82 FR 30931 - Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Proposed Rule Change, Security-Based Swap Submission, or Advance Notice Relating to the Clearance of Additional Credit Default Swap Contracts

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 126 (July 3, 2017)

[Federal Register Volume 82, Number 126 (Monday, July 3, 2017)]
[Notices]
[Pages 30931-30932]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-13899]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81029; File No. SR-ICC-2017-008]


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

June 27, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4,\2\ notice is hereby given that on 
June 13, 2017, ICE Clear Credit LLC (``ICC'') filed with the Securities 
and Exchange Commission the proposed rule change, security-based swap 
submission, or advance notice as described in Items I, II and III 
below, which Items have been prepared primarily by ICC. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

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

I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The principal purpose of the proposed rule change is to revise the 
ICC Rulebook (the ``Rules'') to provide for the clearance of additional 
Standard Emerging Market Sovereign CDS contracts (collectively, ``EM 
Contracts'').

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, ICC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. 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

    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 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 additional EM Contracts will not require any changes to 
ICC's Risk Management Framework or other policies and procedures 
constituting rules within the meaning of the Act.
    ICC proposes amending Subchapter 26D of its Rules to provide for 
the clearance of additional EM Contracts, specifically the Kingdom of 
Saudi Arabia and the Republic of Kazakhstan. 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) are made to provide for clearing the additional 
EM Contracts. Specifically, in Rule 26D-102 (Definitions), ``Eligible 
SES Reference Entities'' is modified to include the Kingdom of Saudi 
Arabia and the Republic of Kazakhstan in the list of specific Eligible 
SES Reference Entities to be cleared by ICC.
    Section 17A(b)(3)(F) of the Act \3\ 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 additional EM

[[Page 30932]]

Contracts are similar to the EM Contracts currently cleared by ICC, and 
will be cleared pursuant to ICC's existing clearing arrangements and 
related financial safeguards, protections and risk management 
procedures. Clearing of the additional EM 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 new EM 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.\4\
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78q-1(b)(3)(F).
    \4\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Clearing of the additional EM Contracts will also satisfy the 
requirements of Rule 17Ad-22.\5\ 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).\6\ 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 17Ad-22(b)(3).\7\ 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),\8\ 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) \9\ 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 additional EM 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 approval by its Board. These governance 
arrangements are consistent with the requirements of Rule 17Ad-
22(d)(8).\10\ Finally, ICC will apply its existing default management 
policies and procedures for the additional EM 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).\11\
---------------------------------------------------------------------------

    \5\ 17 CFR 240.17Ad-22.
    \6\ 17 CFR 240.17Ad-22(b)(2).
    \7\ 17 CFR 240.17Ad-22(b)(3).
    \8\ 17 CFR 240.17Ad-22(d)(4).
    \9\ 17 CFR 240.17Ad-22(d)(5), (12) and (15).
    \10\ 17 CFR 240.17Ad-22(d)(8).
    \11\ 17 CFR 240.17Ad-22(d)(11).
---------------------------------------------------------------------------

B. Clearing Agency's Statement on Burden on Competition

    The additional EM Contracts will be available to all ICC 
participants for clearing. The clearing of these additional EM 
Contracts by ICC does not preclude the offering of the additional EM 
Contracts for clearing by other market participants. Accordingly, ICC 
does not believe that clearance of the additional EM 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 
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 and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change 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-2017-008 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-2017-008. 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 that are 
filed with the Commission, and all written communications relating to 
the proposed rule change 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-2017-008 
and should be submitted on or before July 24, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-13899 Filed 6-30-17; 8:45 am]
 BILLING CODE 8011-01-P