82 FR 19426 - Self-Regulatory Organizations; ICE Clear Credit LLC; Notice and Immediate Effectiveness of Proposed Rule Change, Security-Based Swap Submission, or Advance Notice Relating to Clearance of Additional Credit Default Swap Contracts

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 80 (April 27, 2017)

[Federal Register Volume 82, Number 80 (Thursday, April 27, 2017)]
[Notices]
[Pages 19426-19427]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-08463]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80503; File No. SR-ICC-2017-004]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice and 
Immediate Effectiveness of Proposed Rule Change, Security-Based Swap 
Submission, or Advance Notice Relating to Clearance of Additional 
Credit Default Swap Contracts

April 21, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ and Rule 19b-4,\2\ notice is hereby given that on April 7, 
2017, ICE Clear Credit LLC (``ICC'') filed with the Securities and 
Exchange Commission the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared primarily by ICC. ICC 
filed the proposed rule change pursuant to Section 19(b)(3)(A) of the 
Act,\3\ and Rule 19b-4(f)(4)(i) thereunder,\4\ so that the proposal was 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change, security-
based swap submission, or advance notice from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(4)(i).
---------------------------------------------------------------------------

I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change, Security-Based Swap Submission, or Advance Notice

    The principal purpose of the proposed change is for ICC to provide 
for the clearance of clearing participant (``CP'') single name credit 
default swap contracts (``CDS'') referencing ICC clearing participants 
(``CP CDS Contracts'').

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change, Security-Based Swap Submission, or 
Advance Notice

    In its filing with the Commission, ICC included statements 
concerning the purpose of and basis for the proposed rule change, 
security-based swap submission, or advance notice and discussed any 
comments it received on the proposed rule change, security-based swap 
submission, or advance notice. The text of these statements may be 
examined at the places specified in Item IV below. ICC has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant aspects of these statements.

A. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change, Security-Based Swap Submission, or 
Advance Notice

    ICC plans to expand its product offering to include CP CDS 
Contracts. ICC believes the addition of these contracts will benefit 
the market for credit default swaps by providing market participants 
the benefits of clearing, including reduction in counterparty risk and 
safeguarding of margin assets pursuant to clearing house rules. 
Clearing of the CP CDS Contracts will not require any changes to the 
ICC Clearing Rules, ICC's Risk Management Framework, ICC's Risk 
Management Model Description Document, or other policies and procedures 
constituting rules within the meaning of the Securities Exchange Act of 
1934 (``Act'').
    The CP CDS Contracts will be cleared pursuant to Subchapters 26B 
(Standard North American Corporate (``SNAC'') Single Name) and 26H 
(Standard European Financial Corporate (``STEFC'') Single Name) of the 
ICC Clearing Rules. Furthermore, the General Wrong Way Risk (``GWWR'') 
approach, set forth in the ICC Risk Management Model Description 
Document,\5\ will apply to the CP CDS Contracts. This treatment is 
consistent with ICC's current GWWR approach which applies to all 
products cleared by ICC within the Sovereign and Banking sectors, 
following the Bloomberg Industry Classification System (``BICS''), as 
the CP CDS Contracts are included in the Banking sector, as defined by 
the BICS.
---------------------------------------------------------------------------

    \5\ Such GWWR approach is described in rule filing SR-ICC-2015-
009. The text of rule filing SR-ICC-2015-009 can be found on ICC's 
Web site at https://www.theice.com/clear-credit/regulation.
---------------------------------------------------------------------------

    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 and to comply with the provisions of the Act and the rules 
and regulations thereunder. The CP CDS Contracts will be cleared 
pursuant to ICC's existing clearing arrangements and related financial 
safeguards, protections and risk management procedures. Clearing of the 
CP CDS Contracts will allow market participants an increased ability to 
manage risk and ensure the safeguarding of margin assets pursuant to 
clearing house rules. ICC believes that acceptance of the CP CDS 
Contracts, on the terms and conditions set out in the Rules, is 
consistent with the prompt and accurate clearance of and settlement of 
securities transactions and derivative agreements, contracts and 
transactions cleared by ICC, the safeguarding of securities and funds 
in the custody or control of ICC, and the protection of investors and 
the public interest, within the meaning of Section 17A(b)(3)(F) of the 
Act.\7\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Clearing of the CP CDS Contracts will also satisfy the requirements 
of Rule 17Ad-22.\8\ In particular, in terms of financial resources, ICC 
will apply its existing initial margin methodology to the additional 
contracts. ICC believes that this model will provide sufficient initial 
margin requirements to cover its credit exposure to its clearing 
members from clearing such contracts, consistent with the requirements 
of Rule 17Ad-22(b)(2).\9\ In addition, ICC believes its Guaranty Fund, 
under its existing methodology, will, together with the required 
initial margin, provide sufficient financial resources to support the 
clearing of the additional contracts consistent with the requirements 
of Rule

[[Page 19427]]

17Ad-22(b)(3).\10\ ICC also believes that its existing operational and 
managerial resources will be sufficient for clearing of the additional 
contracts, consistent with the requirements of Rule 17Ad-22(d)(4),\11\ 
as the new contracts are substantially the same from an operational 
perspective as existing contracts. Similarly, ICC will use its existing 
settlement procedures and account structures for the new contracts, 
consistent with the requirements of Rule 17Ad-22(d)(5), (12) and (15) 
\12\ as to the finality and accuracy of its daily settlement process 
and avoidance of the risk to ICC of settlement failures. ICC determined 
to accept the CP CDS Contracts for clearing in accordance with its 
governance process, which included review of the contracts and related 
risk management considerations by the ICC Risk Committee and its Board. 
These governance arrangements are consistent with the requirements of 
Rule 17Ad-22(d)(8).\13\ Finally, ICC will apply its existing default 
management policies and procedures for the CP CDS Contracts. ICC 
believes that these procedures allow for it to take timely action to 
contain losses and liquidity pressures and to continue meeting its 
obligations in the event of clearing member insolvencies or defaults in 
respect of the additional single names, in accordance with Rule 17Ad-
22(d)(11).\14\
---------------------------------------------------------------------------

    \8\ 17 CFR 240.17Ad-22.
    \9\ 17 CFR 240.17Ad-22(b)(2).
    \10\ 17 CFR 240.17Ad-22(b)(3).
    \11\ 17 CFR 240.17Ad-22(d)(4).
    \12\ 17 CFR 240.17Ad-22(d)(5), (12) and (15).
    \13\ 17 CFR 240.17Ad-22(d)(8).
    \14\ 17 CFR 240.17Ad-22(d)(11).
---------------------------------------------------------------------------

B. Clearing Agency's Statement on Burden on Competition

    The CP CDS Contracts will be available to all ICC participants for 
clearing. The clearing of these CP CDS Contracts by ICC does not 
preclude the offering of the CP CDS Contracts for clearing by other 
market participants. Accordingly, ICC does not believe that clearance 
of the CP CDS Contracts will impose any burden on competition not 
necessary or appropriate in furtherance of the purposes of the Act.

C. Clearing Agency's Statement on Comments on the Proposed Rule Change, 
Security-Based Swap Submission, or Advance Notice Received From 
Members, Participants or Others

    Written comments relating to the proposed rule change have not been 
solicited or received. ICC will notify the Commission of any written 
comments received by ICC.

III. Date of Effectiveness of the Proposed Rule Change, Security-Based 
Swap Submission, or Advance Notice and Timing for Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and paragraph (f)(1) of Rule 19b-4 thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, security-based swap submission, or advance notice is consistent 
with the Act. Comments may be submitted by any of the following 
methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-ICC-2017-004 on the subject line.

Paper Comments

    Send paper comments in triplicate to Secretary, Securities and 
Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ICC-2017-004. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change, security-
based swap submission, or advance notice that are filed with the 
Commission, and all written communications relating to the proposed 
rule change, security-based swap submission, or advance notice between 
the Commission and any person, other than those that may be withheld 
from the public in accordance with the provisions of 5 U.S.C. 552, will 
be available for Web site viewing and printing in the Commission's 
Public Reference Room, 100 F Street NE., Washington, DC 20549, on 
official business days between the hours of 10:00 a.m. and 3:00 p.m. 
Copies of such filings will also be available for inspection and 
copying at the principal office of ICE Clear Credit and on ICE Clear 
Credit's Web site at https://www.theice.com/clear-credit/regulation.
    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-ICC-2017-004 
and should be submitted on or before May 18, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
 Assistant Secretary.
[FR Doc. 2017-08463 Filed 4-26-17; 8:45 am]
BILLING CODE 8011-01-P