[Federal Register Volume 85, Number 103 (Thursday, May 28, 2020)]
[Notices]
[Pages 32066-32067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11404]
[[Page 32066]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88929; File No. SR-ICC-2020-003]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to the Clearance of Additional
Credit Default Swap Contracts
May 21, 2020.
I. Introduction
On March 26, 2020, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (the
``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
revise the ICC Rulebook (the ``Rules'') \3\ to provide for the
clearance of an additional Standard Emerging Market Sovereign CDS
contract (the ``EM Contract'') and additional Standard Western European
Sovereign CDS contracts (collectively, the ``SWES Contracts''). The
proposed rule change was published for comment in the Federal Register
on April 7, 2020.\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\ Capitalized terms used but not defined herein have the
meanings specified in the Rules.
\4\ 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.
88537 (April 1, 2020); 85 FR 19551 (April 7, 2020) (``Notice'').
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II. Description of the Proposed Rule Change
The principal purpose of the proposed rule change is to revise the
Rules to provide for the clearance of an additional EM Contract and
additional SWES Contracts.\5\ Specifically, ICC proposes amending
Subchapter 26D of its Rules to provide for the clearance of the
additional EM Contract, the Republic of Croatia. 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. Minor
revisions to Subchapter 26D (Standard Emerging Market Sovereign
(``SES'') Single Name) are made to provide for clearing the additional
EM Contract. Specifically, in Rule 26D-102 (Definitions), ``Eligible
SES Reference Entities'' is modified to include the Republic of Croatia
in the list of specific Eligible SES Reference Entities to be cleared
by ICC.
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\5\ The description that follows is excerpted from the Notice,
85 FR 19551.
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Additionally, ICC proposes amending Subchapter 26I of its Rules to
provide for the clearance of the additional SWES Contracts, the
Republic of Finland and the Hellenic Republic. These additional SWES
Contracts have terms consistent with the other SWES Contracts approved
for clearing at ICC and governed by Subchapter 26I of the Rules. Minor
revisions to Subchapter 26I (Standard Western European Sovereign Single
Name) are made to provide for clearing the additional SWES Contracts.
Specifically, in Rule 26I-102 (Definitions), ``Eligible SWES Reference
Entities'' is modified to include the Republic of Finland and the
Hellenic Republic in the list of specific Eligible SWES Reference
Entities to be cleared by ICC.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\6\ 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, as well as to assure the safeguarding of securities and
funds which are in the custody or control of ICC or for which it is
responsible.\7\
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\6\ 15 U.S.C. 78s(b)(2)(C).
\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 these additional contracts proposed for
clearing and has determined that they are substantially similar to the
other contracts listed in Subchapters 26D and 26I of the ICC Rules, all
of which ICC currently clears, with the key difference being that the
underlying reference obligations will be issuances by the Republic of
Croatia, the Republic of Finland, and the Hellenic Republic. Moreover,
after reviewing the Notice and ICC's Rules, policies and procedures,
the Commission finds that the additional EM and SWES Contracts will be
cleared pursuant to ICC's existing clearing arrangements and related
financial safeguards, protections and risk management procedures. In
addition, based on its own experience and expertise, including a review
of data on volume, open interest, and the number of ICC clearing
participants (``CPs'') that currently trade in the additional EM and
SWES Contracts as well as certain model parameters for the additional
EM and SWES Contracts, the Commission finds that ICC's rules, policies,
and procedures are reasonably designed to price and measure the
potential risk presented by these products, collect financial resources
in proportion to such risk, and liquidate these products in the event
of a CP default, all of which should help ensure ICC's ability to
maintain the financial resources it needs to provide its critical
services and function as a central counter party, thereby promoting the
prompt and accurate settlement of EM and SWES Contracts and other
credit default swap transactions. For the same reasons, the Commission
believes that the proposed rule change should help assure the
safeguarding of securities or funds in the custody or control of ICC,
and would be consistent with the protection of investors and the public
interest.
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\8\ 15 U.S.C. 78q-1(b)(3)(F).
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Therefore, the Commission finds that acceptance of the additional
EM and SWES Contracts, on the terms and conditions set out in ICC's
Rules, is consistent with the prompt and accurate clearance and
settlement of securities transactions and derivative agreements,
contracts, and transactions cleared by ICC and the safeguarding of
securities and funds in the custody or control of ICC, within the
meaning of 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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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.\10\
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\10\ 15 U.S.C. 78q-1(b)(3)(F).
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\11\ that the proposed rule change (SR-ICC-2020-003), be, and hereby
is, approved.\12\
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\11\ 15 U.S.C. 78s(b)(2).
\12\ 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).
[[Page 32067]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-11404 Filed 5-27-20; 8:45 am]
BILLING CODE 8011-01-P