[Federal Register Volume 88, Number 138 (Thursday, July 20, 2023)]
[Notices]
[Pages 46819-46820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-15355]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97908; File No. SR-ICC-2023-005]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to the Clearance of Additional 
Credit Default Swap Contracts

July 14, 2023.

I. Introduction

    On March 30, 2023, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(2) of the Securities Exchange Act of 1934 (the ``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to clear an 
additional credit default swap (``CDS'') contract. The proposed rule 
change was published for comment in the Federal Register on April 18, 
2023.\3\ On May 11, 2023, the Commission designated a longer period for 
Commission action on the proposed rule change until July 17, 2023.\4\ 
The Commission did not receive comments regarding the proposed rule 
change. For the reasons discussed below, the Commission is approving 
the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice 
of Proposed Rule Change Relating to the Clearance of Additional 
Credit Default Swap Contracts; Exchange Act Release No. 97293 (Apr. 
12, 2023), 88 FR 23711 (Apr. 18, 2023) (File No. SR-ICC-2023-005) 
(``Notice'').
    \4\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice 
of Designation of Longer Period for Commission Action on Proposed 
Rule Relating to the Clearance of Additional Credit Default Swap 
Contracts; Exchange Act Release No. 97482 (May 11, 2023), 88 FR 
31554 (May 17, 2023) (File No. SR-ICC-2023-005).
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II. Description of the Proposed Rule Change

    ICC is registered with the Commission as a clearing agency for the 
purpose of clearing CDS contracts. Chapter 26 of ICC's Rulebook covers 
the CDS contracts that ICC clears, with each subchapter of Chapter 26 
defining the characteristics and additional Rules applicable to the 
various specific categories of CDS contracts that ICC clears. Among 
other CDS contracts, ICC currently clears Standard Emerging Market 
Sovereign Single Name CDS (``SES'') contracts.
    The purpose of the proposed rule change is to amend ICC's rules to 
permit ICC to clear an additional SES contract, specifically, SES 
contracts on the Dominican Republic. To carry out this change, the 
proposed rule change would amend Subchapter 26D of Chapter 26. In Rule 
26D-102 (Definitions), ``Eligible SES Reference Entities,'' the 
proposed rule change would add the Dominican Republic to the list of 
specific Eligible SES Reference Entities to be cleared by ICC.
    As discussed below, this additional SES contract has terms 
consistent with the other SES contracts that ICC is already clearing. 
As such, to clear this additional contract, ICC will be able to rely on 
its existing Risk Management Framework and other policies and 
procedures without making any changes.

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act requires the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
the proposed rule change is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to the 
organization.\5\ For the reasons given below, the Commission finds that 
the proposed rule change is consistent with Section 17A(b)(3)(F) of the 
Act \6\ and Rule 17Ad-22(e)(1) thereunder.\7\
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    \5\ 15 U.S.C. 78s(b)(2)(C).
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ 17 CFR 240Ad-22(e)(1).
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A. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, among other things, that 
the rules of ICC be designed to promote the prompt and accurate 
clearance and settlement of securities transactions and, to the extent 
applicable, derivative agreements, contracts, and transactions.\8\
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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    The Commission finds that the proposed rule change is consistent 
with Section 17A(b)(3)(F) of the Act.\9\ The Commission has reviewed 
the terms and conditions of the additional SES contract proposed for 
clearing and has determined that those terms and conditions are 
substantially similar to the terms and conditions of the other 
contracts listed in Subchapter 26D of the ICC Rules, all of which ICC 
currently clears, with the key difference being the underlying 
reference obligations. For the additional SES contract, the underlying 
reference obligations will be issuances by the Dominican Republic.
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    \9\ 15 U.S.C. 78q-1(b)(3)(F).
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    After reviewing the Notice and ICC's Rules, policies, and 
procedures, the Commission also finds that ICC would be able to clear 
the additional SES contract pursuant to its existing clearing 
arrangements and related financial safeguards, protections, and risk 
management procedures. Commission staff also conducted a review of data 
on volume, open interest, and the number of ICC Clearing Participants 
(``CPs'') that currently trade in the SES contracts, as well as certain 
model parameters for the additional contracts. Based on this review, as 
well as its own experience and expertise, the Commission finds that 
ICC's Rules, policies, and procedures are reasonably designed to price 
and measure the potential risk presented by the additional SES 
contract, collect financial resources in proportion to such risk, and 
liquidate the additional contracts in the event of a CP default. This 
should help ensure ICC's ability to maintain the financial

[[Page 46820]]

resources it needs to provide its critical services and function as a 
central counterparty, thereby promoting the prompt and accurate 
settlement of the additional SES contracts and other credit default 
swap transactions.
    Therefore, the Commission finds that clearance of the additional 
SES contract would promote the prompt and accurate clearance and 
settlement of securities transactions, consistent with Section 
17A(b)(3)(F) of the Act.\10\
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    \10\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(e)(1)

    Rule 17Ad-22(e)(1) requires ICC to establish, implement, maintain, 
and enforce written policies and procedures reasonably designed to 
provide for a well-founded, clear, transparent, and enforceable legal 
basis for each aspect of its activities in all relevant 
jurisdictions.\11\
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    \11\ 17 CFR 240.17Ad-22(e)(1).
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    The Commission believes that the proposed rule change would help 
provide a well-founded, clear, transparent, and enforceable legal basis 
for ICC's clearance of SES contracts on the Dominican Republic. By 
amending Rule 26D-102 to add the Dominican Republic to the list of 
specific Eligible SES Reference Entities to be cleared by ICC, the 
proposed rule change would help to ensure that ICC can clear SES 
contracts on the Dominican Republic pursuant to its existing rules in 
Subchapter 26D. The Commission believes Subchapter 26D would provide a 
well-founded, clear, transparent, and enforceable legal basis for ICC 
to clear these contracts, consistent with the requirements of Rule 
17Ad-22(e)(1).\12\
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    \12\ 17 CFR 240.17Ad-22(e)(1).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act, 
and in particular, with the requirements of Section 17A(b)(3)(F) of the 
Act \13\ and Rule 17Ad-22(e)(1) thereunder.\14\
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    \13\ 15 U.S.C. 78q-1(b)(3)(F).
    \14\ 17 CFR 240Ad-22(e)(1).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\15\ that the proposed rule change (SR-ICC-2023-005), be, and hereby 
is, approved.\16\
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    \15\ 15 U.S.C. 78s(b)(2).
    \16\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-15355 Filed 7-19-23; 8:45 am]
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