Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the Clearance of Additional Credit Default Swap Contracts, 32066-32067 [2020-11404]
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Federal Register / Vol. 85, No. 103 / Thursday, May 28, 2020 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88929; File No. SR–ICC–
2020–003]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Order Approving
Proposed Rule Change Relating to the
Clearance of Additional Credit Default
Swap Contracts
May 21, 2020.
I. Introduction
On March 26, 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 the ICC Rulebook (the ‘‘Rules’’) 3
to provide for the clearance of an
additional Standard Emerging Market
Sovereign CDS contract (the ‘‘EM
Contract’’) and additional Standard
Western European Sovereign CDS
contracts (collectively, the ‘‘SWES
Contracts’’). The proposed rule change
was published for comment in the
Federal Register on April 7, 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.
II. Description of the Proposed Rule
Change
The principal purpose of the
proposed rule change is to revise the
Rules to provide for the clearance of an
additional EM Contract and additional
SWES Contracts.5 Specifically, ICC
proposes amending Subchapter 26D of
its Rules to provide for the clearance of
the additional EM Contract, the
Republic of Croatia. This additional EM
Contract has terms consistent with the
other EM Contracts approved for
clearing at ICC and governed by
Subchapter 26D of the Rules. Minor
revisions to Subchapter 26D (Standard
Emerging Market Sovereign (‘‘SES’’)
Single Name) are made to provide for
clearing the additional EM Contract.
Specifically, in Rule 26D–102
(Definitions), ‘‘Eligible SES Reference
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.
4 Self-Regulatory Organizations; ICE Clear Credit
LLC; Notice of Filing of Proposed Rule Change
Relating to the Clearance of Additional Credit
Default Swap Contracts; Exchange Act Release No.
88537 (April 1, 2020); 85 FR 19551 (April 7, 2020)
(‘‘Notice’’).
5 The description that follows is excerpted from
the Notice, 85 FR 19551.
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Jkt 250001
Entities’’ is modified to include the
Republic of Croatia in the list of specific
Eligible SES Reference Entities to be
cleared by ICC.
Additionally, ICC proposes amending
Subchapter 26I of its Rules to provide
for the clearance of the additional SWES
Contracts, the Republic of Finland and
the Hellenic Republic. These additional
SWES Contracts have terms consistent
with the other SWES Contracts
approved for clearing at ICC and
governed by Subchapter 26I of the
Rules. Minor revisions to Subchapter
26I (Standard Western European
Sovereign Single Name) are made to
provide for clearing the additional
SWES Contracts. Specifically, in Rule
26I–102 (Definitions), ‘‘Eligible SWES
Reference Entities’’ is modified to
include the Republic of Finland and the
Hellenic Republic in the list of specific
Eligible SWES Reference Entities to be
cleared by ICC.
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.6
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.7
The Commission finds that the
proposed rule change is consistent with
Section 17A(b)(3)(F) of the Act.8 The
Commission has reviewed the terms and
conditions of these additional contracts
proposed for clearing and has
determined that they are substantially
similar to the other contracts listed in
Subchapters 26D and 26I of the ICC
Rules, all of which ICC currently clears,
with the key difference being that the
underlying reference obligations will be
issuances by the Republic of Croatia, the
Republic of Finland, and the Hellenic
Republic. Moreover, after reviewing the
Notice and ICC’s Rules, policies and
procedures, the Commission finds that
the additional EM and SWES Contracts
will be cleared pursuant to ICC’s
6 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
8 15 U.S.C. 78q–1(b)(3)(F).
7 15
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Sfmt 4703
existing clearing arrangements and
related financial safeguards, protections
and risk management procedures. In
addition, based on its own experience
and expertise, including a review of
data on volume, open interest, and the
number of ICC clearing participants
(‘‘CPs’’) that currently trade in the
additional EM and SWES Contracts as
well as certain model parameters for the
additional EM and SWES Contracts, the
Commission finds that ICC’s rules,
policies, and procedures are reasonably
designed to price and measure the
potential risk presented by these
products, collect financial resources in
proportion to such risk, and liquidate
these products in the event of a CP
default, all of which should help ensure
ICC’s ability to maintain the financial
resources it needs to provide its critical
services and function as a central
counter party, thereby promoting the
prompt and accurate settlement of EM
and SWES Contracts and other credit
default swap transactions. For the same
reasons, the Commission believes that
the proposed rule change should help
assure the safeguarding of securities or
funds in the custody or control of ICC,
and would be consistent with the
protection of investors and the public
interest.
Therefore, the Commission finds that
acceptance of the additional EM and
SWES Contracts, on the terms and
conditions set out in ICC’s Rules, is
consistent with the prompt and accurate
clearance and settlement of securities
transactions and derivative agreements,
contracts, and transactions cleared by
ICC and the safeguarding of securities
and funds in the custody or control of
ICC, within the meaning of Section
17A(b)(3)(F) of the Act.9
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.10
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 11 that the
proposed rule change (SR–ICC–2020–
003), be, and hereby is, approved.12
9 15
U.S.C. 78q–1(b)(3)(F).
U.S.C. 78q–1(b)(3)(F).
11 15 U.S.C. 78s(b)(2).
12 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
10 15
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Federal Register / Vol. 85, No. 103 / Thursday, May 28, 2020 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–11404 Filed 5–27–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88927; File No. SR–ICC–
2020–006)]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Order Approving
Proposed Rule Change Relating to
ICC’s Treasury Operations Policies
and Procedures
May 21, 2020.
I. Introduction
On April 8, 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–4,2
a proposed rule change to revise the ICC
Treasury Operations Policies and
Procedures (‘‘Treasury Policy’’). The
proposed rule change was published for
comment in the Federal Register on
April 20, 2020.3 The Commission did
not receive comments regarding the
proposed rule change. For the reasons
discussed below, the Commission is
approving the proposed rule change.
II. Description of the Proposed Rule
Change
The proposed rule change would
revise the Treasury Policy to clarify
ICC’s approval process for adding a new
settlement bank, ICC’s minimum criteria
applicable to settlement banks, and
ICC’s backup settlement banks.
Currently, the Direct Settlement Section
of the Treasury Policy requires that
ICC’s Director of Treasury and the Risk
Department (credit analyst) conduct a
review before ICC begins using a bank
as a settlement bank, with final approval
from the ICC President. Under the
proposed rule change, ICC’s Director of
Treasury and the Risk Department
(credit analyst) would still conduct a
review before ICC begins using a bank
as a settlement bank. The proposed rule
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Self-Regulatory Organizations; ICE Clear Credit
LLC; Notice of Filing of Proposed Rule Change,
Security-Based Swap Submission, or Advance
Notice Relating to ICC’s Treasury Operations
Policies and Procedures, Exchange Act Release No.
88633 (Apr. 14, 2020); 85 FR 21911 (Apr. 20, 2020)
(SR–ICC–2020–006) (‘‘Notice’’).
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change would require, however, that the
Credit Review Subcommittee of the
Participant Review Committee (the
‘‘CRS’’), rather than ICC’s President,
approve ICC’s use of a bank. The CRS
is comprised of ICC staff, including the
ICC President, ICC Chief Operating
Officer, and representatives from
various departments, and is tasked with
counterparty review responsibilities.
Thus, under the proposed rule change,
ICC’s President would still be involved
in the approval of a bank (as a member
of the CRS) but other ICC personnel, as
CRS members, would also participate in
such approval.
Moreover, the proposed rule change
would amend the Direct Settlement
Section of the Treasury Policy to set
forth the minimum criteria that ICC
applies when determining whether to
use a bank as a settlement bank.
Currently, the Treasury Policy requires
that ICC’s Director of Treasury and the
Risk Department (credit analyst) review
a bank’s capitalization,
creditworthiness, access to liquidity,
operational reliability and supervision
before approval of that bank. In addition
to those items, the proposed rule change
would specify the minimum criteria that
ICC applies to its settlement banks.
Among other things, these criteria
require that a bank be subject to certain
regulatory oversight and supervision
(i.e., the bank must be subject to
regulation and supervision by a
competent authority such as the Federal
Reserve Board or Office of the
Comptroller of the Currency or such
other applicable prudential regulatory
body acceptable to ICC and if the bank
is located outside the United States and
will be used for customer funds, it must
have in excess of $1 billion of regulatory
capital), complete documentation which
would allow ICC to assess the bank’s
financial stability and credit/
counterparty risk, and demonstrate
requisite operational capability.
Finally, the proposed rule change
would amend the Direct Settlement
Section of the Treasury Policy and make
amendments elsewhere in the Treasury
Policy to clarify that ICC currently has
two backup settlement banks in
addition to one primary settlement
bank. Currently, the Treasury Policy
notes ICC’s primary banking
relationship and one backup banking
relationship. The proposed rule change
would incorporate a reference to the
second backup banking relationship,
which was inadvertently excluded and
does not represent a new banking
relationship.
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32067
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.4 For the
reasons given below, the Commission
finds that the proposed rule change is
consistent with Section 17A(b)(3)(F) of
the Act 5 and Rules 17Ad–22(d)(5) and
17Ad–22(d)(8).6
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.7 The Commission
believes that ICC’s use of settlement
banks poses potential risks that, if not
mitigated and managed, could disrupt
its ability to clear and settle transactions
and safeguard securities and funds in its
custody and control. For example,
failure of a settlement bank, due to
operational or financial issues, could
inhibit ICC’s ability to receive and make
payments, which could prevent the final
settlement of transactions and transfer
of margin. As discussed above, the
proposed rule change would revise the
Treasury Policy to state that the CRS
must approve ICC’s use of a bank before
ICC begins using that bank as a
settlement bank and to provide
minimum criteria that ICC must apply
when determining whether to use a
bank as a settlement bank. The
Commission believes that the proposed
rule change should help to manage and
mitigate the potential risks associated
with using a settlement bank, by
improving the approval process for a
settlement bank. The Commission
believes the proposed rule change
would improve this process by
expanding the personnel within ICC
that consider and approve a potential
settlement bank and by providing
certain minimum standards that a
settlement bank must meet for ICC to
use that bank, in addition to the criteria
for review already listed in the Treasury
4 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
6 17 CFR 240.17Ad–22(d)(5), (d)(8).
7 15 U.S.C. 78q–1(b)(3)(F).
5 15
E:\FR\FM\28MYN1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 103 (Thursday, May 28, 2020)]
[Notices]
[Pages 32066-32067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11404]
[[Page 32066]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88929; File No. SR-ICC-2020-003]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to the Clearance of Additional
Credit Default Swap Contracts
May 21, 2020.
I. Introduction
On March 26, 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 the ICC Rulebook (the ``Rules'') \3\ to provide for the
clearance of an additional Standard Emerging Market Sovereign CDS
contract (the ``EM Contract'') and additional Standard Western European
Sovereign CDS contracts (collectively, the ``SWES Contracts''). The
proposed rule change was published for comment in the Federal Register
on April 7, 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 Relating to the Clearance of
Additional Credit Default Swap Contracts; Exchange Act Release No.
88537 (April 1, 2020); 85 FR 19551 (April 7, 2020) (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The principal purpose of the proposed rule change is to revise the
Rules to provide for the clearance of an additional EM Contract and
additional SWES Contracts.\5\ Specifically, ICC proposes amending
Subchapter 26D of its Rules to provide for the clearance of the
additional EM Contract, the Republic of Croatia. This additional EM
Contract has terms consistent with the other EM Contracts approved for
clearing at ICC and governed by Subchapter 26D of the Rules. Minor
revisions to Subchapter 26D (Standard Emerging Market Sovereign
(``SES'') Single Name) are made to provide for clearing the additional
EM Contract. Specifically, in Rule 26D-102 (Definitions), ``Eligible
SES Reference Entities'' is modified to include the Republic of Croatia
in the list of specific Eligible SES Reference Entities to be cleared
by ICC.
---------------------------------------------------------------------------
\5\ The description that follows is excerpted from the Notice,
85 FR 19551.
---------------------------------------------------------------------------
Additionally, ICC proposes amending Subchapter 26I of its Rules to
provide for the clearance of the additional SWES Contracts, the
Republic of Finland and the Hellenic Republic. These additional SWES
Contracts have terms consistent with the other SWES Contracts approved
for clearing at ICC and governed by Subchapter 26I of the Rules. Minor
revisions to Subchapter 26I (Standard Western European Sovereign Single
Name) are made to provide for clearing the additional SWES Contracts.
Specifically, in Rule 26I-102 (Definitions), ``Eligible SWES Reference
Entities'' is modified to include the Republic of Finland and the
Hellenic Republic in the list of specific Eligible SWES Reference
Entities to be cleared by ICC.
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.\6\ 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.\7\
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78s(b)(2)(C).
\7\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The Commission finds that the proposed rule change is consistent
with Section 17A(b)(3)(F) of the Act.\8\ The Commission has reviewed
the terms and conditions of these additional contracts proposed for
clearing and has determined that they are substantially similar to the
other contracts listed in Subchapters 26D and 26I of the ICC Rules, all
of which ICC currently clears, with the key difference being that the
underlying reference obligations will be issuances by the Republic of
Croatia, the Republic of Finland, and the Hellenic Republic. Moreover,
after reviewing the Notice and ICC's Rules, policies and procedures,
the Commission finds that the additional EM and SWES Contracts will be
cleared pursuant to ICC's existing clearing arrangements and related
financial safeguards, protections and risk management procedures. In
addition, based on its own experience and expertise, including a review
of data on volume, open interest, and the number of ICC clearing
participants (``CPs'') that currently trade in the additional EM and
SWES Contracts as well as certain model parameters for the additional
EM and SWES Contracts, the Commission finds that ICC's rules, policies,
and procedures are reasonably designed to price and measure the
potential risk presented by these products, collect financial resources
in proportion to such risk, and liquidate these products in the event
of a CP default, all of which should help ensure ICC's ability to
maintain the financial resources it needs to provide its critical
services and function as a central counter party, thereby promoting the
prompt and accurate settlement of EM and SWES Contracts and other
credit default swap transactions. For the same reasons, the Commission
believes that the proposed rule change should help assure the
safeguarding of securities or funds in the custody or control of ICC,
and would be consistent with the protection of investors and the public
interest.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Therefore, the Commission finds that acceptance of the additional
EM and SWES Contracts, on the terms and conditions set out in ICC's
Rules, is consistent with the prompt and accurate clearance and
settlement of securities transactions and derivative agreements,
contracts, and transactions cleared by ICC and the safeguarding of
securities and funds in the custody or control of ICC, within the
meaning of Section 17A(b)(3)(F) of the Act.\9\
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
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.\10\
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
It is therefore ordered pursuant to Section 19(b)(2) of the Act
\11\ that the proposed rule change (SR-ICC-2020-003), be, and hereby
is, approved.\12\
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(2).
\12\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
[[Page 32067]]
---------------------------------------------------------------------------
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-11404 Filed 5-27-20; 8:45 am]
BILLING CODE 8011-01-P
