[Federal Register Volume 88, Number 238 (Wednesday, December 13, 2023)]
[Notices]
[Pages 86399-86400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27275]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99115; File No. SR-ICC-2023-014]


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

December 7, 2023.

I. Introduction

    On October 25, 2023, 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 clear 
additional credit default swap (``CDS'') contracts. The proposed rule 
change was published for comment in the Federal Register on November 7, 
2023.\3\ The Commission did not receive comments regarding the proposed 
rule change. For the reasons discussed below, the Commission is 
approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice 
of Filing of Proposed Rule Change Relating to the Clearance of 
Additional Credit Default Swap Contracts; Exchange Act Release No. 
98833 (Nov. 1, 2023), 88 FR 76870 (Nov. 7, 2023) (File No. SR-ICC-
2023-014) (``Notice'').
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II. Description of the Proposed Rule Change

    ICC is registered with the Commission as a clearing agency for the 
purpose of clearing CDS contracts. Chapter 26 of ICC's Rulebook covers 
the CDS contracts that ICC clears, with each subchapter of Chapter 26 
defining the characteristics and additional Rules applicable to the 
various specific categories of CDS contracts that ICC clears. Among 
other CDS contracts, ICC currently clears Standard Emerging Market 
Sovereign Single Name CDS (``SES'') contracts.
    The purpose of the proposed rule change is to amend ICC's rules to 
permit ICC to clear additional SES contracts, specifically, SES 
contracts on the Kingdom of Morocco and the Federal Republic of 
Nigeria.
    To carry out this change, the proposed rule change would amend 
Subchapter 26D of Chapter 26. In Rule 26D-102 (Definitions), ``Eligible 
SES Reference Entities,'' the proposed rule change would add the 
Kingdom of Morocco and the Federal Republic of Nigeria to the list of 
specific Eligible SES Reference Entities to be cleared by ICC.
    As discussed below, these additional SES contracts have terms 
consistent with the other SES contracts that ICC is already clearing. 
Likewise, to clear these additional contracts, ICC will be able to rely 
on its existing Risk Management Framework and other policies and 
procedures without making any changes.

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act requires the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
the proposed rule change is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to the 
organization.\4\ For the reasons given below, the proposed rule change 
is consistent with section 17A(b)(3)(F) of the Act \5\ and Rule 17Ad-
22(e)(1) thereunder.\6\
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    \4\ 15 U.S.C. 78s(b)(2)(C).
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ 17 CFR 240.17Ad-22(e)(1).
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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.\7\
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    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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    The proposed rule change is consistent with section 17A(b)(3)(F) of 
the Act.\8\ The terms and conditions of the additional SES contracts 
proposed for clearing are substantially similar to the terms and 
conditions of the other contracts listed in Subchapter 26D of ICC's 
Rules, all of which ICC currently clears, with the key difference being 
the underlying reference obligations. The underlying reference 
obligations will be issuances by the Kingdom of Morocco and the Federal 
Republic of Nigeria.
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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    A review of the Notice and ICC's Rules, policies, and procedures 
shows that ICC would be able to clear the additional SES contracts 
pursuant to its existing clearing arrangements and related financial 
safeguards, protections, and risk management procedures. Furthermore, a 
review of data on volume, open interest, and the number of ICC Clearing 
Participants (``CPs'') that currently trade in the SES contracts, as 
well as certain model parameters for the additional contracts, show 
that ICC's rules, policies, and procedures are reasonably designed to 
price and measure the potential risk presented by the additional SES 
contracts, collect financial resources in proportion to such risk, and 
liquidate the additional contracts in the event of a CP default. This 
should help ensure ICC's ability to maintain the financial resources it 
needs to provide its critical services and function as a central 
counterparty, thereby promoting the prompt and accurate settlement of 
the additional SES contracts and other credit default swap 
transactions.
    Therefore, clearance of the additional SES contracts would promote 
the prompt and accurate clearance and settlement of securities 
transactions, consistent with section 17A(b)(3)(F) of the Act.\9\
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    \9\ 15 U.S.C. 78q-1(b)(3)(F).
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b. Consistency With Rule 17Ad-22(e)(1)

    Rule 17Ad-22(e)(1) requires ICC to establish, implement, maintain, 
and enforce written policies and procedures reasonably designed to 
provide for a well-founded, clear, transparent, and enforceable legal 
basis for each aspect of

[[Page 86400]]

its activities in all relevant jurisdictions.\10\
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    \10\ 17 CFR 240.17Ad-22(e)(1).
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    The proposed rule change would help provide a well-founded, clear, 
transparent, and enforceable legal basis for ICC's clearance of SES 
contracts on the Kingdom of Morocco and the Federal Republic of 
Nigeria. By amending Rule 26D-102 to add both the Kingdom of Morocco 
and the Federal Republic of Nigeria to the list of specific Eligible 
SES Reference Entities to be cleared by ICC, the proposed rule change 
would help to ensure that ICC can clear SES contracts on those 
countries pursuant to its existing rules in Subchapter 26D. The revised 
Subchapter 26D would provide a well-founded, clear, transparent, and 
enforceable legal basis for ICC to clear these contracts, consistent 
with the requirements of Rule 17Ad-22(e)(1).\11\
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    \11\ 17 CFR 240.17Ad-22(e)(1).
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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 \12\ and Rule 17Ad-22(e)(1) thereunder.\13\
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
    \13\ 17 CFR 240.17Ad-22(e)(1).
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    It is therefore ordered pursuant to section 19(b)(2) of the Act 
\14\ that the proposed rule change (SR-ICC-2023-014), be, and hereby 
is, approved.\15\
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    \14\ 15 U.S.C. 78s(b)(2).
    \15\ 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).
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27275 Filed 12-12-23; 8:45 am]
BILLING CODE 8011-01-P