Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving 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. 34-104492; File No. SR-FICC-2025-021]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving Proposed Rule Change To Modify the GSD Rulebook Relating to a New Service Offering Called the ACS Triparty Service</SUBJECT> <DATE>December 22, 2025.</DATE> <HD SOURCE="HD1">I. Introduction</HD> On September 19, 2025, Fixed Income Clearing Corporation (“FICC”) filed with the Securities and Exchange Commission (“Commission”) proposed rule change SR-FICC-2025-021, 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/> The Proposed Rule Change would modify FICC's Government Securities Division (“GSD”) Rule Book  <SU>3</SU> <FTREF/> (the “Rules”) to create a new service offering called the ACS Triparty Service. The Proposed Rule Change was published for comment in the <E T="04">Federal Register</E> on September 30, 2025. <SU>4</SU> <FTREF/> The Commission has received no comments on the changes proposed. <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 available at <E T="03">https://www.dtcc.com/~/media/Files/Downloads/legal/rules/ficc_gov_rules.pdf.</E> Capitalized terms not otherwise defined herein are defined in the GSD Rules. </FTNT> <FTNT> <SU>4</SU>   <E T="03">See</E> Securities Exchange Act Release No. 104084 (Sept. 26, 2025), 90 FR 47045 (Sept. 30, 2025) (File No. SR-FICC-2025-021) (“Notice of Filing”). </FTNT> On November 3, 2025, pursuant to Section 19(b)(2) of the 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>   <E T="03">See</E> Securities Exchange Act Release No. 104173 (Nov. 3, 2025), 90 FR 51424 (Nov. 17, 2025) (File No. SR-FICC-2025-021). </FTNT> For the reasons discussed below, the Commission is approving the Proposed Rule Change. <HD SOURCE="HD1">II. Background</HD> FICC is a central counterparty (“CCP”), which means it interposes itself as the buyer to every seller and seller to every buyer for the financial transactions it clears. FICC's GSD provides trade comparison, netting, risk management, settlement and CCP services for the U.S. Government securities market. <HD SOURCE="HD2">A. FICC's Indirect Participant Access Models</HD> In 2024, FICC consolidated its existing correspondent clearing and prime broker services into a single “Agent Clearing Service.”  <SU>7</SU> <FTREF/> The new service allows certain Netting Members, known as “Agent Clearing Members,” to submit any transaction calling for the delivery of Eligible Securities with the exception of Netting Eligible Auction Purchases, GCF Repo Transactions, and CCIT Transactions (each, an “Agent Clearing Transaction”) to FICC for comparison, novation, netting and settlement purposes. <SU>8</SU> <FTREF/> Each Agent Clearing Transaction is entered into by an Indirect Participant (known as an “Executing Firm Customer”) with an Agent Clearing Member (a “done-with” transaction), or with a different Netting Member, or any Sponsored Member or Executing Firm Customer of any Netting Member (“done-away”). <SU>9</SU> <FTREF/> While the Agent Clearing Member acts solely as the agent of the Executing Firm Customer, it remains fully liable to FICC for all obligations associated with the Agent Clearing Transactions. <SU>10</SU> <FTREF/> <FTNT> <SU>7</SU>  Securities Exchange Act Release No. 101694 (Nov. 21, 2024), 89 FR 93784, 93798-99 (Nov. 27, 2024) (SR-FICC-2024-005). </FTNT> <FTNT> <SU>8</SU>   <E T="03">See</E> Rule 8, <E T="03">supra</E> note 3. </FTNT> <FTNT> <SU>9</SU>   <E T="03">See</E> Notice of Filing, <E T="03">supra</E> note 4 at 47045 note 3. </FTNT> FICC states that the Agent Clearing Service is designed to provide an avenue of access to FICC's clearance and settlement systems for indirect participants unable to onboard directly with FICC due to regulatory, cost, legal, operational or jurisdictional reasons. <SU>11</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,” which results in lower margin obligations than the GSD Sponsored Membership Service (“Sponsored Service”). <SU>12</SU> <FTREF/> <FTNT> <SU>11</SU>   <E T="03">See</E> Notice of Filing, <E T="03">supra</E> note 4 at 47054. </FTNT> <FTNT> <SU>12</SU>   <E T="03">See supra,</E> note 13, at 97398-99. </FTNT> The Agent Clearing Service allows Members to perfect their security interests in an Agent Clearing Transactions without filing a financing statement. According to an industry opinion obtained by SIFMA, the level of intermediation present in the Service means a court would treat Agent Clearing Transactions as “financial assets” in a “securities account,” with the Agent Clearing Member acting as the “securities intermediary” under New York's UCC Article 8. Under Articles 8 and 9, this automatically perfects the securities intermediary's interest and eliminates the need for the costly and time-consuming filing of a financing statement. <SU>13</SU> <FTREF/> The Agent Clearing Service and the Sponsored Service are the two principal Indirect Participant access models offered by FICC. Under the Sponsored Service, a Netting Member of FICC (the “Sponsoring Member”) can sponsor its customer (the “Sponsored Member”) into limited membership and submit certain transactions for comparison, novation, and netting conducted by the Sponsored Member (“Sponsored Member Trades”). <SU>14</SU> <FTREF/> Both the Agent Clearing Member and the Sponsoring Member function as the processing agent for its Sponsored Members or Executing Firm Customers regarding their trades and remains fully liable for the Sponsored Member or Executing Firm Customer's obligations to FICC under these transactions. <SU>15</SU> <FTREF/> <FTNT> <SU>13</SU>   <E T="03">See</E> Notice of Filing, <E T="03">supra</E> note 4, at 47045-46. </FTNT> <FTNT> <SU>14</SU>   <E T="03">See</E> Rule 3A, <E T="03">supra</E> note 3. </FTNT> <FTNT> <SU>15</SU>   <E T="03">See</E> Rule 3A, Section 6, and Rule 8, Section 5, <E T="03">supra</E> note 3. </FTNT> While the Agent Clearing Service and Sponsored Service share similarities including the ability of both to accommodate bilateral DVP repos, there are specific differences in the scope of transactions eligible for clearing, as discussed further in section II.B below, the treatment of haircuts, and the novation of Start Legs. <SU>16</SU> <FTREF/> Current Rules governing the Agent Clearing Service do not address the treatment of Initial Haircuts under Agent Clearing Transactions, whereas transactions with Initial Haircuts in the Sponsored Service are considered “Off-The-Market Transactions.” As for the novation of Start Legs on Same-Day Settling Trades, unlike in the Sponsored Service where FICC expressly does not novate the Start Leg of Sponsored Member Trades, the Rules provide for FICC to novate the Start Leg of done-with repo transactions submitted via the Agent Clearing Service. <FTNT> <SU>16</SU>  The “Start Leg,” means the initial settlement aspects of the Transaction, involving the transfer of the underlying Securities by the funds borrower and the taking in of such Securities by the funds lender. <E T="03">See</E> Rule 1 (definition of “Start Leg”), <E T="03">supra</E> note 3. </FTNT> <HD SOURCE="HD2">B. FICC's Agent Clearing Service and Indirect Participant Triparty Repos</HD> The Agent Clearing Service does not currently support Repo Transactions on securities represented by Generic CUSIP Numbers that settle through a clearing agent bank's triparty repo platform (“Triparty Trades”), whereas the Sponsored Service includes this type of transaction. <SU>17</SU> <FTREF/> FICC clears Triparty Trades between a Sponsored Member and its Sponsoring Member (“Sponsored GC Trades”) through its Sponsored GC Service. <SU>18</SU> <FTREF/> <FTNT> <SU>17</SU>   <E T="03">See</E> Notice of Filing, <E T="03">supra</E> note 4, at 47046. </FTNT> <FTNT> <SU>18</SU>   <E T="03">See</E> Rule 1 (definition of “Sponsored GC Service”), and Rule 3A, <E T="03">supra</E> note 3. </FTNT> Under the Sponsored GC Service, the securities delivery and related payment obligations in a Sponsored GC Trade settle directly between the pre-novation counterparties through a Sponsored GC Clearing Agent Bank's triparty repo platform, rather than through FICC. <SU>19</SU> <FTREF/> This can facilitate access for participants that are not operationally equipped to perform the collateral management and other functions associated with Repo Transactions that settle through FICC on a delivery-versus-payment basis (“DVP Repo Transactions”), or who generally prefer to use the triparty repo market because a clearing bank administers collateral management and other functions. <SU>20</SU> <FTREF/> <FTNT> <SU>19</SU>   <E T="03">See</E> Securities Exchange Act Release Nos. 92808 (Aug. 30, 2021), 86 FR 49580-81 (Sept. 3, 2021) (SR-FICC-2021-003); and 92799 (Aug. 27, 2021), 86 FR 49387-88 (Sept. 2, 2021) (SR-FICC-2021-801). </FTNT> <FTNT> <SU>20</SU>   <E T="03">Id.</E> </FTNT> <HD SOURCE="HD1">III. Description of the Proposed Rule Change</HD> The Proposed Rule Change would: (A) amend the FICC Government Securities Division Rulebook to create the ACS Triparty ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 35k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━