Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to ICC's Clearing Participant Default Management Procedures & ICC Clearing Rules

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-103266; File No. SR-ICC-2025-010]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to ICC's Clearing Participant Default Management Procedures & ICC Clearing Rules</SUBJECT> <DATE>June 16, 2025.</DATE> Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act” or “Act”), <SU>1</SU> <FTREF/> and Rule 19b-4 thereunder, <SU>2</SU> <FTREF/> notice is hereby given that on June 3, 2025, ICE Clear Credit LLC (“ICC” or “ICE Clear Credit”) 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. <FTNT> <SU>1</SU>  15 U.S.C. 78s(b)(1). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.19b-4. </FTNT> <HD SOURCE="HD1">I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change</HD> The principal purpose of the proposed rule change is to revise the ICC Clearing Participant Default Management Procedures (the “Default Management Procedures”) and the ICC Clearing Rules (the “Rules”) related to ICC Clearing Participant (“CP”) default management. <SU>3</SU> <FTREF/> <FTNT> <SU>3</SU>  Capitalized terms used but not defined herein have the meanings specified in the Treasury Policy or, if not defined therein, the ICE Clear Credit Rules (the “Rules”). </FTNT> <HD SOURCE="HD1">II. Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> 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. <HD SOURCE="HD2">(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> <HD SOURCE="HD3">(a) Purpose</HD> ICC proposes to revise the Default Management Procedures and to make related changes to the Rules. The Default Management Procedures set forth ICC's default management process, including the actions taken by ICC to determine that a CP is in default of its obligations to ICC under the Rules, as well as the actions taken by ICC in connection with the close-out of the defaulting CP's portfolio. The proposed revisions (i) remove Direct Liquidation  <SU>4</SU> <FTREF/> transactions as both a hedging and liquidation mechanism, (ii) update ICC's position porting functionality and (iii) make general updates and clarifications, all as discussed herein. ICC believes such revisions will facilitate the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts, and transactions for which it is responsible. ICC proposes to make such changes effective following Commission approval of the proposed rule change. The proposed updates are described in detail as follows. <FTNT> <SU>4</SU>  Direct Liquidation is defined in Rule 20-605(d)(v), but in general means direct transactions with market participants. </FTNT> <HD SOURCE="HD3">I. Remove Direct Liquidation Transactions</HD> ICC proposes to eliminate references to Direct Liquidation in the Default Management Procedures as a hedging and liquidation mechanism in the context of managing a defaulting CP's portfolio. ICC believes that the use of Direct Liquidation transactions is no longer necessary or desirable, as such functionality is now fully available through ICC's Default Management System (“DMS”) through its hedge and liquidation auction capabilities. ICC proposes changes to reflect the removal of Direct Liquidation throughout the Default Management Procedures. As a result of the removal of Direct Liquidations as a hedging and liquidation mechanism, ICC proposes to remove “Direct Liquidation” as a defined term in Section 2. and as a Standard Default Management Action  <SU>5</SU> <FTREF/> in Section 3. ICC proposes to remove language from Section 6.5.2. that describes the operational set-up necessary to execute hedging and/or liquidation transactions directly with CP counterparties, as such operational set-up no longer will be necessary with the removal of Direct Liquidation transactions. Furthermore, ICC proposes to remove Direct Liquidation transactions from the list of items that the CDS Default Committee  <SU>6</SU> <FTREF/> may be consulted on in Section 7. Consultation on this matter will no longer be necessary given the removal of Direct Liquidation transactions. <FTNT> <SU>5</SU>  Rule 20-605(d) defines certain Standard Default Management Actions that ICC has the right to take in effecting the closing-out process. </FTNT> <FTNT> <SU>6</SU>  Rule 20-617(a) defines the CDS Default Committee, which is responsible for taking certain actions provided in the Rules and ICC procedures upon a CP default. </FTNT> ICC proposes to remove Direct Liquidation transactions in the context of liquidating a defaulting CP's portfolio from the Default Management Procedures by deleting Section 8.6. in its entirety. Current Section 8.6. describes the process and steps that ICC would follow should it determine to execute Direct Liquidation transactions to liquidate a defaulting CP's portfolio by way of bilateral transactions directly with counterparties. While the current Default Management Procedures include the option for Direct Liquidation transactions, current Section 8.6. notes that the preferred method of liquidating a defaulting CP's portfolio is by way of an auction (as described in current Section 8.5. of the Default Management Procedures). ICC believes that the automated liquidation auction capabilities of the DMS offer a more efficient and transparent approach to liquidating a defaulting CP's portfolio as compared to Direct Liquidation transactions. As a result, ICC believes that the DMS liquidation auction process has superseded the need for ICC to maintain the capability to directly execute bilateral Direct Liquidation transactions. ICC also proposes to remove direct execution of transactions in the context of hedging a defaulting CP's portfolio from the Default Management Procedures by removing Section 8.4. in its entirety. Current Section 8.4. describes the process and steps that ICC would follow should it determine to execute an Initial Cover Transaction  <SU>7</SU> <FTREF/> by way of bilateral transactions directly with counterparties. While the current Default Management Procedures include the option for the direct execution of Initial Cover Transactions, current Section 8.4. notes that the preferred method of executing Initial Cover Transactions is by way of an auction (as described in Section 8.3. of the Default Management Procedures). ICC believes that the automated hedge auction capabilities of the DMS offer a more efficient and transparent approach to hedging a defaulting CP's portfolio as compared to the direct execution of an Initial Cover Transaction. As a result, ICC believes that the DMS hedge auction process has superseded the need for ICC to maintain the capability to directly execute bilateral Initial Cover Transactions. ICC also proposes to remove a reference to executing Initial Cover Transactions with market participants in Section 7.3. that is no longer necessary given the removal of the option for the direct execution of Initial Cover Transactions. <FTNT> <SU>7</SU>  Initial Cover Transaction is defined in Rule 20-605(d)(i), but is generally understood to mean a hedging transaction. </FTNT> ICC proposes to make changes to the Rules analogous to the above-described changes to the Default Management Procedures to remove Direct Liquidation transactions as both a hedging and liquidation mechanism. ICC proposes to remove the definition of “Direct Liquidation” from Rule 102. Also, ICC proposes to remove Rule 20-605(d)(v)(ii) which covers the option to execute hedge or liquidation transactions by way of direct transactions with market participants. As a result of the proposed deletion of the option to execute hedge or liquidation transactions by way of direct transactions with market participants, ICC proposes to further revise Rule 20-605(d)(v) to indicate that hedge and liquidation transactions “shall” (instead of “may”) be entered into pursuant to Default Auctions  <SU>8</SU> <FTREF/> and, as with the proposed revisions, Default Auctions will be the only mechanism remaining for the execution of hedge and liquidation transactions. In addition, ICC proposes deleting references to Direct Liquidation from Rule 20-605(l), including with respect to entering into trades through Direct Liquidation and using resources to cover certain obligations from a Direct Liquidation. As a result of the above-described changes, certain sub-sections of Rules 20-605(d)(v) and 20-605(l) are proposed to be re-numbered or re-lettered as appropriate. <FTNT> <SU>8</SU>  Default Auctions are defined in Rule 102, but is generally understood to mean an auction conducted pursuant to the Default Auction Procedures. </FTNT> <HD SOURCE="HD3">II. Update ICC's Position Porting Functionality</HD> ICC proposes changes to the Default Management Procedures to describe ICC's updated position porting capabilities. As part of the post-default porting process, ICC shares with its Futures Commission Merchant/Broker Dealer CPs (“potential receiving CPs”) certain client portfolios cleared by the defaul ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 28k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━