
[Federal Register Volume 79, Number 239 (Friday, December 12, 2014)]
[Notices]
[Pages 73924-73925]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29181]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73790; File No. SR-ICC-2014-17]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Granting Approval of Proposed Rule Change To Revise ICC End-of-Day 
Price Discovery Policies and Procedures

December 8, 2014.

I. Introduction

    On October 17, 2014, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change SR-ICC-2014-17 pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The 
proposed rule change was published for comment in the Federal Register 
on November 3, 2014.\3\ The Commission received no comment letters 
regarding the proposed change. 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\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-73451 (Oct. 28, 
2014), 79 FR 65280 (Nov. 3, 2014) (SR-ICC-2014-17).
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II. Description of the Proposed Rule Change

    ICC is proposing this change to revise the ICC End-of-Day Price 
Discovery Policies and Procedures to incorporate enhancements to its 
price discovery

[[Page 73925]]

process. This revision does not require any changes to the ICC Clearing 
Rules.
    According to ICC, it utilizes a ``cross and lock'' algorithm as 
part of its price discovery process. As described by ICC, under this 
algorithm, bids and offers derived from Clearing Participant (``CP'') 
submissions are matched by sorting them from highest to lowest and 
lowest to highest levels, respectively. This sorting process pairs the 
CP submitting the highest bid price with the CP submitting the lowest 
offer price, the CP submitting the second highest bid price with the CP 
submitting the second-lowest offer price, and so on. The algorithm then 
identifies crossed and/or locked markets. Crossed markets are the 
Clearing Participant pairs generated by the sorting and ranking process 
for which the bid price of one Clearing Participant is above the offer 
price of the matched Clearing Participant. The algorithm identifies 
locked markets, where the bid and the offer are equal, in a similar 
fashion. The mid-point of the first non-crossed, non-locked matched 
market is, as stated by ICC, the final end-of-day level (with 
additional steps taken to remove off-market submissions from 
influencing the final level). According to ICC, this process captures 
the market dynamics of trading; however, final pricing levels are 
ultimately determined by a single bid and a single offer, which results 
in the ability for one submission to influence the outcome.
    ICC proposes enhancements to its methodology to improve the 
consistency of prices and reduce the sensitivity of the final level to 
a single Clearing Participant's submission. ICC states that under the 
new ``cross and lock'' methodology, the average of the mid-points of 
all non-crossed, non-locked matched markets that are less than or equal 
to one bid-offer width is used as the final level (with additional 
steps taken to remove off-market submissions from influencing the final 
level). ICC states that, as a result, prices are less sensitive to 
outlying submissions. ICC also proposes additional language in the ICC 
End-of-Day Price Discovery Policies and Procedures to clarify existing 
policies and practices, including, but not limited to, language to 
clarify the existing pricing methodology's treatment of identical 
crossed or locked matched market bids or offers.

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \4\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if the 
Commission finds that such proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such self-regulatory organization. Section 17A(b)(3)(F) 
of the Act \5\ requires, among other things, that the rules of a 
clearing agency are 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 the clearing agency or for which it is 
responsible and, in general, to protect investors and the public 
interest.
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    \4\ 15 U.S.C. 78s(b)(2)(C).
    \5\ 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 of the Act \6\ and the rules thereunder applicable to 
ICC. The revised ICC End-of-Day Price Discovery Policies and Procedures 
will reduce the sensitivity of the final price level to a single 
Clearing Participant's submission, resulting in more consistent day-
over-day end-of-day levels. The proposed rule change is therefore 
reasonably expected to provide a pricing methodology to more accurately 
reflect the market level. As such, the Commission believes that the 
changes will promote the prompt and accurate settlement of securities 
and derivatives transactions, and therefore are consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to ICC, in particular, Section 17(A)(b)(3)(F).
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    \6\ 15 U.S.C. 78q-1.
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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 \7\ and the 
rules and regulations thereunder.
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    \7\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-ICC-2014-17) be, and 
hereby is, approved.\9\
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    \8\ 15 U.S.C. 78s(b)(2).
    \9\ 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.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29181 Filed 12-11-14; 8:45 am]
BILLING CODE 8011-01-P


