SEC Probes Clearing Corp's Fixes for Financial Fails and Fund Shifts
Published Date: 9/23/2025
Notice
Summary
The Fixed Income Clearing Corporation (FICC) wants to update its rules to better handle what happens if a company using its services can’t pay up, especially for indirect participants who use middlemen. These changes aim to make it easier to move accounts between intermediaries and improve how defaults are managed. The SEC is reviewing these updates and asking for public feedback before deciding, with potential impacts on how money and risks are handled in the system.
Analyzed Economic Effects
6 provisions identified: 6 benefits, 0 costs, 0 mixed.
New Ways Intermediaries Can Liquidate Positions
FICC's Amendment No. 1 (filed September 16, 2025) adds two explicit liquidation methods for Sponsoring Members and Agent Clearing Members: (1) record an offsetting trade in the Indirect Participants Omnibus Account, or (2) ask FICC to transfer the positions to the intermediary's Proprietary Account. The rules say these actions (called SMP Liquidation Actions and ACM Liquidation Actions) are representations that the intermediary may take the action and must indemnify certain parties for related losses.
Intermediaries May Liquidate Some, Not Just All
Amendment No. 1 changes Rule 3A so a Sponsoring Member may liquidate "some or all" (instead of "all, but not fewer than all") of a Sponsored Member's done-with trades. FICC explains this gives Sponsoring Members more flexibility to provide clearing services to Sponsored Members.
Transfers of Indirect Activity Require Consent After Defaults
Amendment No. 1 amends proposed Rule 26 to clarify that transfers of an Indirect Participant's activity after a Sponsoring Member or Agent Clearing Member default apply only if FICC ceases to act for that member, and any receiving Sponsoring Member or Agent Clearing Member must consent to the transfer. The change ties transfers to FICC having ceased to act and adds a consent requirement for receivers.
Clarified Payment Direction After Close-Outs
Amendment No. 1 clarifies that after FICC closes out Sponsored Member trades, any amount due to a Sponsored Member would be paid to or as directed by the Sponsoring Member or its trustee or receiver. This expands the proposed disclosure beyond only Segregated Indirect Participants to apply to any Sponsored Member amounts.
FICC Limited From Unilateral Agent Transaction Liquidations
Amendment No. 1 removes the proposed ability for FICC to liquidate done-with Agent Clearing Transactions under the new Section 9 of Rule 8; instead FICC would only settle or close out Agent Clearing Transactions (or transfer them) if FICC has ceased to act for the Agent Clearing Member. The change reflects that Executing Firm Customers are not limited members of FICC.
Indirect Participants Not Required To Report Market Actions
The amendment expands Rule 22A disclosures to state that Indirect Participants who take market action after a Sponsoring Member or Agent Clearing Member default are not required, except as otherwise set forth in the Rules, to report that market action data to FICC. FICC also says it will not use such data in calculations more than it would have without this statement.
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