Document ID: SEC-2015-1222-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: ICE Clear Credit LLC
Posted Date: 2015-07-21T04:00Z

[Federal Register Volume 80, Number 139 (Tuesday, July 21, 2015)]
[Notices]
[Pages 43146-43148]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17755]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75456; File No. SR-ICC-2015-013]

Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change To Provide for the Clearance of 
Additional Western European Sovereign Single Names

July 15, 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 July 6, 2015, 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 prepared primarily by ICC. The Commission is publishing this 
notice to solicit comments on the

[[Page 43147]]

proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 adopt rules that will 
provide the basis for ICC to clear additional credit default swap 
contracts. ICC currently clears seven SWES Contracts: The Republic of 
Ireland, the Italian Republic, the Portuguese Republic, the Kingdom of 
Spain, the Kingdom of Belgium, the Republic of Austria, and the Kingdom 
of the Netherlands. ICC is proposing to amend Subchapter 26I of its 
rules to provide for the clearance of additional SWES Contracts, 
specifically the Federal Republic of Germany, the French Republic, and 
the United Kingdom of Great Britain and Northern Ireland. The proposed 
change is dependent on the approval and implementation of the proposed 
rule change in SR-ICC-2015-009 and therefore, the text of the proposed 
rule change in Exhibit 5 should be read in conjunction with the 
proposed rule change in SR-ICC-2015-009.\3\
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    \3\ See Securities Exchange Act Release No. 34-75119 (June 8, 
2015), 80 FR 33573 (June 12, 2015) (SR-ICC-2015-009). The text of 
the proposed rule change for rule filing SR-ICC-2015-009 can also be 
found on ICC's Web site at https://www.theice.com/clear-credit/regulation.
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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

    The purpose of the proposed rule change is to adopt rules that will 
provide the basis for ICC to clear additional credit default swap 
contracts. ICC currently clears seven SWES Contracts: the Republic of 
Ireland, the Italian Republic, the Portuguese Republic, the Kingdom of 
Spain, the Kingdom of Belgium, the Republic of Austria, and the Kingdom 
of the Netherlands. ICC proposes amending Subchapter 26I of its Rules 
to provide for the clearance of additional SWES Contracts, specifically 
the Federal Republic of Germany, the French Republic, and the United 
Kingdom of Great Britain and Northern Ireland. ICC plans to offer these 
additional SWES Contracts on the 2003 and 2014 ISDA Credit Derivatives 
Definitions. The addition of these SWES Contracts will benefit the 
market for credit default swaps by providing market participants the 
benefits of clearing, including reduction in counterparty risk and 
safeguarding of margin assets pursuant to clearing house rules.
    These additional SWES Contracts have terms consistent with the 
other SWES Contracts approved for clearing at ICC and governed by 
Subchapter 26I of the ICC Rules, namely the Republic of Ireland, the 
Italian Republic, the Portuguese Republic, the Kingdom of Spain, the 
Kingdom of Belgium, the Republic of Austria, and the Kingdom of the 
Netherlands. Minor revisions to Subchapter 26I (Standard Western 
European Sovereign (``SWES'') Single Name) are made to provide for 
clearing the additional SWES Contracts and described as follows.
    Rule 26I-102 is modified to include the Federal Republic of 
Germany, the French Republic, and the United Kingdom of Great Britain 
and Northern Ireland in the list of specific Eligible SWES Reference 
Entities to be cleared by ICC.
    Section 17A(b)(3)(F) of the Act \4\ 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. These contracts are similar to the SWES 
Contracts currently cleared by ICC, and the additional SWES Contracts 
would be cleared pursuant to ICC's clearing arrangements and related 
financial safeguards, protections and risk management procedures, as 
modified by the proposed risk enhancements related to General Wrong Way 
Risk set forth in filing SR-ICC-2015-009.\5\ The additional SWES 
Contracts will allow market participants an increased ability to manage 
risk. ICC believes that acceptance of the new contracts, on the terms 
and conditions set out in the ICC Rules, is consistent with the prompt 
and accurate clearance of 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, 
and the protection of investors and the public interest, within the 
meaning of Section 17A(b)(3)(F) of the Act.\6\
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
    \5\ Pursuant to a telephone call with ICC's internal counsel on 
July 14, 2015, staff in the Division of Trading and Markets has 
modified the text of this sentence to further clarify that the 
proposed rule change is dependent on the approval and implementation 
of the proposed rule change in SR-ICC-2015-009.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    Clearing of the additional SWES Contracts will also satisfy the 
requirements of Rule 17Ad-22.\7\ In particular, in terms of financial 
resources, ICC would apply its initial margin methodology to the 
additional contracts (as modified by rule filing SR-ICC-2015-009).\8\ 
ICC believes that this model would provide sufficient initial margin 
requirements to cover its credit exposure to its clearing members from 
clearing such contracts, consistent with the requirements of Rule 17Ad-
22(b)(2).\9\ In addition, ICC believes its Guaranty Fund, under its 
existing methodology, would, together with the required initial margin, 
provide sufficient financial resources to support the clearing of the 
additional contracts consistent with the requirements of Rule 17Ad-
22(b)(3).\10\ ICC also believes that its existing operational and 
managerial resources will be sufficient for clearing of the additional 
contracts, consistent with the requirements of Rule 17Ad-22(d)(4),\11\ 
as the new contracts are substantially the same from an operational 
perspective as existing contracts. Similarly, ICC will use its existing 
settlement procedures and account structures for the new contracts, 
consistent with the requirements of Rule 17Ad-22(d)(5), (12) and (15) 
\12\ as to the finality and accuracy of its daily settlement process 
and avoidance of the risk to ICC of settlement failures. ICC determined 
to accept the additional SWES Contracts for clearing in accordance with 
its governance process, which included review of the contracts and 
related risk management considerations by the ICC Risk Committee and 
approval by its Board. These governance arrangements are consistent 
with the requirements of Rule

[[Page 43148]]

17Ad-22(d)(8).\13\ Finally, ICC will apply its existing default 
management policies and procedures for the additional SWES Contracts. 
ICC believes that these procedures allow for it to take timely action 
to contain losses and liquidity pressures and to continue meeting its 
obligations in the event of clearing member insolvencies or defaults in 
respect of the additional single names, in accordance with Rule 17Ad-
22(d)(11).\14\
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    \7\ 17 CFR 240.17Ad-22.
    \8\ Pursuant to a telephone call with ICC's internal counsel on 
July 14, 2015, staff in the Division of Trading and Markets has 
modified the text of this paragraph to further clarify that the 
proposed rule change is dependent on the approval and implementation 
of the proposed rule change in SR-ICC-2015-009.
    \9\ 17 CFR 240.17Ad-22(b)(2).
    \10\ 17 CFR 240.17Ad-22(b)(3).
    \11\ 17 CFR 240.17Ad-22(d)(4).
    \12\ 17 CFR 240.17Ad-22(d)(5), (12) and (15).
    \13\ 17 CFR 240.17Ad-22(d)(8).
    \14\ 17 CFR 240.17Ad-22(d)(11).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The additional SWES Contracts will be available to all ICC 
participants for clearing. The clearing of these additional SWES 
Contracts by ICC does not preclude the offering of the additional SWES 
Contracts for clearing by other market participants. Accordingly, ICC 
does not believe that clearance of the additional SWES Contracts will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes 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.

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-2015-013 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-2015-013. 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 Section, 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-2015-013 
and should be submitted on or before August 11, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-17755 Filed 7-20-15; 8:45 am]
 BILLING CODE 8011-01-P