Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change, as Modified by Amendment No. 1, Relating to the ICC Recovery Plan and the ICC Wind-Down Plan, 63997-64000 [2024-17282]
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establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s website (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
with the requirements of 39 CFR
3011.301.1
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern Market Dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3030, and 39
CFR part 3040, subpart B. For request(s)
that the Postal Service states concern
Competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3035, and
39 CFR part 3040, subpart B. Comment
deadline(s) for each request appear in
section II.
II. Docketed Proceeding(s)
1. Docket No(s).: MC2024–464 and
CP2024–471; Filing Title: USPS Request
to Add Priority Mail Express, Priority
Mail & USPS Ground Advantage
Contract 189 to Competitive Product
List and Notice of Filing Materials
Under Seal; Filing Acceptance Date:
July 31, 2024; Filing Authority: 39
U.S.C. 3642, 39 CFR 3040.130 through
3040.135, and 39 CFR 3035.105; Public
Representative: Almaroof Agoro;
Comments Due: August 8, 2024.
2. Docket No(s).: MC2024–465 and
CP2024–472; Filing Title: USPS Request
to Add Priority Mail Express, Priority
Mail & USPS Ground Advantage
Contract 190 to Competitive Product
List and Notice of Filing Materials
Under Seal; Filing Acceptance Date:
July 31, 2024; Filing Authority: 39
U.S.C. 3642, 39 CFR 3040.130 through
3040.135, and 39 CFR 3035.105; Public
Representative: Almaroof Agoro;
Comments Due: August 8, 2024.
3. Docket No(s).: MC2024–466 and
CP2024–473; Filing Title: USPS Request
to Add Priority Mail & USPS Ground
Advantage Contract 293 to Competitive
Product List and Notice of Filing
Materials Under Seal; Filing Acceptance
Date: July 31, 2024; Filing Authority: 39
U.S.C. 3642, 39 CFR 3040.130 through
3040.135, and 39 CFR 3035.105; Public
Representative: Gregory S. Stanton;
Comments Due: August 8, 2024.
1 See Docket No. RM2018–3, Order Adopting
Final Rules Relating to Non-Public Information,
June 27, 2018, Attachment A at 19–22 (Order No.
4679).
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4. Docket No(s).: MC2024–467 and
CP2024–474; Filing Title: USPS Request
to Add Priority Mail & USPS Ground
Advantage Contract 294 to Competitive
Product List and Notice of Filing
Materials Under Seal; Filing Acceptance
Date: July 31, 2024; Filing Authority: 39
U.S.C. 3642, 39 CFR 3040.130 through
3040.135, and 39 CFR 3035.105; Public
Representative: Gregory S. Stanton;
Comments Due: August 8, 2024.
This Notice will be published in the
Federal Register.
Jennie L. Jbara,
Primary Certifying Official.
[FR Doc. 2024–17345 Filed 8–5–24; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100620; File No. SR–ICC–
2024–004]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Order Approving
Proposed Rule Change, as Modified by
Amendment No. 1, Relating to the ICC
Recovery Plan and the ICC Wind-Down
Plan
July 31, 2024.
I. Introduction
On June 4, 2024, ICE Clear Credit LLC
(‘‘ICC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(2) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend its
Recovery Plan and Wind-Down Plan.
On June 6, 2024, ICC filed Amendment
No. 1 to the proposed rule change to
make certain changes to Form 19b–4
and Exhibit 1A.3 The proposed rule
change, as modified by Amendment No.
1, was published for comment in the
Federal Register on June 21, 2024.4 The
Commission did not receive comments
regarding the proposed rule change. For
the reasons discussed below, the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Amendment No. 1 inserts a bullet point to the
‘‘ICC Recovery Plan’’ paragraph of the Form 19b–
4 and the Exhibit 1A with the following text,
‘‘description of Guaranty Fund Replenishment in
Section VIII.B;’’. Amendment No. 1 also removes
the same bullet point from the ‘‘ICC Wind-Down
Plan’’ paragraph of the Form 19b–4 and Exhibit 1A.
4 Self-Regulatory Organizations; ICE Clear Credit
LLC; Notice of Filing of Proposed Rule Change, as
Modified by Amendment No. 1, Relating to the ICC
Recovery Plan and the ICC Wind-Down Plan;
Exchange Act Release No. 100335 (June 14, 2024),
89 FR 52138 (June 21, 2024) (File No. SR–ICC–
2024–004) (‘‘Notice’’).
2 17
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63997
Commission is approving the proposed
rule change.
II. Description of the Proposed Rule
Change
A. Background
ICC is registered with the Commission
as a clearing agency for the purpose of
clearing Credit Default Swap (‘‘CDS’’)
contracts.5 The proposed rule change
would amend both the Recovery Plan
and the Wind-Down Plan, which serve
as plans for the recovery and orderly
wind-down of ICC, respectively, if such
recovery or wind-down is necessitated
by credit losses, liquidity shortfalls,
losses from general business risk, or any
other losses incurred by ICC. The
Recovery Plan is designed to establish
ICC’s actions to maintain its viability as
a going concern by addressing any
uncovered credit loss, liquidity
shortfall, capital inadequacy, or
business, operational or other structural
weakness that threatens ICC’s viability
as a going concern. The Wind-Down
Plan is designed to establish how ICC
could be wound down in an orderly
manner in the event that it cannot
continue as a going concern.
B. Recovery Plan
ICC proposes general updates and
edits to its Recovery Plan to promote
clarity and to ensure that the
information in it is current. The
proposed amendments to the Recovery
Plan reflect and relate to changes that
impacted ICC in the past year. To that
end, the current Recovery Plan includes
in the introduction a disclaimer that,
unless otherwise specified, all
information provided in the plan is
current as of December 31, 2022. The
proposed rule change would update that
date to December 31, 2023.
The proposed amendments reflect and
relate to changes that impacted ICC in
the past year, including the addition of
new ICC clearing participants (‘‘CP’’)
(Intesa Sanpaolo S.P.A. and Royal Bank
of Canada), the addition of British
Pounds Sterling cash (‘‘GBP’’) as
acceptable client-related initial margin,
the removal of references to ICE Clear
Europe Limited (‘‘ICEEU’’) CDS clearing
as that service has closed, and a change
to the Managers of the ICC Board of
Managers (the ‘‘Board’’).
Section IV covers key recovery
elements. Within this section, the
proposed rule change would update
clearing participation (IV.B),
management and governance (IV.C), key
5 Capitalized terms not otherwise defined herein
have the meanings assigned to them in ICC’s
Recovery Plan, Wind-Down Plan, or Clearing Rules,
as applicable.
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performance metrics (IV.D), and
collateral management (IV.E). In Section
IV.B, ICC proposes to add new CP Intesa
Sanpaolo S.p.A and CP Royal Bank of
Canada. In Section IV.C, ICC would
update the description of the nonindependent managers appointed by ICE
US Holding Company L.P. The
proposed rule change would amend the
description to remove Christopher
Edmonds as an independent director of
ICE Inc. He is replaced by Elizabeth
King, Head of Global Clearing and Chief
Regulatory Officer at Intercontinental
Exchange, Inc. Currently, Sumit Roy, an
independent manager nominated by the
ICC risk committee and appointed by
ICE Holding, is listed as a Senior
Portfolio Manager at Magnetar Capital.
He is now listed as former Senior
Portfolio Manager at Magnetar Capital.
In Section IV.D, ICC would update its
revenues, volumes, and expenses for
years 2022 and 2023.
In Sections IV.B and IV.E, ICC would
make changes to collateral valuation 6
and to reflect the addition of GBP as
acceptable margin,7 which reflects
recent ICC rule changes. In Section IV.B,
ICC added language stating that
acceptable forms of collateral for initial
margin now include GBP. In response to
the addition of GBP, ICC proposes to
revise Section IV.E to clarify the
description of ICC’s collateral valuation
process to cover all collateral types
accepted by ICC. ICC previously made
changes to its collateral valuation policy
under its treasury policy. First, ICC
changed the the way it values the
collateral that Clearing Participants
provide to ICC to cover their margin and
guaranty fund requirements. Second,
ICC made changes to address
circumstances under which it would
use a foreign exchange facility to
convert one currency to another. ICC
made changes to Section IV.E to amend
its collateral valuation to reflect those
changes.
The proposed rule change also would
amend Section VI of the Recovery Plan,
which covers interconnections and
interdependencies. Specifically, ICC
proposes to amend the sections covering
operational (VI.A) and financial (VI.B)
interdependencies. The proposed rule
change would update the Material Legal
6 Self-Regulatory Organizations; ICE Clear Credit
LLC; Order Approving Proposed Rule Change
Relating to to ICC’s Treasury Operations Policies
and Procedures, Exchange Act Release No. 98572
(Sep. 27, 2023); 88 FR 68211 (Oct. 3, 2023) (SR–
ICC–2023–013).
7 Self-Regulatory Organizations; ICE Clear Credit
LLC; Order Approving Proposed Rule Change
Relating to British Pounds Sterling as Client-Related
Margin, Exchange Act Release No. 97489 (May 11,
2023); 88 FR 31571 (May 17, 2023) (SR–ICC–2023–
003).
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Entity (‘‘MLE’’) Interrconnections Chart
in the introduction to Section VI. The
proposed updates to Section VI.A would
reflect changes in the last year and
would update the descriptions of ICC’s
personnel and facilities, as well as its
in-house systems and third-party
system. Section VI.B currently includes
a ‘‘Counterparty Chart’’ that lists all of
ICC’s CPs and indicates which
function(s) each CP performs (i.e.,
Clearing Participant, Custodian,
Depository, etc.). The proposed rule
change would update this chart to
reflect the addition of new CPs as
discussed above.
The proposed rule change would
update the description of monitoring
mechanisms for CP default in Section
VII.A of the Recovery Plan, which
addresses ICC’s stress scenarios. In
Section VII.A, ICC also proposes the
addition of a citation to Exchange Act
Rule 17Ad–22(e)(4) (17 CFR 240.17Ad–
22(e)(4)) to reflect and reference the
applicable regulations more accurately.
The proposed rule change would
make several updates to Section VIII of
the Recovery Plan, which addresses
ICC’s recovery tools, primarily in
Section VIII.B. In Section VIII.B, the
proposed rule change first would add a
reference to ICC’s initial auction
procedures. In various subsections of
Section VIII.B, the proposed rule change
would update financial information to
reflect the current information available.
Within Section VIII, in relation to direct
infusion of cash to ICC from Parent/ICE
Group, ICC would update the current
description of ICC’s, ICE Inc.’s, and ICE
Group’s respective year-end cash
balances to reflect their most current
consolidated balance sheets and update
the management contact. ICC also adds
‘‘and SEC’’ in referencing initial margin
requirements and financial resource
requirements of the CFTC, so that it now
also includes SEC regulations. Section X
of the Recovery Plan identifies ICC’s
Financial Resources for Recovery. The
proposed rule change would update the
expected costs of recovery and winddown, including expenses related to
legal services, consulting, operations,
regulatory capital requirements, and
other wind-down costs to reflect current
estimates and expenses.
Section XI of the Recovery Plan
(financial information) provides the
balance sheet and income statement for
ICC and the consolidated balance sheet
and income statement for ICE Inc. and
its subsidiaries. The proposed rule
change would update the financial
information in this section to reflect the
most current financial statements for
both entities.
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In Section XIII, which covers
management information systems, the
proposed rule change would update the
key ICC reports and descriptions to
remove references to reports that ICC no
longer uses and add references to new
reports. The proposed rule change
would update Section XI, Appendix C,
which covers banking institutions and
the percentage of the guaranty fund,
customer margin, and house margin
held at each institution as of December
31, 2021. ICC proposes to change the
date to December 31, 2023 and update
the percentage of holdings for the
guaranty fund, customer margin, and
house margin at each banking
institution. Finally, the proposed rule
change would make non-substantive
typographical fixes in the ICC Recovery
Plan, including grammatical and
formatting changes.
C. Wind-Down Plan
ICC proposes updates and edits to the
Wind-Down Plan that reflect and relate
to changes that have impacted ICC in
the past year, as well as general updates
and edits to promote clarity and to
ensure that the information provided is
current. The changes that impacted ICC
in the past year include the addition of
new CPs (Intesa Sanpaolo S.p.A. and
Royal Bank of Canada), the removal of
references to ICEEU as that service has
closed, and a change to the Managers of
the Board.
The current Wind-Down Plan
includes in the introduction a
disclaimer that, unless otherwise
specified, all information provided in
the plan is current as of December 31,
2022. The proposed rule change would
update that date to December 31, 2023.
Section II of the Wind-Down Plan is
an overview of the structure of ICC.
Section II.A addresses ownership of
ICC. ICC states that, within the ICE
Group’s activities, there are eight
derivatives exchanges and a total of six
clearing houses including ICC. ICC
proposes to remove the word ‘‘to.’’
Section IV addresses membership and
ICC governance. The proposed rule
change would amend Section IV.B to
reflect that Christopher Edmonds was
not reappointed and Elizabeth King, as
discussed above, was appointed as an
independent director instead.
Additionally, the proposed rule change
would update Section IV.A to reflect the
addition of two new CPs, as discussed
above.
Section VII of the Wind-Down Plan
discusses ICC’s interconnections and
interdependencies, and the impact of
each on the Wind-Down Plan. For
example, as explained in the
introduction to this section, ICC relies
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on affiliated entities for certain
operational and financial services. The
Wind-Down Plan considers certain of
these affiliated entities to be ‘‘Material
Legal Entities.’’ As defined in the WindDown Plan, a Material Legal Entity is a
legal entity that is significant to ICC’s
activities and the delivery of clearing
services.
The Wind-Down Plan identifies ICE
Inc. as ICC’s sole Material Legal Entity.
Currently, the Wind-Down Plan
explains that ICC relies on ICE Inc. for
certain shared services, such as
accounting, HR, facilities, and
intellectually property. The proposed
rule change would expand this list of
examples to include corporate finance,
internal audit, enterpretrise risk
management, and systems operations.
These additions would help ensure that
the Wind-Down Plan describes the
current scope of services provided to
ICC by ICE Inc.
Section VII.C describes ICC’s
operational services, including the
facilities where it operates. The
proposed rule change would add to the
description of facilities a description of
ICC’s office in Jacksonville, Florida.
This description would include a list of
the activities performed out of the
Jacksonville facility, such as legal and
compliance functions. Also in VII.C, the
proposed rule change would update the
number of ICC employees to reflect the
current headcount, including
breakdowns by various functions.
Finally, the proposed rule change would
update the table of ICC’s third-party
systems and the table of ICC’s in-house
systems to remove certain systems no
longer in use.
Section VII.D describes financial
services provided to ICC. Section VII.D
contains a chart of ICC’s counterparties
and categorizes these counterparties by
type (such as CP, custodian, investment
manager). The proposed rule change
would update this chart to reflect the
new CPs noted above.
Section IX of the Wind-Down Plan
addresses financial resources to support
wind-down. ICC would update this
section to reflect current financial
information, including revenues and
operating costs.
Finally, the proposed rule change
would update Section XI, Appendix C,
which covers banking institutions and
the percentage of the guaranty fund,
customer margin, and house margin
held at each institution as of December
31, 2021. ICC proposes to change the
date to December 31, 2023 and update
the percentage of holdings for the
guaranty fund, customer margin, and
house margin at each banking
institution.
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III. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Act directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that such
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to such organization.8 Under
the Commission’s Rules of Practice, the
‘‘burden to demonstrate that a proposed
rule change is consistent with the
Exchange Act and the rules and
regulations issued thereunder . . . is on
the self-regulatory organization [‘SRO’]
that proposed the rule change.’’ 9
The description of a proposed rule
change, its purpose and operation, its
effect, and a legal analysis of its
consistency with applicable
requirements must all be sufficiently
detailed and specific to support an
affirmative Commission finding,10 and
any failure of an SRO to provide this
information may result in the
Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Exchange Act and the
applicable rules and regulations.11
Moreover, ‘‘unquestioning reliance’’ on
an SRO’s representations in a proposed
rule change is not sufficient to justify
Commission approval of a proposed rule
change.12
After carefully considering the
proposed rule change, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Exchange Act and the rules and
regulations thereunder applicable to
ICC. For the reasons given below, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Section
17A(b)(3)(F) of the Act 13 and Rule
17Ad–22(e)(3)(ii).14
A. Consistency With Section
17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act
requires, among other things, that the
rules of ICC be designed, to promote the
prompt and accurate clearance and
settlement of securities transactions
and, to the extent applicable, derivative
agreements, contracts, and transactions,
as well as to assure the safeguarding of
8 15
U.S.C. 78s(b)(2)(C).
700(b)(3), Commission Rules of Practice, 17
CFR 201.700(b)(3).
10 Id.
11 Id.
12 Susquehanna Int’l Group, LLP v. Securities and
Exchange Commission, 866 F.3d 442, 447 (D.C. Cir.
2017) (‘‘Susquehanna’’).
13 15 U.S.C. 78q–1(b)(3)(F).
14 17 CFR 240.17Ad–22(e)(3)(ii).
9 Rule
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63999
securities and funds which are in the
custody or control of ICC or for which
it is responsible.15
As noted above, the proposed rule
change primarily would update the
Recovery Plan and Wind-Down Plan
with current information about ICC’s
facilities, finances, and Board. By
providing the most current information
for ICC’s revenues, volumes, and
expenses, the proposed rule change will
support ICC’s ability to monitor its
finances and compare its regulatory
capital to its estimated recovery and
wind-down costs. This in turn will help
ensure ICC has the financial resources to
promptly and accurately clear and settle
transactions during recovery and, if
necessary, conduct an orderly winddown.
Further, updating the Counterparty
Chart to reflect both new CPs and the
addition of GBP as acceptable margin
will generally support those utilizing
the Plans by providing users of the
Plans with a correct overview of ICC’s
CPs and currencies accepted. These
proposed changes would strengthen
both plans by ensuring those utilizing
them have information necessary to
carry out recovery or an orderly winddown, which in turn should help ICC to
promptly and accurately clear and settle
transactions during recovery and, if
necessary, conduct an orderly winddown.
ICC’s CPs provide cash and securities
to ICC to satisfy their various guaranty
fund and margin requirements. ICC in
turn allocates these funds and securities
among different financial institutions,
including its accounts at the Federal
Reserve Bank of Chicago and at certain
depository institutions. ICC proposes to
update the description of the allocation
of funds among these acccounts to
reflect current allocations. Like the
other changes discussed above, these
proposed changes would strengthen the
plans by providing a correct overview of
ICC’s usage of its financial accounts.
Users of the plans could utilize this
information to carry out recovery or an
orderly wind-down. Thus, these
changes would help ICC to promptly
and accurately clear and settle
transactions during recovery and, if
necessary, conduct an orderly winddown.
For the reasons stated above, the
Commission believes that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Section
17A(b)(3)(F) of the Act.16
15 15
16 15
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U.S.C. 78q–1(b)(3)(F).
U.S.C. 78q–1(b)(3)(F).
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B. Consistency With Rule 17Ad–
22(e)(3)(ii)
SECURITIES AND EXCHANGE
COMMISSION
Rule 17Ad–22(e)(3)(ii) requires ICC to
establish, implement, maintain, and
enforce written policies and procedures
reasonably designed to maintain a
sound risk management framework for
comprehensively managing legal, credit,
liquidity, operational, general business,
investment, custody, and other risks
that arise in or are borne by ICC, which
includes plans for the recovery and
orderly wind-down of ICC necessitated
by credit losses, liquidity shortfalls,
losses from general business risk, or any
other losses.17
The proposed changes described
above would support ICC’s maintenance
of plans for the recovery and orderly
wind-down of ICC by helping ensure
that the plans are updated with current,
accurate financial, personnel, and Board
information. The proposed rule change
also updates details regarding the
allocation of guaranty fund and margin
among ICC’s financial institutions,
which helps ensure that those using the
plans have current financial information
and an accurate understanding of the
potential resources available for
recovery or an orderly wind-down.
Therefore, the Commission finds that
the proposed rule change, as modified
by Amendment No. 1, is consistent with
Rule 17Ad–22(e)(3)(ii).18
[Release No. 34–100625; File No. SR–NYSE–
2024–41]
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act, and in
particular, with the requirements of
Section 17A(b)(3)(F) of the Act 19 and
Rule 17Ad–22(e)(3)(ii).20
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 21 that the
proposed rule change, as modified by
Amendment No. 1 (SR–ICC–2024–004),
be, and hereby is, approved.22
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–17282 Filed 8–5–24; 8:45 am]
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BILLING CODE 8011–01–P
17 17
CFR 240.17Ad–22(e)(3)(ii).
18 17 CFR 240.17Ad–22(e)(3)(ii).
19 15 U.S.C. 78q–1(b)(3)(F).
20 17 CFR 240.17Ad–22(e)(3)(ii).
21 15 U.S.C. 78s(b)(2).
22 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
23 17 CFR 200.30–3(a)(12).
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Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change to Modify Rule
7.31
July 31, 2024.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on July 25,
2024, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘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 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 modify
Rule 7.31 Rule 7.31 regarding MPL–
ALO Orders. The proposed rule change
is available on the Exchange’s website at
www.nyse.com, 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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 7.31 regarding MPL–ALO Orders.
Rule 7.31(d)(3) defines a Mid-Point
Liquidity Order (‘‘MPL Order’’) as a
Limit Order to buy (sell) that is not
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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displayed and does not route, with a
working price at the lower (higher) of
the midpoint of the PBBO or its limit
price. An MPL Order is ranked Priority
3—Non-Display Orders, is valid for any
session, and does not participate in
auctions.
Rule 7.31(d)(3)(A) provides that an
MPL Order to buy (sell) must be
designated with a limit price in the
MPV for the security and will be eligible
to trade at the working price of the
order.
Rule 7.31(d)(3)(B) provides that if
there is no PBB, PBO, or the PBBO is
locked or crossed, both an arriving and
resting MPL Order will wait for a PBBO
that is not locked or crossed before
being eligible to trade. If a resting MPL
Order to buy (sell) trades with an MPL
Order to sell (buy) after there is an
unlocked or uncrossed PBBO, the MPL
Order with the later working time will
be the liquidity-removing order.
Rule 7.31(d)(3)(C) provides that an
Aggressing MPL Order to buy (sell) will
trade at the working price of resting
orders to sell (buy) when such resting
orders have a working price at or below
(above) the working price of the MPL
Order. Resting MPL Orders to buy (sell)
will trade against all Aggressing Orders
to sell (buy) priced at or below (above)
the working price of the MPL Order.
Rule 7.31(d)(3)(D) provides that an
MPL Order may be designated IOC
(‘‘MPL–IOC Order’’). Subject to such
IOC instructions, an MPL–IOC Order
will follow the same trading and
priority rules as an MPL Order, expect
that an MPL–IOC Order will be rejected
if there is no PBBO or the PBBO is
locked or crossed. An MPL–IOC Order
cannot be designated ALO or with a
Non-Display Remove Modifier.
Rule 7.31(d)(3)(E) and the
subparagraphs thereunder define the
MPL–ALO Order, which is an MPL
Order designated with an ALO
Modifier.4 An Aggressing 5 MPL–ALO
Order to buy (sell) will trade at the
working price of resting orders to sell
(buy) when such resting orders have a
working price below (above) the less
aggressive of the midpoint of the PBBO
or the limit price of the MPL–ALO
Order, but will not trade with resting
orders to sell (buy) priced equal to the
4 An ALO Order is a Non-Routable Limit Order
that, unless it receives price improvement, will not
remove liquidity from the Exchange Book. See
NYSE Rule 7.31(e)(2).
5 An ‘‘Aggressing Order’’ is a buy (sell) order that
is or becomes marketable against sell (buy) interest
on the Exchange Book. A resting order may become
an Aggressing Order if its working price changes,
if the PBBO or NBBO is updated, because of
changes to other orders on the Exchange Book, or
when processing inbound messages. See Rule
7.36(a)(6).
E:\FR\FM\06AUN1.SGM
06AUN1
]]>Agencies
[Federal Register Volume 89, Number 151 (Tuesday, August 6, 2024)]
[Notices]
[Pages 63997-64000]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-17282]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100620; File No. SR-ICC-2024-004]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change, as Modified by Amendment No. 1,
Relating to the ICC Recovery Plan and the ICC Wind-Down Plan
July 31, 2024.
I. Introduction
On June 4, 2024, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(2) of the Securities Exchange Act of 1934 (the ``Act'')
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend its
Recovery Plan and Wind-Down Plan. On June 6, 2024, ICC filed Amendment
No. 1 to the proposed rule change to make certain changes to Form 19b-4
and Exhibit 1A.\3\ The proposed rule change, as modified by Amendment
No. 1, was published for comment in the Federal Register on June 21,
2024.\4\ The Commission did not receive comments regarding the proposed
rule change. For the reasons discussed below, the Commission is
approving the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 inserts a bullet point to the ``ICC Recovery
Plan'' paragraph of the Form 19b-4 and the Exhibit 1A with the
following text, ``description of Guaranty Fund Replenishment in
Section VIII.B;''. Amendment No. 1 also removes the same bullet
point from the ``ICC Wind-Down Plan'' paragraph of the Form 19b-4
and Exhibit 1A.
\4\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice
of Filing of Proposed Rule Change, as Modified by Amendment No. 1,
Relating to the ICC Recovery Plan and the ICC Wind-Down Plan;
Exchange Act Release No. 100335 (June 14, 2024), 89 FR 52138 (June
21, 2024) (File No. SR-ICC-2024-004) (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
A. Background
ICC is registered with the Commission as a clearing agency for the
purpose of clearing Credit Default Swap (``CDS'') contracts.\5\ The
proposed rule change would amend both the Recovery Plan and the Wind-
Down Plan, which serve as plans for the recovery and orderly wind-down
of ICC, respectively, if such recovery or wind-down is necessitated by
credit losses, liquidity shortfalls, losses from general business risk,
or any other losses incurred by ICC. The Recovery Plan is designed to
establish ICC's actions to maintain its viability as a going concern by
addressing any uncovered credit loss, liquidity shortfall, capital
inadequacy, or business, operational or other structural weakness that
threatens ICC's viability as a going concern. The Wind-Down Plan is
designed to establish how ICC could be wound down in an orderly manner
in the event that it cannot continue as a going concern.
---------------------------------------------------------------------------
\5\ Capitalized terms not otherwise defined herein have the
meanings assigned to them in ICC's Recovery Plan, Wind-Down Plan, or
Clearing Rules, as applicable.
---------------------------------------------------------------------------
B. Recovery Plan
ICC proposes general updates and edits to its Recovery Plan to
promote clarity and to ensure that the information in it is current.
The proposed amendments to the Recovery Plan reflect and relate to
changes that impacted ICC in the past year. To that end, the current
Recovery Plan includes in the introduction a disclaimer that, unless
otherwise specified, all information provided in the plan is current as
of December 31, 2022. The proposed rule change would update that date
to December 31, 2023.
The proposed amendments reflect and relate to changes that impacted
ICC in the past year, including the addition of new ICC clearing
participants (``CP'') (Intesa Sanpaolo S.P.A. and Royal Bank of
Canada), the addition of British Pounds Sterling cash (``GBP'') as
acceptable client-related initial margin, the removal of references to
ICE Clear Europe Limited (``ICEEU'') CDS clearing as that service has
closed, and a change to the Managers of the ICC Board of Managers (the
``Board'').
Section IV covers key recovery elements. Within this section, the
proposed rule change would update clearing participation (IV.B),
management and governance (IV.C), key
[[Page 63998]]
performance metrics (IV.D), and collateral management (IV.E). In
Section IV.B, ICC proposes to add new CP Intesa Sanpaolo S.p.A and CP
Royal Bank of Canada. In Section IV.C, ICC would update the description
of the non-independent managers appointed by ICE US Holding Company
L.P. The proposed rule change would amend the description to remove
Christopher Edmonds as an independent director of ICE Inc. He is
replaced by Elizabeth King, Head of Global Clearing and Chief
Regulatory Officer at Intercontinental Exchange, Inc. Currently, Sumit
Roy, an independent manager nominated by the ICC risk committee and
appointed by ICE Holding, is listed as a Senior Portfolio Manager at
Magnetar Capital. He is now listed as former Senior Portfolio Manager
at Magnetar Capital. In Section IV.D, ICC would update its revenues,
volumes, and expenses for years 2022 and 2023.
In Sections IV.B and IV.E, ICC would make changes to collateral
valuation \6\ and to reflect the addition of GBP as acceptable
margin,\7\ which reflects recent ICC rule changes. In Section IV.B, ICC
added language stating that acceptable forms of collateral for initial
margin now include GBP. In response to the addition of GBP, ICC
proposes to revise Section IV.E to clarify the description of ICC's
collateral valuation process to cover all collateral types accepted by
ICC. ICC previously made changes to its collateral valuation policy
under its treasury policy. First, ICC changed the the way it values the
collateral that Clearing Participants provide to ICC to cover their
margin and guaranty fund requirements. Second, ICC made changes to
address circumstances under which it would use a foreign exchange
facility to convert one currency to another. ICC made changes to
Section IV.E to amend its collateral valuation to reflect those
changes.
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\6\ Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to to ICC's Treasury
Operations Policies and Procedures, Exchange Act Release No. 98572
(Sep. 27, 2023); 88 FR 68211 (Oct. 3, 2023) (SR-ICC-2023-013).
\7\ Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to British Pounds Sterling
as Client-Related Margin, Exchange Act Release No. 97489 (May 11,
2023); 88 FR 31571 (May 17, 2023) (SR-ICC-2023-003).
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The proposed rule change also would amend Section VI of the
Recovery Plan, which covers interconnections and interdependencies.
Specifically, ICC proposes to amend the sections covering operational
(VI.A) and financial (VI.B) interdependencies. The proposed rule change
would update the Material Legal Entity (``MLE'') Interrconnections
Chart in the introduction to Section VI. The proposed updates to
Section VI.A would reflect changes in the last year and would update
the descriptions of ICC's personnel and facilities, as well as its in-
house systems and third-party system. Section VI.B currently includes a
``Counterparty Chart'' that lists all of ICC's CPs and indicates which
function(s) each CP performs (i.e., Clearing Participant, Custodian,
Depository, etc.). The proposed rule change would update this chart to
reflect the addition of new CPs as discussed above.
The proposed rule change would update the description of monitoring
mechanisms for CP default in Section VII.A of the Recovery Plan, which
addresses ICC's stress scenarios. In Section VII.A, ICC also proposes
the addition of a citation to Exchange Act Rule 17Ad-22(e)(4) (17 CFR
240.17Ad-22(e)(4)) to reflect and reference the applicable regulations
more accurately.
The proposed rule change would make several updates to Section VIII
of the Recovery Plan, which addresses ICC's recovery tools, primarily
in Section VIII.B. In Section VIII.B, the proposed rule change first
would add a reference to ICC's initial auction procedures. In various
subsections of Section VIII.B, the proposed rule change would update
financial information to reflect the current information available.
Within Section VIII, in relation to direct infusion of cash to ICC from
Parent/ICE Group, ICC would update the current description of ICC's,
ICE Inc.'s, and ICE Group's respective year-end cash balances to
reflect their most current consolidated balance sheets and update the
management contact. ICC also adds ``and SEC'' in referencing initial
margin requirements and financial resource requirements of the CFTC, so
that it now also includes SEC regulations. Section X of the Recovery
Plan identifies ICC's Financial Resources for Recovery. The proposed
rule change would update the expected costs of recovery and wind-down,
including expenses related to legal services, consulting, operations,
regulatory capital requirements, and other wind-down costs to reflect
current estimates and expenses.
Section XI of the Recovery Plan (financial information) provides
the balance sheet and income statement for ICC and the consolidated
balance sheet and income statement for ICE Inc. and its subsidiaries.
The proposed rule change would update the financial information in this
section to reflect the most current financial statements for both
entities.
In Section XIII, which covers management information systems, the
proposed rule change would update the key ICC reports and descriptions
to remove references to reports that ICC no longer uses and add
references to new reports. The proposed rule change would update
Section XI, Appendix C, which covers banking institutions and the
percentage of the guaranty fund, customer margin, and house margin held
at each institution as of December 31, 2021. ICC proposes to change the
date to December 31, 2023 and update the percentage of holdings for the
guaranty fund, customer margin, and house margin at each banking
institution. Finally, the proposed rule change would make non-
substantive typographical fixes in the ICC Recovery Plan, including
grammatical and formatting changes.
C. Wind-Down Plan
ICC proposes updates and edits to the Wind-Down Plan that reflect
and relate to changes that have impacted ICC in the past year, as well
as general updates and edits to promote clarity and to ensure that the
information provided is current. The changes that impacted ICC in the
past year include the addition of new CPs (Intesa Sanpaolo S.p.A. and
Royal Bank of Canada), the removal of references to ICEEU as that
service has closed, and a change to the Managers of the Board.
The current Wind-Down Plan includes in the introduction a
disclaimer that, unless otherwise specified, all information provided
in the plan is current as of December 31, 2022. The proposed rule
change would update that date to December 31, 2023.
Section II of the Wind-Down Plan is an overview of the structure of
ICC. Section II.A addresses ownership of ICC. ICC states that, within
the ICE Group's activities, there are eight derivatives exchanges and a
total of six clearing houses including ICC. ICC proposes to remove the
word ``to.'' Section IV addresses membership and ICC governance. The
proposed rule change would amend Section IV.B to reflect that
Christopher Edmonds was not reappointed and Elizabeth King, as
discussed above, was appointed as an independent director instead.
Additionally, the proposed rule change would update Section IV.A to
reflect the addition of two new CPs, as discussed above.
Section VII of the Wind-Down Plan discusses ICC's interconnections
and interdependencies, and the impact of each on the Wind-Down Plan.
For example, as explained in the introduction to this section, ICC
relies
[[Page 63999]]
on affiliated entities for certain operational and financial services.
The Wind-Down Plan considers certain of these affiliated entities to be
``Material Legal Entities.'' As defined in the Wind-Down Plan, a
Material Legal Entity is a legal entity that is significant to ICC's
activities and the delivery of clearing services.
The Wind-Down Plan identifies ICE Inc. as ICC's sole Material Legal
Entity. Currently, the Wind-Down Plan explains that ICC relies on ICE
Inc. for certain shared services, such as accounting, HR, facilities,
and intellectually property. The proposed rule change would expand this
list of examples to include corporate finance, internal audit,
enterpretrise risk management, and systems operations. These additions
would help ensure that the Wind-Down Plan describes the current scope
of services provided to ICC by ICE Inc.
Section VII.C describes ICC's operational services, including the
facilities where it operates. The proposed rule change would add to the
description of facilities a description of ICC's office in
Jacksonville, Florida. This description would include a list of the
activities performed out of the Jacksonville facility, such as legal
and compliance functions. Also in VII.C, the proposed rule change would
update the number of ICC employees to reflect the current headcount,
including breakdowns by various functions. Finally, the proposed rule
change would update the table of ICC's third-party systems and the
table of ICC's in-house systems to remove certain systems no longer in
use.
Section VII.D describes financial services provided to ICC. Section
VII.D contains a chart of ICC's counterparties and categorizes these
counterparties by type (such as CP, custodian, investment manager). The
proposed rule change would update this chart to reflect the new CPs
noted above.
Section IX of the Wind-Down Plan addresses financial resources to
support wind-down. ICC would update this section to reflect current
financial information, including revenues and operating costs.
Finally, the proposed rule change would update Section XI, Appendix
C, which covers banking institutions and the percentage of the guaranty
fund, customer margin, and house margin held at each institution as of
December 31, 2021. ICC proposes to change the date to December 31, 2023
and update the percentage of holdings for the guaranty fund, customer
margin, and house margin at each banking institution.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\8\ Under the Commission's Rules of Practice, the ``burden
to demonstrate that a proposed rule change is consistent with the
Exchange Act and the rules and regulations issued thereunder . . . is
on the self-regulatory organization [`SRO'] that proposed the rule
change.'' \9\
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\8\ 15 U.S.C. 78s(b)(2)(C).
\9\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
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The description of a proposed rule change, its purpose and
operation, its effect, and a legal analysis of its consistency with
applicable requirements must all be sufficiently detailed and specific
to support an affirmative Commission finding,\10\ and any failure of an
SRO to provide this information may result in the Commission not having
a sufficient basis to make an affirmative finding that a proposed rule
change is consistent with the Exchange Act and the applicable rules and
regulations.\11\ Moreover, ``unquestioning reliance'' on an SRO's
representations in a proposed rule change is not sufficient to justify
Commission approval of a proposed rule change.\12\
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\10\ Id.
\11\ Id.
\12\ Susquehanna Int'l Group, LLP v. Securities and Exchange
Commission, 866 F.3d 442, 447 (D.C. Cir. 2017) (``Susquehanna'').
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After carefully considering the proposed rule change, the
Commission finds that the proposed rule change is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to ICC. For the reasons given below, the
Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with Section 17A(b)(3)(F) of the Act
\13\ and Rule 17Ad-22(e)(3)(ii).\14\
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\13\ 15 U.S.C. 78q-1(b)(3)(F).
\14\ 17 CFR 240.17Ad-22(e)(3)(ii).
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A. Consistency With Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of ICC be designed, to promote the prompt and accurate
clearance and settlement of securities transactions and, to the extent
applicable, derivative agreements, contracts, and transactions, as well
as to assure the safeguarding of securities and funds which are in the
custody or control of ICC or for which it is responsible.\15\
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
As noted above, the proposed rule change primarily would update the
Recovery Plan and Wind-Down Plan with current information about ICC's
facilities, finances, and Board. By providing the most current
information for ICC's revenues, volumes, and expenses, the proposed
rule change will support ICC's ability to monitor its finances and
compare its regulatory capital to its estimated recovery and wind-down
costs. This in turn will help ensure ICC has the financial resources to
promptly and accurately clear and settle transactions during recovery
and, if necessary, conduct an orderly wind-down.
Further, updating the Counterparty Chart to reflect both new CPs
and the addition of GBP as acceptable margin will generally support
those utilizing the Plans by providing users of the Plans with a
correct overview of ICC's CPs and currencies accepted. These proposed
changes would strengthen both plans by ensuring those utilizing them
have information necessary to carry out recovery or an orderly wind-
down, which in turn should help ICC to promptly and accurately clear
and settle transactions during recovery and, if necessary, conduct an
orderly wind-down.
ICC's CPs provide cash and securities to ICC to satisfy their
various guaranty fund and margin requirements. ICC in turn allocates
these funds and securities among different financial institutions,
including its accounts at the Federal Reserve Bank of Chicago and at
certain depository institutions. ICC proposes to update the description
of the allocation of funds among these acccounts to reflect current
allocations. Like the other changes discussed above, these proposed
changes would strengthen the plans by providing a correct overview of
ICC's usage of its financial accounts. Users of the plans could utilize
this information to carry out recovery or an orderly wind-down. Thus,
these changes would help ICC to promptly and accurately clear and
settle transactions during recovery and, if necessary, conduct an
orderly wind-down.
For the reasons stated above, the Commission believes that the
proposed rule change, as modified by Amendment No. 1, is consistent
with Section 17A(b)(3)(F) of the Act.\16\
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\16\ 15 U.S.C. 78q-1(b)(3)(F).
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[[Page 64000]]
B. Consistency With Rule 17Ad-22(e)(3)(ii)
Rule 17Ad-22(e)(3)(ii) requires ICC to establish, implement,
maintain, and enforce written policies and procedures reasonably
designed to maintain a sound risk management framework for
comprehensively managing legal, credit, liquidity, operational, general
business, investment, custody, and other risks that arise in or are
borne by ICC, which includes plans for the recovery and orderly wind-
down of ICC necessitated by credit losses, liquidity shortfalls, losses
from general business risk, or any other losses.\17\
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\17\ 17 CFR 240.17Ad-22(e)(3)(ii).
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The proposed changes described above would support ICC's
maintenance of plans for the recovery and orderly wind-down of ICC by
helping ensure that the plans are updated with current, accurate
financial, personnel, and Board information. The proposed rule change
also updates details regarding the allocation of guaranty fund and
margin among ICC's financial institutions, which helps ensure that
those using the plans have current financial information and an
accurate understanding of the potential resources available for
recovery or an orderly wind-down.
Therefore, the Commission finds that the proposed rule change, as
modified by Amendment No. 1, is consistent with Rule 17Ad-
22(e)(3)(ii).\18\
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\18\ 17 CFR 240.17Ad-22(e)(3)(ii).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act,
and in particular, with the requirements of Section 17A(b)(3)(F) of the
Act \19\ and Rule 17Ad-22(e)(3)(ii).\20\
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\19\ 15 U.S.C. 78q-1(b)(3)(F).
\20\ 17 CFR 240.17Ad-22(e)(3)(ii).
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\21\ that the proposed rule change, as modified by Amendment No. 1 (SR-
ICC-2024-004), be, and hereby is, approved.\22\
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\21\ 15 U.S.C. 78s(b)(2).
\22\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-17282 Filed 8-5-24; 8:45 am]
BILLING CODE 8011-01-P
