[Federal Register Volume 81, Number 235 (Wednesday, December 7, 2016)]
[Notices]
[Pages 88291-88292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29285]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79439; File No. SR-ICC-2016-014]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change To Provide for the Clearance of 
Additional Credit Default Swap Contracts

December 1, 2016.
    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 November 18, 2016, 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 Rulebook (the ``Rules'') to provide for the clearance of Standard 
Australian Corporate Single Name CDS contracts (collectively, ``STAC 
Contracts'') and Standard Australian Financial Corporate Single Name 
CDS contracts (collectively, ``STAFC Contracts'').

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

    The purpose of the proposed rule change is to adopt rules that will 
provide the basis for ICC to clear additional credit default swap 
contracts. Specifically, ICC proposes amending Chapter 26 of the ICC 
Rules to add Subchapters 26M and 26N to provide for the clearance of 
STAC and STAFC Contracts, respectively. ICC believes the addition of 
these contracts will benefit the market for credit default swaps by 
providing market participants the benefits of clearing, including 
reduction in counterparty risk and safeguarding of margin assets 
pursuant to clearing house rules. Clearing of the additional STAC and 
STAFC Contracts will not require any changes to ICC's Risk Management 
Framework or other policies and procedures constituting rules within 
the meaning of the Securities Exchange Act of 1934 (``Act'').
    STAC Contracts have similar terms to the Standard European 
Corporate Single Name CDS contracts (``STEC Contracts'') currently 
cleared by ICC and governed by Subchapter 26G of the ICC Rules. 
Accordingly, the proposed rules found in Subchapter 26M largely mirror 
the ICC Rules for STEC Contracts in Subchapter 26G, with certain 
modifications that reflect differences in terms and market conventions 
between those contracts and STAC Contracts. STAC Contracts will be 
denominated in United States Dollars.
    ICC Rule 26M-102 (Definitions) sets forth the definitions used for 
the STAC Contracts. The definitions are substantially the same as the 
definitions found in Subchapter 26G of the ICC Rules, other than 
certain conforming changes. ICC Rules 26M-203 (Restriction on 
Activity), 26M-206 (Notices Required of Participants with respect to 
STAC Contracts), 26M-303 (STAC Contract Adjustments), 26M-309 
(Acceptance of STAC Contracts by ICE Clear Credit), 26M-315 (Terms of 
the Cleared STAC Contract), 26M-316 (Relevant Physical Settlement 
Matrix Updates), 26M-502 (Specified Actions), and 26M-616 (Contract 
Modification) reflect or incorporate the basic contract specifications 
for STAC Contracts and are substantially the same as under Subchapter 
26G of the ICC Rules.
    STAFC Contracts have similar terms to the Standard European 
Financial Corporate Single Name CDS contracts (``STEFC Contracts'') 
currently cleared by ICC and governed by Subchapter 26H of the ICC 
Rules. Accordingly, the proposed rules found in Subchapter 26N largely 
mirror the ICC Rules for STEFC Contracts in Subchapter 26H, with 
certain modifications that reflect differences in terms and market 
conventions between those contracts and STAFC Contracts. STAFC 
Contracts will be denominated in United States Dollars.
    ICC Rule 26N-102 (Definitions) sets forth the definitions used for 
the STAFC Contracts. The definitions are substantially the same as the 
definitions found in Subchapter 26H of the ICC Rules, other than 
certain conforming changes. ICC Rules 26N-203 (Restriction on 
Activity), 26N-206 (Notices Required of Participants with respect to 
STAFC Contracts), 26N-303 (STAFC Contract Adjustments), 26N-309 
(Acceptance of STAFC Contracts by ICE Clear Credit), 26N-315 (Terms of 
the Cleared STAFC Contract), 26N-316 (Relevant Physical Settlement 
Matrix Updates), 26N-502 (Specified Actions), and 26N-616 (Contract 
Modification) reflect or incorporate the basic contract specifications 
for STAFC Contracts and are substantially the same as under Subchapter 
26H 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 and to comply with the provisions of the Act and the rules 
and regulations thereunder. The STAC and STAFC Contracts proposed for 
clearing are similar to the STEC and STEFC Contracts currently cleared 
by ICC, and will be cleared pursuant to ICC's existing clearing 
arrangements and related financial safeguards, protections and risk 
management procedures. Clearing of the STAC and STAFC Contracts will 
allow market participants an increased ability to manage risk and 
ensure the safeguarding of margin assets

[[Page 88292]]

pursuant to clearing house rules. ICC believes that acceptance of the 
STAC and STAFC Contracts, on the terms and conditions set out in the 
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 STAC and STAFC Contracts will also satisfy the 
requirements of Rule 17Ad-22.\5\ In particular, in terms of financial 
resources, ICC will apply its existing initial margin methodology to 
the additional contracts. ICC believes that this model will provide 
sufficient initial margin requirements to cover its credit exposure to 
its clearing members from clearing such contracts, consistent with the 
requirements of Rule 17Ad-22(b)(2).\6\ In addition, ICC believes its 
Guaranty Fund, under its existing methodology, will, together with the 
required initial margin, provide sufficient financial resources to 
support the clearing of the additional contracts consistent with the 
requirements of Rule 17Ad-22(b)(3).\7\ 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),\8\ 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) \9\ as to the finality and accuracy of its 
daily settlement process and avoidance of the risk to ICC of settlement 
failures. ICC determined to accept the STAC and STAFC Contracts for 
clearing in accordance with its governance process, which included 
review of the contracts and related risk management considerations by 
the ICC Risk Committee and approval by its Board. These governance 
arrangements are consistent with the requirements of Rule 17Ad-
22(d)(8).\10\ Finally, ICC will apply its existing default management 
policies and procedures for the STAC and STAFC 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(b)(3).
    \8\ 17 CFR 240.17Ad-22(d)(4).
    \9\ 17 CFR 240.17Ad-22(d)(5), (12) and (15).
    \10\ 17 CFR 240.17Ad-22(d)(8).
    \11\ 17 CFR 240.17Ad-22(d)(11).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The STAC and STAFC Contracts will be available to all ICC 
participants for clearing. The clearing of these STAC and STAFC 
Contracts by ICC does not preclude the offering of the STAC and STAFC 
Contracts for clearing by other market participants. Accordingly, ICC 
does not believe that clearance of the STAC and STAFC Contracts will 
impose any burden on competition not necessary or appropriate 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 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-2016-014 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-2016-014. 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-2016-014 
and should be submitted on or before December 28, 2016.

    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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Brent J. Fields,
Secretary.
[FR Doc. 2016-29285 Filed 12-6-16; 8:45 am]
 BILLING CODE 8011-01-P