[Federal Register Volume 86, Number 190 (Tuesday, October 5, 2021)]
[Notices]
[Pages 55037-55039]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-21615]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93177; File No. SR-ICC-2021-019]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change Relating to the ICC CDS Instrument On-
Boarding Policies and Procedures

September 29, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ and Rule 19b-4,\2\ notice is hereby given that on September 
22, 2021, ICE Clear Credit LLC (``ICC'') filed with the Securities and 
Exchange 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. 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 
CDS Instrument On-boarding Policies and Procedures (``Instrument On-
boarding Policy''). These revisions do not require any changes to the 
ICC Clearing Rules (``Rules'').

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, 
security-based swap submission, or advance notice and discussed any 
comments it received on the proposed rule change, security-based swap 
submission, or advance notice. 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

(a) Purpose
    ICC proposes to amend the Instrument On-boarding Policy. This 
document provides an overview of ICC's on-boarding process for new 
instruments, which includes selecting new instruments for clearing, 
configuring internal systems, notifying and receiving feedback from 
stakeholders, and ensuring operational readiness by ICC and its 
Clearing Participants (``CPs''). The proposed changes amend the guiding 
principles that ICC maintains for instrument selection. ICC believes 
that such changes will facilitate the prompt and accurate clearance and 
settlement of securities transactions and derivative agreements, 
contracts, and transactions for which it is responsible. ICC proposes 
to make such changes effective following Commission approval of the 
proposed rule change. The proposed rule change is described in detail 
as follows.

[[Page 55038]]

    ICC proposes amendments to the Subsection III.A which discusses the 
guiding principles that ICC maintains for considering instruments for 
clearing. Such principles are designed to ensure that ICC proceeds in a 
prudent manner with respect to instrument selection while also 
providing the best opportunity for CPs to minimize their risk. The 
proposed changes incorporate an additional guiding principle to 
consider instruments that are constituents of the currently clearable 
On-The-Run (``OTR'') indices to become clearing eligible in order to 
provide additional instruments to hedge and mitigate indirect risk 
exposure from the OTR indices. For other instruments that are not 
constituents of currently clearable OTR indices, the current guiding 
principles would remain and ICC would continue to consider instrument 
open interest and volume. For all instruments, ICC would continue to 
consider instruments that can be cleared through ICC's systems and 
processes and to support industry wide initiatives and protocols.
(b) Statutory Basis
    ICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \3\ and the regulations 
thereunder applicable to it, including the applicable standards under 
Rule 17Ad-22.\4\ In particular, Section 17A(b)(3)(F) of the Act \5\ 
requires that the rule change be consistent with the prompt and 
accurate clearance 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 
or for which it is responsible, and the protection of investors and the 
public interest. As described above, the proposed changes incorporate 
an additional guiding principle that ICC consider instruments that are 
constituents of the currently clearable OTR indices to become clearing 
eligible in order to provide additional instruments to hedge and 
mitigate indirect risk exposure from the OTR indices. ICC believes that 
such changes would support and enhance the guiding principles and 
ensure that ICC continues to proceed in a prudent manner with respect 
to instrument selection while also providing CPs the best opportunity 
to minimize their risk. Moreover, the Instrument On-boarding Policy 
will continue to ensure that ICC's risk models adequately capture the 
risks associated with proposed new instruments and that the end-of-day 
price discovery process operates effectively and provides reliable 
prices for proposed new instruments, including through the risk 
management and pricing configuration and evaluation and the dress 
rehearsal. The proposed rule change is therefore consistent with the 
prompt and accurate clearing and settlement of the contracts cleared by 
ICC, the safeguarding of securities and funds in the custody or control 
of ICC or for which it is responsible, and the protection of investors 
and the public interest, within the meaning of Section 17A(b)(3)(F) of 
the Act.\6\
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    \3\ 15 U.S.C. 78q-1.
    \4\ 17 CFR 240.17Ad-22.
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ Id.
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    The amendments would also satisfy relevant requirements of Rule 
17Ad-22.\7\ Rule 17Ad-22(e)(2)(i) and (v) \8\ requires each covered 
clearing agency to establish, implement, maintain, and enforce written 
policies and procedures reasonably designed to provide for governance 
arrangements that are clear and transparent and specify clear and 
direct lines of responsibility. The Instrument On-boarding Policy 
continues to describe the roles and responsibilities of relevant 
stakeholders with respect to instrument selection and subject new 
instruments to ICC's governance process. As such, in ICC's view, the 
proposed rule change continues to ensure that ICC maintains policies 
and procedures that are reasonably designed to provide for clear and 
transparent governance arrangements and specify clear and direct lines 
of responsibility, consistent with Rule 17Ad-22(e)(2)(i) and (v).\9\
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    \7\ 17 CFR 240.17Ad-22.
    \8\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \9\ Id.
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    Rule 17Ad-22(e)(4)(ii) \10\ requires each covered clearing agency 
to establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to effectively identify, measure, 
monitor, and manage its credit exposures to participants and those 
arising from its payment, clearing, and settlement processes, including 
by maintaining additional financial resources at the minimum to enable 
it to cover a wide range of foreseeable stress scenarios that include, 
but are not limited to, the default of the two participant families 
that would potentially cause the largest aggregate credit exposure for 
the covered clearing agency in extreme but plausible market conditions. 
The proposed changes distinguish a category of instruments that are 
constituents of the currently clearable OTR indices to provide 
additional instruments to hedge and mitigate indirect risk exposure 
from the OTR indices. New instruments will continue to be subject to 
the risk management and pricing configuration and evaluation and the 
dress rehearsal under the Instrument On-boarding Policy to ensure that 
ICC's risk models adequately capture the risks associated with new 
instruments and that the end-of-day price discovery process operates 
effectively, thereby supporting ICC's ability to maintain its financial 
resources and withstand the pressures of defaults, consistent with the 
requirements of Rule 17Ad-22(e)(4)(ii).\11\
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    \10\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \11\ Id.
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    Rule 17Ad-22(e)(17) \12\ requires, in relevant part, each covered 
clearing agency to establish, implement, maintain, and enforce written 
policies and procedures reasonably designed to manage its operational 
risks by (i) identifying the plausible sources of operational risk, 
both internal and external, and mitigating their impact through the use 
of appropriate systems, policies, procedures, and controls; and (ii) 
ensuring that systems have a high degree of security, resiliency, 
operational reliability, and adequate, scalable capacity. The 
Instrument On-boarding Policy continues to describe the process, 
including testing and preparation, for the introduction of new 
instruments to ensure that ICC and its CPs are operationally ready and 
that ICC proceeds in a controlled manner, thereby supporting ICC's 
ability to identify the plausible sources of operational risk and 
mitigate their impact and ensure that systems have a high degree of 
security, resiliency, operational reliability, and adequate, scalable 
capacity, consistent with the requirements of Rule 17Ad-22(e)(17).\13\
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    \12\ 17 CFR 240.17Ad-22(e)(17)(i) and (ii).
    \13\ Id.
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    Rule 17Ad-22(e)(21) \14\ requires, among other things, that each 
covered clearing agency establish, implement, maintain, and enforce 
written policies and procedures reasonably designed to be efficient and 
effective in meeting the requirements of its participants and the 
markets it serves. The proposed changes are designed to provide 
additional instruments to hedge and mitigate indirect risk exposure 
from the OTR indices. Such changes would support and enhance the 
guiding principles by ensuring that ICC continues to proceed in a 
prudent manner with respect to instrument selection while also 
providing CPs the best opportunity to

[[Page 55039]]

minimize their risk, thereby allowing ICC to be efficient and effective 
in meeting the requirements of its participants and the markets it 
serves, consistent with Rule 17Ad-22(e)(21).\15\
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    \14\ 17 CFR 240.17Ad-22(e)(21).
    \15\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    ICC does not believe the proposed amendments would have any impact, 
or impose any burden, on competition not necessary or appropriate in 
furtherance of the purpose of the Act. The proposed changes to the 
Instrument On-boarding Policy will apply uniformly across all market 
participants. Therefore, ICC does not believe the proposed rule change 
imposes any burden on competition not necessary or appropriate in 
furtherance of the purpose of the Act.

(C) Clearing Agency'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-2021-019 on the subject line.

Paper Comments

    Send paper comments in triplicate to Secretary, Securities and 
Exchange Commission, 100 F Street NE, Washington, DC 20549.
    All submissions should refer to File Number SR-ICC-2021-019. 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 website (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 website 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 website at https://www.theice.com/clear-credit/regulation. All comments received will be posted without change. 
Persons submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ICC-2021-019 and should be 
submitted on or before October 26, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21615 Filed 10-4-21; 8:45 am]
BILLING CODE 8011-01-P