Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Rules Relating to the Legal Entity Identifier Requirement

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-102983; File No. SR-FICC-2025-012]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Rules Relating to the Legal Entity Identifier Requirement</SUBJECT> <DATE>May 2, 2025.</DATE> Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)  <SU>1</SU> <FTREF/> and Rule 19b-4 thereunder, <SU>2</SU> <FTREF/> notice is hereby given that on April 25, 2025, 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 proposed rule change pursuant to Section 19(b)(3)(A) of the Act  <SU>3</SU> <FTREF/> and Rule 19b-4(f)(4) thereunder. <SU>4</SU> <FTREF/> The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. <FTNT> <SU>1</SU>  15 U.S.C. 78s(b)(1). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.19b-4. </FTNT> <FTNT> <SU>3</SU>  15 U.S.C. 78s(b)(3)(A). </FTNT> <FTNT> <SU>4</SU>  17 CFR 240.19b-4(f)(4). </FTNT> <HD SOURCE="HD1">I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change</HD> The proposed rule change consists of amendments to the Rules in order to require (i) each applicant applying to become an MBSD Clearing Member or MBSD Cash Settling Bank Member to obtain and provide a Legal Entity Identifier (“LEI”) to FICC as part of its membership application and (ii) each GSD Funds-Only Settling Bank Member, MBSD Clearing Member and MBSD Cash Settling Bank Member to have a current LEI on file with FICC at all times. FICC is also proposing to revise the defined term used in the GSD Rules relating to LEIs to conform to the proposed defined term being added to the MBSD Rules. <SU>5</SU> <FTREF/> <FTNT> <SU>5</SU>  Terms not defined herein are defined in the FICC Government Securities Division (“GSD”) Rulebook (“GSD Rules”) and the FICC Mortgage-Backed Securities Division (“MBSD”) Clearing Rules (“MBSD Rules” and together with the GSD Rules and the MBSD Rules, the “Rules”), <E T="03">available at www.dtcc.com/legal/rules-and-procedures.</E> </FTNT> <HD SOURCE="HD1">II. Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> 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. <HD SOURCE="HD2">(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> <HD SOURCE="HD3">1. Purpose</HD> The purpose of the proposed rule change is to amend the Rules in order to require (i) each applicant applying to become an MBSD Clearing Member or MBSD Cash Settling Bank Member to obtain and provide a LEI to FICC as part of its membership application and (ii) each GSD Funds-Only Settling Bank Member, MBSD Clearing Member and MBSD Cash Settling Bank Member to have a current LEI on file with FICC at all times. FICC is also proposing to revise the defined term used in the GSD Rules relating to LEIs to conform to the proposed defined term being added to the MBSD Rules. <HD SOURCE="HD3">Background</HD> <HD SOURCE="HD3">LEI Background</HD> An LEI is a 20-character reference code to uniquely identify legally distinct entities that engage in financial transactions. <SU>6</SU> <FTREF/> The LEI system was developed by the Financial Stability Board  <SU>7</SU> <FTREF/> together with finance ministers and central bank governors represented in the Group of 20 in the wake of the 2008 financial crisis. <SU>8</SU> <FTREF/> The Financial Stability Board established GLEIF in June 2014 to support the implementation and use of LEIs. <SU>9</SU> <FTREF/> The Regulatory Oversight Committee (“ROC”), a group of public authorities from around the globe, oversees GLEIF and the global LEI system. <SU>10</SU> <FTREF/> <FTNT> <SU>6</SU>   <E T="03">See www.gleif.org/en/about-lei/introducing-the-legal-entity-identifier-lei.</E> The LEI is based on the ISO 17442 standard developed by the International Organization for Standardization and satisfies the standards implemented by the Global Legal Entity Identifier Foundation (“GLEIF”). <E T="03">See www.gleif.org/en/about-lei/introducing-the-legal-entity-identifier-lei.</E> </FTNT> <FTNT> <SU>7</SU>  The Financial Stability Board is an international body that monitors and makes recommendations about the global financial system. <E T="03">See www.fsb.org.</E> </FTNT> <FTNT> <SU>8</SU>   <E T="03">See www.gleif.org/en/about/history.</E> </FTNT> <FTNT> <SU>9</SU>   <E T="03">See supra</E> note 6. <E T="03">See also www.gleif.org/en/about/this-is-gleif.</E> </FTNT> <FTNT> <SU>10</SU>  The ROC is a group of public authorities from around the globe established in January 2013 to coordinate and oversee the global LEI system. <E T="03">See www.gleif.org/en/about/governance/regulatory-oversight-committee-roc.</E> </FTNT> LEIs are issued by entities called Local Operating Units (“LOUs”) that are accredited by GLEIF to issue LEIs within certain jurisdictions. <SU>11</SU> <FTREF/> LOUs validate information about an entity and issue a unique LEI for that entity. An LEI provides information about legal entities, including the official legal name, registered address, country of incorporation, registration authority and the entities' ownership structure, including parent and child organizations. <FTNT> <SU>11</SU>   <E T="03">See www.gleif.org/en/about-lei/get-an-lei-find-lei-issuing-organizations.</E> </FTNT> <HD SOURCE="HD3">Adding the LEI Requirement for FICC</HD> FICC's parent entity, The Depository Trust & Clearing Corporation (“DTCC”), <SU>12</SU> <FTREF/> provides technology resources and support services to FICC and DTCC's other subsidiaries, including providing support for onboarding, lifecycle management and risk management of the subsidiaries' applicants and members. Certain of DTCC's subsidiaries, including FICC with respect to GSD, <SU>13</SU> <FTREF/> currently require that its applicants and members obtain and provide an LEI. However, this requirement is not consistent across DTCC's subsidiaries and services, including MBSD. <FTNT> <SU>12</SU>  DTCC is a non-public holding company that owns three registered clearing agencies and related businesses. In addition to FICC, DTCC also owns the following registered clearing agencies: The Depository Trust Company and the National Securities Clearing Corporation. </FTNT> <FTNT> <SU>13</SU>  FICC implemented LEI requirements for GSD in compliance with a rule adopted by the Office of Financial Research of the U.S. Department of Treasury establishing a data collection requirement covering centrally cleared transactions in the U.S. repurchase market. <E T="03">See</E> Securities Exchange Act Release No. 88557 (Apr. 3, 2020), 85 FR 19979 (Apr. 9, 2020) (SR-FICC-2020-002). </FTNT> FICC is proposing to add a requirement that its applicants and members of MBSD and GSD Funds-Only Settling Bank Members obtain and provide an LEI to FICC similar to the requirement currently in place for GSD. <SU>14</SU> <FTREF/> FICC believes that requiring such applicants and members to obtain and provide an LEI to FICC would improve the quality of data that is collected from its participants as well as the process for collecting that data, including providing the following benefits: <FTNT> <SU>14</SU>   <E T="03">Id.</E> </FTNT> • Simplify Operational Processes—LEIs would help simplify and expedite due diligence and know your customer (“KYC”) verification of participants enabling FICC to do business with participants faster and safer. • Enhance Risk Management—LEIs provide information about counterparty relationships and hierarchies within and between financial entities, improving counterparty risk assessment and management. • Leverage Existing Capabilities—The use of LEIs would allow FICC to leverage existing DTCC technology and data to create automatic upfront validations to support participant onboarding and lifecycle management for FICC and DTCC's other subsidiaries. • Reliable Data Source—The LEI system is supported by a trusted method of verifying the identity of the legal entity in question and would provide a reliable data source. This is supported by the LOUs maintenance of all respective reference and identification data and the overall global LEI system which is coordinated and overseen by ROC. • Reduction in Record Duplication—The use of LEIs would reduce overlap and duplication of data within databases, helps streamline data reconciliations and reduce data errors by decreasing the requirements for manual comparison of different databases. Implementing an LEI requirement is also intended to improve DTCC's ability to manage data across its subsidiaries, including FICC. Many participants are shared among FICC and its affiliates. Currently, there is no consistent requirement for submission of an industry identifier by FICC and DTCC's other subsidiaries. This has impacted DTCC's ability to profile its subsidiaries' participants quickly and efficiently across all the subsidiaries' products and services. DTCC's other subsidiaries are also implementing an LEI requirement consistent with the LEI requirements being proposed for FICC. <HD SOURCE="HD3">Member ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 23k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━