Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating To Revising the ICC Clearing Rules To Consider the Possibility of ICC Receiving Proceeds From Default Insurance, 14284-14286 [2020-04920]
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14284
Federal Register / Vol. 85, No. 48 / Wednesday, March 11, 2020 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–04902 Filed 3–10–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88330; File No. SR–
NYSEArca–2020–01]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Designation of
Longer Period for Commission Action
on Proposed Rule Change To Amend
the Rule 11.6800 Series, the
Exchange’s Compliance Rule
Regarding the National Market System
Plan Governing the Consolidated Audit
Trail
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change.
Accordingly, pursuant to Section
19(b)(2)(A)(ii)(I) of the Act 5 and for the
reasons stated above, the Commission
designates April 22, 2020, as the date by
which the Commission shall either
approve, disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–NYSEArca–2020–01).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–04908 Filed 3–10–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
lotter on DSKBCFDHB2PROD with NOTICES
March 5, 2020.
On January 3, 2020, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) 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 the Exchange’s
compliance rule regarding the National
Market System Plan Governing the
Consolidated Audit Trail. The proposed
rule change was published for comment
in the Federal Register on January 23,
2020.3 The Commission has received no
comment letters on the proposed rule
change.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day for this filing
is March 8, 2020.
The Commission is extending the 45day time period for Commission action
on the proposed rule change. The
Commission finds that it is appropriate
to designate a longer period within
37 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 87987
(January 16, 2020), 85 FR 4011.
4 15 U.S.C. 78s(b)(2).
1 15
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[Release No. 34–88337; File No. SR–ICC–
2020–001]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Order Approving
Proposed Rule Change Relating To
Revising the ICC Clearing Rules To
Consider the Possibility of ICC
Receiving Proceeds From Default
Insurance
March 5, 2020.
I. Introduction
On January 9, 2020, ICE Clear Credit
LLC (‘‘ICC’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (the ‘‘Act’’),1 and Rule 19b–4
thereunder,2 a proposed rule change to
revise its Clearing Rules (the ‘‘Rules’’) 3
to consider the possibility of ICC
receiving proceeds from default
insurance. The proposed rule change
was published for comment in the
Federal Register on January 21, 2020.4
The Commission did not receive
comments regarding the proposed rule
change. For the reasons discussed
below, the Commission is approving the
proposed rule change.
5 15
U.S.C. 78s(b)(2)(A)(ii)(I).
CFR 200.30–3(a)(31).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Capitalized terms used but not defined herein
have the meanings specified in the Rules.
4 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; Exchange
Act Release No. 87958 (Jan. 14, 2020); 85 FR 3446
(Jan. 21, 2020) (‘‘Notice’’).
6 17
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II. Description of the Proposed Rule
Change
The proposed rule change would
amend Chapters 1 and 8 of the ICC
Rules to allow ICC to receive proceeds
from an insurance policy in the event of
the default of a Clearing Participant
(‘‘CP’’). The proposed rule change
would incorporate these proceeds from
insurance into ICC’s default waterfall
and therefore treat them similar to other
resources that ICC uses to cover losses
from CP defaults, like the guaranty fund.
In terms of incorporating insurance
proceeds into ICC’s default waterfall,
under the proposed rule change,
generally ICC would use proceeds from
insurance before using guaranty fund
resources from non-defaulting CPs.
Although the proposed rule change
would establish the legal framework for
ICC to maintain insurance and use
insurance proceeds in the event of a
CP’s default, the proposed rule change
would not require that ICC maintain
such insurance.
With respect to Chapter 1 of the ICC
Rules, which sets out the defined terms
used in the Rules, the proposed rule
change would add to ICC Rule 102
(‘‘Definitions’’) the term ‘‘Insurance
Proceeds’’ and would refer to proposed
Rule 802(b)(i)(A)(4), where the term
would be defined. Proposed Rule
802(b)(i)(A)(4) would define the term
‘‘Insurance Proceeds’’ to mean
insurance proceeds, if any, received by
ICC in connection with a CP’s default.
Additionally, proposed Rule
802(b)(i)(A)(4) would state that ICC shall
not be obligated to obtain or maintain
any insurance policy with respect to the
default of a CP, thus making explicit the
point described above that the proposed
rule change would not require that ICC
maintain insurance against defaults.
With respect to Chapter 8 of the ICC
Rules, the proposed rule change would
first amend ICC Rule 802(a). ICC Rule
802(a) provides that ICC may charge
against a defaulting CP’s contributions
to the guaranty fund losses suffered
from the CP’s default. Rule 802(a) lists
the types of losses and expenses that
ICC may charge against the defaulting
CP’s contributions to the guaranty fund,
ordered by priority. Rule 802(a) also
explains how ICC would pay out any
surplus remaining after paying all of the
other listed items. As explained in Rule
802(a), ICC may pay the surplus to ICC
or to whomever may be lawfully
entitled to receive the surplus,
including any insurer, surety, or
guarantor of the obligations of ICC. The
proposed rule change would add to this
any insurer, surety, or guarantor with
respect to the obligations of the
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Federal Register / Vol. 85, No. 48 / Wednesday, March 11, 2020 / Notices
defaulting CP. This aspect of the
proposed change would thus allow ICC
to pay to an insurance provider surplus
guaranty fund contributions of the
defaulting CP, which ICC may be
required to do under the terms of a
policy insuring against losses resulting
from the default of a CP.
The proposed rule change would next
amend Rule 802(b) to integrate default
insurance into ICC’s default waterfall.
Rule 802(b) gives ICC the right to charge
against certain financial resources losses
resulting from the default of a CP. Rule
802(b) lists the financial resources to
which ICC may charge such losses, in
the order by which ICC may use them.
The proposed rule change would add to
this list the insurance proceeds, if any,
that ICC receives in connection with the
CP’s default. ICC would be able to use
the insurance proceeds only after
charging losses to ICC’s contributions to
the guaranty fund but before using the
guaranty fund contributions of nondefaulting CPs.
Under ICC Rule 802(c), the defaulting
CP remains liable for any losses charged
in the manner permitted under Rule
802(b). As such, Rule 802(c) permits ICC
to recover the liability from the
defaulting CP’s margin, collateral, or
other assets, or by legal process. Rule
802(c) also requires that, should ICC
make any such recovery, ICC must use
the money recovered to pay back certain
expenses and persons, according to the
order listed in Rule 802(c). The
proposed rule change would add to this
list in Rule 802(c) an insurance
provider, to the extent the provider is
entitled to such recovery. Thus, this
aspect of the proposed rule change
would amend Rule 802(c) to reflect that
ICC may owe money recovered from or
in respect of a defaulting CP to the
insurance provider and would allow
ICC to pay back such insurance provider
as necessary.
The proposed rule change would also
make two specific changes to provide
ICC flexibility to cover losses while
waiting for payment under an insurance
policy. First, the proposed rule change
would amend Rule 802(b) to provide
that ICC could use the guaranty fund
contributions of non-defaulting CPs
prior to receipt of any insurance
proceeds. In that event, ICC would be
required to reimburse the nondefaulting CPs from the insurance
proceeds when received. Similarly, the
proposed rule change would amend
Rule 808 to allow ICC to conduct
reduced gains distribution where ICC
has made a claim under an insurance
policy but has not yet received any
proceeds from the claim. In that event,
the proposed rule change would make
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any proceeds ultimately received under
the insurance policy available as a
potential resource to pay back CPs that
have been subject to reduced gains
distribution under Rule 808.
III. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Act directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that such
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to such organization.5 For the
reasons given below, the Commission
finds that the proposed rule change is
consistent with Section 17A(b)(3)(F) of
the Act 6 and Rule 17Ad–22(d)(11)
thereunder.7
A. Consistency With Section
17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act
requires, among other things, that the
rules of ICC be designed to promote the
prompt and accurate clearance and
settlement of securities transactions
and, to the extent applicable, derivative
agreements, contracts, and transactions,
as well as to assure the safeguarding of
securities and funds which are in the
custody or control of ICC or for which
it is responsible, and, in general, to
protect investors and the public
interest.8 As discussed above, the
proposed rule change would establish
the legal framework for the use of
default insurance by amending ICC’s
default waterfall to provide for the use
of such insurance and by allowing ICC
to pay to the insurance provider, as
necessary, surplus guaranty fund
contributions of the defaulting CP and
money recovered from the defaulting
CP. The proposed rule change would
also provide ICC with the ability to use
other financial resources and to engage
in reduced gains distribution while
awaiting payment under a default
insurance policy. Although the
proposed rule change explicitly would
not require that ICC obtain or maintain
a default insurance policy, the
Commission believes that in
establishing the legal framework and
operational flexibility for using such a
default insurance policy, the proposed
rule change would provide ICC a means
of obtaining an additional financial
resource (i.e., insurance) for offsetting
losses resulting from a CP’s default.
5 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
7 17 CFR 240.17Ad–22(d)(11).
8 15 U.S.C. 78q–1(b)(3)(F).
In doing so, the Commission believes
that proposed rule change would
enhance ICC’s ability potentially to
avoid the losses that could result from
the default of a Clearing Participant.
Because losses resulting from a CP’s
default could cause losses for ICC,
disrupting ICC’s ability to clear and
settle securities transactions, the
Commission believes that the proposed
rule change would promote the prompt
and accurate clearance and settlement of
securities transactions. Moreover,
because losses resulting from a CP’s
default could cause losses for ICC,
disrupting ICC’s access to securities and
funds, the Commission believes the
proposed rule change would help to
assure the safeguarding of securities and
funds in ICC’s custody and control.
Finally, for these reasons, the
Commission believes that the proposed
rule change would, in general, protect
investors and the public interest.
Therefore, the Commission finds that
the proposed rule change would
promote the prompt and accurate
clearance and settlement of securities
transactions, assure the safeguarding of
securities and funds in ICC’s custody
and control, and, in general, protect
investors and the public interest,
consistent with the Section 17A(b)(3)(F)
of the Act.9
B. Consistency With Rule 17Ad–
22(d)(11)
Rule 17Ad–22(d)(11) requires that ICC
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to make key
aspects of its default procedures
publicly available and establish default
procedures that 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.10 As discussed
above, the Commission believes the
proposed rule change, in establishing
the legal framework and operational
flexibility for using a default insurance
policy, would provide ICC a means of
obtaining an additional financial
resource (i.e., insurance) for offsetting
losses resulting from a CP’s default. The
Commission believes the proposed rule
change would therefore help to ensure
that ICC is able to take timely action to
contain losses and liquidity pressures
and to continue meeting its obligations
in the event of a CP’s default by giving
ICC the ability to obtain additional
resources to offset losses resulting from
a CP’s default. Therefore the
Commission finds that the proposed
6 15
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Fmt 4703
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14285
9 15
U.S.C. 78q–1(b)(3)(F).
U.S.C. 17Ad–22(d)(11).
10 15
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Federal Register / Vol. 85, No. 48 / Wednesday, March 11, 2020 / Notices
rule change is consistent with Rule
17Ad–22(d)(11).11
SECURITIES AND EXCHANGE
COMMISSION
IV. Conclusion
[SEC File No. 270–598, OMB Control No.
3235–0655]
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act, and in
particular, with the requirements of
Section 17A(b)(3)(F) of the Act 12 and
Rule 17Ad–22(d)(11) thereunder.13
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 14 that the
proposed rule change (SR–ICC–2020–
001), be, and hereby is, approved.15
Proposed Collection; Comment
Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
Extension:
Regulation 14N and Schedule 14N.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–04920 Filed 3–10–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting; Cancellation
FEDERAL REGISTER CITATION OF PREVIOUS
ANNOUNCEMENT: 85 FR 12956, March 5,
2020.
PREVIOUSLY ANNOUNCED TIME AND DATE OF
THE MEETING: Tuesday, March 10, 2020
at 9:30 a.m.
The Open
Meeting scheduled for Tuesday, March
10, 2020 at 9:30 a.m., has been cancelled
and will be rescheduled for a future
date.
CHANGES IN THE MEETING:
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Dated: March 9, 2020
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020–05100 Filed 3–9–20; 4:15 pm]
BILLING CODE 8011–01–P
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11 15
U.S.C. 17Ad–22(d)(11).
U.S.C. 78q–1(b)(3)(F).
13 17 CFR 240.17Ad–22(d)(11).
14 15 U.S.C. 78s(b)(2).
15 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
16 17 CFR 200.30–3(a)(12).
12 15
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Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Schedule 14N (17 CFR 240.14n–101)
requires the filing of certain information
with the Commission by shareholders
who submit a nominee or nominees for
director pursuant to applicable state
law, or a company’s governing
documents. Schedule 14N provides
notice to the company of the
shareholder’s intent to have the
company include the shareholder’s or
shareholder groups’ nominee or
nominees for director in the company’s
proxy materials. This information is
intended to assist shareholders in
making an informed voting decision
with regards to any nominee or
nominees put forth by a nominating
shareholder or group, by allowing
shareholders to gauge the nominating
shareholder’s interest in the company,
longevity of ownership, and intent with
regard to continued ownership in the
company. We estimate that Schedule
14N takes approximately 40 hours per
response and will be filed by
approximately 42 issuers annually. In
addition, we estimate that 75% of the 40
hours per response (30 hours per
response) is prepared by the issuer for
an annual reporting burden of 1,260
hours (30 hours per response × 42
responses).
Written comments are invited on: (a)
Whether this collection of information
is necessary for the proper performance
of the functions of the agency, including
whether the information will have
practical utility; (b) the accuracy of the
agency’s estimate of the burden imposed
by the collection of information; (c)
ways to enhance the quality, utility, and
clarity of the information collected; and
PO 00000
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(d) ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
Please direct your written comments
to David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Cynthia
Roscoe, 100 F Street NE, Washington,
DC 20549 or send and an email to: PRA_
Mailbox@sec.gov.
Dated: March 6, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–04950 Filed 3–10–20; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
[Public Notice: 11068]
Notice of Public Meeting in Preparation
for International Maritime Organization
Sub-Committee Meeting
The Department of State will conduct
an open meeting at 9:00 a.m. on
Monday, April 6, 2019, at the offices of
ABS Consulting, 1525 Wilson
Boulevard, Suite 625, Arlington,
Virginia 22209. The primary purpose of
the meeting is to prepare for the forty
fourth session of the International
Maritime Organization’s (IMO)
Facilitation Committee to be held at the
IMO Headquarters, United Kingdom,
April 20–24, 2020.
The agenda items to be considered
include:
—Decisions of other IMO bodies
—Consideration and adoption of
proposed amendments to the
Convention
—Review and update of the annex of the
FAL Convention
—Application of single-window concept
—Review and revision of the IMO
Compendium on Facilitation and
Electronic Business
—Developing guidance for
authentication, integrity and
confidentiality of content for the
purpose of exchange via a maritime
single window
—Consideration of descriptions of
Maritime Services in the context of enavigation
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]]>Agencies
[Federal Register Volume 85, Number 48 (Wednesday, March 11, 2020)]
[Notices]
[Pages 14284-14286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04920]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88337; File No. SR-ICC-2020-001]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating To Revising the ICC Clearing
Rules To Consider the Possibility of ICC Receiving Proceeds From
Default Insurance
March 5, 2020.
I. Introduction
On January 9, 2020, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (the
``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
revise its Clearing Rules (the ``Rules'') \3\ to consider the
possibility of ICC receiving proceeds from default insurance. The
proposed rule change was published for comment in the Federal Register
on January 21, 2020.\4\ The Commission did not receive comments
regarding the proposed rule change. For the reasons discussed below,
the Commission is approving the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Capitalized terms used but not defined herein have the
meanings specified in the Rules.
\4\ 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; Exchange Act
Release No. 87958 (Jan. 14, 2020); 85 FR 3446 (Jan. 21, 2020)
(``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The proposed rule change would amend Chapters 1 and 8 of the ICC
Rules to allow ICC to receive proceeds from an insurance policy in the
event of the default of a Clearing Participant (``CP''). The proposed
rule change would incorporate these proceeds from insurance into ICC's
default waterfall and therefore treat them similar to other resources
that ICC uses to cover losses from CP defaults, like the guaranty fund.
In terms of incorporating insurance proceeds into ICC's default
waterfall, under the proposed rule change, generally ICC would use
proceeds from insurance before using guaranty fund resources from non-
defaulting CPs. Although the proposed rule change would establish the
legal framework for ICC to maintain insurance and use insurance
proceeds in the event of a CP's default, the proposed rule change would
not require that ICC maintain such insurance.
With respect to Chapter 1 of the ICC Rules, which sets out the
defined terms used in the Rules, the proposed rule change would add to
ICC Rule 102 (``Definitions'') the term ``Insurance Proceeds'' and
would refer to proposed Rule 802(b)(i)(A)(4), where the term would be
defined. Proposed Rule 802(b)(i)(A)(4) would define the term
``Insurance Proceeds'' to mean insurance proceeds, if any, received by
ICC in connection with a CP's default. Additionally, proposed Rule
802(b)(i)(A)(4) would state that ICC shall not be obligated to obtain
or maintain any insurance policy with respect to the default of a CP,
thus making explicit the point described above that the proposed rule
change would not require that ICC maintain insurance against defaults.
With respect to Chapter 8 of the ICC Rules, the proposed rule
change would first amend ICC Rule 802(a). ICC Rule 802(a) provides that
ICC may charge against a defaulting CP's contributions to the guaranty
fund losses suffered from the CP's default. Rule 802(a) lists the types
of losses and expenses that ICC may charge against the defaulting CP's
contributions to the guaranty fund, ordered by priority. Rule 802(a)
also explains how ICC would pay out any surplus remaining after paying
all of the other listed items. As explained in Rule 802(a), ICC may pay
the surplus to ICC or to whomever may be lawfully entitled to receive
the surplus, including any insurer, surety, or guarantor of the
obligations of ICC. The proposed rule change would add to this any
insurer, surety, or guarantor with respect to the obligations of the
[[Page 14285]]
defaulting CP. This aspect of the proposed change would thus allow ICC
to pay to an insurance provider surplus guaranty fund contributions of
the defaulting CP, which ICC may be required to do under the terms of a
policy insuring against losses resulting from the default of a CP.
The proposed rule change would next amend Rule 802(b) to integrate
default insurance into ICC's default waterfall. Rule 802(b) gives ICC
the right to charge against certain financial resources losses
resulting from the default of a CP. Rule 802(b) lists the financial
resources to which ICC may charge such losses, in the order by which
ICC may use them. The proposed rule change would add to this list the
insurance proceeds, if any, that ICC receives in connection with the
CP's default. ICC would be able to use the insurance proceeds only
after charging losses to ICC's contributions to the guaranty fund but
before using the guaranty fund contributions of non-defaulting CPs.
Under ICC Rule 802(c), the defaulting CP remains liable for any
losses charged in the manner permitted under Rule 802(b). As such, Rule
802(c) permits ICC to recover the liability from the defaulting CP's
margin, collateral, or other assets, or by legal process. Rule 802(c)
also requires that, should ICC make any such recovery, ICC must use the
money recovered to pay back certain expenses and persons, according to
the order listed in Rule 802(c). The proposed rule change would add to
this list in Rule 802(c) an insurance provider, to the extent the
provider is entitled to such recovery. Thus, this aspect of the
proposed rule change would amend Rule 802(c) to reflect that ICC may
owe money recovered from or in respect of a defaulting CP to the
insurance provider and would allow ICC to pay back such insurance
provider as necessary.
The proposed rule change would also make two specific changes to
provide ICC flexibility to cover losses while waiting for payment under
an insurance policy. First, the proposed rule change would amend Rule
802(b) to provide that ICC could use the guaranty fund contributions of
non-defaulting CPs prior to receipt of any insurance proceeds. In that
event, ICC would be required to reimburse the non-defaulting CPs from
the insurance proceeds when received. Similarly, the proposed rule
change would amend Rule 808 to allow ICC to conduct reduced gains
distribution where ICC has made a claim under an insurance policy but
has not yet received any proceeds from the claim. In that event, the
proposed rule change would make any proceeds ultimately received under
the insurance policy available as a potential resource to pay back CPs
that have been subject to reduced gains distribution under Rule 808.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\5\ For the reasons given below, the Commission finds that
the proposed rule change is consistent with Section 17A(b)(3)(F) of the
Act \6\ and Rule 17Ad-22(d)(11) thereunder.\7\
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78s(b)(2)(C).
\6\ 15 U.S.C. 78q-1(b)(3)(F).
\7\ 17 CFR 240.17Ad-22(d)(11).
---------------------------------------------------------------------------
A. Consistency With Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of ICC be designed to promote the prompt and accurate
clearance and settlement of securities transactions and, to the extent
applicable, derivative agreements, contracts, and transactions, as well
as to assure the safeguarding of securities and funds which are in the
custody or control of ICC or for which it is responsible, and, in
general, to protect investors and the public interest.\8\ As discussed
above, the proposed rule change would establish the legal framework for
the use of default insurance by amending ICC's default waterfall to
provide for the use of such insurance and by allowing ICC to pay to the
insurance provider, as necessary, surplus guaranty fund contributions
of the defaulting CP and money recovered from the defaulting CP. The
proposed rule change would also provide ICC with the ability to use
other financial resources and to engage in reduced gains distribution
while awaiting payment under a default insurance policy. Although the
proposed rule change explicitly would not require that ICC obtain or
maintain a default insurance policy, the Commission believes that in
establishing the legal framework and operational flexibility for using
such a default insurance policy, the proposed rule change would provide
ICC a means of obtaining an additional financial resource (i.e.,
insurance) for offsetting losses resulting from a CP's default.
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\8\ 15 U.S.C. 78q-1(b)(3)(F).
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In doing so, the Commission believes that proposed rule change
would enhance ICC's ability potentially to avoid the losses that could
result from the default of a Clearing Participant. Because losses
resulting from a CP's default could cause losses for ICC, disrupting
ICC's ability to clear and settle securities transactions, the
Commission believes that the proposed rule change would promote the
prompt and accurate clearance and settlement of securities
transactions. Moreover, because losses resulting from a CP's default
could cause losses for ICC, disrupting ICC's access to securities and
funds, the Commission believes the proposed rule change would help to
assure the safeguarding of securities and funds in ICC's custody and
control. Finally, for these reasons, the Commission believes that the
proposed rule change would, in general, protect investors and the
public interest.
Therefore, the Commission finds that the proposed rule change would
promote the prompt and accurate clearance and settlement of securities
transactions, assure the safeguarding of securities and funds in ICC's
custody and control, and, in general, protect investors and the public
interest, consistent with the Section 17A(b)(3)(F) of the Act.\9\
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\9\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(d)(11)
Rule 17Ad-22(d)(11) requires that ICC establish, implement,
maintain and enforce written policies and procedures reasonably
designed to make key aspects of its default procedures publicly
available and establish default procedures that 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.\10\ As discussed above, the Commission believes the proposed
rule change, in establishing the legal framework and operational
flexibility for using a default insurance policy, would provide ICC a
means of obtaining an additional financial resource (i.e., insurance)
for offsetting losses resulting from a CP's default. The Commission
believes the proposed rule change would therefore help to ensure that
ICC is able to take timely action to contain losses and liquidity
pressures and to continue meeting its obligations in the event of a
CP's default by giving ICC the ability to obtain additional resources
to offset losses resulting from a CP's default. Therefore the
Commission finds that the proposed
[[Page 14286]]
rule change is consistent with Rule 17Ad-22(d)(11).\11\
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\10\ 15 U.S.C. 17Ad-22(d)(11).
\11\ 15 U.S.C. 17Ad-22(d)(11).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act,
and in particular, with the requirements of Section 17A(b)(3)(F) of the
Act \12\ and Rule 17Ad-22(d)(11) thereunder.\13\
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\12\ 15 U.S.C. 78q-1(b)(3)(F).
\13\ 17 CFR 240.17Ad-22(d)(11).
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\14\ that the proposed rule change (SR-ICC-2020-001), be, and hereby
is, approved.\15\
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\14\ 15 U.S.C. 78s(b)(2).
\15\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-04920 Filed 3-10-20; 8:45 am]
BILLING CODE 8011-01-P
