Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the Clearance of Additional Credit Default Swap Contracts, 16042-16045 [2023-05268]
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Federal Register / Vol. 88, No. 50 / Wednesday, March 15, 2023 / Notices
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the organization.17 For the reasons given
below, the Commission finds that the
Proposed Rule Change is consistent
with Section 17A(b)(3)(F) of the Act 18
and Rule 17Ad–22(e)(7) thereunder.19
A. Consistency With Section
17A(b)(3)(F) of the Act
Under Section 17A(b)(3)(F) of the Act,
LCH SA’s rules, among other things,
must be ‘‘designed to promote the
prompt and accurate clearance and
settlement of . . . derivative
agreements, contracts, and transactions
. . . .’’ 20 Based on its review of the
record, and for the reasons discussed
below, the Commission believes that
LCH SA’s changes are consistent with
Section 17A(b)(3)(F) of the Act because
they contribute to LCH SA’s
management of its liquidity risk.
LCH SA relies on the Framework to
support its management of liquidity risk
arising from a potential member default,
default of CC&G, and operational
liquidity requirements. Managing such
risks, such as through the maintenance
of liquid resources sufficient to meet
payment obligations, reduces the
likelihood that LCH would fail to make
payments when due, thereby avoiding
disruptions to the settlement of
transactions for which such payments
are due. Thus, the Framework, as a rule
of LCH SA, supports the prompt and
accurate clearance and settlement of the
derivatives transactions LCH SA clears,
including security-based swaps.
Certain of the changes LCH SA
proposes would update and clarify
existing aspects of the Framework.
These include changes meant to
accurately portray LCH SA’s banking
relationships, changes describing the
options LCH SA has to address default
situations in which there is a liquidity
shortfall in a currency different from
EUR, and changes reflecting that LCH
SA has successfully tested the transfer
of securities coming from settlement for
Italy, Spain, Germany, and Belgium
transactions. These updates and
clarifications contribute to the
effectiveness of the Framework as a tool
supporting LCH SA’s management of
liquidity risk arising from a potential
member default, default of CC&G, and
operational liquidity requirements,
which facilitates prompt and accurate
clearance and settlement.
LCH SA proposes changes designed to
control and more accurately quantify
LCH SA’s liquidity risk with regard to
its operational liquidity needs,
including changes to the Framework
that would take into account decreases
in the Default Fund, adding
arrangements governing how
extraordinary intraday liquidity
injections are approved and considered
in the operational target, and updating
the maximum level of liquidity to be
injected daily in the settlement system
to ease settlement flow for ICSDs.
Control over and accurate measurement
of liquidity risk is necessary to ensure
that LCH SA’s exposure does not exceed
its resource so that LCH SA can meet its
payment obligations on time without
disrupting settlement. Thus, these
changes promote prompt and accurate
clearance and settlement.
The Commission believes, therefore,
that the Proposed Rule Change is
consistent with the requirements of
Section 17A(b)(3)(F) of the Act.21
B. Consistency With Rule 17Ad–22(e)(7)
Under the Act
Rule 17Ad–22(e)(7) requires covered
clearing agencies to establish,
implement, maintain, and enforce
written policies and procedures
reasonably designed to measure,
monitor, and manage the liquidity risk
that arises in or is borne by the covered
clearing agency.22 In adopting Rule
17Ad–22(e)(7), the Commission
provided guidance that a covered
clearing agency should consider in
establishing and maintaining policies
and procedures that address liquidity
risk. Specifically, the Commission
stated that a covered clearing agency
should generally consider whether it
has a robust framework to manage its
liquidity risks from its participants and
other entities.23
LCH SA proposes changes that would
make the Framework more robust by
broadening the description of potential
sources of liquidity risk and describing
internal processes governing when prior
approval must be obtained for an
intraday liquidity injection. For
example, LCH SA proposes to expand
the list of actions that may cause
liquidity needs to arise, and would
adjust how LCH SA considers decreases
in the Default Fund and intraday
liquidity injections with regard to its
operational target. These proposed
changes would provide LCH SA with a
more accurate understanding of both its
liquidity needs and its operational
target. LCH SA’s increased ability to
measure its liquidity risk due to these
21 15
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(e)(7).
23 Securities Exchange Act Release No. 78961
(Sept. 28, 2016), 81 FR 70786, 70823 (Oct. 13, 2016)
(File No. S7–03–14).
17 15
U.S.C. 78s(b)(2)(C).
18 15 U.S.C. 78q–1(b)(3)(F).
19 17 CFR 240.17Ad–22(e)(7).
20 15 U.S.C. 78q–1(b)(3)(F).
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changes makes the Framework more
robust. Additionally, as noted above,
LCH SA proposes changes that would
describe internal processes governing
when prior approval must be obtained
for an intraday liquidity injection. These
changes provide for stronger internal
controls regarding liquidity risk
management. The Commission believes
that the proposed changes to LCH SA’s
Framework described in Section II A
above are consistent with Rule 17Ad–
22(e)(7) because they are strengthening
changes to the Framework and thus
support LCH SA’s ability to measure,
monitor, and manage its liquidity risk.
The Commission believes, therefore,
that the Proposed Rule Change is
consistent with the requirements of Rule
17Ad–22(e)(7) under the Act.24
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, Section 17A(b)(3)(F) of the
Act 25 and Rule 17Ad–22(e)(7)
thereunder.26
It is therefore ordered pursuant to
Section 19(b)(2) of the Act that the
Proposed Rule Change (SR–LCH SA–
2023–001) be, and hereby is,
approved.27
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–05271 Filed 3–14–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97094; File No. SR–ICC–
2023–002]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Filing of
Proposed Rule Change Relating to the
Clearance of Additional Credit Default
Swap Contracts
March 9, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934,1 and
Rule 19b–4,2 notice is hereby given that
on February 24, 2023, ICE Clear Credit
24 17
CFR 240.17Ad–22(e)(7).
U.S.C. 78q–1(b)(3)(F).
26 17 CFR 240.17Ad–22(e)(7).
27 In approving the Proposed Rule Change, the
Commission considered the proposal’s impacts on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
28 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
25 15
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Federal Register / Vol. 88, No. 50 / Wednesday, March 15, 2023 / Notices
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.
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 Rulebook (the ‘‘Rules’’) to provide
for the clearance of additional Standard
Emerging Market Sovereign CDS
contracts and Standard Western
European Sovereign Single Name CDS
contracts (collectively, the ‘‘Sovereign
Contracts’’).
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 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. 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
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(a) Purpose
The purpose of the proposed rule
change is to adopt rules that will
provide the basis for ICC to clear
additional credit default swap contracts.
ICC proposes to make such change
effective following Commission
approval of the proposed rule change.
ICC believes the addition of these
contracts will benefit the market for
credit default swaps by providing
market participants the benefits of
clearing, including reduction in
counterparty risk and safeguarding of
margin assets pursuant to clearing house
rules. Clearing of the additional
Sovereign Contracts will not require any
changes to ICC’s Risk Management
Framework or other policies and
procedures constituting rules within the
meaning of the Securities Exchange Act
of 1934 (‘‘Act’’).
ICC proposes amending Subchapter
26D and Subchapter 26I of its Rules to
provide for the clearance of additional
Sovereign Contracts, specifically the
Socialist Republic of Vietnam, Romania,
and Kingdom of Sweden. These
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additional Sovereign Contracts have
terms consistent with the other SES and
SWES Contracts approved for clearing at
ICC and governed by Subchapter 26D
and Subchapter 26I of the Rules. Minor
revisions to Subchapter 26D (Standard
Emerging Market Sovereign (‘‘SES’’)
Single Name) and 26I (Standard
Western European Sovereign (‘‘SWES’’)
Single Name) are made to provide for
clearing the additional Sovereign
Contracts. Specifically, in Rule 26D–102
(Definitions), ‘‘Eligible SES Reference
Entities’’ is modified to include the
Socialist Republic of Vietnam and
Romania in the list of specific Eligible
SES Reference Entities to be cleared by
ICC. Also, specifically, in Rule 26I–102
(Definitions), ‘‘Eligible SWES Reference
Entities’’ is modified to include the
Kingdom of Sweden in the list of
specific Eligible SWES Reference
Entities to be cleared by ICC.
(b) Statutory Basis
Section 17A(b)(3)(F) of the Act 3
requires, among other things, that the
rules of a clearing agency be designed to
promote the prompt and accurate
clearance and settlement of securities
transactions and, to the extent
applicable, derivative agreements,
contracts, and transactions; to assure the
safeguarding of securities and funds
which are in the custody or control of
ICC or for which it is responsible; and
to comply with the provisions of the Act
and the rules and regulations
thereunder. The additional Sovereign
Contracts proposed for clearing are
similar to the Sovereign Contracts
currently cleared by ICC, and will be
cleared pursuant to ICC’s existing
clearing arrangements and related
financial safeguards, protections and
risk management procedures. Clearing
of the additional Sovereign Contracts
will allow market participants an
increased ability to manage risk and
ensure the safeguarding of margin assets
pursuant to clearing house rules. ICC
believes that acceptance of the new
Sovereign Contracts, on the terms and
conditions set out in the Rules, is
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, within the meaning of Section
17A(b)(3)(F) of the Act.4
Clearing of the additional Sovereign
Contracts will also satisfy the relevant
requirements of Rule 17Ad–22,5 as set
forth in the following discussion.
Rule 17Ad–22(e)(6)(i) 6 requires 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. In terms of financial resources,
ICC will apply its existing margin
methodology to the new Sovereign
Contracts, which are similar to the
Sovereign Contracts currently cleared by
ICC. ICC believes that this model will
provide sufficient margin requirements
to cover its credit exposure to its
clearing members from clearing such
contracts, consistent with the
requirements of Rule 17Ad–22(e)(6)(i).7
Rule 17Ad–22(e)(4)(ii) 8 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. ICC believes its Guaranty
Fund, under its existing methodology,
will, together with the required initial
margin, provide sufficient financial
resources to support the clearing of the
additional Sovereign Contracts,
consistent with the requirements of Rule
17Ad–22(e)(4)(ii).9
Rule 17Ad–22(e)(17) 10 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
5 17
6 17
U.S.C. 78q–1(b)(3)(F).
4 Id.
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CFR 240.17Ad–22.
CFR 240.17Ad–22(e)(6)(i).
7 Id.
8 17
3 15
CFR 240.17Ad–22(e)(4)(ii).
9 Id.
10 17
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CFR 240.17Ad–22(e)(17)(i) and (ii).
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Federal Register / Vol. 88, No. 50 / Wednesday, March 15, 2023 / Notices
degree of security, resiliency,
operational reliability, and adequate,
scalable capacity. ICC believes that its
existing operational and managerial
resources will be sufficient for clearing
of the additional Sovereign Contracts,
consistent with the requirements of Rule
17Ad–22(e)(17),11 as the new contracts
are substantially the same from an
operational perspective as existing
contracts.
Rule 17Ad–22(e)(8), (9) and (10) 12
requires each covered clearing agency to
establish, implement, maintain, and
enforce written policies and procedures
reasonably designed to define the point
at which settlement is final to be no
later than the end of the day on which
payment or obligation is due and, where
necessary or appropriate, intraday or in
real time; conduct its money settlements
in central bank money, where available
and determined to be practical by the
Board, and minimize and manage credit
and liquidity risk arising from
conducting its money settlements in
commercial bank money if central bank
money is not used; and establish and
maintain transparent written standards
that state its obligations with respect to
the delivery of physical instruments,
and establish and maintain operational
practices that identify, monitor, and
manage the risks associated with such
physical deliveries. ICC will use its
existing rules, settlement procedures
and account structures for the new
Sovereign Contracts, which are similar
to the SWES and SES Contracts
currently cleared by ICC, consistent
with the requirements of Rule 17Ad–
22(e)(8), (9) and (10) 13 as to the finality
and accuracy of its daily settlement
process and addressing the risks
associated with physical deliveries.
Rule 17Ad–22(e)(2)(i) and (v) 14
requires each covered clearing agency to
establish, implement, maintain, and
enforce written policies and procedures
reasonably designed to provide for
governance arrangements that are clear
and transparent and specify clear and
direct lines of responsibility. ICC
determined to accept the additional
Sovereign Contracts for clearing in
accordance with its governance process,
which included review of the contract
and related risk management
considerations by the ICC Risk
Committee and approval by its Board.
These governance arrangements
continue to be clear and transparent,
such that information relating to the
assignment of responsibilities and the
requisite involvement of the ICC Board
and committees is clearly detailed in the
ICC Rules and policies and procedures,
consistent with the requirements of Rule
17Ad–22(e)(2)(i) and (v).15
Rule 17Ad–22(e)(13) 16 requires each
covered clearing agency to establish,
implement, maintain, and enforce
written policies and procedures
reasonably designed to ensure it has the
authority and operational capacity to
take timely action to contain losses and
liquidity demands and continue to meet
its obligations by, at a minimum,
requiring its participants and, when
practicable, other stakeholders to
participate in the testing and review of
its default procedures, including any
close-out procedures, at least annually
and following material changes thereto.
ICC will apply its existing default
management policies and procedures for
the additional Sovereign Contracts. ICC
believes that these procedures allow for
it to take timely action to contain losses
and liquidity demands and to continue
meeting its obligations in the event of
clearing member insolvencies or
defaults in respect of the additional
single name, in accordance with Rule
17Ad–22(e)(13).17
(B) Clearing Agency’s Statement on
Burden on Competition
ICC does not believe the proposed
amendments will have any impact, or
impose any burden, on competition not
necessary or appropriate in furtherance
of the purposes of the Act. As discussed
above, the purpose of the proposed rule
change is to adopt rules that will
provide the basis for ICC to clear
additional credit default swap contracts.
The additional Sovereign Contracts will
be available to all ICC participants for
clearing. The clearing of the additional
Sovereign Contracts by ICC does not
preclude the offering of the additional
Sovereign Contracts for clearing by
other market participants. Accordingly,
ICC does not believe that clearance of
the additional Sovereign Contracts will
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change
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.
11 Id.
12 17
CFR 240.17Ad–22(e)(8), (9) and (10).
13 Id.
14 17
15 Id.
16 17
CFR 240.17Ad–22(e)(2)(i) and (v).
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CFR 240.17Ad–22(e)(13).
17 Id.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change 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–2023–002 on the subject line.
Paper Comments
Send paper comments in triplicate to
Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–ICC–2023–002. 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 such
filings will also be available for
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Federal Register / Vol. 88, No. 50 / Wednesday, March 15, 2023 / Notices
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–2023–002 and
should be submitted on or before April
5, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–05268 Filed 3–14–23; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–97093; File No. SR–
PEARL–2023–11]
Self-Regulatory Organizations: Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change To Amend
Exchange Rule 2622, Limit Up-Limit
Down Plan and Trading Halts
March 9, 2023.
Pursuant to the provisions of 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 February 28, 2023, MIAX PEARL,
LLC (‘‘MIAX Pearl’’ or the ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange amend Exchange Rule
2622 to establish common criteria and
procedures for halting and resuming
trading in equity securities on the
Exchange’s equity trading platform
(referred to herein as ‘‘MIAX Pearl
Equities’’) in the event of regulatory or
operational issues, and reorganize the
text of the rule.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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
SECURITIES AND EXCHANGE
COMMISSION
18 17
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/pearl at MIAX Pearl’s principal
office, and at the Commission’s Public
Reference Room.
1. Purpose
In conjunction with adoption of an
amended Nasdaq UTP Plan proposed by
its participants (‘‘Amended Nasdaq UTP
Plan’’),3 the Exchange is amending Rule
2622 to integrate several definitions and
concepts from the Amended Nasdaq
UTP Plan and to reorganize the rule in
light of the Exchange’s experience with
applying the rule over many years as a
national securities exchange.4 The
3 On February 11, 2021, the Nasdaq UTP Plan
participants filed Amendment 50 to the Plan, to
revise provisions governing regulatory and
operational halts. See Letter from Robert Brooks,
Chairman, UTP Operating Committee, Nasdaq UTP
Plan, to Vanessa Countryman, Secretary, Securities
and Exchange Commission, dated February 11,
2021. The Nasdaq UTP Plan subsequently filed two
partial amendments to the 50th Amendment, on
March 31, 2021 and on April 7, 2021. The SEC
approved the amendments on May 28, 2021. See
Securities Exchange Act Release No. 34–92071
(May 28, 2021), 86 FR 29846 (June 3, 2021) (S7–24–
89). The Amended Nasdaq UTP Plan includes
provisions requiring participant self-regulatory
organizations (‘‘SROs’’) to honor a Regulatory Halt
declared by the Primary Listing Market. The
provisions in the Nasdaq UTP Plan, and the plan
for consolidation of data for non-Nasdaq-listed
securities, the Consolidated Tape System and
Consolidated Quotations System (collectively, the
‘‘CTA/CQS Plan’’), include provisions similar to the
changes proposed by the Exchange in this filing.
4 The Exchange notes that this proposed rule
change is based on a similar proposed rule change
recently filed by Nasdaq PHLX LLC (‘‘Phlx’’). See
Securities Exchange Act Release No. 96574
(December 22, 2022), 87 FR 80213 (December 29,
2022) (SR–Phlx–2022–49). The Exchange also notes
The Nasdaq Stock Market, LLC (‘‘Nasdaq’’) filed a
similar proposed rule change with the Commission.
See Securities Exchange Act Release No. 94370
(March 7, 2022), 87 FR 14071 (March 11, 2022);
Securities Exchange Act Release No. 94838 (May 3,
2022), 87 FR 27683 (May 9, 2022). The Commission
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16045
Exchange proposes to reorganize and
amend Rule 2622, entitled Limit UpLimit Down Plan and Trading Halts, on
MIAX Pearl Equities. The rule sets forth
the Exchange’s authority to halt trading
under various circumstances. The
Exchange is a participant of the
transaction reporting plan governing
Tape C Securities (‘‘Nasdaq UTP
Plan’’).5 As part of these changes, the
Exchange will amend categories of
regulatory and operational halts,
improve the rule’s clarity, adopt defined
terms from the Amended Nasdaq UTP
Plan, and relocate certain existing
provisions within Exchange Rule 2622.
Background
The Exchange has been working with
other SROs to establish common criteria
and procedures for halting and
resuming trading in equity securities in
the event of regulatory or operational
issues. These common standards are
designed to ensure that events which
might impact multiple exchanges are
handled in a consistent manner that is
transparent. The Exchange believes that
implementation of these common
standards will assist the SROs in
maintaining fair and orderly markets.
Notwithstanding the development of
these common standards, the Exchange
will retain discretion in certain
instances as to whether and how to
handle halts, as is discussed below.
Every U.S.-listed equity security has
its primary listing on a specific stock
exchange that is responsible for a
number of regulatory functions.6 These
approved the proposed rule change on June 8, 2022.
See Securities Exchange Act Release No. 95069
(June 8, 2022), 87 FR 36018 (June 14, 2022). The
Exchange’s proposal provides the Exchange with
less authority to declare halts in the event of
regulatory or operational issues than under
Nasdaq’s proposal because the Exchange, unlike
Nasdaq, is not a Primary Listing Market. Given the
Exchange’s status as a non-Primary Listing Market,
certain definitions and concepts from the Amended
Nasdaq UTP Plan, integrated in Nasdaq’s proposal,
are not included herein.
5 Each transaction reporting plan has a securities
information processor (‘‘SIP’’) responsible for
consolidation of information for the plan’s
securities, pursuant to Rule 603 of Regulation NMS.
The transaction reporting plan for Nasdaq-listed
securities is known as The Joint Self-Regulatory
Organization Plan Governing the Collection,
Consolidation and Dissemination of Quotation and
Transaction Information for Nasdaq-Listed
Securities Traded on Exchanges on an Unlisted
Trading Privilege Basis or the ‘‘Nasdaq UTP Plan.’’
Pursuant to the Nasdaq UTP Plan, the UTP SIP,
which is Nasdaq, consolidates order and trade data
from all markets trading Nasdaq-listed securities.
The Exchange uses the term ‘‘UTP SIP’’ herein
when referring specifically to the SIP responsible
for consolidation of information in Nasdaq-listed
securities.
6 The Exchange is proposing to adopt Primary
Listing Market as a new term, defined in Nasdaq
UTP Plan, Section X.A.8, as follows: ‘‘[T]he
E:\FR\FM\15MRN1.SGM
Continued
15MRN1
]]>Agencies
[Federal Register Volume 88, Number 50 (Wednesday, March 15, 2023)]
[Notices]
[Pages 16042-16045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05268]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97094; File No. SR-ICC-2023-002]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change Relating to the Clearance of Additional
Credit Default Swap Contracts
March 9, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934,\1\ and Rule 19b-4,\2\ notice is hereby given that on February 24,
2023, ICE Clear Credit
[[Page 16043]]
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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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 Rulebook (the ``Rules'') to provide for the clearance of additional
Standard Emerging Market Sovereign CDS contracts and Standard Western
European Sovereign Single Name CDS contracts (collectively, the
``Sovereign Contracts'').
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 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. 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
The purpose of the proposed rule change is to adopt rules that will
provide the basis for ICC to clear additional credit default swap
contracts. ICC proposes to make such change effective following
Commission approval of the proposed rule change. ICC believes the
addition of these contracts will benefit the market for credit default
swaps by providing market participants the benefits of clearing,
including reduction in counterparty risk and safeguarding of margin
assets pursuant to clearing house rules. Clearing of the additional
Sovereign Contracts will not require any changes to ICC's Risk
Management Framework or other policies and procedures constituting
rules within the meaning of the Securities Exchange Act of 1934
(``Act'').
ICC proposes amending Subchapter 26D and Subchapter 26I of its
Rules to provide for the clearance of additional Sovereign Contracts,
specifically the Socialist Republic of Vietnam, Romania, and Kingdom of
Sweden. These additional Sovereign Contracts have terms consistent with
the other SES and SWES Contracts approved for clearing at ICC and
governed by Subchapter 26D and Subchapter 26I of the Rules. Minor
revisions to Subchapter 26D (Standard Emerging Market Sovereign
(``SES'') Single Name) and 26I (Standard Western European Sovereign
(``SWES'') Single Name) are made to provide for clearing the additional
Sovereign Contracts. Specifically, in Rule 26D-102 (Definitions),
``Eligible SES Reference Entities'' is modified to include the
Socialist Republic of Vietnam and Romania in the list of specific
Eligible SES Reference Entities to be cleared by ICC. Also,
specifically, in Rule 26I-102 (Definitions), ``Eligible SWES Reference
Entities'' is modified to include the Kingdom of Sweden in the list of
specific Eligible SWES Reference Entities to be cleared by ICC.
(b) Statutory Basis
Section 17A(b)(3)(F) of the Act \3\ requires, among other things,
that the rules of a clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions and,
to the extent applicable, derivative agreements, contracts, and
transactions; to assure the safeguarding of securities and funds which
are in the custody or control of ICC or for which it is responsible;
and to comply with the provisions of the Act and the rules and
regulations thereunder. The additional Sovereign Contracts proposed for
clearing are similar to the Sovereign Contracts currently cleared by
ICC, and will be cleared pursuant to ICC's existing clearing
arrangements and related financial safeguards, protections and risk
management procedures. Clearing of the additional Sovereign Contracts
will allow market participants an increased ability to manage risk and
ensure the safeguarding of margin assets pursuant to clearing house
rules. ICC believes that acceptance of the new Sovereign Contracts, on
the terms and conditions set out in the Rules, is 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, within the meaning of Section 17A(b)(3)(F) of the
Act.\4\
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\3\ 15 U.S.C. 78q-1(b)(3)(F).
\4\ Id.
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Clearing of the additional Sovereign Contracts will also satisfy
the relevant requirements of Rule 17Ad-22,\5\ as set forth in the
following discussion.
---------------------------------------------------------------------------
\5\ 17 CFR 240.17Ad-22.
---------------------------------------------------------------------------
Rule 17Ad-22(e)(6)(i) \6\ requires 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. In terms of financial resources, ICC will apply its
existing margin methodology to the new Sovereign Contracts, which are
similar to the Sovereign Contracts currently cleared by ICC. ICC
believes that this model will provide sufficient margin requirements to
cover its credit exposure to its clearing members from clearing such
contracts, consistent with the requirements of Rule 17Ad-
22(e)(6)(i).\7\
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\6\ 17 CFR 240.17Ad-22(e)(6)(i).
\7\ Id.
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Rule 17Ad-22(e)(4)(ii) \8\ 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.
ICC believes its Guaranty Fund, under its existing methodology, will,
together with the required initial margin, provide sufficient financial
resources to support the clearing of the additional Sovereign
Contracts, consistent with the requirements of Rule 17Ad-
22(e)(4)(ii).\9\
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\8\ 17 CFR 240.17Ad-22(e)(4)(ii).
\9\ Id.
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Rule 17Ad-22(e)(17) \10\ 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
[[Page 16044]]
degree of security, resiliency, operational reliability, and adequate,
scalable capacity. ICC believes that its existing operational and
managerial resources will be sufficient for clearing of the additional
Sovereign Contracts, consistent with the requirements of Rule 17Ad-
22(e)(17),\11\ as the new contracts are substantially the same from an
operational perspective as existing contracts.
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\10\ 17 CFR 240.17Ad-22(e)(17)(i) and (ii).
\11\ Id.
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Rule 17Ad-22(e)(8), (9) and (10) \12\ requires each covered
clearing agency to establish, implement, maintain, and enforce written
policies and procedures reasonably designed to define the point at
which settlement is final to be no later than the end of the day on
which payment or obligation is due and, where necessary or appropriate,
intraday or in real time; conduct its money settlements in central bank
money, where available and determined to be practical by the Board, and
minimize and manage credit and liquidity risk arising from conducting
its money settlements in commercial bank money if central bank money is
not used; and establish and maintain transparent written standards that
state its obligations with respect to the delivery of physical
instruments, and establish and maintain operational practices that
identify, monitor, and manage the risks associated with such physical
deliveries. ICC will use its existing rules, settlement procedures and
account structures for the new Sovereign Contracts, which are similar
to the SWES and SES Contracts currently cleared by ICC, consistent with
the requirements of Rule 17Ad-22(e)(8), (9) and (10) \13\ as to the
finality and accuracy of its daily settlement process and addressing
the risks associated with physical deliveries.
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\12\ 17 CFR 240.17Ad-22(e)(8), (9) and (10).
\13\ Id.
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Rule 17Ad-22(e)(2)(i) and (v) \14\ requires each covered clearing
agency to establish, implement, maintain, and enforce written policies
and procedures reasonably designed to provide for governance
arrangements that are clear and transparent and specify clear and
direct lines of responsibility. ICC determined to accept the additional
Sovereign Contracts for clearing in accordance with its governance
process, which included review of the contract and related risk
management considerations by the ICC Risk Committee and approval by its
Board. These governance arrangements continue to be clear and
transparent, such that information relating to the assignment of
responsibilities and the requisite involvement of the ICC Board and
committees is clearly detailed in the ICC Rules and policies and
procedures, consistent with the requirements of Rule 17Ad-22(e)(2)(i)
and (v).\15\
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\14\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
\15\ Id.
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Rule 17Ad-22(e)(13) \16\ requires each covered clearing agency to
establish, implement, maintain, and enforce written policies and
procedures reasonably designed to ensure it has the authority and
operational capacity to take timely action to contain losses and
liquidity demands and continue to meet its obligations by, at a
minimum, requiring its participants and, when practicable, other
stakeholders to participate in the testing and review of its default
procedures, including any close-out procedures, at least annually and
following material changes thereto. ICC will apply its existing default
management policies and procedures for the additional Sovereign
Contracts. ICC believes that these procedures allow for it to take
timely action to contain losses and liquidity demands and to continue
meeting its obligations in the event of clearing member insolvencies or
defaults in respect of the additional single name, in accordance with
Rule 17Ad-22(e)(13).\17\
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\16\ 17 CFR 240.17Ad-22(e)(13).
\17\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
ICC does not believe the proposed amendments will have any impact,
or impose any burden, on competition not necessary or appropriate in
furtherance of the purposes of the Act. As discussed above, the purpose
of the proposed rule change is to adopt rules that will provide the
basis for ICC to clear additional credit default swap contracts. The
additional Sovereign Contracts will be available to all ICC
participants for clearing. The clearing of the additional Sovereign
Contracts by ICC does not preclude the offering of the additional
Sovereign Contracts for clearing by other market participants.
Accordingly, ICC does not believe that clearance of the additional
Sovereign Contracts will impose any burden on competition not necessary
or appropriate in furtherance of the purposes of the Act.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
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
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-2023-002 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-ICC-2023-002. 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 such filings will also be available for
[[Page 16045]]
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-2023-002 and should be
submitted on or before April 5, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-05268 Filed 3-14-23; 8:45 am]
BILLING CODE 8011-01-P
