Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the ICC End-of-Day Price Discovery Policies and Procedures, 88094-88097 [2024-25730]
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Federal Register / Vol. 89, No. 215 / Wednesday, November 6, 2024 / Notices
incentives to provide electronic
liquidity in XND options.
The Exchange does not believe the
proposed rule change will impose any
burden on intermarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because it relates to orders in an
exclusively listed class submitted into a
PIXL Auction on the Exchange.
Additionally, the Exchange notes that
Cboe permits orders for the accounts of
Market-Makers with an appointment in
SPX to be solicited for the Initiating
Order submitted for execution against
an Agency Order in SPX options into an
AIM Auction pursuant to Cboe Rule
5.37. The Exchange believes the
proposed rule change may improve
price competition for smaller-sized
orders within PIXL Auctions for XND
options, because the primary liquidity
providers will be available for the
solicitation necessary to initiate those
auctions.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission shall: (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
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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:
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–Phlx–2024–54. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–Phlx–2024–54 and should be
submitted on or before November 27,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–25728 Filed 11–5–24; 8:45 am]
BILLING CODE 8011–01–P
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–
Phlx–2024–54 on the subject line.
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101489; File No. SR–ICC–
2024–012]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Filing of
Proposed Rule Change Relating to the
ICC End-of-Day Price Discovery
Policies and Procedures
October 31, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934,1 and
Rule 19b–4 thereunder,2 notice is
hereby given that on October 21, 2024,
ICE Clear Credit LLC (‘‘ICC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II and III below, which Items
have been primarily prepared by ICC.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The principal purpose of the
proposed rule change is to revise the
End-of-Day Price Discovery Policies and
Procedures (‘‘EOD Procedures’’). These
revisions do not require any changes to
the ICC Clearing Rules (the ‘‘Rules’’).
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
ICC proposes to revise the EOD
Procedures, which sets out ICC’s end-ofday (‘‘EOD’’) price discovery process
that provides prices for cleared
contracts using submissions made by
Clearing Participants (‘‘CPs’’). ICC
believes such revisions will facilitate
the prompt and accurate clearance and
settlement of securities transactions and
derivative agreements, contracts, and
1 15
8 17
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transactions for which it is responsible.
ICC proposes to make such changes
effective following Commission
approval of the proposed rule change.
The proposed amendments are
described in detail as follows.
The primary purpose of the proposed
revisions is to address Commodity
Futures Trading Commission (‘‘CFTC’’)
exam findings. As requested for
clarification purposes by the CFTC, the
proposed changes highlight that the
meaning of the term ‘Most-ActivelyTraded-Instrument’ (‘‘MATI’’) is
context-dependent. As MATI is defined
to refer to the most-liquid instrument in
a specified group of instruments,
application of MATI is contextdependent on the specific group of
instruments under review.
In order to clarify the meaning of
MATI the proposed revisions provide
examples of the meaning of MATI when
used in the context of different groups
of instruments defined as: (i) index risk
factors,3 (ii) single name risk factors 4
and (iii) single name risk sub-factors.5
The proposed examples illustrate the
most common contexts for the use of the
term MATI throughout the EOD
Procedures. Specifically, ICC proposes
to revise Section 1.2.3., in which the
term MATI is defined, to include the
following examples of the application of
the term MATI to different groups of
instruments. In the context of index risk
factors, the proposed revisions provide
that the MATI for this category typically
is the contract (i) with a scheduled
termination date corresponding to the 5year ‘‘tenor’’ and (ii) being the most
recent series and version of the
applicable cleared credit default swap
(‘‘CDS’’) index instrument. In the
context of single name risk factors, the
proposed revisions provide an example
of the MATI for a Standard North
American Corporate single name risk
factor (which is an example of a single
name risk factor) which typically is the
contract (i) with a scheduled
3 Index risk factor is defined in Section 1.2.1.a. of
the EOD Procedures as a group of clearable CDS
index instruments sharing the same index or subindex (e.g., CDX.NA.IG), but having any
combination of series, version and scheduled
termination date (i.e., tenor).
4 Single name risk factor is defined in Section
1.2.1.b. of the EOD Procedures as the group of
clearable single name CDS instruments sharing the
same refence entity but having any combination of
currency of denomination, reference obligation debt
tier, restructuring clause, coupon and scheduled
termination date.
5 Single name sub-risk factor is defined in Section
1.2.1.b. of the EOD Procedures as a group of
clearable single name CDS instruments sharing the
same refence entity, currency of denomination,
reference obligation debt tier, but having any
combination of coupon and scheduled termination
date.
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termination date corresponding to the 5year ‘‘tenor,’’ (ii) having US Dollar as
the currency of denomination, (iii)
having a coupon of 100 basis points, (iv)
referencing deliverable obligations
having a senior debt tier, and (v) having
‘XR14’ 6 restructuring clause. In the
context of single name risk sub-factor,
proposed revisions provide the example
of the MATI which is the most actively
traded coupon and scheduled
termination date in the group of single
name instruments sharing the same
reference entity, currency of
denomination, reference entity debt tier
and restructuring clause. In addition,
ICC proposes to add a second example
of the MATI in the context of a specific
coupon within a single name risk subfactor, which is the most actively traded
schedule termination date (i.e., tenor) in
the group of single name instruments
sharing the same reference entity,
currency of denomination, reference
entity debt tier, restructuring clause and
coupon.
In addition, ICC proposes additional
clarifying revisions to Section 1.2.3. of
the EOD Procedures to clarify that the
term Most Actively Traded Coupon
(‘‘MATC’’) refers to the coupon of the
MATI for a single name risk factor, or
single name risk sub-factor, depending
on the stated context.
ICC believes its proposed revisions to
describe the use of the terms MATI and
MATC provides a clearer, more robust
context to the information presented in
the EOD Procedures. Also, ICC proposes
to revise Section 5, Table 12 ‘Glossary
of Commonly Used Terms’, to align with
the revised terms presented earlier in
the EOD Procedures.
Furthermore, ICC proposes revisions
to Sections 2.1.2. of the EOD Procedures
to clarify the definition and use of
consensus bid-offer widths (‘‘BOW’’). As
background, BOWs are estimates of the
bid-offer widths for the two-way market
available for each clearing-eligible
instrument at a specific time on each
business day.7 ICC proposes to clarify in
Section 2.1.2. to describe consensus
BOW as the estimate of the prevailing
market BOW during a given period. In
addition, such revisions clarify that ICC
determines a consensus BOW for each
on-the-run index and for all single name
benchmark-instruments at the
appropriate EOD BOW execution time.
ICC also proposes to add further detail
to Section 2.1.2. with respect to ICC’s
estimates of consensus BOWs to add
that such estimations are performed
6 Under applicable ISDA Credit Derivatives
Definitions, ‘XR14’ references no restructuring
under the 2014 ISDA Definitions.
7 Section 2.1 of the EOD Procedures.
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with respect to each index risk factor
MATI. Also, with respect to consensus
BOWs for single name instruments, ICC
proposes to add additional detail to
Section 2.1.2. to clarify that ICC
estimates a consensus BOW from
Clearing Participant submitted midprices for all single name benchmarkinstruments.
In addition, ICC proposes to revise
Section 2.1.4. of the EOD Procedures to
more accurately describe the calculation
of EOD BOWs, which is the BOW
calculated for each clearing-eligible
instrument at the applicable end of the
clearing day. Specifically, ICC proposes
to revise Section 2.1.4.a. to clarify that
the reference to consensus BOW means
such consensus BOW established of the
instrument for which the EOD BOW is
being calculated. Furthermore, ICC
proposes to revise Section 2.1.4.b.
which describes the process for
calculating EOD BOWs for single name
instruments. Such proposed revisions
are intended to improve clarity and
readability. In the description of the
factors ICC applies to each consensus
BOW, the proposes revisions clarify that
such list of factors includes observed
intraday price variability. Also, the
proposed revisions add the description
that the benchmark-instrument BOW
resulting after applying the listed factors
to the benchmark-instrument consensus
BOW is referred to in the EOD
Procedures as the benchmarkinstrument ‘systematic’ BOW. Further,
ICC proposes to add details related to
ICC’s determination of the systematic
BOW for each benchmark-instrument
for non-MATC coupons to clarify that
ICC’s calculation involves use of the
benchmark-instrument consensus BOW
established for non-MATC benchmarkinstruments belonging to the given
single name risk sub-factor. The
proposed amendments also modify the
titles in Table 2, Table 4, and Table 6,
which present very similar information,
to clarify their distinct uses. ICC
proposes to (i) modify the title of Table
2 to indicate the presented data is for
the purpose of determining the
variability band for each market proxy
group, (ii) modify the title of Table 4 to
indicate the presented data is for the
purpose of selecting which market
proxy group’s variability band to apply
to each index risk factor, and (iii)
modify the title of Table 6 to indicate
the presented data is for the purpose of
selecting which market-proxy groups’
variability band to apply to the
benchmark-instruments associated with
each given single name risk factor.
Furthermore, ICC proposes to revise the
content of Table 4 to remove obsolete
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88096
Federal Register / Vol. 89, No. 215 / Wednesday, November 6, 2024 / Notices
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references to the CDX–NAIGHVOL and
iTraxx HiVol index risk factors as those
index types are no longer clearing
eligible at ICC. Also, ICC proposes to
update the content of Table 6 to clarify
that both the Standard Latin American
and Standard Australia single name risk
factors includes not only sovereign
single instruments, but also corporate
instruments, to more accurately reflect
the single name risk factors currently
cleared at ICC.
Finally, ICC purposes to revise
Section 2.5. of the EOD Procedures to
revise the instruments for which ICC
publishes daily EOD prices on the
Intercontinental Exchange, Inc. (‘‘ICE,
Inc.’’) website. This proposed change is
to address a CFTC exam finding related
to publication of CDS index instrument
daily settlement prices. ICC currently
publishes EOD prices for a subset of
cleared index instruments to the
website, but proposes to revise this
practice to instead publish EOD prices
for every clearing eligible index
instrument as required by the CFTC.
Furthermore, ICC proposes to revise
Section 2.5. to clarify the description of
the single name instruments for which
it publishes daily EOD prices on the
website. Section 2.5. currently states
that ICC publishes prices for every listed
risk sub-factor, and ICC proposes to
clarify this description to state that for
every single name risk sub-factor, ICC
publishes the price of all MATI for each
clearable coupon, which is a more
accurate description of the daily single
name settlement prices ICC publishes
on the ICE, Inc. Website. ICC believes
the proposed daily publication of
settlement prices for all clearing eligible
index instruments will improve pricing
transparency to market participants and
the public.
ICC also proposes a number of other
drafting clarifications and conforming
changes to the EOD Procedures, such as
updating the use of relevant defined
terms, section cross-references and other
non-substantive drafting improvements
The amendments would also update the
revision history section to the EOD
Procedures.
(b) Statutory Basis
ICC believes that the proposed rule
change is consistent with the
requirements of Section 17A of the Act 8
and the regulations thereunder
applicable to it, including the applicable
standards under Rule 17Ad–22.9 In
particular, Section 17A(b)(3)(F) of the
Act 10 requires that the rule change be
consistent with the prompt and accurate
clearance and settlement of securities
transactions and derivative agreements,
contracts and transactions cleared by
ICC, the safeguarding of securities and
funds in the custody or control of ICC
or for which it is responsible, and the
protection of investors and the public
interest. ICC believes that the proposed
amendments promote its ability to
maintain the effectiveness and integrity
of its EOD price discovery process. The
clarifications to the MATI, MATC and
BOW further ensure that the EOD
Procedures remain effective, clear, and
up-to-date to support the effectiveness
of ICC’s EOD price discovery process.
The proposed rule change is therefore
consistent with the prompt and accurate
clearing and settlement of the contracts
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.11
The amendments would also satisfy
relevant requirements of Rule 17Ad–
22.12 Rule 17Ad–22(e)(2)(i) and (v) 13
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. The EOD
Procedures continue to subject the ICC
EOD price discovery process to a
governance and oversight structure that
promotes transparency and
accountability and clearly assigns and
documents responsibility for relevant
actions and decisions. ICC believes that
the proposed changes would promote
transparency in ICC’s price discovery
process by providing additional clarity
and transparency in ICC’s EOD price
discovery process by clarifying and
defining the use of MATI, MATC and
consensus BOW. As such, the proposed
revisions continue to ensure that ICC
maintains policies and procedures that
are reasonably designed to provide for
clear and transparent governance
arrangements and specify clear and
direct lines of responsibility, consistent
with the requirements of Rule 17Ad–
22(e)(2)(i) and (v).14
Rule 17Ad–22(e)(3)(i) 15 requires each
covered clearing agency to establish,
implement, maintain, and enforce
written policies and procedures
11 Id.
12 17
8 15
U.S.C. 78q–1.
9 17 CFR 240.17ad–22.
10 15 U.S.C. 78q–1(b)(3)(F).
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13 17
CFR 240.17ad–22.
CFR 240.17ad–22(e)(2)(i) and (v).
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 the covered
clearing agency, which includes risk
management policies, procedures, and
systems designed to identify, measure,
monitor, and manage the range of risks
that arise in or are borne by the covered
clearing agency, that are subject to
review on a specified periodic basis and
approved by the board of directors
annually. ICC maintains a sound risk
management framework that identifies,
measures, monitors, and manages the
range of risks that it faces. The EOD
Procedures is a key aspect of ICC’s risk
management approach, which continues
to be subject to review on a specified
periodic basis and approved by the
Board annually. The proposed
amendments provide for additional
clarity regarding the calculation of EOD
prices, and the expansion of the daily
publication of EOD prices. In ICC’s
view, such changes would promote
transparency in ICC’s price discovery
process and thus enhance
implementation of the EOD Procedures.
The proposed changes would thus
strengthen ICC’s ability to manage risk
associated with its price discovery
process, and ICC’s risk management
more generally as ICC uses the resulting
EOD prices for risk management
purposes, and ICC would continue to
derive reliable, market-driven prices
from its price discovery process. As
such, the amendments would satisfy the
requirements of Rule 17Ad–22(e)(3)(i).16
(B) Clearing Agency’s Statement on
Burden on Competition
ICC does not believe the proposed
rule change would have any impact, or
impose any burden, on competition.
The proposed changes to the EOD
Procedures will apply uniformly across
all market participants. Therefore, ICC
does not believe the amendments would
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
Received From Members, Participants or
Others
Written comments relating to the
proposed rule change have not been
solicited or received. ICC will notify the
Commission of any written comments
received by ICC.
14 Id.
15 17
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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-regulations/self-regulatoryorganization-rulemaking); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
ICC–2024–012 on the subject line.
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Paper Comments
Send paper comments in triplicate to
Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–ICC–2024–012. 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-regulations/self-regulatoryorganization-rulemaking). 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
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a.m. and 3 p.m. Copies of such filings
will also be available for inspection and
copying at the principal office of ICE
Clear Credit and on ICE Clear Credit’s
website at https://www.ice.com/clearcredit/regulation.
Do not include personal identifiable
information in submissions; you should
submit only information that you wish
to make available publicly. We may
redact in part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to file number SR–ICC–2024–012 and
should be submitted on or before
November 27, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–25730 Filed 11–5–24; 8:45 am]
BILLING CODE 8011–01–P
88097
rulebook/bx/rules, at the principal office
of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101496; File No. SR–BX–
2024–044]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend BX Options 7,
Section 3
October 31, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
18, 2024, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Options 7, Section 3.
While these amendments are effective
upon filing, the Exchange has
designated the proposed amendments to
be operative on January 1, 2025.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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The purpose of the proposed rule
change is to amend the Exchange’s SQF
Port Fee and SQF Purge Port Fee.
Specifically, the Exchange proposes to
raise its SQF Port Fee and SQF Purge
Port Fee in Options 7, Section 3 by 10%.
Today, BX assesses an SQF Port and
an SQF Purge Port a $500 per port, per
month fee. With this proposal, BX
would assess Market Makers an SQF
Port Fee and an SQF Purge Port Fee of
$550 per port, per month (a 10%
increase from $500).
The proposed SQF Port Fee and SQF
Purge Port Fee increases would enable
the Exchange to maintain and improve
its market technology and services to
remain competitive with its peers. Over
the years, customer demand for risk
protections and capacity has increased.
The Exchange continues to invest in
maintaining, improving, and enhancing
its port protocols—for the benefit and
often at the behest of its customers.
Such enhancements include refreshing
hardware, upgrading risk protections
and information security, and offering
customers additional capacity. The
Exchange has not increased BX’s SQF
Port Fee since 2016,3 and has not
increased its SQF Purge Port Fee since
2017 4 where inflation has been between
roughly 14%–17%, as measured using
the metric described below.
Nevertheless, the Exchange proposes to
increase its SQF Port Fee by 10%, only
3 See Securities Exchange Act Release No. 76952
(January 21, 2016), 81 FR 4721 (January 27, 2016)
(SR–BX–2016–003).
4 See Securities Exchange Act Release No. 83192
(May 9, 2018), 83 FR 22563 (May 15, 2018) (SR–
BX–2018–017).
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]]>Agencies
[Federal Register Volume 89, Number 215 (Wednesday, November 6, 2024)]
[Notices]
[Pages 88094-88097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25730]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101489; File No. SR-ICC-2024-012]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change Relating to the ICC End-of-Day Price
Discovery Policies and Procedures
October 31, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934,\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on
October 21, 2024, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II and III below, which Items have been
primarily prepared by ICC. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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
End-of-Day Price Discovery Policies and Procedures (``EOD
Procedures''). These revisions do not require any changes to the ICC
Clearing Rules (the ``Rules'').
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
ICC proposes to revise the EOD Procedures, which sets out ICC's
end-of-day (``EOD'') price discovery process that provides prices for
cleared contracts using submissions made by Clearing Participants
(``CPs''). ICC believes such revisions will facilitate the prompt and
accurate clearance and settlement of securities transactions and
derivative agreements, contracts, and
[[Page 88095]]
transactions for which it is responsible. ICC proposes to make such
changes effective following Commission approval of the proposed rule
change. The proposed amendments are described in detail as follows.
The primary purpose of the proposed revisions is to address
Commodity Futures Trading Commission (``CFTC'') exam findings. As
requested for clarification purposes by the CFTC, the proposed changes
highlight that the meaning of the term `Most-Actively-Traded-
Instrument' (``MATI'') is context-dependent. As MATI is defined to
refer to the most-liquid instrument in a specified group of
instruments, application of MATI is context-dependent on the specific
group of instruments under review.
In order to clarify the meaning of MATI the proposed revisions
provide examples of the meaning of MATI when used in the context of
different groups of instruments defined as: (i) index risk factors,\3\
(ii) single name risk factors \4\ and (iii) single name risk sub-
factors.\5\ The proposed examples illustrate the most common contexts
for the use of the term MATI throughout the EOD Procedures.
Specifically, ICC proposes to revise Section 1.2.3., in which the term
MATI is defined, to include the following examples of the application
of the term MATI to different groups of instruments. In the context of
index risk factors, the proposed revisions provide that the MATI for
this category typically is the contract (i) with a scheduled
termination date corresponding to the 5-year ``tenor'' and (ii) being
the most recent series and version of the applicable cleared credit
default swap (``CDS'') index instrument. In the context of single name
risk factors, the proposed revisions provide an example of the MATI for
a Standard North American Corporate single name risk factor (which is
an example of a single name risk factor) which typically is the
contract (i) with a scheduled termination date corresponding to the 5-
year ``tenor,'' (ii) having US Dollar as the currency of denomination,
(iii) having a coupon of 100 basis points, (iv) referencing deliverable
obligations having a senior debt tier, and (v) having `XR14' \6\
restructuring clause. In the context of single name risk sub-factor,
proposed revisions provide the example of the MATI which is the most
actively traded coupon and scheduled termination date in the group of
single name instruments sharing the same reference entity, currency of
denomination, reference entity debt tier and restructuring clause. In
addition, ICC proposes to add a second example of the MATI in the
context of a specific coupon within a single name risk sub-factor,
which is the most actively traded schedule termination date (i.e.,
tenor) in the group of single name instruments sharing the same
reference entity, currency of denomination, reference entity debt tier,
restructuring clause and coupon.
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\3\ Index risk factor is defined in Section 1.2.1.a. of the EOD
Procedures as a group of clearable CDS index instruments sharing the
same index or sub-index (e.g., CDX.NA.IG), but having any
combination of series, version and scheduled termination date (i.e.,
tenor).
\4\ Single name risk factor is defined in Section 1.2.1.b. of
the EOD Procedures as the group of clearable single name CDS
instruments sharing the same refence entity but having any
combination of currency of denomination, reference obligation debt
tier, restructuring clause, coupon and scheduled termination date.
\5\ Single name sub-risk factor is defined in Section 1.2.1.b.
of the EOD Procedures as a group of clearable single name CDS
instruments sharing the same refence entity, currency of
denomination, reference obligation debt tier, but having any
combination of coupon and scheduled termination date.
\6\ Under applicable ISDA Credit Derivatives Definitions, `XR14'
references no restructuring under the 2014 ISDA Definitions.
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In addition, ICC proposes additional clarifying revisions to
Section 1.2.3. of the EOD Procedures to clarify that the term Most
Actively Traded Coupon (``MATC'') refers to the coupon of the MATI for
a single name risk factor, or single name risk sub-factor, depending on
the stated context.
ICC believes its proposed revisions to describe the use of the
terms MATI and MATC provides a clearer, more robust context to the
information presented in the EOD Procedures. Also, ICC proposes to
revise Section 5, Table 12 `Glossary of Commonly Used Terms', to align
with the revised terms presented earlier in the EOD Procedures.
Furthermore, ICC proposes revisions to Sections 2.1.2. of the EOD
Procedures to clarify the definition and use of consensus bid-offer
widths (``BOW''). As background, BOWs are estimates of the bid-offer
widths for the two-way market available for each clearing-eligible
instrument at a specific time on each business day.\7\ ICC proposes to
clarify in Section 2.1.2. to describe consensus BOW as the estimate of
the prevailing market BOW during a given period. In addition, such
revisions clarify that ICC determines a consensus BOW for each on-the-
run index and for all single name benchmark-instruments at the
appropriate EOD BOW execution time. ICC also proposes to add further
detail to Section 2.1.2. with respect to ICC's estimates of consensus
BOWs to add that such estimations are performed with respect to each
index risk factor MATI. Also, with respect to consensus BOWs for single
name instruments, ICC proposes to add additional detail to Section
2.1.2. to clarify that ICC estimates a consensus BOW from Clearing
Participant submitted mid-prices for all single name benchmark-
instruments.
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\7\ Section 2.1 of the EOD Procedures.
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In addition, ICC proposes to revise Section 2.1.4. of the EOD
Procedures to more accurately describe the calculation of EOD BOWs,
which is the BOW calculated for each clearing-eligible instrument at
the applicable end of the clearing day. Specifically, ICC proposes to
revise Section 2.1.4.a. to clarify that the reference to consensus BOW
means such consensus BOW established of the instrument for which the
EOD BOW is being calculated. Furthermore, ICC proposes to revise
Section 2.1.4.b. which describes the process for calculating EOD BOWs
for single name instruments. Such proposed revisions are intended to
improve clarity and readability. In the description of the factors ICC
applies to each consensus BOW, the proposes revisions clarify that such
list of factors includes observed intraday price variability. Also, the
proposed revisions add the description that the benchmark-instrument
BOW resulting after applying the listed factors to the benchmark-
instrument consensus BOW is referred to in the EOD Procedures as the
benchmark-instrument `systematic' BOW. Further, ICC proposes to add
details related to ICC's determination of the systematic BOW for each
benchmark-instrument for non-MATC coupons to clarify that ICC's
calculation involves use of the benchmark-instrument consensus BOW
established for non-MATC benchmark-instruments belonging to the given
single name risk sub-factor. The proposed amendments also modify the
titles in Table 2, Table 4, and Table 6, which present very similar
information, to clarify their distinct uses. ICC proposes to (i) modify
the title of Table 2 to indicate the presented data is for the purpose
of determining the variability band for each market proxy group, (ii)
modify the title of Table 4 to indicate the presented data is for the
purpose of selecting which market proxy group's variability band to
apply to each index risk factor, and (iii) modify the title of Table 6
to indicate the presented data is for the purpose of selecting which
market-proxy groups' variability band to apply to the benchmark-
instruments associated with each given single name risk factor.
Furthermore, ICC proposes to revise the content of Table 4 to remove
obsolete
[[Page 88096]]
references to the CDX-NAIGHVOL and iTraxx HiVol index risk factors as
those index types are no longer clearing eligible at ICC. Also, ICC
proposes to update the content of Table 6 to clarify that both the
Standard Latin American and Standard Australia single name risk factors
includes not only sovereign single instruments, but also corporate
instruments, to more accurately reflect the single name risk factors
currently cleared at ICC.
Finally, ICC purposes to revise Section 2.5. of the EOD Procedures
to revise the instruments for which ICC publishes daily EOD prices on
the Intercontinental Exchange, Inc. (``ICE, Inc.'') website. This
proposed change is to address a CFTC exam finding related to
publication of CDS index instrument daily settlement prices. ICC
currently publishes EOD prices for a subset of cleared index
instruments to the website, but proposes to revise this practice to
instead publish EOD prices for every clearing eligible index instrument
as required by the CFTC. Furthermore, ICC proposes to revise Section
2.5. to clarify the description of the single name instruments for
which it publishes daily EOD prices on the website. Section 2.5.
currently states that ICC publishes prices for every listed risk sub-
factor, and ICC proposes to clarify this description to state that for
every single name risk sub-factor, ICC publishes the price of all MATI
for each clearable coupon, which is a more accurate description of the
daily single name settlement prices ICC publishes on the ICE, Inc.
Website. ICC believes the proposed daily publication of settlement
prices for all clearing eligible index instruments will improve pricing
transparency to market participants and the public.
ICC also proposes a number of other drafting clarifications and
conforming changes to the EOD Procedures, such as updating the use of
relevant defined terms, section cross-references and other non-
substantive drafting improvements The amendments would also update the
revision history section to the EOD Procedures.
(b) Statutory Basis
ICC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \8\ and the regulations
thereunder applicable to it, including the applicable standards under
Rule 17Ad-22.\9\ In particular, Section 17A(b)(3)(F) of the Act \10\
requires that the rule change be consistent with the prompt and
accurate clearance and settlement of securities transactions and
derivative agreements, contracts and transactions cleared by ICC, the
safeguarding of securities and funds in the custody or control of ICC
or for which it is responsible, and the protection of investors and the
public interest. ICC believes that the proposed amendments promote its
ability to maintain the effectiveness and integrity of its EOD price
discovery process. The clarifications to the MATI, MATC and BOW further
ensure that the EOD Procedures remain effective, clear, and up-to-date
to support the effectiveness of ICC's EOD price discovery process. The
proposed rule change is therefore consistent with the prompt and
accurate clearing and settlement of the contracts 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.\11\
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\8\ 15 U.S.C. 78q-1.
\9\ 17 CFR 240.17ad-22.
\10\ 15 U.S.C. 78q-1(b)(3)(F).
\11\ Id.
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The amendments would also satisfy relevant requirements of Rule
17Ad-22.\12\ Rule 17Ad-22(e)(2)(i) and (v) \13\ 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. The EOD Procedures continue to subject
the ICC EOD price discovery process to a governance and oversight
structure that promotes transparency and accountability and clearly
assigns and documents responsibility for relevant actions and
decisions. ICC believes that the proposed changes would promote
transparency in ICC's price discovery process by providing additional
clarity and transparency in ICC's EOD price discovery process by
clarifying and defining the use of MATI, MATC and consensus BOW. As
such, the proposed revisions continue to ensure that ICC maintains
policies and procedures that are reasonably designed to provide for
clear and transparent governance arrangements and specify clear and
direct lines of responsibility, consistent with the requirements of
Rule 17Ad-22(e)(2)(i) and (v).\14\
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\12\ 17 CFR 240.17ad-22.
\13\ 17 CFR 240.17ad-22(e)(2)(i) and (v).
\14\ Id.
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Rule 17Ad-22(e)(3)(i) \15\ requires each covered clearing agency 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 the covered clearing agency, which
includes risk management policies, procedures, and systems designed to
identify, measure, monitor, and manage the range of risks that arise in
or are borne by the covered clearing agency, that are subject to review
on a specified periodic basis and approved by the board of directors
annually. ICC maintains a sound risk management framework that
identifies, measures, monitors, and manages the range of risks that it
faces. The EOD Procedures is a key aspect of ICC's risk management
approach, which continues to be subject to review on a specified
periodic basis and approved by the Board annually. The proposed
amendments provide for additional clarity regarding the calculation of
EOD prices, and the expansion of the daily publication of EOD prices.
In ICC's view, such changes would promote transparency in ICC's price
discovery process and thus enhance implementation of the EOD
Procedures. The proposed changes would thus strengthen ICC's ability to
manage risk associated with its price discovery process, and ICC's risk
management more generally as ICC uses the resulting EOD prices for risk
management purposes, and ICC would continue to derive reliable, market-
driven prices from its price discovery process. As such, the amendments
would satisfy the requirements of Rule 17Ad-22(e)(3)(i).\16\
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\15\ 17 CFR 240.17ad-22(e)(3)(i).
\16\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
ICC does not believe the proposed rule change would have any
impact, or impose any burden, on competition. The proposed changes to
the EOD Procedures will apply uniformly across all market participants.
Therefore, ICC does not believe the amendments would 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
Received From Members, Participants or Others
Written comments relating to the proposed rule change have not been
solicited or received. ICC will notify the Commission of any written
comments received by ICC.
[[Page 88097]]
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-regulations/self-regulatory-organization-rulemaking);
or
Send an email to [email protected]. Please include
file number SR-ICC-2024-012 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-ICC-2024-012. 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-regulations/self-regulatory-organization-rulemaking). 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 a.m. and 3
p.m. Copies of such filings will also be available for inspection and
copying at the principal office of ICE Clear Credit and on ICE Clear
Credit's website at https://www.ice.com/clear-credit/regulation.
Do not include personal identifiable information in submissions;
you should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to file number SR-ICC-2024-012 and should
be submitted on or before November 27, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-25730 Filed 11-5-24; 8:45 am]
BILLING CODE 8011-01-P
