[Federal Register Volume 79, Number 212 (Monday, November 3, 2014)]
[Notices]
[Pages 65280-65282]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26011]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73451; File No. SR-ICC-2014-17]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change To Revise ICC End-of-Day Price Discovery
Policies and Procedures
October 28, 2014.
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 October 17, 2014, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization'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 End-of-Day Price Discovery Policies and Procedures to incorporate
enhancements to its price discovery process. This revision does not
require any changes to the ICC Clearing Rules (``Rules'').
II. Self-Regulatory Organization'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. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
ICC proposes revising the ICC End-of-Day Price Discovery Policies
and Procedures to incorporate enhancements to its price discovery
process.
ICC believes such revisions will facilitate the prompt and accurate
[[Page 65281]]
clearance and settlement of securities transactions and derivative
agreements, contracts, and transactions for which it is responsible.
The proposed revisions are described in detail as follows.
ICC currently utilizes a ``cross and lock'' algorithm as part of
its price discovery process. Under this algorithm, bids and offers
derived from Clearing Participant 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 the final end-of-day level
(with additional steps taken to remove off-market submissions from
influencing the final level). 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. 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). 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.\3\ There are no changes to ICC's Rules as a result of these
enhancements.
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\3\ Pursuant to a teleconference with ICC's in-house counsel on
October 27, 2014, staff in the Division of Trading and Markets has
added this sentence to more completely describe the proposed textual
changes as a result of this proposed rule change.
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Section 17A(b)(3)(F) of the Act \4\ 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 and to comply with the provisions of the Act and the rules
and regulations thereunder. ICC believes that the proposed rule changes
are consistent with the requirements of the Act and the rules and
regulations thereunder applicable to ICC, in particular, to Section
17(A)(b)(3)(F),\5\ because ICC believes that the proposed rule changes
will assure the prompt and accurate clearance and settlement of
securities transactions, derivatives agreements, contracts, and
transactions, as the proposed revisions enhance ICC's price discovery
process, resulting in more consistent day-over-day end-of-day levels.
As such, the proposed changes are designed to promote the prompt and
accurate clearance and settlement of securities transactions,
derivatives agreements, contracts, and transactions within the meaning
of Section 17A(b)(3)(F) \6\ of the Act.
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\4\ 15 U.S.C. 78q-1(b)(3)(F).
\5\ Id.
\6\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition
ICC does not believe the proposed rule changes would have any
impact, or impose any burden, on competition. The enhancements to ICC's
price discovery process apply uniformly across all market participants.
Therefore, ICC does not believe the proposed rule changes impose any
burden on competition that is inappropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization'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
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
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 [email protected]. Please include
File Number SR-ICC-2014-17 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-2014-17. 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 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 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
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submissions should refer to File Number SR-ICC-2014-17 and should be
submitted on or before November 24, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26011 Filed 10-31-14; 8:45 am]
BILLING CODE 8011-01-P