[Federal Register Volume 88, Number 214 (Tuesday, November 7, 2023)]
[Notices]
[Pages 76870-76872]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24517]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98833; File No. SR-ICC-2023-014]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change Relating to the Clearance of Additional 
Credit Default Swap Contracts

November 1, 2023.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ and Rule 19b-4,\2\ notice is hereby given that on October 25, 
2023, ICE Clear Credit LLC (``ICC'') filed with the Securities and 
Exchange Commission the proposed rule change as described in Items I, 
II and III below, which Items have been prepared primarily by ICC. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1)
    \2\ 17 CFR 240.19b-4
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The principal purpose of the proposed rule change is to revise the 
ICC Rulebook (the ``Rules'') to provide for the clearance of additional 
Standard Emerging Market Sovereign Single Name CDS contracts (``EM 
Contracts'').

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, ICC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. ICC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

(a) Purpose
    The purpose of the proposed rule change is to adopt rules that will 
provide the basis for ICC to clear additional CDS contracts. ICC 
proposes to make such change effective following Commission approval of 
the proposed rule change. ICC believes the addition of these EM 
Contracts will benefit the market for CDS by providing market 
participants the benefits of clearing, including reduction in 
counterparty risk, and safeguarding of margin assets

[[Page 76871]]

pursuant to clearing house rules. Clearing of the additional EM 
Contracts will not require any changes to ICC's Risk Management 
Framework or other policies and procedures constituting rules within 
the meaning of the Securities Exchange Act of 1934 (``Act'').
    ICC proposes amending Subchapter 26D of its Rules to provide for 
the clearance of additional EM Contracts, specifically the Kingdom of 
Morocco and the Federal Republic of Nigeria. These additional EM 
Contracts have terms consistent with the other EM Contracts approved 
for clearing at ICC and governed by Subchapter 26D of the Rules. Minor 
revisions to Subchapter 26D (Standard Emerging Market Sovereign 
(``SES'') Single Name) are made to provide for clearing the additional 
EM Contracts. Specifically, in Rule 26D-102 (Definitions), ``Eligible 
SES Reference Entities'' is modified to include the Kingdom of Morocco 
and the Federal Republic of Nigeria in the list of specific Eligible 
SES Reference Entities to be cleared by ICC.
(b) Statutory Basis
    Section 17A(b)(3)(F) of the Act \3\ requires, among other things, 
that the rules of a clearing agency be designed to promote the prompt 
and accurate clearance and settlement of securities transactions and, 
to the extent applicable, derivative agreements, contracts, and 
transactions; to assure the safeguarding of securities and funds which 
are in the custody or control of ICC or for which it is responsible; 
and to comply with the provisions of the Act and the rules and 
regulations thereunder. The additional EM Contracts proposed for 
clearing are similar to the EM Contracts currently cleared by ICC and 
will be cleared pursuant to ICC's existing clearing arrangements and 
related financial safeguards, protections, and risk management 
procedures. Clearing of the additional EM Contracts will allow market 
participants an increased ability to manage risk and ensure the 
safeguarding of margin assets pursuant to clearing house rules. ICC 
believes that acceptance of the new EM Contracts, on the terms and 
conditions set out in the Rules, is consistent with the prompt and 
accurate clearance and settlement of securities transactions and 
derivative agreements, contracts and transactions cleared by ICC, the 
safeguarding of securities and funds in the custody or control of ICC 
or for which it is responsible, and the protection of investors and the 
public interest, within the meaning of section 17A(b)(3)(F) of the 
Act.\4\
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    \3\ 15 U.S.C. 78q-1(b)(3)(F).
    \4\ Id.
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    Clearing of the additional EM Contracts will also satisfy the 
relevant requirements of Rule 17Ad-22,\5\ as set forth in the following 
discussion.
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    \5\ 17 CFR 240.17Ad-22.
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    Rule 17Ad-22(e)(6)(i) \6\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to cover its credit exposures to its 
participants by establishing a risk-based margin system that, at a 
minimum, considers, and produces margin levels commensurate with, the 
risks and particular attributes of each relevant product, portfolio, 
and market. In terms of financial resources, ICC will apply its 
existing margin methodology to the new EM Contracts, which are similar 
to the EM Contracts currently cleared by ICC. ICC believes that this 
model will provide sufficient margin requirements to cover its credit 
exposure to its clearing members from clearing such contracts, 
consistent with the requirements of Rule 17Ad-22(e)(6)(i).\7\
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    \6\ 17 CFR 240.17Ad-22(e)(6)(i).
    \7\ Id.
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    Rule 17Ad-22(e)(4)(ii) \8\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to effectively identify, measure, 
monitor, and manage its credit exposures to participants and those 
arising from its payment, clearing, and settlement processes, including 
by maintaining additional financial resources at the minimum to enable 
it to cover a wide range of foreseeable stress scenarios that include, 
but are not limited to, the default of the two participant families 
that would potentially cause the largest aggregate credit exposure for 
the covered clearing agency in extreme but plausible market conditions. 
ICC believes its Guaranty Fund, under its existing methodology, will, 
together with the required initial margin, provide sufficient financial 
resources to support the clearing of the additional EM Contracts, 
consistent with the requirements of Rule 17Ad-22(e)(4)(ii).\9\
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    \8\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \9\ Id.
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    Rule 17Ad-22(e)(17) \10\ requires, in relevant part, each covered 
clearing agency to establish, implement, maintain, and enforce written 
policies and procedures reasonably designed to manage its operational 
risks by (i) identifying the plausible sources of operational risk, 
both internal and external, and mitigating their impact through the use 
of appropriate systems, policies, procedures, and controls; and (ii) 
ensuring that systems have a high degree of security, resiliency, 
operational reliability, and adequate, scalable capacity. ICC believes 
that its existing operational and managerial resources will be 
sufficient for clearing of the additional EM Contracts, consistent with 
the requirements of Rule 17Ad-22(e)(17),\11\ as the new contracts are 
substantially the same from an operational perspective as existing 
contracts.
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    \10\ 17 CFR 240.17Ad-22(e)(17)(i) and (ii).
    \11\ Id.
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    Rule 17Ad-22(e)(8), (9) and (10) \12\ requires each covered 
clearing agency to establish, implement, maintain, and enforce written 
policies and procedures reasonably designed to define the point at 
which settlement is final to be no later than the end of the day on 
which payment or obligation is due and, where necessary or appropriate, 
intraday or in real time; conduct its money settlements in central bank 
money, where available and determined to be practical by the Board, and 
minimize and manage credit and liquidity risk arising from conducting 
its money settlements in commercial bank money if central bank money is 
not used; and establish and maintain transparent written standards that 
state its obligations with respect to the delivery of physical 
instruments, and establish and maintain operational practices that 
identify, monitor, and manage the risks associated with such physical 
deliveries. ICC will use its existing rules, settlement procedures and 
account structures for the new EM Contracts, which are similar to the 
SES contracts currently cleared by ICC, consistent with the 
requirements of Rule 17Ad-22(e)(8), (9) and (10) \13\ as to the 
finality and accuracy of its daily settlement process and addressing 
the risks associated with physical deliveries.
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    \12\ 17 CFR 240.17Ad-22(e)(8), (9) and (10).
    \13\ Id.
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    Rule 17Ad-22(e)(2)(i) and (v) \14\ requires each covered clearing 
agency to establish, implement, maintain, and enforce written policies 
and procedures reasonably designed to provide for governance 
arrangements that are clear and transparent and specify clear and 
direct lines of responsibility. ICC determined to accept the additional 
EM Contracts for clearing in accordance with its governance process, 
which included review of the contract and related risk management 
considerations by the ICC Risk Committee and approval

[[Page 76872]]

by the ICC Board. These governance arrangements continue to be clear 
and transparent, such that information relating to the assignment of 
responsibilities and the requisite involvement of the ICC Board and 
committees is clearly detailed in the ICC Rules and policies and 
procedures, consistent with the requirements of Rule 17Ad-22(e)(2)(i) 
and (v).\15\
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    \14\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \15\ Id.
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    Rule 17Ad-22(e)(13) \16\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to ensure it has the authority and 
operational capacity to take timely action to contain losses and 
liquidity demands and continue to meet its obligations by, at a 
minimum, requiring its participants and, when practicable, other 
stakeholders to participate in the testing and review of its default 
procedures, including any close-out procedures, at least annually and 
following material changes thereto. ICC will apply its existing default 
management policies and procedures for the additional EM Contracts. ICC 
believes that these procedures allow for it to take timely action to 
contain losses and liquidity demands and to continue meeting its 
obligations in the event of clearing member insolvencies or defaults in 
respect of the additional single name, in accordance with Rule 17Ad-
22(e)(13).\17\
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    \16\ 17 CFR 240.17Ad-22(e)(13).
    \17\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    ICC does not believe the proposed amendments will have any impact, 
or impose any burden, on competition not necessary or appropriate in 
furtherance of the purposes of the Act. As discussed above, the purpose 
of the proposed rule change is to adopt rules that will provide the 
basis for ICC to clear additional credit default swap contracts. The 
additional EM Contracts will be available to all ICC participants for 
clearing. The clearing of the additional EM Contracts by ICC does not 
preclude the offering of the additional EM Contracts for clearing by 
other market participants. Accordingly, ICC does not believe that 
clearance of the additional EM Contracts will impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    Written comments relating to the proposed rule change have not been 
solicited or received. ICC will notify the Commission of any written 
comments received by ICC.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#681a1d040d450b0705050d061c1b281b0d0b460f071e"><span class="__cf_email__" data-cfemail="bac8cfd6df97d9d5d7d7dfd4cec9fac9dfd994ddd5cc">[email protected]</span></a>. Please include 
file number SR-ICC-2023-014 on the subject line.

Paper Comments

    Send paper comments in triplicate to Secretary, Securities and 
Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to file number SR-ICC-2023-014. 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 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-2023-014 and should 
be submitted on or before November 28, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-24517 Filed 11-6-23; 8:45 am]
BILLING CODE 8011-01-P


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