Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change To Amend Rules Relating to Recovery and Resolution Arrangements, 18646-18649 [2013-07008]

Download as PDF 18646 Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices enforcement activities remains the same for Mini Options. mstockstill on DSK4VPTVN1PROD with NOTICES B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed change is designed to provide greater specificity and precision within the Fee Schedule with respect to the fees that will be applicable to Mini Options when they begin trading on the Exchange on March 18, 2013. The Exchange believes that adopting fees for Mini Options that are in some cases the same, in some cases proportionally lower, and in other cases exempt from the fees for standard contracts, strikes the appropriate balance between fees applicable to standard contracts versus fees applicable to Mini Options, and will not impose a burden on competition among various market participants on the Exchange, or between the Exchange and other exchanges in the listed options marketplace, not necessary or appropriate in furtherance of the purposes of the Act. BOX currently assesses distinct standard contract Exchange Fees for different account and transaction types. The Exchange believes that applying this segmented fee structure to Mini Options will result in these participants being charged proportionally for their transactions in Mini Options. In this regard, as Mini Options are a new product being introduced into the listed options marketplace, the Exchange is unable at this time to absolutely determine the impact that the fees and rebates proposed herein will have on trading in Mini Options. That said, however, the Exchange believes that the rates proposed for Mini Options would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment. VerDate Mar<15>2010 18:10 Mar 26, 2013 Jkt 229001 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act 10 and Rule 19b–4(f)(2) thereunder,11 because it establishes or changes a due, fee, or other charge applicable only to a member. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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 rulecomments@sec.gov. Please include File Number SR–BOX–2013–15 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR–BOX–2013–15. 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 Web site (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 Web site 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 filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BOX– 2013–15 and should be submitted on or before April 17, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–07009 Filed 3–26–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69201; File No. SR–ICC– 2013–03] Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change To Amend Rules Relating to Recovery and Resolution Arrangements March 21, 2013. 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 March 7, 2013, 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. 12 17 10 15 U.S.C. 78s(b)(3)(A)(ii). 11 17 CFR 240.19b–4(f)(2). PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\27MRN1.SGM 27MRN1 Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change ICC is proposing amendments to its clearing rules (‘‘Rules’’) relating to clearinghouse resolution and recovery following the exhaustion of available resources after a clearing participant (‘‘Participant’’) defaults or series of Participants default. The amendments would, among other matters: (i) Establish a ‘‘cooling-off period’’ in cases of certain Participant defaults that result in guaranty fund depletion, in which case the liability of Participants and ICC for additional guaranty fund assessments would be capped for all defaults during that period; (ii) establish new procedures under which a Participant may terminate its status as a Participant, both in the ordinary course of business and during a cooling-off period, and related procedures for unwinding all positions of such a Participant and capping its continuing liability to ICC; (iii) provide for ‘‘haircutting’’ of mark-to-market margin gains and other outgoing payments by ICC in situations where ICC determines, following a Participant default, that it is unlikely to have sufficient resources to make all such payments; (iv) permit ICC to temporarily suspend payments on cleared contracts where ICC determines that mark-to-market margin haircutting of gains will not be sufficient to address a shortfall in resources, or where there has been a failed auction of positions of a defaulting Participant; (v) revise procedures for the termination of clearing and wind-up of outstanding contracts; and (vi) eliminate rules permitting the forced allocation of CDS positions to non-defaulting Participants in the case of a failed default auction, and (vii) provide for the use of guaranty fund contributions of Participants that fail to participate in default auctions prior to the use of guaranty fund contributions of other Participants. II. Self-Regulatory Organization’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 and discussed any comments it received on the proposed rule change. 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.3 3 The Commission has modified the text of the summaries prepared by ICC. VerDate Mar<15>2010 18:10 Mar 26, 2013 Jkt 229001 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (1) Purpose The proposed amendments are intended principally to address clearinghouse recovery and resolution arrangements. The proposed Rule amendments are described in detail as follows. In Rule 102, new definitions of ‘‘Account,’’ ‘‘Client Origin Account’’ and ‘‘House Account’’ were added, and certain definitions no longer used in the Rules were removed. Rules 207 (‘‘Termination of Participant Status’’) and 209 (‘‘Risk-Based Capital Requirement’’) have been revised to conform to the new termination provisions in Rule 807. Further conforming changes and corrections are made in, and certain obsolete references have been removed from, Rules 312(b), 402, 406(g) and 503(a). A new subsection (b) has been added to Rule 604, which permits ICC to delay making outgoing mark-to-market margin payments on an intra-day basis in certain circumstances where a Participant has failed to make a markto-market margin payment to ICC on such day. In addition to various conforming changes, Chapter 8 of the Rules has been revised to incorporate the new resolution and recovery provisions. Obsolete references to procedures for initial contributions by ICC to the guaranty fund have been removed from Rule 801 as they are no longer relevant. Rule 801(b)(vi) has been revised to cap ICC’s obligation to contribute additional assets to the guaranty fund at $25 million in respect of any single Participant default and $75 million in respect of all defaults during any cooling-off period. Rule 801(c)(iii) and Rule 802(b) add an additional tranche to the guaranty fund waterfall to provide for use of guaranty fund contributions of Participants that fail to participate in or perform their obligations in connection with default auctions prior to the use of guaranty fund contributions of other Participants. Additional collateral deposits of Participants that fail to participate in or perform their obligations in connection with default auctions are similarly applied before additional collateral deposits of other Participants. Conforming changes have been made to Rules 802(a) and (c). Rule 802(d) has been revised to provide that additional collateral deposits may be called from Participants in anticipation of any charge against the general guaranty fund following a PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 18647 default, rather than only after a charge. In addition, under the revised Rule, a Participant is not required to post an additional collateral deposit of more than 100% of its required guaranty fund contribution for any single default. However, a Participant is still liable for additional collateral deposits in respect of any specific wrong-way risk guaranty fund contribution. In addition, a retiring Participant is only obligated to make additional collateral deposits for defaults occurring prior to its termination date or, if applicable, during the cooling-off period. Rule 802(f) is being modified to provide that ICC may pledge assets in the guaranty fund to support borrowings to be used for default management purposes. Rule 803 addressing the return of the guaranty fund has been revised to conform to the new termination of Participant status provisions in Rule 807. Rule 804 has been revised to conform to the new termination and final settlement provisions in Rule 810. The revised rule also clarifies that the single net amount owed by or owed to each Participant following termination shall take into account and be offset against available mark-to-market margin posted by ICC or the Participant. New Rule 806 implements the ‘‘cooling-off period’’ concept. A ‘‘cooling-off period’’ is triggered by certain calls for additional collateral deposits or by sequential guaranty fund depletion within a 30-day period. Liability of Participants for additional collateral deposits is capped during the cooling-off period at three times the required guaranty fund contribution, regardless of the number of defaults during the period. New procedures for termination of Participant status are added in new Rule 807. These apply both to ordinary course terminations outside of a default scenario and termination during a cooling-off period. Participants may retire from ICC during a cooling-off period by providing an irrevocable notice of termination during the first 10 business days of the period and must close out all positions within 30 days of such termination notice. A retiring Participant (other than during a coolingoff period) must make a deposit of three times its required guaranty fund contribution at the time of notice and will remain liable for defaults occurring prior to its termination date. Together with Rule 803, Rule 807(b)(viii) provides for the return of guaranty fund contributions to a retiring Participant within 5 business days of the termination date, or at the end of the month in which the termination date occurs, whichever is later. E:\FR\FM\27MRN1.SGM 27MRN1 mstockstill on DSK4VPTVN1PROD with NOTICES 18648 Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices Rule 808(a) contains various new definitions used in the haircutting provisions in Rule 808, the suspension provisions of Rule 809 and the termination provisions of Rule 810. New Rule 808 establishes the mark-to-market margin haircutting mechanism. The core of Rule 808 is a procedure for ‘‘haircutting’’ the mark-to-market margin and certain other contractual payments owed by ICC to Participants. A determination to impose such haircutting may be made, once certain conditions are satisfied, including the following: (i) One or more Participant defaults have occurred but ICC has not yet determined and either paid or submitted a claim in respect of all the net amount due to or from the defaulter in respect of its proprietary account and its customer origin account; and (ii) ICC determines, based on one of several relevant tests, that its available resources are insufficient to pay all relevant outward mark-to-market margin and contractual payments and/or its available resources would be insufficient to cover the losses or shortfalls to ICC following a close-out of the defaulter’s positions. A haircutting determination will not be made if a determination to suspend clearing has been made under Rule 809, clearing is being terminated under Rule 810, or an ICC insolvency or failure to pay has occurred. In the event of a haircutting determination, on each day during the ‘‘loss distribution period’’ specified by ICC, the net amount owed on such day to each Participant that is deemed to be a ‘‘cash gainer’’ in respect of its house or customer origin account (i.e., a member that would otherwise be entitled to receive mark-to-market margin or other payments in respect of such account) will be subject to a percentage haircut. Corresponding adjustments are also made for ‘‘cash losers’’ (i.e., those who owe any amounts to ICC) to the extent amounts previously owed to them have been haircut. Haircuts are applied separately for the house and customer origin accounts, and on a net basis within those accounts. New Rule 809 authorizes ICC to make a ‘‘suspension determination’’ for contracts where (i) its obligations to meet mark-to-market margin payments or the cost of auctioning off the positions of a defaulting Participant will not be satisfied through the haircutting procedure in Rule 808, (ii) following the determination of all net amounts owed in respect of a particular default, ICC may be rendered insolvent if it does not suspend clearing, or (iii) there has been a failed auction. In such case, during the VerDate Mar<15>2010 18:10 Mar 26, 2013 Jkt 229001 suspension period, which is initially up to 2 business days, payments in respect of suspended contracts will be suspended. New Rule 810 permits ICC to terminate contracts if, at the end of a suspension period under Rule 809, the conditions for suspension are still satisfied, or if conditions for suspension are satisfied but ICC does not commence a suspension. Rule 810 provides a procedure for determining the termination price for all contracts of the same type. To the extent the termination value payable by ICC for the terminated contracts exceeds available resources for those contracts, ICC’s obligations will be limited to the available resources. Rule 20–605(c)(vii), which permitted the forced allocation of CDS contracts to Participants in the event of a failed auction or other inability to close-out or transfer relevant positions, has been removed following extensive discussions with Participants. ICC believes that the risks of this scenario are now addressed through the haircutting, suspension, and termination procedures discussed above, as well as the revisions to Rule 802(b) that permit the use of guaranty fund contributions of Participants that fail to participate in a default auction prior to the contributions of other Participants. (2) Statutory Basis Section 17A(b)(3)(F) of the Act 4 requires, among other things, that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions. ICC believes that the proposed rule changes are consistent with the Act and the regulations thereunder applicable to ICC, in particular, to Section 17(A)(b)(3)(F),5 because ICC believes that the new resolution and recovery rules will facilitate the prompt and accurate settlement of swaps and contribute to the safeguarding of securities and funds associated with swap transactions which are in the custody or control of ICC or for which it is responsible. ICC has developed the new resolution and recovery rules in response to issues raised by, and following extensive consultation with, its Participants. Specifically, ICC believes that the proposed rule changes will enhance the stability of ICC following the default of one or more Participants and reduce the risk of ICC 4 15 U.S.C. 78q–1(b)(3)(F). 5 Id. PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 failure or insolvency. The revisions will in particular facilitate the orderly winddown or termination of contracts affected by a default. The amendments also provide clearer limitations on the liability of Participants for assessments following defaults, and a clearer procedure for termination of Participant status. (B) Self-Regulatory Organization’s Statement on Burden on Competition ICC does not believe the proposed rule change would have any impact, or impose any burden, on competition. (C) Self-Regulatory Organization’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 the 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 rulecomments@sec.gov. Please include File Number SR–ICC–2013–03 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. E:\FR\FM\27MRN1.SGM 27MRN1 Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices All submissions should refer to File Number SR–ICC–2013–03. 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 Web site (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 Web site viewing and printing in the Commission’s Public Reference Section, 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 ICC and on ICC’s Web site at https://www.theice.com/publicdocs/ regulatory_filings/ ICEClearCredit_20130306.pdf. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–ICC–2013–03 and should be submitted on or before April 17, 2013. For the Commission by the Division of Trading and Markets, pursuant to delegated authority.6 Kevin O’Neill, Deputy Secretary. [FR Doc. 2013–07008 Filed 3–26–13; 8:45 am] mstockstill on DSK4VPTVN1PROD with NOTICES BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69197; File No. SR– NYSEArca–2013–28] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the Definition of Complex Orders and Stock/Options Orders To Accommodate the Trading of Option Contracts Overlying 10 Shares of a Security March 20, 2013. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on March 19, 2013, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to amend the definition of Complex Orders and Stock/Options orders to accommodate the trading of option contracts overlying 10 shares of a security (‘‘mini-options contracts’’). The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 6 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 18:10 Mar 26, 2013 Jkt 229001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 18649 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange recently amended its rules to allow for the listing of minioptions contracts on SPDR S&P 500 (‘‘SPY’’), Apple, Inc. (‘‘AAPL’’), SPDR Gold Trust (‘‘GLD’’), Google Inc. (‘‘GOOG’’) and Amazon.com Inc. (‘‘AMZN’’).4 Whereas standard option contracts represent a deliverable of 100 shares of an underlying security, minioptions contracts represent a deliverable of 10 shares. Except for the difference in the number of deliverable shares, minioptions contracts have the same terms and contract characteristics as regularsized equity and ETF options, including exercise style. The Exchange notes that Exchange rules that apply to the trading of standard option contracts would apply to mini-option contracts as well. Prior to the commencement of trading mini-options, the Exchange proposes to amend Rule 6.62 (Certain Types of Orders Defined) and Rule 6.92 (Definitions) to provide that Exchange rules regarding complex orders shall apply to mini-options and that consequently, OTP Holders may execute complex orders and Stock/Option Orders involving mini-options contracts. Moreover, the Exchange seeks to amend these rules to provide that all permissible ratios referenced in the definitions of Stock/Option Orders represent the total number of shares of the underlying stock in the option leg to the total number of shares of the underlying stock in the stock leg. Finally, the Exchange seeks to make these amendments to coincide with a similar proposal recently submitted by another options market.5 Exchange Rule 6.62 governs Complex Orders and Stock/Options Orders on the Exchange and Rule 6.92 lists definitions applicable to intermarket linkage. Currently, a Stock/Option Orders are defined in Rule 6.62(h)(1) and Rule 6.92(a)(4)(ii) as an order to buy or sell a stated number of units of an underlying stock or a security convertible into the underlying stock coupled with the purchase or sale of options contract(s) on the opposite side of the market representing either (A) the same number of units of the underlying stock or convertible security, or (B) the number of units of the underlying stock 4 See Securities Exchange Act Release Nos. [sic] 67948 (September 28, 2012), 77 FR 60735 (October 4, 2012) (SR–NYSE–Arca–2012–64) (SR–ISE–2012– 58). 5 See Securities Exchange Act Release No. 34– 69129 (March 13, 2013) (SR–CBOE–2013–33). E:\FR\FM\27MRN1.SGM 27MRN1

Agencies

[Federal Register Volume 78, Number 59 (Wednesday, March 27, 2013)]
[Notices]
[Pages 18646-18649]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07008]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69201; File No. SR-ICC-2013-03]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change To Amend Rules Relating to Recovery and 
Resolution Arrangements

March 21, 2013.
    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 March 7, 2013, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 18647]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    ICC is proposing amendments to its clearing rules (``Rules'') 
relating to clearinghouse resolution and recovery following the 
exhaustion of available resources after a clearing participant 
(``Participant'') defaults or series of Participants default. The 
amendments would, among other matters: (i) Establish a ``cooling-off 
period'' in cases of certain Participant defaults that result in 
guaranty fund depletion, in which case the liability of Participants 
and ICC for additional guaranty fund assessments would be capped for 
all defaults during that period; (ii) establish new procedures under 
which a Participant may terminate its status as a Participant, both in 
the ordinary course of business and during a cooling-off period, and 
related procedures for unwinding all positions of such a Participant 
and capping its continuing liability to ICC; (iii) provide for 
``haircutting'' of mark-to-market margin gains and other outgoing 
payments by ICC in situations where ICC determines, following a 
Participant default, that it is unlikely to have sufficient resources 
to make all such payments; (iv) permit ICC to temporarily suspend 
payments on cleared contracts where ICC determines that mark-to-market 
margin haircutting of gains will not be sufficient to address a 
shortfall in resources, or where there has been a failed auction of 
positions of a defaulting Participant; (v) revise procedures for the 
termination of clearing and wind-up of outstanding contracts; and (vi) 
eliminate rules permitting the forced allocation of CDS positions to 
non-defaulting Participants in the case of a failed default auction, 
and (vii) provide for the use of guaranty fund contributions of 
Participants that fail to participate in default auctions prior to the 
use of guaranty fund contributions of other Participants.

II. Self-Regulatory Organization'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 and 
discussed any comments it received on the proposed rule change. 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.\3\
---------------------------------------------------------------------------

    \3\ The Commission has modified the text of the summaries 
prepared by ICC.
---------------------------------------------------------------------------

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

(1) Purpose
    The proposed amendments are intended principally to address 
clearinghouse recovery and resolution arrangements. The proposed Rule 
amendments are described in detail as follows.
    In Rule 102, new definitions of ``Account,'' ``Client Origin 
Account'' and ``House Account'' were added, and certain definitions no 
longer used in the Rules were removed. Rules 207 (``Termination of 
Participant Status'') and 209 (``Risk-Based Capital Requirement'') have 
been revised to conform to the new termination provisions in Rule 807. 
Further conforming changes and corrections are made in, and certain 
obsolete references have been removed from, Rules 312(b), 402, 406(g) 
and 503(a). A new subsection (b) has been added to Rule 604, which 
permits ICC to delay making outgoing mark-to-market margin payments on 
an intra-day basis in certain circumstances where a Participant has 
failed to make a mark-to-market margin payment to ICC on such day.
    In addition to various conforming changes, Chapter 8 of the Rules 
has been revised to incorporate the new resolution and recovery 
provisions. Obsolete references to procedures for initial contributions 
by ICC to the guaranty fund have been removed from Rule 801 as they are 
no longer relevant. Rule 801(b)(vi) has been revised to cap ICC's 
obligation to contribute additional assets to the guaranty fund at $25 
million in respect of any single Participant default and $75 million in 
respect of all defaults during any cooling-off period. Rule 801(c)(iii) 
and Rule 802(b) add an additional tranche to the guaranty fund 
waterfall to provide for use of guaranty fund contributions of 
Participants that fail to participate in or perform their obligations 
in connection with default auctions prior to the use of guaranty fund 
contributions of other Participants. Additional collateral deposits of 
Participants that fail to participate in or perform their obligations 
in connection with default auctions are similarly applied before 
additional collateral deposits of other Participants. Conforming 
changes have been made to Rules 802(a) and (c).
    Rule 802(d) has been revised to provide that additional collateral 
deposits may be called from Participants in anticipation of any charge 
against the general guaranty fund following a default, rather than only 
after a charge. In addition, under the revised Rule, a Participant is 
not required to post an additional collateral deposit of more than 100% 
of its required guaranty fund contribution for any single default. 
However, a Participant is still liable for additional collateral 
deposits in respect of any specific wrong-way risk guaranty fund 
contribution. In addition, a retiring Participant is only obligated to 
make additional collateral deposits for defaults occurring prior to its 
termination date or, if applicable, during the cooling-off period. Rule 
802(f) is being modified to provide that ICC may pledge assets in the 
guaranty fund to support borrowings to be used for default management 
purposes.
    Rule 803 addressing the return of the guaranty fund has been 
revised to conform to the new termination of Participant status 
provisions in Rule 807. Rule 804 has been revised to conform to the new 
termination and final settlement provisions in Rule 810. The revised 
rule also clarifies that the single net amount owed by or owed to each 
Participant following termination shall take into account and be offset 
against available mark-to-market margin posted by ICC or the 
Participant.
    New Rule 806 implements the ``cooling-off period'' concept. A 
``cooling-off period'' is triggered by certain calls for additional 
collateral deposits or by sequential guaranty fund depletion within a 
30-day period. Liability of Participants for additional collateral 
deposits is capped during the cooling-off period at three times the 
required guaranty fund contribution, regardless of the number of 
defaults during the period.
    New procedures for termination of Participant status are added in 
new Rule 807. These apply both to ordinary course terminations outside 
of a default scenario and termination during a cooling-off period. 
Participants may retire from ICC during a cooling-off period by 
providing an irrevocable notice of termination during the first 10 
business days of the period and must close out all positions within 30 
days of such termination notice. A retiring Participant (other than 
during a cooling-off period) must make a deposit of three times its 
required guaranty fund contribution at the time of notice and will 
remain liable for defaults occurring prior to its termination date. 
Together with Rule 803, Rule 807(b)(viii) provides for the return of 
guaranty fund contributions to a retiring Participant within 5 business 
days of the termination date, or at the end of the month in which the 
termination date occurs, whichever is later.

[[Page 18648]]

    Rule 808(a) contains various new definitions used in the 
haircutting provisions in Rule 808, the suspension provisions of Rule 
809 and the termination provisions of Rule 810. New Rule 808 
establishes the mark-to-market margin haircutting mechanism. The core 
of Rule 808 is a procedure for ``haircutting'' the mark-to-market 
margin and certain other contractual payments owed by ICC to 
Participants. A determination to impose such haircutting may be made, 
once certain conditions are satisfied, including the following:
    (i) One or more Participant defaults have occurred but ICC has not 
yet determined and either paid or submitted a claim in respect of all 
the net amount due to or from the defaulter in respect of its 
proprietary account and its customer origin account; and (ii) ICC 
determines, based on one of several relevant tests, that its available 
resources are insufficient to pay all relevant outward mark-to-market 
margin and contractual payments and/or its available resources would be 
insufficient to cover the losses or shortfalls to ICC following a 
close-out of the defaulter's positions.
    A haircutting determination will not be made if a determination to 
suspend clearing has been made under Rule 809, clearing is being 
terminated under Rule 810, or an ICC insolvency or failure to pay has 
occurred. In the event of a haircutting determination, on each day 
during the ``loss distribution period'' specified by ICC, the net 
amount owed on such day to each Participant that is deemed to be a 
``cash gainer'' in respect of its house or customer origin account 
(i.e., a member that would otherwise be entitled to receive mark-to-
market margin or other payments in respect of such account) will be 
subject to a percentage haircut. Corresponding adjustments are also 
made for ``cash losers'' (i.e., those who owe any amounts to ICC) to 
the extent amounts previously owed to them have been haircut. Haircuts 
are applied separately for the house and customer origin accounts, and 
on a net basis within those accounts.
    New Rule 809 authorizes ICC to make a ``suspension determination'' 
for contracts where (i) its obligations to meet mark-to-market margin 
payments or the cost of auctioning off the positions of a defaulting 
Participant will not be satisfied through the haircutting procedure in 
Rule 808, (ii) following the determination of all net amounts owed in 
respect of a particular default, ICC may be rendered insolvent if it 
does not suspend clearing, or (iii) there has been a failed auction. In 
such case, during the suspension period, which is initially up to 2 
business days, payments in respect of suspended contracts will be 
suspended.
    New Rule 810 permits ICC to terminate contracts if, at the end of a 
suspension period under Rule 809, the conditions for suspension are 
still satisfied, or if conditions for suspension are satisfied but ICC 
does not commence a suspension. Rule 810 provides a procedure for 
determining the termination price for all contracts of the same type. 
To the extent the termination value payable by ICC for the terminated 
contracts exceeds available resources for those contracts, ICC's 
obligations will be limited to the available resources.
    Rule 20-605(c)(vii), which permitted the forced allocation of CDS 
contracts to Participants in the event of a failed auction or other 
inability to close-out or transfer relevant positions, has been removed 
following extensive discussions with Participants. ICC believes that 
the risks of this scenario are now addressed through the haircutting, 
suspension, and termination procedures discussed above, as well as the 
revisions to Rule 802(b) that permit the use of guaranty fund 
contributions of Participants that fail to participate in a default 
auction prior to the contributions of other Participants.
(2) Statutory Basis
    Section 17A(b)(3)(F) of the Act \4\ requires, among other things, 
that the rules of a clearing agency be designed to promote the prompt 
and accurate clearance and settlement of securities transactions and, 
to the extent applicable, derivative agreements, contracts, and 
transactions. ICC believes that the proposed rule changes are 
consistent with the Act and the regulations thereunder applicable to 
ICC, in particular, to Section 17(A)(b)(3)(F),\5\ because ICC believes 
that the new resolution and recovery rules will facilitate the prompt 
and accurate settlement of swaps and contribute to the safeguarding of 
securities and funds associated with swap transactions which are in the 
custody or control of ICC or for which it is responsible. ICC has 
developed the new resolution and recovery rules in response to issues 
raised by, and following extensive consultation with, its Participants. 
Specifically, ICC believes that the proposed rule changes will enhance 
the stability of ICC following the default of one or more Participants 
and reduce the risk of ICC failure or insolvency. The revisions will in 
particular facilitate the orderly wind-down or termination of contracts 
affected by a default. The amendments also provide clearer limitations 
on the liability of Participants for assessments following defaults, 
and a clearer procedure for termination of Participant status.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78q-1(b)(3)(F).
    \5\ Id.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    ICC does not believe the proposed rule change would have any 
impact, or impose any burden, on competition.

(C) Self-Regulatory Organization'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 the 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 rule-comments@sec.gov. Please include 
File Number SR-ICC-2013-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.


[[Page 18649]]


All submissions should refer to File Number SR-ICC-2013-03. 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 Web site (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 Web site viewing and 
printing in the Commission's Public Reference Section, 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 ICC and on ICC's 
Web site at https://www.theice.com/publicdocs/regulatory_filings/ICEClearCredit_20130306.pdf.
    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-ICC-2013-03 
and should be submitted on or before April 17, 2013.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
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Kevin O'Neill,
Deputy Secretary.
[FR Doc. 2013-07008 Filed 3-26-13; 8:45 am]
BILLING CODE 8011-01-P