81 FR 76987 - Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change To Provide for the Clearance of Additional Credit Default Swap Contracts

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 214 (November 4, 2016)

[Federal Register Volume 81, Number 214 (Friday, November 4, 2016)]
[Notices]
[Pages 76987-76988]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-26644]



[[Page 76987]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79197; File No. SR-ICC-2016-012]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change To Provide for the Clearance of 
Additional Credit Default Swap Contracts

October 31, 2016.

I. Introduction

    On August 29, 2016, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act (``Act'') \1\ and Rule 
19b-4 thereunder,\2\ a proposed rule change to provide for the 
clearance of additional Standard Emerging Market Sovereign CDS 
contracts (collectively, ``EM Contracts''), 2003 ISDA Definitions of 
Standard Western European Sovereign CDS contracts (collectively, ``SWES 
Contracts''), and an additional Asia/Pacific Sovereign CDS contract 
(the ``Asia/Pacific Contract''). The proposed rule change was published 
for comment in the Federal Register on September 16, 2016.\3\ The 
Commission did not receive comments on the proposed rule change. For 
the reasons discussed below, the Commission is approving the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-78818 (Sept. 12, 
2016), 81 FR 63831 (Sept. 19, 2016) (SR-ICC-2016-012).
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II. Description of the Proposed Rule Change

    The purpose of the proposed rule change is to adopt rules that will 
provide the basis for ICC to clear additional credit default swap 
contracts.
    ICC has proposed amending Subchapter 26D of its Rules to provide 
for the clearance of additional EM Contracts, specifically the Republic 
of Panama, Abu Dhabi, Dubai, the State of Israel and the State of 
Qatar. ICC plans to offer these additional EM Contracts on the 2003 and 
2014 ISDA Credit Derivatives Definitions.
    ICC represents that these additional EM Contracts have terms 
consistent with the other EM Contracts approved for clearing at ICC and 
governed by Subchapter 26D of the Rules. Minor revisions to Subchapter 
26D (Standard Emerging Market Sovereign (``SES'') Single Name) will 
also be made to provide for clearing the additional EM Contracts. 
Specifically, in Rule 26D-102 (Definitions), ``Eligible SES Reference 
Entities'' will be modified to include the Republic of Panama, Abu 
Dhabi, Dubai, the State of Israel and the State of Qatar in the list of 
specific Eligible SES Reference Entities to be cleared by ICC.
    Additionally, ICC has proposed amending Subchapter 26I of its Rules 
to provide for the clearance of 2003 ISDA Definitions of SWES 
Contracts. ICC currently clears the 2014 ISDA Definitions of ten SWES 
Contracts, namely the Republic of Ireland, the Italian Republic, the 
Portuguese Republic, the Kingdom of Spain, the Kingdom of Belgium, the 
Republic of Austria, the Kingdom of the Netherlands, the Federal 
Republic of Germany, the French Republic and the United Kingdom of 
Great Britain and Northern Ireland. The proposed changes to Subchapter 
26I will allow ICC to offer clearing for the 2003 ISDA Definitions of 
these SWES Contracts.
    Minor revisions to Subchapter 26I (Standard Western European 
(``SWES'') Single Name) will be made to provide for clearing the 2003 
ISDA Definitions of SWES Contracts. Specifically, in Rule 26I-102 
(Definitions), the definitions of ``Eligible SWES Reference 
Obligations'', ``List of Eligible SWES Reference Entities'' and ``SWES 
Contract Reference Obligations'' will be updated to distinguish between 
the 2003- and 2014-Type CDS Contracts, and the corresponding Applicable 
Credit Derivatives Definitions.\4\ Rule 26I-309 (Acceptance of SWES 
Contracts by ICE Clear Credit) will be revised in part (c) to note that 
a CDS Participant may not submit a Trade for clearance as a SWES 
contract, and any such Trade shall not be a Confirming Trade, if the 
acceptance would be at a time when the CDS Participant (or any Non-
Participant Party for whom such CDS Participant is acting) is, or is an 
Affiliate of, the Eligible SWES Reference Entity for such SWES Contract 
or is subject to an agreement under which it is reasonably likely that 
the CDS Participant (or any such Non-Participant Party) will become, or 
will become an Affiliate of, the Eligible SWES Reference Entity for 
such SWES Contract. Rule 26I-309 will also be revised in part (e) to 
address and distinguish between relevant successor or other events 
under both 2003- and 2014-Type CDS Contracts, and the corresponding 
Applicable Credit Derivatives Definitions.
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    \4\ As defined in Rule 20-102 (Applicable Credit Derivatives 
Definitions).
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    Rule 26I-315 (Terms of the Cleared SWES Contract) will be revised 
to provide reference to provisions of the proper ISDA Definitions, and 
corresponding changes to provision numbering will be made as necessary. 
Rule 26I-315(h) will be revised to refer to the Applicable Credit 
Derivatives Definitions and eligible Seniority Level, as appropriate.
    Defined terms in Rule 26I-316 (Physical Settlement Matrix Updates) 
will be updated to refer specifically to SWES contracts. Rule 26I-616 
(Contract Modification) will be revised to note that it shall not 
constitute a Contract Modification if the Board (or its designee) 
updates the List of Eligible SWES Reference Entities (and modifies the 
terms and conditions of related SWES Contracts) to give effect to 
determinations of Succession Events.
    Finally, ICC has proposed amending Subchapter 26L of its rules to 
provide for the clearance of an additional Asia/Pacific Contract, 
namely the Kingdom of Thailand. ICC plans to offer this contract on the 
2003 and 2014 ISDA Credit Derivatives Definitions.
    ICC represents that the additional Asia/Pacific Contract has terms 
consistent with the other Asia/Pacific Contracts approved for clearing 
at ICC and governed by Subchapter 26L of the Rules. Minor revisions to 
Subchapter 26L (Asia/Pacific Sovereign (``SAS'') Single Name) will be 
made to provide for clearing the additional Asia/Pacific Contract. 
Specifically, in Rule 26L-102 (Definitions), ``Eligible SAS Reference 
Entities'' will be modified to include the Kingdom of Thailand in the 
list of specific Eligible SAS Reference Entities to be cleared by ICC.

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \5\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if the 
Commission finds that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such self-regulatory organization. Section 17A(b)(3)(F) 
of the Act \6\ requires, among other things, that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions, and to the extent 
applicable, derivative agreements, contracts and transactions, to 
assure the safeguarding of securities and funds which are in the 
custody or control of the clearing agency or for which it is 
responsible and, in general, to protect investors and the public 
interest.
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    \5\ 15 U.S.C. 78s(b)(2)(C).
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    ICC has represented that the additional EM Contracts, Asia/Pacific

[[Page 76988]]

Contract and the 2003 ISDA Definitions of SWES Contracts proposed for 
clearing are similar to the EM, SWES and Asia/Pacific Contracts that 
are currently cleared by ICC. ICC also represents that these contracts 
will be cleared pursuant to ICC's existing clearing arrangements and 
related financial safeguards, protections and risk management 
procedures. The Commission therefore finds that the proposed rule 
change is designed to promote the prompt and accurate clearance and 
settlement of securities transactions and, to the extent applicable, 
derivative agreements, contracts, and transactions, and to assure the 
safeguarding of securities and funds which are in the custody or 
control of the clearing agency or for which it is responsible and, in 
general, to protect investors and the public interest.

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act \7\ and the 
rules and regulations thereunder.
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    \7\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-ICC-2016-012) be, 
and hereby is, approved.\9\
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    \8\ 15 U.S.C. 78s(b)(2).
    \9\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).
    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Brent J. Fields,
Secretary.
[FR Doc. 2016-26644 Filed 11-3-16; 8:45 am]
 BILLING CODE 8011-01-P