Document ID: SEC-2021-0144-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: ICE Clear Credit, LLC
Posted Date: 2021-02-01T05:00Z

[Federal Register Volume 86, Number 19 (Monday, February 1, 2021)]
[Notices]
[Pages 7751-7753]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02004]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90989; File No. SR-ICC-2021-002]

Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change, Security-Based Swap Submission, or 
Advance Notice Relating to the Clearance of an Additional Credit 
Default Swap Contract

January 26, 2021.
    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 January 15, 
2021, ICE Clear Credit LLC (``ICC'') filed with the Securities and 
Exchange Commission the proposed rule change, security-based swap 
submission, or advance notice as described in Items I, II and III 
below, which Items have been prepared by ICC. The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
security-based swap submission, or advance notice 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. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change, Security-Based Swap Submission, or Advance Notice

    The principal purpose of the proposed rule change is to revise the 
ICC Rulebook (the ``Rules'') to provide for the clearance of an 
additional Standard Emerging Market Sovereign CDS contract (the ``EM 
Contract'').

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change, Security-Based Swap Submission, or 
Advance Notice

    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 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, Security-Based Swap Submission, or 
Advance Notice

(a) Purpose
    The purpose of the proposed rule change is to adopt rules that will 
provide the basis for ICC to clear an additional credit default swap 
contract. ICC proposes to make such change effective following 
Commission approval of the proposed rule change. ICC believes the 
addition of this contract 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. Clearing of the additional EM 
Contract will not require any changes to ICC's Risk Management 
Framework or other policies and procedures constituting rules within 
the meaning of the Securities Exchange Act of 1934 (``Act'').
    ICC proposes amending Subchapter 26D of its Rules to provide for 
the clearance of the additional EM Contract, namely Ukraine. This 
additional EM Contract has terms consistent with the other EM Contracts 
approved for clearing at ICC and governed by Subchapter 26D of the 
Rules. A minor revision to Subchapter 26D (Standard Emerging Market 
Sovereign (``SES'') Single Name) is made to provide for clearing the 
additional EM Contract. Specifically, in Rule 26D-102 (Definitions), 
``Eligible SES Reference Entities'' is modified to include Ukraine in 
the list of specific Eligible SES Reference Entities to be cleared by 
ICC.
(b) Statutory Basis
    Section 17A(b)(3)(F) of the Act \3\ 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; to assure the safeguarding of securities and funds which 
are in the custody or control of ICC or for which it is responsible; 
and to comply with the provisions of the Act and the rules and 
regulations thereunder. The additional EM Contract proposed for 
clearing is similar to the EM Contracts currently cleared by ICC, and 
will be cleared pursuant to ICC's existing clearing arrangements and 
related financial safeguards, protections and risk management 
procedures. Clearing of the additional EM Contract

[[Page 7752]]

will allow market participants an increased ability to manage risk and 
ensure the safeguarding of margin assets pursuant to clearing house 
rules. ICC believes that acceptance of the new EM Contract, on the 
terms and conditions set out in the Rules, is consistent with the 
prompt and accurate clearance 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 or for which it is responsible, and the protection of investors and 
the public interest, within the meaning of Section 17A(b)(3)(F) of the 
Act.\4\
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    \3\ 15 U.S.C. 78q-1(b)(3)(F).
    \4\ Id.
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    Clearing of the additional EM Contract will also satisfy the 
relevant requirements of Rule 17Ad-22,\5\ as set forth in the following 
discussion.
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    \5\ 17 CFR 240.17Ad-22.
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    Rule 17Ad-22(e)(6)(i) \6\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to cover its credit exposures to its 
participants by establishing a risk-based margin system that, at a 
minimum, considers, and produces margin levels commensurate with, the 
risks and particular attributes of each relevant product, portfolio, 
and market. In terms of financial resources, ICC will apply its 
existing margin methodology to the new EM Contract, which is similar to 
the EM Contracts currently cleared by ICC. ICC believes that this model 
will provide sufficient margin requirements to cover its credit 
exposure to its clearing members from clearing such contract, 
consistent with the requirements of Rule 17Ad-22(e)(6)(i).\7\
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    \6\ 17 CFR 240.17Ad-22(e)(6)(i).
    \7\ Id.
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    Rule 17Ad-22(e)(4)(ii) \8\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to effectively identify, measure, 
monitor, and manage its credit exposures to participants and those 
arising from its payment, clearing, and settlement processes, including 
by maintaining additional financial resources at the minimum to enable 
it to cover a wide range of foreseeable stress scenarios that include, 
but are not limited to, the default of the two participant families 
that would potentially cause the largest aggregate credit exposure for 
the covered clearing agency in extreme but plausible market conditions. 
ICC believes its Guaranty Fund, under its existing methodology, will, 
together with the required initial margin, provide sufficient financial 
resources to support the clearing of the additional EM Contract, 
consistent with the requirements of Rule 17Ad-22(e)(4)(ii).\9\
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    \8\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \9\ Id.
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    Rule 17Ad-22(e)(17) \10\ requires, in relevant part, each covered 
clearing agency to establish, implement, maintain, and enforce written 
policies and procedures reasonably designed to manage its operational 
risks by (i) identifying the plausible sources of operational risk, 
both internal and external, and mitigating their impact through the use 
of appropriate systems, policies, procedures, and controls; and (ii) 
ensuring that systems have a high degree of security, resiliency, 
operational reliability, and adequate, scalable capacity. ICC believes 
that its existing operational and managerial resources will be 
sufficient for clearing of the additional EM Contract, consistent with 
the requirements of Rule 17Ad-22(e)(17),\11\ as the new contract is 
substantially the same from an operational perspective as existing 
contracts.
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    \10\ 17 CFR 240.17Ad-22(e)(17)(i) and (ii).
    \11\ Id.
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    Rule 17Ad-22(e)(8), (9) and (10) \12\ requires each covered 
clearing agency to establish, implement, maintain, and enforce written 
policies and procedures reasonably designed to define the point at 
which settlement is final to be no later than the end of the day on 
which payment or obligation is due and, where necessary or appropriate, 
intraday or in real time; conduct its money settlements in central bank 
money, where available and determined to be practical by the Board, and 
minimize and manage credit and liquidity risk arising from conducting 
its money settlements in commercial bank money if central bank money is 
not used; and establish and maintain transparent written standards that 
state its obligations with respect to the delivery of physical 
instruments, and establish and maintain operational practices that 
identify, monitor, and manage the risks associated with such physical 
deliveries. ICC will use its existing rules, settlement procedures and 
account structures for the new EM Contract, which is similar to the EM 
Contracts currently cleared by ICC, consistent with the requirements of 
Rule 17Ad-22(e)(8), (9) and (10) \13\ as to the finality and accuracy 
of its daily settlement process and addressing the risks associated 
with physical deliveries.
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    \12\ 17 CFR 240.17Ad-22(e)(8), (9) and (10).
    \13\ Id.
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    Rule 17Ad-22(e)(2)(i) and (v) \14\ requires each covered clearing 
agency to establish, implement, maintain, and enforce written policies 
and procedures reasonably designed to provide for governance 
arrangements that are clear and transparent and specify clear and 
direct lines of responsibility. ICC determined to accept the additional 
EM Contract for clearing in accordance with its governance process, 
which included review of the contract and related risk management 
considerations by the ICC Risk Committee and approval by its Board. 
These governance arrangements continue to be clear and transparent, 
such that information relating to the assignment of responsibilities 
and the requisite involvement of the ICC Board and committees is 
clearly detailed in the ICC Rules and policies and procedures, 
consistent with the requirements of Rule 17Ad-22(e)(2)(i) and (v).\15\
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    \14\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \15\ Id.
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    Rule 17Ad-22(e)(13) \16\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to ensure it has the authority and 
operational capacity to take timely action to contain losses and 
liquidity demands and continue to meet its obligations by, at a 
minimum, requiring its participants and, when practicable, other 
stakeholders to participate in the testing and review of its default 
procedures, including any close-out procedures, at least annually and 
following material changes thereto. ICC will apply its existing default 
management policies and procedures for the additional EM Contract. ICC 
believes that these procedures allow for it to take timely action to 
contain losses and liquidity demands and to continue meeting its 
obligations in the event of clearing member insolvencies or defaults in 
respect of the additional single name, in accordance with Rule 17Ad-
22(e)(13).\17\
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    \16\ 17 CFR 240.17Ad-22(e)(13).
    \17\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    The additional EM Contract will be available to all ICC 
participants for clearing. The clearing of the additional EM Contract 
by ICC does not preclude the offering of the additional EM Contract for 
clearing by other market participants. Accordingly, ICC does not 
believe that clearance of the additional EM Contract will impose any 
burden on competition not necessary or

[[Page 7753]]

appropriate in furtherance of the purposes of the Act.

(C) Clearing Agency's Statement on Comments on the Proposed Rule 
Change, Security-Based Swap Submission, or Advance Notice 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, Security-Based 
Swap Submission, or Advance Notice 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 such 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, security-based swap submission, or advance notice 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-2021-002 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-2021-002. 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, security-based 
swap submission, or advance notice that are filed with the Commission, 
and all written communications relating to the proposed rule change, 
security-based swap submission, or advance notice 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-2021-002 and should be 
submitted on or before February 22, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02004 Filed 1-29-21; 8:45 am]
BILLING CODE 8011-01-P