[Federal Register Volume 80, Number 227 (Wednesday, November 25, 2015)]
[Notices]
[Pages 73852-73853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29927]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76479; File No. SR-ICC-2015-015]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Related to the ICC Rule Enforcement
Process for Missed Submissions
November 19, 2015.
I. Introduction
On September 30, 2015, ICE Clear Credit LLC (``ICC'') filed with
the Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'')\1\
and Rule 19b-4 thereunder,\2\ a proposed rule change (SR-ICC-2015-015)
to the ICC Clearing Rules (the ``Rules'') related to the ICC rule
enforcement process for Missed Submissions. The proposed rule change
was published for comment in the Federal Register on October 16,
2015.\3\ The Commission did not receive comments on 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\ Securities Exchange Act Release No. 34-76122 (Oct. 9, 2015),
80 FR 62593 (Oct. 16, 2015) (SR-ICC-2015-015).
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II. Description of the Proposed Rule Change
As part of ICC's end-of-day price discovery process, ICC Clearing
Participants (``CPs'') are required to submit end-of-day prices for
specific instruments related to their open interest at ICC, in
accordance with Rule 404(b) and ICC Procedures. Failure of a CP to
provide submissions required by ICC pursuant to Rule 404(b) and ICC
Procedures constitute a Missed Submission. In order to provide
incentive against Missed Submissions, ICC has adopted a summary
assessment approach described in Rule 702(e) and Schedule 702 of the
Rules.
Currently, under Rule 702(e)(ii)(2), a CP may be eligible for a
once-in-a-lifetime conditional waiver from such assessments if one or
more Missed Submissions are the first instance(s) of a Missed
Submission for the type of instrument (index or single name) and the CP
provides adequate explanation of the cause and plans for remedial
actions.
Given the increased automation of price submissions, ICC recognizes
that there may be circumstances, due to technological failures, which
may result in Missed Submissions. ICC also notes that, due to the
significant length of time since the inception of the end-of-day
process, many CPs have utilized their once-in-a-lifetime waiver. As
such, ICC believes it is reasonable to provide, under limited
circumstances, a conditional once-a-year waiver for such Missed
Submissions caused by technical failures, as described below. ICC
believes that such Rule changes will not affect the integrity and
effectiveness of the end-of-day price discovery process. ICC believes
such Rule changes provide a valuable and practical balance between the
technicalities of the price discovery process and appropriate
penalization for Missed Submissions.
The proposed Rule text provides for the replacement of ICC's
current once-in-a-lifetime waiver for Missed Submissions with a
conditional once-a-year waiver for Missed Submissions caused by
technical failures. Under revised Rule 702(e)(ii)(2), a CP would be
eligible for one waiver per year for single name Missed Submissions,
and one waiver per year for index Missed Submissions. A CP may request
such wavier(s) be applied against all Missed Submissions for a given
instrument class on a given day. CPs would be required to provide
documentation with a waiver request, explaining that the root-cause of
the Missed Submission was a technology issue and including a
remediation plan to fix the cause of the Missed Submission. ICC states
that it would review and evaluate the waiver request and accept unless
it had legitimate concerns that the root-cause of the Missed Submission
had not been adequately identified, was not due to a technical issue,
and/or would not be corrected by the provided remediation plan. ICC
would maintain its current ability to provide waivers for Missed
Submissions deemed to be due to extraordinary circumstances outside of
a CP's control, as set forth in Rule 702(e)(ii)(3). Pending regulatory
approval, ICC plans to implement these changes on January 1, 2016, and
apply the once-a-year waiver to the 2016 calendar year, and each
calendar year going forward. ICC represents that there are no changes
to ICC policies and procedures as a result of the Rule changes.
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 the 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. Section
17A(b)(3)(G) of the Act \6\ requires that rules the of the clearing
agency provide that its participants shall be appropriately disciplined
for violation of any provision of the rules of the clearing agency,
including through the use of fines or any other fitting sanctions.
Furthermore, Section 17A(b)(3)(H) of the Act \7\ requires, among other
things, that rules the of the clearing agency, in general, provide a
fair procedure with respect to the disciplining of participants.
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\4\ 15 U.S.C. 78s(b)(2)(C).
\5\ 15 U.S.C. 78q-1(b)(3)(F).
\6\ 15 U.S.C. 78q-1(b)(3)(G).
\7\ 15 U.S.C. 78q-1(b)(3)(H).
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The Commission finds that the proposed rule change is consistent
with the requirements of Section 17A of the Act \8\ and the rules and
regulations thereunder applicable to ICC. The proposed rule change
would replace ICC's current once-in-a-lifetime waiver for Missed
Submissions, which has already been utilized by many of ICC's CPs, with
a conditional once-a-year waiver for Missed Submissions (one waiver
each for single name and index Missed Submissions) caused by technical
failures. The proposed rule change also provides details surrounding
the process by which CPs can request such conditional waivers and ICC's
review and evaluation of each request. The Commission believes that
allowing for a once-per-year waiver for technical failures causing
Missed Submissions is appropriate given the increased automation of
end-of-day price submissions and is reasonably designed to maintain the
integrity of ICC's end-of-day pricing process, thereby promoting the
prompt and accurate clearance and settlement of securities transactions
and, to the extent applicable, derivative agreements, contracts, and
transactions in accordance with Section 17A(b)(3)(F) of the Act.\9\
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\8\ 15 U.S.C. 78q-1.
\9\ 15 U.S.C. 78q-1(b)(3)(F).
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Additionally, the Commission believes that allowing for a once-per-
year conditional waiver for technical failures in the summary
assessment process for Missed Submissions is designed to ensure that
CPs are
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appropriately disciplined for violations of ICC's rules consistent with
Section 17A(b)(3)(G) of the Act.\10\ The Commission also finds that the
proposed process for the requesting and review of the conditional
waivers is reasonably designed to provide for a fair procedure with
respect to the disciplining of CPs for Missed Submissions in accordance
with Section 17A(b)(3)(H) of the Act.\11\
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\10\ 15 U.S.C. 78q-1(b)(3)(G).
\11\ 15 U.S.C. 78q-1(b)(3)(H).
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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 \12\ and the
rules and regulations thereunder.
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\12\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change (File No. SR-ICC-2015-015) be,
and hereby is, approved.\14\
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\13\ 15 U.S.C. 78s(b)(2).
\14\ 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.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-29927 Filed 11-24-15; 8:45 am]
BILLING CODE 8011-01-P