[Federal Register Volume 85, Number 106 (Tuesday, June 2, 2020)]
[Notices]
[Pages 33762-33764]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11777]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88954; File No. SR-ICC-2020-007]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to the ICC Clearing Rules

May 27, 2020.

I. Introduction

    On April 10, 2020, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section

[[Page 33763]]

19(b)(1) of the Securities Exchange Act of 1934 (the ``Act''),\1\ and 
Rule 19b-4,\2\ a proposed rule change to amend Chapter 2 of the ICC 
Rules relating to requirements applicable to ICC's Clearing 
Participants. The proposed rule change was published for comment in the 
Federal Register on April 20, 2020.\3\ 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\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice 
of Proposed Rule Change Relating to the ICC Clearing Rules, Exchange 
Act Release No. 88628 (Apr. 14, 2020); 85 FR 21907 (Apr. 20, 2020) 
(SR-ICC-2020-007).
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II. Description of the Proposed Rule Change

    As discussed below, the proposed rule change would amend Chapter 2 
of the ICC Rules, which relates to requirements applicable to ICC's 
Clearing Participants.
    The proposed rule change would amend ICC Rule 201(b), which sets 
out the standards that each of ICC's Clearing Participants must meet, 
to add a new standard in standard in subparagraph (xiv). New 
subparagraph (xiv) would require that a Clearing Participant 
participate in default management simulations, new technology testing 
and other exercises, as notified by ICE Clear Credit from time to time.
    The proposed rule change would also amend Rule 206(a), which 
requires that each Clearing Participant immediately notify ICC, orally 
and in writing, upon the occurrence of certain specified events. The 
proposed rule change would amend Rule 206(a) to delete the requirement 
that Clearing Participants provide notices orally, so that instead 
Clearing Participants would only be required to provide notice in 
writing.
    Finally, the proposed rule change would amend Rule 206(c), which 
requires a Clearing Participant that is a broker-dealer to notify ICC 
of, among other things, any matter of which the Clearing Participant 
must notify FINRA under FINRA Rule 3070. The proposed rule change would 
replace ``FINRA Rule 3070'' with ``FINRA Rule 4530(a)(1)(A),(C),(E) and 
4530(b) (or any similar rules),'' as FINRA Rule 3070 is no longer 
applicable and has been superseded by FINRA Rule 4530.\4\
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    \4\ FINRA Rule 4530 generally requires that its members promptly 
report to FINRA after the member or an associated person of the 
member has been found to have violated any securities or other rules 
and regulations of a regulatory body, is named as a defendant or 
respondent in any proceeding brought by a domestic or foreign 
regulatory body, or is indicted, or convicted of, or pleads guilty 
to any felony or any misdemeanor that involves the purchase or sale 
of any security, etc. Further, this rule also generally requires 
that each member shall promptly report to FINRA after the member has 
concluded or reasonably should have concluded that an associated 
person of the member or the member itself has violated any 
securities or other rules and regulations of a regulatory body.
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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.\5\ For the reasons given below, the Commission finds that 
the proposed rule change is consistent with Section 17A(b)(3)(F) of the 
Act \6\ and Rule 17Ad-22(d)(2).\7\
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    \5\ 15 U.S.C. 78s(b)(2)(C).
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ 17 CFR 240.17Ad-22(d)(2).
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A. Consistency With Section 17A(b)(3)(F) of the Act

    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.\8\ By 
updating the standards for membership applicable to Clearing 
Participants as discussed above, the proposed rule change should help 
to ensure that ICC's Clearing Participants participate in default 
testing and other testing conducted by ICC. In addition, the proposed 
rule change should help to ensure that all of ICC's Clearing 
Participants are prepared for, and ready to take actions in response 
to, a Clearing Participant default, thereby helping to improve ICC's 
management of a Clearing Participant default. Because the Commission 
believes that a Clearing Participant default, if not properly managed, 
could cause ICC to incur losses which could hinder its clearance and 
settlement of securities transactions and safeguarding of securities 
and funds in its custody or control, the Commission believes this 
aspect of the proposed rule change should help to promote the prompt 
and accurate clearance and settlement of securities transactions and 
assure the safeguarding of securities and funds in ICC's custody and 
control.
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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    Similarly, by eliminating the requirement for oral notices and 
updating the reference to the current FINRA rulerequiring notification 
by a Clearing Participant that is a broker-dealer of violations of 
regulatory rules and regulations, the proposed rule change should help 
to ensure that ICC receives notice from a Clearing Participant of 
events or situations which could affect the Clearing Participant's 
ability to satisfy the standards and obligations applicable to it as a 
participant in ICC. The proposed rule change would allow ICC to respond 
as needed to mitigate any potential negative effects to ICC arising 
from such events or situations that could hinder ICC's clearance and 
settlement of securities transactions and safeguarding of securities 
and funds in its custody or control. Consequently, the Commission 
believes this aspect of the proposed rule change should help to promote 
the prompt and accurate clearance and settlement of securities 
transactions and assure the safeguarding of securities and funds in 
ICC's custody and control.
    Therefore, the Commission finds that the proposed rule change 
should promote the prompt and accurate clearance and settlement of 
securities transactions and assure the safeguarding of securities and 
funds in ICC's custody and control, consistent with 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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B. Consistency With Rule 17Ad-22(d)(2)

    Rule 17Ad-22(d)(2) requires that ICC establish, implement, maintain 
and enforce written policies and procedures reasonably designed to 
require participants to have sufficient financial resources and robust 
operational capacity to meet obligations arising from participation in 
ICC; have procedures in place to monitor that participation 
requirements are met on an ongoing basis; and have participation 
requirements that are objective and publicly disclosed, and permit fair 
and open access.\10\ The adoption of a new standard applicable to 
Clearing Participants--participation in default management simulations, 
new technology testing and other exercises, as notified by ICE Clear 
Credit from time to time--should establish a participation requirement 
that is objective in that it applies to all Clearing Participants 
equally, and is publicly disclosed, in that it would be part of ICC's 
publicly available rulebook. Moreover, this new participation standard 
should allow ICC to test a Clearing Participant's operational

[[Page 33764]]

response to a simulated default, thereby helping to ensure that a 
Clearing Participant has robust operational capacity to meet 
obligations arising from participation in ICC. Finally, the elimination 
of the requirement for oral notices and updating of the reference to 
the current FINRA rule should help to ensure that ICC receives notice 
from a Clearing Participant of events or situations which could affect 
the Clearing Participant's ability to satisfy the standards and 
obligations applicable to it as a participant in ICC. Taken together, 
the Commission believes that the proposed rule change should help ICC 
to monitor that Clearing Participants are meeting their participation 
requirements on an ongoing basis. For these reasons, the Commission 
finds that the proposed rule change is consistent with Rule 17Ad-
22(d)(2).\11\
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    \10\ 15 U.S.C. 17Ad-22(d)(2).
    \11\ 15 U.S.C. 17Ad-22(d)(2).
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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 \12\ and Rules 17Ad-22(d)(2).\13\
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
    \13\ 17 CFR 240.17Ad-22(d)(2).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\14\ that the proposed rule change (SR-ICC-2020-007), be, and hereby 
is, approved.\15\
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    \14\ 15 U.S.C. 78s(b)(2).
    \15\ 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.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-11777 Filed 6-1-20; 8:45 am]
 BILLING CODE 8011-01-P


