[Federal Register Volume 86, Number 13 (Friday, January 22, 2021)]
[Notices]
[Pages 6715-6718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01284]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90928; File No. SR-ICC-2021-001]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the ICC Clearing Rules

January 14, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 7, 2021, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange

[[Page 6716]]

Commission the proposed rule change as described in Items I and II 
below, which Items have been prepared primarily by ICC. ICC filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder,\4\ such that the proposed rule change was 
immediately effective upon filing with the Commission. The Commission 
is publishing this notice to solicit comments on 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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 Clearing Rules (the ``Rules'') \5\ to clarify an existing 
requirement of Participants regarding the provision of margin or 
collateral (``Non-Participant Collateral'') by clients (``Non-
Participant Parties'').
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    \5\ Capitalized terms used but not defined herein have the 
meanings specified in the Rules.
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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, 
security-based swap submission, or advance notice and discussed any 
comments it received on the proposed rule change, security-based swap 
submission, or advance notice. 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
    ICC proposes revisions to Rule 406(b) to clarify an existing 
requirement of Participants regarding the provision of Non-Participant 
Collateral by Non-Participant Parties and to update the terminology in 
a manner that is consistent with amended Commodity Futures Trading 
Commission (``CFTC'') Regulation 39.13(g)(8)(ii),\6\ applicable to ICC 
as a derivatives clearing organization, which requires compliance by 
January 27, 2021. As such, ICC has filed the proposed rule change for 
immediate effectiveness and proposes that it will be operative on or 
about January 27, 2021 and subject to any regulatory review, approval, 
or other process. ICC will issue a circular notification, in advance of 
the operative date. The proposed revisions are described in detail as 
follows.
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    \6\ 17 CFR 39.13(g)(8)(ii).
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    ICC proposes changes to Rule 406, which sets out certain 
requirements with respect to client-related positions of futures 
commission merchant (``FCM'') and broker-dealer Participants. Under 
current Rule 406(b), a Participant must require each Non-Participant 
Party to provide Non-Participant Collateral in an amount no less than 
ICC's margin requirement with respect to the relevant client-related 
position(s). The proposed changes clarify that such amount would be 
commensurate with the risk presented by such Non-Participant Party. The 
proposed changes also remove general language whereby ICC may require 
additional margin with respect to Non-Participant Parties and, instead, 
direct Participants to identify Non-Participant Parties with heightened 
risk profiles and collect margin from them at a level exceeding 100% of 
ICC's margin requirement, by such amount as is commensurate with the 
risk presented. Such changes are intended to clarify and incorporate 
terminology that is consistent with amended CFTC Regulation 
39.13(g)(8)(ii) \7\ to facilitate compliance.
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    \7\ Id.
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    In connection with the proposed amendments, ICC would also revoke 
Circular 2012/008 (the ``Circular'') \8\ which requires FCM 
Participants to collect margin from Non-Participant Parties in respect 
of such Non-Participant Parties' non-hedge positions, at a level that 
is 10% greater than ICC's related margin requirement with respect to 
each product and swap portfolio. Amended CFTC Regulation 
39.13(g)(8)(ii) \9\ intended to replace this prior market structure, 
which is reflected in current Rule 406 and the Circular.
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    \8\ The Circular was issued on April 20, 2012 and is available 
at the following: https://www.theice.com/publicdocs/clear_credit/circulars/Circular_2012_008_FINAL.pdf.
    \9\ 17 CFR 39.13(g)(8)(ii).
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(b) Statutory Basis
    ICC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \10\ and the regulations 
thereunder applicable to it, including the applicable standards under 
Rule 17Ad-22.\11\ In particular, Section 17A(b)(3)(F) of the Act \12\ 
requires that the rule change be 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. The proposed rule change would update Rule 406(b) to 
provide clarification to the existing requirement and to update the 
terminology in a manner that is consistent with amended CFTC Regulation 
39.13(g)(8)(ii).\13\ Specifically, the proposed revisions clarify that 
the amount of Non-Participant Collateral would be commensurate with the 
risk presented by such Non-Participant Party. The proposed changes also 
remove general language whereby ICC may require additional margin with 
respect to Non-Participant Parties and, instead, direct Participants to 
identify Non-Participant Parties with heightened risk profiles and 
collect margin from them at a level exceeding ICC's margin requirement. 
Such changes would accordingly replace the requirement in the Circular, 
which ICC believes is appropriate to facilitate compliance with amended 
CFTC Regulation 39.13(g)(8)(ii),\14\ and better support ICC's ability 
to manage the risks posed by Non-Participant Parties as the proposed 
changes result in Participants collecting Non-Participant Collateral at 
levels commensurate with the risk presented by each Non-Participant 
Party. Such changes further provide clarity and transparency on the 
requirement in Rule 406(b) regarding the provision of Non-Participant 
Collateral and thus strengthen the Rules with clear and more specific 
guidance, which supports the prompt and accurate clearance and 
settlement of securities transactions, derivatives agreements, 
contracts, and transactions, the safeguarding of securities and funds 
which are in the custody or control of ICC or for which it is 
responsible, and the protection of investors and the public interest. 
The proposed rule change is thus consistent with the prompt and 
accurate clearance and settlement of securities transactions, 
derivatives agreements, contracts, and transactions, 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.\15\
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    \10\ 15 U.S.C. 78q-1.
    \11\ 17 CFR 240.17Ad-22.
    \12\ 15 U.S.C. 78q-1(b)(3)(F).
    \13\ 17 CFR 39.13(g)(8)(ii).
    \14\ Id.
    \15\ 15 U.S.C. 78q-1(b)(3)(F).

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[[Page 6717]]

    The amendments would also satisfy relevant requirements of Rule 
17Ad-22.\16\ Rule 17Ad-22(e)(4)(ii) \17\ 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. 
The proposed changes promote ICC's ability to address and manage the 
risk posed by Non-Participant Parties, including by clarifying that the 
amount of Non-Participant Collateral would be commensurate with the 
risk presented by such Non-Participant Party and by directing 
Participants to identify Non-Participant Parties with heightened risk 
profiles and collect margin from them at a level exceeding ICC's margin 
requirement. In ICC's view, the amended language in Rule 406(b) 
protects the financial integrity of ICC and Participants, as it results 
in Participants collecting Non-Participant Collateral in an amount 
commensurate with the risk presented by Non-Participant Parties and is 
more appropriate in light of amended Regulation 39.13(g)(8)(ii).\18\ 
Such changes promote ICC's ability to manage the risks posed by Non-
Participant Parties, including by managing the potential risks arising 
from Non-Participant Party transactions relating to a potential default 
of a Non-Participant Party that disrupts a Participant, thereby 
promoting ICC's ability to continue to maintain its financial resources 
and withstand the pressures of defaults, consistent with the 
requirements of Rule 17Ad-22(e)(4)(ii).\19\
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    \16\ 17 CFR 240.17Ad-22.
    \17\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \18\ 17 CFR 39.13(g)(8)(ii).
    \19\ 17 CFR 240.17Ad-22(e)(4)(ii).
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    Rule 17Ad-22(e)(6)(i) and (ii) \20\ require 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 and marks participant positions to market and collects 
margin, including variation margin or equivalent charges if relevant, 
at least daily and includes the authority and operational capacity to 
make intraday margin calls in defined circumstances. As described 
above, the proposed revisions are intended to clarify the existing 
requirement in Rule 406(b) and to incorporate terminology that is 
consistent with amended CFTC Regulation 39.13(g)(8)(ii) \21\ to 
facilitate compliance. Such revisions do not change ICC's margin 
methodology, which continues to consider, and produce margin levels 
commensurate with, the risks and particular attributes of each relevant 
product, portfolio, and market, and do not impact or alter ICC's 
ability to collect margin or make intraday margin calls. Therefore, ICC 
believes that the proposed rule change is consistent with the 
requirements of Rule 17Ad-22(e)(6)(i) and (ii).\22\
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    \20\ 17 CFR 240.17Ad-22(e)(6)(i) and (ii).
    \21\ 17 CFR 39.13(g)(8)(ii).
    \22\ 17 CFR 240.17Ad-22(e)(6)(i) and (ii).
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    Rule 17Ad-22(e)(19) \23\ requires each covered clearing agency to 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to identify, monitor, and manage the 
material risks to the covered clearing agency arising from arrangements 
in which firms that are indirect participants in the covered clearing 
agency rely on the services provided by direct participants to access 
the covered clearing agency's payment, clearing, or settlement 
facilities. The proposed amendments support ICC's ability to manage the 
risks posed by Non-Participant Parties, including by elaborating on the 
requirement in Rule 406(b) to state that the amount of Non-Participant 
Collateral would be commensurate with the risk presented by such Non-
Participant Party. The proposed changes also include language directing 
Participants to identify Non-Participant Parties with heightened risk 
profiles and collect margin from them at a level exceeding ICC's margin 
requirement to replace general language whereby ICC may require 
additional margin with respect to Non-Participant Parties. Such changes 
would replace the requirement in the Circular, which would result in 
Participants collecting Non-Participant Collateral at levels 
commensurate with the risk presented by each Non-Participant Party and 
support ICC's ability to manage the risks posed by Non-Participant 
Parties given the relationship that Participants have with Non-
Participant Parties as opposed to ICC. Such changes also foster a more 
clear and transparent Rule that will enhance ICC's ability to identify, 
monitor, and manage the risks posed by Non-Participant Parties, 
consistent with the requirements of Rule 17Ad-22(e)(19).\24\
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    \23\ 17 CFR 240.17Ad-22(e)(19).
    \24\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    ICC does not believe the proposed amendments would have any impact, 
or impose any burden, on competition. The proposed rule change will 
apply uniformly across all market participants. Therefore, ICC does not 
believe the proposed rule change imposes any burden on competition that 
is inappropriate in furtherance of the purposes of the Act.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) \25\ of the Act and 
Rule 19b-4(f)(6) \26\ thereunder.
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    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 17 CFR 240.19b-4(f)(6).
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    ICC has requested that the Commission waive both the five-day pre-
filing requirement and the 30-day delayed operative date under Rule 
19b-4(6)(iii) \27\ so that the proposed rule change may become 
effective and operative upon filing with the Commission. As noted 
above, ICC designed the proposed amendments to Rule 406(b) for 
consistency with amended CFTC Regulation 39.13(g)(8)(ii),\28\ which 
requires ICC's compliance by January 27, 2021. ICC does not believe 
that any delay in implementing rules that reflect these requirements 
will benefit Participants, their customers, or any other market

[[Page 6718]]

participants. Any delay is also likely to be inconsistent with market 
expectations in light of the compliance date of the amended CFTC 
regulation. As a result, in ICC's view, immediate effectiveness is 
consistent with the protection of investors and the public interest.
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    \27\ 17 CFR 240.19b-4(f)(6)(iii).
    \28\ 17 CFR 39.13(g)(8)(ii).
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    The Commission believes that the delay of the operation of the 
proposed rule change, through the five-day pre-filing requirement and 
the 30-day delayed operative date, could impede ICC's timely compliance 
with amended CFTC Regulation 39.13(g)(8)(ii) \29\ and thereby defer the 
intended benefits and objectives of such regulatory requirements for 
customer initial margin levels. This, in turn, could disrupt market 
expectations that ICC will implement the amended CFTC regulation by the 
January 27, 2021 compliance date, which may adversely affect ICC and 
its ability to timely replace the requirement in the Circular and 
manage the risks posed by Non-Participant Parties in compliance with 
applicable regulatory requirements for the collection of Non-
Participant Collateral. The Commission therefore believes that waiving 
the five-day pre-filing requirement and 30-day operative delay should 
facilitate ICC's timely compliance with the amended CFTC regulation and 
avert any potential adverse consequences if such compliance were 
delayed. Moreover, the Commission believes the proposed rule change 
would not impose any significant burden on competition because it 
applies uniformly to both FCM and broker-dealer Participants and their 
customers as Non-Participant Parties. Thus, the Commission believes the 
proposed rule change, and waiving the five-day pre-filing requirement 
and 30-day operative delay, would not (i) significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; or (iii) affect the safeguarding of 
funds or securities in the custody or control of ICC or for which it is 
responsible. Therefore, the Commission waives the five-day pre-filing 
requirement and 30-day operative delay, and designates the proposed 
rule change as operative upon filing.\30\
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    \29\ 17 CFR 39.13(g)(8)(ii).
    \30\ For purposes only of waiving the five-day pre-filing 
requirement and the 30-day operative delay, the Commission has 
considered the proposed rule change's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-ICC-2021-001 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-2021-001. 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 (http://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 10:00 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 website at https://www.theice.com/clear-credit/regulation.
    All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ICC-2021-001 and should be 
submitted on or before February 12, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-01284 Filed 1-21-21; 8:45 am]
BILLING CODE 8011-01-P


