Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change To Provide for the Clearance of Additional Non-Investment Grade Instruments on Standard North American Corporate Single Name Reference Entities, 36112-36114 [2014-14781]
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Federal Register / Vol. 79, No. 122 / Wednesday, June 25, 2014 / Notices
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Exchange or FINRA’s clearly erroneous
executions rules.17
2. Trading Halts
The Exchanges and FINRA also
propose to adopt an additional
paragraph in their respective clearly
erroneous executions rules relating to
transactions resulting from certain
disruptions or malfunctions in
connection with a regulatory trading
halt, suspension or pause (‘‘trading
halt’’) in a security. Specifically, in the
event of any disruption or malfunction
in the operation of the electronic
communications and trading facilities of
an Exchange, another SRO, or
responsible single plan processor in
connection with the transmittal or
receipt of a trading halt, an Officer,
acting on his or her own motion, shall
nullify any transaction that occurs after
a trading halt has been declared by the
primary listing market for a security and
before such trading halt has officially
ended according to the primary listing
market. In addition, the Exchanges and
FINRA propose that, in the event a
trading halt is declared, then
prematurely lifted in error, and then reinstituted, an Officer, acting on his or
her own motion shall nullify
transactions that occur before the
official, final end of the trading halt
according to the primary listing market.
In the event that a trading halt is
declared as of a future time, the
Exchanges and FINRA would nullify
only those transactions occurring after
the time the trading halt was supposed
to be in place until the official end of
the trading halt according to the primary
listing market.
The Exchanges and FINRA propose
that any action taken in connection with
the proposed paragraph would be taken
in a timely fashion, generally within
thirty minutes of the detection of the
erroneous transaction and in no
circumstances later than the start of
regular market hours, generally between
9:30 a.m. EST to 4:00 p.m. EST, on the
trading day following the date of
execution(s) under review. The
Exchanges and FINRA also propose that
any action taken in connection with the
proposed rule would be required to be
taken without regard to the numerical
guidelines set forth in their respective
clearly erroneous executions rules 18
because such transactions should not
have occurred during a trading halt, and
thus, nullifying them, or declaring them
null and void would not put the parties
in a different position. Lastly, the
17 See
e.g., BATS Rule 11.17(e)(2); Nasdaq Rule
11890(c); FINRA Rule 11894.
18 See supra note 16.
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Exchanges and FINRA also propose to
include a provision stating that each
party involved in a transaction subject
to the proposed paragraph would be
required to be notified as soon as
practicable of a determination to nullify
such transaction, and that the party
aggrieved by such action may appeal in
accordance with the applicable appeals
provision of each Exchange or FINRA’s
clearly erroneous executions rules.19
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule changes are
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to national
securities exchanges and national
securities associations.20 In particular,
the Commission finds that the proposed
rule changes submitted by the
Exchanges and FINRA are consistent
with the requirements of Section 6(b)(5)
of the Act 21 (in the case of the
Exchanges) and Section 15A(b)(6) of the
Act 22 (in the case of FINRA) which
require, among other things, that the
rules of national securities exchanges
and FINRA, respectively, must be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, remove impediments to and
perfect the mechanism of a free and
open market and a national market
system and, in general, to protect
investors and the public interest.
In the Commission’s view, the
proposed rule changes will continue to
help assure that the determination of
whether a clearly erroneous trade has
occurred will be based on clear and
objective criteria, and that the resolution
of the incident will occur promptly
through a transparent process. The
proposed rule changes also should help
continue to assure consistent results in
handling erroneous trades across the
U.S. markets, thus furthering fair and
orderly markets and the protection of
investors and the public interest.
Specifically, the Commission believes
that the provision relating to the
handling of Multi-Day Events effected
based on the same fundamentally
incorrect or grossly misinterpreted
issuance information that results in a
severe valuation error should contribute
to a more transparent process, and help
achieve a fair and equitable result, on
19 See
supra note 17.
approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
21 15 U.S.C. 78f(b)(5).
22 15 U.S.C. 78o–3(b)(6).
20 In
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the very rare occasions such events
occur. The Commission believes that the
proposed trading halt provision should
help to increase certainty and
transparency with respect to
transactions that inadvertently occur
during trading halts due to a technology
failure. The Commission notes that
these transactions should not have
occurred in the first place, and that the
proposed rule change provides certainty
to market participants that these
transactions will be nullified promptly
through an objective and transparent
process.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,23 that the
proposed rule changes, SR–BATS–
2014–014; SR–BX–2014–021; SR–BYX–
2014–007; SR–CHX–2014–06; SR–
EDGA–2014–11; SR–EDGX–2014–12;
SR–FINRA–2014–021; SR–ISE–2014–25;
SR–NASDAQ–2014–044; SR–NSX–
2014–08; SR–NYSE–2014–22; SR–
NYSEArca–2014–48; SR–NYSEMKT–
2014–37; SR–Phlx–2014–27, be, and
hereby are, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–14779 Filed 6–24–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72437; File No. SR–ICC–
2014–06]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Order Approving
Proposed Rule Change To Provide for
the Clearance of Additional NonInvestment Grade Instruments on
Standard North American Corporate
Single Name Reference Entities
June 19, 2014.
I. Introduction
On April 25, 2014, ICE Clear Credit
LLC (‘‘ICC’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change SR–ICC–2014–06 pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder.2 The proposed rule
change was published for comment in
23 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
24 17
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Federal Register / Vol. 79, No. 122 / Wednesday, June 25, 2014 / Notices
the Federal Register on May 14, 2014.3
The Commission received no comment
letters regarding the proposed change.
For the reasons discussed below, the
Commission is granting approval of the
proposed rule change.
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II. Description
ICC is proposing to expand its
product offering to provide for the
clearance of additional non-investment
grade instruments on Standard North
American Corporate Single Name
reference entities. ICC has stated that
the term ‘‘non-investment grade’’ refers
to those Standard North American
Corporate Single Names which
reference an entity that has been
assigned a debt rating of below ‘‘BBB-’’
by Moody’s, below ‘‘Baa3’’ by S&P, or is
not rated.
ICC has also stated that the risk
profiles (as related to underlying debt
rating) of these new non-investment
grade instruments on Standard North
American Corporate Single Name
reference entities are similar to certain
Standard North American Corporate
Single Name and Standard Emerging
Sovereign Single Name CDS contracts
currently cleared at ICC with similar
debt ratings to the proposed noninvestment grade instruments. ICC
currently clears investment grade
instruments on Standard North
American Corporate Single Name
reference entities. ICC contends that the
debt ratings of the entities that these
contracts reference may change over
time, resulting in an investment grade
single name becoming a non-investment
grade single name. ICC states that it
already clears eleven non-investment
grade instruments on Standard North
American Corporate Single Name
reference entities as a result of such
changes. ICC also states that it clears
certain Standard Emerging Sovereign
Single Name CDS contracts, which
reference countries with debt ratings
similar to the additional non-investment
grade instruments on Standard North
American Corporate Single Name
reference entities that ICC is proposing
to clear.
ICC has also stated that the additional
non-investment grade instruments on
Standard North American Corporate
Single Name reference entities have
terms consistent with the Standard
North American Corporate Single
Names currently cleared by ICC and
governed by Section 26B of the ICC
Rules.
III. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Act 4 directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if the Commission finds
that such proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to such selfregulatory organization. Section
17A(b)(3)(F) of the Act 5 requires, among
other things, that the rules of a clearing
agency are designed to promote the
prompt and accurate clearance and
settlement of securities transactions
and, to the extent applicable, derivative
agreements, contracts, and transactions,
to assure the safeguarding of securities
and funds which are in the custody or
control of the clearing agency or for
which it is responsible and, in general,
to protect investors and the public
interest. As part of the process of
preparing this order, the Commission
reviewed information and
representations of ICC.
The Commission finds that the
proposed rule change is consistent with
Section 17A of the Act 6 and the rules
thereunder applicable to ICC. The
proposed rule change will provide for
clearing of new CDS contracts on noninvestment grade reference entities.
These contracts are substantially similar
to the Standard North American
Corporate Single Name contracts
currently cleared by ICC, and the new
contracts will be cleared pursuant to
ICC’s existing clearing arrangements and
related financial safeguards, protections
and risk management framework,
including policies and procedures. The
Commission believes that the proposal
is therefore 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, and the protection of
investors and the public interest, within
the meaning of Section 17A(b)(3)(F) of
the Act.7
Specifically, the Commission finds
that clearing of the new non-investment
grade instruments on Standard North
American Corporate Single Name
reference entities by ICC is consistent
with the requirements of Rule 17Ad–
22.8 In particular, in terms of financial
resources, ICC represents that its
existing margin methodology, when
4 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
6 15 U.S.C. 78q–1.
7 15 U.S.C. 78q–1(b)(3)(F).
8 17 CFR 240.17Ad–22.
5 15
3 Securities Exchange Act Release No. 34–72124
(May 8, 2014), 79 FR 27669 (May 14, 2014) (SR–
ICC–2014–06).
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36113
applying to the clearing of the new
contracts, will be reasonably designed to
provide sufficient margin to cover ICC’s
credit exposure to its clearing members
from clearing the existing contracts and
the new contracts,9 consistent with the
requirements of Rule 17Ad–22(b)(2).10
In addition, based on representations
and information provided by ICC, under
its existing methodology, ICC’s
Guaranty Fund, together with the
required margin, will provide sufficient
financial resources to support the
clearing of the additional contracts
consistent with the requirements of Rule
17Ad–22(b)(3).11 Because the new
contracts are substantially similar to
existing products already cleared by
ICC, ICC already has in place
operational and managerial resources
sufficient for clearing of the additional
contracts, consistent with the
requirements of Rule 17Ad–22(d)(4).12
Furthermore, ICC’s existing settlement
procedures and account structures will
apply to the new contracts, consistent
with the requirements of Rules 17Ad–
22(d)(5), (12) and (15) 13 relating to the
finality, accuracy and risk mitigation of
its daily settlement process. Finally, ICC
will apply its existing default
management policies and procedures for
the new contracts, allowing it to take
timely action to contain losses and
liquidity pressures and to continue
meeting its obligations in the event of
clearing member insolvencies or
defaults in respect of the new single
names, in accordance with Rule 17Ad–
22(d)(11).14
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act and in particular with the
requirements of Section 17A of the
Act 15 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,16 that the
9 ICC acknowledges that, if clearing of any noninvestment grade instruments on standard North
American corporate single name reference entities
would result in changes to its existing margin
methodology or risk policies and procedures, it
would be required to submit a rule filing to seek
approval of clearing such additional noninvestment grade instruments and change of its risk
methodology and policies and procedures.
10 17 CFR 240.17Ad–22(b)(2).
11 17 CFR 240.17Ad–22(b)(3).
12 17 CFR 240.17Ad–22(d)(4).
13 17 CFR 240.17Ad–22(d)(5), (12) and (15).
14 17 CFR 240.17Ad–22(d)(11).
15 15 U.S.C. 78q–1.
16 15 U.S.C. 78s(b)(2).
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Federal Register / Vol. 79, No. 122 / Wednesday, June 25, 2014 / Notices
BILLING CODE 8011–01–P
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.
SECURITIES AND EXCHANGE
COMMISSION
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–72433; File No. SR–
NYSEArca–2014–69]
1. Purpose
proposed rule change (File No. SR–ICC–
2014–06) be, and hereby is, approved.17
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–14781 Filed 6–24–14; 8:45 am]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Holdings in
Equity Securities by the Peritus High
Yield ETF
June 19, 2014.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on June 10,
2014, NYSE Arca, Inc. (‘‘Exchange’’ or
‘‘NYSE Arca’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. 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 Substance of
the Proposed Rule Change
The Exchange proposes to reflect a
change to the holdings to be
implemented by the Peritus High Yield
ETF to achieve its investment objective
with respect to holdings in equity
securities. 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.
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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,
17 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).
18 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
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The Commission has approved a
proposal to list and trade on the
Exchange shares (‘‘Shares’’) of the
Peritus High Yield ETF (‘‘Fund’’) under
NYSE Arca Equities Rule 8.600,4 which
governs the listing and trading of
Managed Fund Shares.5
The Shares are offered by
AdvisorShares Trust (the ‘‘Trust’’), a
statutory trust organized under the laws
of the State of Delaware and registered
with the Commission as an open-end
management investment company.6 The
Fund’s Shares are currently listed and
traded on the Exchange under NYSE
Arca Equities Rule 8.600.
The investment adviser to the Fund is
AdvisorShares Investments, LLC (the
‘‘Adviser’’). Peritus I Asset Management,
LLC is the Fund’s sub-adviser (‘‘Peritus’’
or the ‘‘Sub-Adviser’’).
4 See Securities Exchange Act Release No. 63329
(November 17, 2010), 75 FR 71760 (November 24,
2010) (SR–NYSEArca–2010–86) (the ‘‘Prior Order’’).
The notice with respect to the Prior Order was
published in Securities Exchange Act Release No.
63041 (October 5, 2010), 75 FR 62905 (October 13,
2010) (‘‘Prior Notice’’ and, together with the Prior
Order, the ‘‘Prior Release’’).
5 A Managed Fund Share is a security that
represents an interest in an investment company
registered under the Investment Company Act of
1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as
an open-end investment company or similar entity
that invests in a portfolio of securities selected by
its investment adviser consistent with its
investment objectives and policies. In contrast, an
open-end investment company that issues
Investment Company Units, listed and traded on
the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that
correspond generally to the price and yield
performance of a specific foreign or domestic stock
index, fixed income securities index or combination
thereof.
6 The Trust is registered under the 1940 Act. On
October 29, 2012, the Trust filed with the
Commission an amendment to its registration
statement on Form N–1A under the Securities Act
of 1933 (15 U.S.C. 77a) and the 1940 Act relating
to the Fund (File Nos. 333–157876 and 811–22110)
(the ‘‘Registration Statement’’). The description of
the operation of the Trust and the Fund herein is
based, in part, on the Registration Statement. In
addition, the Commission has issued an order
granting certain exemptive relief to the Trust under
the 1940 Act. See Investment Company Act Release
No. 29291 (May 28, 2010) (File No. 812–13677)
(‘‘Exemptive Order’’).
PO 00000
Frm 00127
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According to the Registration
Statement and as stated in the Prior
Release, the Fund’s investment objective
is to achieve high current income with
a secondary goal of capital appreciation.
The Sub-Adviser seeks to achieve the
Fund’s investment objective by
selecting, among other investments, a
focused portfolio of high yield debt
securities, which include senior and
subordinated corporate debt obligations
(such as bonds, debentures, notes and
commercial paper). The Fund does not
have any portfolio maturity limitation
and may invest its assets from time to
time primarily in instruments with
short-term, medium-term or long-term
maturities. The Adviser represents that
the investment objective of the Fund is
not changing.
The Fund currently is permitted to
invest no more than 10% of the Fund’s
net assets in equity securities that the
Sub-Adviser believes will yield high
dividends.7
The Exchange proposes to reflect a
change to be implemented by the Fund
with respect to the holdings in equity
securities to increase the percentage of
Fund assets that generally may be
invested in equity securities to no more
than 20% of the Fund’s net assets. Thus,
in addition to the investments
referenced in the Prior Release and the
Leveraged Loan Release, the Fund will
seek to invest generally no more than
20% of its net assets in equity securities
that the Sub-Adviser believes will yield
high dividends.8 According to the
Registration Statement and, as stated in
the Equity Investment Release, equity
securities in which the Fund may invest
will include common stock, preferred
stock, warrants, convertible securities,
rights, master limited partnerships,
depositary receipts (including American
Depositary Receipts (‘‘ADRs’’) and
Global Depositary Receipts (‘‘GDRs’’,
together with ADRs, ‘‘Depositary
7 See Securities Exchange Act Release No. 66818
(April 17, 20120 [sic], 77 FR 24233 (April 23, 2012)
(SR–NYSEArca–2012–33) (notice of filing and
immediate effectiveness of proposed rule change
relating to the Fund’s investment in equity
securities) (‘‘Equity Investment Release’’). The
Exchange also filed a proposed rule change to
reflect a change in the Fund’s holdings to allow
investment of up to 20% of the Fund’s net assets
in leveraged loans. See Securities Exchange Act
Release No. 70284 (August 29, 2013), 78 FR 54715
(September 5, 2013) (SR–NYSEArca–2013–83)
(notice of filing and immediate effectiveness of
proposed rule change relating to Fund investments
in leveraged loans) (‘‘Leveraged Loan Release’’ and,
together with the Prior Release and the Equity
Investment Release, the ‘‘Prior Releases’’).
8 The change to the Fund’s holdings to include
equity securities will be effective upon filing with
the Commission of an amendment to the Trust’s
Registration Statement on Form N–1A, and
shareholders will be notified of such change by
means of such amendment.
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]]>Agencies
[Federal Register Volume 79, Number 122 (Wednesday, June 25, 2014)]
[Notices]
[Pages 36112-36114]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-14781]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72437; File No. SR-ICC-2014-06]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change To Provide for the Clearance of
Additional Non-Investment Grade Instruments on Standard North American
Corporate Single Name Reference Entities
June 19, 2014.
I. Introduction
On April 25, 2014, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change SR-ICC-2014-06 pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The
proposed rule change was published for comment in
[[Page 36113]]
the Federal Register on May 14, 2014.\3\ The Commission received no
comment letters regarding the proposed change. For the reasons
discussed below, the Commission is granting approval of the proposed
rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 34-72124 (May 8, 2014),
79 FR 27669 (May 14, 2014) (SR-ICC-2014-06).
---------------------------------------------------------------------------
II. Description
ICC is proposing to expand its product offering to provide for the
clearance of additional non-investment grade instruments on Standard
North American Corporate Single Name reference entities. ICC has stated
that the term ``non-investment grade'' refers to those Standard North
American Corporate Single Names which reference an entity that has been
assigned a debt rating of below ``BBB-'' by Moody's, below ``Baa3'' by
S&P, or is not rated.
ICC has also stated that the risk profiles (as related to
underlying debt rating) of these new non-investment grade instruments
on Standard North American Corporate Single Name reference entities are
similar to certain Standard North American Corporate Single Name and
Standard Emerging Sovereign Single Name CDS contracts currently cleared
at ICC with similar debt ratings to the proposed non-investment grade
instruments. ICC currently clears investment grade instruments on
Standard North American Corporate Single Name reference entities. ICC
contends that the debt ratings of the entities that these contracts
reference may change over time, resulting in an investment grade single
name becoming a non-investment grade single name. ICC states that it
already clears eleven non-investment grade instruments on Standard
North American Corporate Single Name reference entities as a result of
such changes. ICC also states that it clears certain Standard Emerging
Sovereign Single Name CDS contracts, which reference countries with
debt ratings similar to the additional non-investment grade instruments
on Standard North American Corporate Single Name reference entities
that ICC is proposing to clear.
ICC has also stated that the additional non-investment grade
instruments on Standard North American Corporate Single Name reference
entities have terms consistent with the Standard North American
Corporate Single Names currently cleared by ICC and governed by Section
26B of the ICC Rules.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act \4\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if the
Commission finds that such proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to such self-regulatory organization. Section 17A(b)(3)(F)
of the Act \5\ requires, among other things, that the rules of a
clearing agency are designed to promote the prompt and accurate
clearance and settlement of securities transactions and, to the extent
applicable, derivative agreements, contracts, and transactions, to
assure the safeguarding of securities and funds which are in the
custody or control of the clearing agency or for which it is
responsible and, in general, to protect investors and the public
interest. As part of the process of preparing this order, the
Commission reviewed information and representations of ICC.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(2)(C).
\5\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The Commission finds that the proposed rule change is consistent
with Section 17A of the Act \6\ and the rules thereunder applicable to
ICC. The proposed rule change will provide for clearing of new CDS
contracts on non-investment grade reference entities. These contracts
are substantially similar to the Standard North American Corporate
Single Name contracts currently cleared by ICC, and the new contracts
will be cleared pursuant to ICC's existing clearing arrangements and
related financial safeguards, protections and risk management
framework, including policies and procedures. The Commission believes
that the proposal is therefore 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, and the
protection of investors and the public interest, within the meaning of
Section 17A(b)(3)(F) of the Act.\7\
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q-1.
\7\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Specifically, the Commission finds that clearing of the new non-
investment grade instruments on Standard North American Corporate
Single Name reference entities by ICC is consistent with the
requirements of Rule 17Ad-22.\8\ In particular, in terms of financial
resources, ICC represents that its existing margin methodology, when
applying to the clearing of the new contracts, will be reasonably
designed to provide sufficient margin to cover ICC's credit exposure to
its clearing members from clearing the existing contracts and the new
contracts,\9\ consistent with the requirements of Rule 17Ad-
22(b)(2).\10\ In addition, based on representations and information
provided by ICC, under its existing methodology, ICC's Guaranty Fund,
together with the required margin, will provide sufficient financial
resources to support the clearing of the additional contracts
consistent with the requirements of Rule 17Ad-22(b)(3).\11\ Because the
new contracts are substantially similar to existing products already
cleared by ICC, ICC already has in place operational and managerial
resources sufficient for clearing of the additional contracts,
consistent with the requirements of Rule 17Ad-22(d)(4).\12\
Furthermore, ICC's existing settlement procedures and account
structures will apply to the new contracts, consistent with the
requirements of Rules 17Ad-22(d)(5), (12) and (15) \13\ relating to the
finality, accuracy and risk mitigation of its daily settlement process.
Finally, ICC will apply its existing default management policies and
procedures for the new contracts, allowing it to take timely action to
contain losses and liquidity pressures and to continue meeting its
obligations in the event of clearing member insolvencies or defaults in
respect of the new single names, in accordance with Rule 17Ad-
22(d)(11).\14\
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\8\ 17 CFR 240.17Ad-22.
\9\ ICC acknowledges that, if clearing of any non-investment
grade instruments on standard North American corporate single name
reference entities would result in changes to its existing margin
methodology or risk policies and procedures, it would be required to
submit a rule filing to seek approval of clearing such additional
non-investment grade instruments and change of its risk methodology
and policies and procedures.
\10\ 17 CFR 240.17Ad-22(b)(2).
\11\ 17 CFR 240.17Ad-22(b)(3).
\12\ 17 CFR 240.17Ad-22(d)(4).
\13\ 17 CFR 240.17Ad-22(d)(5), (12) and (15).
\14\ 17 CFR 240.17Ad-22(d)(11).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A of the Act \15\ and the
rules and regulations thereunder.
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\15\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\16\ that the
[[Page 36114]]
proposed rule change (File No. SR-ICC-2014-06) be, and hereby is,
approved.\17\
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\16\ 15 U.S.C. 78s(b)(2).
\17\ 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.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14781 Filed 6-24-14; 8:45 am]
BILLING CODE 8011-01-P
