Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the ICC Clearing Rules, 6715-6718 [2021-01284]
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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices
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facilitate the Exchange’s overall goals of
facilitating access to its data by retail
investors, which the Commission has
continually found to be consistent with
the Exchange Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would result
in any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange operates in a highly
competitive environment, and its ability
to price these data products is
constrained by: (i) Competition among
exchanges that offer similar data
products to their customers; and (ii) the
existence of inexpensive real-time
consolidated data disseminated by the
SIPs. Top-of-book data is broadly
disseminated by both the SIPs and the
sixteen U.S. equities exchanges. There
are therefore a number of alternative
products available to market
participants and investors, including
products offered by certain competing
U.S. equities exchanges without charge.
In this competitive environment
potential subscribers are free to choose
which competing product to purchase to
satisfy their need for market
information. Often, the choice comes
down to price, as market data customers
look to purchase cheaper top-of-book
data products, and quality, as market
participants seek to purchase data that
represents significant market liquidity.
Intramarket Competition. The
Exchange believes that the proposed
fees do not put any market participants
at a relative disadvantage compared to
other market participants. As discussed,
the proposed fees would apply to all
internal distributors of the BZX Top
Feed on an equal and nondiscriminatory basis. The Exchange
therefore believes that the proposed fees
neither favor nor penalize one or more
categories of market participants in a
manner that would impose an undue
burden on competition. To the extent
that particular fees would apply to only
a subset of subscribers, e.g., Professional
versus Non-Professional Users, those
distinctions are not unfairly
discriminatory and do not unfairly
burden one set of customers over
another.
Intermarket Competition. The
Exchange believes that the proposed
fees do not impose a burden on
competition or on other SROs that is not
necessary or appropriate in furtherance
of the purposes of the Act. In setting the
proposed fees, the Exchange is
constrained by the availability of
numerous substitute products offered by
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other national securities exchanges as
well as core data offered by the SIPs.
Because market data customers can find
suitable substitute feeds, an exchange
that overprices its market data products
stands a high risk that users may
substitute another product. These
competitive pressures ensure that no
one exchange’s market data fees can
impose an undue burden on
competition, and the Exchange’s
proposed fees do not do so here.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 39 and paragraph (f) of Rule
19b–4 40 thereunder. At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2021–002 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CboeBZX–2021–002. 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–CboeBZX–2021–002 and
should be submitted on or before
February 12, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.41
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–01279 Filed 1–21–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90928; File No. SR–ICC–
2021–001]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to the ICC
Clearing Rules
January 14, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January 7,
2021, ICE Clear Credit LLC (‘‘ICC’’) filed
with the Securities and Exchange
41 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
39 15
U.S.C. 78s(b)(3)(A).
40 17 CFR 240.19b–4(f).
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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices
Commission the proposed rule change
as described in Items I and II below,
which Items have been prepared
primarily by ICC. ICC filed the proposed
rule change pursuant to Section
19(b)(3)(A) of the Act 3 and Rule 19b–
4(f)(6) thereunder,4 such that the
proposed rule change was immediately
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The principal purpose of the
proposed rule change is to revise the
ICC Clearing Rules (the ‘‘Rules’’) 5 to
clarify an existing requirement of
Participants regarding the provision of
margin or collateral (‘‘Non-Participant
Collateral’’) by clients (‘‘Non-Participant
Parties’’).
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, ICC
included statements concerning the
purpose of and basis for the proposed
rule change, 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.
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(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
(a) Purpose
ICC proposes revisions to Rule 406(b)
to clarify an existing requirement of
Participants regarding the provision of
Non-Participant Collateral by NonParticipant Parties and to update the
terminology in a manner that is
consistent with amended Commodity
Futures Trading Commission (‘‘CFTC’’)
Regulation 39.13(g)(8)(ii),6 applicable to
ICC as a derivatives clearing
organization, which requires
compliance by January 27, 2021. As
such, ICC has filed the proposed rule
change for immediate effectiveness and
proposes that it will be operative on or
3 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
5 Capitalized terms used but not defined herein
have the meanings specified in the Rules.
6 17 CFR 39.13(g)(8)(ii).
4 17
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about January 27, 2021 and subject to
any regulatory review, approval, or
other process. ICC will issue a circular
notification, in advance of the operative
date. The proposed revisions are
described in detail as follows.
ICC proposes changes to Rule 406,
which sets out certain requirements
with respect to client-related positions
of futures commission merchant
(‘‘FCM’’) and broker-dealer Participants.
Under current Rule 406(b), a Participant
must require each Non-Participant Party
to provide Non-Participant Collateral in
an amount no less than ICC’s margin
requirement with respect to the relevant
client-related position(s). The proposed
changes clarify that such amount would
be commensurate with the risk
presented by such Non-Participant
Party. The proposed changes also
remove general language whereby ICC
may require additional margin with
respect to Non-Participant Parties and,
instead, direct Participants to identify
Non-Participant Parties with heightened
risk profiles and collect margin from
them at a level exceeding 100% of ICC’s
margin requirement, by such amount as
is commensurate with the risk
presented. Such changes are intended to
clarify and incorporate terminology that
is consistent with amended CFTC
Regulation 39.13(g)(8)(ii) 7 to facilitate
compliance.
In connection with the proposed
amendments, ICC would also revoke
Circular 2012/008 (the ‘‘Circular’’) 8
which requires FCM Participants to
collect margin from Non-Participant
Parties in respect of such NonParticipant Parties’ non-hedge positions,
at a level that is 10% greater than ICC’s
related margin requirement with respect
to each product and swap portfolio.
Amended CFTC Regulation
39.13(g)(8)(ii) 9 intended to replace this
prior market structure, which is
reflected in current Rule 406 and the
Circular.
(b) Statutory Basis
ICC believes that the proposed rule
change is consistent with the
requirements of Section 17A of the
Act 10 and the regulations thereunder
applicable to it, including the applicable
standards under Rule 17Ad–22.11 In
particular, Section 17A(b)(3)(F) of the
Act 12 requires that the rule change be
7 Id.
8 The Circular was issued on April 20, 2012 and
is available at the following: https://
www.theice.com/publicdocs/clear_credit/circulars/
Circular_2012_008_FINAL.pdf.
9 17 CFR 39.13(g)(8)(ii).
10 15 U.S.C. 78q–1.
11 17 CFR 240.17Ad–22.
12 15 U.S.C. 78q–1(b)(3)(F).
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consistent with the prompt and accurate
clearance and settlement of securities
transactions and derivative agreements,
contracts and transactions cleared by
ICC, the safeguarding of securities and
funds in the custody or control of ICC
or for which it is responsible, and the
protection of investors and the public
interest. The proposed rule change
would update Rule 406(b) to provide
clarification to the existing requirement
and to update the terminology in a
manner that is consistent with amended
CFTC Regulation 39.13(g)(8)(ii).13
Specifically, the proposed revisions
clarify that the amount of NonParticipant Collateral would be
commensurate with the risk presented
by such Non-Participant Party. The
proposed changes also remove general
language whereby ICC may require
additional margin with respect to NonParticipant Parties and, instead, direct
Participants to identify Non-Participant
Parties with heightened risk profiles and
collect margin from them at a level
exceeding ICC’s margin requirement.
Such changes would accordingly
replace the requirement in the Circular,
which ICC believes is appropriate to
facilitate compliance with amended
CFTC Regulation 39.13(g)(8)(ii),14 and
better support ICC’s ability to manage
the risks posed by Non-Participant
Parties as the proposed changes result in
Participants collecting Non-Participant
Collateral at levels commensurate with
the risk presented by each NonParticipant Party. Such changes further
provide clarity and transparency on the
requirement in Rule 406(b) regarding
the provision of Non-Participant
Collateral and thus strengthen the Rules
with clear and more specific guidance,
which supports the prompt and accurate
clearance and settlement of securities
transactions, derivatives agreements,
contracts, and transactions, the
safeguarding of securities and funds
which are in the custody or control of
ICC or for which it is responsible, and
the protection of investors and the
public interest. The proposed rule
change is thus consistent with the
prompt and accurate clearance and
settlement of securities transactions,
derivatives agreements, contracts, and
transactions, the safeguarding of
securities and funds in the custody or
control of ICC or for which it is
responsible, and the protection of
investors and the public interest, within
the meaning of Section 17A(b)(3)(F) of
the Act.15
13 17
CFR 39.13(g)(8)(ii).
14 Id.
15 15
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U.S.C. 78q–1(b)(3)(F).
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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices
The amendments would also satisfy
relevant requirements of Rule 17Ad–
22.16 Rule 17Ad–22(e)(4)(ii) 17 requires
each covered clearing agency to
establish, implement, maintain, and
enforce written policies and procedures
reasonably designed to effectively
identify, measure, monitor, and manage
its credit exposures to participants and
those arising from its payment, clearing,
and settlement processes, including by
maintaining additional financial
resources at the minimum to enable it
to cover a wide range of foreseeable
stress scenarios that include, but are not
limited to, the default of the two
participant families that would
potentially cause the largest aggregate
credit exposure for the covered clearing
agency in extreme but plausible market
conditions. The proposed changes
promote ICC’s ability to address and
manage the risk posed by NonParticipant Parties, including by
clarifying that the amount of NonParticipant Collateral would be
commensurate with the risk presented
by such Non-Participant Party and by
directing Participants to identify NonParticipant Parties with heightened risk
profiles and collect margin from them at
a level exceeding ICC’s margin
requirement. In ICC’s view, the
amended language in Rule 406(b)
protects the financial integrity of ICC
and Participants, as it results in
Participants collecting Non-Participant
Collateral in an amount commensurate
with the risk presented by NonParticipant Parties and is more
appropriate in light of amended
Regulation 39.13(g)(8)(ii).18 Such
changes promote ICC’s ability to manage
the risks posed by Non-Participant
Parties, including by managing the
potential risks arising from NonParticipant Party transactions relating to
a potential default of a Non-Participant
Party that disrupts a Participant, thereby
promoting ICC’s ability to continue to
maintain its financial resources and
withstand the pressures of defaults,
consistent with the requirements of Rule
17Ad–22(e)(4)(ii).19
Rule 17Ad–22(e)(6)(i) and (ii) 20
require each covered clearing agency to
establish, implement, maintain, and
enforce written policies and procedures
reasonably designed to cover its credit
exposures to its participants by
establishing a risk-based margin system
that, at a minimum, considers, and
produces margin levels commensurate
16 17
CFR 240.17Ad–22.
CFR 240.17Ad–22(e)(4)(ii).
18 17 CFR 39.13(g)(8)(ii).
19 17 CFR 240.17Ad–22(e)(4)(ii).
20 17 CFR 240.17Ad–22(e)(6)(i) and (ii).
with, the risks and particular attributes
of each relevant product, portfolio, and
market and marks participant positions
to market and collects margin, including
variation margin or equivalent charges if
relevant, at least daily and includes the
authority and operational capacity to
make intraday margin calls in defined
circumstances. As described above, the
proposed revisions are intended to
clarify the existing requirement in Rule
406(b) and to incorporate terminology
that is consistent with amended CFTC
Regulation 39.13(g)(8)(ii) 21 to facilitate
compliance. Such revisions do not
change ICC’s margin methodology,
which continues to consider, and
produce margin levels commensurate
with, the risks and particular attributes
of each relevant product, portfolio, and
market, and do not impact or alter ICC’s
ability to collect margin or make
intraday margin calls. Therefore, ICC
believes that the proposed rule change
is consistent with the requirements of
Rule 17Ad–22(e)(6)(i) and (ii).22
Rule 17Ad–22(e)(19) 23 requires each
covered clearing agency to establish,
implement, maintain, and enforce
written policies and procedures
reasonably designed to identify,
monitor, and manage the material risks
to the covered clearing agency arising
from arrangements in which firms that
are indirect participants in the covered
clearing agency rely on the services
provided by direct participants to access
the covered clearing agency’s payment,
clearing, or settlement facilities. The
proposed amendments support ICC’s
ability to manage the risks posed by
Non-Participant Parties, including by
elaborating on the requirement in Rule
406(b) to state that the amount of NonParticipant Collateral would be
commensurate with the risk presented
by such Non-Participant Party. The
proposed changes also include language
directing Participants to identify NonParticipant Parties with heightened risk
profiles and collect margin from them at
a level exceeding ICC’s margin
requirement to replace general language
whereby ICC may require additional
margin with respect to Non-Participant
Parties. Such changes would replace the
requirement in the Circular, which
would result in Participants collecting
Non-Participant Collateral at levels
commensurate with the risk presented
by each Non-Participant Party and
support ICC’s ability to manage the risks
posed by Non-Participant Parties given
the relationship that Participants have
with Non-Participant Parties as opposed
17 17
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19:27 Jan 21, 2021
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to ICC. Such changes also foster a more
clear and transparent Rule that will
enhance ICC’s ability to identify,
monitor, and manage the risks posed by
Non-Participant Parties, consistent with
the requirements of Rule 17Ad–
22(e)(19).24
(B) Clearing Agency’s Statement on
Burden on Competition
ICC does not believe the proposed
amendments would have any impact, or
impose any burden, on competition.
The proposed rule change 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 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 and Timing for
Commission Action
Because the foregoing proposed rule
change does not:
(i) Significantly affect the protection
of investors or the public interest;
(ii) impose any significant burden on
competition; and
(iii) become operative for 30 days
from the date on which it was filed, or
such shorter time as the Commission
may designate, it has become effective
pursuant to Section 19(b)(3)(A) 25 of the
Act and Rule 19b–4(f)(6) 26 thereunder.
ICC has requested that the
Commission waive both the five-day
pre-filing requirement and the 30-day
delayed operative date under Rule 19b–
4(6)(iii) 27 so that the proposed rule
change may become effective and
operative upon filing with the
Commission. As noted above, ICC
designed the proposed amendments to
Rule 406(b) for consistency with
amended CFTC Regulation
39.13(g)(8)(ii),28 which requires ICC’s
compliance by January 27, 2021. ICC
does not believe that any delay in
implementing rules that reflect these
requirements will benefit Participants,
their customers, or any other market
24 Id.
25 15
21 17
CFR 39.13(g)(8)(ii).
22 17 CFR 240.17Ad–22(e)(6)(i) and (ii).
23 17 CFR 240.17Ad–22(e)(19).
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6717
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
27 17 CFR 240.19b–4(f)(6)(iii).
28 17 CFR 39.13(g)(8)(ii).
26 17
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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices
participants. Any delay is also likely to
be inconsistent with market
expectations in light of the compliance
date of the amended CFTC regulation.
As a result, in ICC’s view, immediate
effectiveness is consistent with the
protection of investors and the public
interest.
The Commission believes that the
delay of the operation of the proposed
rule change, through the five-day prefiling requirement and the 30-day
delayed operative date, could impede
ICC’s timely compliance with amended
CFTC Regulation 39.13(g)(8)(ii) 29 and
thereby defer the intended benefits and
objectives of such regulatory
requirements for customer initial margin
levels. This, in turn, could disrupt
market expectations that ICC will
implement the amended CFTC
regulation by the January 27, 2021
compliance date, which may adversely
affect ICC and its ability to timely
replace the requirement in the Circular
and manage the risks posed by NonParticipant Parties in compliance with
applicable regulatory requirements for
the collection of Non-Participant
Collateral. The Commission therefore
believes that waiving the five-day prefiling requirement and 30-day operative
delay should facilitate ICC’s timely
compliance with the amended CFTC
regulation and avert any potential
adverse consequences if such
compliance were delayed. Moreover, the
Commission believes the proposed rule
change would not impose any
significant burden on competition
because it applies uniformly to both
FCM and broker-dealer Participants and
their customers as Non-Participant
Parties. Thus, the Commission believes
the proposed rule change, and waiving
the five-day pre-filing requirement and
30-day operative delay, would not (i)
significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; or (iii) affect the
safeguarding of funds or securities in
the custody or control of ICC or for
which it is responsible. Therefore, the
Commission waives the five-day prefiling requirement and 30-day operative
delay, and designates the proposed rule
change as operative upon filing.30
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
29 17
CFR 39.13(g)(8)(ii).
purposes only of waiving the five-day prefiling requirement and the 30-day operative delay,
the Commission has considered the proposed rule
change’s impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
30 For
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action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ICC–2021–001 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–2021–001. 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 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 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–2021–001 and
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should be submitted on or before
February 12, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–01284 Filed 1–21–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90925; File No. SR–CBOE–
2020–034]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Designation
of a Longer Period for Commission
Action on Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change, as Modified by
Amendment No. 1, To Authorize for
Trading Flexible Exchange Options on
Full-Value Indexes With a Contract
Multiplier of One
January 14, 2021.
On June 30, 2020, Cboe Exchange, Inc.
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 authorize for trading flexible
exchange options on full-value indexes
with a contract multiplier of one. The
proposed rule change was published in
the Federal Register on July 20, 2020.3
On September 2, 2020, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 On October 15,
2020, the Commission instituted
proceedings under Section 19(b)(2)(B) of
the Act 6 to determine whether to
approve or disapprove the proposed
rule change.7 On January 21, 2021, the
31 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. 89308
(July 14, 2020), 85 FR 43923 (‘‘Notice’’). Comments
received on the proposed rule change are available
on the Commission’s website at: https://
www.sec.gov/comments/sr-cboe-2020-034/
srcboe2020034.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 89743,
85 FR 55717 (September 9, 2020).
6 15 U.S.C. 78s(b)(2)(B).
7 See Securities Exchange Act Release No. 90204,
85 FR 67037 (October 21, 2020).
1 15
E:\FR\FM\22JAN1.SGM
22JAN1
]]>Agencies
[Federal Register Volume 86, Number 13 (Friday, January 22, 2021)]
[Notices]
[Pages 6715-6718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01284]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90928; File No. SR-ICC-2021-001]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
the ICC Clearing Rules
January 14, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on January 7, 2021, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange
[[Page 6716]]
Commission the proposed rule change as described in Items I and II
below, which Items have been prepared primarily by ICC. ICC filed the
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and
Rule 19b-4(f)(6) thereunder,\4\ such that the proposed rule change was
immediately effective upon filing with the Commission. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The principal purpose of the proposed rule change is to revise the
ICC Clearing Rules (the ``Rules'') \5\ to clarify an existing
requirement of Participants regarding the provision of margin or
collateral (``Non-Participant Collateral'') by clients (``Non-
Participant Parties'').
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\5\ Capitalized terms used but not defined herein have the
meanings specified in the Rules.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, ICC included statements
concerning the purpose of and basis for the proposed rule change,
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
(a) Purpose
ICC proposes revisions to Rule 406(b) to clarify an existing
requirement of Participants regarding the provision of Non-Participant
Collateral by Non-Participant Parties and to update the terminology in
a manner that is consistent with amended Commodity Futures Trading
Commission (``CFTC'') Regulation 39.13(g)(8)(ii),\6\ applicable to ICC
as a derivatives clearing organization, which requires compliance by
January 27, 2021. As such, ICC has filed the proposed rule change for
immediate effectiveness and proposes that it will be operative on or
about January 27, 2021 and subject to any regulatory review, approval,
or other process. ICC will issue a circular notification, in advance of
the operative date. The proposed revisions are described in detail as
follows.
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\6\ 17 CFR 39.13(g)(8)(ii).
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ICC proposes changes to Rule 406, which sets out certain
requirements with respect to client-related positions of futures
commission merchant (``FCM'') and broker-dealer Participants. Under
current Rule 406(b), a Participant must require each Non-Participant
Party to provide Non-Participant Collateral in an amount no less than
ICC's margin requirement with respect to the relevant client-related
position(s). The proposed changes clarify that such amount would be
commensurate with the risk presented by such Non-Participant Party. The
proposed changes also remove general language whereby ICC may require
additional margin with respect to Non-Participant Parties and, instead,
direct Participants to identify Non-Participant Parties with heightened
risk profiles and collect margin from them at a level exceeding 100% of
ICC's margin requirement, by such amount as is commensurate with the
risk presented. Such changes are intended to clarify and incorporate
terminology that is consistent with amended CFTC Regulation
39.13(g)(8)(ii) \7\ to facilitate compliance.
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\7\ Id.
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In connection with the proposed amendments, ICC would also revoke
Circular 2012/008 (the ``Circular'') \8\ which requires FCM
Participants to collect margin from Non-Participant Parties in respect
of such Non-Participant Parties' non-hedge positions, at a level that
is 10% greater than ICC's related margin requirement with respect to
each product and swap portfolio. Amended CFTC Regulation
39.13(g)(8)(ii) \9\ intended to replace this prior market structure,
which is reflected in current Rule 406 and the Circular.
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\8\ The Circular was issued on April 20, 2012 and is available
at the following: https://www.theice.com/publicdocs/clear_credit/circulars/Circular_2012_008_FINAL.pdf.
\9\ 17 CFR 39.13(g)(8)(ii).
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(b) Statutory Basis
ICC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \10\ and the regulations
thereunder applicable to it, including the applicable standards under
Rule 17Ad-22.\11\ In particular, Section 17A(b)(3)(F) of the Act \12\
requires that the rule change be consistent with the prompt and
accurate clearance and settlement of securities transactions and
derivative agreements, contracts and transactions cleared by ICC, the
safeguarding of securities and funds in the custody or control of ICC
or for which it is responsible, and the protection of investors and the
public interest. The proposed rule change would update Rule 406(b) to
provide clarification to the existing requirement and to update the
terminology in a manner that is consistent with amended CFTC Regulation
39.13(g)(8)(ii).\13\ Specifically, the proposed revisions clarify that
the amount of Non-Participant Collateral would be commensurate with the
risk presented by such Non-Participant Party. The proposed changes also
remove general language whereby ICC may require additional margin with
respect to Non-Participant Parties and, instead, direct Participants to
identify Non-Participant Parties with heightened risk profiles and
collect margin from them at a level exceeding ICC's margin requirement.
Such changes would accordingly replace the requirement in the Circular,
which ICC believes is appropriate to facilitate compliance with amended
CFTC Regulation 39.13(g)(8)(ii),\14\ and better support ICC's ability
to manage the risks posed by Non-Participant Parties as the proposed
changes result in Participants collecting Non-Participant Collateral at
levels commensurate with the risk presented by each Non-Participant
Party. Such changes further provide clarity and transparency on the
requirement in Rule 406(b) regarding the provision of Non-Participant
Collateral and thus strengthen the Rules with clear and more specific
guidance, which supports the prompt and accurate clearance and
settlement of securities transactions, derivatives agreements,
contracts, and transactions, the safeguarding of securities and funds
which are in the custody or control of ICC or for which it is
responsible, and the protection of investors and the public interest.
The proposed rule change is thus consistent with the prompt and
accurate clearance and settlement of securities transactions,
derivatives agreements, contracts, and transactions, the safeguarding
of securities and funds in the custody or control of ICC or for which
it is responsible, and the protection of investors and the public
interest, within the meaning of Section 17A(b)(3)(F) of the Act.\15\
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\10\ 15 U.S.C. 78q-1.
\11\ 17 CFR 240.17Ad-22.
\12\ 15 U.S.C. 78q-1(b)(3)(F).
\13\ 17 CFR 39.13(g)(8)(ii).
\14\ Id.
\15\ 15 U.S.C. 78q-1(b)(3)(F).
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[[Page 6717]]
The amendments would also satisfy relevant requirements of Rule
17Ad-22.\16\ Rule 17Ad-22(e)(4)(ii) \17\ requires each covered clearing
agency to establish, implement, maintain, and enforce written policies
and procedures reasonably designed to effectively identify, measure,
monitor, and manage its credit exposures to participants and those
arising from its payment, clearing, and settlement processes, including
by maintaining additional financial resources at the minimum to enable
it to cover a wide range of foreseeable stress scenarios that include,
but are not limited to, the default of the two participant families
that would potentially cause the largest aggregate credit exposure for
the covered clearing agency in extreme but plausible market conditions.
The proposed changes promote ICC's ability to address and manage the
risk posed by Non-Participant Parties, including by clarifying that the
amount of Non-Participant Collateral would be commensurate with the
risk presented by such Non-Participant Party and by directing
Participants to identify Non-Participant Parties with heightened risk
profiles and collect margin from them at a level exceeding ICC's margin
requirement. In ICC's view, the amended language in Rule 406(b)
protects the financial integrity of ICC and Participants, as it results
in Participants collecting Non-Participant Collateral in an amount
commensurate with the risk presented by Non-Participant Parties and is
more appropriate in light of amended Regulation 39.13(g)(8)(ii).\18\
Such changes promote ICC's ability to manage the risks posed by Non-
Participant Parties, including by managing the potential risks arising
from Non-Participant Party transactions relating to a potential default
of a Non-Participant Party that disrupts a Participant, thereby
promoting ICC's ability to continue to maintain its financial resources
and withstand the pressures of defaults, consistent with the
requirements of Rule 17Ad-22(e)(4)(ii).\19\
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\16\ 17 CFR 240.17Ad-22.
\17\ 17 CFR 240.17Ad-22(e)(4)(ii).
\18\ 17 CFR 39.13(g)(8)(ii).
\19\ 17 CFR 240.17Ad-22(e)(4)(ii).
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Rule 17Ad-22(e)(6)(i) and (ii) \20\ require each covered clearing
agency to establish, implement, maintain, and enforce written policies
and procedures reasonably designed to cover its credit exposures to its
participants by establishing a risk-based margin system that, at a
minimum, considers, and produces margin levels commensurate with, the
risks and particular attributes of each relevant product, portfolio,
and market and marks participant positions to market and collects
margin, including variation margin or equivalent charges if relevant,
at least daily and includes the authority and operational capacity to
make intraday margin calls in defined circumstances. As described
above, the proposed revisions are intended to clarify the existing
requirement in Rule 406(b) and to incorporate terminology that is
consistent with amended CFTC Regulation 39.13(g)(8)(ii) \21\ to
facilitate compliance. Such revisions do not change ICC's margin
methodology, which continues to consider, and produce margin levels
commensurate with, the risks and particular attributes of each relevant
product, portfolio, and market, and do not impact or alter ICC's
ability to collect margin or make intraday margin calls. Therefore, ICC
believes that the proposed rule change is consistent with the
requirements of Rule 17Ad-22(e)(6)(i) and (ii).\22\
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\20\ 17 CFR 240.17Ad-22(e)(6)(i) and (ii).
\21\ 17 CFR 39.13(g)(8)(ii).
\22\ 17 CFR 240.17Ad-22(e)(6)(i) and (ii).
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Rule 17Ad-22(e)(19) \23\ requires each covered clearing agency to
establish, implement, maintain, and enforce written policies and
procedures reasonably designed to identify, monitor, and manage the
material risks to the covered clearing agency arising from arrangements
in which firms that are indirect participants in the covered clearing
agency rely on the services provided by direct participants to access
the covered clearing agency's payment, clearing, or settlement
facilities. The proposed amendments support ICC's ability to manage the
risks posed by Non-Participant Parties, including by elaborating on the
requirement in Rule 406(b) to state that the amount of Non-Participant
Collateral would be commensurate with the risk presented by such Non-
Participant Party. The proposed changes also include language directing
Participants to identify Non-Participant Parties with heightened risk
profiles and collect margin from them at a level exceeding ICC's margin
requirement to replace general language whereby ICC may require
additional margin with respect to Non-Participant Parties. Such changes
would replace the requirement in the Circular, which would result in
Participants collecting Non-Participant Collateral at levels
commensurate with the risk presented by each Non-Participant Party and
support ICC's ability to manage the risks posed by Non-Participant
Parties given the relationship that Participants have with Non-
Participant Parties as opposed to ICC. Such changes also foster a more
clear and transparent Rule that will enhance ICC's ability to identify,
monitor, and manage the risks posed by Non-Participant Parties,
consistent with the requirements of Rule 17Ad-22(e)(19).\24\
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\23\ 17 CFR 240.17Ad-22(e)(19).
\24\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
ICC does not believe the proposed amendments would have any impact,
or impose any burden, on competition. The proposed rule change 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
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 and Timing for
Commission Action
Because the foregoing proposed rule change does not:
(i) Significantly affect the protection of investors or the public
interest;
(ii) impose any significant burden on competition; and
(iii) become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to Section 19(b)(3)(A) \25\ of the Act and
Rule 19b-4(f)(6) \26\ thereunder.
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\25\ 15 U.S.C. 78s(b)(3)(A).
\26\ 17 CFR 240.19b-4(f)(6).
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ICC has requested that the Commission waive both the five-day pre-
filing requirement and the 30-day delayed operative date under Rule
19b-4(6)(iii) \27\ so that the proposed rule change may become
effective and operative upon filing with the Commission. As noted
above, ICC designed the proposed amendments to Rule 406(b) for
consistency with amended CFTC Regulation 39.13(g)(8)(ii),\28\ which
requires ICC's compliance by January 27, 2021. ICC does not believe
that any delay in implementing rules that reflect these requirements
will benefit Participants, their customers, or any other market
[[Page 6718]]
participants. Any delay is also likely to be inconsistent with market
expectations in light of the compliance date of the amended CFTC
regulation. As a result, in ICC's view, immediate effectiveness is
consistent with the protection of investors and the public interest.
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\27\ 17 CFR 240.19b-4(f)(6)(iii).
\28\ 17 CFR 39.13(g)(8)(ii).
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The Commission believes that the delay of the operation of the
proposed rule change, through the five-day pre-filing requirement and
the 30-day delayed operative date, could impede ICC's timely compliance
with amended CFTC Regulation 39.13(g)(8)(ii) \29\ and thereby defer the
intended benefits and objectives of such regulatory requirements for
customer initial margin levels. This, in turn, could disrupt market
expectations that ICC will implement the amended CFTC regulation by the
January 27, 2021 compliance date, which may adversely affect ICC and
its ability to timely replace the requirement in the Circular and
manage the risks posed by Non-Participant Parties in compliance with
applicable regulatory requirements for the collection of Non-
Participant Collateral. The Commission therefore believes that waiving
the five-day pre-filing requirement and 30-day operative delay should
facilitate ICC's timely compliance with the amended CFTC regulation and
avert any potential adverse consequences if such compliance were
delayed. Moreover, the Commission believes the proposed rule change
would not impose any significant burden on competition because it
applies uniformly to both FCM and broker-dealer Participants and their
customers as Non-Participant Parties. Thus, the Commission believes the
proposed rule change, and waiving the five-day pre-filing requirement
and 30-day operative delay, would not (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; or (iii) affect the safeguarding of
funds or securities in the custody or control of ICC or for which it is
responsible. Therefore, the Commission waives the five-day pre-filing
requirement and 30-day operative delay, and designates the proposed
rule change as operative upon filing.\30\
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\29\ 17 CFR 39.13(g)(8)(ii).
\30\ For purposes only of waiving the five-day pre-filing
requirement and the 30-day operative delay, the Commission has
considered the proposed rule change's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-ICC-2021-001 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-2021-001. 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 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 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-2021-001 and should be
submitted on or before February 12, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-01284 Filed 1-21-21; 8:45 am]
BILLING CODE 8011-01-P
