[Federal Register Volume 82, Number 203 (Monday, October 23, 2017)]
[Notices]
[Pages 49055-49057]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22887]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81892; File No. SR-ICC-2017-013]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing and Order Granting Accelerated Approval of Proposed Rule Change 
Relating to Changes to the ICC Clearing Rules

October 17, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ notice is hereby given that on October 
11, 2017, ICE Clear Credit LLC (``ICC'' or ``ICE Clear Credit'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change described in Items I, II, and III below, which 
Items have been prepared primarily by ICC. The Commission is publishing 
this notice and order to solicit comments on the proposed rule change 
from interested persons and to approve the proposed rule changes on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 implement 
certain amendments to the ICC Clearing Rules (the ``Rules'') relating 
to implementation of Venezuela sanctions.

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 changes is to modify certain provisions 
of the Rules applicable to cleared CDS contracts (or components 
thereof) for which the Bolivarian Republic of Venezuela is a reference 
entity, in light of the sanctions (the ``Venezuela Sanctions'') imposed 
by Executive Order 13808 of August 24, 2017

[[Page 49056]]

Imposing Additional Sanctions With Respect to the Situation in 
Venezuela \3\ (the ``Executive Order'') and related implementing 
actions by the U.S. Treasury Department Office of Foreign Asset Control 
(``OFAC'').
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    \3\ 82 FR 41155 (August 29, 2017).
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    The amendments will incorporate in the terms and conditions for 
such contracts the Additional Provisions for Certain Venezuelan 
Entities: Excluded Obligations and Excluded Deliverable Obligations 
published by the International Swaps and Derivatives Association, Inc. 
(``ISDA'') on September 19, 2017 (the ``Venezuela Additional 
Provisions''). Consistent with the approach expected to be taken 
throughout the cleared and uncleared CDS market, ICE Clear Credit will 
make the Venezuela Additional Provisions applicable to relevant CDS 
contracts cleared by ICE Clear Credit beginning on the industry-wide 
implementation date (currently expected to be on or around October 20, 
2017 (the ``Additional Provisions Effective Date'')).
    Among other provisions, the Executive Order prohibits transactions 
in or relating to certain bonds issued by the government of Venezuela, 
except to the extent permitted by a license issued by OFAC 
(``Restricted Debt''). The Venezuela Additional Provisions implement 
this prohibition by excluding Venezuela government bonds that are 
Restricted Debt from being ``Obligations'' or ``Deliverable 
Obligations'' under the terms of a CDS contract. As such, credit events 
with respect to such Restricted Debt could not be used to trigger 
credit protection under a CDS contract, and such Restricted Debt could 
not be used in settlement of a CDS contract. Pursuant to the terms of 
the Venezuela Additional Provisions, these limitations would cease to 
apply upon the lifting of sanctions under the Executive Order.
    ICE Clear Credit understands, through discussions with market 
participants, that market participants generally are expected to adhere 
to a protocol implementing the Venezuela Additional Provisions for 
existing contracts in the uncleared CDS market, effective as of the 
Additional Provisions Effective Date. In an effort to maintain 
consistency across the CDS market, ICE Clear Credit plans to implement 
the amendments discussed herein as of the same time.
    ICE Clear Credit is amending its Rules to incorporate the Venezuela 
Additional Provisions into existing Contracts. ICE Clear Credit is 
amending Rule 26C-316, which applies to CDX.EM Contracts, an index CDS 
contract for which Venezuela may be an index component. New subsection 
(e) provides that all open positions in CDX.EM Contracts that have a 
component transaction in which Venezuela is a reference entity will be 
amended, effective as of the Additional Provisions Effective Date, such 
that the Venezuela Additional Provisions apply. For clarity, the 
amendment also updates the transaction terms to reference the updated 
September 2017 ISDA Credit Derivatives Physical Settlement Matrix that 
takes into account the Venezuela Additional Provisions.
    Similarly, ICE Clear Credit is amending Rule 26D-616, which applies 
to emerging market sovereign single-name CDS contracts. New subsection 
(c) provides that a sovereign single-name CDS contract referencing 
Venezuela will be amended, effective as of the Additional Provisions 
Effective Date, such that the Venezuela Additional Provisions apply. 
For clarity, the amendment also updates the transaction terms to 
reference the updated September 2017 ISDA Credit Derivatives Physical 
Settlement Matrix that takes into account the Venezuela Additional 
Provisions.
(b) Statutory Basis
    ICE Clear Credit believes that the proposed amendments are 
consistent with the requirements of Section 17A of the Act \4\ and the 
regulations thereunder applicable to it, including the standards under 
Rule 17Ad-22.\5\ Section 17A(b)(3)(F) of the Act \6\ 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, the safeguarding of securities and funds 
in the custody or control of the clearing agency or for which it is 
responsible, and the protection of investors and the public interest. 
Consistent with this Section, the amendments revise the terms of 
single-name and index CDS contracts referencing Venezuela in order to 
implement the Venezuela Additional Provisions and comply with the 
relevant restrictions in the Executive Order. In ICE Clear Credit's 
view, the amendments will therefore facilitate its ability to continue 
prompt and accurate clearing of such contracts, consistent with 
applicable law and the public interest as set out in the Executive 
Order.
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    \4\ 15 U.S.C. 78q-1.
    \5\ 17 CFR 240.17Ad-22.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    Moreover, the amendments are consistent with Rule 17Ad-22(d)(1), 
\7\ which requires that each covered clearing agency 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. As discussed herein, the amendments are 
designed to facilitate compliance by ICE Clear Credit and its clearing 
participants with the Venezuela Sanctions imposed by the Executive 
Order, by permitting clearing to continue in accordance with the 
restrictions on Restricted Debt imposed by the Executive Order.
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    \7\ 17 CFR 240.17Ad-22(d)(1).
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(B) Clearing Agency's Statement on Burden on Competition

    ICE Clear Credit does not believe the proposed amendments would 
have any impact, or impose any burden, on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The changes will 
apply to all clearing participants and other market participants. The 
changes are being proposed in order to comply with the Executive Order 
and are being made in conjunction with an industry-wide effort to amend 
relevant CDS contract terms. ICE Clear Credit does not believe the 
amendments will impact competition among clearing members or other 
market participants, affect the ability of market participants to 
access clearing generally, or affect the cost of clearing. ICE Clear 
Credit further believes that any impact on clearing results from the 
restrictions imposed under the Executive Order, and is necessary and 
appropriate to ensure compliance with those restrictions.

(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. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, security-based swap submission, or advance notice is consistent 
with the Act. Comments may be submitted by any of the following 
methods:

[[Page 49057]]

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-ICC-2017-013 on the subject line.

Paper Comments

    Send paper comments in triplicate to Secretary, Securities and 
Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ICC-2017-013. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change, security-
based swap submission, or advance notice that are filed with the 
Commission, and all written communications relating to the proposed 
rule change, security-based swap submission, or advance notice 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 Web site 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 10:00 a.m. and 3:00 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 Web site at https://www.theice.com/clear-credit/regulation.
    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-ICC-2017-013 
and should be submitted on or before November 13, 2017.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    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.\8\ Section 17A(b)(3)(F) of the Act \9\ requires, among 
other things, that the rules of a registered 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 the 
clearing agency or for which it is responsible, and, in general, to 
protect investors and the public interest. Rule 17Ad-22(d)(1) \10\ 
requires a registered clearing agency that is not a covered clearing 
agency to establish, implement, maintain, and enforce written policies 
and procedures reasonably designed to provide for a well-founded, 
transparent, and enforceable legal framework for each aspect of its 
activities in all relevant jurisdictions.
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    \8\ 15 U.S.C. 78s(b)(2)(C).
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
    \10\ 17 CFR 240.17Ad-22(d)(1).
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    The Commission finds that the proposed rule change is consistent 
with Section 17A of the Act and the relevant rules thereunder.\11\ As 
described above, the proposed rule change is designed to amend ICC's 
Rules in order to take into account the Venezuela Sanctions by 
incorporating the Venezuela Additional Provisions. As a result of the 
proposed rule changes, credit events involving such bonds will not be 
permitted to trigger credit protection in connection with a CDS 
contract, nor may such bonds be used to settle a CDS contract. 
Consequently, the proposed rule changes are in the public interest 
because they ensure that ICC will be able to continue to promptly and 
accurately clear single-name and index CDS contracts referencing the 
Bolivarian Republic of Venezuela in a manner that comports with the 
Venezuela Sanctions. Therefore, the Commission finds that the proposed 
rule changes are consistent with the requirements of Section 
17A(b)(3)(F) of the Act.
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    \11\ 15 U.S.C. 78q-1.
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    In addition, by amending its Rules to account for the Venezuela 
Sanctions described above, the Commission believes ICC's Rules will 
appropriately establish an enforceable legal framework with respect to 
the clearance of single-name and index CDS contracts referencing the 
Bolivarian Republic of Venezuela, and that such framework is 
transparent as ICC's Clearing Members, as well as other industry 
participants generally, are aware of such sanctions and restrictions on 
the relevant contracts. Therefore, the Commission finds that the 
proposed rule change is consistent with the requirements of Rule 17Ad-
22(d)(1).
    In its filing, ICC requested that the Commission grant accelerated 
approval of the proposed rule change pursuant to Section 19(b)(2) of 
the Act. Under Section 19(b)(2)(C)(iii) of the Act,\12\ the Commission 
may grant accelerated approval of a proposed rule change if the 
Commission finds good cause for doing so. ICC believes that accelerated 
approval is warranted because the proposed rule change is designed to 
ensure that ICC can continue to clear single-name and index CDS 
referencing the Bolivarian Republic of Venezuela consistent with the 
terms of the Venezuela Sanctions, thereby promoting the maintenance of 
fair and orderly markets in such CDS contracts.
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    \12\ 15 U.S.C. 78s(b)(2)(C)(iii).
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    The Commission finds good cause, pursuant to Section 
19(b)(2)(C)(iii) of the Act, for approving the proposed rule change on 
an accelerated basis, prior to the 30th day after the date of 
publication in the Federal Register because the proposed rule change is 
intended to comply with the requirements set forth in an Executive 
Order binding on ICC. Moreover, the proposed rule change must be in 
place prior to the 30th day after the date of publication in the 
Federal Register in order to meet the timing of the industry-wide 
implementation of uniform terms to comply with the Executive Order.

V. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the Requirements of the Act and the 
relevant rules thereunder.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (File No. SR-ICC-2017-013) be, 
and hereby is, approved on an accelerated basis.\14\
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    \13\ 15 U.S.C. 78s(b)(2).
    \14\ 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.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22887 Filed 10-20-17; 8:45 am]
 BILLING CODE 8011-01-P


