ICE Clears Path for Swap Obligation Swaps
Published Date: 4/22/2025
Notice
Summary
ICE Clear Credit LLC is updating its rules to clearly explain how it picks and swaps out key contracts tied to credit default swaps (CDS). This change helps everyone understand the process better and keeps things running smoothly for companies and investors using these contracts. The new rules kick in soon and don’t affect costs but improve transparency and fairness.
Analyzed Economic Effects
4 provisions identified: 4 benefits, 0 costs, 0 mixed.
New Public Consultation And Objection Process
When ICC proposes an Original or Substitute Contract Reference Obligation, it will consult its Operations Working Group (OWG) and Trading Advisory Group (TAG), publish the proposal on its website, and invite objections by the Objection Date (submit by email). ICC must pause adoption until objections are addressed and may use steps like vendor contact, legal review, consulting the CDS Risk Committee, or asking the relevant Determinations Committee questions to resolve objections.
Calculation Agent Role Narrowed
New Rule 20-601 says that when ICC acts as Calculation Agent to identify a Substitute Reference Obligation after a Substitution Event, ICC must follow the functions and process set out in the newly adopted Procedures. That limits ICC's Calculation Agent role for these specific determinations to the Procedure steps.
Greater Clarity On Risks And Settlement
The Commission found the Procedures increase clarity and transparency about how ICC selects reference obligations and require ICC to consult with market participants, which helps participants identify and evaluate the risks, fees, and material costs of clearing CDS at ICC. The Commission also found these Procedures help promote prompt and accurate clearance and settlement of single-name CDS transactions.
Selection Criteria Now Written Down
ICC now puts in writing how it picks the specific debt obligation that a single-name CDS contract refers to. The Procedures list factors such as outstanding principal amount, remaining maturity, liquidity, and availability of public information and say ICC will start from the most liquid obligation identified by a commercial data vendor (the "Preferred" reference obligation).
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