[Federal Register Volume 80, Number 13 (Wednesday, January 21, 2015)]
[Notices]
[Pages 2985-2986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00838]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74053; File No. SR-ICC-2015-001]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change To Revise ICC End-of-Day Price Discovery 
Policies and Procedures

January 14, 2015.
    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 January 5, 2015, 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 End-of-Day Price Discovery Policies and Procedures to incorporate 
enhancements to its price discovery process. This revision 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 revising the ICC End-of-Day Price Discovery Policies 
and Procedures to incorporate enhancements to its price discovery 
process.
    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 currently utilizes a ``cross and lock'' algorithm as part of 
its price discovery process. Under this algorithm, standardized bids 
and offers derived from Clearing Participant (``CP'') submissions are 
matched by sorting them from highest to lowest and lowest to highest 
levels, respectively. This sorting process pairs the CP submitting the 
highest bid price with the CP submitting the lowest offer price, the CP 
submitting the second highest bid price with the CP submitting the 
second-lowest offer price, and so on. The algorithm then identifies 
crossed and/or locked markets. Crossed markets are the CP pairs 
generated by the sorting and ranking process for which the bid price of 
one CP is above the offer price of the matched CP. The algorithm 
identifies locked markets, where the bid and the offer are equal, in a 
similar fashion.
    Whenever there are crossed and/or locked matched markets, the 
algorithm applies a set of rules designed to identify standardized 
submissions that are ``obvious errors.'' The algorithm sets a high bid 
threshold equal to the preliminary end-of-day (``EOD'') level plus one 
EOD bid offer width (``BOW''), and a low offer threshold equal to the 
preliminary EOD level minus one EOD BOW. The algorithm considers a CP's 
standardized submission to be an ``obvious error'' if the bid is higher 
than the high bid threshold, or the offer is lower than the low offer 
threshold.
    CP pairs identified by the algorithm as crossed or locked markets 
are required from time to time, under the End-of-Day Price Discovery 
Policies and Procedures, to enter into cleared trades with each other 
as part of the ICC EOD price discovery process (``Firm Trade''). 
Currently, ICC excludes standardized submissions it identifies as 
obvious errors from Firm Trades and does not use these submissions in 
its determination of published EOD levels.
    ICC proposes implementing consequences for CPs providing price 
discovery submissions deemed to be

[[Page 2986]]

obvious errors. Effectively, ICC is extending the process for 
determining Firm Trades to include all standardized submissions, 
including those classified as obvious errors. ICC will effectively 
execute its current EOD algorithm twice, initially in the same way it 
does today, by eliminating obvious errors, to generate the final EOD 
levels, and again, without excluding obvious errors, to generate Firm 
Trades and reversing transactions.\3\
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    \3\ A reversing transaction is a second Firm Trade with 
identical attributes to the initial Firm Trade, but with the buyer 
and seller counterparties reversed, and at that day's EOD price 
rather than the original Firm Trade price.
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    To limit the potential exposure created through Firm Trades that 
include a bid or offer from an obvious error submission, ICC will 
adjust trade prices, where appropriate, to fall within a predefined 
band on either side of the EOD price such that the potential profit or 
loss (``P/L'') realized by unwinding the trade at the EOD level is 
capped.
    To prevent CPs from receiving Firm Trades with large P/L impact in 
Index instruments that are less actively traded, and therefore more 
difficult and/or more expensive to manage the associated risk, ICC will 
have the ability to automatically generate reversing transactions at 
the EOD level for specific Index instruments (i.e., for specific index 
risk sub-factors as defined by specific combinations of index/sub-index 
and series) based on liquidity.\4\ Currently, reversing transactions 
are only available for Single Name instruments. There are no changes to 
ICC's Clearing Rules as a result of these changes.
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    \4\ The ICC Risk Department, in conjunction with the ICC Trading 
Advisory Committee, specifies the index risk sub-factors that are 
eligible for automatic reversing transactions.
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    Section 17A(b)(3)(F) of the Act \5\ 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 change 
is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to ICC, in particular, to section 
17A(b)(3)(F),\6\ because ICC believes that the proposed rule change 
will assure the prompt and accurate clearance and settlement of 
securities transactions, derivatives agreements, contracts, and 
transactions, as the proposed revisions enhance ICC's price discovery 
process, by ensuring traders are accountable for all price discovery 
submissions to ICC, not just those submissions nearer to ICC's final 
EOD level. As such, the proposed change is 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) of the Act.\7\
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ Id.
    \7\ Id.
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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. The enhancements to ICC's 
price discovery process apply uniformly across all market participants. 
Therefore, ICC does not believe the proposed rule change imposes 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-2015-001 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-2015-001. 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-2015-001 
and should be submitted on or before February 11, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-00838 Filed 1-20-15; 8:45 am]
BILLING CODE 8011-01-P