Notice2021-23813
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to the ICC End-of-Day Price Discovery 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
November 2, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 209 (Tuesday, November 2, 2021)</title>
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[Federal Register Volume 86, Number 209 (Tuesday, November 2, 2021)]
[Notices]
[Pages 60493-60496]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-23813]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93432; File No. SR-ICC-2021-022]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change Relating to the ICC End-of-Day Price
Discovery Policies and Procedures
October 27, 2021.
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 October 13, 2021, 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 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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[[Page 60494]]
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 make
changes to ICC's End-of-Day Price Discovery Policies and Procedures
(``Pricing Policy''). These revisions do not require any changes to the
ICC Clearing Rules (the ``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 revising the Pricing Policy, which sets out ICC's end-
of-day (``EOD'') price discovery process that provides prices for
cleared contracts using submissions made by Clearing Participants
(``CPs''). ICC requires all CPs to provide EOD submissions for specific
instruments related to their open positions at ICC. Submissions for
index instruments (``index submissions'') may be provided in spread or
price convention under the current Pricing Policy. The proposed
amendments would remove the ability for CPs to provide index
submissions in spread convention and would require all index
submissions to be provided in price convention. ICC believes such
revisions 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 move forward with implementation of these changes following
Commission approval of the proposed rule change.\3\ The proposed
amendments are described in detail as follows.
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\3\ ICC intends to move away from supporting index submissions
in spread convention in a phased approach and does not intend to
remove the ability for CPs to submit index submissions in spread
convention until ICC is permitted to implement the changes described
herein and ICC completes any other required governance or internal
processes.
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ICC proposes to amend Subsection 2.2.3, which sets out the
submission format requirements for index instruments. Currently, index
submissions may be provided in spread or price convention depending on
the instrument, as illustrated in Table 8. Under the proposed changes,
index submissions must be provided in price convention, which has two
acceptably types, price or upfront. The proposed changes remove Table 8
and language regarding the submission of recovery rates, which related
to submissions provided in spread terms and is no longer necessary. ICC
proposes minor changes to renumber the tables in the Pricing Policy
accordingly and to spell out an abbreviated term in this subsection.
ICC proposes to amend Subsection 2.2.4 related to the
standardization of submissions. Currently, the cross-and-lock algorithm
used by ICC to determine EOD prices and potential trades requires
inputs in bid-offer format and executes in price or spread terms
depending on the convention for the considered instrument. ICC
standardizes CP submissions into bid-offer format in either price or
spread terms, depending on the convention. Under the proposed changes,
the cross-and-lock algorithm will execute in price terms. The proposed
changes remove language referencing spread terms and distinguishing
between price and spread terms. The proposed changes also remove
language differentiating between submissions in price or spread in
subpart (a).
ICC proposes similar changes to Subsection 2.3. ICC would no longer
determine EOD levels in terms of either spread or price. The proposed
changes remove language requiring ICC to execute the cross-and-lock
algorithm in spread-space for index instruments with a quote convention
of spread, in price-space for index instruments with a quote convention
of price, and in price-space for all single name and index option
instruments. Currently, in Subsection 2.3.1(g), ICC adjusts outlying
submission trade prices for index option, single name, and index
instruments with a cross-and-lock convention of price and outlying
submission trade spreads for index instruments with a cross-and-lock
convention of spread. For index instruments with a cross-and-lock
convention of spread, a conversion between trade price and spread is
also done. The proposed changes would remove the need to adjust
outlying submission trade spreads, including the need for such
conversion.
(b) Statutory Basis
ICC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \4\ and the regulations
thereunder applicable to it, including the applicable standards under
Rule 17Ad-22.\5\ In particular, Section 17A(b)(3)(F) of the Act \6\
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. ICC believes that the proposed amendments promote its
ability to maintain the effectiveness and integrity of its EOD price
discovery process. The proposed revisions require all index submissions
to be provided in price convention and remove language distinguishing
between price or spread in certain aspects of the price discovery
process, which is no longer necessary. The cross-and-lock algorithm
would execute in price terms (rather than in price or spread terms
depending on the convention for the considered instrument) and ICC
would no longer determine EOD levels in terms of either spread or
price. The proposed amendments allow ICC to further standardize its
instrument submission requirements, which would promote consistency and
simplify ICC's submission format requirements. The proposed changes
would result in more clarity and uniformity around how certain
processes are completed, including the standardization of submissions
and adjustments for outlying submission trades, and allow ICC to avoid
converting between spread and price. Following such changes, ICC will
continue to maintain a robust EOD price discovery process, which
includes the determination of EOD pricing levels and firm trades. 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.\7\
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\4\ 15 U.S.C. 78q-1.
\5\ 17 CFR 240.17Ad-22.
\6\ 15 U.S.C. 78q-1(b)(3)(F).
\7\ Id.
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[[Page 60495]]
The amendments would also satisfy relevant requirements of Rule
17Ad-22.\8\ Rule 17Ad-22(e)(2)(i) and (v) \9\ 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 Pricing Policy continues to subject
the ICC EOD price discovery process to a governance and oversight
structure that promotes transparency and accountability and clearly
assigns and documents responsibility for relevant actions and
decisions. ICC believes that the proposed rule change would promote
consistency and transparency in ICC's price discovery process and thus
enhance implementation of the Pricing Policy and continue to ensure
that responsible parties appropriately and effectively carry out their
duties. As such, 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 the
requirements of Rule 17Ad-22(e)(2)(i) and (v).\10\
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\8\ 17 CFR 240.17Ad-22.
\9\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
\10\ Id.
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Rule 17Ad-22(e)(3)(i) \11\ requires each covered clearing agency to
establish, implement, maintain, and enforce written policies and
procedures reasonably designed to maintain a sound risk management
framework for comprehensively managing legal, credit, liquidity,
operational, general business, investment, custody, and other risks
that arise in or are borne by the covered clearing agency, which
includes risk management policies, procedures, and systems designed to
identify, measure, monitor, and manage the range of risks that arise in
or are borne by the covered clearing agency, that are subject to review
on a specified periodic basis and approved by the board of directors
annually. The Pricing Policy is a key aspect of ICC's risk management
approach, which continues to be subject to review on a specified
periodic basis and approved by the Board annually. The proposed changes
further standardize ICC's instrument submission requirements, remove
the need to distinguish between price and spread terms in certain
aspects of the price discovery process, and allow ICC to avoid
converting between spread and price. In ICC's view, such changes would
simplify and promote transparency in ICC's price discovery process and
thus enhance implementation of the Pricing Policy. The proposed rule
change would thus strengthen ICC's ability to manage risk associated
with its price discovery process, and ICC's risk management more
generally as ICC uses the resulting EOD prices for risk management
purposes, and ICC would continue to derive reliable, market-driven
prices from its price discovery process. As such, the amendments would
satisfy the requirements of Rule 17Ad-22(e)(3)(i).\12\
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\11\ 17 CFR 240.17Ad-22(e)(3)(i).
\12\ Id.
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Rule 17Ad-22(e)(6)(iv) \13\ 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 uses reliable sources of timely price data and uses procedures
and sound valuation models for addressing circumstances in which
pricing data are not readily available or reliable. ICC believes that
the proposed changes are appropriately designed to support and maintain
the effectiveness of ICC's EOD price discovery process that provides
reliable prices, which ICC uses for risk management purposes. As
described above, the proposed changes would result in more consistency
in ICC's instrument submission requirements as well as more clarity and
uniformity around how certain processes are completed, including the
standardization of submissions and adjustments for outlying submission
trades. ICC believes that the proposed rule change would result in
additional clarity surrounding ICC's price discovery process overall
and ICC's determination of EOD levels. In ICC's view, such changes are
appropriately designed to promote and maintain the effectiveness and
integrity of the Pricing Policy and the EOD price discovery process
that provides reliable prices, consistent with the requirements of Rule
17Ad-22(e)(6)(iv).\14\
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\13\ 17 CFR 240.17Ad-22(e)(6)(iv).
\14\ Id.
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(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. The proposed changes to
the Pricing Policy will apply uniformly across all market participants.
Therefore, ICC does not believe the amendments would impose any burden
on competition not necessary or appropriate in furtherance of the
purposes 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#afdddac3ca82ccc0c2c2cac1dbdcefdccacc81c8c0d9"><span class="__cf_email__" data-cfemail="097b7c656c246a6664646c677d7a497a6c6a276e667f">[email protected]</span></a>. Please include
File Number SR-ICC-2021-022 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-2021-022. 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
[[Page 60496]]
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-2021-022 and should be
submitted on or before November 23, 2021.
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\15\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-23813 Filed 11-1-21; 8:45 am]
BILLING CODE 8011-01-P
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