion of the DVP Service, on Start Date, the
Start Leg of each Brokered Repo Transaction would settle versus FICC
upon submission of the trade data from the Demand Trade Source. The
Repo Brokers would be removed from the settlement process. The
settlement of the Start Leg of each Brokered Repo Transaction would
settle over Fedwire (or on the books of FICC's Clearing Agent Bank (The
Bank of New York Mellon) between the two dealer counterparties and FICC
(acting as the central counterparty)).
    Specifically, with the proposed expansion of the DVP Service, with
respect to Brokered Repo 1, Dealer A would deliver securities in CUSIP
XYZ of $50 million par to FICC, and Dealer A would receive $50 million
in principal (cash) from FICC. FICC would then deliver to Dealer B
securities in CUSIP XYZ of $50 million par, and FICC would receive $50
million in principal (cash) from Dealer B. With respect to Brokered
Repo 2, Dealer B would deliver securities in CUSIP XYZ with a par of
$50 million to FICC, and Dealer B would receive $51 million in
principal (cash) from FICC. FICC would then deliver to Dealer A
securities in CUSIP XYZ with a par of $50 million, and FICC would
receive from Dealer A principal (cash) of $51 million.
    If these same-day settling Securities Settlement Obligations failed
to settle on their original Scheduled Settlement Date, and Dealer A and
Dealer B have chosen to opt into the proposed Pair-Off Service (as
described below), FICC would pair-down the failed Securities Settlement
Obligations, resulting in a net money difference of $1 million debit to
Dealer A and $1 million credit to Dealer B. To complete the settlement
process on the same day that the Same-Day Settling Trade is executed,
the money differences would settle through intraday funds-only
settlement (FOS). If the dealer parties have not opted into the
proposed Pair-Off Service, the failed same-day settling Securities
Settlement Obligations would go into the night's net and the collection
of any money differences would occur on the following Business Day
through the start of day FOS.
    Under Section 7 of Rule 12, if FICC has delivered Eligible Netting
Securities to a Netting Member with a Net Long Position (Dealer B in
our example), such Member shall be obligated to accept delivery of all
such securities at the Settlement Value for the Receive Obligation or
Receive Obligations that comprise such Position. If such Member fails
to do so, it shall be obligated to pay, or to reimburse FICC for, all
costs, expenses, and charges incurred by FICC as the result thereof,
and it may be subject to a fine by FICC if FICC, in its sole
discretion, determines that such failure to accept securities was done
without good cause.\8\
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    \8\ Rule 12, Section 7, supra note 4.
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    In addition, in the event Dealer B's failure to pay the principal
amount is due to financial difficulties, FICC would also have the right
to suspend a Member from any service provided by FICC either with
respect to a particular transaction or transactions or with respect to
transactions generally, or prohibit or limit such Member with respect
to access to services offered by FICC and/or to cease to act for such
Member.\9\
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    \9\ Rule 21 and Rule 22A, supra note 4.
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    FICC proposes to include the following transactions in the risk
management, Novation, guarantee, and settlement services of GSD's DVP
Service: (i) A Start Leg of a Netting Member's Repo Transaction where
the Scheduled Settlement Date of the Start Leg is the current Business
Day, (ii) an As-Of Trade of a Netting Member where the Scheduled
Settlement Date of the Start Leg is the previous Business Day and the
End Leg is the current Business Day or thereafter,\10\ and (iii) a
Sponsored

Member Trade within the meaning of section (b) of that definition that
meets the requirements of either (i) or (ii) above (hereinafter,
collectively, ``Same-Day Settling Trades''). Same-Day Settling Trades
would not go through FICC's netting process. This is because GSD
netting occurs the night before the Scheduled Settlement Date for such
transactions, and these Same-Day Settling Trades would not be submitted
for settlement until after this time.
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    \10\ FICC has added As-Of Trades in this proposal in order to
reasonably include as many variations of Same-Day Settling Trades as
possible. This addition of As-Of Trades in this proposal covers
scenarios in which a Member submits a DVP repo transaction for
comparison on the day after the Scheduled Settlement Date for the
Start Leg (i.e., where a trade compares on the day after the
Scheduled Settlement Date of the Start Leg). Members may
occasionally need to submit As-Of Trades due to human or operational
errors.
    Although this scenario is not frequently observed, FICC believes
that inclusion of these transactions in the Novation and settlement
process under this proposal would provide Members with consistent
processing in terms of settlement of their FICC-cleared DVP Repo
Transactions, irrespective of whether those transactions are
submitted as As-Of Trades or Same-Day Settling Trades.
    Under this proposal, from an operational and risk management
perspective, As-Of Trades would be risk managed and settled in the
same manner as all other eligible Same-Day Settling Trades. FICC
would settle both the Start Leg and the End Leg of an As-Of Trade on
a bilateral basis between FICC and the Member that submitted the
trade. The End Leg of an As-Of Trade would not be netted unless the
Scheduled Settlement Date of the End Leg is later than the current
Business Day that the trade was submitted.
    For purposes of clarity, Securities Settlement Obligations
generated for the purposes of settlement of the Start Leg and End
Leg of an As-Of Trade that is eligible for settlement under this
proposal would be generated based on the Scheduled Settlement Date
(i.e. contractual settlement date) for each leg of the As-Of Trade.
However, the generation of such obligation(s) on the Scheduled
Settlement Date for each leg of an As-Of Trade does not mean that
such obligation(s) would actually settle on such date.
    Today, the Start Leg of an As-Of Trade settles outside of FICC,
and if the Scheduled Settlement Date of the End Leg is the current
Business Day, the End Leg would also settle outside of FICC.
    Under this proposal, if an As-Of Trade is an overnight repo that
is submitted on the current Business Day (so the Start Date would be
as of the prior Business Day) and the Scheduled Settlement Date of
its End Leg is the current Business Day, then FICC would settle each
leg independently at Contract Value with the Member.
    If an As-Of Trade is a term repo that is submitted on the
current Business Day (so the Start Leg would be as of the prior
Business Day) and the Scheduled Settlement Date of the End Leg is
the next Business Day or thereafter, then the End Leg would go into
the netting process and would settle at System Value. For As-Of
Trades that are term repos, FICC would settle the Start Legs at
Contract Value.
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    Same-Day Settling Trades would settle on a trade-for-trade basis at
Contract Value unless such Same-Day Settling Trades fail to settle.
Because Same-Day Settling Trades are not netted, they would settle at
Contract Value (not at System Value). In the event that such Same-Day
Settling Trades fail to settle, they would be netted for settlement on
the next Business Day as is the case for current Securities Settlement
Obligations that fail to settle. If such Same-Day Settling Trades fail
to settle, the trade would be netted at Contract Value versus System
Value, which all other Fail Deliver Obligations and Fail Receive
Obligations would be netted at. Same-Day Settling Trades that fail to
settle are netted with other transactions that fail in that security
(i.e., the process for netting fails of Same-Day Settling Trades would
remain the same). Those obligations that fail to settle would be
subject to the fails charge (either a debit or a credit), the accrual
of which would be included in the Member's monthly invoice.\11\
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    \11\ Rule 11, Section 14, supra note 4.
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    The Start Leg of an As-Of Trade (overnight and term) and a same-day
starting repo (overnight and term) would settle at Contract Value. The
End Leg of an As-Of Trade that is an overnight repo would settle at
Contract Value. Both the Start Leg and End Leg of an As-Of Trade that
is an overnight repo are Same-Day Settling Trades and, therefore, would
settle at the Contract Value. Similarly, the Start Leg of a same-day
starting repo (overnight or term) is also a Same-Day Settling Trade and
would settle at Contract Value.
    The End Leg of an As-Of Trade that is a term repo, same-day
starting repo that is an overnight repo, and same-day starting repo
that is a term repo would settle at System Value. The End Leg of an As-
Of Trade that is a term repo, the End Legs of a same-day starting repo
(overnight and term), and the Start Legs and End Legs of a forward
starting repo (overnight and term) would settle at System Value because
these legs would go through FICC's netting process.
    Below is a chart that describes whether the Start Legs and End Legs
of As-Of Trades, same-day starting repos, and forward starting repos
would settle at Contract Value or System Value:

------------------------------------------------------------------------
                                   Start leg settles    End leg settles
           Trade type                     at:                 at:
------------------------------------------------------------------------
As-Of Overnight Trade...........  Contract Value....  Contract Value.
As-Of Term Trade................  Contract Value....  System Value.
Same-Day Starting Overnight Repo  Contract Value....  System Value.
Same-Day Starting Term Repo.....  Contract Value....  System Value.
Forward Starting Overnight Repo.  System Value......  System Value.
Forward Starting Term Repo......  System Value......  System Value.
------------------------------------------------------------------------

    The proposed Same-Day Settling Service would be voluntary for
Inter-Dealer Broker Netting Members and Non-IDB Repo Brokers with
Segregated Repo Accounts (collectively, ``Repo Brokers''). Because Repo
Brokers tend to provide a suite of services to their clients where
facilitating the settlement of a Same-Day Settling Trade is one of
those services, FICC did not want to cause any disruption to Repo
Brokers and their clients by bifurcating the existing set of services
whereby FICC does the settlement of the Same-Day Settling Trade and the
Repo Broker continues to provide the rest of their existing services to
their clients. FICC believes that providing optionality will allow Repo
Brokers and their clients to determine how and when a Repo Broker
should participate in the proposed Same-Day Settling Service. GSD would
discontinue assuming fails for Repo Brokers who choose to participate
in this proposed Same-Day Settling Service, because such assumption
would be replaced by the FICC Novation that would occur upon comparison
of the Same-Day Settling Trades. As described above, today, FICC
assumes the fails for Repo Brokers (and has been doing so since the
inception of its blind brokered repo service) in order to decrease
risk. By assuming the fail, FICC removes the Repo Broker, who acts as
an intermediary and who expects to net out of every transaction and not
have a settlement position, from the settlement process. In all cases
where FICC assumes a fail from a Repo Broker, the counterparty remains
responsible for its obligations with respect to the transaction.
    The proposed Same-Day Settling Service would be mandatory for all
other Netting Members and for Sponsored Members who execute
transactions with Netting Members other than their Sponsoring Member
because GSD must have a balanced set (both a Repo and a Reverse Repo)
on all transactions. Specifically, if a Member (other than a Repo
Broker \12\) that is a party to a Same-Day Settling Trade could choose
to opt out of the Same-Day Settling Service, FICC would not be able to
create equal and opposite Securities Settlement Obligations for the two
counterparties, which would require them to settle away from FICC. This
would create uncertainty among Members as to who to settle their
transactions with (i.e., FICC or bilaterally outside of FICC). By
requiring these Members to participate, Members would have certainty
that their compared transactions would settle with FICC as their
settlement counterparty.
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    \12\ Repo Brokers submit a side for each of their two
counterparties. Therefore, if a Repo Broker participates in the
proposed Same-Day Settling Service, then FICC would settle the two
trades (i.e., a Receive Obligation and a Deliver Obligation with the
two counterparties). However, if a Repo Broker does not participate
in the proposed Same-Day Settling Service, the two trades would
settle away from FICC as they do today (except in the instance of a
broker fail where FICC would assume the broker fails).
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    To implement these changes, FICC is proposing to revise Rule 1 by:
(1) Adding a new definition for ``Same-Day Settling Trade'' and (2)
revising the definitions of ``Deliver Obligation,'' ``Receive
Obligation,'' ``Settlement Value,'' and ``System Value.''
    ``Same-Day Settling Trade'' would mean (i) a Start Leg of a Netting

Member's Repo Transaction where the Scheduled Settlement Date of the
Start Leg is the current Business Day, (ii) an As-Of Trade of a Netting
Member where the Scheduled Settlement Date of the Start Leg is the
previous Business Day and the End Leg is the current Business Day or
thereafter, or (iii) a Sponsored Member Trade within the meaning of
subsection (b) of that definition \13\ that meets the requirements of
either (i) or (ii) above.
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    \13\ ``Sponsored Member Trade'' means a transaction that
satisfies the requirements of Section 5 of Rule 3A and that is (a)
between a Sponsored Member and its Sponsoring Member or (b) between
a Sponsored Member and a Netting Member. Rule 1, supra note 4.
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    The definitions of Deliver Obligation and Receive Obligation would
be amended to include references to Same-Day Settling Trades.
Similarly, the definition of Settlement Value would be amended to
specify that, with respect to a Deliver Obligation or a Receive
Obligation for a Same-Day Settling Trade, Settlement Value means the
Contract Value for such obligation. In addition, FICC would amend the
definition of System Value to exclude Same-Day Settling Trades because
Same-Day Settling Trades would settle at the Contract Value (not the
System Value). Members are currently settling their Same-Day Settling
Trades at the Contract Value, so FICC would not be changing the way
such Members are settling these transactions, consistent with what is
occurring today.
    FICC would revise Section 8(c) of Rule 3A to reference new Section
11 of Rule 12 (described below).
    In addition, FICC would amend Section 5 of Rule 5 to provide that
settlement of Same-Day Settling Trades would be processed as per new
Section 11 of Rule 12. This proposed addition is needed in that
provision of Rule 5 because the prior sentence (that is, the current
last sentence of that section) addresses the current process where
trades that are not netted and settled with FICC are settled between
the parties to the trades; with this proposal, Same-Day Settling Trades
would be settled with FICC even though they are not netted.
    FICC would revise Section 8 of Rule 5 to address the Novation and
guaranty of Same-Day Settling Trades in a new subsection (b).
Specifically, language would be added that each Same-Day Settling Trade
that becomes a Compared Trade and was entered into in good faith would
be novated to FICC, and that FICC would guarantee the settlement of
each such Compared Trade at the time at which the comparison of such
trade occurs pursuant to Rules 6A and 6B, as applicable. Such Novation
would consist of the termination of the deliver, receive, and related
payment obligations between the Netting Members and their replacement
with identical obligations to and from FICC in accordance with the
Rules.
    FICC would amend Section 2 of Rule 11 to state that Same-Day
Settling Trades would not be netted. As explained above, in GSD's DVP
Service netting takes place the night before the Scheduled Settlement
Date; Same-Day Settling Trades would settle after the net is run
(unless a settlement fail occurs). Because they will not be netted,
Same-Day Settling Trades would settle on a trade-for-trade basis at
Contract Value with FICC on their Scheduled Settlement Date unless such
Same-Day Settling Trades fail to settle. If a Same-Day Settling Trade
fails to settle, such Same-Day Settling Trade would be netted for
settlement on the next Business Day as is the current process for
Securities Settlement Obligations that fail to settle. Those that fail
to settle would be subject to the fails charge.
    FICC would amend Rule 11B to add a new subsection that would
describe that FICC would guarantee the settlement of any Same-Day
Settling Trade provided that certain requirements are met.
Specifically, the data on such Same-Day Settling Trade must be
submitted for Bilateral or Demand Comparison at the time that the
comparison of such trade occurs pursuant to Rules 6A or 6B,
respectively. Rules 6A and 6B discuss Bilateral Comparison and Demand
Comparison, respectively. In order for FICC to settle the trades, the
trades must be novated. In order to novate the trades, they must first
be compared.
    FICC would amend Rule 12 to add a section (new Section 11) stating
that Same-Day Settling Trades must also meet the requirements of new
Section 11(ii) of Rule 12 (which is a proposed section pursuant to this
filing) and the trade must have been entered into in good faith.
Proposed Section 11(ii) would state that a Same-Day Settling Trade
would be eligible for settlement with FICC if it meets all of the
following requirements: (a) The Same-Day Settling Trade is a Compared
Trade, (b) the data on the Same-Day Settling Trade are listed on a
Report that has been made available to Netting Members, (c) (i) the End
Leg of the Same-Day Settling Trade meets the eligibility requirements
for netting in Rule 11, or (ii) the Repo Transaction is an As-Of Trade
and its End Leg settles on the current Business Day or thereafter, and
(d) the underlying securities are Eligible Netting Securities.
    In addition, notwithstanding the above, a Same-Day Settling Trade
eligible for settlement to which an Executing Firm is a party, the data
on which has been submitted to FICC on behalf of such Executing Firm by
a Submitting Member that is a Netting Member, would not be settled if
the Submitting Member has provided FICC with notice that it does not
wish to have trades submitted by it on behalf of that Executing Firm be
settled through the Comparison System. Also notwithstanding the above,
a trade would not be settled if either Submitting Member had submitted
data on a side of the trade on behalf of an Executing Firm whose trades
it had provided FICC with notice pursuant to the Rules that it did not
wish to be settled. Pursuant to Section 1 of Rule 8, a Submitting
Member must submit to FICC for comparison and/or netting data on any
transaction calling for the delivery of Eligible Securities between an
Executing Firm on whose behalf it is acting pursuant to these Rules and
either another Member of the Netting System, Comparison System or
another Executing Firm on whose behalf it or another Member is acting
pursuant to these Rules. Therefore, a Same-Day Settling Trade submitted
by such Submitting Member will be eligible to settle through the
proposed Same-Day Settling Service unless the Submitting Member has
provided notice to FICC in advance that it does not wish to have such
trades settled through the Comparison System. This provision in
proposed Section 11 of Rule 12 that discusses the eligibility for
settlement through the Same-Day Settling Service would also align with
FICC's current rule on the eligibility for netting in Section 2 of Rule
11.\14\
---------------------------------------------------------------------------

    \14\ Rule 8, Section 1, supra note 4.
---------------------------------------------------------------------------

    Proposed Section 11 of Rule 12 would also state that,
notwithstanding the above, FICC may, in its sole discretion, exclude
any Same-Day Settling Trade or Same-Day Settling Trades from the
Comparison System, by Netting Member or by Eligible Netting Security.
For example, if a trade was submitted to the Comparison System because
of an operational error or technological error and the client is unable
to delete such trade, then FICC may exclude such trade from the
Comparison System. In addition, with respect to Repo Transactions, if
the Start Leg is excluded, then the corresponding End Leg would also be
excluded. This provision of the new Section 11 of Rule 12 that
discusses the eligibility for settlement through the Same-Day Settling
Service would also align with

FICC's current rule on the eligibility for netting in Section 2 of Rule
11.
    In addition to the above, in the new Section 11 of Rule 12, FICC
would describe the settlement of Same-Day Settling Trades with FICC,
including eligibility requirements for settlement and how the Deliver
Obligations and Receive Obligations related to such transactions must
be satisfied. FICC would also describe that if a novated Same-Day
Settling Trade becomes uncompared or is cancelled pursuant to the
Rules, the Novation and FICC's guaranty of settlement of such
transaction would no longer apply, cancelling the deliver, receive, and
related payment obligations between FICC and the applicable Members,
created by such Novation. Furthermore, FICC would state that in the
event that such transaction is cancelled after the satisfaction of the
deliver, receive, and related payment obligations between FICC and the
applicable Netting Members, FICC would establish reverse Securities
Settlement Obligations in the form of a Receive Obligation or a Deliver
Obligation for the amount of the Contract Value of the Same-Day
Settling Trades that have become uncompared or cancelled between FICC
and the applicable Members. If such Receive Obligation or Deliver
Obligation fails to settle, then such obligations would be netted at
Contract Value for settlement on the next Business Day. Those that fail
to settle would be subject to the fails charge (either a debit or
credit), the accrual of which would be included in the Member's monthly
invoice.
    FICC would make clear that Sections 6 (Finance Costs), 7
(Obligation to Receive Securities), 8 (Obligation to Facilitate
Financing) and 9 (Relationship with Clearing Banks) of Rule 12 would be
applicable in connection with the settlement of Same-Day Settling
Trades with FICC.\15\ These sections are part of GSD's securities
settlement rule and do not require any changes to accommodate the
settlement of Same-Day Settling Trades.
---------------------------------------------------------------------------

    \15\ Section 6 (Financing Costs) addresses situations where if a
Netting Member with a Net Short Position delivers eligible Netting
Securities to FICC and FICC is unable, because the delivery was made
near the close of Fedwire or for any other reason, to redeliver such
securities on the same Business Day to a Netting Member or Members
with Net Long Positions in such securities and, as a result, FICC
incurs costs, expenses, or charges related to financing such
securities (the ``financing costs''), then the Netting Members, as a
group, shall be obligated to pay, or to reimburse FICC, for such
financing costs. Section 7 (Obligation to Receive Securities) covers
the obligation of Members to accept delivery of securities regarding
their Receive Obligations. Section 8 (Obligation to Facilitate
Financing) sets forth FICC's ability to obtain financing necessary
for the provision of securities settlement services contemplated by
the Rules. Section 9 (Relationship with Clearing Banks) makes clear
that no improper or unauthorized action, or failure to act, by a
clearing bank acting on behalf of a Netting Member shall excuse or
otherwise affect the obligations of a Netting Member to FICC
pursuant to the Rules. Rule 12, supra note 4.
---------------------------------------------------------------------------

    Furthermore, because the proposed Same-Day Settling Service would
be voluntary for Repo Brokers, FICC would amend Section 5 of Rule 19
and Sections IV.A.5, IV.A.6, and IV.B.3 of the Fee Structure to state
that the applicable section would only apply to Repo Brokers that do
not elect to settle Same-Day Settling Trades with FICC. This is because
these sections address the assumption of certain Start Legs by GSD that
would be replaced by GSD's Novation, guaranty, and settlement of Same-
Day Settling Trades of those Repo Brokers that elect to participate in
the proposed service.
(ii) Proposed Change To Provide That FICC Would Attempt To Settle Same-
Day Settling Trades That Are Compared in the Timeframe Specified by
FICC in Notices Made Available to Members From Time to Time on a
Reasonable Efforts Basis
    Today, Members occasionally execute Same-Day Settling Trades after
the close of the Fedwire Securities Service. These Same-Day Settling
Trades are settled between the Members (outside of FICC) as long as
both parties to the trade settle such trades within the same Clearing
Bank.
    In order to accommodate this practice, FICC proposes to provide the
proposed Same-Day Settling Service to late-day compared Same-Day
Settling Trades (i.e., those Same-Day Settling Trades that are compared
after 3:01 p.m.\16\). FICC would attempt to settle, on a reasonable
efforts basis, such trades that are compared in the timeframe specified
by FICC in notices made available to Members from time to time,
provided (i) FICC is able to contact the counterparties to the trade
and FICC's Clearing Agent Bank and (ii) FICC's Clearing Agent Bank and
the counterparties to the trade agree to settle such trade. The
foregoing sentence would only apply to Same-Day Settling Trades of
Members that clear at FICC's Clearing Agent Bank. Reasonable efforts
basis would mean that FICC would attempt to contact the counterparties
to the trade and FICC's Clearing Agent Bank to confirm they agree to
settle such trade. Specifically, FICC would continue to process
securities movements between FICC's account at FICC's Clearing Agent
Bank and Members' accounts at FICC's Clearing Agent Bank, on a
reasonable efforts basis, in the timeframe specified by FICC in notices
made available to Members from time to time, provided that (i) FICC is
able to contact FICC's Clearing Agent Bank and (ii) FICC's Clearing
Agent Bank and the counterparties to the trade agree to settle such
trade.\17\
---------------------------------------------------------------------------

    \16\ As described above, if the FRB announces an extension of
the Fedwire Securities Service, FICC would match the duration of the
extension.
    \17\ Initially, this would apply to Same-Day Settling Trades
that are compared after 3:01 p.m. until 5 p.m.
---------------------------------------------------------------------------

    For those Members that do not have accounts at FICC's Clearing
Agent Bank, FICC would attempt to settle, on a reasonable efforts
basis, Same-Day Settling Trades that are compared after the time
specified by FICC in notices made available to Members from time to
time during the reversal period of the Fedwire Securities Service,\18\
provided (i) FICC is able to contact FICC's Clearing Agent Bank, (ii)
FICC is able to contact the counterparties to the trade to confirm that
they agree to settle the trade, and (iii) FICC's Clearing Agent Bank,
the Member's Clearing Agent Bank, and the Federal Reserve Bank of New
York each permit settlement of the trade (Fedwire must be open for
settlement). Reasonable efforts basis would mean that FICC would
attempt to contact the counterparties to the trade and FICC's Clearing
Agent Bank to confirm that they agree to settle such trade.
---------------------------------------------------------------------------

    \18\ Initially, this time would be after 3:01 p.m. until 3:30
p.m. If the FRB announces an extension for the reversal period of
the Fedwire Securities Service, FICC would match the duration of the
extension for the reversal period. The Fedwire Securities Services
closes at 3:30 p.m. for transfer reversals. See Fedwire[supreg] and
National Securities Service, Federal Reserve Bank of New York (March
2015), available at https://www.newyorkfed.org/aboutthefed/fedpoint/fed43.html and Fedwire Securities Service, Board of Governors of the
Federal Reserve System (July 31, 2014), available at https://www.federalreserve.gov/paymentsystems/fedsecs_about.htm.
---------------------------------------------------------------------------

    To implement this proposed rule change, FICC would include
provisions in newly added Section 11 of Rule 12.
(iii) Proposed Change To Introduce an Optional Service That Would Allow
GSD To Systematically Pair-Off Certain Members' Failed Securities
Settlement Obligations Between Approximately 3:32 p.m. and 4:00 p.m.
    FICC also proposes to introduce an optional service for Netting
Members (other than Repo Brokers) and for Sponsored Member Trades
(other than those between the Sponsored Member and its Sponsoring
Member) whereby GSD would systematically pair-off such Members' failed
Securities Settlement Obligations between approximately 3:32 p.m. and
4:00 p.m.

    The failed Securities Settlement Obligations could include (i)
Receive Obligations and Deliver Obligations resulting from the previous
night's net and (ii) obligations that were created intraday in order to
settle a Right of Substitution or a Same-Day Settling Trade. Fails that
occur go into the net that evening.\19\
---------------------------------------------------------------------------

    \19\ Fails occur because one party does not have the inventory
to settle with the other party on the scheduled date.
---------------------------------------------------------------------------

    GSD would look at each Member's failing activity on a per CUSIP
basis and pair-off their Receive Obligations and Deliver Obligations
irrespective of the settlement amounts on those obligations; this could
result in money differences. This proposed process would be structured
so that the net par result of the pair-offs would be zero.
Specifically, the proposed pair-off process (``Pair-Off Service'')
would consist of the matching and the offset of a participating
Member's Fail Deliver Obligations and Fail Receive Obligations in equal
par amounts of the same Eligible Netting Security. The participating
Member would receive a debit or credit Pair-Off Adjustment Amount
(which FICC may initially collect as a Miscellaneous Adjustment
Amount), as applicable, of the difference in the Settlement Values of
the applicable Fail Deliver Obligations and Fail Receive Obligations in
the intraday funds-only settlement process. The proposed Pair-Off
Service would start at approximately 3:32 p.m. The proposed rule change
would provide FICC with the discretion to suspend or delay the Pair-Off
Service in the event of an operational or market event. For example,
FICC may delay the Pair-Off Service if the FRB extends Fedwire because
extending the Fedwire would enable trades to potentially settle instead
of fail. FICC believes that suspending the Pair-Off Service would not
adversely affect Members because failed obligations would go into the
net as they do today, and would continue to be risk-managed.
    The proposed Pair-Off Service would allow the participating Member
to settle their cash obligations today; the settlement process would be
completed on the same day (via intraday FOS) rather than on the next
day (via start of day FOS). As noted in the example in Item II(B)(i)
above, if these obligations failed to settle, and Dealer A and Dealer B
have chosen to opt into the proposed Pair-Off Service, FICC would pair-
down the failed obligations, resulting in a net money difference of $1
million debit to Dealer A and $1 million credit to Dealer B. To
complete the settlement process on the same day that the trade is
executed, the money differences would settle through intraday funds-
only settlement. The alternative to the proposed Pair-Off Service is to
let the failed obligations go into the net and collect any money
differences on the following Business Day through the start of day FOS.
    To implement the proposed Pair-Off Service, FICC would revise Rules
1, 3A, and 12. Specifically, FICC would amend Rule 1 by adding two
definitions, ``Pair-Off Service'' and ``Pair-Off Adjustment Payment.''
FICC would initially collect this amount as a Miscellaneous Adjustment
Amount. Then, following development by FICC, this amount would be
collected as a ``Pair-Off Adjustment Payment.''
    FICC would also revise Rule 12 to describe the proposed Pair-Off
Service, which would be a voluntary automated process. The proposed
Pair-Off Service would consist of the matching and offset of a
participating Netting Member's Fail Deliver Obligations and Fail
Receive Obligations in equal par amounts in the same Eligible Netting
Security. The participating Netting Member would receive either a debit
or credit Pair-Off Adjustment Payment, as applicable, of the difference
in the Settlement Values of the applicable Fail Deliver Obligations and
Fail Receive Obligations in the FOS process under Rule 13. Any
Securities Settlement Obligations remaining after the pair-off of
eligible obligations would constitute a Fail Net Settlement Position.
    Rule 12 would also state that FICC would have the discretion to
suspend the Pair-Off Service on any Business Day due to FRB extensions
and/or system or operational issues. FICC would notify Members of any
such extension.
    FICC would also revise Section 8 of Rule 3A to state that with
respect to Section 1 of Rule 12, the optional Pair-Off Service would be
available to Sponsored Member Trades within the meaning of section (b)
of that definition.
(iv) Proposed Change To Change the Time of Intraday FOS Processing From
3:15 p.m. to 4:30 p.m.
    FICC proposes to change the time of intraday FOS processing from
3:15 p.m. to 4:30 p.m. because FICC proposes to start the proposed
Pair-Off Service at approximately 3:32 p.m. and would provide Funds-
Only Settling Banks with their intraday net FOS figures by 4:00 p.m.
for acknowledgment by 4:30 p.m. The proposed rule change would also
provide that such time may be extended due to FRB extensions and/or
system or operational issues. Moving this processing time from 3:15
p.m. to 4:30 p.m. would enable FICC to settle any net money differences
that arise from the proposed Pair-Off Service.
    To implement this change, FICC would amend the Schedule of
Timeframes by deleting the 3:15 p.m. time and the related description,
and adding a 4:30 p.m. time and a description that would state that
intraday FOS debits and credits would be executed via the FRB's
National Settlement Service for Netting Members.
(v) Proposed Technical Changes
    FICC also proposes to make certain technical changes. Because a
subsection would be added to Section 8 of Rule 5 to describe the
comparison, Novation, and guarantee of Same-Day Settling Trades (as
described in detail above), FICC would also renumber subsections that
follow the proposed section for consistency and accuracy.
Implementation Timeframe
    FICC would implement the proposed rule changes within 90 days after
the later of the no objection to the advance notice and approval of the
related proposed rule change \20\ by the Commission. FICC would
announce the effective date of the proposed changes by Important Notice
posted to its website.
---------------------------------------------------------------------------

    \20\ Supra note 3.
---------------------------------------------------------------------------

Expected Effect on Risks to the Clearing Agency, Its Participants and
the Market
    FICC believes that the proposed changes in Items II(B)(i) through
II(B)(iv) above could increase settlement efficiencies in most
instances and decrease settlement and operational risk because
participants would have one settlement counterparty, FICC, for this
activity. FICC believes that the proposed changes described in Items
II(B)(i) and II(B)(ii) above could potentially reduce settlement fails
by centralizing the settlement of the Same-Day Settling Trades with
FICC.
    FICC also believes that the proposed changes described in Items
II(B)(iii) and II(B)(iv) above could provide FICC with the ability to
potentially complete securities movements after the close of the
Fedwire Securities Service. FICC believes these proposals could improve
market risk to FICC because the settlement process would be completed
on the same day rather than on the next Business Day.
Management of Identified Risks
    The Same-Day Settling Trades that are the subject of the proposed
rule changes in Items II(B)(i) and II(B)(ii) above are

currently being submitted to FICC today. To the extent that they are
unsettled during the times at which FICC runs its risk management
processes, they are margined accordingly. Such Same-Day Settling Trades
are also captured in FICC's liquidity risk processes today.
    As such, FICC is not proposing any changes to its risk management
processes in order to accommodate the activity that would be submitted
to FICC in connection with the proposed rule changes described in Items
II(B)(i) and II(B)(ii) above. The risk management is based on the
outstanding settlement obligations regardless of where the Start-Leg
cash payments are exchanged. The activity would be measured, monitored,
margined and provisioned for potential market and liquidity exposure in
the same way as netting eligible trades are currently.
    In order to risk manage the proposed changes described in Item
II(B)(iii) above, FICC is proposing in this filing the changes
discussed in Item II(B)(iv) above. Specifically, FICC would move the
intraday FOS processing time to later in the day in order to include
the results of the proposed Pair-Off Service in the FOS process.
Consistency With the Clearing Supervision Act
    FICC believes that the proposed rule change would be consistent
with Section 805(b) of the Clearing Supervision Act.\21\ The objectives
and principles of Section 805(b) of the Clearing Supervision Act are to
promote robust risk management, promote safety and soundness, reduce
systemic risks, and support the stability of the broader financial
system.\22\
---------------------------------------------------------------------------

    \21\ 12 U.S.C. 5464(b).
    \22\ Id.
---------------------------------------------------------------------------

    FICC believes that the proposed changes described in Items II(B)(i)
and II(B)(ii) above would promote robust risk management and promote
safety and soundness. This is because the proposed changes would enable
Members' Same-Day Settling Trades in Eligible Netting Securities,
including Brokered Repo Transactions, to be included in the risk
management, Novation, guarantee, and settlement services of the DVP
Service. FICC does not settle such trades today (with the exception of
assumed Broker fails). These proposed changes would enable the
settlement of these trades to be centralized with FICC. FICC believes
these proposed changes could increase settlement efficiencies and
decrease settlement risk in the market and operational risk with
respect to its Members because the participants would have one
settlement counterparty, FICC, for this activity. As such, FICC
believes that the proposed changes described in Items II(B)(i) and
II(B)(ii) above would promote robust risk management and promote safety
and soundness, consistent with the objectives and principles of Section
805(b) of the Clearing Supervision Act cited above.
    FICC believes the proposed changes described in Items II(B)(iii)
and II(B)(iv) above are designed to promote robust risk management and
promote safety and soundness. Specifically, the proposed changes
described in Items II(B)(iii) and II(B)(iv) above could reduce market
risk to FICC because additional settlements would be completed on the
same day rather than on the next Business Day. As such, FICC believes
that the proposed changes described in Items II(B)(iii) and II(B)(iv)
above, taken together, would promote robust risk management and promote
safety and soundness, consistent with the objectives and principles of
Section 805(b) of the Clearing Supervision Act cited above.
    FICC believes the proposed technical changes described in Item
II(B)(v) above are designed to provide clear and coherent Rules
regarding the proposed expanded DVP Service described above for
Members. FICC believes that clear and coherent Rules would enhance the
ability of FICC and its Members to more effectively plan for, manage,
and address the risks related to the proposed expanded DVP Service. As
such, FICC believes that the technical changes would promote robust
risk management, consistent with the objectives and principles of
Section 805(b) of the Clearing Supervision Act cited above.

III. Date of Effectiveness of the Advance Notice, and Timing for
Commission Action

    The proposed change may be implemented if the Commission does not
object to the proposed change within 60 days of the later of (i) the
date that the proposed change was filed with the Commission or (ii) the
date that any additional information requested by the Commission is
received. The clearing agency shall not implement the proposed change
if the Commission has any objection to the proposed change.
    The Commission may extend the period for review by an additional 60
days if the proposed change raises novel or complex issues, subject to
the Commission providing the clearing agency with prompt written notice
of the extension. A proposed change may be implemented in less than 60
days from the date the advance notice is filed, or the date further
information requested by the Commission is received, if the Commission
notifies the clearing agency in writing that it does not object to the
proposed change and authorizes the clearing agency to implement the
proposed change on an earlier date, subject to any conditions imposed
by the Commission.
    The clearing agency shall post notice on its website of proposed
changes that are implemented.
    The proposal shall not take effect until all regulatory actions
required with respect to the proposal are completed.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the advance
notice is consistent with the Clearing Supervision 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-2020-803 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-2020-803. 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 website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the advance notice that are filed with the
Commission, and all written communications relating to the advance
notice 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 website 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 website (http://dtcc.com/legal/sec-rule-filings.aspx). All comments received will be posted without change.
Persons submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions.
    You should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-FICC-2020-803
and should be submitted on or before January 13, 2021.

    By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28652 Filed 12-28-20; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 83, Number 156 (Monday, August 13, 2018)]
[Notices]
[Pages 40117-40140]
[FR Doc No: 2018-17301]

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

DEPARTMENT OF TRANSPORTATION

[Docket No. DOT-OST-2018-0075]

Request for Comments of a Previously Approved Information
Collection(s)

AGENCY: Office of the Secretary, DOT.

ACTION: Notice and request for comments.

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

SUMMARY: In accordance with the Paperwork Reduction Act of 1995, this
notice announces that the Information Collection Request (ICR)
abstracted below is being forwarded to the Office of Management and
Budget (OMB) for review and comment. A Federal Register Notice with a
60-day comment period soliciting comments on the information collection
was published on June 4, 2018. One comment was received that does not
warrant any adjustments to the forms.

DATES: Comments must be submitted on or before September 12, 2018.

ADDRESSES: Send comments regarding the burden estimate, including
suggestions for reducing the burden, to the Office of Management and
Budget, Attention: Desk Officer for the Office of the Secretary of
Transportation, 725 17th Street NW, Washington, DC 20503.
    Comments are invited on: Whether the proposed collection of
information is necessary for the proper performance of the functions of
the Department, including whether the information will have practical
utility; the accuracy of the Department's estimate of the burden of the
proposed information collection; ways to enhance the quality, utility
and clarity of the information to be collected; and ways to minimize
the burden of the collection of information on respondents, including
the use of automated collection techniques or other forms of
information technology.

FOR FURTHER INFORMATION CONTACT: Mr. Marc Pentino, Departmental Office
of Civil Rights, Office of the Secretary, U.S. Department of
Transportation, 1200 New Jersey Avenue SE, Washington, DC 20590, (202)
366-6968, or at [email protected].

SUPPLEMENTARY INFORMATION:
    Title: Disadvantaged Business Enterprise Program Collections.
    OMB Control Number: 2105-0510.
    Type of Request: Renewal of a Previously Approved Information
Collection.
    Abstract: The following information collections are associated with
the U.S. Department of Transportation's (DOT) Disadvantaged Business
Enterprise (DBE) program: Uniform Report of DBE Awards or Commitments
and Payments, Uniform Certification Application Form, Annual Affidavit
of No Change, DOT Personal Net Worth Form, and Reporting Requirements
for Percentages of DBEs in Various Categories. All five collections
were previously approved under one OMB Control Number (2105-0510) to
allow DOT to more efficiently administer the DBE program. The DBE
program is mandated by statute, including Section 1101(b) of the Fixing
America's Surface Transportation Act (FAST Act) (Pub. L. 114-94) and 49
U.S.C. 47113. DOT's final regulations implementing these statutes are
49 CFR parts 23 and 26. The information to be collected is necessary
because it helps to ensure that State and local recipients that let
federally-funded contracts carry out their mandated responsibility to
provide a level playing field for small businesses owned and controlled
by socially and economically disadvantaged individuals.

Uniform Report of DBE Awards/Commitments and Payments

    Affected Public: DOT financially-assisted State and local
transportation agencies.

    Number of Respondents: 1,250.
    Frequency: Once/twice per year.
    Number of Responses: One/two.
    Total Annual Burden: 9,000 hours.

Uniform Certification Application Form

    Affected Public: Firms applying to be certified as DBEs.
    Number of Respondents: 9,500.
    Frequency: Once during initial certification.
    Number of Responses: One.
    Total Annual Burden: 76,000 hours.

Annual Affidavit of No Change

    Affected Public: Certified DBEs.
    Number of Respondents: Approximately 38,465 certified DBE firms.
    Frequency: Once per year.
    Number of Responses: One.
    Total Annual Burden: 57,698 hours.

Personal Net Worth Form

    Affected Public: Firms applying to be DBEs.
    Number of Respondents: 9,500.
    Frequency: Once.
    Number of Responses: One.
    Total Annual Burden: 19,000 hours.

Percentage of DBEs in Various Categories

    Affected Public: States (through their Unified Certification
Programs).
    Number of Respondents: 53 (50 states, plus the District of
Columbia, Puerto Rico, and the Virgin Islands).
    Frequency: Once per year.
    Number of Responses: One.
    Total Annual Burden: 161.6 hours.

    Authority: The Paperwork Reduction Act of 1995; 44 U.S.C.
Chapter 35, as amended; and 49 CFR 1:48.

    Issued in Washington, DC.
Charles E. James, Sr.,
Director, Departmental Office of Civil Rights, U.S. Department of
Transportation.
BILLING CODE 4910-9X-P

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BILLING CODE 4910-9X-C

Appendix B to Part 26--Uniform Report of DBE Awards or Commitments and
Payments Form

Instructions for Completing the Uniform Report of DBE Awards/
Commitments and Payments

    Recipients of Department of Transportation (DOT) funds are
expected to keep accurate data regarding the contracting
opportunities available to firms paid for with DOT dollars. Failure
to submit contracting data relative to the DBE program will result
in noncompliance with Part 26. All dollar values listed on this form
should represent the DOT share attributable to the Operating
Administration (OA): Federal Highway Administration (FHWA), Federal
Aviation Administration (FAA) or Federal Transit Administration
(FTA) to which this report will be submitted.
    1. Indicate the DOT (OA) that provides your Federal financial
assistance. If assistance comes from more than one OA, use separate
reporting forms for each OA. If you are an FTA recipient, indicate
your Vendor Number in the space provided.
    2. If you are an FAA recipient, indicate the relevant AIP
Numbers covered by this report. If you are an FTA recipient,
indicate the Grant/Project numbers covered by this report. If more
than ten attach a separate sheet.
    3. Specify the Federal fiscal year (i.e., October 1-September
30) in which the covered reporting period falls.
    4. State the date of submission of this report.
    5. Check the appropriate box that indicates the reporting period
that the data provided in this report covers. For FHWA and FTA
recipients, if this report is due June 1, data should cover October
1-March 31. If this report is due December 1, data should cover
April 1-September 30. If the report is due to the FAA, data should
cover the entire fiscal year.
    6. Provide the name and address of the recipient.
    7. State your overall DBE goal(s) established for the Federal
fiscal year of the report being submitted to and approved by the
relevant OA. Your overall goal is to be reported as well as the
breakdown for specific Race Conscious and Race Neutral projections
(both of which include gender-conscious/neutral projections). The
Race Conscious projection should be based on measures that focus on
and provide benefits only for DBEs. The use of contract goals is a
primary example of a race conscious measure. The Race Neutral
projection should include measures that, while benefiting DBEs, are
not solely focused on DBE firms. For example, a small business
outreach program, technical assistance, and prompt payment clauses
can assist a wide variety of businesses in addition to helping DBE
firms.

Section A: Awards and Commitments Made During This Period

    The amounts in items 8(A)-10(I) should include all types of
prime contracts awarded and all types of subcontracts awarded or
committed, including: professional or consultant services,
construction, purchase of materials or supplies, lease or purchase
of equipment and any other types of services. All dollar amounts are
to reflect only the Federal share of such contracts and should be
rounded to the nearest dollar.
    Line 8: Prime contracts awarded this period: The items on this
line should correspond to the contracts directly between the
recipient and a supply or service contractor, with no intermediaries
between the two.
    8(A). Provide the total dollar amount for all prime contracts
assisted with DOT funds and awarded during this reporting period.
This value should include the entire Federal share of the contracts
without removing any amounts associated with resulting subcontracts.
    8(B). Provide the total number of all prime contracts assisted
with DOT funds and awarded during this reporting period.
    8(C). From the total dollar amount awarded in item 8(A), provide
the dollar amount awarded in prime contracts to certified DBE firms
during this reporting period. This amount should not include the
amounts sub contracted to other firms.
    8(D). From the total number of prime contracts awarded in item
8(B), specify the number of prime contracts awarded to certified DBE
firms during this reporting period.
    8(E&F). This field is closed for data entry. Except for the very
rare case of DBE-set asides permitted under 49 CFR part 26, all
prime contracts awarded to DBES are regarded as race-neutral.
    8(G). From the total dollar amount awarded in item 8(C), provide
the dollar amount awarded to certified DBEs through the use of Race
Neutral methods. See the definition of Race Neutral in item 7 and
the explanation in item 8 of project types to include.
    8(H). From the total number of prime contracts awarded in 8(D),
specify the number awarded to DBEs through Race Neutral methods.
    8(I). Of all prime contracts awarded this reporting period,
calculate the percentage going to DBEs. Divide the dollar amount in
item 8(C) by the dollar amount in item 8(A) to derive this
percentage. Round the percentage to the nearest tenth.
    Line 9: Subcontracts awarded/committed this period: Items 9(A)-
9(I) are derived in the same way as items 8(A)-8(I), except that
these calculations should be based on subcontracts rather than prime
contracts. Unlike prime contracts, which may only be awarded,
subcontracts may be either awarded or committed.
    9(A). If filling out the form for general reporting, provide the
total dollar amount of subcontracts assisted with DOT funds awarded
or committed during this period. This value should be a subset of
the total dollars awarded in prime contracts in 8(A), and therefore
should never be greater than the amount awarded in prime contracts.
If filling out the form for project reporting, provide the total
dollar amount of subcontracts assisted with DOT funds awarded or
committed during this period. This value should be a subset of the
total dollars awarded or previously in prime contracts in 8(A). The
sum of all subcontract amounts in consecutive periods should never
exceed the sum of all prime contract amounts awarded in those
periods.
    9(B). Provide the total number of all sub contracts assisted
with DOT funds that were awarded or committed during this reporting
period.
    9(C). From the total dollar amount of sub contracts awarded/
committed this period in item 9(A), provide the total dollar amount
awarded in sub contracts to DBEs.
    9(D). From the total number of sub contracts awarded or
committed in item 9(B), specify the number of sub contracts awarded
or committed to DBEs.
    9(E). From the total dollar amount of sub contracts awarded or
committed to DBEs this period, provide the amount in dollars to DBEs
using Race Conscious measures.
    9(F). From the total number of sub contracts awarded or
committed to DBEs this period, provide the number of sub contracts
awarded or committed to DBEs using Race Conscious measures.
    9(G). From the total dollar amount of sub contracts awarded/
committed to DBEs this period, provide the amount in dollars to DBEs
using Race Neutral measures.
    9(H). From the total number of sub contracts awarded/committed
to DBEs this period, provide the number of sub contracts awarded to
DBEs using Race Neutral measures.
    9(I). Of all subcontracts awarded this reporting period,
calculate the percentage going to DBEs. Divide the dollar amount in
item 9(C) by the dollar amount in item 9(A) to derive this
percentage. Round the percentage to the nearest tenth.
    Line 10: Total contracts awarded or committed this period. These
fields should be used to show the total dollar value and number of
contracts awarded to DBEs and to calculate the overall percentage of
dollars awarded to DBEs.
    10(A)-10(B). These fields are unavailable for data entry.
    10(C-H). Combine the total values listed on the prime contracts
line (Line 8) with the corresponding values on the subcontracts line
(Line 9).
    10(I). Of all contracts awarded this reporting period, calculate
the percentage going to DBEs. Divide the total dollars awarded to
DBEs in item 10(C) by the dollar amount in item 8(A) to derive this
percentage. Round the percentage to the nearest tenth.

Section B: Breakdown by Ethnicity & Gender of Contracts Awarded to
DBEs This Period

    11-17. Further breakdown the contracting activity with DBE
involvement. The Total Dollar Amount to DBEs in 17(C) should equal
the Total Dollar Amount to DBEs in 10(C). Likewise, the total number
of contracts to DBEs in 17(F) should equal the Total Number of
Contracts to DBEs in 10(D).
    Line 16: The ``Non-Minority'' category is reserved for any firms
whose owners are not members of the presumptively disadvantaged
groups already listed, but who are either ``women'' OR eligible for
the DBE program on an individual basis. All DBE firms must be
certified by the Unified Certification Program to be counted in this
report.

Section C: Payments on Ongoing Contracts

    Line 18(A-E). Submit information on contracts that are currently
in progress. All dollar amounts are to reflect only the Federal
share of such contracts, and should be rounded to the nearest
dollar.
    18(A). Provide the total number of prime and sub-contracts where
work was performed during the reporting period.
    18(B). Provide the total dollar amount paid to all firms
performing work on contracts.
    18(C). From the total number of contracts provided in 18(A)
provide the total number of contracts that are currently being
performed by DBE firms for which payments have been made.
    18(D). From the total dollar amount paid to all firms in 18(A),
provide the total dollar value paid to DBE firms currently
performing work during this period.
    18(E). Provide the total number of DBE firms that received
payment during this reporting period. For example, while 3 contracts
may be active during this period, one DBE firm may be providing
supplies or services on all three contracts. This field should only
list the number of DBE firms performing work.
    18(F). Of all payments made during this period, calculate the
percentage going to DBEs. Divide the total dollar value to DBEs in
item 18(D) by the total dollars of all payments in 18(B). Round the
percentage to the nearest tenth.

Section D: Actual Payments on Contracts Completed This Reporting
Period

    This section should provide information only on contracts that
are closed during this period. All dollar amounts are to reflect the
entire Federal share of such contracts, and should be rounded to the
nearest dollar.
    19(A). Provide the total number of contracts completed during
this reporting period that used Race Conscious measures. Race
Conscious contracts are those with contract goals or another race
conscious measure.
    19(B). Provide the total dollar value of prime contracts
completed this reporting period that had race conscious measures.
    19(C). From the total dollar value of prime contracts completed
this period in 19(B), provide the total dollar amount of dollars
awarded or committed to DBE firms in order to meet the contract
goals. This applies only to Race Conscious contracts.
    19(D). Provide the actual total DBE participation in dollars on
the race conscious contracts completed this reporting period.
    19(E). Of all the contracts completed this reporting period
using Race Conscious measures, calculate the percentage of DBE
participation. Divide the total dollar amount to DBEs in item 19(D)
by the total dollar value provided in 19(B) to derive this
percentage. Round to the nearest tenth.
    20(A)-20(E). Items 21(A)-21(E) are derived in the same manner as
items 19(A)-19(E), except these figures should be based on contracts
completed using Race Neutral measures.
    20(C). This field is closed.
    21(A)-21(D). Calculate the totals for each column by adding the
race conscious and neutral figures provided in each row above.
    21(C). This field is closed.
    21(E). Calculate the overall percentage of dollars to DBEs on
completed contracts. Divide the Total DBE participation dollar value
in 21(D) by the Total Dollar Value of Contracts Completed in 21(B)
to derive this percentage. Round to the nearest tenth.
    22. Name of the Authorized Representative preparing this form.
    23. Left blank for future use.
    24. Signature of the Authorized Representative.
    25. Phone number of the Authorized Representative.
    **Submit your completed report to your Regional or Division
Office.

[FR Doc. 2018-17301 Filed 8-10-18; 8:45 am]
 BILLING CODE 4910-9X-P