Notice2023-15355
Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the Clearance of Additional Credit Default Swap Contracts
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
July 20, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 138 (Thursday, July 20, 2023)</title>
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[Federal Register Volume 88, Number 138 (Thursday, July 20, 2023)]
[Notices]
[Pages 46819-46820]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-15355]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97908; File No. SR-ICC-2023-005]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to the Clearance of Additional
Credit Default Swap Contracts
July 14, 2023.
I. Introduction
On March 30, 2023, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(2) of the Securities Exchange Act of 1934 (the ``Act'')
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to clear an
additional credit default swap (``CDS'') contract. The proposed rule
change was published for comment in the Federal Register on April 18,
2023.\3\ On May 11, 2023, the Commission designated a longer period for
Commission action on the proposed rule change until July 17, 2023.\4\
The Commission did not receive comments regarding the proposed rule
change. For the reasons discussed below, the Commission is approving
the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice
of Proposed Rule Change Relating to the Clearance of Additional
Credit Default Swap Contracts; Exchange Act Release No. 97293 (Apr.
12, 2023), 88 FR 23711 (Apr. 18, 2023) (File No. SR-ICC-2023-005)
(``Notice'').
\4\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice
of Designation of Longer Period for Commission Action on Proposed
Rule Relating to the Clearance of Additional Credit Default Swap
Contracts; Exchange Act Release No. 97482 (May 11, 2023), 88 FR
31554 (May 17, 2023) (File No. SR-ICC-2023-005).
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II. Description of the Proposed Rule Change
ICC is registered with the Commission as a clearing agency for the
purpose of clearing CDS contracts. Chapter 26 of ICC's Rulebook covers
the CDS contracts that ICC clears, with each subchapter of Chapter 26
defining the characteristics and additional Rules applicable to the
various specific categories of CDS contracts that ICC clears. Among
other CDS contracts, ICC currently clears Standard Emerging Market
Sovereign Single Name CDS (``SES'') contracts.
The purpose of the proposed rule change is to amend ICC's rules to
permit ICC to clear an additional SES contract, specifically, SES
contracts on the Dominican Republic. To carry out this change, the
proposed rule change would amend Subchapter 26D of Chapter 26. In Rule
26D-102 (Definitions), ``Eligible SES Reference Entities,'' the
proposed rule change would add the Dominican Republic to the list of
specific Eligible SES Reference Entities to be cleared by ICC.
As discussed below, this additional SES contract has terms
consistent with the other SES contracts that ICC is already clearing.
As such, to clear this additional contract, ICC will be able to rely on
its existing Risk Management Framework and other policies and
procedures without making any changes.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act requires the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
the proposed rule change is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to the
organization.\5\ For the reasons given below, the Commission finds that
the proposed rule change is consistent with Section 17A(b)(3)(F) of the
Act \6\ and Rule 17Ad-22(e)(1) thereunder.\7\
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\5\ 15 U.S.C. 78s(b)(2)(C).
\6\ 15 U.S.C. 78q-1(b)(3)(F).
\7\ 17 CFR 240Ad-22(e)(1).
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A. Consistency With Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of ICC be designed to promote the prompt and accurate
clearance and settlement of securities transactions and, to the extent
applicable, derivative agreements, contracts, and transactions.\8\
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\8\ 15 U.S.C. 78q-1(b)(3)(F).
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The Commission finds that the proposed rule change is consistent
with Section 17A(b)(3)(F) of the Act.\9\ The Commission has reviewed
the terms and conditions of the additional SES contract proposed for
clearing and has determined that those terms and conditions are
substantially similar to the terms and conditions of the other
contracts listed in Subchapter 26D of the ICC Rules, all of which ICC
currently clears, with the key difference being the underlying
reference obligations. For the additional SES contract, the underlying
reference obligations will be issuances by the Dominican Republic.
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\9\ 15 U.S.C. 78q-1(b)(3)(F).
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After reviewing the Notice and ICC's Rules, policies, and
procedures, the Commission also finds that ICC would be able to clear
the additional SES contract pursuant to its existing clearing
arrangements and related financial safeguards, protections, and risk
management procedures. Commission staff also conducted a review of data
on volume, open interest, and the number of ICC Clearing Participants
(``CPs'') that currently trade in the SES contracts, as well as certain
model parameters for the additional contracts. Based on this review, as
well as its own experience and expertise, the Commission finds that
ICC's Rules, policies, and procedures are reasonably designed to price
and measure the potential risk presented by the additional SES
contract, collect financial resources in proportion to such risk, and
liquidate the additional contracts in the event of a CP default. This
should help ensure ICC's ability to maintain the financial
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resources it needs to provide its critical services and function as a
central counterparty, thereby promoting the prompt and accurate
settlement of the additional SES contracts and other credit default
swap transactions.
Therefore, the Commission finds that clearance of the additional
SES contract would promote the prompt and accurate clearance and
settlement of securities transactions, consistent with Section
17A(b)(3)(F) of the Act.\10\
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\10\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(e)(1)
Rule 17Ad-22(e)(1) requires ICC to establish, implement, maintain,
and enforce written policies and procedures reasonably designed to
provide for a well-founded, clear, transparent, and enforceable legal
basis for each aspect of its activities in all relevant
jurisdictions.\11\
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\11\ 17 CFR 240.17Ad-22(e)(1).
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The Commission believes that the proposed rule change would help
provide a well-founded, clear, transparent, and enforceable legal basis
for ICC's clearance of SES contracts on the Dominican Republic. By
amending Rule 26D-102 to add the Dominican Republic to the list of
specific Eligible SES Reference Entities to be cleared by ICC, the
proposed rule change would help to ensure that ICC can clear SES
contracts on the Dominican Republic pursuant to its existing rules in
Subchapter 26D. The Commission believes Subchapter 26D would provide a
well-founded, clear, transparent, and enforceable legal basis for ICC
to clear these contracts, consistent with the requirements of Rule
17Ad-22(e)(1).\12\
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\12\ 17 CFR 240.17Ad-22(e)(1).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act,
and in particular, with the requirements of Section 17A(b)(3)(F) of the
Act \13\ and Rule 17Ad-22(e)(1) thereunder.\14\
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\13\ 15 U.S.C. 78q-1(b)(3)(F).
\14\ 17 CFR 240Ad-22(e)(1).
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\15\ that the proposed rule change (SR-ICC-2023-005), be, and hereby
is, approved.\16\
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\15\ 15 U.S.C. 78s(b)(2).
\16\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-15355 Filed 7-19-23; 8:45 am]
BILLING CODE 8011-01-P
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