[Federal Register Volume 82, Number 110 (Friday, June 9, 2017)]
[Notices]
[Pages 26824-26825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11963]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80858; File No. SR-ICC-2017-003]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Amendment No. 1 and Order Approving Proposed Rule Change, as
Modified by Amendment No. 1 Thereto, Relating to ICC's End-of-Day Price
Discovery Policies and Procedures
June 5, 2017.
I. Introduction
On February 16, 2017, ICE Clear Credit LLC (``ICC'' or ``ICE Clear
Credit'') 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-2017-003) to amend ICC's End-of-Day Price
Discovery Policies and Procedures (``Pricing Policy'') to implement a
new price submission process for Clearing Participants (``CPs''). The
proposed rule change was published for comment in the Federal Register
on March 9, 2017.\3\ The Commission did not receive comments regarding
the proposed changes. On April 21, 2017, the Commission extended the
period in which to approve, disapprove, or institute proceedings to
determine whether to disapprove the proposed rule change to June 7,
2017.\4\ On May 25, 2017, ICC filed Amendment No. 1 to the proposal.\5\
For the reasons discussed below, the Commission is approving the
proposed rule changes, as modified by Amendment No. 1.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 34-80150 (March 3,
2017), 82 FR 13173 (March 9, 2017) (SR-ICC-2017-003) (``Notice'').
\4\ Securities Exchange Act Release No. 34-80506 (April 21,
2017), 82 FR 19412 (April 27, 2017).
\5\ ICE Clear Credit filed Amendment No. 1 to clarify that the
implementation date for the proposed rule change will be July 10,
2017, and to note that ICE Clear Credit will issue a circular
confirming this timeline in advance of the July 10, 2017
implementation date. Because Amendment No. 1 is a clarifying
amendment that does not alter the substance of the propose rule
change the Commission is not publishing it for comment.
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II. Description of the Proposed Rule Change
ICC has proposed changes to its Pricing Policy that are designed to
implement a new price submission process. As part of its current price
submission process, ICC requires CPs to submit certain required price
information to an intermediary, which ICC then obtains and uses as part
of its
[[Page 26825]]
price discovery process. The proposed rule changes would eliminate the
use of the intermediary in the price submission process and instead
require CPs to submit required price information directly to ICC. In
order to implement the direct price submission process, ICC proposed to
amend its Pricing Policy to (1) require CPs establish direct
connectivity with ICC and use a FIX API to provide ICC with the
required price information, (2) add references to FIX API terminology,
and (3) make revisions reflecting the replacement of existing trade
date files with FIX API firm trade messages.\6\ Moreover, ICC proposed
amending the Pricing Policy to note that ICC will send FIX API messages
directly to CPs, and removed references to the intermediary and its
``Valuation Service API'' previously used.\7\ Although ICC proposed
additional minor changes to the timing of various steps in the pricing
process, these proposed changes would not affect the actual settlement
submission windows.\8\
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\6\ Notice, 82 FR at 13173-74.
\7\ Notice, 82 FR at 13173.
\8\ Notice, 82 FR at 13174.
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In addition to the changes described above, ICC also proposed
changes with respect to the format of information required to be
submitted by CPs for the iTraxx Australia and iTraxx Asia Ex-Japan
Indices, as well as the CDX.NA.HY and CDS.EM indices. ICC also proposed
modifications to the process for distributing end-of-day prices, which
will result in ICC publishing to CPs separate messages setting forth
end-of-day price information for single name and index CDS.\9\
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\9\ Id.
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III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act directs the Commission to approve a
propose rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\10\ Section 17A(b)(3)(F) of the Act requires, among other
things, that the rules of a registered 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.\11\ Rule 17Ad-22(d)(4) requires, in
relevant part, that a registered clearing agency shall establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to identify sources of operational risk and
minimize them through the development of appropriate systems, controls,
and procedures; implement systems that are reliable, resilient and
secure, and have adequate, scalable capacity.\12\
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\10\ 15 U.S.C. 78s(b)(2)(C).
\11\ 15 U.S.C. 78q-1(b)(3)(F).
\12\ 17 CFR 240.17Ad-22(d)(4).
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The Commission finds that the proposed rule change, which modifies
ICC's Pricing Policy to implement a direct price submission process for
CPs, is consistent with Section 17A of the Act and Rule 17Ad-22
thereunder. The proposed rule change is consistent with the
requirements of Section 17A(b)(3)(F) that the rules of a registered
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. By
reducing operational risk the proposed rule changes reduce the
likelihood that ICC will be unable to complete its end-of-day price
discovery process. Completion of the end-of-day price discovery process
is a necessary and essential element in ICC's clearance and settlement
processes. The Commission believes that the proposed changes should
enhance ICC's ability to complete the necessary pricing process
effectively and thereby promote the prompt and accurate clearance and
settlement of derivative agreements, contracts and transactions
consistent with Section 17A(b)(3)(F).
For similar reasons, the proposed rule changes are also consistent
with Rule 17Ad-22(d)(4) in that they are designed to reduce operational
risk outside of ICC's control.\13\ The proposed rule changes are
intended to reduce ICC's external operational risk by allowing ICC to
control the price submission process through the implementation of
systems designed to provide for direct connection and communication
with CPs instead of relying on an intermediary to collect price
information needed for ICC's price discovery process. As a result,
because ICC will be able to reduce its reliance on intermediaries and
thereby reduce operational risk that is outside of its control, the
proposed rule changes are consistent with the requirements of Rule
17Ad-22(d)(4).
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\13\ Id.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
that the proposed rule change (SR-ICC-2017-003), as amended by
Amendment No. 1, be, and hereby is, approved.\14\
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\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).
\15\ 17 CFR 200.30-3(a)(12).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-11963 Filed 6-8-17; 8:45 am]
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