[Federal Register Volume 82, Number 126 (Monday, July 3, 2017)]
[Notices]
[Pages 30933-30935]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13900]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81030; File No. SR-ICC-2017-009]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Proposed Rule Change, Security-Based Swap Submission, or Advance Notice 
Relating to the Clearance of Additional Credit Default Swap Contracts

June 27, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 \2\ notice is hereby given that on 
June 13, 2017, ICE Clear Credit LLC (``ICC'') filed with the Securities 
and Exchange Commission the proposed rule change, security-based swap 
submission, or advance notice as described in Items I, II and III 
below, which Items have been primarily prepared by ICC. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Clearing Agency'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 
Asia Corporate Single Name CDS contracts (collectively, ``STASC 
Contracts''), Standard Asia Financial Corporate Single Name CDS 
contracts (collectively, ``STASFC Contracts''), and Standard Emerging 
Market Corporate Single Name CDS contracts (collectively, ``STEMC 
Contracts'').

II. Clearing Agency'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. Clearing Agency'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.

[[Page 30934]]

Specifically, ICC proposes amending Chapter 26 of the ICC Rules to add 
Subchapters 26O, 26P, and 26Q to provide for the clearance of STASC, 
STASFC, and STEMC 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 STASC, STASFC, and 
STEMC Contracts will not require any changes to ICC's Risk Management 
Framework or other policies and procedures constituting rules within 
the meaning of the Act.
    STASC Contracts have similar terms to the Standard European 
Corporate Single Name CDS contracts (``STEC Contracts'') and Standard 
Australian Corporate Single Name CDS contracts (``STAC Contracts'') 
currently cleared by ICC and governed by Subchapters 26G and 26M of the 
ICC Rules, respectively. Accordingly, the proposed rules found in 
Subchapter 26O largely mirror the ICC Rules for STEC Contracts in 
Subchapter 26G and STAC Contracts in Subchapter 26M, with certain 
modifications that reflect differences in terms and market conventions 
between those contracts and STASC Contracts. STASC Contracts will be 
denominated in United States Dollars.
    ICC Rule 26O-102 (Definitions) sets forth the definitions used for 
the STAC Contracts. The definitions are substantially the same as the 
definitions found in Subchapters 26G and 26M of the ICC Rules, other 
than certain conforming changes. ICC Rules 26O-203 (Restriction on 
Activity), 26O-206 (Notices Required of Participants with respect to 
STASC Contracts), 26O-303 (STASC Contract Adjustments), 26O-309 
(Acceptance of STASC Contracts by ICE Clear Credit), 26O-315 (Terms of 
the Cleared STASC Contract), 26O-316 (Relevant Physical Settlement 
Matrix Updates), 26O-502 (Specified Actions), and 26O-616 (Contract 
Modification) reflect or incorporate the basic contract specifications 
for STASC Contracts and are substantially the same as under Subchapters 
26G and 26M of the ICC Rules.
    STASFC Contracts have similar terms to the Standard European 
Financial Corporate Single Name CDS contracts (``STEFC Contracts'') and 
Standard Australian Financial Corporate Single Name CDS contracts 
(``STAFC Contracts'') currently cleared by ICC and governed by 
Subchapters 26H and 26N of the ICC Rules, respectively. Accordingly, 
the proposed rules found in Subchapter 26P largely mirror the ICC Rules 
for STEFC Contracts in Subchapter 26H and STAFC Contracts in Subchapter 
26N, with certain modifications that reflect differences in terms and 
market conventions between those contracts and STASFC Contracts. STASFC 
Contracts will be denominated in United States Dollars.
    ICC Rule 26P-102 (Definitions) sets forth the definitions used for 
the STASFC Contracts. The definitions are substantially the same as the 
definitions found in Subchapters 26H and 26N of the ICC Rules, other 
than certain conforming changes. ICC Rules 26P-203 (Restriction on 
Activity), 26P-206 (Notices Required of Participants with respect to 
STASFC Contracts), 26P-303 (STASFC Contract Adjustments), 26P-309 
(Acceptance of STASFC Contracts by ICE Clear Credit), 26P-315 (Terms of 
the Cleared STASFC Contract), 26P-316 (Relevant Physical Settlement 
Matrix Updates), 26P-502 (Specified Actions), and 26P-616 (Contract 
Modification) reflect or incorporate the basic contract specifications 
for STASFC Contracts and are substantially the same as under 
Subchapters 26H and 26N of the ICC Rules.
    STEMC Contracts also have similar terms to the STEC and STAC 
Contracts currently cleared by ICC and governed by Subchapters 26G and 
26M of the ICC Rules, respectively. Accordingly, the proposed rules 
found in Subchapter 26Q largely mirror the ICC Rules for STEC Contracts 
in Subchapter 26G and STAC Contracts in Subchapter 26M, with certain 
modifications that reflect differences in terms and market conventions 
between those contracts and STEMC Contracts. STEMC Contracts will be 
denominated in United States Dollars.
    ICC Rule 26Q-102 (Definitions) sets forth the definitions used for 
the STEMC Contracts. The definitions are substantially the same as the 
definitions found in Subchapters 26G and 26M of the ICC Rules, other 
than certain conforming changes. ICC Rules 26Q-203 (Restriction on 
Activity), 26Q-206 (Notices Required of Participants with respect to 
STEMC Contracts), 26Q-303 (STEMC Contract Adjustments), 26Q-309 
(Acceptance of STEMC Contracts by ICE Clear Credit), 26Q-315 (Terms of 
the Cleared STEMC Contract), 26Q-316 (Relevant Physical Settlement 
Matrix Updates), 26Q-502 (Specified Actions), and 26Q-616 (Contract 
Modification) reflect or incorporate the basic contract specifications 
for STEMC Contracts and are substantially the same as under Subchapters 
26G and 26M 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. As described above, the STASC, STASFC, and 
STEMC Contracts proposed for clearing are similar to 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 STASC, 
STASFC, and STEMC Contracts will allow market participants an increased 
ability to manage risk and ensure the safeguarding of margin assets 
pursuant to clearing house rules. ICC believes that acceptance of the 
STASC, STASFC, and STEMC 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\
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78q-1(b)(3)(F).
    \4\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Clearing of the STASC, STASFC, and STEMC 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

[[Page 30935]]

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 STASC, STASFC, and STEMC 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 STASC, STASFC, and STEMC 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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

B. Clearing Agency's Statement on Burden on Competition

    The STASC, STASFC, and STEMC Contracts will be available to all ICC 
participants for clearing. The clearing of these STASC, STASFC, and 
STEMC Contracts by ICC does not preclude the offering of the STASC, 
STASFC, and STEMC Contracts for clearing by other market participants. 
Accordingly, ICC does not believe that clearance of the STASC, STASFC, 
and STEMC Contracts will impose any burden on competition not necessary 
or appropriate in furtherance of the purposes of the Act.

C. Clearing Agency's Statement on Comments on the Proposed Rule 
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-2017-009 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-2017-009. 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-2017-009 
and should be submitted on or before July 24, 2017.
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-13900 Filed 6-30-17; 8:45 am]
 BILLING CODE 8011-01-P