[Federal Register Volume 88, Number 126 (Monday, July 3, 2023)]
[Notices]
[Pages 42807-42809]
[FR Doc No: 2023-13998]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97808; File No. SR-ICC-2023-010]

Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change, as Modified by Amendment No. 1,
Relating to the Clearance of Additional Credit Default Swap Contracts

June 27, 2023.
    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 June 13,
2023, 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. On
June 19, 2023, ICC filed Amendment No. 1 to the proposed rule
change.\3\ The Commission is publishing this notice to solicit comments
on the proposed rule change, as modified by Amendment No. 1 (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.
    \3\ In Amendment No. 1, ICC provided an updated version of the
Exhibit 5.
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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
ICC Rulebook (the ``Rules'') to provide for the clearance of additional
Standard Emerging Market Sovereign CDS contracts and Standard Western
European Sovereign Single Name CDS contracts (collectively, the
``Sovereign Contracts'').

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 and
discussed any comments it received on the proposed rule change. 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
    The purpose of the proposed rule change is to adopt rules that will

provide the basis for ICC to clear additional credit default swap
contracts. ICC proposes to make such change effective following
Commission approval of the proposed rule change. ICC believes the
addition of these contracts will benefit the market for credit default
swaps by providing market participants the benefits of clearing,
including reduction in counterparty risk and safeguarding of margin
assets pursuant to clearing house rules. Clearing of the additional
Sovereign Contracts will not require any changes to ICC's Risk
Management Framework or other policies and procedures constituting
rules within the meaning of the Securities Exchange Act of 1934
(``Act'').
    ICC proposes amending Subchapter 26D and Subchapter 26I of its
Rules to provide for the clearance of additional Sovereign Contracts,
specifically the Socialist Republic of Vietnam, Romania, and Kingdom of
Sweden. These additional Sovereign Contracts have terms consistent with
the other SES and SWES Contracts approved for clearing at ICC and
governed by Subchapter 26D and Subchapter 26I of the Rules. Minor
revisions to Subchapter 26D (Standard Emerging Market Sovereign
(``SES'') Single Name) and 26I (Standard Western European Sovereign
(``SWES'') Single Name) are made to provide for clearing the additional
Sovereign Contracts. Specifically, in Rule 26D-102 (Definitions),
``Eligible SES Reference Entities'' is modified to include the
Socialist Republic of Vietnam and Romania in the list of specific
Eligible SES Reference Entities to be cleared by ICC. Also,
specifically, in Rule 26I-102 (Definitions), ``Eligible SWES Reference
Entities'' is modified to include the Kingdom of Sweden in the list of
specific Eligible SWES Reference Entities to be cleared by ICC.
(b) Statutory Basis
    Section 17A(b)(3)(F) of the Act \4\ requires, among other things,
that the rules of a clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions and,
to the extent applicable, derivative agreements, contracts, and
transactions; to assure the safeguarding of securities and funds which
are in the custody or control of ICC or for which it is responsible;
and to comply with the provisions of the Act and the rules and
regulations thereunder. The additional Sovereign Contracts proposed for
clearing are similar to the Sovereign Contracts currently cleared by
ICC, and will be cleared pursuant to ICC's existing clearing
arrangements and related financial safeguards, protections and risk
management procedures. Clearing of the additional Sovereign Contracts
will allow market participants an increased ability to manage risk and
ensure the safeguarding of margin assets pursuant to clearing house
rules. ICC believes that acceptance of the new Sovereign Contracts, on
the terms and conditions set out in the Rules, is 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, within the meaning of Section 17A(b)(3)(F) of the
Act.\5\
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
    \5\ Id.
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    Clearing of the additional Sovereign Contracts will also satisfy
the relevant requirements of Rule 17Ad-22,\6\ as set forth in the
following discussion.
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    \6\ 17 CFR 240.17Ad-22.
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    Rule 17Ad-22(e)(6)(i) \7\ 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, considers, and produces margin levels commensurate with, the
risks and particular attributes of each relevant product, portfolio,
and market. In terms of financial resources, ICC will apply its
existing margin methodology to the new Sovereign Contracts, which are
similar to the Sovereign Contracts currently cleared by ICC. ICC
believes that this model will provide sufficient margin requirements to
cover its credit exposure to its clearing members from clearing such
contracts, consistent with the requirements of Rule 17Ad-
22(e)(6)(i).\8\
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    \7\ 17 CFR 240.17Ad-22(e)(6)(i).
    \8\ Id.
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    Rule 17Ad-22(e)(4)(ii) \9\ 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.
ICC believes its Guaranty Fund, under its existing methodology, will,
together with the required initial margin, provide sufficient financial
resources to support the clearing of the additional Sovereign
Contracts, consistent with the requirements of Rule 17Ad-
22(e)(4)(ii).\10\
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    \9\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \10\ Id.
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    Rule 17Ad-22(e)(17) \11\ 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. ICC believes
that its existing operational and managerial resources will be
sufficient for clearing of the additional Sovereign Contracts,
consistent with the requirements of Rule 17Ad-22(e)(17),\12\ as the new
contracts are substantially the same from an operational perspective as
existing contracts.
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    \11\ 17 CFR 240.17Ad-22(e)(17)(i) and (ii).
    \12\ Id.
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    Rule 17Ad-22(e)(8), (9) and (10) \13\ requires each covered
clearing agency to establish, implement, maintain, and enforce written
policies and procedures reasonably designed to define the point at
which settlement is final to be no later than the end of the day on
which payment or obligation is due and, where necessary or appropriate,
intraday or in real time; conduct its money settlements in central bank
money, where available and determined to be practical by the Board, and
minimize and manage credit and liquidity risk arising from conducting
its money settlements in commercial bank money if central bank money is
not used; and establish and maintain transparent written standards that
state its obligations with respect to the delivery of physical
instruments, and establish and maintain operational practices that
identify, monitor, and manage the risks associated with such physical
deliveries. ICC will use its existing rules, settlement procedures and
account structures for the new Sovereign Contracts, which are similar
to the SWES and SES Contracts currently cleared by ICC, consistent with
the requirements of Rule 17Ad-

22(e)(8), (9) and (10) \14\ as to the finality and accuracy of its
daily settlement process and addressing the risks associated with
physical deliveries.
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    \13\ 17 CFR 240.17Ad-22(e)(8), (9) and (10).
    \14\ Id.
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    Rule 17Ad-22(e)(2)(i) and (v) \15\ 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. ICC determined to accept the additional
Sovereign Contracts for clearing in accordance with its governance
process, which included review of the contract and related risk
management considerations by the ICC Risk Committee and approval by its
Board. These governance arrangements continue to be clear and
transparent, such that information relating to the assignment of
responsibilities and the requisite involvement of the ICC Board and
committees is clearly detailed in the ICC Rules and policies and
procedures, consistent with the requirements of Rule 17Ad-22(e)(2)(i)
and (v).\16\
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    \15\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \16\ Id.
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    Rule 17Ad-22(e)(13) \17\ requires each covered clearing agency to
establish, implement, maintain, and enforce written policies and
procedures reasonably designed to ensure it has the authority and
operational capacity to take timely action to contain losses and
liquidity demands and continue to meet its obligations by, at a
minimum, requiring its participants and, when practicable, other
stakeholders to participate in the testing and review of its default
procedures, including any close-out procedures, at least annually and
following material changes thereto. ICC will apply its existing default
management policies and procedures for the additional Sovereign
Contracts. ICC believes that these procedures allow for it to take
timely action to contain losses and liquidity demands and to continue
meeting its obligations in the event of clearing member insolvencies or
defaults in respect of the additional single name, in accordance with
Rule 17Ad-22(e)(13).\18\
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    \17\ 17 CFR 240.17Ad-22(e)(13).
    \18\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    ICC does not believe the proposed amendments will have any impact,
or impose any burden, on competition not necessary or appropriate in
furtherance of the purposes of the Act. As discussed above, the purpose
of the proposed rule change is to adopt rules that will provide the
basis for ICC to clear additional credit default swap contracts. The
additional Sovereign Contracts will be available to all ICC
participants for clearing. The clearing of the additional Sovereign
Contracts by ICC does not preclude the offering of the additional
Sovereign Contracts for clearing by other market participants.
Accordingly, ICC does not believe that clearance of the additional
Sovereign Contracts will 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

    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

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
file number SR-ICC-2023-010 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-2023-010. 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 (https://www.sec.gov/rules/sro.shtml). 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
a.m. and 3 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 https://www.theice.com/clear-credit/regulation.
    Do not include personal identifiable information in submissions;
you should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to File Number SR-ICC-2023-010 and should
be submitted on or before July 24, 2023.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Vanessa A. Countryman,
Secretary.
[FR Doc. 2023-13998 Filed 6-30-23; 8:45 am]
BILLING CODE 8011-01-P