Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change To Revise End-of-Day Price Discovery Policies and Procedures, 41710-41711 [2014-16785]

Download as PDF 41710 Federal Register / Vol. 79, No. 137 / Thursday, July 17, 2014 / Notices pmangrum on DSK3VPTVN1PROD with NOTICES deposit may include an LC issued by any one of these non-U.S. institutions.5 Pursuant to review and analysis performed by OCC’s Risk Committee, OCC is applying the existing concentration limits related to the deposit of LCs, as set forth in OCC Rule 604, Interpretation and Policy .02, applicable to all margin deposits of LCs regardless of issuer. As a result of this change, no more than 50% of a clearing member’s margin on deposit may include LCs and no more than 20% of a clearing member’s margin may include an LC from a single issuer. This change is intended to reduce OCC’s overall credit risk exposure to LCs deposited as margin by a single clearing member and the potential adverse consequences should an LC issuer not perform upon its payment commitment after receiving a demand for payment. OCC believes that the rule change will have a minimal impact on its clearing members because LCs comprise less than one percent of OCC’s total margin deposits and are currently used by only 13 clearing members. OCC estimates that the proposal will impact three clearing members and .13% of OCC’s total margin deposits. Each of these three clearing members has been advised by OCC of the proposed change and OCC stated that all of the affected clearing members have indicated that they will be able to modify its margin deposit practices to reduce its LC deposits without undue difficulty. OCC has indicated that prior to implementation of this rule change it will publish an information memorandum to inform all clearing members of the rule change. In addition, OCC stated that it contacted clearing members with LCs on deposit that are directly affected by the filing and all clearing members will have access to information, as necessary, to better understand any potential impact the proposed rule change may have on their margin deposits at OCC. III. Discussion Section 19(b)(2)(C) of the Act 6 directs the Commission to approve a selfregulatory organization’s proposed rule change 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 organization. Section 17A(b)(3)(F) of the Act 7 requires, among other things, that the rules of a clearing agency are designed to promote the prompt and accurate clearance and 5 Id. 6 15 7 15 U.S.C. 78s(b)(2)(C). U.S.C. 78q–1(b)(3)(F). VerDate Mar<15>2010 15:01 Jul 16, 2014 Jkt 232001 settlement of securities transactions and to the extent applicable derivative agreements, contracts and transactions, and 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. The Commission finds that the proposed rule change to enhance concentration limits related to deposits of LC and making those limits applicable to all LC is consistent with Section 17A(b)(3)(F) of the Act.8 The Commission believes the limitations on the concentration of LC as margin deposits generally and the concentration of LCs by a particular issuer should reduce the credit risk and settlement risk to OCC associated with LCs as margin deposits by reducing the risk that an LC issuer would not be able to provide funds to OCC to close out a defaulting clearing member’s positions. By reducing the risk that OCC will not be able to use the deposited LC in the event of a clearing member default, the limitations promote the prompt and accurate clearance and settlement of securities transactions and other transactions by OCC and help OCC assure the safeguarding of securities and funds which are in its custody or control or for which it is responsible.9 IV. Conclusion On the basis of the foregoing, the Commission concludes that the proposal is consistent with the requirements of the Act, particularly the requirements of Section 17A of the Act,10 and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,11 that the proposed rule change (File No. SR– OCC–2014–12) be and hereby is APPROVED.12 For the Commission by the Division of Trading and Markets, pursuant to delegated authority.13 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–16786 Filed 7–16–14; 8:45 am] BILLING CODE 8011–01–P U.S.C. 78q–1(b)(3)(F). id. 10 15 U.S.C. 78q–1. 11 15 U.S.C. 78s(b)(2). 12 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). 13 17 CFR 200.30–3(a)(12). PO 00000 8 15 9 See Frm 00041 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72596; File No. SR–ICC– 2014–07] Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change To Revise Endof-Day Price Discovery Policies and Procedures July 11, 2014. I. Introduction On May 22, 2014, ICE Clear Credit LLC (‘‘ICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change SR–ICC–2014–07 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 the Federal Register on June 10, 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. II. Description ICC is proposing to amend the ICC End-of-Day Price Discovery Policies and Procedures (‘‘EOD Pricing Policy’’) to revise the expectations surrounding the unwind of any Firm Trade transaction. ICC contends that the proposed revision to ICC’s EOD Pricing Policy is intended to make the policy more readily enforceable, while maintaining the same or similar level of incentive for ICC Clearing Participants to provide quality price submissions. ICC contends that ICC Clearing Participants (‘‘CPs’’) may be required from time to time, under the ICC EOD Pricing Policy, to enter into trades with other CPs as part of the ICC end-of-day price discovery process (‘‘Firm Trade’’). ICC contends that it does not require CPs to maintain Firm Trades as outstanding positions for any particular length of time. Prior to the operation of this proposed rule change, ICC has stated that the ICC EOD Pricing Policy requires CPs that elect to unwind a Firm Trade to do so ‘‘at the then-current market price.’’ ICC contends that there are practical difficulties with objectively determining whether an unwind transaction was executed at the ‘‘thencurrent market price’’ and therefore such policy is difficult to enforce. ICC proposes via this rule change to revise 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Securities Exchange Act Release No. 34–72306 (June 4, 2014), 79 FR 33243 (June 10, 2014) (SR– ICC–2014–07). 2 17 E:\FR\FM\17JYN1.SGM 17JYN1 Federal Register / Vol. 79, No. 137 / Thursday, July 17, 2014 / Notices pmangrum on DSK3VPTVN1PROD with NOTICES the ICC EOD Pricing Policy to replace references to the ‘‘then-current market price’’ with the requirement that unwind transactions be executed in a competitive manner. Further, ICC proposes via this rule change to add the requirement that, upon request, CPs be able to demonstrate to ICC’s satisfaction that such unwind transaction was executed in a competitive manner. Additionally, ICC proposes to add a non-exclusive list of examples of how CPs may be able to demonstrate competitive execution of unwind transactions, for example: (i) Execution on an available trading venue (e.g., a SEF or DCM); (ii) multiple dealer quotes received and execution of the unwind transaction at the best quoted price; or (iii) placement of the unwind transaction with an interdealer broker with price terms and instructions commensurate with a competitive execution. 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. The Commission finds that the proposed revision to ICC’s EOD Pricing Policy is consistent with the requirements of the Act and the rules and regulations thereunder applicable to ICC, in particular, to Section 17(A)(b)(3)(F).6 The Commission finds that the update to ICC’s EOD Pricing Policy regarding Firm Trade unwind transactions clarifies the policy while maintaining the same or similar level of incentive for CPs to provide quality price submissions. Because of the clarification of the Firm Trade unwind requirements and the potential increase in the enforceability thereof, CPs may 4 15 5 15 U.S.C. 78s(b)(2)(C). U.S.C. 78q–1(b)(3)(F). 6 Id. VerDate Mar<15>2010 15:01 Jul 16, 2014 Jkt 232001 have a greater incentive to submit quality price submissions. Since quality price submissions are an integral part of the end-of-day pricing process, the Commission finds that the proposed rule change therefore promotes the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts and transactions and contributes to the safeguarding of securities and funds which are in the custody or control of ICC or for which it is responsible in a manner consistent with the Act and the regulations thereunder applicable to ICC. 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 7 and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,8 that the proposed rule change (File No. SR–ICC– 2014–07) be, and hereby is, approved.9 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–16785 Filed 7–16–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72595; File No. SR–FINRA– 2014–032] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 7710 Relating to Fees for the OTC Reporting Facility and Delete Rule 7740 Relating to Historical Research and Administrative Reports 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 July 2, 2014, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the 7 15 U.S.C. 78q–1. U.S.C. 78s(b)(2). 9 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). 10 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 8 15 Frm 00042 Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under paragraph (f)(6) of Rule 19b–4 under the Act,3 which renders the proposal effective upon receipt of this filing by the Commission. 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 FINRA is proposing to amend Rule 7710 (OTC Reporting Facility) relating to fees for the OTC Reporting Facility (‘‘ORF’’) and delete Rule 7740 (Historical Research and Administrative Reports) upon migration of the ORF to FINRA’s Multi-Product Platform (‘‘MPP’’). The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose July 11, 2014. PO 00000 41711 Fmt 4703 Sfmt 4703 The ORF is the FINRA facility used by members to report transactions in OTC Equity Securities, as defined in Rule 6420 (i.e., equity securities that are not NMS stocks), and transactions in Restricted Equity Securities, as defined in Rule 6420, effected pursuant to Securities Act Rule 144A.4 Currently, the ORF utilizes technology provided by The NASDAQ OMX Group, Inc. (‘‘NASDAQ’’) that is based on NASDAQ’s proprietary Automated 3 17 4 17 E:\FR\FM\17JYN1.SGM CFR 240.19b–4(f)(6). CFR 230.144A. 17JYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 137 (Thursday, July 17, 2014)]
[Notices]
[Pages 41710-41711]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16785]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72596; File No. SR-ICC-2014-07]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change To Revise End-of-Day Price Discovery 
Policies and Procedures

July 11, 2014.

I. Introduction

    On May 22, 2014, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change SR-ICC-2014-07 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 the Federal Register 
on June 10, 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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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-72306 (June 4, 2014), 
79 FR 33243 (June 10, 2014) (SR-ICC-2014-07).
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II. Description

    ICC is proposing to amend the ICC End-of-Day Price Discovery 
Policies and Procedures (``EOD Pricing Policy'') to revise the 
expectations surrounding the unwind of any Firm Trade transaction.
    ICC contends that the proposed revision to ICC's EOD Pricing Policy 
is intended to make the policy more readily enforceable, while 
maintaining the same or similar level of incentive for ICC Clearing 
Participants to provide quality price submissions.
    ICC contends that ICC Clearing Participants (``CPs'') may be 
required from time to time, under the ICC EOD Pricing Policy, to enter 
into trades with other CPs as part of the ICC end-of-day price 
discovery process (``Firm Trade''). ICC contends that it does not 
require CPs to maintain Firm Trades as outstanding positions for any 
particular length of time. Prior to the operation of this proposed rule 
change, ICC has stated that the ICC EOD Pricing Policy requires CPs 
that elect to unwind a Firm Trade to do so ``at the then-current market 
price.'' ICC contends that there are practical difficulties with 
objectively determining whether an unwind transaction was executed at 
the ``then-current market price'' and therefore such policy is 
difficult to enforce. ICC proposes via this rule change to revise

[[Page 41711]]

the ICC EOD Pricing Policy to replace references to the ``then-current 
market price'' with the requirement that unwind transactions be 
executed in a competitive manner. Further, ICC proposes via this rule 
change to add the requirement that, upon request, CPs be able to 
demonstrate to ICC's satisfaction that such unwind transaction was 
executed in a competitive manner. Additionally, ICC proposes to add a 
non-exclusive list of examples of how CPs may be able to demonstrate 
competitive execution of unwind transactions, for example: (i) 
Execution on an available trading venue (e.g., a SEF or DCM); (ii) 
multiple dealer quotes received and execution of the unwind transaction 
at the best quoted price; or (iii) placement of the unwind transaction 
with an interdealer broker with price terms and instructions 
commensurate with a competitive execution.

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.
---------------------------------------------------------------------------

    \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 revision to ICC's EOD 
Pricing Policy is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to ICC, in particular, to 
Section 17(A)(b)(3)(F).\6\ The Commission finds that the update to 
ICC's EOD Pricing Policy regarding Firm Trade unwind transactions 
clarifies the policy while maintaining the same or similar level of 
incentive for CPs to provide quality price submissions. Because of the 
clarification of the Firm Trade unwind requirements and the potential 
increase in the enforceability thereof, CPs may have a greater 
incentive to submit quality price submissions. Since quality price 
submissions are an integral part of the end-of-day pricing process, the 
Commission finds that the proposed rule change therefore promotes the 
prompt and accurate clearance and settlement of securities transactions 
and, to the extent applicable, derivative agreements, contracts and 
transactions and contributes to the safeguarding of securities and 
funds which are in the custody or control of ICC or for which it is 
responsible in a manner consistent with the Act and the regulations 
thereunder applicable to ICC.
---------------------------------------------------------------------------

    \6\ Id.
---------------------------------------------------------------------------

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 \7\ and the 
rules and regulations thereunder.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-ICC-2014-07) be, and 
hereby is, approved.\9\
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    \8\ 15 U.S.C. 78s(b)(2).
    \9\ 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.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-16785 Filed 7-16-14; 8:45 am]
BILLING CODE 8011-01-P

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