
[Federal Register Volume 77, Number 83 (Monday, April 30, 2012)]
[Notices]
[Page 25522]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-10307]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66853; File No. SR-ICC-2012-02]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change to Provide for a T+1 Settlement of the 
Initial Payment Related to the CDS Contracts Cleared by ICE Clear 
Credit LLC

April 24, 2012.

I. Introduction

    On March 1, 2012, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change SR-ICC-2012-02 pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'').\1\ The proposed rule change was 
published for comment in the Federal Register on March 12, 2012.\2\ The 
Commission received no comment letters. For the reasons discussed 
below, the Commission is granting approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 34-66517 (March 6, 
2012), 77 FR 14578 (March 12, 2012).
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II. Description

    ICC proposed rule amendments that were intended to modify the terms 
of each of the various CDS Contracts cleared by ICC (CDX.NA Untranched 
Contracts, Standard North American Corporate (``SNAC'') Single Name 
Contracts and Standard Emerging Sovereign (``SES'') Single Name 
Contracts) to make the Initial Payment \3\ date the first business day 
immediately following the trade date, provided that with respect to CDS 
Contracts that are accepted for clearing after the trade date, the 
Initial Payment date will be the date that is the first business day 
following the date when the CDS Contract is accepted for clearing. The 
Initial Payment under a CDS Contract is established at the time the 
contract is executed and may be payable from either the protection 
buyer to the protection seller or vice versa. Under the current ICC 
Rules (by way of the incorporated ISDA Credit Derivatives Definitions), 
and consistent with practice in the market for uncleared credit default 
swaps, the Initial Payment is required to be made on the third business 
day following the trade date (the execution date). ICC proposed to add 
the definition of Initial Payment Date to its Clearing Rules to provide 
instead that the Initial Payment is to be made on the first business 
day following the trade date (or, if the transaction is accepted for 
clearing after the trade date, the Initial Payment is to be made on the 
first business day following the date of acceptance for clearing). ICC 
believes that this change from ``T+3'' settlement to ``T+1'' settlement 
for the Initial Payment will facilitate customer-related clearing. In 
addition, this change will improve margin efficiency (as margin 
requirements will no longer need to take into account the additional 
risk from a T+3 as opposed to a T+1 settlement rule).
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    \3\ The Initial Payment is an obligation by either counterparty 
to make an upfront payment established at the time the contract is 
executed. See ICE Clear Credit Clearing Rules, Section 301(b).
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    The other proposed changes in the ICC Rules reflect updates to 
cross-references and defined terms and similar drafting clarifications, 
and do not affect the substance of the ICC Rules or cleared products.

III. Discussion

    Section 19(b)(2)(B) of the Act \4\ 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. Section 17A(b)(3)(F) of the Act \5\ 
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.
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    \4\ 15 U.S.C. 78s(b)(2)(B).
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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    Because the proposed rule change will accelerate the Initial 
Payment date, it will improve margin efficiency (as margin requirements 
will no longer need to take into account the additional risk from a T+3 
as opposed to a T+1 settlement rule) thereby promoting the prompt and 
accurate clearance and settlement of derivative agreements, contracts, 
and transactions, and therefore is consistent with the requirements of 
Section 17A(b)(3)(F) of the Act.

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \6\ and the 
rules and regulations thereunder.
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    \6\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (File No. SR-ICC-2012-02) be, and 
hereby is, approved.\8\
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ 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).
    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Kevin O'Neill,
Deputy Secretary.
[FR Doc. 2012-10307 Filed 4-27-12; 8:45 am]
BILLING CODE 8011-01-P


