Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Modify the GSD Rulebook Relating to a New Service Offering Called the ACS Triparty Service

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-104084; File No. SR-FICC-2025-021]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Modify the GSD Rulebook Relating to a New Service Offering Called the ACS Triparty Service</SUBJECT> <DATES> <HD SOURCE="HED">DATES:</HD> September 26, 2025. 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 September 19, 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. 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> </DATES> <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 FICC Government Securities Division (“GSD”) Rulebook (“Rules”)  <SU>3</SU> <FTREF/> to (i) add a new service offering (the “ACS Triparty Service”) that would allow an Agent Clearing Member to submit to FICC for Novation Repo Transactions on securities represented by Generic CUSIP Numbers and held under a triparty custodial arrangement, (ii) align how the Rules treat Initial Haircuts and Start Legs under done-with Agent Clearing Transactions ( <E T="03">i.e.,</E> Agent Clearing Transactions between an Executing Firm Customer and its own Agent Clearing Member) with the treatment applicable to done-with Sponsored Member Trades, and (iii) make certain conforming and clarifying changes. The proposed rule changes are designed to facilitate access to FICC's clearance and settlement services, including by indirect participants, in accordance with the requirements of Rule 17ad-22(e)(18) under the Act. <SU>4</SU> <FTREF/> <FTNT> <SU>3</SU>  Capitalized terms not defined herein are defined in the Rules, <E T="03">available at http://www.dtcc.com/legal/rules-and-procedures.</E> </FTNT> <FTNT> <SU>4</SU>  17 CFR 240.17ad-22(e)(18). </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 to (i) add the ACS Triparty Service that would allow an Agent Clearing Member to submit to FICC for Novation Repo Transactions on securities represented by Generic CUSIP Numbers and held under a triparty custodial arrangement, (ii) align how the Rules treat Initial Haircuts and Start Legs under done-with Agent Clearing Transactions with the treatment applicable to done-with Sponsored Member Trades, and (iii) make certain conforming and clarifying changes. <HD SOURCE="HD3">(i) Background</HD> <HD SOURCE="HD3">a. The Agent Clearing Service</HD> In 2024, FICC renamed and consolidated its existing correspondent clearing/prime broker services into a single “Agent Clearing Service.”  <SU>5</SU> <FTREF/> The Agent Clearing Service allows certain Netting Members (each, an “Agent Clearing Member”) to submit to FICC for comparison, Novation, and netting cash transactions and Repo Transactions (each, an “Agent Clearing Transaction”) entered into by a customer (each, an “Executing Firm Customer”) with the Agent Clearing Member (“done-with”) or with a different Netting Member or any Sponsored Member or Executing Firm Customer (“Indirect Participant”) of any Netting Member (“done-away”). Under the Agent Clearing Service, the Agent Clearing Member acts solely as agent of the Executing Firm Customer in connection with the clearing of Agent Clearing Transactions. However, the Agent Clearing Member remains fully liable to FICC for the performance of all obligations, financial or otherwise, arising in connection with Agent Clearing Transactions. <FTNT> <SU>5</SU>  Securities Exchange Act Release No. 101694 (Nov. 21, 2024), 89 FR 93784, 93798-99 (Nov. 27, 2024) (SR-FICC-2024-005). </FTNT> The Agent Clearing Service aims to allow indirect participants to access FICC's clearance and settlement systems using a model that is similar in many respects to the agent clearing model through which market participants clear U.S. futures and cleared derivatives. <SU>6</SU> <FTREF/> Furthermore, Clearing Fund requirements for Agent Clearing Transactions are “calculated on a net basis across all Executing Firm Customers whose transactions are recorded within the same Account, resulting in aggregate margin obligations that are substantially lower than under the GSD sponsored membership service (“Sponsored Service”). <SU>7</SU> <FTREF/> Moreover, the Agent Clearing Service allows indirect participants that are unable to onboard directly with FICC to access FICC's clearance and settlement services. In addition, the level of intermediation present in the Agent Clearing Service allows Agent Clearing Members to take steps to perfect their security interests in Agent Clearing Transactions without the costly and time-consuming filing of a financing statement. <SU>8</SU> <FTREF/> FICC understands that SIFMA has commissioned an industry opinion concluding that, due to the intermediated nature of the Agent Clearing Service, a court would give effect to an agreement between an Agent Clearing Member and its Executing Firm Customer to treat Agent Clearing Transactions as “financial assets” credited to a “securities account” for which the Agent Clearing Member is “securities intermediary” within the meaning of Article 8 of the New York Uniform Commercial Code (“UCC”). Under Articles 8 and 9 of the UCC, a securities intermediary's security interest is automatically perfected. <SU>9</SU> <FTREF/> As a result, the opinion reasons, an Agent Clearing Member that makes such election would be able to perfect its security interest in the Agent Clearing Transactions without needing to file a financing statement. <SU>10</SU> <FTREF/> <FTNT> <SU>6</SU>   <E T="03">See</E> note 3. </FTNT> <FTNT> <SU>7</SU>   <E T="03">See supra</E> note 5. </FTNT> <FTNT> <SU>8</SU>   <E T="03">See</E> Letter from Laura Klimpel, Head of Fixed Income Financing Solutions, The Depository Trust & Clearing Corporation (Aug. 1, 2024), at 50, <E T="03">available at https://www.sec.gov/comments/sr-ficc-2024-007/srficc2024007-500915-1465682.pdf</E> (“Given the greater intermediation of the [Agent Clearing Service], a Netting Member would be able to utilize a `financial asset' election to perfect its security interest in transactions cleared under the [Agent Clearing Service] without having to file a UCC financing statement. Both Netting Members and customers may find this beneficial since UCC financing statements give rise to costs, risk, and publicity.”). </FTNT> <FTNT> <SU>9</SU>   <E T="03">See</E> UCC 9-309(10). </FTNT> <FTNT> <SU>10</SU>   <E T="03">See</E> SIFMA Confirmation Letter Related to the SIFMA Accounting Committee's UST Clearing Working Group's Accounting Treatment for UST Repo Transactions Cleared Through FICC White Paper, <E T="03">available at https://www.sifma.org/wp-content/uploads/2025/09/Public-SIFMA-UST-Repo-Clearing-Confirming-Letter_final.pdf.</E> </FTNT> The Agent Clearing Service is one of FICC's two principal indirect participant access models. The other is FICC's Sponsored Service. Under that service, a Netting Member of FICC (in such capacity, a “Sponsoring Member”) may sponsor into limited membership its customer (a “Sponsored Member”) and submit for comparison, Novation, and netting certain transactions entered into by the Sponsored Member (each, a “Sponsored Member Trade”). Similar to the Agent Clearing Service, the Sponsoring Member acts as processing agent for its Sponsored Members in relation to their Sponsored Member Trades and guarantees to FICC the Sponsored Member's obligations under such transactions. The Sponsored Service and Agent Clearing Service share a number of similarities. However, there are certain aspects in which the Agent Clearing Service and the Sponsored Service differ. These include the scope of transactions eligible to be cleared, the treatment of haircuts, and the Novation of Start Legs, each as further described below. <HD SOURCE="HD3">b. Triparty Repo Transactions</HD> While the Agent Clearing Service supports cash transactions and Repo Transactions that settle through FICC on a delivery-versus-payment basis (“DVP Repo Transactions”), it does not support Repo Transactions on securities represented by Generic CUSIP Numbers that settle through a clearing agent bank's triparty repo platform (“Triparty Trades”). By contrast, the Sponsored Service supports not only DVP Repo Transactions (“DVP Sponsored Member Trades”) and cash transactions, but also Triparty Trades between a Sponsored Member and its Sponsoring Member (“Sponsored GC Trades”). <SU>11</SU> <FTREF/> FICC clears Sponsored GC Trades through its Sponsored GC Service. <FTNT> <SU>11</SU>   <E T="03">See</E> Rule 3A, Section 7(b), <E T="03">supr ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 81k characters. 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