Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change To Revise Rules To Provide for the 2014 ISDA Definitions, 45565-45570 [2014-18377]
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Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Notices
requirements, terms and conditions
established from time to time by the
Exchange.
Finally, the Exchange believes that it
is subject to significant competitive
forces, as described below in the
Exchange’s statement regarding the
burden on competition.
For these reasons, the Exchange
believes that the proposal is consistent
with the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,16 the Exchange believes that the
proposed rule change will not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed change is not intended to
address a competitive issue with other
exchanges that offer co-location or
related services, or competitive issues
between Users of these services in the
data center, but rather to streamline the
offerings available to Users in the data
center and eliminate references to
services that are no longer utilized by
Users, thereby making the Price List
easier to understand and administer.
Finally, the Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing venues if they
deem fee levels at a particular venue to
be excessive. In such an environment,
the Exchange must continually review,
and consider adjusting, its services and
related 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.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 17 of the Act and
subparagraph (f)(2) of Rule 19b–4 18
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
At any time within 60 days of the
filing of such proposed rule change, the
16 15
U.S.C. 78f(b)(8).
U.S.C. 78s(b)(3)(A).
18 17 CFR 240.19b–4(f)(2).
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 19 of the Act to
determine whether the proposed rule
change 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2014–37 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2014–37. 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 (https://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 20549–1090, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing will also be available for Web site
viewing and printing at the NYSE’s
principal office and on its Internet Web
site at www.nyse.com. All comments
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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–NYSE–
2014–37 and should be submitted on or
before August 26, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–18435 Filed 8–4–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72701; File No. SR–ICC–
2014–11]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Filing of
Proposed Rule Change To Revise
Rules To Provide for the 2014 ISDA
Definitions
July 29, 2014.
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 24,
2014, ICE Clear Credit LLC (‘‘ICC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The principal purpose of the
proposed change is to amend ICC rules
to incorporate references to revised
Credit Derivatives Definitions, as
published by the International Swaps
and Derivatives Association, Inc.
(‘‘ISDA’’) on February 21, 2014 (the
‘‘2014 ISDA Definitions’’). Consistent
with the approach being taken
throughout the CDS market, the
industry standard 2014 ISDA
Definitions will be applicable to certain
products cleared by ICC beginning on
September 22, 2014.
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
17 15
19 15
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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, 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.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
ICC submits proposed amendments to
the ICC Clearing Rules (the ‘‘ICC Rules’’)
to incorporate references to the 2014
ISDA Definitions to be effective by the
industry implementation date of
September 22, 2014. ICC principally
proposes to (i) revise the ICC Rules to
make proper distinctions between the
2014 ISDA Definitions and the ISDA
Credit Derivatives Definitions published
previously in 2003 (as amended in 2009,
the ‘‘2003 ISDA Definitions’’) and
related documentation; and (ii) make
conforming changes throughout the ICC
Rules to reference provisions from the
proper ISDA Definitions. ICC also
submits the ICC Restructuring
Procedures revised to reflect proper
distinctions between the 2003 ISDA
Definitions and the 2014 ISDA
Definitions. Finally, the ICC Risk
Management Framework has been
revised to reflect appropriate portfolio
treatment between CDS Contracts
cleared under the 2003 and 2014 ISDA
Definitions.
As described by ISDA, the 2014
Definitions make a number of changes
from the 2003 ISDA Definitions to the
standard terms for CDS Contracts,
including (i) introduction of new terms
applicable to credit events involving
financial reference entities and
settlement of such credit events, (ii)
introduction of new terms applicable to
credit events involving sovereign
reference entities and settlement of such
credit events, (iii) implementation of
standard reference obligations
applicable to certain reference entities,
and (iv) various other improvements
and drafting updates that reflect market
experience and developments since the
2009 amendments to the 2003 ISDA
Definitions.
Commencing on the implementation
date of September 22, 2014, ICC intends
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to accept for clearing new transactions
in eligible contracts that reference the
2014 ISDA Definitions. In addition, the
amendments will provide for the
conversion of certain existing contracts
(so-called ‘‘Converting Contracts’’)
currently based on the 2003 ISDA
Definitions into contracts based on the
2014 ISDA Definitions. (This approach
is consistent with expected industry
practice for similar contracts not cleared
by ICC, which will be subject to a
multilateral amendment ‘‘protocol’’
sponsored by ISDA.) For contracts that
are not Converting Contracts, ICC
expects to continue to accept for
clearing both new transactions
referencing the 2014 ISDA Definitions
and new transactions referencing the
2003 ISDA Definitions (and such
contracts based on different definitions
will not be fungible). The ISDA protocol
implementation has been developed
with a high level of industry
involvement and consultation. ICC
understands, through industry
consensus, that ICC Participants plan to
adhere to the ISDA protocol and would
desire ICC to convert certain contracts
cleared at ICC into contracts based on
the 2014 ISDA Definitions, consistent
with the ISDA protocol. Therefore, in an
effort to achieve consistency across the
CDS marketplace, ICC’s implementation
plan is intended to be fully consistent
with the planned ISDA protocol
implementation. ICC will publish on its
Web site a list of Converting Contracts,
which is expected to be the same as the
list of contracts subject to the ISDA
protocol. (Most ICC Contracts will be
Converting Contracts with certain
exceptions including CDS on sovereigns
and certain financial reference entities.)
ICC proposes to amend Chapters 20,
21, 22 and 26 of the ICC Rules and the
ICC Restructuring Procedures and ICC
Risk Management Framework to provide
for the 2014 ISDA Definitions. All
capitalized terms not defined herein are
defined in the ICC Rules. Each of these
changes is described in detail as
follows.
Chapter 20 of the ICC Rules (Credit
Default Swaps), has been amended to
provide new definitions for ‘‘2003/2014
Changeover Effective Date,’’ ‘‘2003
Definitions,’’ ‘‘2003-Type CDS
Contract,’’ ‘‘2014 Definitions,’’ ‘‘2014Type CDS Contract,’’ ‘‘Applicable Credit
Derivatives Definitions’’ and
‘‘Converting Contacts.’’ The new
definitions accommodate the 2014 ISDA
Definitions and provide terms that allow
for distinctions between the 2014 ISDA
Definitions and the 2003 ISDA
Definitions and have been applied
throughout the ICC Rules. Additionally,
the references in the definitions of ‘‘CDS
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Restructuring Rules’’ and ‘‘DC Rules’’
are updated. Rule 20–103
‘‘Interpretation Relating to Index CDS
Contracts’’ is added to clarify that the
determination of whether the 2003 or
2014 ISDA Definitions applies may be
made separately for each component
transaction in the index. Finally, Rule
20–617(g) is revised to remove a crossreference to the definition of ‘‘SR
Auction’’ because SR Auction is defined
as appropriate in multiple Subchapters,
specifically, 26B, 26D and 26G.
Chapter 21 (Regional CDS Committees
and Dispute Resolution Procedures) and
Chapter 22 (CDS Physical Settlement) of
the ICC Rules have been revised to
include references, as appropriate, to
the 2014 ISDA Definitions as well as the
current 2003 ISDA Definitions. Within
Chapter 21, ICC Rules 2101–02(a), (c),
(d), (e), (f), 2103–02(c) and 2106–04 are
updated to make reference to the
parallel provisions of the 2014 ISDA
Definitions in conjunction with the
existing references to specific provisions
of the 2003 ISDA Definitions. In
addition, those rules are updated to
incorporate certain new concepts in the
2014 ISDA Definitions, particularly the
concept of Asset Package Credit Events
for financial and sovereign reference
entities. Such events may result in the
delivery of a specified asset package in
lieu of an otherwise qualifying
deliverable obligation, and the revised
rules provide for certain decisions that
may need to be taken with respect to
such asset packages in such
circumstances. In Chapter 22, ICC Rules
2202(d) and 2203(a) also are updated to
make parallel reference to the
provisions of the 2014 ISDA Definitions
in conjunction with the existing
references to specific provisions of the
2003 ISDA Definitions.
Chapter 26 of the ICC Rules (Cleared
CDS Products) is revised as applicable
to implement the definitional changes
in Chapter 20 of the ICC Rules and the
2014 ISDA Definitions. These changes
include clarification of reference to
provisions within the DC Rules,
clarification as to whether previous
references to ‘‘Credit Derivatives
Definitions’’ are to the 2003 ISDA
Definitions or the 2014 ISDA Definitions
and the addition of provisions
consistent with the 2014 ISDA
Definitions. The revisions to Chapter 26
are intended to ensure that all ICC
Cleared CDS Products are treated
consistently with the Applicable ISDA
Definitions in effect from time to time,
as is in practice today.
Subchapter 26A (CDX Untranched
North American IG/HY/XO) is revised
as follows. In ICC Rule 26A–102
(Definitions), the definition of ‘‘CDX.NA
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Untranched Terms Supplement’’ is
updated to include a reference to the
new ‘‘CDX Untranched Transactions
Standard Terms Supplement’’ expected
to be published by Markit North
America, Inc. on or about September 20,
2014 to incorporate the 2014 ISDA
Definitions, in addition to the existing
references to the CDX Untranched
Standard Terms Supplements published
on March 20, 2008 and January 31,
2011. Additionally in ICC Rule 26A–102
(Definitions), the definition of ‘‘List of
Eligible CDX.NA Untranched Indexes’’
is revised in part (e) to state that the List
of Eligible CDX.NA Untranched Indexes
will specify the Applicable Credit
Derivatives Definitions for each
component of the Index, if applicable.
ICC Rule 26A–316 (Updating Index
Version of Fungible Contracts After a
Credit Event or a Succession Event;
Updating Relevant Untranched
Standard Terms Supplement) is revised
in part (a) to add parallel references to
Successor determinations under the
2014 ISDA Definitions and in part (d) to
provide that CDX.NA Untranched
Contracts that are Converting Contracts
will be deemed amended as of the 2003/
2014 Changeover Date to reference the
updated CDX Untranched Standard
Terms Supplement. ICC Rule 26A–317
(Terms of CDX.NA Untranched
Contracts) is revised to add references to
provisions of the proper ISDA
Definitions and Relevant CDX
Untranched Terms Supplement versions
for the CDX Untranched Contracts that
ICC clears. Corresponding changes to
provision numbering are made as
necessary. Specifically, ICC Rule 26A–
317(a) reorganizes and consolidates
existing provisions that apply to each
CDX.NA Untranched Contract or
component thereof to which the 2003
ISDA Definitions apply. ICC Rule 26A–
317(a)(ix) was previously 26A–317(j)
and has been reproduced with amended
reference to the 2003 ISDA Definitions
and the correct provisions within the
2003 ISDA Definitions.
Correspondingly, ICC Rule 26A–317(b)
is added to the ICC Rules to provide
analogous terms that apply to each
CDX.NA Untranched Contract or
component thereof to which the 2014
ISDA Definitions apply. ICC Rule 26A–
317(c) was previously the first sentence
of 26A–317(i) and is unchanged and
applies consistently to each CDX.NA
Untranched Contract (whether under
the 2003 or 2014 ISDA Definitions). ICC
Rule 26A–317(d) is renumbered and the
reference to the CDX.NA Untranched
Terms Supplement is generalized, but
otherwise remains unchanged.
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Subchapter 26B (Standard North
American Corporate (‘‘SNAC’’) Single
Name) is revised as follows: In ICC Rule
26B–102 (Definitions), the definitions of
‘‘Eligible SNAC Reference Obligations,’’
‘‘List of Eligible SNAC Reference
Entities’’ and ‘‘SNAC Contract Reference
Obligations’’ are updated to include
reference to the Applicable Credit
Derivatives Definitions and to provide
for the use of Standard Reference
Obligations, Financial Reference Entity
Terms and eligible Seniority Levels
under the 2014, ISDA Definitions,
where applicable. The restrictions on
‘‘self-referencing’’ transactions in ICC
Rules 26B–203 (Restriction on Activity)
and 26B–206 (Notices Required of
Participants with Respect to SNAC
Contracts) are revised to cover, in
addition to transactions referencing CDS
Participants, also transactions
referencing Non-Participant Parties for
whom such CDS Participant is acting.
ICC Rule 26B–309 (Acceptance of SNAC
Contracts by ICE Clear Credit) is revised
in part (b)(iii) to add ‘‘Relevant’’ to the
definition of Restructuring Credit Event
(reflecting the use of that defined term
in Subchapter 26E of the ICC Rules) and
in part (e) to address relevant successor
or other events under both 2003 and
2014-Type CDS Contracts. ICC Rule
26B–315 (Terms of the Cleared SNAC
Contract) is revised to provide reference
to provisions of the proper ISDA
Definitions, and corresponding changes
to provision numbering are made as
necessary. Specifically, ICC Rule 26B–
315(d) reorganizes and consolidates
existing provisions that apply to each
SNAC Contract to which the 2003 ISDA
Definitions apply. Correspondingly, ICC
Rule 26B–315(e) is added to the ICC
Rules to provide analogous provisions
that apply to each SNAC Contract to
which the 2014 ISDA Definitions apply.
ICC Rule 26B–315(f) was previously the
first sentence of 26B–315(h) and is
unchanged (and applies to both SNAC
Contracts under both the 2003 and 2014
ISDA Definitions). ICC Rule 26B–315(g)
is revised to refer to the Applicable
Credit Derivatives Definitions, as
appropriate, including, in the case of
2014-Type CDS Contracts, any
supplemental or additional provisions
or Financial Reference Entity Terms
specified as applicable in the List of
Eligible SNAC Reference Entities. ICC
Rule 26B–616 (Contract Modification) is
revised in part (a) to provide for
successors to SNAC Contracts and
Standard Reference Obligations, as
applicable under the ISDA Definitions,
and part (b) is added to provide that
SNAC Contracts that are Converting
Contracts will be deemed amended as of
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the 2003/2014 Changeover Effective
Date to be 2014-Type CDS Contracts.
Subchapter 26C (CDX Untranched
Emerging Markets) is revised as follows:
In ICC Rule 26C–102 (Definitions), the
definition of ‘‘CDX.EM Untranched
Terms Supplement’’ is updated to
include a reference to the new ‘‘CDX
Emerging Markets Untranched
Transactions Standard Terms
Supplement’’ expected to be published
by Markit North America, Inc. on or
about September 20, 2014 to incorporate
the 2014 ISDA Definitions, in addition
to the existing reference to the CDX.EM
Untranched Standard Terms
Supplement published on January 31,
2011. Additionally in ICC Rule 26C–102
(Definitions), the definition of ‘‘List of
Eligible CDX.EM Untranched Indexes’’
is revised in part (e) to state that the List
of Eligible CDX.EM Untranched Indexes
will specify reference to the Applicable
Credit Derivatives Definitions for each
component of the Index, if applicable.
ICC Rule 26C–316 (Updating Index
Version of Fungible Contracts After a
Credit Event or a Succession Event;
Updating Relevant Untranched
Standard Terms Supplement) is revised
in part (a) to add parallel references to
Successor determinations under the
2014 ISDA Definitions and in part (d) to
provide that CDX.EM Untranched
Contracts that are Converting Contracts
will be deemed amended as of the 2003/
2014 Changeover Date to reference the
updated CDX.EM Untranched Terms
Supplement. ICC Rule 26C–317 (Terms
of CDX.EM Untranched Contracts) is
revised to add references to provisions
of the proper ISDA Definitions and
Relevant CDX.EM Untranched Terms
Supplement versions for the CDX.EM
Untranched Contracts that ICC clears.
Corresponding changes to provision
numbering are made as necessary.
Specifically, ICC Rule 26C–317(a)
reorganizes and consolidates existing
provisions that apply to each CDX.EM
Untranched Contract or component
thereof to which the 2003 ISDA
Definitions apply. Correspondingly, ICC
Rule 26C–317(b) is added to the ICC
Rules to provide analogous terms that
apply to each CDX.EM Untranched
Contract or component thereof to which
the 2014 ISDA Definitions apply. ICC
Rule 26C–317(c) was previously the first
sentence of 26C–317(g) and is
unchanged and applies consistently to
each CDX.NA Untranched Contract. ICC
Rule 26C–317(d) was previously the
first sentence of 26C–317(i) and is
generalized to apply consistently to
each CDX.EM Untranched Contract
(whether under the 2003 or 2014 ISDA
Definitions). ICC Rule 26C–317(e) is
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generalized to apply to both the 2003
and 2014 ISDA Definitions with the
same effect of stating that the Reference
Obligation for a Restructured Entity will
be specified by ICC following
consultation with the ICC Risk
Committee.
Subchapter 26D (Standard Emerging
Sovereign (‘‘SES’’) Single Name) is
revised as follows. In ICC Rule 26D–102
(Definitions), the definition of ‘‘Eligible
SES Reference Entities’’ is revised to
correct a typo and correctly identify the
reference entity for a cleared product as
the Bolivarian Republic of Venezuela
and the definitions of ‘‘Eligible SES
Reference Obligations,’’ ‘‘List of Eligible
SES Reference Entities’’ and ‘‘SES
Contract Reference Obligations’’ are
updated to include reference to the
Applicable Credit Derivatives
Definitions and to provide for the use of
a Standard Reference Obligation under
the 2014 ISDA Definitions, where
applicable. The restrictions on ‘‘selfreferencing’’ transactions in ICC Rules
26D–203 (Restriction on Activity) and
26D–206 (Notices Required of
Participants with Respect to SES
Contracts) are revised to cover, in
addition to transactions referencing CDS
Participants, also transactions
referencing Non-Participant Parties for
whom such CDS Participant is acting.
ICC Rule 26D–309 (Acceptance of SES
Contracts by ICE Clear Credit) is revised
in part (b)(iii) to add ‘‘Relevant’’ to the
definition of Restructuring Credit Event
(reflecting the use of that defined term
in Subchapter 26E of the ICC Rules), in
part (c) to, in addition to CDS
Participant, also provide for NonParticipant Parties for whom such CDS
Participant is acting and in part (e) to
address relevant successor or other
events under both 2003 and 2014-Type
CDS Contracts. ICC Rule 26D–315
(Terms of the Cleared SES Contract) is
revised to provide reference to
provisions of the proper ISDA
Definitions, and corresponding changes
to provision numbering are made as
necessary. Specifically, ICC Rule 26D–
315(d) reorganizes and consolidates
existing provisions that apply to each
SES Contract to which the 2003 ISDA
Definitions apply. Correspondingly, ICC
Rule 26D–315(e) is added to the ICC
Rules to provide analogous provisions
that apply to each SES Contract to
which the 2014 ISDA Definitions apply.
ICC Rule 26D–315(f) was previously the
first sentence of 26D–315(h) and is
unchanged (and applies to both 2003
and 2014-Type CDS Contracts. ICC Rule
26D–315(g) remains unchanged; the
previous reference was 26D–315(k). ICC
Rule 26D–315(h) is revised to refer to
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the Applicable Credit Derivatives
Definitions, as appropriate. ICC Rule
26D–616 (Contract Modification) is
revised in part (a) to provide for
successors to SES Contracts and
Standard Reference Obligations, as
applicable under the relevant ISDA
Definitions, and part (b) is added to
provide that SES Contracts that are
Converting Contracts will be deemed
amended as of the 2003/2014
Changeover Effective Date to be 2014Type CDS Contracts.
Subchapter 26E is updated to provide
for the differences in the treatment of
Relevant Restructuring Contracts under
the 2003 ISDA Definitions and 2014
ISDA Definitions. Specifically, in ICC
Rule 26E–102 (Definitions) the
definitions of ‘‘Matched Restructuring
Pair,’’ ‘‘Relevant Restructuring
Contract,’’ ‘‘Relevant Restructuring
Credit Event’’ and ‘‘Restructuring CDS
Contract’’ are updated to allow for
application of either the 2003 ISDA
Definitions or the 2014 ISDA Definitions
as relevant. Additionally, the definition
of ‘‘Triggered Restructuring CDS
Contract’’ as well as ICC Rules 26E–
104(a) and (b) are updated to include
provisions consistent with the 2014
ISDA Definitions.
Subchapter 26F (iTraxx Europe) is
revised as follows: In ICC Rule 26F–102
(Definitions), the definition of ‘‘iTraxx
Europe Untranched Terms Supplement’’
is updated to include reference to the
new ‘‘iTraxx Europe Untranched
Standard Terms Supplement’’ expected
to be published by Markit North
America, Inc. on or about September, 20
2014 to incorporate the 2014 ISDA
Definitions, in addition to the existing
reference to the iTraxx Europe
Untranched Standard Terms
Supplement published on November 23,
2009. Additionally in ICC Rule 26F–102
(Definitions), the definition of ‘‘List of
Eligible iTraxx Europe Untranched
Indexes’’ is revised in part (e) to state
that the List of Eligible iTraxx Europe
Untranched Indexes will include
reference to the Applicable Credit
Derivatives Definitions for each
component of the Index, if applicable.
ICC Rule 26F–309 (Acceptance of iTraxx
Europe Untranched Contracts by ICE
Clear Credit) is revised to correct a typo
from ‘‘clauses’’ to ‘‘clause.’’ ICC Rule
26F–316 (Updating Index Version of
Fungible Contracts After a Credit Event
or a Succession Event; Updating
Relevant Untranched Standard Terms
Supplement) is revised in part (a) to add
parallel references to Successor
determinations under the 2014 ISDA
Definitions and in part (d) to provide
that iTraxx Europe Untranched
Contracts that are Converting Contracts
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will be deemed amended as of the 2003/
2014 Changeover Date to reference the
updated iTraxx Europe Untranched
Terms Supplement. ICC Rule 26F–317
(Terms of iTraxx Europe Untranched
Contracts) is revised to add references to
provisions of the proper ISDA
Definitions and Relevant iTraxx Europe
Untranched Terms Supplement versions
for the iTraxx Europe Untranched
Contracts that ICC clears. Corresponding
changes to provision numbering are
made as necessary. Specifically, ICC
Rule 26F–317(a) reorganizes and
consolidates existing provisions that
apply to each iTraxx Europe
Untranched Contract or component
thereof to which the 2003 ISDA
Definitions apply. Correspondingly, ICC
Rule 26F–317(b) is added to the ICC
Rules to provide analogous terms that
apply to each iTraxx Europe
Untranched Contract or component
thereof to which the 2014 ISDA
Definitions apply. ICC Rule 26F–317(c)
was previously the first sentence of ICC
Rule 26F–317(f) and is unchanged and
applies consistently to each iTraxx
Europe Untranched Contract (whether
under the 2003 or 2014 ISDA
Definitions). ICC Rule 26F–317(d),
which provides for the determination of
a Reference Obligation for a
Restructured Entity, is revised slightly
to accommodate a Standard Reference
Obligation, if applicable. ICC Rule 26F–
317(e)(vi) is generalized to provide for
the Relevant iTraxx Europe Untranched
Terms Supplement.
Subchapter 26G (Standard European
Corporate (‘‘STEC’’) Single Name) is
revised throughout to change ‘‘SDEC’’ to
‘‘STEC’’ to follow the industry standard
acronym, and as follows: In ICC Rule
26G–102 (Definitions), the definitions of
‘‘Eligible STEC Reference Obligations,’’
‘‘List of Eligible STEC Reference
Entities’’ and ‘‘STEC Contract Reference
Obligations’’ are updated to include
reference to the Applicable Credit
Derivatives Definitions and to provide
for the use of a Standard Reference
Obligation under the 2014 ISDA
Definitions and eligible Seniority
Levels, where applicable. The
restrictions on ‘‘self-referencing’’
transactions in ICC Rules 26G–203
(Restriction on Activity) and 26G–206
(Notices Required of Participants with
Respect to STEC Contracts) are revised
to cover, in addition to transactions
referencing a CDS Participant, also
transactions referencing Non-Participant
Parties for whom such CDS Participant
is acting. ICC Rule 26G–309
(Acceptance of STEC Contracts by ICE
Clear Credit) is revised in part (b)(iii) to
add ‘‘Relevant’’ to the definition of
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Restructuring Credit Event (reflecting
the use of that defined term in
Subchapter 26E of the ICC Rules) and in
part (e) to address relevant successor or
other events under both 2003 and 2014Type CDS Contracts. ICC Rule 26G–315
(Terms of the Cleared STEC Contract) is
revised to provide reference to
provisions of the proper ISDA
Definitions, and corresponding changes
to provision numbering are made as
necessary. Specifically, ICC Rule 26G–
315(d) reorganizes and consolidates
existing provisions that apply to each
STEC Contract to which the 2003 ISDA
Definitions apply. Correspondingly, ICC
Rule 26G–315(e) is added to the ICC
Rules to provide analogous terms that
apply to each STEC Contract to which
the 2014 ISDA Definitions apply. ICC
Rule 26G–315(f) was previously the first
sentence of 26G–315(h) and is
unchanged (and applies to both 2003
and 2014-Type CDS Contracts). ICC
Rule 26G–315(g) remains unchanged;
the previous reference was 26G–315(k).
ICC Rule 26G–315(h) is revised to refer
to the Applicable Credit Derivatives
Definitions and eligible Seniority Level,
as appropriate. ICC Rule 26G–616
(Contract Modification) is revised in
part (a) to provide for successors to
STEC Contracts and Standard Reference
Obligations, as applicable under the
relevant ISDA Definitions, and part (b)
is added to provide that STEC Contracts
that are Converting Contracts will be
deemed amended as of the 2003/2014
Changeover Effective Date to be 2014Type CDS Contracts.
Subchapter 26H (Standard European
Financial Corporate (‘‘STEFC’’) Single
Name) is added to the ICC Rules to
provide for the clearance of STEFC
Single Names. Such contracts will be
subject only to the 2014 ISDA
Definitions. STEFC Contracts have
similar terms to the Standard European
Corporate Single Name CDS contracts
(‘‘STEC Contracts’’) currently cleared by
ICC and governed by Section 26G of the
ICC Rules, the Standard Emerging
Sovereign CDS contracts (‘‘SES
Contracts’’) currently cleared by ICC and
governed by Section 26D of the Rules.
Accordingly, the proposed rules found
in Section 26H largely mirror the ICC
rules for STEC Contracts in Section 26G,
with certain modifications that reflect
differences in terms and market
conventions between those contracts
and STEFC Contracts (including that
STEFC Contracts incorporate additional
Financial Reference Entity terms under
the 2014 ISDA Definitions). STEFC
Contracts will be denominated in Euros.
Rule 26H–102 (Definitions) sets forth
the definitions used for the STEFC
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Contracts. The definitions are
substantially similar to the definitions
found in Subchapter 26G of the ICC
Rulebook, but contain reference only to
the 2014 ISDA Definitions and contain
other conforming changes. Rules 26H–
203 (Restriction on Activity), 26H–206
(Notices Required of Participants with
respect to STEFC Contracts), 26H–303
(STEFC Contract Adjustments), 26H–
309 (Acceptance of STEFC Contracts by
ICE Clear Credit), 26H–315 (Terms of
the Cleared STEFC Contract), 26H–316
(Relevant Physical Settlement Matrix
Updates), 26H–502 (Specified Actions),
and 26H–616 (Contract Modification)
reflect or incorporate the basic contract
specifications for STEFC Contracts and
are substantially similar to
corresponding sections of Subchapter
26G of the ICC Rulebook.
The ICC Restructuring Procedures
supplement the provisions of
Subchapter 26E of the ICC Rules with
respect to Relevant Restructuring
Contracts. The ICC Restructuring
Procedures are amended throughout to
reflect revisions to defined terms in the
ICC Rules including ‘‘Relevant
Restructuring Contract,’’ ‘‘Relevant
Restructuring Credit Event,’’ and
‘‘Applicable Credit Derivatives
Definitions’’ as defined in ICC Rules
26E–102 (Definitions) and 20–102
(Definitions) and to make appropriate
distinctions between the applicability of
the 2003 ISDA Definitions and the 2014
ISDA Definitions and provisions
therein.
The ICC Risk Management Framework
has been revised to provide for
appropriate portfolio treatment between
CDS Contracts cleared under the 2003
and 2014 Definitions. In the ICC Risk
Management Framework, each index,
sub-index or underlying single name is
deemed a separate ‘‘Risk Factor.’’ The
revisions to the ICC Risk Management
Framework introduce a ‘‘Risk SubFactor’’ as a specific single name and
any unique combination of instrument
attributes (e.g., restructuring clause,
2003 or 2014 ISDA Definitions, debt
tier, etc). The union of all Risk SubFactors that share the same underlying
single name form a single name Risk
Factor. The portfolio treatment at the
Risk Sub-Factor level is provided for in
the Risk Management Framework, as
appropriate. Additionally, the ICC Risk
Management Framework has been
revised to include long and short
positions of Risk Sub-Factors for a
single name Risk Factor into the Jumpto-Default requirement. Finally, the ICC
Risk Management Framework has been
revised to include other cleanup and
clarification changes (e.g., to address the
difference in risk time horizon between
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45569
North American and European
instruments).
2. Statutory Basis
Section 17A(b)(3)(F) of the Act 3
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 and to
comply with the provisions of the Act
and the rules and regulations
thereunder. ICC believes that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to ICC, in particular, to
Section 17A(b)(3)(F) 4 and Rule 17Ad–
22,5 because ICC believes that the
proposed rule change will assure the
prompt and accurate clearance and
settlement of securities transactions,
derivatives agreements, contracts, and
transactions. ICC believes the proposed
change to the ICC Rules, Restructuring
Procedures and Risk Management
Framework conforms to the Applicable
Credit Definitions as published by ISDA
in conjunction with an industry-wide
effort. As part of this effort, CDS market
participants have developed the 2014
ISDA Definitions to reflect market
experience since the ISDA Credit
Derivatives Definitions were last
significantly amended in 2009
(including credit events involving
financial and sovereign entities), and to
make various related improvements and
clarifications to the terms of CDS
contracts and the operation of the CDS
market. The change to the ICC Rules
thus incorporates references to the 2014
ISDA Definitions in order to permit
clearing of contracts referencing the new
definitions, and distinguishes where
applicable between the 2014 ISDA
Definitions and the 2003 ISDA
Definitions. ICC plans to accept for
clearing contracts referencing the
industry standard 2014 ISDA
Definitions beginning with the planned
industry-wide implementation on
September 22, 2014 (and to convert
certain existing contracts to the new
definitions as of that date). ICC believes
the revisions to the ICC Rules,
Restructuring Procedures and Risk
Management Framework are necessary
in order to permit clearing of contracts
on the new terms, and to provide the
market with the necessary assurances
that ICC plans to implement the
Applicable Credit Definitions consistent
3 15
U.S.C. 78q–1(b)(3)(F).
4 Id.
5 17
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Federal Register / Vol. 79, No. 150 / Tuesday, August 5, 2014 / Notices
with industry practice. As such, the
proposed rule change is designed to
promote the prompt and accurate
clearance and settlement of securities
transactions, derivatives agreements,
contracts, and transactions within the
meaning of Section 17A(b)(3)(F) 6 of the
Act.
Electronic Comments
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Paper Comments
The proposed change to the ICC Rules
in order to incorporate references to the
2014 ISDA Definitions will apply
consistently across all Participants and
Non-Participant Parties and facilitates
changes sought to be made by the
industry throughout the CDS market.
ICC does not expect that the proposed
change will affect access to clearing for
Participants or their customers, or
materially affect the cost of clearing. As
a result, ICC does not believe the
proposed rule change would have any
impact, or impose any burden, on
competition not appropriate in
furtherance of the purposes of the Act.
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 by ICC. 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
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
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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:
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml) or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ICC–2014–11 on the subject line.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–ICC–2014–11. 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 (https://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
filings also will be available for
inspection and copying at the principal
office of ICC and on ICC’s Web site at
https://www.theice.com/clear-credit/
regulation.
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–2014–11 and should
be submitted on or before August 26,
2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–18377 Filed 8–4–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72711; File No. SR–CHX–
2014–10]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change Concerning
the Use of Market Data Feeds by the
Exchange
July 29, 2014.
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 16,
2014, the Chicago Stock Exchange, Inc.
(‘‘CHX’’ or the ‘‘Exchange’’) 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
CHX proposes to adopt Article 1, Rule
4, to provide that the consolidated
market data feed disseminated by the
securities information processors shall
be the only market data feed utilized by
the Exchange for all operational and
regulatory compliance purposes. The
Exchange has designated this proposal
as non-controversial and provided the
Commission with the notice required by
Rule 19b–4(f)(6)(iii) under the Act.3
The text of this proposed rule change
is available on the Exchange’s Web site
at (www.chx.com) and in 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
CHX included statements concerning
the purpose of and basis for the
proposed rule changes 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. The
CHX has prepared summaries, set forth
in sections A, B and C below, of the
most significant aspects of such
statements.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6)(iii).
2 17
6 15
U.S.C. 78q–1(b)(3)(F).
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]]>Agencies
[Federal Register Volume 79, Number 150 (Tuesday, August 5, 2014)]
[Notices]
[Pages 45565-45570]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18377]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72701; File No. SR-ICC-2014-11]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change To Revise Rules To Provide for the 2014
ISDA Definitions
July 29, 2014.
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 24, 2014, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The principal purpose of the proposed change is to amend ICC rules
to incorporate references to revised Credit Derivatives Definitions, as
published by the International Swaps and Derivatives Association, Inc.
(``ISDA'') on February 21, 2014 (the ``2014 ISDA Definitions'').
Consistent with the approach being taken throughout the CDS market, the
industry standard 2014 ISDA Definitions will be applicable to certain
products cleared by ICC beginning on September 22, 2014.
[[Page 45566]]
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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
ICC submits proposed amendments to the ICC Clearing Rules (the
``ICC Rules'') to incorporate references to the 2014 ISDA Definitions
to be effective by the industry implementation date of September 22,
2014. ICC principally proposes to (i) revise the ICC Rules to make
proper distinctions between the 2014 ISDA Definitions and the ISDA
Credit Derivatives Definitions published previously in 2003 (as amended
in 2009, the ``2003 ISDA Definitions'') and related documentation; and
(ii) make conforming changes throughout the ICC Rules to reference
provisions from the proper ISDA Definitions. ICC also submits the ICC
Restructuring Procedures revised to reflect proper distinctions between
the 2003 ISDA Definitions and the 2014 ISDA Definitions. Finally, the
ICC Risk Management Framework has been revised to reflect appropriate
portfolio treatment between CDS Contracts cleared under the 2003 and
2014 ISDA Definitions.
As described by ISDA, the 2014 Definitions make a number of changes
from the 2003 ISDA Definitions to the standard terms for CDS Contracts,
including (i) introduction of new terms applicable to credit events
involving financial reference entities and settlement of such credit
events, (ii) introduction of new terms applicable to credit events
involving sovereign reference entities and settlement of such credit
events, (iii) implementation of standard reference obligations
applicable to certain reference entities, and (iv) various other
improvements and drafting updates that reflect market experience and
developments since the 2009 amendments to the 2003 ISDA Definitions.
Commencing on the implementation date of September 22, 2014, ICC
intends to accept for clearing new transactions in eligible contracts
that reference the 2014 ISDA Definitions. In addition, the amendments
will provide for the conversion of certain existing contracts (so-
called ``Converting Contracts'') currently based on the 2003 ISDA
Definitions into contracts based on the 2014 ISDA Definitions. (This
approach is consistent with expected industry practice for similar
contracts not cleared by ICC, which will be subject to a multilateral
amendment ``protocol'' sponsored by ISDA.) For contracts that are not
Converting Contracts, ICC expects to continue to accept for clearing
both new transactions referencing the 2014 ISDA Definitions and new
transactions referencing the 2003 ISDA Definitions (and such contracts
based on different definitions will not be fungible). The ISDA protocol
implementation has been developed with a high level of industry
involvement and consultation. ICC understands, through industry
consensus, that ICC Participants plan to adhere to the ISDA protocol
and would desire ICC to convert certain contracts cleared at ICC into
contracts based on the 2014 ISDA Definitions, consistent with the ISDA
protocol. Therefore, in an effort to achieve consistency across the CDS
marketplace, ICC's implementation plan is intended to be fully
consistent with the planned ISDA protocol implementation. ICC will
publish on its Web site a list of Converting Contracts, which is
expected to be the same as the list of contracts subject to the ISDA
protocol. (Most ICC Contracts will be Converting Contracts with certain
exceptions including CDS on sovereigns and certain financial reference
entities.)
ICC proposes to amend Chapters 20, 21, 22 and 26 of the ICC Rules
and the ICC Restructuring Procedures and ICC Risk Management Framework
to provide for the 2014 ISDA Definitions. All capitalized terms not
defined herein are defined in the ICC Rules. Each of these changes is
described in detail as follows.
Chapter 20 of the ICC Rules (Credit Default Swaps), has been
amended to provide new definitions for ``2003/2014 Changeover Effective
Date,'' ``2003 Definitions,'' ``2003-Type CDS Contract,'' ``2014
Definitions,'' ``2014-Type CDS Contract,'' ``Applicable Credit
Derivatives Definitions'' and ``Converting Contacts.'' The new
definitions accommodate the 2014 ISDA Definitions and provide terms
that allow for distinctions between the 2014 ISDA Definitions and the
2003 ISDA Definitions and have been applied throughout the ICC Rules.
Additionally, the references in the definitions of ``CDS Restructuring
Rules'' and ``DC Rules'' are updated. Rule 20-103 ``Interpretation
Relating to Index CDS Contracts'' is added to clarify that the
determination of whether the 2003 or 2014 ISDA Definitions applies may
be made separately for each component transaction in the index.
Finally, Rule 20-617(g) is revised to remove a cross-reference to the
definition of ``SR Auction'' because SR Auction is defined as
appropriate in multiple Subchapters, specifically, 26B, 26D and 26G.
Chapter 21 (Regional CDS Committees and Dispute Resolution
Procedures) and Chapter 22 (CDS Physical Settlement) of the ICC Rules
have been revised to include references, as appropriate, to the 2014
ISDA Definitions as well as the current 2003 ISDA Definitions. Within
Chapter 21, ICC Rules 2101-02(a), (c), (d), (e), (f), 2103-02(c) and
2106-04 are updated to make reference to the parallel provisions of the
2014 ISDA Definitions in conjunction with the existing references to
specific provisions of the 2003 ISDA Definitions. In addition, those
rules are updated to incorporate certain new concepts in the 2014 ISDA
Definitions, particularly the concept of Asset Package Credit Events
for financial and sovereign reference entities. Such events may result
in the delivery of a specified asset package in lieu of an otherwise
qualifying deliverable obligation, and the revised rules provide for
certain decisions that may need to be taken with respect to such asset
packages in such circumstances. In Chapter 22, ICC Rules 2202(d) and
2203(a) also are updated to make parallel reference to the provisions
of the 2014 ISDA Definitions in conjunction with the existing
references to specific provisions of the 2003 ISDA Definitions.
Chapter 26 of the ICC Rules (Cleared CDS Products) is revised as
applicable to implement the definitional changes in Chapter 20 of the
ICC Rules and the 2014 ISDA Definitions. These changes include
clarification of reference to provisions within the DC Rules,
clarification as to whether previous references to ``Credit Derivatives
Definitions'' are to the 2003 ISDA Definitions or the 2014 ISDA
Definitions and the addition of provisions consistent with the 2014
ISDA Definitions. The revisions to Chapter 26 are intended to ensure
that all ICC Cleared CDS Products are treated consistently with the
Applicable ISDA Definitions in effect from time to time, as is in
practice today.
Subchapter 26A (CDX Untranched North American IG/HY/XO) is revised
as follows. In ICC Rule 26A-102 (Definitions), the definition of
``CDX.NA
[[Page 45567]]
Untranched Terms Supplement'' is updated to include a reference to the
new ``CDX Untranched Transactions Standard Terms Supplement'' expected
to be published by Markit North America, Inc. on or about September 20,
2014 to incorporate the 2014 ISDA Definitions, in addition to the
existing references to the CDX Untranched Standard Terms Supplements
published on March 20, 2008 and January 31, 2011. Additionally in ICC
Rule 26A-102 (Definitions), the definition of ``List of Eligible CDX.NA
Untranched Indexes'' is revised in part (e) to state that the List of
Eligible CDX.NA Untranched Indexes will specify the Applicable Credit
Derivatives Definitions for each component of the Index, if applicable.
ICC Rule 26A-316 (Updating Index Version of Fungible Contracts After a
Credit Event or a Succession Event; Updating Relevant Untranched
Standard Terms Supplement) is revised in part (a) to add parallel
references to Successor determinations under the 2014 ISDA Definitions
and in part (d) to provide that CDX.NA Untranched Contracts that are
Converting Contracts will be deemed amended as of the 2003/2014
Changeover Date to reference the updated CDX Untranched Standard Terms
Supplement. ICC Rule 26A-317 (Terms of CDX.NA Untranched Contracts) is
revised to add references to provisions of the proper ISDA Definitions
and Relevant CDX Untranched Terms Supplement versions for the CDX
Untranched Contracts that ICC clears. Corresponding changes to
provision numbering are made as necessary. Specifically, ICC Rule 26A-
317(a) reorganizes and consolidates existing provisions that apply to
each CDX.NA Untranched Contract or component thereof to which the 2003
ISDA Definitions apply. ICC Rule 26A-317(a)(ix) was previously 26A-
317(j) and has been reproduced with amended reference to the 2003 ISDA
Definitions and the correct provisions within the 2003 ISDA
Definitions. Correspondingly, ICC Rule 26A-317(b) is added to the ICC
Rules to provide analogous terms that apply to each CDX.NA Untranched
Contract or component thereof to which the 2014 ISDA Definitions apply.
ICC Rule 26A-317(c) was previously the first sentence of 26A-317(i) and
is unchanged and applies consistently to each CDX.NA Untranched
Contract (whether under the 2003 or 2014 ISDA Definitions). ICC Rule
26A-317(d) is renumbered and the reference to the CDX.NA Untranched
Terms Supplement is generalized, but otherwise remains unchanged.
Subchapter 26B (Standard North American Corporate (``SNAC'') Single
Name) is revised as follows: In ICC Rule 26B-102 (Definitions), the
definitions of ``Eligible SNAC Reference Obligations,'' ``List of
Eligible SNAC Reference Entities'' and ``SNAC Contract Reference
Obligations'' are updated to include reference to the Applicable Credit
Derivatives Definitions and to provide for the use of Standard
Reference Obligations, Financial Reference Entity Terms and eligible
Seniority Levels under the 2014, ISDA Definitions, where applicable.
The restrictions on ``self-referencing'' transactions in ICC Rules 26B-
203 (Restriction on Activity) and 26B-206 (Notices Required of
Participants with Respect to SNAC Contracts) are revised to cover, in
addition to transactions referencing CDS Participants, also
transactions referencing Non-Participant Parties for whom such CDS
Participant is acting. ICC Rule 26B-309 (Acceptance of SNAC Contracts
by ICE Clear Credit) is revised in part (b)(iii) to add ``Relevant'' to
the definition of Restructuring Credit Event (reflecting the use of
that defined term in Subchapter 26E of the ICC Rules) and in part (e)
to address relevant successor or other events under both 2003 and 2014-
Type CDS Contracts. ICC Rule 26B-315 (Terms of the Cleared SNAC
Contract) is revised to provide reference to provisions of the proper
ISDA Definitions, and corresponding changes to provision numbering are
made as necessary. Specifically, ICC Rule 26B-315(d) reorganizes and
consolidates existing provisions that apply to each SNAC Contract to
which the 2003 ISDA Definitions apply. Correspondingly, ICC Rule 26B-
315(e) is added to the ICC Rules to provide analogous provisions that
apply to each SNAC Contract to which the 2014 ISDA Definitions apply.
ICC Rule 26B-315(f) was previously the first sentence of 26B-315(h) and
is unchanged (and applies to both SNAC Contracts under both the 2003
and 2014 ISDA Definitions). ICC Rule 26B-315(g) is revised to refer to
the Applicable Credit Derivatives Definitions, as appropriate,
including, in the case of 2014-Type CDS Contracts, any supplemental or
additional provisions or Financial Reference Entity Terms specified as
applicable in the List of Eligible SNAC Reference Entities. ICC Rule
26B-616 (Contract Modification) is revised in part (a) to provide for
successors to SNAC Contracts and Standard Reference Obligations, as
applicable under the ISDA Definitions, and part (b) is added to provide
that SNAC Contracts that are Converting Contracts will be deemed
amended as of the 2003/2014 Changeover Effective Date to be 2014-Type
CDS Contracts.
Subchapter 26C (CDX Untranched Emerging Markets) is revised as
follows: In ICC Rule 26C-102 (Definitions), the definition of ``CDX.EM
Untranched Terms Supplement'' is updated to include a reference to the
new ``CDX Emerging Markets Untranched Transactions Standard Terms
Supplement'' expected to be published by Markit North America, Inc. on
or about September 20, 2014 to incorporate the 2014 ISDA Definitions,
in addition to the existing reference to the CDX.EM Untranched Standard
Terms Supplement published on January 31, 2011. Additionally in ICC
Rule 26C-102 (Definitions), the definition of ``List of Eligible CDX.EM
Untranched Indexes'' is revised in part (e) to state that the List of
Eligible CDX.EM Untranched Indexes will specify reference to the
Applicable Credit Derivatives Definitions for each component of the
Index, if applicable. ICC Rule 26C-316 (Updating Index Version of
Fungible Contracts After a Credit Event or a Succession Event; Updating
Relevant Untranched Standard Terms Supplement) is revised in part (a)
to add parallel references to Successor determinations under the 2014
ISDA Definitions and in part (d) to provide that CDX.EM Untranched
Contracts that are Converting Contracts will be deemed amended as of
the 2003/2014 Changeover Date to reference the updated CDX.EM
Untranched Terms Supplement. ICC Rule 26C-317 (Terms of CDX.EM
Untranched Contracts) is revised to add references to provisions of the
proper ISDA Definitions and Relevant CDX.EM Untranched Terms Supplement
versions for the CDX.EM Untranched Contracts that ICC clears.
Corresponding changes to provision numbering are made as necessary.
Specifically, ICC Rule 26C-317(a) reorganizes and consolidates existing
provisions that apply to each CDX.EM Untranched Contract or component
thereof to which the 2003 ISDA Definitions apply. Correspondingly, ICC
Rule 26C-317(b) is added to the ICC Rules to provide analogous terms
that apply to each CDX.EM Untranched Contract or component thereof to
which the 2014 ISDA Definitions apply. ICC Rule 26C-317(c) was
previously the first sentence of 26C-317(g) and is unchanged and
applies consistently to each CDX.NA Untranched Contract. ICC Rule 26C-
317(d) was previously the first sentence of 26C-317(i) and is
generalized to apply consistently to each CDX.EM Untranched Contract
(whether under the 2003 or 2014 ISDA Definitions). ICC Rule 26C-317(e)
is
[[Page 45568]]
generalized to apply to both the 2003 and 2014 ISDA Definitions with
the same effect of stating that the Reference Obligation for a
Restructured Entity will be specified by ICC following consultation
with the ICC Risk Committee.
Subchapter 26D (Standard Emerging Sovereign (``SES'') Single Name)
is revised as follows. In ICC Rule 26D-102 (Definitions), the
definition of ``Eligible SES Reference Entities'' is revised to correct
a typo and correctly identify the reference entity for a cleared
product as the Bolivarian Republic of Venezuela and the definitions of
``Eligible SES Reference Obligations,'' ``List of Eligible SES
Reference Entities'' and ``SES Contract Reference Obligations'' are
updated to include reference to the Applicable Credit Derivatives
Definitions and to provide for the use of a Standard Reference
Obligation under the 2014 ISDA Definitions, where applicable. The
restrictions on ``self-referencing'' transactions in ICC Rules 26D-203
(Restriction on Activity) and 26D-206 (Notices Required of Participants
with Respect to SES Contracts) are revised to cover, in addition to
transactions referencing CDS Participants, also transactions
referencing Non-Participant Parties for whom such CDS Participant is
acting. ICC Rule 26D-309 (Acceptance of SES Contracts by ICE Clear
Credit) is revised in part (b)(iii) to add ``Relevant'' to the
definition of Restructuring Credit Event (reflecting the use of that
defined term in Subchapter 26E of the ICC Rules), in part (c) to, in
addition to CDS Participant, also provide for Non-Participant Parties
for whom such CDS Participant is acting and in part (e) to address
relevant successor or other events under both 2003 and 2014-Type CDS
Contracts. ICC Rule 26D-315 (Terms of the Cleared SES Contract) is
revised to provide reference to provisions of the proper ISDA
Definitions, and corresponding changes to provision numbering are made
as necessary. Specifically, ICC Rule 26D-315(d) reorganizes and
consolidates existing provisions that apply to each SES Contract to
which the 2003 ISDA Definitions apply. Correspondingly, ICC Rule 26D-
315(e) is added to the ICC Rules to provide analogous provisions that
apply to each SES Contract to which the 2014 ISDA Definitions apply.
ICC Rule 26D-315(f) was previously the first sentence of 26D-315(h) and
is unchanged (and applies to both 2003 and 2014-Type CDS Contracts. ICC
Rule 26D-315(g) remains unchanged; the previous reference was 26D-
315(k). ICC Rule 26D-315(h) is revised to refer to the Applicable
Credit Derivatives Definitions, as appropriate. ICC Rule 26D-616
(Contract Modification) is revised in part (a) to provide for
successors to SES Contracts and Standard Reference Obligations, as
applicable under the relevant ISDA Definitions, and part (b) is added
to provide that SES Contracts that are Converting Contracts will be
deemed amended as of the 2003/2014 Changeover Effective Date to be
2014-Type CDS Contracts.
Subchapter 26E is updated to provide for the differences in the
treatment of Relevant Restructuring Contracts under the 2003 ISDA
Definitions and 2014 ISDA Definitions. Specifically, in ICC Rule 26E-
102 (Definitions) the definitions of ``Matched Restructuring Pair,''
``Relevant Restructuring Contract,'' ``Relevant Restructuring Credit
Event'' and ``Restructuring CDS Contract'' are updated to allow for
application of either the 2003 ISDA Definitions or the 2014 ISDA
Definitions as relevant. Additionally, the definition of ``Triggered
Restructuring CDS Contract'' as well as ICC Rules 26E-104(a) and (b)
are updated to include provisions consistent with the 2014 ISDA
Definitions.
Subchapter 26F (iTraxx Europe) is revised as follows: In ICC Rule
26F-102 (Definitions), the definition of ``iTraxx Europe Untranched
Terms Supplement'' is updated to include reference to the new ``iTraxx
Europe Untranched Standard Terms Supplement'' expected to be published
by Markit North America, Inc. on or about September, 20 2014 to
incorporate the 2014 ISDA Definitions, in addition to the existing
reference to the iTraxx Europe Untranched Standard Terms Supplement
published on November 23, 2009. Additionally in ICC Rule 26F-102
(Definitions), the definition of ``List of Eligible iTraxx Europe
Untranched Indexes'' is revised in part (e) to state that the List of
Eligible iTraxx Europe Untranched Indexes will include reference to the
Applicable Credit Derivatives Definitions for each component of the
Index, if applicable. ICC Rule 26F-309 (Acceptance of iTraxx Europe
Untranched Contracts by ICE Clear Credit) is revised to correct a typo
from ``clauses'' to ``clause.'' ICC Rule 26F-316 (Updating Index
Version of Fungible Contracts After a Credit Event or a Succession
Event; Updating Relevant Untranched Standard Terms Supplement) is
revised in part (a) to add parallel references to Successor
determinations under the 2014 ISDA Definitions and in part (d) to
provide that iTraxx Europe Untranched Contracts that are Converting
Contracts will be deemed amended as of the 2003/2014 Changeover Date to
reference the updated iTraxx Europe Untranched Terms Supplement. ICC
Rule 26F-317 (Terms of iTraxx Europe Untranched Contracts) is revised
to add references to provisions of the proper ISDA Definitions and
Relevant iTraxx Europe Untranched Terms Supplement versions for the
iTraxx Europe Untranched Contracts that ICC clears. Corresponding
changes to provision numbering are made as necessary. Specifically, ICC
Rule 26F-317(a) reorganizes and consolidates existing provisions that
apply to each iTraxx Europe Untranched Contract or component thereof to
which the 2003 ISDA Definitions apply. Correspondingly, ICC Rule 26F-
317(b) is added to the ICC Rules to provide analogous terms that apply
to each iTraxx Europe Untranched Contract or component thereof to which
the 2014 ISDA Definitions apply. ICC Rule 26F-317(c) was previously the
first sentence of ICC Rule 26F-317(f) and is unchanged and applies
consistently to each iTraxx Europe Untranched Contract (whether under
the 2003 or 2014 ISDA Definitions). ICC Rule 26F-317(d), which provides
for the determination of a Reference Obligation for a Restructured
Entity, is revised slightly to accommodate a Standard Reference
Obligation, if applicable. ICC Rule 26F-317(e)(vi) is generalized to
provide for the Relevant iTraxx Europe Untranched Terms Supplement.
Subchapter 26G (Standard European Corporate (``STEC'') Single Name)
is revised throughout to change ``SDEC'' to ``STEC'' to follow the
industry standard acronym, and as follows: In ICC Rule 26G-102
(Definitions), the definitions of ``Eligible STEC Reference
Obligations,'' ``List of Eligible STEC Reference Entities'' and ``STEC
Contract Reference Obligations'' are updated to include reference to
the Applicable Credit Derivatives Definitions and to provide for the
use of a Standard Reference Obligation under the 2014 ISDA Definitions
and eligible Seniority Levels, where applicable. The restrictions on
``self-referencing'' transactions in ICC Rules 26G-203 (Restriction on
Activity) and 26G-206 (Notices Required of Participants with Respect to
STEC Contracts) are revised to cover, in addition to transactions
referencing a CDS Participant, also transactions referencing Non-
Participant Parties for whom such CDS Participant is acting. ICC Rule
26G-309 (Acceptance of STEC Contracts by ICE Clear Credit) is revised
in part (b)(iii) to add ``Relevant'' to the definition of
[[Page 45569]]
Restructuring Credit Event (reflecting the use of that defined term in
Subchapter 26E of the ICC Rules) and in part (e) to address relevant
successor or other events under both 2003 and 2014-Type CDS Contracts.
ICC Rule 26G-315 (Terms of the Cleared STEC Contract) is revised to
provide reference to provisions of the proper ISDA Definitions, and
corresponding changes to provision numbering are made as necessary.
Specifically, ICC Rule 26G-315(d) reorganizes and consolidates existing
provisions that apply to each STEC Contract to which the 2003 ISDA
Definitions apply. Correspondingly, ICC Rule 26G-315(e) is added to the
ICC Rules to provide analogous terms that apply to each STEC Contract
to which the 2014 ISDA Definitions apply. ICC Rule 26G-315(f) was
previously the first sentence of 26G-315(h) and is unchanged (and
applies to both 2003 and 2014-Type CDS Contracts). ICC Rule 26G-315(g)
remains unchanged; the previous reference was 26G-315(k). ICC Rule 26G-
315(h) is revised to refer to the Applicable Credit Derivatives
Definitions and eligible Seniority Level, as appropriate. ICC Rule 26G-
616 (Contract Modification) is revised in part (a) to provide for
successors to STEC Contracts and Standard Reference Obligations, as
applicable under the relevant ISDA Definitions, and part (b) is added
to provide that STEC Contracts that are Converting Contracts will be
deemed amended as of the 2003/2014 Changeover Effective Date to be
2014-Type CDS Contracts.
Subchapter 26H (Standard European Financial Corporate (``STEFC'')
Single Name) is added to the ICC Rules to provide for the clearance of
STEFC Single Names. Such contracts will be subject only to the 2014
ISDA Definitions. STEFC Contracts have similar terms to the Standard
European Corporate Single Name CDS contracts (``STEC Contracts'')
currently cleared by ICC and governed by Section 26G of the ICC Rules,
the Standard Emerging Sovereign CDS contracts (``SES Contracts'')
currently cleared by ICC and governed by Section 26D of the Rules.
Accordingly, the proposed rules found in Section 26H largely mirror the
ICC rules for STEC Contracts in Section 26G, with certain modifications
that reflect differences in terms and market conventions between those
contracts and STEFC Contracts (including that STEFC Contracts
incorporate additional Financial Reference Entity terms under the 2014
ISDA Definitions). STEFC Contracts will be denominated in Euros. Rule
26H-102 (Definitions) sets forth the definitions used for the STEFC
Contracts. The definitions are substantially similar to the definitions
found in Subchapter 26G of the ICC Rulebook, but contain reference only
to the 2014 ISDA Definitions and contain other conforming changes.
Rules 26H-203 (Restriction on Activity), 26H-206 (Notices Required of
Participants with respect to STEFC Contracts), 26H-303 (STEFC Contract
Adjustments), 26H-309 (Acceptance of STEFC Contracts by ICE Clear
Credit), 26H-315 (Terms of the Cleared STEFC Contract), 26H-316
(Relevant Physical Settlement Matrix Updates), 26H-502 (Specified
Actions), and 26H-616 (Contract Modification) reflect or incorporate
the basic contract specifications for STEFC Contracts and are
substantially similar to corresponding sections of Subchapter 26G of
the ICC Rulebook.
The ICC Restructuring Procedures supplement the provisions of
Subchapter 26E of the ICC Rules with respect to Relevant Restructuring
Contracts. The ICC Restructuring Procedures are amended throughout to
reflect revisions to defined terms in the ICC Rules including
``Relevant Restructuring Contract,'' ``Relevant Restructuring Credit
Event,'' and ``Applicable Credit Derivatives Definitions'' as defined
in ICC Rules 26E-102 (Definitions) and 20-102 (Definitions) and to make
appropriate distinctions between the applicability of the 2003 ISDA
Definitions and the 2014 ISDA Definitions and provisions therein.
The ICC Risk Management Framework has been revised to provide for
appropriate portfolio treatment between CDS Contracts cleared under the
2003 and 2014 Definitions. In the ICC Risk Management Framework, each
index, sub-index or underlying single name is deemed a separate ``Risk
Factor.'' The revisions to the ICC Risk Management Framework introduce
a ``Risk Sub-Factor'' as a specific single name and any unique
combination of instrument attributes (e.g., restructuring clause, 2003
or 2014 ISDA Definitions, debt tier, etc). The union of all Risk Sub-
Factors that share the same underlying single name form a single name
Risk Factor. The portfolio treatment at the Risk Sub-Factor level is
provided for in the Risk Management Framework, as appropriate.
Additionally, the ICC Risk Management Framework has been revised to
include long and short positions of Risk Sub-Factors for a single name
Risk Factor into the Jump-to-Default requirement. Finally, the ICC Risk
Management Framework has been revised to include other cleanup and
clarification changes (e.g., to address the difference in risk time
horizon between North American and European instruments).
2. Statutory Basis
Section 17A(b)(3)(F) of the Act \3\ 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 and to comply with the provisions of the Act and the rules
and regulations thereunder. ICC believes that the proposed rule change
is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to ICC, in particular, to Section
17A(b)(3)(F) \4\ and Rule 17Ad-22,\5\ because ICC believes that the
proposed rule change will assure the prompt and accurate clearance and
settlement of securities transactions, derivatives agreements,
contracts, and transactions. ICC believes the proposed change to the
ICC Rules, Restructuring Procedures and Risk Management Framework
conforms to the Applicable Credit Definitions as published by ISDA in
conjunction with an industry-wide effort. As part of this effort, CDS
market participants have developed the 2014 ISDA Definitions to reflect
market experience since the ISDA Credit Derivatives Definitions were
last significantly amended in 2009 (including credit events involving
financial and sovereign entities), and to make various related
improvements and clarifications to the terms of CDS contracts and the
operation of the CDS market. The change to the ICC Rules thus
incorporates references to the 2014 ISDA Definitions in order to permit
clearing of contracts referencing the new definitions, and
distinguishes where applicable between the 2014 ISDA Definitions and
the 2003 ISDA Definitions. ICC plans to accept for clearing contracts
referencing the industry standard 2014 ISDA Definitions beginning with
the planned industry-wide implementation on September 22, 2014 (and to
convert certain existing contracts to the new definitions as of that
date). ICC believes the revisions to the ICC Rules, Restructuring
Procedures and Risk Management Framework are necessary in order to
permit clearing of contracts on the new terms, and to provide the
market with the necessary assurances that ICC plans to implement the
Applicable Credit Definitions consistent
[[Page 45570]]
with industry practice. As such, the proposed rule change is designed
to promote the prompt and accurate clearance and settlement of
securities transactions, derivatives agreements, contracts, and
transactions within the meaning of Section 17A(b)(3)(F) \6\ of the Act.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78q-1(b)(3)(F).
\4\ Id.
\5\ 17 CFR 240.17Ad-22.
\6\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed change to the ICC Rules in order to incorporate
references to the 2014 ISDA Definitions will apply consistently across
all Participants and Non-Participant Parties and facilitates changes
sought to be made by the industry throughout the CDS market. ICC does
not expect that the proposed change will affect access to clearing for
Participants or their customers, or materially affect the cost of
clearing. As a result, ICC does not believe the proposed rule change
would have any impact, or impose any burden, on competition not
appropriate in furtherance of the purposes of the Act.
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 by ICC. 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 such 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 (https://www.sec.gov/rules/sro.shtml) or
Send an email to rule-comments@sec.gov. Please include
File Number SR-ICC-2014-11 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-ICC-2014-11. 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 (https://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 filings also will be available
for inspection and copying at the principal office of ICC and on ICC's
Web site at https://www.theice.com/clear-credit/regulation.
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-2014-11
and should be submitted on or before August 26, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
---------------------------------------------------------------------------
\7\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18377 Filed 8-4-14; 8:45 am]
BILLING CODE 8011-01-P
