[Federal Register Volume 87, Number 138 (Wednesday, July 20, 2022)]
[Notices]
[Pages 43351-43354]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-15444]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95279; File No. SR-ICC-2022-010]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change Relating to the Clearing Rules and the 
End-of-Day Price Discovery Policies and Procedures

July 14, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on July 7, 2022, ICE Clear Credit LLC (``ICE Clear Credit'' or 
``ICC'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared primarily by ICC. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 ICC's Clearing Rules (the ``Rules'') and End-of-
Day Price Discovery Policies and Procedures (the ``EOD Policy'') to 
establish an additional class of clearing participant. The text of the 
proposed amendments is attached in Exhibit 5 [sic].

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
    The purpose of the proposed changes is to modify certain provisions 
of the Rules and the EOD Policy to permit the establishment of an 
additional class of clearing participant at ICC, the ``Associate 
Clearing Participant'', or ``ACP''. ICC proposes to move forward with 
implementation of these changes following Commission approval of the 
proposed rule change.\3\ In general, an ACP would have the same rights, 
obligations and responsibilities as other Participants (referred to as 
``Full Participants''), with defined exceptions. Specifically, an ACP 
will be permitted to provide pricing submissions with respect to 
certain North American CDS products as of the end of the London trading 
day, rather than the end of the New York trading day. This change is 
intended to facilitate United Kingdom and European institutions 
becoming clearing participants in ICC where they may not have the 
global operational or other resources to support price submissions for 
North American instruments outside of London trading hours. The 
amendments would make a number of corresponding changes and impose 
certain limitations on ACPs intended to assist ICC in mitigating any 
additional risks resulting from these changes in the price submission 
process for ACPs. For example, the amendments allow ICC to impose a 
different clearing cut-off time for ACPs (intended to coincide with the 
end of the London trading day, such that ACPs may not submit new trades 
for clearing at a time when they are not able to provide price 
submissions). ACPs also will not be permitted to submit trades on 
behalf of customers.\4\ In addition, ICC may, but is not obligated to, 
impose additional or alternative margin requirements for ACPs if it 
determines that is appropriate from a risk management perspective. It 
is expected that ACPs will be required to satisfy the same initial and 
ongoing

[[Page 43352]]

membership standards and requirements as Full Participants, although 
ICC will have the authority to modify membership standards for ACPs if 
it determines it is appropriate to do so. ACPs will be required to make 
contributions to the General Guaranty Fund and participate in default 
management (including through mandatory auctions, if applicable) to the 
same extent as Full Participants.
---------------------------------------------------------------------------

    \3\ ICC does not intend to implement this additional class of 
clearing participant until ICC is permitted to implement the changes 
described herein and ICC completes any other required governance or 
internal processes. ICC will issue a circular notification in 
advance of the operative date.
    \4\ It is accordingly not expected that ACPs would be registered 
futures commission merchants.
---------------------------------------------------------------------------

    A number of provisions of the Rules would be amended to implement 
the ACP category. In Rule 102, definitions for ``Associate Clearing 
Participant'', ``Full Participant'', ``NA Instruments'' and ``NA 
Instrument EU EOD Submission'' (defined in Rule 212 as discussed below) 
would be added.
    ICC would adopt a new Rule 212 authorizing it to establish ACPs as 
a new category of clearing participant, on the terms set out in the 
Rule. Subsection (a) would provide that ACPs constitute Participants 
for all purposes under the Rules, except as provided in Rule 212 or the 
ICE Clear Credit Procedures. Subsection (b) would authorize ICC to 
establish separate price submission requirements for ACPs, including 
for Contracts with North American reference entities or indices (or 
such other Contracts as ICC determines), referred to as ``NA 
Instruments''. For such contracts, ICC would establish a new price 
submission window at the end of the London trading day during which 
ACPs would be required to make price submissions for NA Instruments 
(referred to as ``NA Instrument EU EOD Submissions''). ACPs would not 
be required to make the standard end-of-day price submissions at the 
end of the New York trading day for NA Instruments, however. ICC would 
also be permitted to establish firm trade requirements between ACPs 
with respect to NA Instrument EU EOD Submissions (as discussed further 
below in connection with the EOD Policy). Full Participants would be 
permitted, but not required to make NA Instrument EU EOD Submissions 
(and would not be subject to firm trade requirements with respect to 
such submissions). For all other Contracts, ACPs would be subject to 
the same end-of-day price submission requirements as Full Participants.
    Subsection (c) would permit ICC to establish different daily 
deadlines for submission of trades by ACPs as compared to Full 
Participants. ICC expects to impose such a deadline for ACPs at the 
close of the London trading day. Subsection (d) would permit ICC to 
establish different or supplemental margin requirements (or margin 
parameters) applicable to ACPs. ICC does not at this time plan to 
implement such margin requirements but believes it is appropriate to 
have the authority to do so to manage any incremental risk that may 
arise from the activity of ACPs.
    Pursuant to subsection (e), ACPs would be permitted to submit 
trades for clearing only for their own accounts or the account of 
affiliates, as House Positions. ICC believes that clearing participants 
that engage in clearing on behalf of customers should be Full 
Participants, with the operational and other resources to submit 
pricing at all relevant times for the full spectrum of products that 
they or their customers may submit.
    ICC would have the authority to establish additional or alternative 
membership standards, specifically as to business integrity, financial 
capacity, creditworthiness, operational capability, experience and 
competence for ACPs, pursuant to subsection (f). Except to the extent 
of any such alternative or additional standards, the existing 
membership standards in Rule 201 would apply to ACPs. Under subsection 
(g), ICC may adopt a separate form of participant agreement for ACPs 
reflecting their status as such.
    Under Rule 212(h), an affiliate of an existing Participant would 
not be eligible to be an ACP. Rule 212(i) would add, for clarification, 
that Rule 212 does not affect the rights or obligations of Full 
Participants.
    ICC would also make related changes to the EOD Policy addressing 
the price submission requirements applicable to ACPs, and 
differentiating the requirements for ACPs and Full Participants 
relating to NA Instruments. Specifically, the amendments would add an 
additional submission window for the ICC end-of-day price submission 
process, covering NA Instruments but determined at the end of the 
London trading day (referred to as the ``NA Instrument EU Submission 
Window''). The amendments would provide that the NA Instrument EU 
Submission Window is intended primarily to support ACPs, and further 
that all elements of the price discovery process for that window would 
follow those for the EU submission window. Certain other clarifying and 
conforming drafting changes would be made to distinguish the NA 
Instrument EU Submission Window from other submission windows.
    The provisions of the EOD Policy relating to the use of intraday 
quotes received by ICC would be amended to provide that if a 
Participant fails to make a required end-of-day submission during the 
applicable window, ICC may use the last intraday quote received prior 
to the close of that window (if one has been received on that day) to 
serve as that Participant's end-of-day submission.
    The submission requirement section would be revised to provide that 
(i) ACPs must provide submissions for NA Instruments during the NA 
Instrument EU Submission Window, but would not be required to provide 
submissions for the end-of-NY trading day NA submission window, and 
(ii) Full Participants may, but will not be obligated to, provide 
submissions for the NA Instrument EU Submission Window. The amendments 
would also state, consistent with the Rule amendments, that ACPs have 
the same obligations with respect to daily end-of-day submissions as 
Full Participants, except as set out in the amended EOD Policy. 
Conforming changes would be made throughout this section.
    The provisions of the EOD Policy relating to firm trades would be 
revised to provide that for the NA Instrument EU Submission Window, ICC 
will only designate firm trades between ACPs (and, for the avoidance of 
doubt, voluntary submissions by Full Participants in that window will 
not be subject to firm trades). Further, firm trades between ACPs 
originating from the NA Instrument EU Submission Window would not be 
eligible for reversing transactions.
    The revised EOD Policy would also provide that prices established 
in the NA Instrument EU Submission Window will not be published 
externally by ICC. Such prices would be used only for ICC risk 
management purposes.
    The timetables for the end-of-day submission process in the 
appendix to the EOD Policy would also be updated to include the NA 
Instrument EU Submission Window (with timing and deadlines consistent 
with the EU submission window, as noted above).
(b) Statutory Basis
    ICE Clear Credit believes that the proposed amendments are 
consistent with the requirements of Section 17A of the Act \5\ and the 
regulations thereunder applicable to it, including the standards under 
Rule 17Ad-22.\6\ Section 17A(b)(3)(F) of the Act \7\ 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

[[Page 43353]]

agency or for which it is responsible, and the protection of investors 
and the public interest.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78q-1.
    \6\ 17 CFR 240.17Ad-22.
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The amendments provide for the establishment of a new category of 
clearing participant, ACPs. The ACP category is intended to facilitate 
entities becoming clearing participants, particularly European 
institutions, that may have limited global operational or other 
resources outside of London business hours that may otherwise make it 
difficult to satisfy the price submission requirements of being a 
clearing participant for NA Instruments. ACPs would be required to 
submit prices in NA Instruments at the end of the London trading day 
(instead of the New York trading day), to facilitate the risk 
management by ICC of ACP positions. Further, the proposed rules will 
impose certain limitations on ACPs, as compared to Full Participants, 
including allowing ICC to limit the ability of ACPs to submit new 
trades for clearing after the close of the London trading day and to 
limit the ability of ACPs to submit trades for customers. ICC also 
retains the ability to impose additional or alternative margin 
requirements on ACPs to the extent appropriate from a risk management 
perspective. In ICC's view, the ACP category thus provides an ability 
for ICC to potentially expand the pool of clearing participants, while 
maintaining the clearing house's ability to conduct risk management. In 
this regard, ICC notes that ACPs will, with the limited exceptions 
identified herein, be required to perform all obligations of 
Participants, including contributions to the General Guaranty Fund and 
default management. ICC will further maintain ACP margin and guaranty 
fund contributions in the same manner it holds margin and guaranty fund 
contributions of Full Participants. As a result, in ICC's view, the 
amendments are consistent with the prompt and accurate clearance and 
settlement of securities transactions and 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 the investors and the public 
interest, within the meaning of Section 17A(b)(3)(F).\8\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Moreover, the amendments are consistent with relevant provisions of 
Rule 17Ad-22.\9\ In particular, Rule 17Ad-22(e)(18) requires that each 
covered clearing agency ``establish, implement, maintain and enforce 
written policies and procedures reasonably designed to . . . establish 
objective, risk-based and publicly disclosed criteria for 
participation, which permit fair and open access by direct and, where 
relevant indirect participants . . . require participants to have 
sufficient financial resources and robust operational capacity to meet 
obligations arising from participation in the clearing agency, and 
monitor compliance with such participation requirements on an ongoing 
basis.'' \10\ The amendments would create a new category of 
participant, ACPs, and set out rights, obligations and responsibilities 
of such participants. As noted above, ACPs would largely have the same 
rights and obligations as Full Participants, with certain exceptions 
designed to facilitate participation by persons that may not have the 
full global operational capability to provide prices for NA Instruments 
at the close of the New York trading day. The amendments appropriately 
limit clearing by ACPs in light of the limited submission requirements 
by allowing for an earlier deadline for clearing submission, limiting 
customer clearing and providing ICC the flexibility to impose 
additional or alternative margin requirements if appropriate. In ICC's 
view, the proposed rules thus provide a way of expanding the potential 
pool of clearing participants while maintaining robust risk management. 
As noted above, ACPs will be subject to the same guaranty fund, and the 
same or additional margin requirements as Full Participants. All other 
requirements of Participant status, and ICC's existing Participant 
monitoring program, will apply to ACPs (although ICC can impose 
additional or modified requirements appropriate to ACPs). As a result, 
in ICC's view, the amendments are consistent with the requirements of 
Rule 17Ad-22(e)(18).\11\
---------------------------------------------------------------------------

    \9\ 17 CFR 240.17Ad-22.
    \10\ 17 CFR 240.17Ad-22(e)(18).
    \11\ 17 CFR 240.17Ad-22(e)(18).
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(6)(iv) \12\ requires that a covered clearing agency 
``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: . . . (iv) uses reliable sources of timely 
price data and uses procedures and sound valuation models for 
addressing circumstances in which pricing data are not readily 
available or reliable.'' The amendments, including the changes to the 
EOD Policy, are designed, consistent with the goal of admitting ACPs 
that may not have global operational capability to submit prices 
outside of London trading hours, to continue to provide ICC with robust 
pricing to support its margin model. ACPs would be required, for NA 
Instruments, to submit prices in a new submission window at the end of 
the London trading day. ICC would use such prices for risk management 
purposes, including for purposes of the margin model. ICC would use the 
same procedures for other price submissions, including requiring firm 
trades among ACPs, to ensure the robustness of submitted prices. In 
ICC's view, the amendments are therefore consistent with the 
requirements of Rule 17Ad-22(e)(6)(iv).\13\
---------------------------------------------------------------------------

    \12\ 17 CFR 270.17Ad-22(e)(6).
    \13\ 17 CFR 240.17Ad-22(e)(6)(iv).
---------------------------------------------------------------------------

(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 amendments 
are not intended to affect the rights or obligations of existing 
Participants. The changes would adopt an additional category of 
clearing participant, the ACP, which would be available to eligible 
institutions that meet the clearing house's requirements. ACPs will be 
subject to the same rights, obligations and responsibilities as Full 
Participants, but will submit prices for NA Instruments during a 
submission window at the end of the London trading day rather than the 
New York trading day. This is intended to facilitate participation by 
institutions that may not have the global operational capability to 
submit prices outside of the London trading day, but maintain the 
clearing house's ability to manage the risk of clearing in such 
instruments. As a result, ICE Clear Credit does not believe the 
amendments will impact competition among clearing members or other 
market participants, adversely affect the ability of market 
participants to access clearing generally, or adversely affect the cost 
of clearing. ICE Clear Credit thus 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.

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

    Written comments relating to the proposed amendments have not been 
solicited or received by ICE Clear Credit.

[[Page 43354]]

ICE Clear Credit will notify the Commission of any comments received 
with respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
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 [email protected]. Please include 
File Number SR-ICC-2022-010 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-2022-010. 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-2022-010 and should be 
submitted on or before August 10, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-15444 Filed 7-19-22; 8:45 am]
BILLING CODE 8011-01-P


