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Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to FICC's Schedule of Money Tolerances

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Start Preamble March 26, 2003.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] notice is hereby given that on December 20, 2002, the 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 primarily by FICC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The proposed rule change amends the schedule of money tolerances set forth in the rules of the Government Securities Division of FICC.

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, FICC 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. FICC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of such statements.[2]

(A) Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

The rules of the Government Securities Division of FICC contain a schedule of money tolerances (“Schedule”) that permits FICC, among other things, to compare a buy-sell trade with a discrepancy in its settlement amount of $1 per million in real time.[3] FICC is proposing to amend this tolerance to $2 per million in order to increase the intraday comparison rate of valid trades.

FICC has found that the current $1 tolerance on the settlement amount of buy-sell transactions results in increased risk. Specifically, FICC has found after conducting an analysis that many valid trades remain uncompared during the day and thus do not receive the benefit of FICC's guaranty. These trades eventually compare at end of day, when the applicable tolerance is higher, but they are left without the FICC guaranty during the day. FICC's analysis has shown that increasing the real-time money tolerance to $2 per million would cause more than 1,000 additional trades to compare earlier in the day. FICC is thus proposing to amend the Schedule to provide for a $2 real-time tolerance per million for buy-sell transactions.

FICC believes the proposed rule change is consistent with the Act and the rules and regulations thereunder because it will permit valid trades to compare earlier in the day and thus will eliminate risk and will promote the prompt and accurate clearance and settlement of securities.

(B) Self-Regulatory Organization's Statement on Burden on Competition.

FICC does not believe that the proposed rule change would have an impact on or impose a burden on competition.

(C) Self-Regulatory Organization'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 yet been solicited nor 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)(iii) of the Act [4] and Rule 19b-4(f)(4) [5] thereunder because it Start Printed Page 15782effects a change in an existing service of OCC that (i) does not adversely affect the safeguarding of securities or funds in the custody or control of OCC or for which it is responsible and (ii) does not significantly affect the respective rights or obligations of OCC or persons using the service. At any time within sixty days of the filing of the proposed rule change, the Commission may summarily abrogate 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.

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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street NW., Washington, DC 20549-0609. Comments may also be submitted electronically at the following e-mail address: All comment letters should refer to File No. SR-FICC-2002-13. This file number should be included on the subject line if e-mail is used. To help us process and review comments more efficiently, comments should be sent in hardcopy or by e-mail but not by both methods. 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 inspection and copying in the Commission's Public Reference Section, 450 Fifth Street NW., Washington, DC 20549. Copies of such filing will also be available for inspection and copying at the principal office of FICC. All submissions should refer to the File No. SR-FICC-2002-13 and should be submitted by April 22, 2003.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[6]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


2.  The Commission has modified parts of these statements.

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3.  Money tolerances are calculated based on the par amount of the securities. GSCC, FICC's predecessor, recently amended the real-time money tolerance applicable to the statement amount of repo transactions from $1 to $0.10. Securities Exchange act Release No. 46658 (October 11, 2002) 67 FR 64943 [SR-GSCC-2002-08]. In making that rule filing, GSCC inadvertently eliminated the text that was applicable to the real-time tolerance for the settlement money of buy-sell transactions, which is the subject of this present rule filing. This present rule filing therefore reinstates the necessary language to cover the real time tolerance applicable to buy-sell transactions and distinguishes it from the language applicable to repo transactions.

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4.  15 U.S.C. 78s(b)(3)(A)(iii).

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[FR Doc. 03-7758 Filed 3-31-03; 8:45 am]