Document ID: SEC-2020-1923-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: ICE Clear Credit, LLC
Posted Date: 2020-12-03T05:00Z

[Federal Register Volume 85, Number 233 (Thursday, December 3, 2020)]
[Notices]
[Pages 78157-78159]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26595]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90524; File No. SR-ICC-2020-013]

Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change, as Modified 
by Partial Amendment No. 1, Relating to ICC's Fee Schedule

November 27, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
\1\ and Rule 19b-4,\2\ notice is hereby given that on November 16, 
2020, ICE Clear Credit LLC (``ICC'') filed with the Securities and 
Exchange Commission the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared primarily by ICC. On 
November 25, 2020, ICC filed Partial Amendment No. 1 to the proposed 
rule change.\3\ ICC filed the proposed rule change pursuant Section 
19(b)(3)(A) of the Act \4\ and Rule 19b-4(f)(2) thereunder,\5\ such 
that the proposed rule change was immediately effective upon filing 
with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as modified by Partial 
Amendment No. 1 (hereinafter the ``proposed rule change''), from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Partial Amendment No. 1 to the proposed rule change, ICC 
provided additional details and analyses surrounding the proposed 
rule change in the form of a confidential Exhibit 3. Partial 
Amendment No. 1 did not make any changes to the substance of the 
filing or the text of the proposed rule change.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(2).
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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 modify 
ICC's fee schedule to introduce two credit default index swaption 
(``Index Swaption'') volume incentive programs.

[[Page 78158]]

These revisions do not require any changes to the ICC Clearing 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
    The proposed changes are intended to modify ICE Clear Credit's fee 
schedule to introduce two Index Swaption volume incentive programs for 
house origin Index Swaption transactions. Pursuant to an Index 
Swaption, one party (the ``Swaption Buyer'') has the right (but not the 
obligation) to cause the other party (the ``Swaption Seller'') to enter 
into an index credit default swap transaction at a pre-determined 
strike price on a specified expiration date on specified terms.\6\ In 
the case of Index Swaptions that may be cleared by ICC, the underlying 
index credit default swap is limited to certain CDX and iTraxx Europe 
index credit default swaps that are accepted for clearing by ICC, and 
which would be automatically cleared by ICC upon exercise of the Index 
Swaption by the Swaption Buyer in accordance with its terms.\7\ The 
proposed changes are described in detail as follows.
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    \6\ ICC previously filed with the Commission changes to certain 
other policies and procedures related to clearing Index Swaptions 
(the ``Swaption Rule Filings''). See the Swaption Rule Filings for 
additional details. SEC Release No. 34-87297 (October 15, 2019) 
(approval), 84 FR 56270 (October 21, 2019) (SR-ICC-2019-007); SEC 
Release No. 34-89142 (June 24, 2020) (approval), 85 FR 39226 (June 
30, 2020) (SR-ICC-2020-002); SEC Release No. 34-89436 (July 31, 
2020) (approval), 85 FR 47827 (August 6, 2020) (SR-ICC-2020-008); 
SEC Release No. 34-89948 (September 22, 2020) (approval), 85 FR 
60845 (September 28, 2020) (SR-ICC-2020-010).
    \7\ Index Swaptions are also referred to herein and in the 
Swaption Rule Filings as ``index options'' or ``index CDS options'', 
or in similar terms.
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    ICC maintains a Clearing Participant (``CP'') fee schedule \8\ that 
is publicly available on its website, which ICC proposes to update in 
connection with the proposed volume incentive programs. Currently, 
clearing fees are due by CPs in accordance with the product, amount and 
currency set out in the fee schedule. ICC proposes to amend this fee 
schedule to include details on the volume incentive programs, subject 
to any regulatory review or approval process.
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    \8\ CP fee details available at: https://www.theice.com/publicdocs/clear_credit/ICE_Clear_Credit_Fees_Clearing_Participant.pdf.
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    ICC previously filed with the Commission the relevant clearing fees 
for Index Swaptions \9\ and further proposes to amend the CP fee 
schedule to introduce the volume incentive programs for house origin 
Index Swaption transactions. Under the amended fee schedule, the 
proposed Standard Program automatically, and without further action by 
CPs, applies to CPs and provides a tiered discount schedule based on 
USD equivalent, non-discounted Index Swaption fees billed since the 
start of the year (``Billed Fees''). The first 300,000 of Billed Fees 
are not discounted, a 10% discount is provided for the second 300,000 
of Billed Fees, a 20% discount is provided for the third 300,000 of 
Billed Fees, and a 30% discount is provided for all cleared Index 
Swaptions above that level. As an alternative to the Standard Program, 
CPs may elect to participate in the annual Prepaid Program. For 
calendar year 2021, the proposed Prepaid Program election deadline is 
January 25, 2021 and requires an upfront payment of $750,000 by 
February 1, 2021. Index Swaption fees are $2/million or [euro]2/
million, and the upfront payment is applied toward the first $750,000 
of Index Swaption clearing fees due in 2021. The discount or prepaid 
fee schedule would be applied at the time of invoice.
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    \9\ SEC Release No. 34-90299 (October 30, 2020) (notice), 85 FR 
70700 (November 5, 2020) (SR-ICC-2020-012).
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(b) Statutory Basis
    ICC believes that the proposed rule change is consistent with the 
requirements of the Act, including Section 17A of the Act \10\ and the 
regulations thereunder applicable to it. More specifically, the 
proposed rule change establishes or changes a member due, fee or other 
charge imposed by ICC under Section 19(b)(3)(A)(ii) of the Act \11\ and 
Rule 19b-4(f)(2) \12\ thereunder. ICC believes the proposed rule change 
is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to ICC, in particular, to Section 
17A(b)(3)(D),\13\ which requires that the rules of the clearing agency 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its participants.
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    \10\ 15 U.S.C. 78q-1.
    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
    \13\ 15 U.S.C. 78q-1(b)(3)(D).
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    ICC believes that the proposed fee discounts for house origin Index 
Swaption transactions have been set at an appropriate level. In ICC's 
view, the proposed fees are reasonable under each proposed volume 
incentive program as the discounts correspond with anticipated volumes, 
costs and expenses, and revenues under each program, and they consider 
current market activity as well as anticipated market activity with 
respect to clearing house origin Index Swaption transactions at ICC. 
Namely, in determining the appropriate discount level and program 
structure, ICC discussed the proposed volume incentive programs with 
its Board (who approved the programs and discounts) and took into 
account factors such as anticipated volume, revenue, expenses, and CP 
market participation in this clearing service, including based on 
different fee levels. More specifically, the proposed discounts are 
associated with anticipated volumes via the tiered discount schedule in 
the Standard Program and the upfront payment applied toward clearing 
fees in the Prepaid Program, and are designed to encourage CP market 
participation to bring increased volume to grow the clearing service 
while properly compensating ICC for the risks, costs and expenses of 
clearing house origin Index Swaption transactions.
    Moreover, the proposed fee changes will apply equally to all market 
participants clearing house origin Index Swaption transactions. Namely, 
the Standard Program automatically, and without further action by CPs, 
applies to all CPs. As an alternative to the Standard Program, any CP 
may elect to participate in the annual Prepaid Program, which requires 
election and an upfront payment by specified dates. Therefore, the 
proposed rule change provides for the equitable allocation of 
reasonable dues, fees and other charges among participants, within the 
meaning of Section 17A(b)(3)(D) of the Act.\14\ ICC therefore believes 
that the proposed rule change is consistent with the requirements of 
Section 17A of the Act \15\ and the regulations thereunder applicable 
to it and is appropriately filed pursuant to Section 19(b)(3)(A) of the 
Act \16\ and paragraph (f)(2) of Rule 19b-4 \17\ thereunder.
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    \14\ Id.
    \15\ 15 U.S.C. 78q-1.
    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(2).

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[[Page 78159]]

(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 not necessary or 
appropriate in furtherance of the purpose of the Act. As discussed 
above, the proposed changes modify ICC's fee schedule to introduce two 
volume incentive programs for house origin Index Swaption transactions 
and will apply uniformly across all market participants clearing house 
origin Index Swaption transactions. The implementation of such changes 
does not preclude other market participants from offering similar 
incentive programs. Moreover, ICC does not believe that the amendments 
would adversely affect the ability of market participants to access 
clearing services. Accordingly, ICC does not believe the amendments 
impose any burden on competition not necessary or appropriate in 
furtherance of the purpose of the Act.

(C) Clearing Agency'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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \18\ and paragraph (f) of Rule 19b-4 \19\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(2).
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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-2020-013 on the subject line.

Paper Comments

    Send paper comments in triplicate to Secretary, Securities and 
Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-ICC-2020-013. 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 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-2020-013 and should be 
submitted on or before December 24, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-26595 Filed 12-2-20; 8:45 am]
BILLING CODE 8011-01-P