[Federal Register Volume 77, Number 71 (Thursday, April 12, 2012)]
[Notices]
[Pages 22019-22020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-8790]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66766; File No. SR-ICC-2012-05]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change to Membership Qualifications

April 6, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given that 
on April 3, 2012, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of Terms of Substance of 
the Proposed Rule Change

    The purpose of proposed rule change is to conform the ICC 
membership qualifications to be in compliance with Commodity Futures 
Trading Commission (``CFTC'') Regulations 39.12(a)(2)(ii) and 
39.12(a)(2)(iii) no later than the May 7, 2012 effective date of CFTC 
Regulations 39.12(a)(2)(ii) and 39.12(a)(2)(iii). ICC believes these 
changes are also consistent with Commission Proposed Rule 17Ad-
22(b)(7).
    As discussed in more detail in Item II(A) below, the changes to 
Chapters 1 and 2 of the ICC Rules provide for amendments to the 
membership qualifications of ICC and related definitions.

II. Self-Regulatory Organization's Statement of 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. Self-Regulatory Organization's Statement of Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    CFTC Regulation 39.12(a)(2)(ii) provides that ``the participant 
requirements shall set forth capital requirements that are based on 
objective, transparent, and commonly accepted standards that 
appropriately match capital to risk. Capital requirements shall be 
scalable to the risks posed by clearing members.''
    Accordingly, ICC revised Rule 209 (Risk-Based Capital Requirement) 
to provide that if at any time and for so long as a Clearing 
Participant has a required contribution to the ICC General Guaranty 
Fund that exceeds 25% of its ``excess net capital,'' ICC may (in 
addition to imposing the trading activity limitations provided for in 
ICC Rule 203(b)) require such Clearing Participant to prepay and 
maintain with ICE Clear Credit an amount up to the Clearing 
Participant's assessment obligation. ICC Rule 102, the definitional 
section of the Rules, has been amended to define ``excess net capital'' 
as the amount reported on Form 1-FR-FCM or FOCUS Report or as otherwise 
reported to the CFTC under CFTC Rule 1.12. For a Participant that is 
not an FCM or a Broker-Dealer, there is no standard equivalent to 
``excess net capital'' which can be utilized across all types of 
Clearing Participant entities. Therefore, Rule 102 places the burden on 
the Clearing Participant to demonstrate that its capital exceeds the 
capital requirement that would be applicable to it if it were an FCM, 
as determined pursuant to a methodology acceptable to ICC.
    CFTC Regulation 39.12(a)(2)(iii) provides that ``a derivatives 
clearing organization shall not set a minimum capital requirement of 
more than $50 million for any person that seeks to become a clearing 
member in order to clear swaps''. [Emphasis added.]
    Accordingly, ICC revised Rule 201(b)(ii) incorporates the CFTC 
mandated $50,000,000 minimum adjusted net capital requirement for all 
ICC Clearing Participants. For a Participant that is not an FCM or a 
Broker-Dealer, there is no standard equivalent to ``adjusted net 
capital'' which can be utilized across all types of Clearing 
Participant entities. Therefore, Rule 201(b)(ii)(C) places the burden 
on the Clearing Participant to demonstrate that its capital exceeds the 
capital requirement that would be applicable to it if it were an FCM, 
as determined pursuant to a methodology acceptable to ICC.
    In addition, in order to promote compliance with the capital 
adequacy requirements, Rule 201(b)(i) has been amended to provide that 
a Clearing Participant must be regulated for capital adequacy by a 
competent authority such as the CFTC, SEC, Federal Reserve Board, 
Office of the Comptroller of the Currency, U.K. Financial Services 
Authority or any other regulatory body ICC designates from time to time 
for this purpose, or is an affiliate of an entity that satisfies the 
capital adequacy regulatory requirement and is subject to consolidated 
holding company group supervision.
    The Board of Managers approved the above amendments on March 22, 
2012 after receiving recommendations to approve from the ICE Clear 
Credit Risk Committee on March 21, 2012, and the ICE Clear Credit Risk 
Management Subcommittee on March 7, 2012. However, the ICE Clear Credit 
Board, Risk Committee and Risk Management Subcommittee expressed 
concern with respect the Amended Rules relating to Commission Proposed 
Rule 17Ad-22(b)(7) and CFTC Regulation 39.12(a)(2)(iii) and only 
recommended approval or approved the same in order

[[Page 22020]]

for ICC to be in compliance with the law. The ICE Clear Credit Board, 
Risk Committee and Risk Management Subcommittee discussed with concern 
the extreme reduction in the minimum capital requirement from the 
current ICC requirement of $5,000,000,000 for non-FCM or Broker Dealer 
Clearing Participants to the minimum capital requirement of $50,000,000 
mandated by CFTC Regulation 39.12(a)(2)(iii) and proposed in Commission 
Rule 17Ad-22(b)(7).
    Similarly, the ICE Clear Credit Board, Risk Committee and Risk 
Management Subcommittee discussed the very significant reduction in the 
minimum capital requirement initially established by ICC for its FCM or 
Broker Dealer Clearing Participants of $500,000,000 (subsequently 
reduced to $100,000,000) to the minimum capital requirement of 
$50,000,000 mandated by CFTC Regulation 39.12(a)(2)(iii) and proposed 
in Commission Rule 17Ad-22(b)(7). The concerns raised by the ICE Clear 
Credit Board, Risk Committee, and Risk Management Subcommittee are 
mitigated in part by the Risk-Based Capital Requirement ICC is 
proposing.
    ICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act and the rules and regulations 
thereunder applicable to it. ICC believes that the proposed membership 
requirements will comply with the Act and the rules and regulations 
thereunder.

B. Self-Regulatory Organization's Statement on Burden on Competition

    ICC does not believe that the proposed rule change would impose any 
burden on competition.

C. Self-Regulatory Organization'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 Change 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 the 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 may be submitted by using the 
Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml), or send an email to [email protected]. Please include 
File No. SR-ICC-2012-05 on the subject line.
     Paper comments should be sent in triplicate to Elizabeth 
M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ICC-2012-05. 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 
a.m. and 3 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/publicdocs/regulatory_filings/032812_SEC_ICEClearCredit.pdf. 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-2012-05 and 
should be submitted on or before May 3, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\3\
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    \3\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-8790 Filed 4-11-12; 8:45 am]
BILLING CODE 8011-01-P