[Federal Register Volume 87, Number 82 (Thursday, April 28, 2022)]
[Notices]
[Pages 25324-25327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-09042]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94784; File No. SR-ICC-2022-005]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing and Order Granting Accelerated Approval of Proposed Rule Change 
Relating to the ICC Clearing Rules

April 22, 2022.
    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 April 13, 2022, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II, which Items have been prepared 
primarily by ICC. The Commission is publishing this notice and order to 
solicit comments on the proposed rule change from interested persons 
and to approve the proposed rule change on an accelerated basis.
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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 implement 
certain amendments to the ICC Clearing Rules (the ``Rules'') relating 
to implementation of Russia Sanctions (defined below).

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, 
security-based swap submission, or advance notice and discussed any 
comments it received on the proposed rule change, security-based swap 
submission, or advance notice. The text of these statements may be 
examined at the places specified in Item III below. ICC has prepared 
summaries, set forth in sections (A), (B), and (C) below, of the most 
significant aspects of these statements.

[[Page 25325]]

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

(a) Purpose
    The purpose of the proposed changes is to modify certain provisions 
of the Rules applicable to cleared CDS contracts (or components 
thereof) for which the Russian Federation is a reference entity, in 
light of the sanctions imposed by Directive 1A of February 22, 2022 
(Prohibitions Related to Certain Sovereign Debt of the Russian 
Federation) under Executive Order 14024 of April 21, 2021 (Blocking 
Property With Respect To Specified Harmful Foreign Activities of the 
Government of the Russian Federation \3\) (together, the ``Executive 
Order'') and related implementing actions by the U.S. Treasury 
Department Office of Foreign Asset Control (``OFAC''), as well as 
similar sanctions imposed by sanctions authorities in Canada, the 
European Union, Japan, Switzerland and the United Kingdom 
(collectively, the ``Russia Sanctions'').
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    \3\ 86 FR 20249 (April 15, 2021).
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    The amendments will incorporate in the terms and conditions for 
such contracts the Additional Provisions for Certain Russian Entities: 
Excluded Obligations and Excluded Deliverable Obligations, published by 
the International Swaps and Derivatives Association, Inc. (``ISDA'') on 
March 25, 2022 (the ``Russia Additional Provisions''). Consistent with 
the approach expected to be taken throughout the cleared and uncleared 
CDS market, ICE Clear Credit will make the Russia Additional Provisions 
applicable to relevant CDS contracts cleared by ICE Clear Credit 
beginning on the industry-wide implementation date (currently expected 
to be on or around April 25, 2022 (the ``Additional Provisions 
Effective Date'')). Accordingly, the amendments to the Rules will 
define the Additional Provisions Effective Date as April 25, 2022, or 
such later date as may be designated by ICE Clear Credit Circular.
    Among other provisions, the Russia Sanctions prohibit secondary 
market transactions in or relating to certain bonds issued by the 
Russian Federation (``Restricted Debt''). The Russia Additional 
Provisions implement this prohibition by excluding Russia government 
bonds that are Restricted Debt from being ``Obligations'' or 
``Deliverable Obligations'' under the terms of a CDS contract. As such, 
credit events with respect to such Restricted Debt could not be used to 
trigger credit protection under a CDS contract, and such Restricted 
Debt could not be used in settlement of a CDS contract. Pursuant to the 
terms of the Russia Additional Provisions, these limitations would 
cease to apply at such time as no relevant sanctions apply to secondary 
trading in the relevant Restricted Debt.
    ICE Clear Credit understands, through discussions with market 
participants, that market participants generally are expected to adhere 
to a protocol implementing the Russia Additional Provisions for 
existing contracts in the uncleared CDS market, effective as of the 
Additional Provisions Effective Date. In an effort to maintain 
consistency across the CDS market, ICE Clear Credit plans to implement 
the amendments discussed herein as of the same time.
    ICE Clear Credit is proposing to amend its Rules to incorporate the 
Russia Additional Provisions into existing Contracts. ICE Clear Credit 
would amend Rule 26C-316, which applies to CDX.EM Contracts, an index 
CDS contract for which Russia may be an index component. New subsection 
(f) would provide that all open positions in CDX.EM Contracts that that 
have a component transaction in which the Russian Federation is a 
Reference Entity will be amended, effective as of the Additional 
Provisions Effective Date, such that the Russia Additional Provisions 
apply. For clarity, the amendment would also update the transaction 
terms to reference the updated ISDA Credit Derivatives Physical 
Settlement Matrix with the Additional Provisions Effective Date that 
takes into account the Russia Additional Provisions.
    Similarly, ICE Clear Credit is proposing to amend Rule 26D-616, 
which applies to emerging market sovereign single-name CDS contracts. 
New subsection (d) would provide that a sovereign single-name CDS 
contract referencing the Russian Federation will be amended, effective 
as of the Additional Provisions Effective Date, such that the Russia 
Additional Provisions apply. For clarity, the amendment would also 
update the transaction terms to reference the updated ISDA Credit 
Derivatives Physical Settlement Matrix with the Additional Provisions 
Effective Date that takes into account the Russia Additional 
Provisions.
(b) Statutory Basis
    ICE Clear Credit believes that the proposed amendments are 
consistent with the requirements of Section 17A of the Act \4\ and the 
regulations thereunder applicable to it, including the standards under 
Rule 17Ad-22.\5\ 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, the safeguarding of securities and funds 
in the custody or control of the clearing agency or for which it is 
responsible, and the protection of investors and the public interest. 
Consistent with this Section, the amendments revise the terms of 
single-name and index CDS contracts referencing the Russian Federation 
in order to implement the Russia Additional Provisions and comply with 
the relevant restrictions in the Russia Sanctions. In ICE Clear 
Credit's view, the amendments will therefore facilitate its ability to 
continue prompt and accurate clearing of such contracts, consistent 
with applicable law and the public interest as set out in the Executive 
Order and other Russia Sanctions.
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    \4\ 15 U.S.C. 78q-1.
    \5\ 17 CFR 240.17Ad-22.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    Moreover, the amendments are consistent with Rule 17Ad-22(e)(1),\7\ 
which requires that each covered clearing agency 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 its activities in all 
relevant jurisdictions. As discussed herein, the amendments are 
designed to facilitate compliance by ICE Clear Credit and its clearing 
participants with the Russia Sanctions, by permitting clearing to 
continue in accordance with the restrictions on Restricted Debt imposed 
by the Russia Sanctions.
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    \7\ 17 CFR 240.17Ad-22(e)(1).
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(B) Clearing Agency's Statement on Burden on Competition

    ICE Clear Credit does not believe the proposed amendments would 
have any impact, or impose any burden, on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The changes will 
apply to all clearing participants and other market participants. The 
changes are being proposed in order to comply with the Russia Sanctions 
and are being made in conjunction with an industry-wide effort to amend 
relevant CDS contract terms. ICE Clear Credit does not believe the 
amendments will impact competition among clearing members or other 
market participants, affect the ability of market participants to 
access

[[Page 25326]]

clearing generally, or affect the cost of clearing. ICE Clear Credit 
further believes that any impact on clearing results from the 
restrictions imposed under the Russia Sanctions and is necessary and 
appropriate to ensure compliance with those restrictions.

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

    Written comments relating to the proposed amendments have not been 
solicited or received by ICE Clear Credit. ICE Clear Credit will notify 
the Commission of any comments received with respect to the proposed 
rule change.

III. 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 (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#80f2f5ece5ade3efedede5eef4f3c0f3e5e3aee7eff6"><span class="__cf_email__" data-cfemail="d1a3a4bdb4fcb2bebcbcb4bfa5a291a2b4b2ffb6bea7">[email protected]</span></a>. Please include 
File Number SR-ICC-2022-005 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-2022-005. 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 (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 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 10:00 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 website at https://www.theice.com/clear-credit/regulation. All comments received will be posted without change. 
Persons submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ICC-2022-005 and should be 
submitted on or before May 19, 2022.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    Section 19(b)(2)(C) of the Act directs the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
such proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to such 
organization.\8\ For the reasons discussed below, the Commission finds 
that the proposed rule change is consistent with Section 17A(b)(3)(F) 
of the Act \9\ and Rule 17Ad-22(e)(1) thereunder.\10\
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    \8\ 15 U.S.C. 78s(b)(2)(C).
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
    \10\ 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.\11\ Based on its 
review of the record, and for the reasons discussed below, the 
Commission believes the proposed rule change is consistent with the 
promotion of the prompt and accurate clearance and settlement of 
transactions at ICC.
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    \11\ 15 U.S.C. 78q-1(b)(3)(F).
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    The Commission believes that the proposed rule change should help 
to assure compliance with the Russia Sanctions. The Commission believes 
that the proposed rule change should do so by incorporating the Russia 
Additional Provisions into cleared CDS contracts that reference the 
Russian Federation. As discussed above, the Russia Additional 
Provisions are designed to implement the Russia Sanctions by, among 
other things, excluding Russia government bonds that are Restricted 
Debt from being ``Obligations'' or ``Deliverable Obligations'' under 
the terms of a CDS contract.
    The Commission believes that failure to comply with the Russia 
Sanctions could potentially result in legal liability and other 
consequences to ICC, like financial penalties. The Commission believes 
that such liability and penalties could impede ICC's operations and 
therefore its ability to clear and settle transactions. Moreover, the 
Commission believes that failure to comply with the Russia sanctions 
could specifically impede ICC's ability to process credit events and 
other transactions affecting CDS contracts that reference the Russian 
Federation. The Commission therefore believes that the proposed rule 
change, by helping assure compliance with the Russia Sanctions, is 
consistent with the promotion of the prompt and accurate clearance and 
settlement of transactions at ICC.
    The Commission further believes that the proposed rule change 
should help to ensure consistency between cleared and uncleared CDS 
contracts. The Commission notes ICC's representation that market 
participants generally are expected to adhere to a protocol 
implementing the Russia Additional Provisions for existing contracts in 
the uncleared CDS market. The Commission believes that incorporating 
into cleared CDS contracts the Russia Additional Provisions should help 
to ensure that the CDS cleared at ICC are consistent with CDS in the 
uncleared market. The Commission further believes that doing so should 
help to ensure that ICC is able to accept such uncleared CDS if 
counterparties later submit them for clearing. In this way, the 
Commission believes the proposed rule change should promote the prompt 
and accurate clearance and settlement of transactions at ICC.
    Therefore, the Commission finds that the proposed rule change is 
with Section 17A(b)(3)(F) of the Act.\12\
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    \12\ 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 that ICC 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 its activities in all relevant 
jurisdictions.\13\ As discussed above, the Commission believes that the 
proposed rule change should help to assure compliance with the Russia 
Sanctions by incorporating the Russia Additional Provisions into 
cleared CDS contracts that reference the Russian Federation. The 
Commission further believes that

[[Page 25327]]

failure to comply with the Russia Additional Provisions could 
potentially result in legal liability and other consequences to ICC and 
could impede the enforceability of cleared CDS that reference the 
Russian Federation. For example, if there was a credit event that 
triggered credit protection, then the Russian Sanctions could disrupt 
settlement of such CDS by prohibiting secondary market transactions in 
Restricted Debt. Such disrupted settlement could result in CDS buyers 
not receiving any credit protection payments, effectively making the 
CDS unenforceable. The Commission therefore believes that by assuring 
compliance with the Russian Sanctions, the proposed rule change should 
help assure that ICC's legal basis for clearing CDS contracts 
referencing the Russian Federation is well-founded and enforceable.
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    \13\ 17 CFR 240.17Ad-22(e)(1).
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    Therefore, the Commission finds that the proposed rule change is 
with Rule 17Ad-22(e)(1).\14\
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    \14\ 17 CFR 240.17Ad-22(e)(1).
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(C) Accelerated Approval of the Proposed Rule Change

    In its filing, ICC requests that the Commission grant accelerated 
approval of the proposed rule change pursuant to Section 
19(b)(2)(C)(iii) of the Act.\15\ Under Section 19(b)(2)(C)(iii) of the 
Act,\16\ the Commission may grant accelerated approval of a proposed 
rule change if the Commission finds good cause for doing so. ICC 
believes that accelerated approval is warranted because incorporating 
the Russia Additional Provisions is necessary for the maintenance of 
fair and orderly markets in CDS contracts referencing the Russian 
Federation in light of the restrictions on Restricted Debt imposed 
under the Russia Sanctions. Moreover, ICC believes approving the 
proposed rule change on an accelerated basis is needed for ICC to stay 
consistent with the uncleared market, which plans to implement the new 
provisions on or around April 25, 2022. Finally, ICC represents that 
the proposed rule change will not affect the safeguarding of funds or 
securities in the custody or control of ICC or for which it is 
responsible.
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    \15\ 15 U.S.C. 78s(b)(2)(C)(iii).
    \16\ 15 U.S.C. 78s(b)(2)(C)(iii).
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    The Commission finds good cause, pursuant to Section 
19(b)(2)(C)(iii) of the Act,\17\ for approving the proposed rule change 
on an accelerated basis prior to the 30th day after the date of 
publication of notice in the Federal Register because the proposed rule 
change is required to implement the Russia Additional Provisions on or 
around April 25, 2022. As discussed above, the Commission believes that 
implementing the Russia Additional Provisions should help assure 
compliance with the Russia Sanctions, and therefore help avoid 
potential legal liability and disruptions to ICC's operations. The 
Commission further believes that implementing the Russia Additional 
Provisions on or around April 25, 2022 should help assure that ICC 
maintains a well-founded and enforceable legal basis for clearing CDS 
contracts that reference the Russian Federation. Finally, the 
Commission believes that implementing the Russia Additional Provisions 
on or around April 25, 2022 should help assure that ICC stays 
consistent with the uncleared market.
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    \17\ 15 U.S.C. 78s(b)(2)(C)(iii).
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V. 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 
\18\ and Rule 17Ad-22(e)(1) \19\ thereunder.
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    \18\ 15 U.S.C. 78q-1(b)(3)(F).
    \19\ 17 CFR 240.17Ad-22(e)(1).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\20\ that the proposed rule change (SR-ICC-2022-005) be, and hereby is, 
approved on an accelerated basis.\21\
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    \20\ 15 U.S.C. 78s(b)(2).
    \21\ 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).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-09042 Filed 4-27-22; 8:45 am]
BILLING CODE 8011-01-P


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