[Federal Register Volume 85, Number 235 (Monday, December 7, 2020)]
[Notices]
[Pages 78904-78909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26786]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90544; File No. SR-FICC-2020-014]
Self-Regulatory Organizations; Fixed Income Clearing Corporation;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change,
as Modified by Amendment No. 1, To Modify the Clearance Maintenance
Fee, Reduce the End of Day Position Fee of the Government Securities
Division, and Describe the Current Rebate Policy
December 1, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 16, 2020, Fixed Income Clearing Corporation (``FICC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change. On November 30, 2020, FICC filed Amendment No. 1
to the proposed rule change, which revised a portion of the rule text
and corresponding description in the notice relating to FICC's current
policy regarding the issuance of rebates to its members. FICC filed the
proposed rule change, as modified by Amendment No. 1, pursuant to
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(2) thereunder.\4\
The proposed rule change, as modified by Amendment No. 1 is hereinafter
referred to as the ``Proposed Rule Change.'' The Proposed Rule Change
is described in Items I, II, and III below, which Items have been
prepared primarily by FICC. The Commission is publishing this notice to
solicit comments on the Proposed Rule Change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The Proposed Rule Change consists of modifications to FICC's
Mortgage-Backed Securities Division (``MBSD'') Clearing Rules (``MBSD
Rules'') and Government Securities Division (``GSD'') Rulebook (``GSD
Rules'' and together with the MBSD Rules, the ``Rules'') in order to
(i) modify the respective Clearing Fund Maintenance Fee (``Maintenance
Fee'') of GSD and MBSD, (ii) reduce the end of day position fee of GSD,
and (iii) include a description of FICC's current policy regarding the
issuance of rebates to GSD Members and MBSD Clearing Members, as
described in greater detail below.\5\
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\5\ Capitalized terms not defined herein are defined in the GSD
Rules and the MBSD 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
FICC is proposing to amend the MBSD Rules and the GSD Rules in
order to (i) modify the respective Maintenance Fee of GSD and MBSD,
(ii) reduce the end of day position fee of GSD, and (iii) include a
description of FICC's current policy regarding the issuance of rebates
to GSD Members and MBSD Clearing Members, as described in greater
detail below.
[[Page 78905]]
(i) Background
FICC operates a cost plus low margin pricing model and has in place
procedures to control costs and to regularly review pricing levels
against costs of operation. It reviews pricing levels against its costs
of operation typically during the annual budget process. The budget is
approved annually by the Board. FICC's fees are cost-based plus a
markup as approved by the Board or management (pursuant to authority
delegated by the Board), as applicable. This markup or ``low margin''
is applied to recover development costs and operating expenses and to
accumulate capital sufficient to meet regulatory and economic
requirements.
a. Maintenance Fee
FICC implemented the Maintenance Fee in 2016 in order to (i)
diversify FICC's revenue sources, mitigating its dependence on revenues
driven by settlement volumes, and (ii) add a stable revenue source that
would contribute to FICC's operating margin by offsetting increasing
costs and expenses.\6\ The Maintenance Fees for MBSD and GSD are
effectively the same and charged to MBSD Clearing Members and GSD
Netting Members (collectively, ``Members'') in proportion to the
Member's deposit in their respective MBSD or GSD Clearing Fund
(collectively, ``Clearing Fund''), as described below.
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\6\ Securities Exchange Act Release No. 78529 (August 10, 2016),
81 FR 54626 (August 16, 2016) (SR-FICC-2016-004).
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The Maintenance Fee is calculated monthly, in arrears, as the
product of (A) 0.25 percent and (B) the average of the Member's cash
deposit balance in the Clearing Fund as of the end of each day, for the
month, multiplied by the number of days in that month and divided by
360. However, by its terms, the fee is waived if the monthly rate of
return on FICC's investment of the cash deposit balance of the Clearing
Fund is less than 0.25 percent for the month (``Waiver Provision'').
The Waiver Provision was included for the benefit of Members. FICC
believed that if its monthly rate of return on the investment of the
cash deposit balance in the Clearing Fund was less than 0.25 percent,
then Members would likely be experiencing similarly low interest income
on their deposits, including excess reserves, if applicable; in which
case, FICC would waive the fee. Although this approach exposed FICC to
the risk of not receiving revenue from the Maintenance Fee, FICC did
not believe that such an exposure would be common, significant, or
long-term.
b. End of Day Position Fee
Currently, the Fee Structure of the GSD Rules includes the end of
day position fee, which is a position management fee. FICC implemented
the end of day position fee in 2018.\7\ The current end of day position
fee is $0.115 per million par value. This end of day position fee is
calculated for a GSD Member each Business Day based on the end of day
gross position of the GSD Member (including positions of any GSD Non-
Member that the GSD Member is clearing for) that Business Day. FICC
determines the end of day gross position of a GSD Member by netting the
par value of all compared buy/sell transactions, Repo Transactions, and
unsettled obligations of the GSD Member (including any such activity
submitted by the GSD Member for a GSD Non-Member that the GSD Member is
clearing for) at the end of the Business Day by CUSIP Number and taking
the sum of the absolute par value of each such CUSIP Number.
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\7\ Securities Exchange Act Release No. 83401 (June 8, 2018), 83
FR 27812 (June 14, 2018) (SR-FICC-2018-003).
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The end of day position fee aims to align pricing with the costs of
services provided by FICC because the end of day position fee is driven
by position management. The end of day position fee aims to reflect the
costs associated with end of day processing, overnight position
management, and various risk and operational activities required to
assure the ability of FICC to continue to provide a dependable, stable
and efficient clearing and settlement service for GSD Members.
c. Rebate
FICC is also proposing to amend Section XII of the Fee Structure of
the GSD Rules, the Important Note under Section I of the FICC MBSD
Schedule of Charges Broker Account Group (``Schedule of Charges Broker
Account Group'') of the MBSD Rules and Section I of the FICC MSBD
Schedule of Charges Dealer Account Group (``Schedule of Charges Dealer
Account Group'') of the MBSD Rules. The Proposed Rule Change would
replace a current description of FICC's policy on providing GSD Members
and MBSD Clearing Members with a discount or surcharge with a
description of its current policy regarding the issuance of rebates to
GSD Members and MBSD Clearing Members. In connection with this change,
the Proposed Rule Change would also change the title of Section XII of
the Fee Structure of the GSD Rules from ``Capital Base, Pricing and
Rebate Policy'' to ``Rebate Policy'' to better describe the policy
described in this section.
(ii) Proposed Changes
a. Proposed Modification to the Maintenance Fee
Due to the coronavirus global pandemic and overall reaction by the
financial markets, the rate of return on FICC's investment of the cash
deposit balance in the Clearing Fund has fallen below 0.25 percent,
triggering the Waiver Provision. However, application of the Waiver
Provision in this instance has proven to be longer and more significant
than what FICC originally contemplated when drafting the provision,
resulting in a drop in FICC's revenues. If unaddressed, FICC's revenue
could continue to deteriorate and negatively impact FICC's long-term
financial health.
To address this issue, FICC is removing the Waiver Provision so
that FICC would be able to generate revenue from the Maintenance Fee
even if FICC's monthly rate of return on the investment of the cash
deposit balance in the Clearing Fund is less than 0.25 percent. The
ability to generate such revenue under such circumstances is important
in helping FICC offset its costs and expenses in many economic
environments. Additionally, the Proposed Rule Change would help provide
consistent pricing between FICC and its affiliate clearing agencies,
National Securities Clearing Corporation (``NSCC'') and The Depository
Trust Company (``DTC''),\8\ as both NSCC and DTC have filed proposed
rule changes concurrently with this filing that would result in the
same calculation of their respective Maintenance Fee.\9\
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\8\ The Depository Trust & Clearing Corporation (``DTCC'') is
the parent company of DTC, NSCC, and FICC. DTCC operates on a shared
services model for DTC, NSCC, and FICC. Most corporate functions are
established and managed on an enterprise-wide basis pursuant to
intercompany agreements under which it is generally DTCC that
provides a relevant service to DTC, NSCC, or FICC.
\9\ See File No. SR-DTC-2020-014 and File No. SR-NSCC-2020-018
available at https://www.dtcc.com/legal/sec-rule-filings.
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To effectuate the proposed change described above, the Waiver
Provision would be removed from (i) the Maintenance Fee in Section I
(Fees) of the Schedule of Charges Broker Account Group in the MBSD
Rules, (ii) the Maintenance Fee of Section 1(Fees) of the Schedule of
Charges Dealer Account Group in the MBSD Rules, and (iii) Section XIII
(Clearing Fund
[[Page 78906]]
Maintenance Fee) of the Fee Structure in the GSD Rules.
b. Proposed Reduction of End of Day Position Fee
FICC is proposing to reduce the end of day position fee from $0.115
per million par value to $0.105 per million par value.
FICC believes that this proposed reduction in the end of day
position fee would be consistent with FICC's cost plus low-margin
pricing model. As described above, FICC regularly reviews pricing
levels against its costs of operation typically during the annual
budget process. FICC determined during the 2020 annual budget process
that the proposed reduction in the end of day position fee would help
better align costs to revenue and be consistent with its cost plus low-
margin pricing model. In addition, FICC believes a proposed reduction
in one fee (rather than in a number of fees) is a more simple and clear
way for FICC to continue to generate sufficient revenues to cover its
operating costs plus generate a low net income operating margin (i.e.,
to be consistent with its pricing model).
Furthermore, FICC believes that, with the proposed reduction in the
end of day position fee, all GSD Members would benefit from a lower end
of day position fee while, as described above, still enabling FICC to
continue to generate sufficient revenues to cover its operating costs
plus generate a low net income operating margin. As described above,
because the end of day position fee is calculated based on the gross
position of the GSD Members, GSD Members that generate higher levels of
activity and make greater use of FICC's services would generally be
subject to a higher overall amount in terms of the end of day position
fee (similar to the Maintenance Fee described above). Conversely, GSD
Members that generate lower levels of activity and use FICC's services
less would generally be subject to smaller overall amount in terms of
their end of day position fee. Therefore, some GSD Members may see a
greater reduction in the overall amount of the fee given that it is
based on the level of their activity. The described change would not
adjust that allocation.
To effectuate the proposed change described above, FICC would
revise the end of day position fee from $0.115 per million par value to
$0.105 per million par value in Section II.B of the Fee Structure of
the GSD Rules.
c. Proposed Changes to the Rebate Policy
FICC is also proposing to amend Section XII of the Fee Structure of
the GSD Rules, the Important Note under Section I of the Schedule of
Charges Broker Account Group of the MBSD Rules and the Important Note
under Section I of the Schedule of Charges Dealer Account Group of the
MBSD Rules. The Proposed Rule Change would replace a current
description of FICC's policy on providing GSD Members and MBSD Clearing
Members with a discount or surcharge with a description of its current
policy regarding the issuance of rebates to GSD Members and MBSD
Clearing Members.
Currently, Section XII of the Fee Structure of the GSD Rules, the
Important Note under Section I of the Schedule of Charges Broker
Account Group of the MBSD Rules and the Important Note under Section I
of the Schedule of Charges Dealer Account Group of the MBSD Rules all
include an outdated description of FICC's policy to adjust GSD Members'
and MBSD Clearing Members' invoices based on FICC's revenues. This
description states that FICC may adjust invoices down in the form of a
discount or up in the form of a surcharge, based on its revenues. FICC
did historically provide GSD Members and MBSD Clearing Members with a
discount on their invoices, but it does not have any record of
adjusting invoices up, in the form of a surcharge, in the past.
FICC views its practice of providing a rebate to GSD Members and
MBSD Clearing Members as a corporate function, and not related to its
operation as a self-regulatory organization. An FICC rebate is
essentially a return of the revenue that FICC collects through the fees
it charges GSD Members and MBSD Clearing Members for its services (as
set forth in the Fee Structure of the GSD Rules, the Schedule of
Charges Broker Account Group of the MBSD Rules and Schedule of Charges
Dealer Account Group of the MBSD Rules). Rebates are not related to the
amounts GSD Members and MBSD Clearing Members deposit with FICC as
their Required Fund Deposits, which are made up of risk-based margin
charges. The determination to provide a rebate is made at the
corporation-level, based on a number of factors and considerations, as
described below, and is not a separate determination made for each
individual GSD Member and MBSD Clearing Member.
Following the financial recession of 2008, FICC ceased providing
such discounts in connection with the implementation of a financial
strategy to strengthen its financial position and health. As a result
of that strategy and improved financial markets, in 2019, FICC
determined to reinstitute its practice of discounting GSD Members' and
MBSD Clearing Members' invoices, in the form of a rebate, based on its
financial performance. In connection with this decision, FICC is
proposing to replace the language regarding adjustment of invoices in
Section XII of the Fee Structure of the GSD Rules, the Important Note
under Section I of the Schedule of Charges Broker Account Group of the
MBSD Rules and the Important Note under Section I of the Schedule of
Charges Dealer Account Group of the MBSD Rules to describe its current
rebate practice. This proposed change would not change FICC's current
rebate practice but would provide GSD Members and MBSD Clearing Members
with transparency into this practice and the governance around rebates.
First, the Proposed Rule Change would change the title of Section
XII of the Fee Structure of the GSD Rules from ``Capital Base, Pricing
and Rebate Policy'' to ``Rebate Policy'' to better describe the policy
described in this section.
Second, the proposed language would describe that FICC may provide
GSD Members and MBSD Clearing Members with a rebate of excess net
income, and would define excess net income as income of either FICC or
related to one business line of FICC after application of expenses,
capitalization costs, and applicable regulatory requirements. The
language would also state that a rebate is discretionary, to make it
clear that FICC is not obligated to provide a rebate.
Third, the proposed language would state that a rebate would be
approved by the Board. The proposed language would also state that, in
determining whether a rebate is appropriate, the Board would consider
one or more of the following, as appropriate: FICC's regulatory capital
requirements,\10\ anticipated expenses, investment needs, anticipated
future expenses with respect to improvement or maintenance of FICC's
operations, cash balances, financial projections, and appropriate level
of shareholders' equity.
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\10\ FICC manages its general business risk by holding
sufficient liquid net assets funded by equity to cover potential
general business losses so it can continue operations and services
as going concerns if those losses materialize, in compliance with
the requirements of Rule 17Ad-22(e)(15). 17 CFR 240.17Ad-22(e)(15).
FICC maintains a Clearing Agency Policy on Capital Requirements
which defines the amount of capital it must maintain for this
purpose and sets forth the manner in which this amount is
calculated. See Securities Exchange Act Release No. 89363 (July 21,
2020), 85 FR 45276 (July 27, 2020) (SR-FICC-2020-008) (amending
original filing).
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Fourth, the proposed language would state that, if the Board
determined to
[[Page 78907]]
issue a rebate, it would set a rebate period and a rebate payment date,
both of which are used to determine which GSD Members and MBSD Clearing
Members are eligible for a rebate. The proposed language would state
that GSD Members and MBSD Clearing Members that maintain their
membership during all or a portion of the rebate period and on the
rebate payment date are eligible for a rebate.
Finally, the proposed language would describe how rebates are
applied to the invoices of eligible GSD Members and MBSD Clearing
Members. The proposed language would state that rebates are applied to
all eligible GSD Members and MBSD Clearing Members on a pro-rata basis
based on such GSD Members' and MBSD Clearing Members' gross fees paid
to FICC within the applicable rebate period, excluding pass-through
fees and interest earned on cash deposits to the Clearing Fund. The
proposed language would also state that rebates are applied to eligible
Members' invoices on the rebate payment date as either a reduction in
fees owed or, if fees owed are lower than the allocated rebate amount,
a payment of such difference. The proposed language would also note
that rebate amounts may be adjusted for miscellaneous charges and
discounts.
(iii) Expected Member Impact
The Proposed Rule Change is expected to increase FICC's annual
revenue by approximately $14.5 million.
In general, FICC anticipates that the proposal would result in fee
decreases for approximately 27% of impacted affiliated family of
Members and fee increases for approximately 73% of impacted affiliated
family of Members. Of the impacted affiliated family of Members that
may have their fees decrease, 100% of those affiliated family of
Members would have a decrease between $1,000 and $100,000 per year. Of
the impacted affiliated family of Members that may have their fees
increase, approximately 2% of those impacted affiliated family of
Members would have an increase of less than $1,000 per year,
approximately 60% of those impacted affiliated family of Members would
have an increase of $1,000 to $100,000 per year, approximately 32% of
those impacted affiliated family of members would have an increase of
$100,000 to $1 million per year, and approximately 6% of those impacted
affiliated family of Members would have an increase of $1 million or
greater per year.
(iv) Member Outreach
FICC has conducted ongoing outreach to each Member in order to
provide them with notice of the proposed changes and the anticipated
impact for the Member. As of the date of this filing, no written
comments relating to the proposed changes have been received in
response to this outreach. The Commission will be notified of any
written comments received.
Implementation Timeframe
FICC would implement this proposal on January 1, 2021. As proposed,
a legend would be added to the Fee Structure of the GSD Rules, the
Schedule of Charges Broker Account Group of the MBSD Rules and the
Schedule of Charges Dealer Account Group of the MBSD Rules, as
appropriate, stating there are changes that became effective upon
filing with the Commission but have not yet been implemented. The
proposed legend would include the date on which such changes would be
implemented and the file number of this proposal, and state that once
this proposal is implemented, the legend would automatically be
removed.
2. Statutory Basis
FICC believes this proposal is consistent with the requirements of
the Act, and the rules and regulations thereunder applicable to a
registered clearing agency. Specifically, FICC believes the proposed
changes to (i) modify the respective Maintenance Fee of GSD and MBSD
and (ii) reduce the end of day position fee of GSD are consistent with
Section 17A(b)(3)(D) of the Act \11\ and the Proposed Rule Change to
include a description of FICC's current policy regarding the issuance
of rebates to GSD Members and MBSD Clearing Members is consistent with
Rule 17Ad-22(e)(23)(ii),\12\ as promulgated under the Act, for the
reasons described below.
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\11\ 15 U.S.C. 78q-1(b)(3)(D).
\12\ 17 CFR.17Ad-22(e)(23)(ii).
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Section 17A(b)(3)(D) of the Act requires that the rules of a
clearing agency, such as FICC, provide for the equitable allocation of
reasonable dues, fees, and other charges among its participants.\13\
FICC believes that the proposed changes to the Maintenance Fee and the
end of day position fee are consistent with this provision of the
Act.\14\
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\13\ 15 U.S.C. 78q-1(b)(3)(D).
\14\ Id.
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As described above, the proposal would modify the Maintenance Fee
to remove the Waiver Provision. Because the proposed change would not
alter how the Maintenance Fee is currently allocated (i.e., charged) to
Members, FICC believes the fee would continue to be equitably
allocated. More specifically, as mentioned above, the Maintenance Fee
is and would continue to be charged to all Members in proportion to the
Member's cash deposit balance in the Clearing Fund. As such, and as is
currently the case, Members that make greater use of FICC's services
would generally be subject to a larger Maintenance Fee because such
Member would typically be required to maintain a larger Clearing Fund
deposit pursuant to the respective MBSD Rules or GSD Rules.\15\
Conversely, Members that use FICC's services less would generally be
subject to a smaller Maintenance Fee because such Members would
typically be required to maintain a smaller Clearing Fund deposit
pursuant to the respective MBSD Rules or GSD Rules.\16\ The described
change would not adjust that allocation. For this reason, FICC believes
the Maintenance Fee would continue to be equitably allocated among
Members.
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\15\ See Rule 4, GSD Rules and Rule 4, MBSD Rules, supra note 5.
\16\ Id.
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Similarly, FICC believes that the Maintenance Fee would continue to
be a reasonable fee under the proposed change described above. Although
removal of the Waiver Provision means that Members could be assessed a
Maintenance Fee at times when they may not otherwise have been assessed
the fee, the removal of the provision would enable FICC to collect
needed revenue from the fee even in a difficult economic environment.
Additionally, the proposed change would help establish consistent
pricing between FICC and its affiliates, NSCC and DTC, regarding each
of their respective Maintenance Fees, as concurrent proposals by NSCC
and DTC would result in the same calculation.\17\ For this reason, FICC
believes the Maintenance Fee would continue to be reasonable.
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\17\ See supra note 9.
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In addition, FICC believes the proposed change to reduce the end of
day position fee in the GSD Rules is consistent with Section
17A(b)(3)(D).\18\ The proposal would provide for the equitable
allocation of fees among participants because the proposal would apply
to all participants, such that all Members would be subject to this
proposed reduction of the end of the day position fee following the
implementation of the proposed change. The end of day position fee is
and
[[Page 78908]]
would continue to be charged to all GSD Members.
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\18\ 15 U.S.C. 78q-1(b)(3)(D).
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Because these proposed changes would not alter how the end of day
position fee is currently allocated (i.e., charged) to Members, FICC
believes these fees would continue to be equitably allocated. More
specifically, as mentioned above, the end of day position fee is and
would continue to be charged to all GSD Members based on their end of
day gross positions. As such, and is currently the case, GSD Members
that have more activity and make greater use of FICC's services would
generally be subject to a greater overall amount in terms of their end
of day position fee. Conversely, GSD Members that generate lower levels
of activity and use FICC's services less would generally be subject to
smaller overall amount in terms of their end of day position fee. For
this reason, FICC believes the end of day position fee would continue
to be equitably allocated among GSD Members.
Similarly, FICC believes that the end of day position fee would
continue to be a reasonable fee under the proposed change described
above. The proposed reduction of the end of the day position fee would
be consistent with FICC's cost plus low-margin pricing model. With the
proposed reduction of the end of day position fee, FICC believes it
would still be able to continue to generate sufficient revenues to
cover its operating costs plus generate a low net income operating
margin while also enabling all GSD Members to benefit from a lower end
of day position fee. For this reason, FICC believes the end of day
position fee would continue to be reasonable.
Based on the forgoing, FICC believes the Proposed Rule Change is
consistent with Section 17A(b)(3)(D).\19\
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\19\ Id.
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Rule 17Ad-22(e)(23)(ii) under the Act requires that FICC establish,
implement, maintain and enforce written policies and procedures
reasonably designed to provide sufficient information to enable
participants to identify and evaluate the risks, fees, and other
material costs they incur by participating in the covered clearing
agency.\20\ The Proposed Rule Change would replace an outdated
description of FICC's past practice of adjusting GSD Members' and MBSD
Clearing Members' invoices, with an updated description of its current
rebate practice, which, when applicable, results in a reduction to the
amount of fees a GSD Member and MBSD Clearing Member owes to FICC. By
updating Section XII of the Fee Structure of the GSD Rules, the
Important Note under Section I of the Schedule of Charges Broker
Account Group of the MBSD Rules and the Important Note under Section I
of the Schedule of Charges Dealer Account Group of the MBSD Rules with
a clear, transparent description of FICC's current rebate practice, the
Proposed Rule Change would provide GSD Members and MBSD Clearing
Members with sufficient information to evaluate the fees they may incur
by participating in FICC. Therefore, FICC believes the Proposed Rule
Change would be consistent with the requirements of Rule 17Ad-
22(e)(23)(ii).\21\
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\20\ 17 CFR 240.17Ad-22(e)(23)(ii).
\21\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
FICC does not believe that the Proposed Rule Changes to (i) modify
the Maintenance Fee of GSD and MBSD and (ii) update and enhance the
transparency of FICC's policy regarding the issuance of rebates to GSD
Members and MBSD Clearing Members in the GSD Rules and MBSD Rules would
have any impact, or impose any burden, on competition among its Members
for the reasons described below. FICC believes that the proposed change
to reduce the end of day position fee could promote competition among
GSD Members for the reasons described below.
FICC does not believe that the proposed change to the Maintenance
Fee would have an impact on competition among its Members. As described
above, the Maintenance Fee is charged ratably based on Members' use of
FICC's services, as reflected in Members' cash deposit balances to the
Clearing Fund. Thus, the fee is designed to be reflective of each
Member's individual activity at FICC. Nevertheless, if removal of the
Waiver Provision, and the resulting imposition of the Maintenance Fee
at a time when a Member would not have otherwise been assessed the fee,
would create a competitive burden for a Member, FICC believes such a
burden would not be significant, given that the amount assessed would
be the same but for application of the Waiver Provision. Moreover, FICC
believes that any such burden would be necessary and appropriate in
furtherance of the purposes of the Act, as permitted by Section
17A(b)(3)(I) of the Act.\22\
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\22\ 15 U.S.C. 78q-1(b)(3)(I).
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The burden would be necessary because it is essential that FICC
offset some of its costs and expenses with stable revenue generated
from the Maintenance Fee, regardless of the economic environment. As
described above, not doing so could adversely affect FICC's financial
health. The burden would be appropriate because, as described above,
the Maintenance Fee is calculated, using a balanced formula, to assess
a fee that is reflective of the Member's use of FICC's services, so
that FICC can defray some of its costs and expenses in providing those
services.
FICC believes that the proposed reduction of the end of day
position fee could promote competition among GSD Members by potentially
reducing GSD Members' operating costs. As described above, the proposed
reduction of the end of day position fee would apply equally to all GSD
Members.
In addition, FICC does not believe the Proposed Rule Change to
describe its current rebate practice would have any impact, or impose
any burden, on competition among its Members. As described above, this
Proposed Rule Change would replace information currently in Section XII
of the Fee Structure of the GSD Rules, the Important Note under Section
I of the Schedule of Charges Broker Account Group of the MBSD Rules and
Section I of the Schedule of Charges Dealer Account Group of the MBSD
Rules, with a description of FICC's current rebate practice. As
described in the proposed language, under its current practice, rebates
are allocated to eligible Members on a pro-rata basis based on such
Members' gross fees paid to FICC within the applicable rebate period.
Therefore, the current practice is applied equally to all eligible
Members. The Proposed Rule Change to provide Members with transparency
into this practice would not cause any increase or decrease in the
rebates Members may receive. Therefore, this Proposed Rule Change would
not have any impact, or impose any burden, on competition among
Members.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
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.
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) \23\ of the Act and paragraph
[[Page 78909]]
(f) \24\ of Rule 19b-4 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.
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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the Proposed Rule
Change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-FICC-2020-014 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-2020-014. 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 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 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-2020-014 and should be submitted on
or before December 28, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-26786 Filed 12-4-20; 8:45 am]
BILLING CODE 8011-01-P