FICC has filed a rule change (SR-FICC-2005-22) with the Securities and Exchange Commission (the “SEC”) to amend the rules of the Government Securities Division (the “GSD”) and the Mortgage-Backed Securities Division (the “MBSD”) regarding the payment of interest on cash collateral deposits. The GSD requires that all netting members maintain a portion of their Clearing Fund deposit in cash. FICC currently retains the interest earned on those balances; such interest income is effectively paid back to GSD members through the rebate process, as opposed to being paid back directly and proportionally to those members whose cash generated such income. In order to more fairly distribute interest earned on the GSD cash portion of the Clearing Fund and to implement a consistent policy across the DTCC clearing agencies, FICC will begin crediting interest earned on Clearing Fund cash balances to GSD netting members on a periodic basis. FICC plans to begin accruing the interest in this regard beginning on With respect to the MBSD, while this Division generally pays interest on Participants Fund cash to its clearing participants, there is one small portion of the MBSD Participants Fund called the "Basic Deposit",[1] the interest on which the MBSD currently retains. FICC believes that to be consistent with the GSD rule change and the practice observed for all other cash deposits across the DTCC clearing agencies, the MBSD rule should be amended to provide for the payment of interest earned on the Basic Deposits to be paid directly to participants. FICC plans to begin accruing the interest in this regard beginning on FICC will announce via Important Notice the date of the first payment of this interest to members and the frequency of the payments of interest in this regard going forward. Copies of the proposed rule filing are available upon request from FICC and on FICC’s website at www.FICC.com. Written comments on the changes may be addressed to the undersigned at 55 Water Street, 31st Floor, New York, N.Y. 10041; any such comments will be forwarded to the SEC. Written comments may also be addressed to the SEC at 100 F Street, NE, Washington, D.C. 20549. We request that you provide any such comments to FICC. Questions regarding the GSD and MBSD collateral funds should be directed to Dave Cosgrove, Vice President, at dcosgrove@dtcc.com, or 212-855-7688. Questions regarding the rule filing should be directed to the undersigned at npoulos@dtcc.com, or 212-855-7633. Nikki Poulos Vice President and General Counsel [1] The Basic Deposit is a relatively small amount that is required to be paid in cash by each clearing participant and is meant to protect the clearing corporation against a participant’s failure to pay its fees. |