Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 16471 

20 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 ICC notes that to date, physical settlement has 

not been necessary for any of the CDS Contracts 

cleared by ICC. 

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 Web site (http://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 Web site 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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the MSRB. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–MSRB– 

2015–02 and should be submitted on or 

before April 17, 2015. 

For the Commission, pursuant to delegated 

authority.20

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–06993 Filed 3–26–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74563; File No. SR–ICC– 

2015–004] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Notice of Filing of 

Proposed Rule Change Relating to 

Physical Settlement of CDS Contracts 

March 23, 2015. 

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 March 11, 

2015, ICE Clear Credit LLC (‘‘ICC’’ or the 

‘‘clearinghouse’’) 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 

primarily by ICC. 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 purpose of the proposed rule 

change is to amend ICC rules to modify 

the terms and conditions for physical 

settlement of cleared CDS Contracts, 

and to adopt certain new delivery 

procedures relating to physical 

settlement. 

II. Self-Regulatory Organization’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. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

ICC submits proposed amendments to 

the ICC Clearing Rules (‘‘ICC Rules’’) 

relating to physical settlement of CDS 

Contracts. Upon the occurrence of a 

credit event under a cleared CDS 

Contract, the contract is typically settled 

in cash in accordance with the terms of 

the ICC Rules, which incorporate the 

applicable ISDA Credit Derivatives 

Definitions (the ‘‘ISDA Definitions’’) 

and the market-standard credit default 

swap auction methodology for 

determining the cash settlement price. 

However, in certain circumstances, such 

as where the Credit Derivatives 

Determinations Committee decides not 

to hold a cash settlement auction for a 

particular credit event, or such an 

auction is cancelled under the terms of 

the auction methodology (including 

because of a failure to determine the 

auction settlement price), the CDS 

Contracts provide for a fallback 

settlement method of physical 

settlement. Under physical settlement of 

a CDS contract generally, the protection 

buyer will be entitled to deliver one or 

more qualifying deliverable obligations 

to the protection seller, in which case 

the protection seller will be required to 

pay the protection buyer a defined 

physical settlement amount. Under the 

current ICC Rules, if physical settlement 

applies,3 the clearinghouse will match 

clearing participants (‘‘Participants’’) 

that are protection buyers with 

Participants that are protection sellers in 

the relevant contract, and the two 

Participants will be responsible for 

effecting physical settlement between 

them. ICC does not itself perform or 

guarantee performance of physical 

settlement between the matched 

Participants. Once matching occurs, the 

contract is purely a bilateral contract 

between the matched Participants, and 

the clearinghouse has no further rights 

or obligations with respect to the 

contract. ICC does, however, collect and 

hold physical settlement margin as 

collateral agent on behalf of the 

protection buyer to secure the 

protection seller’s obligations to the 

protection buyer under physical 

settlement. 

At the request of its Participants, and 

following extensive consultation with 

them, ICC proposes to amend the ICC 

Rules relating to physical settlement 

such that the clearinghouse will be 

responsible for financial performance of 

physical settlement. ICC understands 

that Participants and other market 

participants view the current approach, 

in which cash settlement of credit 

events is guaranteed by the 

clearinghouse but physical settlement is 

not, as creating a potentially anomalous 

result in the unlikely case that physical 

settlement may apply. The application 

of physical settlement would be a 

circumstance that is generally not 

within any Participant’s control, and 

under the current rules may expose 

Participants to a significantly different 

credit risk profile than under cash 

settlement (where the Participant is 

exposed to the credit of the 

clearinghouse). In light of these 

discussions, ICC has determined that it 

is appropriate to extend the clearing 

guarantee to the financial performance 

of physical settlement. ICC notes that 

under the amended approach, it would 

still require payments and deliveries in 

the ordinary course under physical 

settlement to be made directly between 

the matched buying Participant and 

selling Participant, with the 

clearinghouse only being obligated to 

make direct payments in the case of 

certain defined settlement failure 

scenarios. ICC believes that this 

proposed rule change will further the 

general policy goals of central clearing 

for CDS transactions, and is consistent 

with the clearinghouse’s financial 

mstockstill on DSK4VPTVN1PROD with NOTICES

16472 Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 

4 ICC notes that a substantially similar approach 

to physical settlement is used in the ICE Clear 

Europe Limited CDS clearing service. 

resources, risk management procedures 

and operational capabilities.4

ICC proposes to make certain 

amendments to Chapters 1, 4, 5, 21 and 

22 of the ICC Rules. ICC also proposes 

to adopt a related set of Delivery 

Procedures and Physical Settlement and 

Notices Terms. ICC also proposes to 

make certain related and conforming 

changes to its Risk Management 

Framework. All capitalized terms not 

defined herein are defined in the ICC 

Rules. 

In Chapter 1 of the ICC Rules, the 

definition of ‘‘Client-Related Initial 

Margin’’ has been amended so that it 

now includes Physical Settlement 

Margin collected with respect to ClientRelated Positions. As discussed below, 

such Physical Settlement Margin will 

now secure the obligations of a 

Participant to ICC in connection with 

physical settlement. Similarly, in Rule 

403, the definition of ‘‘Physical 

Settlement Margin’’ has been amended 

to refer to such obligations to ICC (as 

opposed to the obligations to the 

matched Participant under the current 

ICC Rules). In Rule 502(b), a conforming 

reference to Physical Settlement Margin 

has been updated. A conforming change 

is also made in Rule 2101–02(a)(iv). 

In Chapter 22 (which covers physical 

settlement), a new Rule 2200 is added 

with definitions relating to the revised 

physical settlement provisions, 

including ‘‘Matched Delivery Buyer’’ 

and ‘‘Matched Delivery Seller,’’ and the 

related terms ‘‘Matched Delivery 

Contract,’’ ‘‘Matched Delivery Buyer 

Contract,’’ ‘‘Matched Delivery Seller 

Contract’’ and ‘‘MP Delivery Amount.’’ 

As discussed below, these terms are 

used in connection with the matching of 

buying Participants and selling 

Participants in the revised settlement 

procedures. A new definition of ‘‘Asset 

Package Delivery Notice’’ has also been 

added to address notices in connection 

with Asset Package delivery under the 

2014 ISDA Credit Derivatives 

Definitions (the ‘‘2014 ISDA 

Definitions’’). 

Rule 2201(a), which provides for 

matching of buying Participants and 

selling Participants into a Matched 

Delivery Pair in the case of physical 

settlement, has been revised to address 

scenarios where a Participant’s CDS 

contracts must be split and matched 

with multiple other Participants for 

purposes of physical settlement. 

Conforming changes to use applicable 

defined terms (such as Relevant 

Restructuring Credit Event) have also 

been made. Rule 2201(b), which 

addresses delivery of certain notices 

between a Matched Delivery Pair, has 

been revised to include references to 

Asset Package Delivery Notices. Rule 

2201(c) has been deleted at the request 

of Participants as being inconsistent 

with the terms of uncleared CDS and 

unnecessary in light of the provisions of 

the ISDA Definitions and Rule 2202. 

Rule 2202, which addresses 

resolution of disputes related to 

permissible deliverable obligations, has 

been revised to incorporate the concept 

of Asset Package Delivery under the 

2014 ISDA Definitions, as well as 

related concepts of Prior Deliverable 

Obligations, Package Observable Bonds 

and Asset Package Delivery Notices. 

Rules 2202(b) and (c) have also been 

revised to address the consequences of 

a selling Participant’s refusal to accept 

delivery of a particular obligation, 

including for the offsetting transaction 

between ICC and the buying Participant. 

Rule 2203 has been replaced with 

new provisions addressing the 

clearinghouse’s role in physical 

settlement. When a Matched Delivery 

Pair is established, the CDS Contract 

between the Matched Delivery Buyer 

and ICC is referred to as the Matched 

Delivery Buyer Contract, and the 

corresponding CDS Contract between 

ICC and the Matched Delivery Seller is 

referred to as the Matched Delivery 

Seller Contract. Under the revised 

physical settlement approach, ICC 

remains party to each such contract, but 

requires certain notices, payments and 

deliveries to take place directly between 

the Matched Delivery Buyer and 

Matched Delivery Seller. Accordingly, 

under Rule 2203(a), for each Matched 

Delivery Buyer Contract, ICC designates 

the Matched Delivery Seller to receive 

on ICC’s behalf notices and deliveries 

from the Matched Delivery Buyer and to 

make payments on ICC’s behalf to the 

Matched Delivery Buyer. Similarly, 

under Rule 2203(b), for each Matched 

Delivery Seller Contract, ICC designates 

the Matched Delivery Buyer to deliver 

on ICC’s behalf notices and deliveries to 

the Matched Delivery Seller, and to 

receive on ICC’s behalf payments from 

the Matched Delivery Seller. The result 

is that notices, payments and deliveries 

will be made directly between the 

Matched Delivery Buyer and Matched 

Delivery Seller, in satisfaction of the 

parties and ICC’s respective obligations 

under both the Matched Delivery Buyer 

Contract and Matched Delivery Seller 

Contract. Rule 2203(c) further clarifies 

that the exercise of rights by Matched 

Delivery Buyer against ICC will be 

deemed the exercise by ICC of the 

corresponding rights against Matched 

Delivery Seller, and vice versa. Rules 

2203(d) and (e) provide for copies of 

relevant notices to be provided to ICC, 

as well as notice of the completion of 

settlement between the Matched 

Delivery Buyer and Matched Delivery 

Seller. Rule 2203(f) clarifies the 

obligations of the respective parties to a 

Matched Delivery Contract, and 

addresses a scenario where an Asset 

Package being delivered is deemed to 

have a value of zero under the 2014 

ISDA Definitions. Rule 2203(g) allocates 

costs and expenses that may be incurred 

by ICC in connection with physical 

settlement. 

Rule 2204, as revised, addresses 

physical settlement of certain 

deliverable obligations that do not settle 

in the ordinary course on a deliveryversus-payment basis (‘‘Non-DVP 

Obligations’’). The rule establishes a 

procedure under which the Matched 

Delivery Seller pays the physical 

settlement amount owed to ICC, which 

in turn will not pay such amount to the 

Matched Delivery Buyer until ICC 

receives notice that the obligation has 

been received by the Matched Delivery 

Seller from the Matched Delivery Buyer. 

If the obligation is not delivered, the 

physical settlement amount is returned 

to the Matched Delivery Seller. 

Rule 2205 addresses settlement 

failures by the Matched Delivery Seller 

or Matched Delivery Buyer. Under 

subsection (a), if the Matched Delivery 

Seller fails to pay the physical 

settlement amount when due, the 

Matched Delivery Buyer Contract will 

be cash settled as between the Matched 

Delivery Buyer and ICC. ICC thus will 

not be obligated to take delivery of the 

relevant deliverable obligations (and 

dispose of them in a situation where the 

Matched Delivery Seller has failed to 

perform), but will compensate the 

Matched Delivery Buyer for the value of 

the Matched Delivery Buyer Contract 

through the cash settlement process. 

Pursuant to subsection (b), ICC may, in 

addition to its other default remedies, 

terminate the Matched Delivery Seller 

Contract, in which case the Matched 

Delivery Seller will owe ICC an amount 

equal to the cash settlement amount ICC 

paid the Matched Delivery Buyer, 

together with other losses and expenses 

incurred by ICC as a result of the failure. 

Rule 2205(c) provides that, consistent 

with the terms of the ISDA Definitions 

applicable to a protection buyer 

generally, any failure by ICC to deliver 

any deliverable obligations to the 

Matched Delivery Seller (including as a 

result of a failure by the Matched 

Delivery Buyer to make a delivery) will 

not constitute a default by ICC, and the 

Matched Delivery Seller’s sole remedy 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 16473 

5Cash settlement in this context is different from 

the auction cash settlement that normally applies to 

CDS contracts under the ISDA Definitions, and is 

based on price quotations obtained by the relevant 

party to the contract for the obligation or obligations 

that cannot be delivered. 

6 15 U.S.C. 78q–1(b)(3)(F). 

7 Id. 

8 17 CFR 240.17Ad–22. 

will be as set forth in the Matched 

Delivery Seller Contract (which may 

include, for example, buy-in remedies of 

the Matched Delivery Seller). ICC will 

not have any obligation to purchase or 

acquire deliverable obligations (other 

than in settlement of the Matched 

Delivery Buyer Contract) in order to 

settle the Matched Delivery Seller 

Contract. This is consistent with the 

clearinghouse’s guarantee of finance 

performance, but not actual delivery. In 

the event of a delivery failure by a 

Matched Delivery Buyer, such party will 

be liable to ICC for any costs incurred 

by ICC in settling the corresponding 

Matched Delivery Seller Contract (in 

addition to ICC’s other remedies for a 

default). 

Rule 2206 covers certain other, nondefault scenarios in which physical 

settlement fails to occur. Under Rule 

2206(a) and (b), if physical settlement of 

the Matched Buyer Delivery Contract 

does not occur because the deliverable 

obligation is in less than the relevant 

minimum denomination or the Matched 

Delivery Seller is not a permitted 

transferee of the obligation, the failure 

will be treated as an illegality or 

impossibility outside of the parties’ 

control, which will result in cash 

settlement 5 under the ISDA Definitions. 

In this and other scenarios where a cash 

settlement fallback applies, the same 

cash settlement amount will apply to 

both the Matched Delivery Buyer 

Contract and Matched Delivery Seller 

Contract under Rule 2206(c). Similarly, 

in the case of a buy-in, the same buyin price will apply to both contracts. 

Rule 2206(d) provides for cash 

settlement of both the Matched Delivery 

Buyer Contract and Matched Delivery 

Seller Contract in certain cases where 

delivery does not occur between the 

Matched Delivery Buyer and the 

customer for which it is acting. Rule 

2206(e) specifies the date of any cash 

settlement and provides for notice of the 

relevant amount owed. 

Rule 2207(a) provides for certain 

standard representations and related 

provisions for physical settlement in the 

ISDA Definitions to apply as between 

the Matched Delivery Buyer and 

Matched Delivery Seller, and clarifies 

ICC’s authority to designate a 

Participant to make or receive physical 

settlement on its behalf as provided in 

Rules 2203 and 2204 for purposes of 

Section 9.2(c)(iv) of the 2003 Definitions 

or Section 11.2(c)(iv) of the 2014 

Definitions, even though the Participant 

is not its Affiliate. Rule 2207(b) clarifies 

certain procedures for obtaining price 

quotations for the relevant deliverable 

obligations in the event that a cash 

settlement fallback applies. 

Rule 2208 allows the Matched 

Delivery Buyer and Matched Delivery 

Seller to settle their rights and 

obligations as to physical settlement 

through an alternative arrangement 

agreed between them (referred to as a 

‘‘CADP’’), in lieu of settlement pursuant 

to Chapter 22 of the Rules. If they so 

agree, ICC will have no obligation in 

respect of such alternative arrangement. 

Rule 2209(a) and (c) provide that 

margin (including physical settlement 

margin) will continue to be called and 

held through settlement. Rule 2209(b) 

provides that ICC will apply physical 

settlement margin to satisfy the Matched 

Delivery Seller’s obligation to pay the 

physical settlement amount, and call 

such seller for any shortfall. 

ICC also proposes to adopt Delivery 

Procedures that further specify certain 

operational and other details for the 

physical settlement process. Paragraph 1 

provides certain definitions used in the 

Delivery Procedures. Paragraph 3.2 sets 

out certain requirements for providing 

notices in connection with physical 

settlement. Paragraphs 3.3(a)–(e) 

establish the procedures and timetable 

for ICC to allocate Matched Delivery 

Pairs and notify Participants 

accordingly. Paragraph 3.3(g) addresses 

additional procedures concerning 

delivery of notices by Participants in 

connection with physical settlement, 

including as to relevant notice 

deadlines, requirements for providing 

copies of notices to the clearinghouse, 

treatment of late notices and procedures 

for disputes involving notices. 

Paragraph 4 of the Delivery Procedures 

specifies certain deadlines in 

connection with the physical settlement 

of Non-DVP Obligations under Rule 

2204. Paragraph 5 specifies the deadline 

for notices that parties have elected a 

CADP. 

ICC also proposes to adopt a set of 

Physical Settlement and Notices Terms 

(‘‘Notices Terms’’) with respect to 

physical settlement. The Notices Terms 

are intended to set forth in a uniform 

way certain matters between a 

Participant and its customer in 

connection with physical settlement, 

including delivery of physical 

settlement notices and delivery and 

receipt of deliverable obligations as 

between the Participant and its 

customer. The Notices Terms also 

address the operation of certain cash 

settlement and other fallbacks as 

between the Participant and its 

customer. The Notices Terms do not 

bind ICC and do not form part of the ICC 

Rules or ICC Procedures. The Notices 

Terms are published for the 

convenience and use of Participants and 

their customers, and are designed to be 

incorporated by reference in customer 

clearing documentation. However, a 

Participant and its customer may agree 

to vary the Notices Terms as between 

them. 

ICC also proposes to make certain 

changes to its Risk Management 

Framework to accommodate the changes 

relating to physical settlement that are 

being made to the Rules and procedures 

as set forth herein. As revised, the Risk 

Management Framework reflects the 

clearinghouse’s obligations in respect of 

physical settlement as provided in the 

amended Rules and procedures. It sets 

out the steps in the physical settlement 

process to be taken by the clearinghouse 

if physical settlement applies, including 

the matching of Participants into 

Matched Delivery Pairs, consistent with 

the Rules and procedures. The revisions 

also address the calculation, collection 

and use of margin (including physical 

settlement margin) where physical 

settlement applies. 

Section 17A(b)(3)(F) of the Act 6

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 and to 

comply with the provisions of the Act 

and the rules and regulations 

thereunder. ICC believes that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to ICC, in particular, Section 

17(A)(b)(3)(F) 7 and Rule 17Ad–22,8

because the proposed rule change will 

assure the prompt and accurate 

clearance and settlement of securities 

transactions and derivatives agreements, 

contracts, and transactions. Specifically, 

ICC believes that the proposed 

amendments will enhance the clearance 

and settlement of CDS transactions in 

circumstances where physical 

settlement applies. Although physical 

settlement applies only rarely, and as a 

fallback to the normal procedure for 

auction cash settlement, ICC and its 

Participants believe that the 

amendments will benefit the CDS 

market generally by making the physical 

settlement process more robust and 

providing greater certainty around the 

mstockstill on DSK4VPTVN1PROD with NOTICES

16474 Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 

9 15 U.S.C. 78q–1(b)(3)(F). 

10 17 CFR 240.17Ad–22. 

11 17 CFR 240.17Ad–22(d)(15). 

12 Id. 

13 17 CFR 240.17Ad–22(d)(2). 

14 17 CFR 240.17Ad–22(d)(11). 

15 17 CFR 240.17Ad–22(d)(4). 

physical settlement process. ICC 

proposes to extend its clearing 

guarantee to the financial performance 

of physical settlement, which eliminates 

the existing gap in coverage where 

contracts go to physical settlement and 

avoids exposing Participants to the 

direct credit of other Participants in the 

case of physical settlement. At the same 

time, ICC has designed the revised 

procedures so that it is not itself 

required to make or take delivery of 

underlying deliverable obligations. In 

the ordinary course, payments and 

deliveries (and related notices) will be 

made directly between the matched 

buying and selling Participants. In the 

case of a settlement failure, the 

clearinghouse’s obligations will be 

settled in cash, avoiding the need for the 

clearinghouse to obtain or dispose of 

deliverable obligations. In ICC’s view, 

this allows it to appropriately limit and 

manage its risks with respect to physical 

settlement of cleared CDS contracts. As 

a result, ICC believes that the 

amendments will promote the accurate 

clearing and settlement of CDS 

contracts, and are therefore consistent 

with the requirements of Section 

17A(b)(3)(F) of the Act.9

In addition, the amendments are 

consistent with the requirements of Rule 

17Ad–22.10 In particular, Rule 17Ad– 

22(d)(15) 11 requires that ICC ‘‘state to its 

participants the clearing agency’s 

obligations with respect to physical 

deliveries and identify and manage the 

risks from these obligations.’’ As 

discussed above, revised chapter 22 of 

the Rules clearly states ICC’s obligations 

with respect to physical settlement of 

CDS Contracts. The revised Rules 

establish the clearinghouse’s 

responsibility for financial performance 

of physically settled contracts, while 

establishing the procedures for 

settlement in the ordinary course to take 

place directly between the buying 

Participant and the selling Participant. 

The Rules also establish the procedures 

to be followed in the case of a 

settlement failure and the 

responsibilities of the relevant 

Participants and ICC with respect 

thereto, and provide a mechanism for 

ICC to effect settlement in cash without 

having to acquire or dispose of the 

underlying deliverable obligations. In 

ICC’s view, these arrangements permit it 

to appropriately manage the risks to the 

clearinghouse from the physical 

settlement obligations it would 

undertake under the proposed 

amendments, and are therefore 

consistent with the requirements of Rule 

17Ad–22(d)(15).12

In terms of financial resources, ICC 

will continue to collect initial and markto-market margin for CDS Contracts 

through the completion of physical 

settlement, and does not propose to 

change its margin methodology with 

respect thereto in connection with these 

amendments. In addition, ICC will 

collect physical settlement margin to 

cover the specific obligations of 

Participants to the clearinghouse with 

respect to physical settlement. In ICC’s 

view, its financial resources will as a 

result be sufficient to support its 

clearing operations, including under the 

amended physical settlement 

procedures, in a manner consistent with 

the requirements of Rule 17Ad– 

22(d)(2).13

In terms of default management, the 

amendments provide additional 

procedures for addressing settlement 

failures in the physical settlement 

process, in a manner that provides 

financial protection to non-defaulting 

Participants while avoiding the need for 

the clearinghouse to make or take 

physical delivery. ICC believes that 

these additional provisions, together 

with its existing default management 

rules and procedures, will permit it to 

take timely action to contain losses and 

liquidity pressures and continue 

meeting its obligations in the case of a 

default, including in connection with 

physical settlement, within the meaning 

of Rule 17Ad–22(d)(11).14

ICC also believes that its operational 

systems and capabilities are sufficient to 

support the changes to physical 

settlement. As discussed above, ICC 

proposes to adopt Delivery Procedures 

that would specify certain key 

operational aspects of the physical 

settlement process. These procedures, as 

well as related systems and 

arrangements, address relevant sources 

of operational risk in the physical 

settlement process and are designed to 

minimize such risks, within the 

meaning of Rule 17Ad–22(d)(4).15

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

ICC does not believe the proposed 

amendments would have any impact, or 

impose any burden, on competition not 

necessary or appropriate in furtherance 

of the purpose of the Act. The 

amendments will apply uniformly 

across all Participants. Although 

physical settlement is expected to be a 

remote circumstance, the amendments 

are intended to extend the benefit of the 

clearing guarantee to that process in the 

event it occurs, and therefore would 

generally be expected to benefit all 

market participants. Although ICC may 

collect additional physical settlement 

margin in connection with physical 

settlement, such margin is, in ICC’s 

view, necessary to protect the operation 

of the clearinghouse and will affect all 

Participants with positions that go to 

physical settlement. In other respects, 

ICC does not anticipate that these 

enhancements will materially affect the 

cost of clearing for Participants or other 

market participants. In addition, ICC is 

not otherwise proposing to change its 

standards for access to the 

clearinghouse or the terms and 

conditions of cleared contracts (which 

already provide for physical settlement 

in these limited circumstances, but 

without the benefit of the clearinghouse 

guarantee). As a result, ICC does not 

believe the amendments will adversely 

affect the ability of Participants or other 

market participants to continue to clear 

CDS contracts. ICC also does not believe 

the enhancements will limit the 

availability of clearing in CDS products 

for Participants or their customers or 

otherwise limit market participants’ 

choices for selecting clearing services in 

CDS. Therefore, ICC does not believe the 

proposed rule change imposes any 

burden on competition that is not 

appropriate in furtherance of the 

purpose of the Act. 

C. Self-Regulatory Organization’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 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 16475 

16 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(6)(iii). 

5A User is defined as ‘‘any Options member or 

Sponsored Participant who is authorized to obtain 

access to the System pursuant to Rule 11.3 

(Access).’’ See Exchange Rule 16.1(a)(63). 

6A Clearing Member is defined as ‘‘an Options 

Member that is self-clearing or an Options Member 

that clears BATS Options Transactions for other 

Members of BATS Options.’’ See Exchange Rule 

16.1(a)(15). 

7An Options Member is defined as ‘‘a firm, or 

organization that is registered with the Exchange 

pursuant to Chapter XVII of these Rules for 

purposes of participating in options trading on 

BATS Options as an ‘Options Order Entry Firm’ or 

‘Options Market Maker.’ ’’ See Exchange Rule 

16.1(a)(38). 

8A BATS Options Transactions is defined as ‘‘a 

transaction involving an options contract that is 

effected on or through BATS Options or its facilities 

or systems.’’ See Exchange Rule 16.1(a)(11). 

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 (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

ICC–2015–004 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–2015–004. 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 Web site (http://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 Web site 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 

10:00 a.m. and 3:00 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 Web site at https://

www.theice.com/clear-credit/regulation. 

All comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–ICC–2015–004 and should 

be submitted on or before April 17, 

2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–06992 Filed 3–26–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74565; File No. SR–BATS– 

2015–22] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Adopt New Rule 21.17, 

Exchange Sharing of User Designated 

Risk Settings 

March 23, 2015. 

Pursuant to section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on March 13, 

2015, BATS Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BATS’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Exchange has 

designated this proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(6)(iii) 

thereunder,4 which renders it effective 

upon filing with the Commission. 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 filed a proposal to 

authorize the BATS Options Market 

(‘‘BATS Options’’) to share a User’s 5

risk settings with the Clearing Member 6

that clears transactions on behalf of the 

User. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at www.batstrading.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is proposing to adopt 

new Rule 21.17, Exchange Sharing of 

User Designated Risk Settings, in order 

to authorize the Exchange to share any 

of a User’s risk settings with the 

Clearing Member that clears 

transactions on behalf of the User. 

Under BATS Rule 17.2(b), Options 

Members 7 must be Clearing Members or 

establish a clearing arrangement with a 

Clearing Member. Rule 21.13(a) 

provides that every Clearing Member is 

responsible for the clearance of BATS 

Options Transactions 8 of such Clearing 

Member and of each User that gives up 

such Clearing Member’s name pursuant 

to a letter of authorization, letter of 

guarantee, or other authorization given 

by such Clearing Member to such User, 

which authorization must be submitted 

to the Exchange. Further, no Options 

Member may make any transactions on 

the Exchange unless a letter of guarantee 

providing that the issuing Clearing 

Member accepts financial 

responsibilities for all BATS Options 

Transactions made by the Options 

Member (a ‘‘Letter of Guarantee’’) has 

been issued for such Options Member 

by a Clearing Member and filed with the 

Exchange. 

Thus, while not all Options Members 

are Clearing Members, all Options 

mstockstill on DSK4VPTVN1PROD with NOTICES