[Federal Register Volume 88, Number 161 (Tuesday, August 22, 2023)]
[Notices]
[Pages 57163-57164]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17977]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98143; File No. SR-ICC-2023-010]


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

August 16, 2023.

I. Introduction

    On June 13, 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 
additional credit default swap (``CDS'') contracts. The proposed rule 
change was published for comment in the Federal Register on July 3, 
2023.\3\ 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 Filing of Proposed Rule Change Relating to the Clearance of 
Additional Credit Default Swap Contracts; Exchange Act Release No. 
97808 (June 27, 2023), 88 FR 42807 (July 3, 2023) (File No. SR-ICC-
2023-010) (``Notice'').
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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 and Standard Western 
European Sovereign Single Name (``SWES'') contracts.
    The purpose of the proposed rule change is to amend ICC's rules to 
permit ICC to clear additional SES and SWES contracts, specifically, 
SES contracts on Romania and the Socialist Republic of Vietnam and SWES 
contracts on the Kingdom of Sweden.
    To carry out this change, the proposed rule change would amend 
Subchapter 26D and Subchapter 26I of Chapter 26. In Rule 26D-102 
(Definitions), ``Eligible SES Reference Entities,'' the proposed rule 
change would add Romania and the Socialist Republic of Vietnam to the 
list of specific Eligible SES Reference Entities to be cleared by ICC. 
Likewise, in Rule 26I-102 (Definitions), ``Eligible SWES Reference 
Entities,'' the proposed rule change would add the Kingdom of Sweden to 
the list of specific Eligible SWES Reference Entities to be cleared by 
ICC.
    As discussed below, these additional SES and SWES contracts have 
terms consistent with the other SES and SWES contracts that ICC is 
already clearing. Likewise, to clear these additional contracts, 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.\4\ For the reasons given below, the Commission finds that 
the proposed rule change is consistent with section 17A(b)(3)(F) of the 
Act \5\ and Rule 17Ad-22(e)(1) thereunder.\6\
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    \4\ 15 U.S.C. 78s(b)(2)(C).
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ 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.\7\
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    \7\ 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.\8\ The Commission has reviewed 
the terms and conditions of the additional SES and SWES contracts 
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 and 26I of the ICC Rules, all 
of which ICC currently clears, with the key difference being the 
underlying reference obligations. For the additional SES contracts, the 
underlying reference obligations will be issuances by Romania and the 
Socialist Republic of Vietnam. For the additional SWES contracts, the 
underlying reference obligations will be issuances by the Kingdom of 
Sweden.
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    \8\ 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 and SWES contracts 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 and SWES 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 and SWES contracts, 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 resources it needs to provide its critical 
services and function as a

[[Page 57164]]

central counterparty, thereby promoting the prompt and accurate 
settlement of the additional SES and SWES contracts and other credit 
default swap transactions.
    Therefore, the Commission finds that clearance of the additional 
SES and SWES contracts would promote the prompt and accurate clearance 
and settlement of securities transactions, consistent with section 
17A(b)(3)(F) of the Act.\9\
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    \9\ 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.\10\
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    \10\ 17 CFR 240Ad-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 Romania and the Socialist 
Republic of Vietnam as well as SWES contracts on the Kingdom of Sweden. 
By amending Rule 26D-102 to add both the Socialist Republic of Vietnam 
and Romania 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 those countries pursuant to its existing 
rules in Subchapter 26D. Likewise, by amending Rule 26I-102 to add the 
Kingdom of Sweden to the list of specific Eligible SWES Reference 
Entities to be cleared by ICC, the proposed rule change would help to 
ensure that ICC can clear SWES contracts on the Kingdom of Sweden 
pursuant to its rules in Subchapter 26I. The Commission believes 
Subchapter 26D and Subchapter 26I each 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).\11\
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    \11\ 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 \12\ and Rule 17Ad-22(e)(1) thereunder.\13\
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
    \13\ 17 CFR 240.17Ad-22(e)(1).
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    It is therefore ordered pursuant to section 19(b)(2) of the Act 
\14\ that the proposed rule change (SR-ICC-2023-010), be, and hereby 
is, approved.\15\
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    \14\ 15 U.S.C. 78s(b)(2).
    \15\ 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.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17977 Filed 8-21-23; 8:45 am]
BILLING CODE 8011-01-P