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Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices SECURITIES AND EXCHANGE
COMMISSION
Release No. 3492799; File No. SRFICC
2021801

Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Amendment No. 1 and Notice of No Objection to Advance Notice, as Modified by Amendment No. 1, To Add the Sponsored GC Service and Make Other Changes August 27, 2021.

On May 12, 2021, Fixed Income Clearing Corporation FICC filed with the Securities and Exchange Commission Commission advance notice SRFICC2021801 pursuant to Section 806e1 of Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, entitled Payment, Clearing and Settlement Supervision Act of 2010 Clearing Supervision Act,1 and Rule 19b 4n1i 2 under the Securities Exchange Act of 1934 Exchange Act 3 to amend FICCs Government Securities Division Rulebook 4 to add a new service that expands FICCs existing Sponsored Service. The advance notice was published for public comment in the Federal Register on June 3, 2021.5 On June 8, 2021, FICC
filed Amendment No. 1 to the advance notice, to correct an erroneous cross reference in the original filing.6 The 1 12

U.S.C. 5465e1.
CFR 240.19b4n1i.
3 15 U.S.C. 78a et seq.
4 FICCs Government Securities Division GSD
Rulebook Rules are available at http
www.dtcc.com/legal/rules-and-procedures.
5 Securities Exchange Act Release No. 92019 May 27, 2021, 86 FR 29834 June 3, 2021 SRFICC
2021801 Notice of Filing.
6 Amendment No. 1 made a correction to Exhibit 5 of the filing. On May 12, 2021, FICC also filed a related proposed rule change SRFICC2021
003 with the Commission pursuant to Section 19b1 of the Exchange Act and Rule 19b4
thereunder. 15 U.S.C. 78sb1 and 17 CFR
240.19b4, respectively. The proposed rule change was published in the Federal Register on June 1, 2021. Securities Exchange Act Release No. 92014
May 25, 2021, 86 FR 29334 June 1, 2021 SR
FICC2020003. On June 8, 2021, FICC filed Amendment No. 1 to the proposed rule change to make the same correction as regarding the Advance Notice. The proposed rule change, as amended by Amendment No. 1, is hereinafter referred to as the Proposed Rule Change. In the Proposed Rule Change, FICC seeks approval of proposed changes to its rules necessary to implement the Advance Notice. On June 24, 2021, the Commission published a notice designating a longer period of time for Commission action and a longer period for public comment on the Proposed Rule Change.
Securities Exchange Act Release No. 92185 June 15, 2021, 86 FR 33420 June 24, 2021 SRFICC
2021003. The Commission has received one comment in support of the Proposed Rule Change, available at https www.sec.gov/comments/sr-ficc2021-003/srficc2021003.htm. Because the proposals
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advance notice, as modified by Amendment No. 1, is hereinafter referred to as the Advance Notice. On June 11, 2021, the Commission, by the Division of Trading and Markets, pursuant to delegated authority,7
requested additional information from FICC pursuant to Section 806e1D of the Act.8 The request for information tolled the Commissions period of review of the Advance Notice until 60
days from the date of the Commissions receipt of the information requested from FICC, absent an additional information request.9 The Commission received the information requested from FICC on July 2, 2021.
The Commission is publishing this notice to solicit comments on Amendment No. 1 from interested persons and, for the reasons discussed below, is hereby providing notice of no objection to the Advance Notice.
I. The Advance Notice A. Background 1. FICC Services for Repurchase Agreement Repo Transactions Repos involve a pair of securities transactions between two parties. The parties agree to the terms of the trade, including the securities, principal amount, interest rate, haircut, and tenor i.e., date of maturity. The first transaction the Start Leg consists of the sale of securities, in which one party the cash borrower delivers securities, and in exchange, the other party the cash lender delivers cash.
At the Start Leg, the cash borrower typically delivers an amount of securities equal in value to the amount of cash received from the cash lender, plus a haircut. Repo durations range from one day overnight to a year or more, but are usually less than three months term. The second transaction the End Leg occurs on a date after that of the Start Leg and consists of the repurchase of securities, in which the obligations to deliver cash and securities are the reverse of the Start Leg. At the End Leg, the cash borrower typically delivers the amount of cash contained in the Advance Notice and the Proposed Rule Change are the same, the Commission considered all public comments received on the proposal as applicable to both filings, regardless of whether the comments were submitted with respect to the Advance Notice or the Proposed Rule Change.
7 17 CFR 200.303a93.
8 12 U.S.C. 5465e1D.
9 See 12 U.S.C. 5465e1Eii and Gii; see Memorandum from the Office of Clearance and Settlement, Division of Trading and Markets, titled Commissions Request for Additional Information, available at https www.sec.gov/
rules/sro/ficc-an/2021/34-92019-memo-ficc.pdf.

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borrowed, plus interest, and the cash lender returns the securities.
FICC serves as CCP and provides clearance and settlement services to facilitate both bilateral and tri-party repo transactions. FICC facilitates bilateral repos 10 in which all securities delivery obligations are made against full payment delivery-versuspayment or DVP the DVP
Service. FICC generally novates and guarantees settlement of a trade upon validation of the trade details, which results in the legally binding and enforceable contract between FICC and the parties to the trade.11 On a daily basis, FICC aggregates and matches a members offsetting obligations resulting from the members trades, thereby netting the members total daily settlement obligations.12
FICC facilitates tri-party repos 13
through its General Collateral Finance GCF Repo Service, which enables members to trade general collateral finance repos based on rate, term, and underlying product throughout the day on a blind basis.14 The Bank of New York Mellon operates the tri-party platform that facilitates trades conducted through the GCF Repo Service. FICC has established standardized, generic CUSIP Numbers exclusively for GCF Repo processing and to specify the acceptable types of underlying Fedwire book-entry eligible collateral, which include U.S.
Treasuries, U.S. government agency securities, and certain mortgage-backed securities.15
10 A bilateral repo is one in which the cash lender and cash borrower directly exchange cash and securities. In the bilateral repo market, the parties specify the securities used as collateral. Therefore, a cash lender seeking to obtain a particular security would utilize the bilateral repo market.
11 See Rule 5, supra note 4.
12 See Rule 11, supra note 4.
13 A tri-party repo is one in which a clearing bank, acting as tri-party agent, provides to both the cash lender and the cash borrower certain operational, custodial, collateral management, and other services. In tri-party repo trading, both parties maintain accounts at a clearing bank, which facilitates the payment and delivery of cash and securities between the parties accounts. In contrast to the bilateral repo market and its use of specific collateral, the tri-party repo market is exclusively for general collateral repos, meaning that the parties agree to use any securities from a pre-approved basket of acceptable securities as collateral. In a general collateral repo, the cash lender is indifferent to the particular securities it receives as collateral, provided that the securities come from the preapproved basket of acceptable securities.
14 See Rule 20, supra note 4.
15 See Rule 1 definitions of GCF Repo Transaction and Generic CUSIP Number and Rule 20, Section 2, supra note 4; Notice of Filing, supra note 5 at 29836.

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