July 11, 2013.
On May 15, 2013, the Fixed Income Clearing Corporation (“FICC”) filed with the Securities and Exchange Commission (“Commission”) proposed rule change SR-FICC-2013-05 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 
and Rule 19b-4 thereunder.
The proposed rule change was published for comment in the Federal Register on June 4, 2013.
The Commission received one comment on the proposed rule change that did not address the content of the proposal.
For the reasons discussed below, the Commission is approving the proposed rule change.
I. Description of the Proposed Rule Change
FICC's proposed rule change would amend the rulebook of the Government Securities Division (“GSD”) to include trueEX LLC (“trueEX”) as one of the GSD's designated locked-in trade sources. The GSD's rules currently provide for the submission of locked-in trades 
by certain locked-in trade sources 
on behalf of GSD members. Currently, the GSD's designated locked-in trade sources are the following entities: (i) Federal Reserve Banks (as fiscal agents of the United States); (ii) the Federal Home Loan Mortgage Start Printed Page 42810Corporation (“Freddie Mac”); (iii) GCF-Authorized Inter-Dealer Brokers; 
(iv) the U.S. Department of the Treasury; and (v) New York Portfolio Clearing, LLC.
trueEX is an electronic exchange for interest rate swaps, and has been designated a contract market by the Commodity Futures Trading Commission.
The swap transactions executed by trueEX are cleared by a clearinghouse other than the GSD, but in the event one of these swap transactions results in the physical delivery of the underlying instrument,
the GSD will clear and settle the exchange of that instrument in certain instances.
Accordingly, for the delivery-versus-payment (“DVP”) 
leg of these physical delivery transactions, trueEX will offer members who are also members of GSD the ability to have such transactions submitted to the GSD by trueEX as netting-eligible transactions (e.g., as Treasury DVP transactions). In its capacity as a designated locked-in trade source, trueEX will transmit transactions to the GSD throughout the day by submitting single tickets in a batch format. Once trueEX transmits a locked-in trade to the GSD, the GSD will process the trade normally, along with the respective GSD member's other DVP trades. Because the ticket submitted by trueEX lists trueEX as the submitter on behalf of two GSD counterparties, the single-ticket format ensures that trueEX will not have a resulting settlement obligation, even though it is a party to the trade.
If trueEX is approved as a locked-in trade source by the GSD during the onboarding phase,
it will be the first designated contract market 
to act as a locked-in trade source for the GSD.
As is the case with other locked-in trade submissions accepted by the GSD, GSD members will be required to execute appropriate documentation evidencing to the GSD their authorization of trueEX to submit trades on their behalf. The GSD will notify members of the availability of this documentation via Important Notice.
Section 19(b)(2)(C) of the Act 
directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization. Section 17A(b)(3)(F) of the Act 
requires, among other things, that the rules of a clearing agency be designed to achieve several goals, including (i) Promoting the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions, (ii) assuring the safeguarding of securities and funds that are in the custody or control of the clearing agency or for which it is responsible, and (iii) protecting investors and the public interest.
The Commission concludes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder. The Commission believes that adding trueEX as a source of locked-in trades for the GSD will promote the prompt and accurate clearance and settlement of securities transactions by expediting the GSD's receipt of accurate trade data. In the absence of a locked-in trade source, trades must be compared bilaterally, which requires that both parties to the transaction independently transmit trade information to the GSD.
This confirmation process can occasion delays when the parties fail to submit trade information in a timely fashion, or when they submit inaccurate or incomplete information that the GSD must then verify. The Commission believes that allowing the GSD to accept trade information from trueEX on a locked-in basis will help the GSD process transactions more rapidly, and will enhance the accuracy of the trade information the GSD uses in performing its clearing services.
In addition, the Commission believes that allowing trueEX to serve as a locked-in trade source is generally consistent with the safeguarding of the securities and funds in the GSD's control, or for which it is responsible.
Trades originating on the trueEX exchange will remain subject to all of the GSD's normal risk management procedures, which include marking member portfolios to the market on an intraday basis and charging variation margins accordingly.
These risk management procedures should help ensure the safety of the securities and funds handled by the GSD in connection with transactions effected on the trueEX exchange.
Finally, the Commission believes that trueEX satisfies the general criteria for serving as a locked-in trade source to the GSD, provided the GSD determines that trueEX meets all of the GSD's applicable onboarding protocols. The Commission has previously determined that the GSD may utilize locked-in comparison for trades executed on a “pure electronic trading system that is [computer] terminal-driven” and which permits “no discretion over trade details . . . once the trade is submitted.” 
trueEX meets all of these requirements. The trueEX exchange is exclusively an electronic trading platform, and counterparties executing trades there may not unilaterally modify or cancel trades once trueEX has matched them.
Start Printed Page 42811
On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act, particularly those set forth in Section 17A,
and the rules and regulations thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-FICC-2013-05) be, and hereby is, approved.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Elizabeth M. Murphy,
[FR Doc. 2013-17096 Filed 7-16-13; 8:45 am]
BILLING CODE 8011-01-P