Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change, Security-Based Swap Submission, or Advance Notice Relating to the ICC Clearing Rules, 3446-3448 [2020-00806]
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3446
Federal Register / Vol. 85, No. 13 / Tuesday, January 21, 2020 / Notices
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
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–2020–02 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.
jbell on DSKJLSW7X2PROD with NOTICES
All submissions should refer to File
Number SR–NYSE–2020–02. 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 website (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 website 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 the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSE–2020–02 and should
be submitted on or before February 11,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–00801 Filed 1–17–20; 8:45 am]
BILLING CODE 8011–01–P
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18:20 Jan 17, 2020
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Filing of
Proposed Rule Change, SecurityBased Swap Submission, or Advance
Notice Relating to the ICC Clearing
Rules
January 14, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934,1 and
Rule 19b–4,2 notice is hereby given that
on January 9, 2020, ICE Clear Credit LLC
(‘‘ICC’’) filed with the Securities and
Exchange Commission (‘‘SEC’’ or the
‘‘Commission’’) the proposed rule
change, security-based swap
submission, or advance notice as
described in Items I, II and III below,
which Items have been prepared by ICC.
The Commission is publishing this
notice to solicit comments on the
proposed rule change, security-based
swap submission, or advance notice
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change, Security-Based Swap
Submission, or Advance Notice
The principal purpose of the
proposed rule change is to revise its
Clearing Rules (the ‘‘Rules’’) 3 to
consider the possibility of ICC receiving
proceeds from default insurance.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change, Security-Based
Swap Submission, or Advance Notice
In its filing with the Commission, ICC
included statements concerning the
purpose of and basis for the proposed
rule change, security-based swap
submission, or advance notice and
discussed any comments it received on
the proposed rule change, securitybased swap submission, or advance
notice. 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.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Capitalized terms used but not defined herein
have the meanings specified in the Rules.
2 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
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2020–001]
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(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change, Security-Based
Swap Submission, or Advance Notice
(a) Purpose
ICC proposes amendments to
Chapters 1 and 8 of the ICC Rules as
they relate to default insurance that is
intended to cover specified losses
resulting from a Clearing Participant
(‘‘CP’’) default. The proposed
amendments consider the possibility of
ICC receiving proceeds from default
insurance, which would be applied as
part of the resources available to ICC in
the event of a CP default. Such default
insurance would provide additional
default resources to cover losses from
CP defaults, prior to the need to use
guaranty fund resources from nondefaulting CPs. ICC believes that such
revisions will facilitate the prompt and
accurate clearance and settlement of
securities transactions and derivative
agreements, contracts, and transactions
for which it is responsible. ICC proposes
to make such changes effective
following Commission approval of the
proposed rule change. The proposed
revisions are described in detail as
follows.
ICC proposes to update ICC Rule 102
to reference ‘‘Insurance Proceeds’’
which would be defined in Rule
802(b)(i)(A)(4).
ICC proposes to amend ICC Rule
802(a), which addresses the application
of General Guaranty Fund contributions
of a defaulting CP, to incorporate a
reference to any insurer, surety or
guarantor of the obligations of the
defaulting CP to reflect that certain
recoveries from a defaulting CP may be
owed to the insurance provider. ICC
does not propose any changes to the
order of priority set forth in ICC Rule
802(a).
ICC proposes changes to ICC Rule
802(b) to integrate default insurance
into the default waterfall. ICC proposes
to amend the default waterfall in Rule
802(b)(i) to include the proceeds of
default insurance (if any) as a default
resource, to be applied after the
application of ICC’s own guaranty fund
contributions of $50 million and prior to
the application of guaranty fund
contributions of non-defaulting CPs.
Under proposed ICC Rule
802(b)(i)(A)(4), ICC defines Insurance
Proceeds and clarifies that ICC has no
obligation to obtain or maintain default
insurance. ICC proposes to re-number
the following clauses accordingly.
Further, amended ICC Rule 802(b)(iii)
provides that ICC may use the
contributions of non-defaulting CPs to
the guaranty fund (and assessments on
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Federal Register / Vol. 85, No. 13 / Tuesday, January 21, 2020 / Notices
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such CPs) prior to the receipt of
proceeds owed under the default
insurance, provided that those CPs are
reimbursed from the insurance proceeds
when received.
ICC proposes changes to ICC Rule
802(c) to reflect that certain recoveries
from or in respect of a defaulting CP
may be owed to the insurance provider.
ICC proposes conforming changes to
ICC Rule 808 that address Reduced
Gains Distribution in order to permit
Reduced Gains Distribution to occur
prior to the end of the waiting period
under the default insurance policy.
Amended ICC Rule 808(b) clarifies that
a claim under a default insurance policy
will not preclude ICC from applying
Reduced Gains Distribution after a CP
default. Amended ICC Rule 808(m)
provides that proceeds from a default
insurance policy will be available as a
potential resource to pay CPs that have
been subject to Reduced Gains
Distribution.
(b) Statutory Basis
Section 17A(b)(3)(F) of the Act 4
requires, among other things, that the
rules of a clearing agency be designed to
promote the prompt and accurate
clearance and settlement of securities
transactions, and to the extent
applicable, derivative agreements,
contracts and transactions; 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 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 17(A)(b)(3)(F),5
because ICC believes that the proposed
rule change will promote the prompt
and accurate clearance and settlement of
securities transactions, derivatives
agreements, contracts, and transactions,
and contribute to the safeguarding of
securities and funds associated with
security-based swap transactions in
ICC’s custody or control, or for which
ICC is responsible. The proposed
changes amend the default waterfall in
ICC Rule 802(b)(i)(A) to include the
proceeds of default insurance, if any, as
a default resource, to be applied after
the application of ICC’s own guaranty
fund contributions and prior to the
application of guaranty fund
contributions of non-defaulting CPs.
Placing the proceeds from any default
insurance that ICC may receive before
4 15
U.S.C. 78q–1(b)(3)(F).
18:20 Jan 17, 2020
Jkt 250001
policy will be available as a potential
resource to pay CPs that have been
subject to Reduced Gains Distribution.
Such amendments consider the
possibility of ICC receiving proceeds
from default insurance, which, in ICC’s
view, represents a tool that strengthens
ICC’s ability to manage its financial
resources and withstand the pressures
of defaults, consistent with the
requirements of Rule 17Ad–22(b)(3).9
Rule 17Ad–22(d)(11) 10 requires ICC
to establish, implement, maintain and
enforce written policies and procedures
reasonably designed to make key
aspects of the clearing agency’s default
procedures publicly available and
establish default procedures that ensure
that the clearing agency can take timely
action to contain losses and liquidity
pressures and to continue meeting its
obligations in the event of a participant
default. ICC’s default management rules
and procedures contained in the ICC
Rules, the Initial Default Auction
Procedures, and the Secondary Auction
Procedures are publically available on
ICC’s website. The proposed changes to
the ICC Rules integrate default
insurance into the default waterfall,
providing additional default resources
to cover losses from CP defaults, prior
to the need to use guaranty fund
resources from non-defaulting CPs.
Amended ICC Rule 802(b)(iii) provides
that ICC may use the contributions of
non-defaulting CPs to the guaranty fund
(and assessments on such CPs) prior to
the receipt of proceeds owed under the
default insurance, provided that those
CPs are reimbursed from the insurance
proceeds when received. Given that it
can be relatively time consuming to
make and process an insurance claim,
this provision ensures that the existence
of default insurance does not interfere
with ICC’s default management and
allows ICC to continue its default
management process without having to
wait for the payment of insurance
proceeds. Moreover, the proposed
changes to ICC Rule 808 permit
Reduced Gains Distribution to occur
prior to the end of the waiting period
under the default insurance policy. The
proposed amendments thus ensure that
ICC can take timely action to contain
losses and liquidity pressures and to
continue meeting its obligations in the
event of a participant default, consistent
with the requirements of Rule 17Ad–
22(d)(11).11
6 Id.
9 Id.
7 17
10 17
CFR 240.17Ad–22.
8 17 CFR 240.17Ad–22(b)(3).
5 Id.
VerDate Sep<11>2014
the guaranty fund resources of nondefaulting CPs in the default waterfall is
generally favorable to non-defaulting
CPs and enhances ICC’s procedures that
are designed to protect and ensure the
safety of CP funds and assets. The
default insurance provides additional
default resources, after the exhaustion of
the defaulting CP’s margin and guaranty
fund contributions and ICC’s own
guaranty fund contributions. In ICC’s
view, the proposed changes to the ICC
Rules enhance ICC’s ability to manage
the risk of defaults by providing
additional default resources to cover
losses from CP defaults, prior to the
need to use guaranty fund resources
from non-defaulting CPs, thereby
promoting the prompt and accurate
clearance and settlement of securities
transactions, derivatives agreements,
contracts, and transactions and the
safeguarding of securities and funds
which are in the custody or control of
ICC or for which it is responsible. 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
and to contribute to the safeguarding of
securities and funds associated with
security-based swap transactions in
ICC’s custody or control, or for which
ICC is responsible within the meaning
of Section 17A(b)(3)(F) of the Act.6
In addition, the proposed rule change
is consistent with the relevant
requirements of Rule 17Ad–22.7 Rule
17Ad–22(b)(3) 8 requires ICC to
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to maintain
sufficient financial resources to
withstand, at a minimum, a default by
the two CP families to which it has the
largest exposures in extreme but
plausible market conditions. ICC
believes that the proposed revisions
enhance its default waterfall and default
management procedures. As described
above, the proposed amendments
contemplate the possibility of ICC
receiving proceeds from default
insurance, which would provide
additional default resources to cover
losses from CP defaults, prior to the
need to use guaranty fund resources
from non-defaulting CPs. Conforming
changes are also proposed to ICC Rule
808 to permit Reduced Gains
Distribution to occur prior to the end of
the waiting period under the default
insurance policy and to provide that
proceeds from a default insurance
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3447
CFR 240.17Ad–22(d)(11).
11 Id.
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Federal Register / Vol. 85, No. 13 / Tuesday, January 21, 2020 / Notices
(B) Clearing Agency’s Statement on
Burden on Competition
ICC does not believe the proposed
rule change would have any impact, or
impose any burden, on competition.
The proposed changes to the ICC Rules
will apply uniformly across all market
participants. Therefore, ICC does not
believe the proposed rule change
imposes any burden on competition that
is inappropriate in furtherance of the
purposes of the Act.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change, Security-Based Swap
Submission, or Advance Notice
Received From Members, Participants or
Others
Written comments relating to the
proposed rule change have not been
solicited or received. ICC will notify the
Commission of any written comments
received by ICC.
III. Date of Effectiveness of the
Proposed Rule Change, Security-Based
Swap Submission, or Advance Notice
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, security-based swap
submission, or advance notice is
consistent with the Act. Comments may
be submitted by any of the following
methods:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–00806 Filed 1–17–20; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
jbell on DSKJLSW7X2PROD with NOTICES
All submissions should refer to File
Number SR–ICC–2020–001. 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 website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change, security-based swap
submission, or advance notice that are
filed with the Commission, and all
written communications relating to the
proposed rule change, security-based
swap submission, or advance notice
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 website 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 will also be available for
inspection and copying at the principal
office of ICE Clear Credit and on ICE
Clear Credit’s website at https://
www.theice.com/clear-credit/regulation.
All comments received will be posted
without change. Persons submitting
comments are cautioned that we do not
redact or edit personal identifying
information from comment submissions.
You should submit only information
that you wish to make available
publicly. All submissions should refer
to File Number SR–ICC–2020–001 and
should be submitted on or before
February 11, 2020.
• 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–2020–001 on the subject line.
Paper Comments
Send paper comments in triplicate to
Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
VerDate Sep<11>2014
18:20 Jan 17, 2020
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12 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00114
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87959; File No. SR–CBOE–
2019–035]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Designation
of Longer Period for Commission
Action on Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change, as Modified by
Amendment Nos. 1 and 2, Regarding
Off-Floor Position Transfers
January 14, 2020.
On July 3, 2019, Cboe Exchange, Inc.
(the ‘‘Exchange’’ or ‘‘Cboe Options’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’),1 and
Rule 19b–4 thereunder,2 a proposed rule
change to amend its rule relating to offfloor position transfers. The proposed
rule change was published for comment
in the Federal Register on July 23,
2019.3 On August 6, 2019, the Exchange
filed Amendment No. 1 to the proposed
rule change.4 On September 4, 2019, the
Commission extended the time period
within which to either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether to
approve or disapprove the propose rule
change, to October 21, 2019.5 On
October 7, 2019, the Exchange filed
Amendment No. 2 to the proposed rule
change.6 The Commission received two
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 86400
(July 17, 2019), 84 FR 35438 (‘‘Notice’’).
4 In Amendment No. 1, the Exchange deleted
from the proposed rule change the proposal to
permit off-floor risk-weighted asset (‘‘RWA’’)
transfers. The exchange subsequently refiled the
RWA transfer proposal as a separate proposed rule
change filing in SR–CBOE–2019–044. See Securities
Exchange Release No. 87107 (September 25, 2019),
84 FR 52149 (October 1, 2019) (order approving
proposed rule change to adopt Cboe Rule 6.49B
regarding off-floor RWA transfers). When the
Exchange filed Amendment No. 1 to CBOE–2019–
035, it also submitted the text of the amendment as
a comment letter to the filing, which the
Commission made publicly available at https://
www.sec.gov/comments/sr-cboe-2019-035/
srcboe2019035-5917170-189047.pdf.
5 See Securities Exchange Act Release No. 86861
(September 4, 2019), 84 FR 47627 (September 10,
2019).
6 In Amendment No. 2, the Exchange updated
cross-references to Cboe rules throughout the
proposed rule change to reflect separate
amendments it made to its rulebook in connection
with the Exchange’s technology migration, which it
subsequently completed on October 7, 2019. When
the Exchange filed Amendment No. 2 to CBOE–
2019–035, it also submitted the text of the
amendment as a comment letter to the filing, which
the Commission made publicly available at https://
www.sec.gov/comments/sr-cboe-2019-035/srcboe
2019035-6258833-192955.pdf. The Commission
2 17
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]]>Agencies
[Federal Register Volume 85, Number 13 (Tuesday, January 21, 2020)]
[Notices]
[Pages 3446-3448]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00806]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87958; File No. SR-ICC-2020-001]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change, Security-Based Swap Submission, or
Advance Notice Relating to the ICC Clearing Rules
January 14, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934,\1\ and Rule 19b-4,\2\ notice is hereby given that on January 9,
2020, ICE Clear Credit LLC (``ICC'') filed with the Securities and
Exchange Commission (``SEC'' or the ``Commission'') the proposed rule
change, security-based swap submission, or advance notice as described
in Items I, II and III below, which Items have been prepared by ICC.
The Commission is publishing this notice to solicit comments on the
proposed rule change, security-based swap submission, or advance notice
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change, Security-Based Swap Submission, or Advance Notice
The principal purpose of the proposed rule change is to revise its
Clearing Rules (the ``Rules'') \3\ to consider the possibility of ICC
receiving proceeds from default insurance.
---------------------------------------------------------------------------
\3\ Capitalized terms used but not defined herein have the
meanings specified in the Rules.
---------------------------------------------------------------------------
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change, Security-Based Swap Submission, or
Advance Notice
In its filing with the Commission, ICC included statements
concerning the purpose of and basis for the proposed rule change,
security-based swap submission, or advance notice and discussed any
comments it received on the proposed rule change, security-based swap
submission, or advance notice. 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) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change, Security-Based Swap Submission, or
Advance Notice
(a) Purpose
ICC proposes amendments to Chapters 1 and 8 of the ICC Rules as
they relate to default insurance that is intended to cover specified
losses resulting from a Clearing Participant (``CP'') default. The
proposed amendments consider the possibility of ICC receiving proceeds
from default insurance, which would be applied as part of the resources
available to ICC in the event of a CP default. Such default insurance
would provide additional default resources to cover losses from CP
defaults, prior to the need to use guaranty fund resources from non-
defaulting CPs. ICC believes that such revisions will facilitate the
prompt and accurate clearance and settlement of securities transactions
and derivative agreements, contracts, and transactions for which it is
responsible. ICC proposes to make such changes effective following
Commission approval of the proposed rule change. The proposed revisions
are described in detail as follows.
ICC proposes to update ICC Rule 102 to reference ``Insurance
Proceeds'' which would be defined in Rule 802(b)(i)(A)(4).
ICC proposes to amend ICC Rule 802(a), which addresses the
application of General Guaranty Fund contributions of a defaulting CP,
to incorporate a reference to any insurer, surety or guarantor of the
obligations of the defaulting CP to reflect that certain recoveries
from a defaulting CP may be owed to the insurance provider. ICC does
not propose any changes to the order of priority set forth in ICC Rule
802(a).
ICC proposes changes to ICC Rule 802(b) to integrate default
insurance into the default waterfall. ICC proposes to amend the default
waterfall in Rule 802(b)(i) to include the proceeds of default
insurance (if any) as a default resource, to be applied after the
application of ICC's own guaranty fund contributions of $50 million and
prior to the application of guaranty fund contributions of non-
defaulting CPs. Under proposed ICC Rule 802(b)(i)(A)(4), ICC defines
Insurance Proceeds and clarifies that ICC has no obligation to obtain
or maintain default insurance. ICC proposes to re-number the following
clauses accordingly. Further, amended ICC Rule 802(b)(iii) provides
that ICC may use the contributions of non-defaulting CPs to the
guaranty fund (and assessments on
[[Page 3447]]
such CPs) prior to the receipt of proceeds owed under the default
insurance, provided that those CPs are reimbursed from the insurance
proceeds when received.
ICC proposes changes to ICC Rule 802(c) to reflect that certain
recoveries from or in respect of a defaulting CP may be owed to the
insurance provider.
ICC proposes conforming changes to ICC Rule 808 that address
Reduced Gains Distribution in order to permit Reduced Gains
Distribution to occur prior to the end of the waiting period under the
default insurance policy. Amended ICC Rule 808(b) clarifies that a
claim under a default insurance policy will not preclude ICC from
applying Reduced Gains Distribution after a CP default. Amended ICC
Rule 808(m) provides that proceeds from a default insurance policy will
be available as a potential resource to pay CPs that have been subject
to Reduced Gains Distribution.
(b) Statutory Basis
Section 17A(b)(3)(F) of the Act \4\ requires, among other things,
that the rules of a clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions, and
to the extent applicable, derivative agreements, contracts and
transactions; 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 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
17(A)(b)(3)(F),\5\ because ICC believes that the proposed rule change
will promote the prompt and accurate clearance and settlement of
securities transactions, derivatives agreements, contracts, and
transactions, and contribute to the safeguarding of securities and
funds associated with security-based swap transactions in ICC's custody
or control, or for which ICC is responsible. The proposed changes amend
the default waterfall in ICC Rule 802(b)(i)(A) to include the proceeds
of default insurance, if any, as a default resource, to be applied
after the application of ICC's own guaranty fund contributions and
prior to the application of guaranty fund contributions of non-
defaulting CPs. Placing the proceeds from any default insurance that
ICC may receive before the guaranty fund resources of non-defaulting
CPs in the default waterfall is generally favorable to non-defaulting
CPs and enhances ICC's procedures that are designed to protect and
ensure the safety of CP funds and assets. The default insurance
provides additional default resources, after the exhaustion of the
defaulting CP's margin and guaranty fund contributions and ICC's own
guaranty fund contributions. In ICC's view, the proposed changes to the
ICC Rules enhance ICC's ability to manage the risk of defaults by
providing additional default resources to cover losses from CP
defaults, prior to the need to use guaranty fund resources from non-
defaulting CPs, thereby promoting the prompt and accurate clearance and
settlement of securities transactions, derivatives agreements,
contracts, and transactions and the safeguarding of securities and
funds which are in the custody or control of ICC or for which it is
responsible. 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 and
to contribute to the safeguarding of securities and funds associated
with security-based swap transactions in ICC's custody or control, or
for which ICC is responsible within the meaning of Section 17A(b)(3)(F)
of the Act.\6\
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\4\ 15 U.S.C. 78q-1(b)(3)(F).
\5\ Id.
\6\ Id.
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In addition, the proposed rule change is consistent with the
relevant requirements of Rule 17Ad-22.\7\ Rule 17Ad-22(b)(3) \8\
requires ICC to establish, implement, maintain and enforce written
policies and procedures reasonably designed to maintain sufficient
financial resources to withstand, at a minimum, a default by the two CP
families to which it has the largest exposures in extreme but plausible
market conditions. ICC believes that the proposed revisions enhance its
default waterfall and default management procedures. As described
above, the proposed amendments contemplate the possibility of ICC
receiving proceeds from default insurance, which would provide
additional default resources to cover losses from CP defaults, prior to
the need to use guaranty fund resources from non-defaulting CPs.
Conforming changes are also proposed to ICC Rule 808 to permit Reduced
Gains Distribution to occur prior to the end of the waiting period
under the default insurance policy and to provide that proceeds from a
default insurance policy will be available as a potential resource to
pay CPs that have been subject to Reduced Gains Distribution. Such
amendments consider the possibility of ICC receiving proceeds from
default insurance, which, in ICC's view, represents a tool that
strengthens ICC's ability to manage its financial resources and
withstand the pressures of defaults, consistent with the requirements
of Rule 17Ad-22(b)(3).\9\
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\7\ 17 CFR 240.17Ad-22.
\8\ 17 CFR 240.17Ad-22(b)(3).
\9\ Id.
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Rule 17Ad-22(d)(11) \10\ requires ICC to establish, implement,
maintain and enforce written policies and procedures reasonably
designed to make key aspects of the clearing agency's default
procedures publicly available and establish default procedures that
ensure that the clearing agency can take timely action to contain
losses and liquidity pressures and to continue meeting its obligations
in the event of a participant default. ICC's default management rules
and procedures contained in the ICC Rules, the Initial Default Auction
Procedures, and the Secondary Auction Procedures are publically
available on ICC's website. The proposed changes to the ICC Rules
integrate default insurance into the default waterfall, providing
additional default resources to cover losses from CP defaults, prior to
the need to use guaranty fund resources from non-defaulting CPs.
Amended ICC Rule 802(b)(iii) provides that ICC may use the
contributions of non-defaulting CPs to the guaranty fund (and
assessments on such CPs) prior to the receipt of proceeds owed under
the default insurance, provided that those CPs are reimbursed from the
insurance proceeds when received. Given that it can be relatively time
consuming to make and process an insurance claim, this provision
ensures that the existence of default insurance does not interfere with
ICC's default management and allows ICC to continue its default
management process without having to wait for the payment of insurance
proceeds. Moreover, the proposed changes to ICC Rule 808 permit Reduced
Gains Distribution to occur prior to the end of the waiting period
under the default insurance policy. The proposed amendments thus ensure
that ICC can take timely action to contain losses and liquidity
pressures and to continue meeting its obligations in the event of a
participant default, consistent with the requirements of Rule 17Ad-
22(d)(11).\11\
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\10\ 17 CFR 240.17Ad-22(d)(11).
\11\ Id.
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[[Page 3448]]
(B) Clearing Agency's Statement on Burden on Competition
ICC does not believe the proposed rule change would have any
impact, or impose any burden, on competition. The proposed changes to
the ICC Rules will apply uniformly across all market participants.
Therefore, ICC does not believe the proposed rule change imposes any
burden on competition that is inappropriate in furtherance of the
purposes of the Act.
(C) Clearing Agency's Statement on Comments on the Proposed Rule
Change, Security-Based Swap Submission, or Advance Notice Received From
Members, Participants or Others
Written comments relating to the proposed rule change have not been
solicited or received. ICC will notify the Commission of any written
comments received by ICC.
III. Date of Effectiveness of the Proposed Rule Change, Security-Based
Swap Submission, or Advance Notice 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, security-based swap submission, or advance notice 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 [email protected]. Please include
File Number SR-ICC-2020-001 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-ICC-2020-001. 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 website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change, security-based
swap submission, or advance notice that are filed with the Commission,
and all written communications relating to the proposed rule change,
security-based swap submission, or advance notice 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 website 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 will also be available for inspection and copying at the
principal office of ICE Clear Credit and on ICE Clear Credit's website
at https://www.theice.com/clear-credit/regulation.
All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-ICC-2020-001 and should be
submitted on or before February 11, 2020.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-00806 Filed 1-17-20; 8:45 am]
BILLING CODE 8011-01-P
