[Federal Register Volume 79, Number 93 (Wednesday, May 14, 2014)]
[Notices]
[Pages 27669-27671]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-11028]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72124; File No. SR-ICC-2014-06]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change To Provide for the Clearance of 
Additional Non-Investment Grade Instruments on Standard North American 
Corporate Single Name Reference Entities

May 8, 2014.
    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 25, 2014, 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 the Terms of Substance 
of the Proposed Rule Change

    ICC proposes expanding its product offering to provide for the 
clearance of additional non-investment grade instruments on Standard 
North American Corporate Single Name reference entities. The addition 
of this product does not require any changes to the ICC Rules.

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 proposes to expand its product offering to provide for the 
clearance of additional non-investment grade instruments on Standard 
North American Corporate Single Name

[[Page 27670]]

reference entities. Non-investment grade refers to those Standard North 
American Corporate Single Names which reference an entity that has been 
assigned a debt rating of below ``BBB-'' by Moody's, below ``Baa3'' by 
S&P, or is not rated. The risk profiles (as related to underlying debt 
rating) of these additional non-investment grade instruments on 
Standard North American Corporate Single Name reference entities are 
similar to certain Standard North American Corporate Single Name and 
Standard Emerging Sovereign Single Name CDS contracts currently cleared 
at ICC with similar debt ratings to the proposed non-investment grade 
instruments. Specifically, ICC clears investment grade instruments on 
Standard North American Corporate Single Name reference entities. The 
debt ratings of the entities that these contracts reference may change 
over time, resulting in an investment grade single name becoming a non-
investment grade single name. As a result of these described changes, 
ICC currently clears eleven non-investment grade instruments on 
Standard North American Corporate Single Name reference entities. ICC 
also clears certain Standard Emerging Sovereign Single Name CDS 
contracts, which reference countries with debt ratings similar to the 
additional non-investment grade instruments on Standard North American 
Corporate Single Name reference entities that ICC is proposing to 
clear.
    The additional non-investment grade instruments on Standard North 
American Corporate Single Name reference entities have terms consistent 
with the Standard North American Corporate Single Names currently 
cleared by ICC and governed by Section 26B of the ICC Rules.
    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. The proposed rule change will provide for clearing of 
additional CDS contracts on non-investment grade reference entities. 
These contracts are substantially similar to the Standard North 
American Corporate Single Name contracts currently cleared by ICC, and 
the new contracts will be cleared pursuant to ICC's existing clearing 
arrangements and related financial safeguards, protections and risk 
management procedures. In ICC's view, acceptance of the new contracts, 
on the terms and conditions set out in the ICC 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\
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    \3\ 15 U.S.C. 78q-1(b)(3)(F).
    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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    Clearing of the additional non-investment grade instruments on 
Standard North American Corporate Single Name reference entities will 
also satisfy the requirements of Rule 17Ad-22.\5\ In particular, in 
terms of financial resources, ICC will apply its existing margin 
methodology to the additional contracts. ICC believes that this model 
will provide sufficient margin to cover its credit exposure to its 
clearing members from clearing such contracts, consistent with the 
requirements of Rule 17Ad-22(b)(2) \6\ and Rule 17Ad-22(d)(14).\7\ In 
addition, ICC believes its Guaranty Fund, under its existing 
methodology, will, together with the required margin, provide 
sufficient financial resources to support the clearing of the 
additional contracts consistent with the requirements of Rule 17Ad-
22(b)(3).\8\ 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),\9\ 
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) 
\10\ as to the finality and accuracy of its daily settlement process 
and avoidance of the risk to ICC of settlement failures. Finally, ICC 
will apply its existing default management policies and procedures for 
the new 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\
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    \5\ 17 CFR 240.17Ad-22.
    \6\ 17 CFR 240.17Ad-22(b)(2).
    \7\ 17 CFR 240.17Ad-22(d)(14).
    \8\ 17 CFR 240.17Ad-22(b)(3).
    \9\ 17 CFR 240.17Ad-22(d)(4).
    \10\ 17 CFR 240.17Ad-22(d)(5), (12) and (15).
    \11\ 17 CFR 240.17Ad-22(d)(11).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The additional non-investment grade instruments on Standard North 
American Corporate Single Name reference entities will be available to 
all ICC Participants for clearing. The clearing of additional non-
investment grade instruments on Standard North American Corporate 
Single Name reference entities by ICC does not preclude the offering of 
these instruments for clearing by other market participants. Therefore, 
ICC does not believe the proposed product offering 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-2014-06 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.

[[Page 27671]]

    All submissions should refer to File Number SR-ICC-2014-06. 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/notices/Notices.shtml?regulatoryFilings.
    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-2014-06 
and should be submitted on or before June 4, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-11028 Filed 5-13-14; 8:45 am]
BILLING CODE 8011-01-P