[Federal Register Volume 77, Number 73 (Monday, April 16, 2012)]
[Notices]
[Pages 22623-22624]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9010]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66777; File No. SR-ICC-2012-04]


 Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change To Add Rules Related to the Clearing of 
Emerging Markets Sovereign Index CDS

April 10, 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.\3\ 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.
    \3\ The Commission has modified the text of the descriptions 
prepared by ICC.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of the proposed rule change is to adopt new rules that 
will provide the basis for ICC to clear additional credit default swap 
(``CDS'') contracts. Specifically, ICC is proposing to amend Chapter 26 
of its rules to add Section 26C to provide for the clearance of the CDX 
Emerging Markets CDS contracts (``CDX.EM Contracts''), which reference 
an emerging market sovereign index. Upon Commission approval, ICC will 
list the five year tenor of the CDX.EM Series 14, 15, 16 and 17 
contracts.
    As discussed in more detail in Item II(A) below, Section 26C (CDX 
Untranched Emerging Markets) provides for the definitions and certain 
specific contract terms for cleared CDX.EM Contracts. A conforming 
change is also made to the definition of ``Restructuring CDS Contract'' 
in Section 26E (CDS Restructuring Rules) to encompass components of 
CDX.EM Contracts that are subject to a restructuring credit event.

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

    ICC has identified CDX.EM Contracts as a product that has become 
increasingly important for market participants to manage risk and 
express views with respect to emerging market sovereign credit. ICC 
believes clearance of CDX.EM Contracts will facilitate the prompt and 
accurate settlement of swaps and contribute to the safeguarding of 
securities and funds associated with swap transactions.
    CDX.EM Contracts have similar terms to the CDX North American Index 
CDS contracts (``CDX.NA Contracts'') currently cleared by ICC and 
governed by Section 26A of the ICC rules. Accordingly, the proposed 
rules found in Section 26C largely mirror the ICC rules for CDX.NA 
Contracts in Section 26A, with certain modifications that reflect the 
underlying reference entities (sovereign reference entities instead of 
corporate) and differences in terms and market conventions between 
CDX.EM Contracts and CDX.NA Contracts. The CDX.EM Contracts reference 
the CDX.EM Index, the current series of which consists of 15 emerging 
market sovereign entities: Argentina, Venezuela, Brazil, Malaysia, 
Colombia, Hungary, Indonesia, Panama, Peru, South Africa, the 
Philippines, Turkey, Russia, Ukraine and Mexico. CDX.EM Contracts, 
consistent with market convention and widely used standard terms 
documentation, can be triggered by credit events for failure to pay, 
restructuring and repudiation/moratorium (by contrast to the credit 
events of failure to pay and bankruptcy applicable to the CDX.NA 
Contracts). CDX.EM Contracts will only be denominated in U.S. dollars.
    Rule 26C-102 (Definitions) sets forth the definitions used for the 
CDX.EM Contract Rules. An ``Eligible CDX.EM Untranched Index'' is 
defined as ``each particular series and version of a CDX.EM index or 
sub-index, as published by the CDX.EM Untranched Publisher, included 
from time to time in the List of Eligible CDX.EM Untranched Indexes,'' 
which is a list maintained, updated and published from time to time by 
the ICC board of directors or its designee, containing certain 
specified information with respect to each index. ``CDX.EM Untranched 
Terms Supplement'' refers to the market standard form of documentation 
used for credit default swaps on the CDX.EM index, which is 
incorporated by reference into the contract specifications in Chapter 
26C. The remaining definitions are substantially the same as the 
definitions found in ICC Section 26A, other than certain conforming 
changes.
    Specifically, Rules 26C-309 (Acceptance of CDX.EM Untranched 
Contract), 26C-315 (Terms of the Cleared CDX.EM Untranched Contract), 
and 26C-316 (Updating Index Version of Fungible Contracts After a 
Credit Event or a Succession Event; Updating Relevant Untranched 
Standard Terms Supplement) reflect or incorporate the basic contract 
specifications for CDX.EM Contracts and are substantially the same as 
under ICC Section 26A for CDX.NA Contracts. In addition to various non-
substantive conforming changes, proposed Rule 26C-317 (Terms of CDX.EM 
Untranched Contracts) differs from the corresponding Rule 26A-317 to 
reflect the fact that restructuring and repudiation/moratorium are 
credit events for the CDX.EM Contract. (CDX.NA Contracts currently 
cleared by ICC do not use the restructuring and repudiation/moratorium 
credit event.)
    In addition, a conforming change is made to the definition of 
``Restructuring CDS Contract'' in Section 26E (CDS Restructuring Rules) 
to address components of CDX.EM Contracts that become subject to a 
restructuring credit event. The treatment of such restructuring credit 
events for CDX.EM Contracts will thus be as set forth in existing 
Section 26E of the Rules.
    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 clearance of CDX.EM 
Contracts will facilitate the prompt and accurate settlement of swaps 
and contribute to the safeguarding of securities and funds associated 
with swap transactions.

[[Page 22624]]

(B) Self-Regulatory Organization's Statement on Burden on Competition

    ICC does not believe the proposed rule change would have any 
impact, or 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

     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-2012-04 on the subject line.

Paper Comments

    Send paper comments 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-2012-04. 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 Section, 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 ICC and on ICC's Web 
site at https://www.theice.com/publicdocs/regulatory_filings/040312b_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-2012-04 
and should be submitted on or before May 7, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Kevin O'Neill,
Deputy Secretary.
[FR Doc. 2012-9010 Filed 4-13-12; 8:45 am]
BILLING CODE 8011-01-P