[Federal Register Volume 79, Number 212 (Monday, November 3, 2014)]
[Notices]
[Pages 65270-65271]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26005]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73444; File No. SR-ICC-2014-18]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change To Revise the ICC Risk Management 
Framework

October 28, 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 October 22, 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

    The principal purpose of the proposed rule change is to revise the 
ICC Risk Management Framework to incorporate certain risk model 
enhancements. These revisions do not require any changes to the ICC 
Clearing Rules (``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 revising the ICC Risk Management Framework to 
incorporate risk model enhancements related to anti-procyclicality, 
devolatilization, liquidity charges, and concentration charges. ICC 
believes such revisions will facilitate the prompt and accurate 
clearance and settlement of securities transactions and derivative 
agreements, contracts, and transactions for which it is responsible. 
The proposed revisions are described in detail as follows.
    ICC proposes revising the ICC Risk Management Framework to 
facilitate compliance with requirements under the European Market 
Infrastructure Regulations, specifically anti-procyclicality conditions 
described in Article 28 of the Regulatory Technical Standards.\3\ 
Currently, ICC considers three levels of volatility in its Risk 
Management Framework to account for stable but prudent margin 
requirements. ICC proposes adding a fourth volatility scale that 
assigns a 25% weight to a stress period (currently the stress period is 
set to January 14, 2008 to December 31, 2008) and the remaining 75% to 
the immediate most recent 250 observations, consistent with Article 
28(b) of the Regulatory Technical Standards. The revised initial margin 
requirements are expected to result in more conservative initial margin 
figures for some risk factors. In addition, ICC proposes introducing 
devolatilization enhancements to describe spread log-return time series 
that span market periods associated with different volatility regimes.
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    \3\ Commission Delegated Regulation (EU) No. 153/2013 of 19 
December 2012 Supplementing Regulation (EU) No. 648/2012 of the 
European Parliament and of the Council with regard to Regulatory 
Technical Standards on Requirements for Central Counterparties (the 
``Regulatory Technical Standards'').
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    Additionally, ICC proposes a revised approach to computing index 
liquidity charges. The enhancement consists of reducing the portfolio 
liquidity benefits across different index series. As part of its 
product offering, ICC clears credit default swap (``CDS'') index 
series. A new series of CDS indices is issued every six months, and the 
new series is referred to as being ``on-the-run,'' while previous 
series is referred to as being ``off-the-run.'' The revised calculation 
establishes series-specific liquidity charges by considering the 
series-specific positions and establishing series-specific position 
directionality based on the corresponding 5-year equivalent notional 
amount directionality. Further, to capture the market behavior around 
index rolls when the bid/offer width for index-roll transactions (i.e., 
trading the on-the-run vs. first off-the-run indices) is typically 
smaller than the bid/offer width of each individual leg, ICC proposes 
implementing time-dependent long/short liquidity charge portfolio 
benefits for the on-the-run and the first off-the run series. The 
proposed revisions to the liquidity charges are expected to result in 
more conservative requirements than the ones associated with the 
current approach.
    ICC also proposes enhancements to the calculation of its 
concentration charges by introducing index series-specific 
concentration charges. The revised calculation establishes series-
specific concentration charges for positions exceeding series-specific 
concentration threshold limits based on the direction of the 5-year 
equivalent notional amount or the net notional amount. Under the 
revised calculation, ICC will estimate series-specific concentration 
charge threshold limits based on the distribution of series-specific 
open interest information at the Clearing House. The estimated series-
specific concentration charge threshold limits reflect the average open 
interest over a 5-day period. The proposed revisions to the 
concentration charge are expected to result in more conservative 
requirements than the ones associated with the current approach.
    Section 17A(b)(3)(F) of the Act \4\ 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. ICC believes that the proposed rule changes 
are consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to ICC, in particular, to Section 
17(A)(b)(3)(F),\5\ because ICC believes that the proposed rule changes 
will promote the prompt and accurate clearance and settlement of 
securities transactions, derivatives agreements, contracts, and 
transactions, as the proposed risk model revisions enhance risk 
policies and are expected to impose more conservative initial margin 
requirements, which would enhance the financial resources available to 
ICC and thereby facilitate its ability to promptly and accurately clear 
and settle its

[[Page 65271]]

cleared CDS contracts. In addition, the proposed revisions are 
consistent with the relevant requirements of Rule 17Ad-22. In 
particular, the amendments to the Risk Management Framework will 
enhance the financial resources available to the Clearing House by 
imposing a more conservative initial margin requirement, and are 
therefore reasonably designed to meet the margin and financial resource 
requirements of Rule 17Ad-22(b)(2-3). As such, the proposed rule 
changes are designed to promote the prompt and accurate clearance and 
settlement of securities transactions, derivatives agreements, 
contracts, and transactions within the meaning of Section 17A(b)(3)(F) 
\6\ of the Act.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
    \5\ Id.
    \6\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    ICC does not believe the proposed rule changes would have any 
impact, or impose any burden, on competition. The risk model 
enhancements apply uniformly across all market participants. Therefore, 
ICC does not believe the proposed rule changes impose any burden on 
competition that is inappropriate in furtherance of the purposes of the 
Act.

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 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 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-2014-18 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.

All submissions should refer to File Number SR-ICC-2014-18. 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/clear-credit/regulation.
    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-2014-18 
and should be submitted on or before November 24, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26005 Filed 10-31-14; 8:45 am]
BILLING CODE 8011-01-P