```

[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]

-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \7\ Section 2.1 of the EOD Procedures.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \12\ 17 CFR 240.17ad-22.
    \13\ 17 CFR 240.17ad-22(e)(2)(i) and (v).
    \14\ Id.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \15\ 17 CFR 240.17ad-22(e)(3)(i).
    \16\ Id.
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-25730 Filed 11-5-24; 8:45 am]
BILLING CODE 8011-01-P
```