[Federal Register Volume 81, Number 157 (Monday, August 15, 2016)]
[Notices]
[Pages 54170-54173]
[FR Doc No: 2016-19322]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78520; File No. SR-DTC-2016-005]

Self-Regulatory Organizations; The Depository Trust Company;
Notice of Filing of Proposed Rule Change Regarding the Implementation
of Functionality To Submit a Cover of Protect on Behalf of Another
Participant and the Removal of the Option To Cover of Protect Directly
With Agent

August 9, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 29, 2016, The Depository Trust Company (``DTC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II and III below, which Items have been
prepared by DTC. DTC filed the proposed rule change pursuant to Section
19(b)(2) of the Act.\3\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    The proposed rule change by DTC would update its Procedures\4\ set
forth in the Guide to make changes to certain options within its
Participant Subscription Offer Program (``PSOP'')\5\ and Participant
Tender Offer Program (``PTOP'') functions.\6\ Specifically, DTC
proposes to add an option called ``Cover of Protect on Behalf of
Another Participant'' (``CPAP'') to both PSOP and PTOP (``PSOP/PTOP'')
that would allow a Participant to tender subscription rights
(``Rights'') or Securities through DTC to an agent (``Offer
Agent''),\7\ on behalf of another Participant that needs to tender such
Rights or Securities in order to receive the shares and/or
consideration from (i) a subscription rights offering (a ``Rights
Offer''); or (ii) a cash tender offer or exchange offer (collectively,
a ``Tender/Exchange Offer'') (together with Rights Offer, ``Offer'').
DTC would also eliminate an option called ``Cover of Protect Submitted
Directly to Agent'' (``CPDA'') from PSOP/PTOP that has allowed a
Participant to tender Rights or Securities through DTC to be eligible
to receive the shares and/or consideration from an Offer, when such
Participant submitted its initial acceptance directly to the Offer
Agent outside of DTC. In addition, DTC proposes to make ministerial
changes to the text of the Guide, as more fully described below.
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    \4\ Capitalized terms not otherwise defined herein have the
meaning set forth in the Rules, By-Laws and Organization Certificate
of DTC (the ``Rules''), available at http://www.dtcc.com/legal/rules-and-procedures.aspx and the Reorganizations Service Guide (the
``Guide''), available at http://www.dtcc.com/~/media/Files/
Downloads/legal/service-guides/Reorganizations.pdf.
    \5\ References in this rule filing to ``PSOP'' refer to both the
PSOP function within the DTC Participant Terminal System (``PTS'')
interface and the equivalent ``Rights Subscription'' function within
the Participant Browser System (``PBS'') interface. PSOP is a
function that is used by Participants to submit instructions
including oversubscriptions, submit protects, submit cover of
protects, submit cover of protects on behalf of another Participant,
and submit Rights sell instructions on Rights Subscription events.
PTS and PBS are user interfaces for DTC's Settlement and Asset
Services functions. PTS is mainframe-based and PBS is web-based with
a mainframe back-end. Participants may use either PTS or PBS, as
they are functionally equivalent.
    \6\ References in this rule filing to ``PTOP'' refer to both the
PTOP function within the PTS interface and the equivalent
``Voluntary Tenders and Exchanges'' function within the PBS
interface. PTOP is a function that is used by Participants to submit
instructions, submit protects, submit cover of protects, submit
cover of protects on behalf of another Participant, and submit
withdrawals on various Voluntary Reorganization events.
    \7\ The Offer Agent is the fiscal agent of the offeror,
typically a bank or trust company that is designated to coordinate
the process of the Offer.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

    In its filing with the Commission, DTC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. DTC has prepared summaries, set forth in sections A, B,
and C below, of the most significant aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

1. Purpose
    The proposed rule change by DTC would update its Procedures set
forth in the Guide to make changes to certain options within its PSOP
and PTOP functions. Specifically, DTC proposes to add an option called
CPAP to PSOP/PTOP that would allow a Participant to tender Rights or
Securities through DTC to an Offer Agent, on behalf of another
Participant that needs to tender such Rights or Securities in order to
receive the shares and/or consideration from (i) a Rights Offer; or
(ii) a Tender/Exchange Offer. DTC would also eliminate an option called
CPDA from PSOP/PTOP that has allowed a Participant to tender Rights or
Securities through DTC to be eligible to receive the shares and/or
consideration from an Offer, when such Participant submitted its
initial acceptance directly to the Offer Agent outside of DTC. In
addition, DTC proposes to make ministerial changes to the text of the
Guide, as more fully described below.
(i) Protects and Covers
(a) Protects and Covers Outside of DTC
Subscription Rights Offering
    A Rights Offer is the issuance of Rights to each shareholder as of
a record date set by the issuer. Rights are issued to each shareholder
in proportion to the number of shares it holds, and entitles the
shareholder to purchase additional

shares at a discount. Rights may be either non-transferable or
transferable. Holders are able to trade transferable Rights in the
secondary market.
    In order to subscribe to a Rights Offer, an investor or its broker
(``Investor'') must, prior to the expiration of the Rights Offer,
deliver to the Offer Agent: (i) The Rights, (ii) an executed
subscription form for such Rights Offer (``Subscription Form'') in
which it subscribes to the new shares of the Rights Offer, and (iii)
the payment due for the purchase of the shares.
Tender Offers and Exchange Offers
    A tender offer is a solicitation by an issuer or a third party to
purchase a substantial percentage of the issuer's shares for a
specified period of time. The tender offer is at a fixed price, usually
higher than the current market price, and is usually conditioned on a
sufficient number of the issuer's shareholders tendering a fixed number
of their shares. An exchange offer is an offer by an issuer to exchange
its Securities for other Securities (of that issuer or another).
    If an Investor wants to accept a Tender/Exchange Offer, it submits
to the Offer Agent: (i) The letter of transmittal for such Tender/
Exchange Offer (``Letter of Transmittal'') setting forth the terms of
the tender or exchange, including information about the quantity of
Securities being tendered as well as where and to whom the payment
should be made, and (ii) the Securities it is tendering.
Cover of Protect
    An Investor may want to accept an Offer but will not have the
necessary Rights or Securities, as the case may be, before the
expiration date of the Offer. If permitted by the terms of the Offer,
the Investor may submit to the Offer Agent the notice of guaranteed
delivery for such Offer (``Notice of Guaranteed Delivery'') which
serves as (i) protection of the Investor's acceptance of the Offer (the
``Protect''), and sets forth the number of shares being subscribed to
or the amount of Securities being tendered, and (ii) a guarantee that
the Rights or Securities (the ``Cover'') will be delivered to the Offer
Agent within the period prescribed by the Offer (the ``Protect
Period'').\8\
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    \8\ A Protect Period is usually three business days after the
expiration of the Offer.
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Covering Another Investor's Protect
    In some cases, an Investor may find that it will not have the
necessary Rights or Securities, as the case may be, in time to tender
to the Offer Agent before the expiration of the Protect Period. This
may occur due to a failed trade or late delivery of such Rights or
Securities. If the Investor is unable to deliver the Rights or
Securities within the Protect Period, it will have failed to validly
tender and will not be eligible to purchase shares under the Rights
Offer or to receive the consideration of the Tender/Exchange Offer,
respectively. However, another Investor who does hold the Rights or
Securities, and typically owes such Rights or Securities to the
Investor who submitted the Protect because of a failed trade or late
delivery, may submit the Cover to the Offer Agent on behalf of such
Investor.
(b) Protects and Covers Through DTC
PSOP and PTOP
    DTC distributes information to Participants regarding the
reorganization activity that it handles. Generally, this information is
distributed through PSOP/PTOP, or the Reorganization Inquiry for
Participants (``RIPS'') function of PTS/PBS. Upon receiving notice of
such reorganization activity, Participants may use the PSOP (for Rights
Offers) or PTOP (for Tender/Exchange Offers) functions to elect
participation in the reorganization event and to place related
instructions for DTC to process.
DTC's Automated Subscription Offer Program
    As part of its corporate action \9\ services, DTC offers the
Automated Subscription Offer Program (``ASOP''),\10\ through which DTC,
as a conduit between Participants and the Offer Agents, processes
Rights Offers for Eligible Securities. Each Offer Agent for a Rights
Offer that is eligible for processing through ASOP enters into an
agreement with DTC specifying, among other things, that the relay of
electronic messages by DTC will qualify as the execution and delivery
of Subscription Forms or Notices of Guaranteed Delivery by
Participants.
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    \9\ Corporate actions processed by DTC include, but are not
limited to, the reorganization of Eligible Securities resulting from
mergers, acquisitions, and reverse splits. DTC performs corporate
actions processing through its Mandatory and Voluntary
Reorganization Services. See DTC Operational Arrangements, available
at http://www.dtcc.com/~/media/Files/Downloads/legal/issue-
eligibility/eligibility/operational-arrangements.pdf.
    \10\ See Securities Exchange Act Release No. 35108 (December 16,
1994), 59 FR 67356 (December 29, 1994) (SR-DTC-94-15) (instituting
ASOP).
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    ASOP enables Participants to submit subscription instructions using
PSOP. Through PSOP, a Participant that wants to subscribe to a Rights
Offer transmits its acceptance and acknowledgment of the terms of the
Subscription Form, and instructs and authorizes DTC to surrender the
Rights and process the corresponding payment to the Offer Agent. In
accordance with these electronic instructions, DTC effects book-entry
deliveries of the Rights by transferring the Rights from the
Participant's Account to a DTC operational account maintained by DTC on
behalf of the Offer Agent (``Agent Account'') and sending an electronic
confirmation to the Offer Agent. DTC debits the Participant's
Settlement Account for the amount of the subscription payments and
wires the payment to the Offer Agent. When the additional shares are
distributed by the Offer Agent, DTC credits the Securities to the
Account of the Participant.
    If permitted by the terms of the Rights Offer, if a Participant
will not have the Rights before the expiration date of the Rights
Offer, it may submit a Protect to the Offer Agent by transmitting
through PSOP its acceptance and acknowledgment of the terms of the
Notice of Guaranteed Delivery. If the Participant receives the Rights
before the day designated by DTC as the Cover end date (the ``DTC Cover
Protect Expiration Date''),\11\ the Participant may submit a Cover of
Protect by transmitting its acceptance of the terms in the Letter of
Transmittal via a Cover of Protect option in PSOP, and instructing DTC
to deliver the Rights and process the payment to the Offer Agent.
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    \11\ The DTC Cover Protect Expiration Date is usually one
business day earlier than the Protect Period expiration date
established by the terms of the Offer.
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DTC's Automated Tender Offer Program
    DTC offers the Automated Tender Offer Program (``ATOP''),\12\
through which DTC processes Tender/Exchange Offers for Eligible
Securities. Offer Agents for Tender/Exchange Offers eligible for
processing through ATOP must enter into a master agreement with DTC.
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    \12\ For a description of ATOP, refer to Securities Exchange Act
Release No. 33797 (March 22, 1994), 59 FR 14696 (March 29, 1994)
(SR-DTC-93-11) (approving enhancements to ATOP).
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    A Participant uses PTOP to transmit its acceptance and
acknowledgement of the Letter of Transmittal of the applicable Tender/
Exchange Offer and to instruct DTC to deliver the Securities to the
Offer Agent. In accordance with permitted instructions, DTC effects
book-entry delivery of Securities from the Participant's Account to the
Agent Account. When the payment (for a tender offer) and/or Securities
(for an exchange offer) are distributed by the Offer Agent, DTC credits
the amount of

the payment and/or Securities to the Settlement Account or Account of
the Participant, respectively.
    A Participant's Securities may not be available to tender to the
Offer Agent prior to the expiration of the Tender/Exchange Offer. If
the Participant anticipates receiving the Securities and wants to
participate in the Tender/Exchange Offer, it may, if permitted by the
terms of the Tender/Exchange Offer, submit a Protect by transmitting
through PTOP its acknowledgement and acceptance of the terms of the
Notice of Guaranteed Delivery. Before the DTC Cover Protect Expiration
Date, the Participant must acknowledge and agree to the terms of the
Letter of Transmittal through PTOP and instruct DTC to deliver the
Securities to the Offer Agent to Cover such Participant's Protect. If
the Participant is unable to deliver the Securities before the DTC
Cover Protect Expiration Date, it will have failed to validly tender
and will not be eligible for the consideration of the Tender/Exchange
Offer.
(c) Proposal
    As explained above, there are times when a Participant that
submitted a Protect (the ``Protecting Participant'') may need to have
another Participant (the ``Covering Participant'') Cover the Protect.
Currently, neither PSOP nor PTOP has the specific functionality for a
Covering Participant to submit a Cover on behalf of a Protecting
Participant.
    However, DTC is aware that Covering Participants frequently utilize
the PSOP/PTOP CPDA option in order to submit a Cover on behalf of
another Participant, which is not the intended purpose of the CPDA
function. The intended purpose of the CPDA function is to enable a
Participant that submitted a Protect directly to an Offer Agent outside
of DTC to later submit the corresponding Cover through DTC.
    In order to address directly a Participant's need to submit a Cover
of another Participant's Protect, DTC proposes to add the CPAP option
to PSOP/PTOP. With this enhancement, the Protecting Participant would
submit a Protect through PSOP/PTOP, and the Covering Participant would
be able to submit a Cover through PSOP/PTOP by providing the Protecting
Participant's Protect ID, Protect Sequence Number, and Protect
Participant ID. This enhanced functionality would automate the matching
of Covers to corresponding Protects, as well as automatically allocate
the applicable credits for Securities and/or payments directly to the
Protecting Participant, rather than to the Covering Participant. The
CPAP option would eliminate the need for Participants to utilize CPDA
for the unintended purpose of Covering another Participant's Protect.
    In addition, to further reduce the risks, burden, and costs to DTC
associated with the manual processing of the CPDA option in PSOP/PTOP,
DTC is proposing to eliminate that option. When a Participant uses CPDA
to submit a Cover for another Participant's Protect, DTC must manually
process the Cover and use manual exception processing to match the
Cover to the corresponding Protect. In addition, DTC must allocate the
credits for Securities and/or payment from the Offer to the Covering
Participant. Even when a Participant uses CPDA for its intended
purpose, which is infrequent, it is a labor intensive process for DTC,
as it must manually process the Cover and return the allocation to the
Offer Agent within a narrow timeframe. Therefore, DTC proposes that
when a Participant submits a Protect directly to the Offer Agent, such
Participant would need to submit the Cover directly to the Offer Agent,
and not through PSOP/PTOP.
(ii) Technical Changes
    The proposed rule change would revise the Guide to make ministerial
updates to reflect current terminology and practices, as set forth
below. The Guide would be updated to:
     Correct the text of the Guide to accurately reflect names
of functions accessible through PTS, and to accurately reflect the
names of the corresponding functions that are accessible through PBS.
Presently, the Guide assigns PTS functions to PBS, and does not provide
the names of the corresponding PBS functions.
     Correct the timeframes within which a Participant can
submit a Notice of Guaranteed Delivery on the expiration date of a
Rights Offer. Generally, a Participant may submit a Notice of
Guaranteed Delivery through PSOP/PTOP from 8:00 a.m. to 2:15 p.m., at
which time the window closes to allow for settlement of cash
activities. However, DTC will re-open the window from 3:30 p.m. to 5:00
p.m. on the expiration date of the Offer to allow Participants extra
time to submit a Notice of Guaranteed Delivery before the Offer
expires, provided that the Offer Agent agrees to accept deferred
subscription payments. The text of the Guide incorrectly reflects an
open window from 8:00 a.m. to 5:00 p.m., which is not the practice.
With this rule filing, the text would be corrected to reflect the
correct 8:00 a.m. to 2:15 p.m. and 3:30 p.m. to 5:00 p.m. windows.
     Pursuant to Participant requests, expand the availability
of PTOP for a Participant to submit a Cover of Protect, on the dates
specified in the notice of an Offer. The current availability is until
4:15 p.m. or 12:00 p.m., depending on the type of Offer, and the
proposed rule change would revise the text to reflect availability
until 5:00 p.m. or 1:00 p.m., as applicable.
     Remove references to the UNIT Swingovers service. Several
years ago, the UNIT Swingovers service was discontinued, and instead,
voluntary unit separations and recombinations \13\ began to be
processed under the FAST program.\14\
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    \13\ A unit is a Security comprised of more than one class of
Securities, e.g., common stock and warrants (the components). In a
voluntary unit separation, the separation and recombination between
the security component and the security is done by the Participant
and transfer agent using DTC's Deposit and Withdrawal at Custodian
system.
    \14\ Securities Exchange Act Release No. 59199 (January 6,
2009), 74 FR 1266 (January 12, 2009) (SR-DTC-2008-14).
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     Clarify information regarding available reports and
methods of submission and receipt.
     Replace reference to `NASDAQ' with `FINRA'.
     Replace reference to `AMEX' with `NASDAQ'.
     Add the title of the Guide, delete `Copyright,' and update
the `Important Legal Information' to align with other DTC service
guides.
     Correct spelling, grammatical, capitalization, numbering,
and typographical errors throughout.
     Update other text, including address, phone numbers, Web
site information, and methods of communication.
Implementation Date
    DTC will announce the effective date via Important Notice upon the
Commission's approval of the proposed rule change.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act \15\ requires that the rules of the
clearing agency be designed, inter alia, to promote the prompt and
accurate clearance and settlement of securities transactions. DTC
believes that the proposed rule change is consistent with this
provision because (i) by adding the CPAP option by which a Participant
can submit a Cover through PSOP/PTOP on behalf of another Participant
instead of improperly using the CPDA option that then requires DTC to
resort to manual processing and allocate the consideration to the
Covering

Participant rather than the Protecting Participant, and (ii) by
removing the CPDA option and requiring that Participants that Protect
outside of DTC to also Cover outside DTC, the proposed rule change
would establish a process that would streamline Cover of Protect
transactions, allocations and recordkeeping for Participants, and
reduce manual processing and the risks, burdens, and costs associated
with such processing for DTC, thereby promoting the prompt and accurate
clearance and settlement of securities, consistent with the
requirements of the Act, in particular Section 17A(b)(3)(F), cited
above.
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    \15\ 15 U.S.C. 78q-1(b)(3)(F).
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    Additionally, the proposed ministerial changes to the Procedures,
which update the Guide as set forth above, would provide additional
clarity to Participants and would ensure the accuracy of the Procedures
by reflecting the present state of DTC's reorganization services and
practices, thereby promoting the prompt and accurate clearance and
settlement of securities, consistent with the requirements of the Act,
in particular Section 17A(b)(3)(F), cited above.

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

    DTC does not believe that the proposed rule change would have any
impact, or impose any burden, on competition because it would remove a
function that is infrequently used for its intended purpose, and would
establish a new function, available to all Participants, without the
addition of a new fee.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others

    Written comments relating to the proposed rule change have not been
solicited or received. DTC will notify the Commission of any written
comments received by DTC.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-DTC-2016-005 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-DTC-2016-005. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of DTC and on DTCC's
Web site (http://dtcc.com/legal/sec-rule-filings.aspx). All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-DTC-2016-005 and should be
submitted on or before September 6, 2016.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Robert W. Errett,
Deputy Secretary.
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    \16\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-19322 Filed 8-12-16; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 82, Number 123 (Wednesday, June 28, 2017)]
[Notices]
[Pages 29355-29359]
[FR Doc No: 2017-13490]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81002; File No. SR-FICC-2017-015]

Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Make Clarifications and Corrections to the Government Securities
Division Rulebook, the Mortgage-Backed Securities Division Clearing
Rules and the Mortgage-Backed Securities Division EPN Rules

June 22, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 16, 2017, Fixed Income Clearing Corporation (``FICC'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II and III below, which
Items have been prepared by the clearing agency. FICC filed the

proposal pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(4) thereunder \4\ so that the proposal was effective upon filing
with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    The proposed rule change would make clarifications and corrections
(including the addition of certain new definitions, as described in
more detail below) to FICC's Government Securities Division (``GSD'')
Rulebook (the ``GSD Rules''), Mortgage-Backed Securities Division
(``MBSD'') Clearing Rules (the ``MBSD Clearing Rules'') and MBSD EPN
Rules (the ``EPN Rules,'' and collectively with the GSD Rules and the
MBSD Clearing Rules, the ``Rules''), as described in greater detail
below.\5\
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    \5\ Each capitalized term used herein and not otherwise defined
shall have the meaning set forth in the GSD Rules, MBSD Clearing
Rules or the EPN Rules, as applicable, available at http://www.dtcc.com/legal/rules-and-procedures.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency included
statements concerning the purpose of and basis for the proposed rule
change and discussed any comments it received on the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. The clearing agency has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to make certain
clarifications and corrections (including the addition of certain new
definitions) to the Rules so that the Rules remain consistent and
clear. The proposed changes consist only of clarifications and
corrections (including the addition of certain new definitions) and do
not change any of the rights or obligations of the GSD Members, MBSD
Members or EPN Users.
(i) Proposed Changes to the GSD Rules
    FICC is proposing to make the following changes to the GSD Rules:
A. Proposed Changes to GSD Rule 1--Definitions
    (1) Delete the incorrect reference to ``Section 1 of Rule 2'' in
the definition of ``Bank Netting Member'' and replace it with a
reference to ``Section 2 of Rule 2A.''
    (2) Correct certain definitions relating to brokers and dealers and
add certain defined terms in conjunction with such corrections, as
described below (collectively, the changes referred to in this item (2)
are referred to as the ``Broker/Dealer Changes''):
    (i) FICC has identified that the existing terms ``Registered
Government Securities Brokers'' and ``Registered Government Securities
Dealers'' refer to brokers and dealers registered with the Commission
under either Section 15 or Section 15C of the Act, when such terms
should only refer to brokers and dealers registered under Section 15C
of the Act. The proposed rule change would correct these definitions in
this regard.
    (ii) Two new terms, ``Registered Broker'' and ``Registered
Dealer,'' would be added to GSD Rule 1 to address brokers and dealers
that are registered under Section 15 of the Act.
    (iii) The term ``Broker,'' which is defined in part as a
``Registered Government Securities Broker,'' would be updated to add a
reference to a ``Registered Broker.'' In addition, ``or'' is being
added to reflect that a Broker would include a Registered Broker or a
Registered Government Securities Broker. These corrections would make
the definition consistent with the manner in which the term ``Broker''
is used throughout the GSD Rules and consistent with the corrections
noted above in clauses (i) and (ii).
    (iv) The term ``Dealer,'' which is defined as a ``Registered
Government Securities Dealer,'' would be updated to add a reference to
a ``Registered Dealer.'' In addition, ``or'' is being added to reflect
that a Dealer would include a Registered Dealer or a Registered
Government Securities Dealer. These corrections would make the
definition consistent with the manner in which the term ``Dealer'' is
used throughout the GSD Rules and consistent with the corrections noted
above in clauses (i) and (ii).
    (3) Delete references to ``Category 1 Inter-Dealer Broker'' and
``Category 2 Inter-Dealer Broker'' in the definition of ``Brokered
Transaction'' and replace them with ``Inter-Dealer Broker,'' make a
grammatical change, and change the numbering in the definition to
reflect the replacements. The concept of and all other references to
Category 1 Inter-Dealer Brokers and Category 2 Inter-Dealer Brokers
were intended to be removed from the GSD Rules in connection with the
Commission's approval of rule filing SR-FICC-2010-09,\6\ however, a few
references inadvertently remain in the current version of the GSD
Rules.
---------------------------------------------------------------------------

    \6\ Securities Exchange Act Release No. 63986 (February 28,
2011); 76 FR 12144 (March 4, 2011) (SR-FICC-2010-09).
---------------------------------------------------------------------------

    (4) Delete the references to ``Registered Government Securities
Broker'' and ``Registered Government Securities Dealer'' in the
definition of ``Covered Affiliate'' and replace each reference with
``Broker'' and ``Dealer,'' respectively. Currently, ``Covered
Affiliate'' is defined in part to include certain ``Registered
Government Securities Brokers'' and ``Registered Government Securities
Dealers,'' however, this definition should also include certain
``Registered Brokers'' and ``Registered Dealers,'' as such terms are
proposed to be added in this filing. The revised terms ``Broker'' and
``Dealer'' as proposed by this filing would also include Registered
Brokers and Registered Dealers. This correction would make the
definition consistent with the manner in which the term ``Covered
Affiliate'' is used throughout the GSD Rules and consistent with the
Broker/Dealer Changes noted above.
    (5) Change the definition of the term ``Designated Examining
Authority'' to replace the existing descriptions of brokers and dealers
with ``Broker or Dealer, as applicable.'' The use of the updated terms
``Broker'' and ``Dealer'' as proposed above and the addition of ``as
applicable'' would refer to brokers and dealers registered under
Section 15 of the Act and under Section 15C of the Act in a more
succinct manner, would ensure consistency with the manner in which
``Designated Examining Authority'' is used throughout the GSD Rules and
would be consistent with the Broker/Dealer Changes noted above.
    (6) Delete the repeated definitions of the terms ``Eligible Letter
of Credit'' and ``Eligible Netting Security.''
    (7) Delete the reference to ``whole percentage'' and replace it
with ``two decimal places'' in the definition of the term ``Excess
Capital Ratio'' to reflect that the quotient is rounded to the nearest
two decimal places. The proposed change would make the GSD Rules
consistent with the MBSD Clearing Rules, which would have an equivalent
definition.
    (8) Delete the reference to ``GSCC'' and replace it with ``the
Corporation'' in the definition of the ``Full-Sized Trade'' because
GSCC is not a defined term that is used in the GSD Rules. GSCC refers

to GSD's predecessor, the Government Securities Clearing
Corporation.\7\
---------------------------------------------------------------------------

    \7\ FICC resulted from a merger of GSCC and the Mortgage-Backed
Securities Clearing Corporation on January 1, 2003.
---------------------------------------------------------------------------

    (9) Add a new defined term for ``Inter-Dealer Broker'' consistent
with the manner in which the term is currently used in the GSD Rules
and consistent with the MBSD Clearing Rules, which have the equivalent
definition.
    (10) Delete the following definitions because they are not used in
the GSD Rules: ``Member Brokered Transaction,'' ``Non-Member Brokered
Transaction,'' and ``Offsetting Position.''
B. Proposed Changes to GSD Rule 2A--Initial Membership Requirements
    (1) Delete the references to ``Registered Government Securities
Dealer'' and replace them with ``Dealer'' in Section 2(a)(ii) to
reflect the Broker/Dealer Changes noted above.
    (2) Correct two grammatical errors in Section 2(a)(iv).
    (3) Delete the references to ``Duff & Phelps (``D&P'')'' and
``D&P'' and replace them with ``Fitch Ratings (``Fitch'')'' and
``Fitch,'' respectively, in Section 4 because Duff & Phelps Credit
Rating Co. was acquired by Fitch IBCA.
    (4) Delete the incorrect reference to ``Rule 3'' and replace it
with ``this Rule 2A'' in Section 6.
C. Proposed Changes to GSD Rule 3--Ongoing Membership Requirements
    Add ``Ratio'' after the reference to ``Excess Capital'' to read
``Excess Capital Ratio'' in Section 14. Section 14 requires a Netting
Member to make a Clearing Fund deposit if its Excess Capital Ratio
exceeds 1.0 because of the perceived risk posed by such Netting Member.
Such deposit is calculated to bring the Clearing Fund to a desired
level regarding the risk relating to such Netting Member. FICC
currently calculates and has historically calculated this deposit using
the Excess Capital Ratio as a multiple. Reference to Excess Capital as
the multiple in the GSD Rules is incorrect--using Excess Capital as the
multiple would result in a deposit requirement for a Netting Member
that far exceeds the amount that FICC has determined is needed to
increase the Clearing Fund to the desired level. The proposed change
would make the GSD Rules consistent with the MBSD Clearing Rules, which
have an equivalent formula in MBSD Clearing Rule 3 Section 12.
D. Proposed Changes to GSD Rule 4--Clearing Fund and Loss Allocation
    (1) Delete the incorrect reference to ``Section 8'' in the first
paragraph of Section 5 and replace it with ``Section 7.''
    (2) Delete the phrase ``Category 1'' before the words ``Inter-
Dealer Broker Netting Member'' in Section 5 and make a grammatical
change to reflect the deletion. The concept of and all other references
to the term Category 1 were intended to be removed from the GSD Rules
in connection with the Commission's approval of rule filing SR-FICC-
2010-09,\8\ however, this reference inadvertently remains in the
current version of the GSD Rules.
---------------------------------------------------------------------------

    \8\ See supra note 6.
---------------------------------------------------------------------------

E. Proposed Changes to GSD Rule 5--Comparison System
    Capitalize the word ``trades'' in the phrase ``Full-Sized trades''
in Section 4 so that it reflects the defined term ``Full-Sized Trade,''
which is currently included in GSD Rule 1.\9\
---------------------------------------------------------------------------

    \9\ ``Full-Sized Trade'' means a trade that is submitted to FICC
in the full-size dollar amount in which it was executed as opposed
to being submitted in an equivalent amount of $50 million pieces and
a single tail. See GSD Rule 1, supra note 5.
---------------------------------------------------------------------------

F. Proposed Changes to GSD Rule 15--Special Provisions for Certain
Netting Members
    (1) Remove a reserved section heading and renumber section headings
that currently follow that heading to reflect its removal.
    (2) Delete the phrase ``or an Inter-Dealer Broker Netting Member''
in the third sentence in proposed renumbered Section 2 because the term
Inter-Dealer Broker Netting Member is inadvertently referenced twice.
G. Proposed Changes to GSD Rule 17--Netting and Settlement of Netting-
Eligible Auction Purchases
    Remove a reserved section heading and renumber section headings
that currently follow that heading to reflect its removal.
(ii) Proposed Changes to the MBSD Clearing Rules
    FICC is proposing to make the following changes to the MBSD
Clearing Rules:
A. Proposed Changes to MBSD Clearing Rule 1--Definitions
    (1) Add a new defined term for ``Close of Business'' consistent
with the manner in which the term is currently used in the MBSD
Clearing Rules and consistent with the GSD Rules which have the
equivalent definition.
    (2) Delete the word ``whole'' from the phrase ``whole two decimal
places'' in the definition of ``Excess Capital Ratio'' to reflect the
standard convention for referencing decimals.
B. Proposed Changes to MBSD Clearing Rule 3--Ongoing Membership
Requirements
    Delete the phrase ``close of business'' and replace it with ``Close
of Business'' in Section 2 so that it reflects the proposed new defined
term ``Close of Business,'' which would be added in MBSD Clearing Rule
1.
C. Proposed Changes to MBSD Clearing Rule 4--Clearing Fund and Loss
Allocation
    (1) Delete the references to ``Total Amount'' and replace them with
``Required Fund Deposit'' in Section 2(d) because Total Amount is not a
defined term and the correct reference in that section should be to the
amount a Clearing Member is required to deposit to the Clearing Fund
pursuant to MBSD Clearing Rule 4, which is the ``Required Fund
Deposit.\10\
---------------------------------------------------------------------------

    \10\ ``Required Fund Deposit'' means the amount a Clearing
Member is required to deposit to the Clearing Fund pursuant to MBSD
Clearing Rule 4. See MBSD Clearing Rule 1, supra note 5.
---------------------------------------------------------------------------

    (2) Delete the reference to ``deposit'' and replace it with
``Required Fund Deposit'' in Section 3 because the correct reference in
that section should be to the amount a Clearing Member is required to
deposit to the Clearing Fund pursuant to MBSD Clearing Rule 4, which is
the ``Required Fund Deposit.''
    (3) Clarify that the minimum amount of cash a Clearing Member must
deposit into its Required Fund Deposit is $100,000 in Section 3.
Section 2(d) refers to the same minimum Required Fund Deposit amount
and the proposed change would make Section 3 consistent with Section
2(d).
    (4) Delete the references to ``close of business'' and replace them
with ``Close of Business'' in Section 5 and Section 8 so that they
reflect the proposed new defined term ``Close of Business,'' which
would be added in MBSD Clearing Rule 1.
(iii) Proposed Changes to the EPN Rules
    FICC is proposing to make the following changes to the EPN Rules:
A. Proposed Changes to Article 1 EPN Rule 1--Definitions
    (1) Add a period after ``Rule 1'' to conform the punctuation in EPN
Rule 1 with other EPN Rules.
    (2) Delete the incorrect cross-reference to ``Article VII'' and
replace it with ``Article II'' in the definition of ``Account.''
    (3) Delete the incorrect cross-reference to ``Article VI'' and
replace it with

``Article I'' in the definition of ``EPN Eligible Security.''
    (4) Delete the incorrect cross-reference to ``Article X'' and
replace it with ``Article V'' in the definition of ``EPN Procedures.''
    (5) Delete the incorrect cross-references to ``Articles VI, VII,
VIII, IX and X of the Rules,'' in the definition of ``EPN Rules.'' Such
references to the Articles are unnecessary.
    (6) Move the definition of ``EPN Service'' so that it is in correct
alphabetical order.
    (7) Delete the incorrect cross-reference to ``Article VIII'' and
replace it with ``Article III'' in the definition of ``EPN User
Agreement.''
    (8) Delete the definition of ``Membership and Risk Management
Committee'' because this term is not used in the EPN Rules.
    (9) Move the definition of ``Messages'' so that it is in correct
alphabetical order.
    (10) Delete the incorrect cross-reference to ``Article VII'' and
replace it with ``Article II'' in the definition of ``Message Detail
Report.''
    (11) Delete the incorrect reference to ``Article VII'' and replace
it with ``Article II'' in the definition of ``Message Summary Report.''
    (12) Delete the definition of ``Operations and Planning Committee''
because this term is not used in the EPN Rules.
B. Proposed Changes to Article I EPN Rule 2--EPN Eligible Securities
    Correct a grammatical error and delete the incorrect cross-
reference to ``Article X'' and replace it with ``Article V.''
C. Proposed Changes to Article II--Messages Processed by the
Corporation
    (1) Add the following language to EPN Rule 1 Section 1: ``The
Corporation shall maintain one or more Accounts for each EPN User''
because this language appears to have been inadvertently deleted from
previous versions of the EPN Rules.
    (2) Delete the term ``Reports'' and replace it with lowercased
``reports'' in EPN Rule 2 Section 1 because Reports is not a defined
term in the EPN Rules.
D. Proposed Changes to Article III--EPN Users
    (1) Delete the incorrect cross-reference to ``Article X'' and
replace it with ``Article V'' and correct a grammatical error in EPN
Rule 1 Section 5.
    (2) Delete the incorrect cross-reference to ``Article X'' and
replace it with ``Article V'' in EPN Rule 1 Section 7.
    (3) Correct two grammatical errors in EPN Rule 2 Section 1.
    (4) Delete the incorrect cross-reference to ``Article VIII'' and
replace it with ``Article III'' in EPN Rule 3 Section 1.
E. Proposed Changes to Article V--Miscellaneous
    (1) Add ``EPN'' before each reference to ``Rules'' because ``EPN
Rules'' is the correct defined term.
    (2) Remove extra spaces between ``Interested'' and ``Person'' in
the first paragraph of Rule 7 Section 1 and replace ``a'' with ``an''
before the proposed addition of ``EPN'' in the second paragraph of Rule
7 Section 1 for grammatical correctness.
    (3) Add ``EPN'' before each reference to ``Procedures'' because
``EPN Procedures'' is the correct defined term.
    (4) Add a tab space before certain paragraphs throughout Article V
to conform the spacing in Article V to the other Articles in the EPN
Rules.
    (5) Delete the reference to ``minor rule violation'' and replace it
with ``Minor Rule Violation'' in EPN Rule 7 Section 3 so that it
reflects the defined term, ``Minor Rule Violation,'' which is currently
included in EPN Rule 7 Section 2, and correct the cross-reference in
that Section to reflect that the term ``Minor Rule Violation'' is
defined in Section 2 of EPN Rule 7 rather than Section 3.\11\
---------------------------------------------------------------------------

    \11\ ``Minor Rule Violation'' means a violation of the EPN Rules
for which a fine may be assessed against the Interested Person in an
amount not to exceed $5,000. See Article V, EPN Rule 7, Section 2,
supra note 5.
---------------------------------------------------------------------------

    (6) Delete the heading ``SEC. 6. FINALITY OF CORPORATION ACTION''
because it is misplaced, and reorder the numbering for each EPN Rule
that currently follows that heading so that each such EPN Rule
continues as part of Article V.
    (7) Correct a grammatical error in proposed renumbered EPN Rule
14(b)(ii).
    (8) Correct a grammatical error, and delete the incorrect cross-
reference to ``Article X'' and replace it with ``Article V'' in
proposed renumbered EPN Rule 14(c).
2. Statutory Basis
    Section 17A(b)(3)(F) \12\ of the Act requires, in part, that the
Rules be designed to promote the prompt and accurate clearance and
settlement of securities transactions. FICC believes that the proposed
rule change has been designed to promote the prompt and accurate
clearance and settlement of securities transactions, consistent with
Section 17A(b)(3)(F).\13\ Specifically, the proposed rule change would
clarify the meaning of certain provisions of the Rules, correct
grammatical errors, correct cross-references and similar technical
changes, which ensure that the Rules are consistent and clear. As such,
FICC believes the proposed rule change would allow GSD Members, MBSD
Members and EPN Users governed by the applicable Rules to have a better
understanding of the Rules and thereby assist in promoting the prompt
and accurate clearance and settlement of securities transactions.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78q-1(b)(3)(F).
    \13\ Id.
---------------------------------------------------------------------------

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

    FICC does not believe that the proposed rule change will have any
impact on competition because the proposed changes to the Rules are
clarifications and corrections (including the addition of certain new
definitions), which would not change FICC's current practices or the
rights or obligations of the GSD Members, MBSD Members or EPN Users
bound by the applicable Rules. Therefore, the proposed changes should
have no effect on the GSD Members, MBSD Members or EPN Users that are
bound by the applicable Rules other than to foster a better
understanding of the applicable Rules by such GSD Members, MBSD Members
and EPN Users.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others

    Written comments relating to the proposed rule change have not been
solicited or received. FICC will notify the Commission of any written
comments received by FICC.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) \14\ of the Act and subparagraph (f)(4) of Rule 19b-4 \15\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing,

including whether the proposed rule change is consistent with the Act.
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-FICC-2017-015 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FICC-2017-015. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of FICC and on
DTCC's Web site (http://dtcc.com/legal/sec-rule-filings.aspx). All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-FICC-2017-015 and should be
submitted on or before July 19, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-13490 Filed 6-27-17; 8:45 am]
 BILLING CODE 8011-01-P