[Federal Register Volume 86, Number 209 (Tuesday, November 2, 2021)]
[Notices]
[Pages 60493-60496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-23813]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93432; File No. SR-ICC-2021-022]


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

October 27, 2021.
    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 13, 2021, 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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[[Page 60494]]

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 make 
changes to ICC's End-of-Day Price Discovery Policies and Procedures 
(``Pricing Policy''). These revisions do not require any changes to the 
ICC Clearing Rules (the ``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 revising the Pricing Policy, which sets out ICC's end-
of-day (``EOD'') price discovery process that provides prices for 
cleared contracts using submissions made by Clearing Participants 
(``CPs''). ICC requires all CPs to provide EOD submissions for specific 
instruments related to their open positions at ICC. Submissions for 
index instruments (``index submissions'') may be provided in spread or 
price convention under the current Pricing Policy. The proposed 
amendments would remove the ability for CPs to provide index 
submissions in spread convention and would require all index 
submissions to be provided in price convention. 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. ICC proposes 
to move forward with implementation of these changes following 
Commission approval of the proposed rule change.\3\ The proposed 
amendments are described in detail as follows.
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    \3\ ICC intends to move away from supporting index submissions 
in spread convention in a phased approach and does not intend to 
remove the ability for CPs to submit index submissions in spread 
convention until ICC is permitted to implement the changes described 
herein and ICC completes any other required governance or internal 
processes.
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    ICC proposes to amend Subsection 2.2.3, which sets out the 
submission format requirements for index instruments. Currently, index 
submissions may be provided in spread or price convention depending on 
the instrument, as illustrated in Table 8. Under the proposed changes, 
index submissions must be provided in price convention, which has two 
acceptably types, price or upfront. The proposed changes remove Table 8 
and language regarding the submission of recovery rates, which related 
to submissions provided in spread terms and is no longer necessary. ICC 
proposes minor changes to renumber the tables in the Pricing Policy 
accordingly and to spell out an abbreviated term in this subsection.
    ICC proposes to amend Subsection 2.2.4 related to the 
standardization of submissions. Currently, the cross-and-lock algorithm 
used by ICC to determine EOD prices and potential trades requires 
inputs in bid-offer format and executes in price or spread terms 
depending on the convention for the considered instrument. ICC 
standardizes CP submissions into bid-offer format in either price or 
spread terms, depending on the convention. Under the proposed changes, 
the cross-and-lock algorithm will execute in price terms. The proposed 
changes remove language referencing spread terms and distinguishing 
between price and spread terms. The proposed changes also remove 
language differentiating between submissions in price or spread in 
subpart (a).
    ICC proposes similar changes to Subsection 2.3. ICC would no longer 
determine EOD levels in terms of either spread or price. The proposed 
changes remove language requiring ICC to execute the cross-and-lock 
algorithm in spread-space for index instruments with a quote convention 
of spread, in price-space for index instruments with a quote convention 
of price, and in price-space for all single name and index option 
instruments. Currently, in Subsection 2.3.1(g), ICC adjusts outlying 
submission trade prices for index option, single name, and index 
instruments with a cross-and-lock convention of price and outlying 
submission trade spreads for index instruments with a cross-and-lock 
convention of spread. For index instruments with a cross-and-lock 
convention of spread, a conversion between trade price and spread is 
also done. The proposed changes would remove the need to adjust 
outlying submission trade spreads, including the need for such 
conversion.
(b) Statutory Basis
    ICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \4\ and the regulations 
thereunder applicable to it, including the applicable standards under 
Rule 17Ad-22.\5\ In particular, Section 17A(b)(3)(F) of the Act \6\ 
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. ICC believes that the proposed amendments promote its 
ability to maintain the effectiveness and integrity of its EOD price 
discovery process. The proposed revisions require all index submissions 
to be provided in price convention and remove language distinguishing 
between price or spread in certain aspects of the price discovery 
process, which is no longer necessary. The cross-and-lock algorithm 
would execute in price terms (rather than in price or spread terms 
depending on the convention for the considered instrument) and ICC 
would no longer determine EOD levels in terms of either spread or 
price. The proposed amendments allow ICC to further standardize its 
instrument submission requirements, which would promote consistency and 
simplify ICC's submission format requirements. The proposed changes 
would result in more clarity and uniformity around how certain 
processes are completed, including the standardization of submissions 
and adjustments for outlying submission trades, and allow ICC to avoid 
converting between spread and price. Following such changes, ICC will 
continue to maintain a robust EOD price discovery process, which 
includes the determination of EOD pricing levels and firm trades. 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.\7\
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    \4\ 15 U.S.C. 78q-1.
    \5\ 17 CFR 240.17Ad-22.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ Id.

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[[Page 60495]]

    The amendments would also satisfy relevant requirements of Rule 
17Ad-22.\8\ Rule 17Ad-22(e)(2)(i) and (v) \9\ 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 Pricing Policy continues to subject 
the ICC EOD price discovery process to a governance and oversight 
structure that promotes transparency and accountability and clearly 
assigns and documents responsibility for relevant actions and 
decisions. ICC believes that the proposed rule change would promote 
consistency and transparency in ICC's price discovery process and thus 
enhance implementation of the Pricing Policy and continue to ensure 
that responsible parties appropriately and effectively carry out their 
duties. As such, 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 the 
requirements of Rule 17Ad-22(e)(2)(i) and (v).\10\
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    \8\ 17 CFR 240.17Ad-22.
    \9\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \10\ Id.
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    Rule 17Ad-22(e)(3)(i) \11\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to maintain a sound risk management 
framework for comprehensively managing legal, credit, liquidity, 
operational, general business, investment, custody, and other risks 
that arise in or are borne by the covered clearing agency, which 
includes risk management policies, procedures, and systems designed to 
identify, measure, monitor, and manage the range of risks that arise in 
or are borne by the covered clearing agency, that are subject to review 
on a specified periodic basis and approved by the board of directors 
annually. The Pricing Policy is a key aspect of ICC's risk management 
approach, which continues to be subject to review on a specified 
periodic basis and approved by the Board annually. The proposed changes 
further standardize ICC's instrument submission requirements, remove 
the need to distinguish between price and spread terms in certain 
aspects of the price discovery process, and allow ICC to avoid 
converting between spread and price. In ICC's view, such changes would 
simplify and promote transparency in ICC's price discovery process and 
thus enhance implementation of the Pricing Policy. The proposed rule 
change would thus strengthen ICC's ability to manage risk associated 
with its price discovery process, and ICC's risk management more 
generally as ICC uses the resulting EOD prices for risk management 
purposes, and ICC would continue to derive reliable, market-driven 
prices from its price discovery process. As such, the amendments would 
satisfy the requirements of Rule 17Ad-22(e)(3)(i).\12\
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    \11\ 17 CFR 240.17Ad-22(e)(3)(i).
    \12\ Id.
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    Rule 17Ad-22(e)(6)(iv) \13\ requires each covered clearing agency 
to establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to cover its credit exposures to its 
participants by establishing a risk-based margin system that, at a 
minimum uses reliable sources of timely price data and uses procedures 
and sound valuation models for addressing circumstances in which 
pricing data are not readily available or reliable. ICC believes that 
the proposed changes are appropriately designed to support and maintain 
the effectiveness of ICC's EOD price discovery process that provides 
reliable prices, which ICC uses for risk management purposes. As 
described above, the proposed changes would result in more consistency 
in ICC's instrument submission requirements as well as more clarity and 
uniformity around how certain processes are completed, including the 
standardization of submissions and adjustments for outlying submission 
trades. ICC believes that the proposed rule change would result in 
additional clarity surrounding ICC's price discovery process overall 
and ICC's determination of EOD levels. In ICC's view, such changes are 
appropriately designed to promote and maintain the effectiveness and 
integrity of the Pricing Policy and the EOD price discovery process 
that provides reliable prices, consistent with the requirements of Rule 
17Ad-22(e)(6)(iv).\14\
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    \13\ 17 CFR 240.17Ad-22(e)(6)(iv).
    \14\ Id.
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(B) Clearing Agency'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 proposed changes to 
the Pricing Policy will apply uniformly across all market participants. 
Therefore, ICC does not believe the amendments would 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 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-2021-022 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-2021-022. 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

[[Page 60496]]

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-2021-022 and should be 
submitted on or before November 23, 2021.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-23813 Filed 11-1-21; 8:45 am]
BILLING CODE 8011-01-P