[Federal Register Volume 88, Number 238 (Wednesday, December 13, 2023)]
[Notices]
[Pages 86399-86400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27275]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99115; File No. SR-ICC-2023-014]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to the Clearance of Additional
Credit Default Swap Contracts
December 7, 2023.
I. Introduction
On October 25, 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 November 7,
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.
98833 (Nov. 1, 2023), 88 FR 76870 (Nov. 7, 2023) (File No. SR-ICC-
2023-014) (``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.
The purpose of the proposed rule change is to amend ICC's rules to
permit ICC to clear additional SES contracts, specifically, SES
contracts on the Kingdom of Morocco and the Federal Republic of
Nigeria.
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
Kingdom of Morocco and the Federal Republic of Nigeria to the list of
specific Eligible SES Reference Entities to be cleared by ICC.
As discussed below, these additional SES contracts have terms
consistent with the other SES 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 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 240.17Ad-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 proposed rule change is consistent with section 17A(b)(3)(F) of
the Act.\8\ The terms and conditions of the additional SES contracts
proposed for clearing are substantially similar to the terms and
conditions of the other contracts listed in Subchapter 26D of ICC's
Rules, all of which ICC currently clears, with the key difference being
the underlying reference obligations. The underlying reference
obligations will be issuances by the Kingdom of Morocco and the Federal
Republic of Nigeria.
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\8\ 15 U.S.C. 78q-1(b)(3)(F).
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A review of the Notice and ICC's Rules, policies, and procedures
shows that ICC would be able to clear the additional SES contracts
pursuant to its existing clearing arrangements and related financial
safeguards, protections, and risk management procedures. Furthermore, 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, show
that ICC's rules, policies, and procedures are reasonably designed to
price and measure the potential risk presented by the additional SES
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 central
counterparty, thereby promoting the prompt and accurate settlement of
the additional SES contracts and other credit default swap
transactions.
Therefore, clearance of the additional SES 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
[[Page 86400]]
its activities in all relevant jurisdictions.\10\
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\10\ 17 CFR 240.17Ad-22(e)(1).
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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 Kingdom of Morocco and the Federal Republic of
Nigeria. By amending Rule 26D-102 to add both the Kingdom of Morocco
and the Federal Republic of Nigeria 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. The revised
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).\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-2023-014), 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).
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\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27275 Filed 12-12-23; 8:45 am]
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