80 FR 17537 - Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change Relating to Additional European Sovereign CDS Contracts

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 62 (April 1, 2015)

[Federal Register Volume 80, Number 62 (Wednesday, April 1, 2015)]
[Notices]
[Pages 17537-17538]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-07362]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74588; File No. SR-ICEEU-2015-004]


Self-Regulatory Organizations; ICE Clear Europe Limited; Order 
Approving Proposed Rule Change Relating to Additional European 
Sovereign CDS Contracts

March 26, 2015.

I. Introduction

    On January 27, 2015, ICE Clear Europe Limited (``ICE Clear 
Europe'') 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 to provide for the clearance of additional 
European sovereign credit default swap (``CDS'') contracts. The 
proposed rule change was published for comment in the Federal Register 
on February 11, 2015.\3\ The Commission did not receive comments on the 
proposed rule change. This order approves 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. 34-74213 (February 5, 
2015), 80 FR 7661 (February 11, 2015) (SR-ICEEU-2015-004).
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II. Description of the Proposed Rule Change

    The purpose of the proposed rule change is to provide for the 
clearing of Western European sovereign CDS contracts referencing four 
additional reference entities: The Kingdom of the Netherlands, the 
Republic of Finland, the Kingdom of Sweden and the Kingdom of Denmark 
(the ``Additional WE Sovereign Contracts''). ICE Clear Europe currently 
clears CDS contracts referencing six other Western European sovereigns: 
Ireland, the Republic of Italy, the Portuguese Republic, the Kingdom of 
Spain, the Kingdom of Belgium and the Republic of Austria.\4\ ICE Clear 
Europe believes clearance of the Additional WE Sovereign Contracts will 
benefit the markets for credit default swaps on Western European 
sovereigns by offering to market participants the benefits of clearing, 
including reduction in counterparty risk and safeguarding of margin 
assets pursuant to clearing house rules.
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    \4\ See Securities Exchange Act Release No. 34-71920 (April 9, 
2014), 79 FR 21331 (April 15, 2015) (SR-ICEEU-2014-04) (order 
approving proposed rule change to clear Western European sovereign 
CDS contracts referencing Ireland, the Republic of Italy, the 
Portuguese Republic and the Kingdom of Spain) and Securities 
Exchange Act Release No. 34-73737 (December 4, 2014), 79 FR 73372 
(December 10, 2014) (SR-ICEEU-2014-18) (order approving proposed 
rule change to clear additional Western European sovereign CDS 
contracts referencing Kingdom of Belgium and the Republic of 
Austria) (collectively, the ``Prior WE Sovereigns Orders'').
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    ICE Clear Europe has stated that the Additional WE Sovereign 
Contracts will constitute ``Non-STEC Single Name Contracts'' for 
purposes of the CDS Procedures and, accordingly, will be governed by 
Paragraph 10 of the CDS Procedures consistent with the treatment of the 
other Western European sovereign CDS contracts currently cleared by ICE 
Clear Europe. ICE Clear Europe has represented that clearing of the 
Additional WE Sovereign Contracts will not require any changes to ICE 
Clear Europe's existing Clearing Rules and Procedures, risk management 
framework (including relevant policies), or margin model.\5\
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    \5\ For a description of previously approved changes to ICE 
Clear Europe's risk management framework to accommodate clearing of 
Western European sovereign CDS contracts, see the Prior WE 
Sovereigns Orders. Id. ICE Clear Europe represents that it has 
performed a variety of empirical analyses related to clearing of the 
Additional WE Sovereign Contracts under its margin methodology, 
including back tests and stress tests.
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III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \6\ directs the Commission to 
approve a proposed 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. Section 17A(b)(3)(F) of the Act \7\ 
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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    \6\ 15 U.S.C. 78s(b)(2)(C).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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    After careful review, the Commission finds that the proposed rule 
change is consistent with Section 17A of the Act \8\ and the rules 
thereunder applicable to ICE Clear Europe. The proposed rule change 
will provide for clearing of the Additional WE Sovereign Contracts, 
which are similar to the other Western European sovereign CDS contracts 
currently cleared by ICE Clear Europe, in accordance with the existing 
rules and procedures applicable to Western European sovereign CDS 
contracts. Specifically, the Commission believes that ICE Clear 
Europe's proposal to clear the Additional WE Sovereign Contracts 
pursuant to its current risk management framework (including margin and 
guaranty fund methodology), operational procedures, settlement 
procedures and default management policies is designed to promote the 
prompt and accurate clearance and settlement of securities 
transactions, to assure the safeguarding of securities and funds which 
are in the custody or control of ICE Clear Europe or for which it is 
responsible, and in general, to protect investors and the public 
interest, consistent 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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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 \10\ and the 
rules and regulations thereunder.
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    \10\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the

[[Page 17538]]

proposed rule change (SR-ICEEU-2015-004) be, and hereby is, 
approved.\12\
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    \11\ 15 U.S.C. 78s(b)(2).
    \12\ 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.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-07362 Filed 3-31-15; 8:45 am]
 BILLING CODE 8011-01-P