FICC Amends its Default Procedures for Government Securities

The SEC approved amendments to the Fixed Income Clearing Corporation ("FICC") Government Securities Division Rulebook ("GSD Rules"). The amendments facilitate the porting of indirect participant activity from one intermediary Netting Member to another.

The principal amendments as to defaults with respect to Sponsoring Members and Sponsored Members are as follows:

• In the event the FICC ceases to act for a Sponsoring Member, the FICC will provide the porting (i.e., transfer) of those Sponsored Member positions to a different Sponsoring Member.
• In the case of a defaulting Sponsoring Member, the FICC will permit the defaulting Sponsoring Member to settle its outstanding Sponsored Member trades in the ordinary course.  
• In closing out a defaulting Sponsoring Member's customer positions, the FICC may net the positions of any single Sponsored Member, but will not net the trades of one Sponsored Member against the trades of another Sponsored Member.  
• A Sponsoring Member can close out any of a Sponsored Member's positions; it is not required to close out all if it closes out any.  
• A Sponsoring Member can close out a defaulted customer position for a Sponsored Member by moving the trade to the Sponsoring Member's proprietary account. The Sponsoring Member can offset the defaulting trade with a position of another Sponsored Member.

In addition, FICC adopted a new rule with respect to Agent Clearing. One significant rule amendment provides for the porting of customer positions both in the ordinary course when requested by a customer and following the default of an Agent Clearing Member.