83 FR 31244 - Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change, Security-Based Swap Submission, or Advance Notice Relating to the Clearance of an Additional Credit Default Swap Contract

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 128 (July 3, 2018)

[Federal Register Volume 83, Number 128 (Tuesday, July 3, 2018)]
[Notices]
[Pages 31244-31246]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-14299]


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SECURITIES AND EXCHANGE COMMISSION

[[Release No. 34-83545; File No. SR-ICC-2018-007]


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

June 28, 2018
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, 15 U.S.C. 78s(b)(1) and Rule 19b-4, 17 CFR 240.19b-4, notice is 
hereby given that on June 13, 2018, 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, security-based swap submission, or advance 
notice from interested persons.

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 rule change is to revise the 
ICC Rulebook (the ``Rules'') to provide for the clearance of an 
additional Standard Emerging Market Sovereign CDS contract (``EM 
Contract'').

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

(a) Purpose
    The purpose of the proposed rule change is to adopt rules that will

[[Page 31245]]

provide the basis for ICC to clear an additional credit default swap 
contract. ICC believes the addition of this contract 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 Contract will not require any changes to 
ICC's Risk Management Framework or other policies and procedures 
constituting rules within the meaning of the Securities Exchange Act of 
1934 (``Act'').
    ICC proposes amending Subchapter 26D of its Rules to provide for 
the clearance of the additional EM Contract, namely the Lebanese 
Republic. This additional EM Contract has 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 Contract. Specifically, in Rule 
26D-102 (Definitions), ``Eligible SES Reference Entities'' is modified 
to include the Lebanese Republic in the list of specific Eligible SES 
Reference Entities to be cleared by ICC.
(b) Statutory Basis
    Section 17A(b)(3)(F) of the Act \1\ 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 Contract is 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 Contract 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 Contract, 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.\2\
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    \1\ 15 U.S.C. 78q-1(b)(3)(F).
    \2\ 15 U.S.C. 78q-1(b)(3)(F).
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    Clearing of the additional EM Contract will also satisfy the 
requirements of Rule 17Ad-22.\3\ In particular, in terms of financial 
resources, ICC will apply its existing initial margin methodology to 
the additional contract. ICC believes that this model will provide 
sufficient initial margin requirements to cover its credit exposure to 
its clearing members from clearing such contract, consistent with the 
requirements of Rule 17Ad-22(b)(2).\4\ 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 contract consistent with the 
requirements of Rule 17Ad-22(b)(3).\5\ ICC also believes that its 
existing operational and managerial resources will be sufficient for 
clearing of the additional contract, consistent with the requirements 
of Rule 17Ad-22(d)(4),\6\ as the new contract is substantially the same 
from an operational perspective as existing contracts. Similarly, ICC 
will use its existing settlement procedures and account structures for 
the new contract, consistent with the requirements of Rule 17Ad-
22(d)(5), (12) and (15) \7\ 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 Contract for 
clearing in accordance with its governance process, which included 
review of the contract 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).\8\ Finally, ICC will apply its existing default management 
policies and procedures for the additional EM Contract. 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).\9\
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    \3\ 17 CFR 240.17Ad-22.
    \4\ 17 CFR 240.17Ad-22(b)(2).
    \5\ 17 CFR 240.17Ad-22(b)(3).
    \6\ 17 CFR 240.17Ad-22(d)(4).
    \7\ 17 CFR 240.17Ad-22(d)(5), (12) and (15).
    \8\ 17 CFR 240.17Ad-22(d)(8).
    \9\ 17 CFR 240.17Ad-22(d)(11).
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(B) Clearing Agency's Statement on Burden on Competition

    The additional EM Contract will be available to all ICC 
participants for clearing. The clearing of this additional EM Contract 
by ICC does not preclude the offering of the additional EM Contract for 
clearing by other market participants. Accordingly, ICC does not 
believe that clearance of the additional EM Contract 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

    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, 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-2018-007 on the subject line.

Paper Comments

    Send paper comments in triplicate to Secretary, Securities and 
Exchange

[[Page 31246]]

Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-ICC-2018-007. 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 website (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 website 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 website 
at https://www.theice.com/clear-credit/regulation.
    All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ICC-2018-007 and should be 
submitted on or before July 24, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14299 Filed 7-2-18; 8:45 am]
BILLING CODE 8011-01-P