Notice2021-21615
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the ICC CDS Instrument On-Boarding Policies and Procedures
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 5, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 190 (Tuesday, October 5, 2021)</title>
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[Federal Register Volume 86, Number 190 (Tuesday, October 5, 2021)]
[Notices]
[Pages 55037-55039]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-21615]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93177; File No. SR-ICC-2021-019]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change Relating to the ICC CDS Instrument On-
Boarding Policies and Procedures
September 29, 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 September
22, 2021, 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. The
Commission is publishing this notice to solicit comments on 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.
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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 revise the
CDS Instrument On-boarding Policies and Procedures (``Instrument On-
boarding Policy''). These revisions do not require any changes to the
ICC Clearing Rules (``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,
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
(a) Purpose
ICC proposes to amend the Instrument On-boarding Policy. This
document provides an overview of ICC's on-boarding process for new
instruments, which includes selecting new instruments for clearing,
configuring internal systems, notifying and receiving feedback from
stakeholders, and ensuring operational readiness by ICC and its
Clearing Participants (``CPs''). The proposed changes amend the guiding
principles that ICC maintains for instrument selection. ICC believes
that such changes will facilitate the prompt and accurate clearance and
settlement of securities transactions and derivative agreements,
contracts, and transactions for which it is responsible. ICC proposes
to make such changes effective following Commission approval of the
proposed rule change. The proposed rule change is described in detail
as follows.
[[Page 55038]]
ICC proposes amendments to the Subsection III.A which discusses the
guiding principles that ICC maintains for considering instruments for
clearing. Such principles are designed to ensure that ICC proceeds in a
prudent manner with respect to instrument selection while also
providing the best opportunity for CPs to minimize their risk. The
proposed changes incorporate an additional guiding principle to
consider instruments that are constituents of the currently clearable
On-The-Run (``OTR'') indices to become clearing eligible in order to
provide additional instruments to hedge and mitigate indirect risk
exposure from the OTR indices. For other instruments that are not
constituents of currently clearable OTR indices, the current guiding
principles would remain and ICC would continue to consider instrument
open interest and volume. For all instruments, ICC would continue to
consider instruments that can be cleared through ICC's systems and
processes and to support industry wide initiatives and protocols.
(b) Statutory Basis
ICC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \3\ and the regulations
thereunder applicable to it, including the applicable standards under
Rule 17Ad-22.\4\ In particular, Section 17A(b)(3)(F) of the Act \5\
requires that the rule change be 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. As described above, the proposed changes incorporate
an additional guiding principle that ICC consider instruments that are
constituents of the currently clearable OTR indices to become clearing
eligible in order to provide additional instruments to hedge and
mitigate indirect risk exposure from the OTR indices. ICC believes that
such changes would support and enhance the guiding principles and
ensure that ICC continues to proceed in a prudent manner with respect
to instrument selection while also providing CPs the best opportunity
to minimize their risk. Moreover, the Instrument On-boarding Policy
will continue to ensure that ICC's risk models adequately capture the
risks associated with proposed new instruments and that the end-of-day
price discovery process operates effectively and provides reliable
prices for proposed new instruments, including through the risk
management and pricing configuration and evaluation and the dress
rehearsal. The proposed rule change is therefore consistent with the
prompt and accurate clearing and settlement of the contracts 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.\6\
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\3\ 15 U.S.C. 78q-1.
\4\ 17 CFR 240.17Ad-22.
\5\ 15 U.S.C. 78q-1(b)(3)(F).
\6\ Id.
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The amendments would also satisfy relevant requirements of Rule
17Ad-22.\7\ Rule 17Ad-22(e)(2)(i) and (v) \8\ 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. The Instrument On-boarding Policy
continues to describe the roles and responsibilities of relevant
stakeholders with respect to instrument selection and subject new
instruments to ICC's governance process. As such, in ICC's view, the
proposed rule change continues to ensure that ICC maintains policies
and procedures that are reasonably designed to provide for clear and
transparent governance arrangements and specify clear and direct lines
of responsibility, consistent with Rule 17Ad-22(e)(2)(i) and (v).\9\
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\7\ 17 CFR 240.17Ad-22.
\8\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
\9\ Id.
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Rule 17Ad-22(e)(4)(ii) \10\ 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.
The proposed changes distinguish a category of instruments that are
constituents of the currently clearable OTR indices to provide
additional instruments to hedge and mitigate indirect risk exposure
from the OTR indices. New instruments will continue to be subject to
the risk management and pricing configuration and evaluation and the
dress rehearsal under the Instrument On-boarding Policy to ensure that
ICC's risk models adequately capture the risks associated with new
instruments and that the end-of-day price discovery process operates
effectively, thereby supporting ICC's ability to maintain its financial
resources and withstand the pressures of defaults, consistent with the
requirements of Rule 17Ad-22(e)(4)(ii).\11\
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\10\ 17 CFR 240.17Ad-22(e)(4)(ii).
\11\ Id.
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Rule 17Ad-22(e)(17) \12\ 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. The
Instrument On-boarding Policy continues to describe the process,
including testing and preparation, for the introduction of new
instruments to ensure that ICC and its CPs are operationally ready and
that ICC proceeds in a controlled manner, thereby supporting ICC's
ability to identify the plausible sources of operational risk and
mitigate their impact and ensure that systems have a high degree of
security, resiliency, operational reliability, and adequate, scalable
capacity, consistent with the requirements of Rule 17Ad-22(e)(17).\13\
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\12\ 17 CFR 240.17Ad-22(e)(17)(i) and (ii).
\13\ Id.
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Rule 17Ad-22(e)(21) \14\ requires, among other things, that each
covered clearing agency establish, implement, maintain, and enforce
written policies and procedures reasonably designed to be efficient and
effective in meeting the requirements of its participants and the
markets it serves. The proposed changes are designed to provide
additional instruments to hedge and mitigate indirect risk exposure
from the OTR indices. Such changes would support and enhance the
guiding principles by ensuring that ICC continues to proceed in a
prudent manner with respect to instrument selection while also
providing CPs the best opportunity to
[[Page 55039]]
minimize their risk, thereby allowing ICC to be efficient and effective
in meeting the requirements of its participants and the markets it
serves, consistent with Rule 17Ad-22(e)(21).\15\
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\14\ 17 CFR 240.17Ad-22(e)(21).
\15\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
ICC does not believe the proposed amendments would have any impact,
or impose any burden, on competition not necessary or appropriate in
furtherance of the purpose of the Act. The proposed changes to the
Instrument On-boarding Policy will apply uniformly across all market
participants. Therefore, ICC does not believe the proposed rule change
imposes 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
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 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#95e7e0f9f0b8f6faf8f8f0fbe1e6d5e6f0f6bbf2fae3"><span class="__cf_email__" data-cfemail="acded9c0c981cfc3c1c1c9c2d8dfecdfc9cf82cbc3da">[email protected]</span></a>. Please include
File Number SR-ICC-2021-019 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-2021-019. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 <a href="https://www.theice.com/clear-credit/regulation">https://www.theice.com/clear-credit/regulation</a>. 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-2021-019 and should be
submitted on or before October 26, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21615 Filed 10-4-21; 8:45 am]
BILLING CODE 8011-01-P
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