77578 Federal Register / Vol. 79, No. 247 / Wednesday, December 24, 2014 / Notices 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 34–73444 

(Oct. 28, 2014), 79 FR 65270 (Nov. 3, 2014) (SR– 

ICC–2014–18). 

4Commission Delegated Regulation (EU) No. 153/ 

2013 of 19 December 2012 Supplementing 

Regulation (EU) No. 648/2012 of the European 

Parliament and of the Council with regard to 

Regulatory Technical Standards on Requirements 

for Central Counterparties (the ‘‘Regulatory 

Technical Standards’’). 

5 15 U.S.C. 78s(b)(2)(C). 

6 15 U.S.C. 78q–1(b)(3)(F). 

7 15 U.S.C. 78q–1. 

8 17 CFR 240.17Ad–22(b)(1) and (2). 

9 17 CFR 240.17Ad–22(b)(3). 

10 17 CFR 240.17Ad–22(b)(1)—(3). 

11 15 U.S.C. 78q–1(b)(3)(F). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73877; File No. SR–ICC– 

2014–18] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Order Granting 

Approval of Proposed Rule Change To 

Revise the ICC Risk Management 

Framework 

December 18, 2014. 

I. Introduction 

On October 22, 2014, ICE Clear Credit 

LLC (‘‘ICC’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change SR–ICC–2014–18 pursuant to 

section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder.2 The proposed rule 

change was published for comment in 

the Federal Register on November 3, 

2014.3 The Commission received no 

comment letters regarding the proposed 

change. For the reasons discussed 

below, the Commission is granting 

approval of the proposed rule change. 

II. Description of the Proposed Rule 

Change 

ICC is proposing to revise the ICC 

Risk Management Framework to 

incorporate certain risk model 

enhancements. The revisions do not 

require any changes to the ICC Clearing 

Rules. 

ICC proposes revising the ICC Risk 

Management Framework to facilitate 

compliance with requirements under 

the European Market Infrastructure 

Regulations, specifically antiprocyclicality conditions described in 

Article 28 of the Regulatory Technical 

Standards.4 Currently, according to ICC, 

it considers three levels of volatility in 

its Risk Management Framework to 

account for stable but prudent margin 

requirements. ICC proposes adding a 

fourth volatility scale that assigns a 25% 

weight to a stress period (currently the 

stress period is set to January 14, 2008 

to December 31, 2008) and the 

remaining 75% to the immediate most 

recent 250 observations, consistent with 

Article 28(b) of the Regulatory 

Technical Standards. According to ICC, 

the revised initial margin requirements 

are expected to result in more 

conservative initial margin figures for 

some risk factors. In addition, ICC 

proposes introducing devolatilization 

enhancements to describe spread logreturn time series that span market 

periods associated with different 

volatility regimes. 

Additionally, ICC proposes a revised 

approach to computing index liquidity 

charges. As described by ICC, the 

enhancement consists of reducing the 

portfolio liquidity benefits across 

different index series. As part of its 

product offering, ICC clears credit 

default swap (‘‘CDS’’) index series. A 

new series of CDS indices is issued 

every six months, and the new series is 

referred to as being ‘‘on-the-run,’’ while 

previous series are referred to as being 

‘‘off-the-run.’’ ICC states that the revised 

calculation establishes series-specific 

liquidity charges by considering the 

series-specific positions and 

establishing series-specific position 

directionality based on the 

corresponding 5-year equivalent 

notional amount directionality. Further, 

to capture the market behavior around 

index rolls when the bid/offer width for 

index-roll transactions (i.e., trading the 

on-the-run vs. first off-the-run indices) 

is typically smaller than the bid/offer 

width of each individual leg, ICC 

proposes implementing time-dependent 

long/short liquidity charge portfolio 

benefits for the on-the-run and the first 

off-the run series. The proposed 

revisions to the liquidity charges are 

expected by ICC to result in more 

conservative requirements than the ones 

associated with the current approach. 

ICC also proposes enhancements to 

the calculation of its concentration 

charges by introducing index seriesspecific concentration charges. 

According to ICC, the revised 

calculation establishes series-specific 

concentration charges for positions 

exceeding series-specific concentration 

threshold limits based on the direction 

of the 5-year equivalent notional 

amount or the net notional amount. 

Under the revised calculation, ICC states 

it will estimate series-specific 

concentration charge threshold limits 

based on the distribution of seriesspecific open interest information at the 

Clearing House. ICC believes that the 

estimated series-specific concentration 

charge threshold limits reflect the 

average open interest over a 5-day 

period. ICC expects the proposed 

revisions to the concentration charge 

will result in more conservative 

requirements than the ones associated 

with the current approach. 

III. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Act 5 directs 

the Commission to approve a proposed 

rule change of a self-regulatory 

organization if the Commission finds 

that such proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to such selfregulatory organization. Section 

17A(b)(3)(F) of the Act 6 requires, among 

other things, that the rules of a clearing 

agency are 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 the clearing agency or for 

which it is responsible and, in general, 

to protect investors and the public 

interest. 

The Commission finds that the 

proposed rule change is consistent with 

section 17A of the Act 7 and the rules 

thereunder applicable to ICC. The 

proposed changes to the ICC Risk 

Management Framework are expected to 

impose more prudent initial margin 

requirements, meeting the requirements 

of Rule 17Ad–22(b)(1) and (2).8 The 

proposed changes, when considered 

together with ICC’s existing Guaranty 

Fund methodology, are expected to 

result in total financial resources 

maintained by ICC sufficient to 

withstand, at a minimum, a default by 

the two participant families to which it 

has the largest exposures in extreme but 

plausible market conditions in 

accordance with Rule 17Ad–22(b)(3).9

Therefore, ICC’s proposed changes are 

reasonably designed to meet the margin 

and financial resource requirements of 

Rule 17Ad–22(b)(1)—(3).10 The 

Commission therefore believes that the 

changes will promote the prompt and 

accurate settlement of securities and 

derivatives transactions, consistent with 

the requirements of section 17A(b)(3)(F) 

of the Act.11

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposal is 

consistent with the requirements of the 

Act and in particular with the 

requirements of section 17A of the 

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Federal Register / Vol. 79, No. 247 / Wednesday, December 24, 2014 / Notices 77579 

12 15 U.S.C. 78q–1. 

13 15 U.S.C. 78s(b)(2). 

14 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). 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See, e.g. Phlx Rule 1080(l), CBOE Rule 8.13, ISE 

Supplementary Material .03 to Rule 713, MIAX 

Rule 514. 

Act 12 and the rules and regulations 

thereunder. 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,13 that the 

proposed rule change (File No. SR–ICC– 

2014–18) be, and hereby is, approved.14

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–30120 Filed 12–23–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73878; File No. SR–BOX– 

2014–28] 

Self-Regulatory Organizations; BOX 

Options Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Adopt New Rule 7300 To Allow the 

Exchange To Trade Preferenced 

Orders 

December 18, 2014. 

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 December 

8, 2014, BOX Options Exchange LLC 

(the ‘‘Exchange’’) 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 by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule from 

interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to adopt new 

Rule 7300 to allow the Exchange to 

trade Preferenced Orders. The text of the 

proposed rule change is available from 

the principal office of the Exchange, at 

the Commission’s Public Reference 

Room and also on the Exchange’s 

Internet Web site at http://

boxexchange.com. 

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 

self-regulatory organization 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 self-regulatory organization has 

prepared summaries, set forth in 

sections A, B, and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to adopt new 

Rule 7300 (Preferenced Orders) to allow 

BOX Options Participants 

(‘‘Participants’’) to submit orders for 

which a Market Maker is designated to 

receive an allocation preference on the 

Exchange (‘‘Preferenced Orders’’). This 

proposal provides an enhanced 

allocation to a Preferred Market Maker 

when it is quoting at NBBO. 

This is a competitive filing based on 

the rules of a number of competing 

options exchanges.3 This proposal will 

allow the Exchange to be competitive 

with other options exchanges that 

provide similar enhanced allocation 

opportunities to Market Makers to 

reward them for attracting order flow to 

the Exchange. 

Preferenced Orders 

A Preferenced Order, as proposed, is 

any order submitted by a Participant to 

the Exchange for which a Market Maker 

is designated (a ‘‘Preferred Market 

Maker’’) to receive execution priority, 

with respect to a portion of the 

Preferenced Order, upon meeting 

certain qualifications described below. 

Preferenced Orders are submitted by a 

Participant by designating an order as 

such and identifying a Preferred Market 

Maker when entering the order. 

Preferenced Orders may be submitted 

by any Participant on the Exchange. All 

existing order types and designations 

may be entered as Preferenced Orders, 

with the exception of Customer Cross 

Orders (which do not involve Market 

Makers) and Directed Orders (which 

relate to the PIP and COPIP matching 

algorithms). If a Market-on-Opening 

Order or a Complex Order is submitted 

as a Preferenced Order, the designation 

as a Preferenced Order will be 

disregarded and such order will be 

treated on the Exchange the same as if 

it were not a Preferenced Order. 

Preferenced Orders may interact with 

auctions and other functionality of the 

Exchange. 

Participants may designate an order as 

a Preferenced Order and identify the 

applicable Preferred Market Maker 

across all forms of connectivity to the 

Exchange. Preferenced Orders will be 

displayed on the Exchange’s High Speed 

Vendor Feed (‘‘HSVF’’) the same as 

orders that are not designated as 

Preferenced Orders. 

A Preferred Market Maker must 

maintain a continuous two-sided 

market, pursuant to Rule 8050(c)(1), 

throughout the trading day, in option 

classes for which it accepts Preferenced 

Orders, for 99% of the time the 

Exchange is open for trading in each 

such option class; provided, however, 

that for purposes of this requirement, a 

Preferred Market Maker is not required 

to quote in intra-day add-on series or 

series that have a time to expiration of 

nine months or more in classes for 

which it receives Preferenced Orders 

and a Market Maker may still be a 

Preferred Market Maker in any such 

series if the Market Maker otherwise 

complies with the Preferred Market 

Maker requirements. Compliance with 

this requirement will be determined on 

a monthly basis; however, determining 

compliance with this requirement on a 

monthly basis does not relieve a 

Preferred Market Maker from meeting 

this quoting requirement on a daily 

basis, nor does it prohibit the Exchange 

from taking disciplinary action against a 

Preferred Market Maker for failing to 

meet this requirement each trading day. 

If a technical failure or limitation of a 

system of the Exchange prevents a 

Market Maker from maintaining, or 

prevents a Market Maker from 

communicating to the Exchange, timely 

and accurate electronic quotes in an 

option class, the duration of such failure 

will be disregarded in determining 

whether the Market Maker has satisfied 

this requirement. The Exchange may 

consider other exceptions to this 

obligation based on a demonstrated 

legal or regulatory requirement or other 

mitigating circumstances. 

Except as described below, orders 

submitted to the Exchange as 

Preferenced Orders will be treated the 

same as other orders submitted to the 

Exchange, including being executed in 

price/time priority according to the 

existing matching algorithm on the 

Exchange. 

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