[Federal Register Volume 79, Number 239 (Friday, December 12, 2014)]
[Notices]
[Pages 73924-73925]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-29181]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73790; File No. SR-ICC-2014-17]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Granting Approval of Proposed Rule Change To Revise ICC End-of-Day
Price Discovery Policies and Procedures
December 8, 2014.
I. Introduction
On October 17, 2014, ICE Clear Credit LLC (``ICC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change SR-ICC-2014-17 pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The
proposed rule change was published for comment in the Federal Register
on November 3, 2014.\3\ The Commission received no comment letters
regarding the proposed change. For the reasons discussed below, the
Commission is granting approval of the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 34-73451 (Oct. 28,
2014), 79 FR 65280 (Nov. 3, 2014) (SR-ICC-2014-17).
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II. Description of the Proposed Rule Change
ICC is proposing this change to revise the ICC End-of-Day Price
Discovery Policies and Procedures to incorporate enhancements to its
price discovery
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process. This revision does not require any changes to the ICC Clearing
Rules.
According to ICC, it utilizes a ``cross and lock'' algorithm as
part of its price discovery process. As described by ICC, under this
algorithm, bids and offers derived from Clearing Participant (``CP'')
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, as stated by ICC, the final end-of-day level (with
additional steps taken to remove off-market submissions from
influencing the final level). According to ICC, 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. ICC states that 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). ICC states that, 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.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act \4\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if the
Commission finds that such proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to such self-regulatory organization. Section 17A(b)(3)(F)
of the Act \5\ requires, among other things, that the rules of a
clearing agency are 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.
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\4\ 15 U.S.C. 78s(b)(2)(C).
\5\ 15 U.S.C. 78q-1(b)(3)(F).
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The Commission finds that the proposed rule change is consistent
with Section 17A of the Act \6\ and the rules thereunder applicable to
ICC. The revised ICC End-of-Day Price Discovery Policies and Procedures
will reduce the sensitivity of the final price level to a single
Clearing Participant's submission, resulting in more consistent day-
over-day end-of-day levels. The proposed rule change is therefore
reasonably expected to provide a pricing methodology to more accurately
reflect the market level. As such, the Commission believes that the
changes will promote the prompt and accurate settlement of securities
and derivatives transactions, and therefore are consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to ICC, in particular, Section 17(A)(b)(3)(F).
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\6\ 15 U.S.C. 78q-1.
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A of the Act \7\ and the
rules and regulations thereunder.
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\7\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (File No. SR-ICC-2014-17) be, and
hereby is, approved.\9\
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\8\ 15 U.S.C. 78s(b)(2).
\9\ 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.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29181 Filed 12-11-14; 8:45 am]
BILLING CODE 8011-01-P