83 FR 47665 - Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the Clearance of an Additional Credit Default Swap Contract

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 183 (September 20, 2018)

[Federal Register Volume 83, Number 183 (Thursday, September 20, 2018)]
[Notices]
[Pages 47665-47666]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-20434]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84130; File No. SR-ICC-2018-007]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to the Clearance of an 
Additional Credit Default Swap Contract

September 14, 2018.

I. Introduction

    On June 13, 2018, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 \1\ and Rule 
19b-4 thereunder,\2\ a proposed rule change to revise the ICC Rulebook 
(the ``Rules'') \3\ to provide for the clearance of an additional 
Standard Emerging Market Sovereign CDS contract (``EM Contract''). The 
proposed rule change was published for comment in the Federal Register 
on July 3, 2018.\4\ The Commission did not receive comments regarding 
the proposed rule change. On August 16, 2018, the Commission designated 
a longer period for Commission action on the proposed rule change.\5\ 
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\ Capitalized terms used herein but not otherwise defined have 
the meaning set forth in the ICC Rules. Available at https://www.theice.com/publicdocs/clear_credit/ICE_Clear_Credit_Rules.pdf.
    \4\ Securities Exchange Act Release No. 34-83545 (June 28, 
2018), 83 FR 31244 (July 3, 2018) (SR-ICC-2018-007) (``Notice'').
    \5\ Securities Exchange Act Release No. 34-83864 (August 16, 
2018), 83 FR 42540 (August 22, 2018) (SR-ICC-2018-007).
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II. Description of the Proposed Rule Change

    The proposed rule change will provide the basis for ICC to clear an 
additional credit default swap contract. ICC proposes to amend 
Subchapter 26D of its Rules to provide for the clearance of an 
additional EM Contract, the Lebanese Republic. ICC represents that this 
additional EM Contract has terms consistent with the other EM Contracts 
approved for clearing at ICC and is governed by Subchapter 26D of the 
Rules.\6\ Minor revisions to Subchapter 26D (Standard Emerging Market 
Sovereign (``SES'') Single Name) are being 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. ICC has also represented that 
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'').\7\
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    \6\ Notice, 83 FR at 31245.
    \7\ Id.
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III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act directs the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
such proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to such 
organization.\8\ Section 17A(b)(3)(F) of the Act requires, among other 
things, that the rules of a registered clearing agency be designed to 
promote the prompt and accurate clearance and settlement of securities 
transactions, assure the safeguarding of securities and funds which are 
in the custody or control of the clearing agency for which it is 
responsible and, in general, to protect investors and the public 
interest.\9\
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    \8\ 15 U.S.C. 78s(b)(2)(C).
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
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    The Commission finds that the rule change is consistent with 
Section 17A(b)(3)(F) of the Act \10\ and the rules and regulations 
thereunder applicable to ICC. The Commission has reviewed the terms and 
conditions of this contract and has determined that it is substantially 
similar to the other contracts listed in Subchapter 26D of the ICC 
Rules, all of which ICC currently clears, the key difference being that 
the underlying reference obligations will be issuances by the Lebanese 
Republic. Moreover, after reviewing the Notice and ICC's Rules, 
policies and procedures, the Commission finds that the additional EM 
Contract will be cleared pursuant to ICC's existing clearing 
arrangements and related financial safeguards, protections and risk 
management procedures.\11\ In addition, based on its own experience and 
expertise, including a review of data on volume, open interest, and the 
number of ICC clearing participants (``CPs'') that currently trade in 
the additional EM Contract as well as certain model parameters for the 
additional EM Contract, the Commission finds that ICC's rules, 
policies, and procedures are reasonably designed to price and measure 
the

[[Page 47666]]

potential risk presented by this product, collect financial resources 
in proportion to such risk, and liquidate this product in the event of 
a CP default, all of which should help ensure ICC's ability to maintain 
the financial resources it needs to provide its critical services and 
function as a central counter party, thereby promoting the prompt and 
accurate settlement of EM Contracts and other credit default swap 
transactions. For the same reasons, the Commission believes that the 
rule change would help assure the safeguarding of securities or funds 
in the custody or control of ICC, and would be consistent with the 
protection of investors and the public interest.
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    \10\ 15 U.S.C. 78q-1.
    \11\ Notice, 83 FR at 31245.
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    Therefore, the Commission finds that acceptance of the additional 
EM Contract, on the terms and conditions set out in ICC's Rules, is 
consistent with the prompt and accurate clearance 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.\12\
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular with the requirements of Section 17A of the Act,\13\ and 
the rules and regulations thereunder.
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    \13\ 15 U.S.C. 78q-1.
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\14\ that the proposed rule change (SR-ICC-2018-007) be, and hereby is, 
approved.\15\
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    \14\ 15 U.S.C. 78s(b)(2).
    \15\ 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).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-20434 Filed 9-19-18; 8:45 am]
 BILLING CODE 8011-01-P