Notice2023-17977
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
August 22, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 161 (Tuesday, August 22, 2023)</title>
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[Federal Register Volume 88, Number 161 (Tuesday, August 22, 2023)]
[Notices]
[Pages 57163-57164]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-17977]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98143; File No. SR-ICC-2023-010]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to the Clearance of Additional
Credit Default Swap Contracts
August 16, 2023.
I. Introduction
On June 13, 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
additional credit default swap (``CDS'') contracts. The proposed rule
change was published for comment in the Federal Register on July 3,
2023.\3\ 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 Filing of Proposed Rule Change Relating to the Clearance of
Additional Credit Default Swap Contracts; Exchange Act Release No.
97808 (June 27, 2023), 88 FR 42807 (July 3, 2023) (File No. SR-ICC-
2023-010) (``Notice'').
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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 and Standard Western
European Sovereign Single Name (``SWES'') contracts.
The purpose of the proposed rule change is to amend ICC's rules to
permit ICC to clear additional SES and SWES contracts, specifically,
SES contracts on Romania and the Socialist Republic of Vietnam and SWES
contracts on the Kingdom of Sweden.
To carry out this change, the proposed rule change would amend
Subchapter 26D and Subchapter 26I of Chapter 26. In Rule 26D-102
(Definitions), ``Eligible SES Reference Entities,'' the proposed rule
change would add Romania and the Socialist Republic of Vietnam to the
list of specific Eligible SES Reference Entities to be cleared by ICC.
Likewise, in Rule 26I-102 (Definitions), ``Eligible SWES Reference
Entities,'' the proposed rule change would add the Kingdom of Sweden to
the list of specific Eligible SWES Reference Entities to be cleared by
ICC.
As discussed below, these additional SES and SWES contracts have
terms consistent with the other SES and SWES contracts that ICC is
already clearing. Likewise, to clear these additional contracts, 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.\4\ For the reasons given below, the Commission finds that
the proposed rule change is consistent with section 17A(b)(3)(F) of the
Act \5\ and Rule 17Ad-22(e)(1) thereunder.\6\
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\4\ 15 U.S.C. 78s(b)(2)(C).
\5\ 15 U.S.C. 78q-1(b)(3)(F).
\6\ 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.\7\
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\7\ 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.\8\ The Commission has reviewed
the terms and conditions of the additional SES and SWES contracts
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 and 26I of the ICC Rules, all
of which ICC currently clears, with the key difference being the
underlying reference obligations. For the additional SES contracts, the
underlying reference obligations will be issuances by Romania and the
Socialist Republic of Vietnam. For the additional SWES contracts, the
underlying reference obligations will be issuances by the Kingdom of
Sweden.
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\8\ 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 and SWES contracts 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 and SWES 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 and SWES contracts, 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 resources it needs to provide its critical
services and function as a
[[Page 57164]]
central counterparty, thereby promoting the prompt and accurate
settlement of the additional SES and SWES contracts and other credit
default swap transactions.
Therefore, the Commission finds that clearance of the additional
SES and SWES contracts would promote the prompt and accurate clearance
and settlement of securities transactions, consistent with section
17A(b)(3)(F) of the Act.\9\
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\9\ 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.\10\
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\10\ 17 CFR 240Ad-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 Romania and the Socialist
Republic of Vietnam as well as SWES contracts on the Kingdom of Sweden.
By amending Rule 26D-102 to add both the Socialist Republic of Vietnam
and Romania 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 those countries pursuant to its existing
rules in Subchapter 26D. Likewise, by amending Rule 26I-102 to add the
Kingdom of Sweden to the list of specific Eligible SWES Reference
Entities to be cleared by ICC, the proposed rule change would help to
ensure that ICC can clear SWES contracts on the Kingdom of Sweden
pursuant to its rules in Subchapter 26I. The Commission believes
Subchapter 26D and Subchapter 26I each 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).\11\
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\11\ 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 \12\ and Rule 17Ad-22(e)(1) thereunder.\13\
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\12\ 15 U.S.C. 78q-1(b)(3)(F).
\13\ 17 CFR 240.17Ad-22(e)(1).
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It is therefore ordered pursuant to section 19(b)(2) of the Act
\14\ that the proposed rule change (SR-ICC-2023-010), be, and hereby
is, approved.\15\
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\14\ 15 U.S.C. 78s(b)(2).
\15\ 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.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17977 Filed 8-21-23; 8:45 am]
BILLING CODE 8011-01-P
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