Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving Proposed Rule Change, as Modified by Partial Amendment No. 1, To Establish a New Collateral-in-Lieu Offering Within the Sponsored GC Service, and Expand the Sponsored GC Service To Allow a Sponsoring Member To Submit for Clearing a “Done-Away” Sponsored GC Trade

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-104374A; File No. SR-FICC-2025-019]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving Proposed Rule Change, as Modified by Partial Amendment No. 1, To Establish a New Collateral-in-Lieu Offering Within the Sponsored GC Service, and Expand the Sponsored GC Service To Allow a Sponsoring Member To Submit for Clearing a “Done-Away” Sponsored GC Trade</SUBJECT> <DATE>December 12, 2025.</DATE> On August 29, 2025, Fixed Income Clearing Corporation (“FICC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change SR-FICC-2025-019 pursuant to Section 19(b) of the Securities Exchange Act of 1934 (“Exchange Act”)  thereunder to modify FICC's Government Securities Division (“GSD”) Rulebook (“GSD Rules”)  <SU>3</SU> <FTREF/> to incorporate rules to establish a new Collateral-in-Lieu offering within the Sponsored GC Service, and expand the Sponsored GC Service to allow a Sponsoring Member to submit for clearing a “done-away” Sponsored GC Trade. The proposed rule change was published for public comment in the <E T="04">Federal Register</E> on September 15, 2025. <SU>4</SU> <FTREF/> <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>  The GSD Rules are <E T="03">available at https://www.dtcc.com/~/media/Files/Downloads/legal/rules/ficc_gov_rules.pdf.</E> Terms not otherwise defined herein are defined in the GSD Rules or in the proposed rule change. </FTNT> <FTNT> <SU>4</SU>   <E T="03">See</E> Exchange Act Release No. 103940 (Sept. 10, 2025), 90 FR 44408 (Sept. 15, 2025) (File No. SR-FICC-2025-019) (“Notice of Filing”). </FTNT> On September 26, 2025, pursuant to Section 19(b)(2) of the Exchange Act, <SU>5</SU> <FTREF/> the Commission designated a longer period within which to approve, disapprove, or institute proceedings to determine whether to approve or disapprove the proposed rule change. <SU>6</SU> <FTREF/> <FTNT> <SU>5</SU>  15 U.S.C. 78s(b)(2). </FTNT> <FTNT> <SU>6</SU>  Securities Exchange Act Release No. 104085 (Sept. 26, 2025), 90 FR 46981 (Sept. 30, 2025) (File No. SR-FICC-2025-019). </FTNT> On September 29, 2025, FICC filed Partial Amendment No. 1 to the proposed rule change  <SU>7</SU> <FTREF/> to make conforming changes to GSD Rule 3A liquidation provisions for consistency with a separate pending proposed rule change that FICC amended after the Notice of Filing. <SU>8</SU> <FTREF/> The Proposed Rule Change was published for public comment in the <E T="04">Federal Register</E> on November 20, 2025. <SU>9</SU> <FTREF/> <FTNT> <SU>7</SU>  Text of the proposed changes made by the Partial Amendment No. 1 to the proposed rule change is <E T="03">available at https://www.sec.gov/comments/sr-ficc-2025-019/srficc2025019-664907-1986975.pdf.</E> The proposed rule change, as modified by Partial Amendment No. 1, is hereinafter referred to as the “Proposed Rule Change.” </FTNT> <FTNT> <SU>8</SU>  Specifically, FICC amended proposed rule change SR-FICC-2025-015 to include express language regarding the ability of a Sponsoring Member or FICC to liquidate an indirect participant's done-away positions and to describe two ways that a Sponsoring Member may liquidate done-away transactions pursuant to FICC's default management rules. <E T="03">See</E> Securities Exchange Act Release No. 104001 (Sept. 18, 2025), 90 FR 45850 (Sept. 23, 2025) (File No. SR-FICC-2025-015). <E T="03">See also</E> Securities Exchange Act Release No. 103282 (June 17, 2025), 90 FR 26656 (June 23, 2025) (File No. SR-FICC-2025-015). </FTNT> <FTNT> <SU>9</SU>  Securities Exchange Act Release No. 104193 (November 17, 2025), 90 FR 52466 (Nov. 20, 2025) (File No. SR-FICC-2025-019). </FTNT> The Commission has received no comments regarding the substance of the Proposed Rule Change. For the reasons discussed below, the Commission is approving the Proposed Rule Change. <HD SOURCE="HD1">I. Description of the Proposed Rule Change</HD> <HD SOURCE="HD2">A. Background</HD> FICC, through GSD, serves as a central counterparty (“CCP”) and provides real-time trade matching, clearing, risk management and netting for cash purchases and sales and repurchase and reverse repurchase transactions (“repos”) involving U.S. Treasury securities. Market participants that are not direct members of FICC may access FICC's clearing services indirectly through a FICC direct member ( <E T="03">i.e.,</E> Netting Member). Through the Sponsored Service, one of FICC's indirect participation offerings, FICC permits Netting Members, approved under the GSD Rules as “Sponsoring Members,” to sponsor certain firms, referred to as “Sponsored Members,” into a limited form of GSD membership. <SU>10</SU> <FTREF/> A Sponsoring Member is permitted to submit to FICC, for comparison, novation, and netting, certain eligible securities transactions of its Sponsored Members. FICC requires each Sponsoring Member to establish an omnibus account at FICC (separate from its regular netting account) for Sponsored Member trading activity. For operational and administrative purposes, a Sponsored Member appoints its Sponsoring Member to act as processing agent with respect to the Sponsored Member's satisfaction of its securities and funds-only settlement obligations. <SU>11</SU> <FTREF/> <FTNT> <SU>10</SU>   <E T="03">See</E> note 3. </FTNT> <FTNT> <SU>11</SU>   <E T="03">See</E> GSD Rule 3A, <E T="03">supra</E> note 3. An entity that chooses to become a Sponsoring Member retains its status as a Netting Member and can continue to submit any non-Sponsored Member activity to FICC as such. </FTNT> A Sponsored Member is the legal counterparty to FICC for any submitted transactions. <SU>12</SU> <FTREF/> However, the Sponsoring Member unconditionally guarantees to FICC the Sponsored Member's performance under a Sponsoring Member Guaranty, which guarantees to FICC the payment and performance of a Sponsored Member's obligations to FICC. <SU>13</SU> <FTREF/> Therefore, FICC relies on the financial resources of the Sponsoring Member as guarantor. <FTNT> <SU>12</SU>   <E T="03">See</E> GSD Rule 3A, section 7 (describing novation of Sponsored Member Trades) and section 2 (identifying membership types), <E T="03">supra</E> note 3. </FTNT> <FTNT> <SU>13</SU>   <E T="03">See</E> GSD Rule 3A, section 2 (describing the operation of the Sponsoring Member Guaranty) <E T="03">and</E> GSD Rule 1 (defining the Sponsoring Member Guaranty), <E T="03">supra</E> note 3. </FTNT> General collateral  <SU>14</SU> <FTREF/> triparty repos between Sponsoring Members and Sponsored Members ( <E T="03">i.e.,</E> “done-with” trades) are eligible for clearing under FICC's Sponsored GC Service within FICC's Sponsored Service (“Sponsored GC Trades”). <SU>15</SU> <FTREF/> After the Start Leg settles away from FICC, the End Leg, or the concluding Sponsored GC Trade ( <E T="03">i.e.,</E> the “repurchase”), is novated to FICC and is eligible for netting against all other eligible trades of the GSD Member. <SU>16</SU> <FTREF/> FICC states that, to protect against the non-performance of the End Leg, certain cash lenders, such as registered investment companies (“RICs”), generally charge cash borrowers a haircut as additional collateral above 100% of the cash value lent at settlement of the Start Leg (hereinafter “collateral haircut”). <SU>17</SU> <FTREF/> Currently, this haircut is charged away from FICC and is distinct from FICC's margin charge. <SU>18</SU> <FTREF/> Furthermore, FICC charges margin ( <E T="03">i.e.,</E> the member's Clearing Fund Requirement) on all trades, including any Sponsored GC Trades, novated to FICC. <FTNT> <SU>14</SU>  General collateral, or GC, refers to a set of high-quality, liquid security issues, which trade in the repo market at the same or a very similar repo rate. These security issues can therefore be substituted for one another without changing the repo rate. In other words, the buyer in a general collateral repo is indifferent to which of the general collateral securities she will receive. The basket of security issues that form a particular general collateral repo market belong to the same class ( <E T="03">e.g.,</E> government bonds) or sub-class ( <E T="03">e.g.,</E> government bonds with no more than five years remaining to maturity). <E T="03">See</E> International Capital Market Association, <E T="03">[FAQ] 8. What is General Collateral (GC)?,</E> ICMA ERCC Publications (Jan. 2019), <E T="03">available at https://www.icmagroup.org/market-practice-and-regulatory-policy/repo-and-collateral-markets/icma-erccpublications/frequently-asked-questions-on-repo/8-what-is-general-collateral-gc.</E> </FTNT> <FTNT> <SU>15</SU>   <E T="03">See</E> GSD Rule 3A, <E T="03">supra</E> note 3. The Start Leg, or the initial trade of the general collateral triparty repo, is not centrally cleared and is settled on a trade-for-trade basis on the triparty repo platform of a Sponsored GC Clearing Agent Bank. BNY currently operates the tri-party platform that facilitates trades conducted through the Sponsored GC Service. </FTNT> <FTNT> <SU>16</SU>   <E T="03">See</E> GSD Rule 3A, <E T="03">supra</E> note 3. Sponsored GC Trades are settled on the triparty repo platform of a Sponsored GC Clearing Agent Bank. </FTNT> <FTNT> <SU>17</SU>  FICC states the haircut amount typically is set at 102%, although this amount may vary based on the commercial terms agreed upon by the counterparties involved. <E T="03">See</E> Notice of Filing, <E T="03">supra</E> note 4, at 44413. </FTNT> <FTNT> <SU>18</SU>   <E T="03">See</E> Notice of Filing, <E T="03">su ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 75k characters. 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