Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Proposed Rule Change Relating to the ICC Exercise Procedures, 40665-40667 [2021-15993]
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Federal Register / Vol. 86, No. 142 / Wednesday, July 28, 2021 / Notices
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[FR Doc. 2021–16011 Filed 7–27–21; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92468; File No. SR–ICC–
2021–016]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Proposed
Rule Change Relating to the ICC
Exercise Procedures
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934, (the
‘‘Act’’),1 and Rule 19b-4 thereunder,2
notice is hereby given that on July 8,
2021, ICE Clear Credit LLC (‘‘ICC’’) filed
with the Securities and Exchange
Commission the proposed rule change
as described in Items I, II, and III below,
which Items have been prepared
primarily by ICC. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. 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
Exercise Procedures in connection with
the clearing of credit default index
swaptions (‘‘Index Swaptions’’).
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
PO 00000
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00222
Fmt 4703
Sfmt 4703
40665
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.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
(a) Purpose
ICC proposes revising the Exercise
Procedures in connection with the
clearing of Index Swaptions. The
Exercise Procedures supplement the
provisions of Subchapter 26R of the ICC
Clearing Rules (the ‘‘Rules’’) with
respect to Index Swaptions 3 and
provide further detail as to the manner
in which Index Swaptions may be
exercised by Swaption Buyers, the
manner in which ICC will assign such
exercises to Swaption Sellers, and
certain actions that ICC may take in the
event of technical issues. ICC proposes
to make the changes effective following
Commission approval of the proposed
rule change. The proposed revisions are
described in detail as follows.
ICC proposes changes related to
certain fallback measures included in
the Exercise Procedures. ICC proposes
to amend Paragraph 2.6, which includes
procedures to address a failure of the
electronic system established by ICC for
exercise (‘‘Exercise System Failure’’). In
such case, Paragraph 2.6 currently
provides ICC with the following
options: (i) Cancel and reschedule the
Exercise Period (i.e., the period on the
expiration date of an Index Swaption
during which the Swaption Buyer may
deliver an exercise notice to ICC to
exercise all or part of such Index
Swaption); (ii) determine that automatic
exercise will apply; and/or (iii) take
such other action as ICC determines to
be appropriate to permit exercising
parties to submit exercise notices and to
permit ICC to assign such notices. The
proposed changes remove the ability to
cancel and reschedule the Exercise
Period and renumber the following
options accordingly.
3 Pursuant to an Index Swaption, one party (the
‘‘Swaption Buyer’’) has the right (but not the
obligation) to cause the other party (the ‘‘Swaption
Seller’’) to enter into an index credit default swap
transaction at a pre-determined strike price on a
specified expiration date on specified terms. In the
case of Index Swaptions cleared by ICC, the
underlying index credit default swap is limited to
certain CDX and iTraxx index credit default swaps
that are accepted for clearing by ICC, and which
would be automatically cleared by ICC upon
exercise of the Index Swaption by the Swaption
Buyer in accordance with its terms.
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40666
Federal Register / Vol. 86, No. 142 / Wednesday, July 28, 2021 / Notices
ICC maintains the ability to effect an
automatic exercise under Paragraph 2.8,
which addresses the situation where
ICC will automatically exercise on the
expiration date each open position (of
all exercising parties) in an Index
Swaption that is determined by ICC to
be ‘‘in the money’’ on such date.
Whether an Index Swaption is ‘‘in the
money’’ is currently based on the
average of the end-of-day (‘‘EOD’’) price
of the underlying CDS contract on the
preceding business day and on the
expiration date, and where relevant,
also based on the average of the EOD
price on the preceding business day and
on the expiration date of each single
name constituent contract with respect
to which an Existing Restructuring 4 has
occurred. Under the proposed changes,
whether an Index Swaption is ‘‘in the
money’’ is based on the relevant marketobserved prices for the underlying CDS
contract determined by ICC using the
intraday market data available to it at
the time, or the EOD price of the
underlying CDS contract on the
expiration date established at any
Intercontinental Exchange, Inc. (‘‘ICE’’)
clearinghouse, and where relevant, also
based on the last available ICE EOD
price of each single name constituent
contract with respect to which an
Existing Restructuring has occurred.
Such changes provide ICC with
additional flexibility, as ICC need not
wait until EOD to execute an automatic
exercise, and allow this fallback
measure to coincide with the timing of
the Exercise Period.5
khammond on DSKJM1Z7X2PROD with NOTICES
(b) Statutory Basis
ICC believes that the proposed rule
change is consistent with the
requirements of Section 17A of the Act 6
and the regulations thereunder
applicable to it, including the applicable
standards under Rule 17Ad–22.7 In
particular, Section 17A(b)(3)(F) of the
Act 8 requires that the rule change be
consistent with the prompt and accurate
4 An Existing Restructuring is defined in ICC Rule
26R–319(c) and is applicable upon the occurrence
of an M(M)R Restructuring Credit Event with
respect to an Index Swaption for which the DC
Credit Event Announcement or Regional CDS
Committee Restructuring Announcement occurs on
or prior to the expiration date.
5 The Exercise Period starts at the Swaption
Exercise Start Time (with respect to an Index
Swaption referencing a CDX.NA index, 9:00 a.m.,
New York time and referencing an iTraxx Europe
index, 9:00 a.m., London time) and ends at the
Swaption Exercise Cut-Off Time (with respect to an
Index Swaption referencing a CDX.NA index, 11:00
a.m., New York time and referencing an iTraxx
Europe index, 4:00 p.m., London time) under the
Exercise Procedures.
6 15 U.S.C. 78q–1.
7 17 CFR 240.17Ad–22.
8 15 U.S.C. 78q–1(b)(3)(F).
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17:16 Jul 27, 2021
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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. ICC proposes changes related to
certain fallback measures in the Exercise
Procedures. Removing the option to
cancel and reschedule the Exercise
Period under Paragraph 2.6 would
streamline and simplify ICC’s
procedures in the case of an Exercise
System Failure, thereby reducing the
potential for confusion regarding ICC’s
practices under such circumstances.
Moreover, to provide consistency where
possible in the event of an Exercise
System Failure, amended Paragraph 2.8
allows the timing of automatic exercise
to coincide with the timing of the
Exercise Period. Accordingly, in ICC’s
view, the proposed rule change will
facilitate understanding of how
unforeseen operational or technical
issues are handled and promote
preparedness by market participants to
enhance the implementation of the
Exercise Procedures, thereby promoting
the prompt and accurate clearing and
settlement of the contracts cleared by
ICC, including Index Swaptions, 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.9
The amendments would also satisfy
relevant requirements of Rule 17Ad22.10 Rule 17Ad–22(e)(1) 11 requires
each covered clearing agency to
establish, implement, maintain, and
enforce written policies and procedures
reasonably designed to provide for a
well-founded, clear, transparent, and
enforceable legal basis for each aspect of
its activities in all relevant jurisdictions.
The Exercise Procedures supplement
the provisions of Subchapter 26R of the
Rules with respect to Index Swaptions
and further ensure that ICC’s Rules
clearly reflect the terms and conditions
applicable to Index Swaptions. As
described above, the proposed revisions
would support the clearing of Index
Swaptions by ICC by providing
additional consistency to market
participants and simplifying the
procedures in the case of an Exercise
System Failure. The proposed rule
change would continue to support the
legal basis for ICC’s clearance of Index
Swaptions and operation of the exercise
PO 00000
and assignment process, including
addressing situations where there are
operational or technical issues. As such,
the proposed rule change would satisfy
the requirements of the Rule 17Ad–
22(e)(1).12
Rule 17Ad–22(e)(17) 13 requires, in
relevant part, each covered clearing
agency to establish, implement,
maintain, and enforce written policies
and procedures reasonably designed to
manage its operational risks by (i)
identifying the plausible sources of
operational risk, both internal and
external, and mitigating their impact
through the use of appropriate systems,
policies, procedures, and controls; and
(ii) ensuring that systems have a high
degree of security, resiliency,
operational reliability, and adequate,
scalable capacity. The Exercise
Procedures allow ICC to manage the
operational risks associated with the
exercise and assignment process by
establishing procedures for the exercise
and assignment of Index Swaptions and
including fallback measures, which help
mitigate the impact from operational or
technical issues and ensure that the
system has a high degree of security,
resiliency, operational reliability, and
adequate, scalable capacity. The
proposed changes remove the option to
cancel and reschedule an Exercise
Period, which would reduce the
potential for confusion regarding ICC’s
practices under such circumstances.
The proposed changes also provide ICC
with additional flexibility for
determining whether an Index Swaption
is ‘‘in the money’’ such that ICC need
not wait until EOD to execute an
automatic exercise to provide
consistency where possible in the case
of an Exercise System Failure. ICC
believes that these amendments would
streamline and simplify ICC’s
procedures in the event of an Exercise
System Failure and help mitigate the
impact from operational or technical
issues. The proposed rule change is
therefore reasonably designed to meet
the requirements of Rule 17Ad–
22(e)(17).14
(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 not
necessary or appropriate in furtherance
of the purpose of the Act. The proposed
changes to the Exercise Procedures will
apply uniformly across all market
participants. Therefore, ICC does not
9 Id.
12 Id.
10 17
13 17
CFR 240.17Ad–22.
11 17 CFR 240.17Ad–22(e)(1).
Frm 00223
Fmt 4703
Sfmt 4703
CFR 240.17Ad–22(e)(17)(i)–(ii).
14 Id.
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Federal Register / Vol. 86, No. 142 / Wednesday, July 28, 2021 / Notices
believe the proposed rule change
imposes any burden on competition not
necessary or appropriate in furtherance
of the purpose 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 for Commission
Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
khammond on DSKJM1Z7X2PROD with NOTICES
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–2021–016 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–2021–016. 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
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17:16 Jul 27, 2021
Jkt 253001
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–2021–016 and
should be submitted on or before
August 18, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–15993 Filed 7–27–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92466; File No. SR–
NASDAQ–2021–040]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Establish the ‘‘Extended Trading
Close’’ and a New ‘‘Extended Trading
Close’’ Order Type
July 22, 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 July 12,
2021, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
PO 00000
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
Frm 00224
Fmt 4703
Sfmt 4703
40667
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Equity 4, Rule 4702 and Rule 4703, and
add Rule 4755, to establish the
‘‘Extended Trading Close’’ and new
‘‘ETC Eligible LOC’’ and ‘‘Extended
Trading Close’’ Order Types, as is
described further below.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to adopt new
Equity 4, Rule 4755 3 to establish the
‘‘Extended Trading Close.’’ The
Extended Trading Close will allow
Participants an additional opportunity
to access liquidity in Nasdaq-listed
securities at the Nasdaq Official Closing
Price for a limited period of time after
the Nasdaq Closing Cross 4 or the LULD
Closing Cross,5 (collectively, the
‘‘Closing Cross’’) concludes. The
Exchange also proposes to amend Rule
4702 and Rule 4703 to establish new
‘‘ETC Eligible LOC’’ and ‘‘Extended
Trading Close’’ Order Types that may
3 References herein to Nasdaq Rules in the 4000
Series shall mean Rules in Nasdaq Equity 4.
4 The ‘‘Nasdaq Closing Cross’’ refers to Nasdaq’s
process for determining the price at which it will
execute orders at the close and for executing those
orders, as set forth in Rule 4754.
5 The ‘‘LULD Closing Cross’’ refers to Nasdaq’s
modified process for determining the price at which
it will execute orders at the close, following a
Trading Pause, as set forth in Rule 4120(a), which
exists at or after 3:50 p.m. and before 4:00 p.m., as
well as the process for executing those orders, as
set forth in Rule 4754(b)(6).
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]]>Agencies
[Federal Register Volume 86, Number 142 (Wednesday, July 28, 2021)]
[Notices]
[Pages 40665-40667]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15993]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92468; File No. SR-ICC-2021-016]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Proposed Rule Change Relating to the ICC Exercise Procedures
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934, (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on July 8, 2021, ICE Clear Credit LLC (``ICC'') filed with
the Securities and Exchange Commission the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
primarily by ICC. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. 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
Exercise Procedures in connection with the clearing of credit default
index swaptions (``Index Swaptions'').
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 revising the Exercise Procedures in connection with
the clearing of Index Swaptions. The Exercise Procedures supplement the
provisions of Subchapter 26R of the ICC Clearing Rules (the ``Rules'')
with respect to Index Swaptions \3\ and provide further detail as to
the manner in which Index Swaptions may be exercised by Swaption
Buyers, the manner in which ICC will assign such exercises to Swaption
Sellers, and certain actions that ICC may take in the event of
technical issues. ICC proposes to make the changes effective following
Commission approval of the proposed rule change. The proposed revisions
are described in detail as follows.
---------------------------------------------------------------------------
\3\ Pursuant to an Index Swaption, one party (the ``Swaption
Buyer'') has the right (but not the obligation) to cause the other
party (the ``Swaption Seller'') to enter into an index credit
default swap transaction at a pre-determined strike price on a
specified expiration date on specified terms. In the case of Index
Swaptions cleared by ICC, the underlying index credit default swap
is limited to certain CDX and iTraxx index credit default swaps that
are accepted for clearing by ICC, and which would be automatically
cleared by ICC upon exercise of the Index Swaption by the Swaption
Buyer in accordance with its terms.
---------------------------------------------------------------------------
ICC proposes changes related to certain fallback measures included
in the Exercise Procedures. ICC proposes to amend Paragraph 2.6, which
includes procedures to address a failure of the electronic system
established by ICC for exercise (``Exercise System Failure''). In such
case, Paragraph 2.6 currently provides ICC with the following options:
(i) Cancel and reschedule the Exercise Period (i.e., the period on the
expiration date of an Index Swaption during which the Swaption Buyer
may deliver an exercise notice to ICC to exercise all or part of such
Index Swaption); (ii) determine that automatic exercise will apply;
and/or (iii) take such other action as ICC determines to be appropriate
to permit exercising parties to submit exercise notices and to permit
ICC to assign such notices. The proposed changes remove the ability to
cancel and reschedule the Exercise Period and renumber the following
options accordingly.
[[Page 40666]]
ICC maintains the ability to effect an automatic exercise under
Paragraph 2.8, which addresses the situation where ICC will
automatically exercise on the expiration date each open position (of
all exercising parties) in an Index Swaption that is determined by ICC
to be ``in the money'' on such date. Whether an Index Swaption is ``in
the money'' is currently based on the average of the end-of-day
(``EOD'') price of the underlying CDS contract on the preceding
business day and on the expiration date, and where relevant, also based
on the average of the EOD price on the preceding business day and on
the expiration date of each single name constituent contract with
respect to which an Existing Restructuring \4\ has occurred. Under the
proposed changes, whether an Index Swaption is ``in the money'' is
based on the relevant market-observed prices for the underlying CDS
contract determined by ICC using the intraday market data available to
it at the time, or the EOD price of the underlying CDS contract on the
expiration date established at any Intercontinental Exchange, Inc.
(``ICE'') clearinghouse, and where relevant, also based on the last
available ICE EOD price of each single name constituent contract with
respect to which an Existing Restructuring has occurred. Such changes
provide ICC with additional flexibility, as ICC need not wait until EOD
to execute an automatic exercise, and allow this fallback measure to
coincide with the timing of the Exercise Period.\5\
---------------------------------------------------------------------------
\4\ An Existing Restructuring is defined in ICC Rule 26R-319(c)
and is applicable upon the occurrence of an M(M)R Restructuring
Credit Event with respect to an Index Swaption for which the DC
Credit Event Announcement or Regional CDS Committee Restructuring
Announcement occurs on or prior to the expiration date.
\5\ The Exercise Period starts at the Swaption Exercise Start
Time (with respect to an Index Swaption referencing a CDX.NA index,
9:00 a.m., New York time and referencing an iTraxx Europe index,
9:00 a.m., London time) and ends at the Swaption Exercise Cut-Off
Time (with respect to an Index Swaption referencing a CDX.NA index,
11:00 a.m., New York time and referencing an iTraxx Europe index,
4:00 p.m., London time) under the Exercise Procedures.
---------------------------------------------------------------------------
(b) Statutory Basis
ICC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \6\ and the regulations
thereunder applicable to it, including the applicable standards under
Rule 17Ad-22.\7\ In particular, Section 17A(b)(3)(F) of the Act \8\
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. ICC proposes changes related to certain fallback
measures in the Exercise Procedures. Removing the option to cancel and
reschedule the Exercise Period under Paragraph 2.6 would streamline and
simplify ICC's procedures in the case of an Exercise System Failure,
thereby reducing the potential for confusion regarding ICC's practices
under such circumstances. Moreover, to provide consistency where
possible in the event of an Exercise System Failure, amended Paragraph
2.8 allows the timing of automatic exercise to coincide with the timing
of the Exercise Period. Accordingly, in ICC's view, the proposed rule
change will facilitate understanding of how unforeseen operational or
technical issues are handled and promote preparedness by market
participants to enhance the implementation of the Exercise Procedures,
thereby promoting the prompt and accurate clearing and settlement of
the contracts cleared by ICC, including Index Swaptions, 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.\9\
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\6\ 15 U.S.C. 78q-1.
\7\ 17 CFR 240.17Ad-22.
\8\ 15 U.S.C. 78q-1(b)(3)(F).
\9\ Id.
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The amendments would also satisfy relevant requirements of Rule
17Ad-22.\10\ Rule 17Ad-22(e)(1) \11\ requires each covered clearing
agency to establish, implement, maintain, and enforce written policies
and procedures reasonably designed to provide for a well-founded,
clear, transparent, and enforceable legal basis for each aspect of its
activities in all relevant jurisdictions. The Exercise Procedures
supplement the provisions of Subchapter 26R of the Rules with respect
to Index Swaptions and further ensure that ICC's Rules clearly reflect
the terms and conditions applicable to Index Swaptions. As described
above, the proposed revisions would support the clearing of Index
Swaptions by ICC by providing additional consistency to market
participants and simplifying the procedures in the case of an Exercise
System Failure. The proposed rule change would continue to support the
legal basis for ICC's clearance of Index Swaptions and operation of the
exercise and assignment process, including addressing situations where
there are operational or technical issues. As such, the proposed rule
change would satisfy the requirements of the Rule 17Ad-22(e)(1).\12\
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\10\ 17 CFR 240.17Ad-22.
\11\ 17 CFR 240.17Ad-22(e)(1).
\12\ Id.
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Rule 17Ad-22(e)(17) \13\ requires, in relevant part, each covered
clearing agency to establish, implement, maintain, and enforce written
policies and procedures reasonably designed to manage its operational
risks by (i) identifying the plausible sources of operational risk,
both internal and external, and mitigating their impact through the use
of appropriate systems, policies, procedures, and controls; and (ii)
ensuring that systems have a high degree of security, resiliency,
operational reliability, and adequate, scalable capacity. The Exercise
Procedures allow ICC to manage the operational risks associated with
the exercise and assignment process by establishing procedures for the
exercise and assignment of Index Swaptions and including fallback
measures, which help mitigate the impact from operational or technical
issues and ensure that the system has a high degree of security,
resiliency, operational reliability, and adequate, scalable capacity.
The proposed changes remove the option to cancel and reschedule an
Exercise Period, which would reduce the potential for confusion
regarding ICC's practices under such circumstances. The proposed
changes also provide ICC with additional flexibility for determining
whether an Index Swaption is ``in the money'' such that ICC need not
wait until EOD to execute an automatic exercise to provide consistency
where possible in the case of an Exercise System Failure. ICC believes
that these amendments would streamline and simplify ICC's procedures in
the event of an Exercise System Failure and help mitigate the impact
from operational or technical issues. The proposed rule change is
therefore reasonably designed to meet the requirements of Rule 17Ad-
22(e)(17).\14\
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\13\ 17 CFR 240.17Ad-22(e)(17)(i)-(ii).
\14\ 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 not necessary or appropriate in
furtherance of the purpose of the Act. The proposed changes to the
Exercise Procedures will apply uniformly across all market
participants. Therefore, ICC does not
[[Page 40667]]
believe the proposed rule change imposes any burden on competition not
necessary or appropriate in furtherance of the purpose 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 for Commission
Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-ICC-2021-016 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-2021-016. 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-2021-016 and should be
submitted on or before August 18, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15993 Filed 7-27-21; 8:45 am]
BILLING CODE 8011-01-P
