80 FR 63269 - Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to Credit Default Swap Risk Policies

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 201 (October 19, 2015)

Page Range		63269-63272
FR Document		2015-26423
Federal Register, Volume 80 Issue 201 (Monday, October 19, 2015)
[Federal Register Volume 80, Number 201 (Monday, October 19, 2015)]
[Notices]
[Pages 63269-63272]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-26423]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76136; File No. SR-ICEEU-2015-010]


Self-Regulatory Organizations; ICE Clear Europe Limited; Order 
Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, 
Relating to Credit Default Swap Risk Policies

October 13, 2015.

I. Introduction

    On June 25, 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 
amend certain of its credit default swap (``CDS'') risk policies (the 
``Risk Policy Amendments'') in order to enhance its current risk model 
(SR-ICEEU-2015-010). The proposed rule change was published for comment 
in the Federal Register on July 16, 2015.\3\ On July 21, 2015, ICE 
Clear Europe filed Amendment No. 1 to the proposed rule change solely 
to reflect the formal approval of the Risk Policy Amendments by the ICE 
Clear Europe Board.\4\ ICE Clear Europe consented to an extension of 
the time period in which the Commission shall approve, disapprove, or 
institute proceedings to determine whether to disapprove the proposed 
rule change to October 14, 2015. The Commission received no comment 
letters regarding the proposed change. For the reasons discussed below, 
the Commission is approving the proposed rule change, 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. 34-75426 (July 10, 
2015), 80 FR 42146 (July 16, 2015) (SR-ICEEU-2015-010).
    \4\ In its filing on June 25, 2015, ICE Clear Europe represented 
that the Risk Policy Amendments would be approved by the ICE Clear 
Europe Board before implementation. ICE Clear Europe subsequently 
filed Amendment No. 1 to state that the ICE Clear Europe Board 
approved the Risk Policy Amendments on July 8, 2015. Amendment No. 1 
is not subject to notice and comment because it is a technical 
amendment that does not alter the substance of the proposed rule 
change or raise any novel regulatory issues.
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II. Description of the Proposed Rule Change

    ICE Clear Europe has proposed amending certain risk policies 
relating to the CDS product category to incorporate enhancements to the 
existing CDS risk model. The relevant policies to be modified are the 
CDS Risk Policy (``CDS Risk Policy'') and the CDS Risk Model 
Description (``Risk Model Description''). ICE Clear Europe did not 
propose to make any changes to its Clearing Rules or Procedures in 
connection with these amendments.
    ICE Clear Europe has proposed to, among other matters, (i) modify 
the credit spread response component of the risk model to devolatilize 
returns, (ii) enhance the portfolio spread response component of the 
risk model to limit procyclicality, (iii) establish a new framework for 
recovery rate sensitivity requirement (``RRSR'') parameters, (iv) 
modify the CDS Guaranty Fund allocation methodology, (v) modify index 
liquidity and concentration charges and (vi) revise procedures for 
intraday margin calls. The Risk Policy Amendments would also include 
certain other clarifications and conforming changes.
    The following is a summary of the principal changes to be made by 
the Risk Policy Amendments:
    Devolatilization of Credit Spread Response. Under the revised Risk 
Model Description, the credit spread response component of the margin 
model would be revised to provide that the tail estimation of the 
relevant fitted returns distribution is based on devolatilized returns. 
ICE Clear Europe has represented that the use of devolatilized returns 
in this manner facilitates the comparison of returns for periods with 
different volatilities.
    Procyclicality of Portfolio Spread Response. In order to limit 
procyclicality of the spread response component of the model, ICE Clear 
Europe has proposed to modify the CDS Risk Policy and Risk Model 
Description to use an additional portfolio analysis that features price 
changes observed during and immediately after the Lehman Brothers 
default. According to ICE Clear Europe, the analysis considers price 
scenarios derived from the greatest price decrease and increase during 
and immediately after the Lehman Brothers default. ICE Clear Europe has 
designed these scenarios to capture the default of a major participant 
in the credit market and the market response to the event. ICE Clear 
Europe has defined the introduced scenarios in price terms to maintain 
the stress severity during periods of low credit spread levels (high 
price) when the spread response requirements, computed under the 
current framework, are expected to be lower. Furthermore, ICE Clear 
Europe has also incorporated the Lehman default price scenarios into 
the

[[Page 63270]]

calculation of CDS Guaranty Fund requirements.\5\
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    \5\ ICE Clear Europe has represented that this enhancement also 
addresses a regulatory requirement in Article 30 of the Regulatory 
Technical Standards implementing the European Market Infrastructure 
Regulations (``EMIR''). Commission Delegated Regulation (EU) No. 
153/2013 of 19 December 2012 Supplementing Regulation (EU) No. 648/
2012 of the European Parliament and of the Council with regard to 
Regulatory Technical Standards on Requirements for Central 
Counterparties (the ``Regulatory Technical Standards'').
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    Recovery Rate Sensitivity Requirements. ICE Clear Europe has 
proposed to revise the Risk Model Description to incorporate a more 
sensitive parameter estimation approach for the RRSR computation. The 
RRSR factor is designed to capture the risk of fluctuations in market 
expected recovery rates under CDS transactions. Under the current 
model, the RRSR is determined using fixed minimum and maximum recovery 
rate stress scenarios based on sector levels. In calculating the RRSR, 
all instruments belonging to a risk factor (``RF'') or risk sub-factor 
(``RSF'') are subjected to recovery rate stress scenarios to obtain 
resulting profit/loss responses, and the worst scenario response is 
chosen for the estimation of the RRSR. (In addition, these same 
recovery rate stress scenarios are used in determination of jump-to-
default requirements.)
    ICE Clear Europe has proposed separating the recovery rate stress 
levels for these two computations in order to introduce more dynamic 
and appropriate estimations of the recovery rate stress levels for RRSR 
purposes. Under the revised framework, the recovery rate levels for 
RRSR purposes will be determined using a 5-day, 99% confidence interval 
expected shortfall risk measure assuming a distribution of recovery 
rate fluctuations. The proposal will also eliminate index RRSR, as 
index recovery rates are assumed under relevant market convention and 
are thus not subject to market uncertainty. ICE Clear Europe represents 
that the dynamic feature of the revised stress level estimations is 
achieved by analyzing historical time series of recovery rates in order 
to calibrate a statistical model with a time varying volatility. In ICE 
Clear Europe's view, the proposed enhancements provide a robust and 
quantitative driven approach for establishing the recovery rate stress 
scenarios.
    Modifications to Guaranty Fund Methodology. ICE Clear Europe has 
proposed certain clarifications and enhancements to its CDS Guaranty 
Fund methodology. The Risk Model Description will be revised to clarify 
that the CDS Guaranty Fund size is calculated to cover losses 
associated with the default of the two Clearing Members and their 
affiliates that create the greatest cumulative uncollateralized loss 
under extreme but plausible scenarios. Certain other clarifications 
will be made in the calculation of the various components of the 
overall CDS Guaranty Fund requirement.
    ICE Clear Europe has also proposed to modify the procedure for 
allocating CDS Guaranty Fund requirements among the CDS Clearing 
Members. Under the existing model, CDS Guaranty Fund allocations 
reflect a risk ``silo'' approach, in which a Clearing Member's 
contribution reflects its uncollateralized exposure for each CDS 
Guaranty Fund component or ``silo''. Under the current approach, 
allocations can significantly fluctuate in response to position changes 
in the portfolios of the Clearing Members that drive the CDS Guaranty 
Fund size, and in response to the distribution of the total CDS 
Guaranty Fund size across all ``silos''. ICE Clear Europe has proposed 
modifying the methodology, so that the allocations are based on the 
Clearing Members' total unconditional uncollateralized losses in the 
CDS product category.\6\ ICE Clear Europe represents that under the 
proposed approach, the allocations are independent of the distribution 
of the uncollateralized losses across the ``silos''. In ICE Clear 
Europe's view, the new allocation methodology reflects an improved and 
more stable approach which allows for easier attributions of 
contributions to individual CDS Clearing Member or client portfolios.
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    \6\ ICE Clear Europe has represented that the existing specific 
wrong way risk component of the CDS Guaranty Fund calculation is 
maintained.
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    ICE Clear Europe has also proposed revising the CDS Risk Policy's 
discussion of the initial CDS Guaranty Fund contribution to be 
consistent with the requirements of the Finance Procedures.
    Index Liquidity and Concentration Charges. ICE Clear Europe has 
proposed to modify the liquidity charge calculation in the margin model 
as it applies to index CDS positions. (The existing liquidity charge 
calculation for single-name CDS will remain unchanged.) ICE Clear 
Europe represents that the revised approach will address calculation of 
liquidity charges where index CDS is traded under either price or 
spread terms, and will calculate a separate liquidity charge for 
positions in each series of the relevant index. ICE Clear Europe also 
represents that the revised approach limits the reduction in liquidity 
charge for offsetting positions across different series of the same 
index family, by applying the greater of the liquidity charge 
applicable to the long and short positions in the relevant portfolio in 
the same index family. According to ICE Clear Europe, under the revised 
methodology, the reduction in liquidity charge is greatest across 
positions in the ``on-the-run'' (current) index and first (most recent) 
``off-the-run'' indices, with a higher reduction during the period 
immediately following the index roll (when the two indices are treated 
as effectively the same index) and a lower reduction over time as the 
liquidity of contracts in the two series diverge.
    ICE Clear Europe has proposed to modify the concentration charge 
calculation for index CDS positions. (Again, the existing approach for 
single-name CDS will not change.) ICE Clear Europe represents that the 
revised framework provides for calculation of series-specific 
concentration charges, based on the direction of the 5-year equivalent 
notional amount or the net notional amount of positions in the 
particular series and a series threshold limit (above which the 
concentration charge is imposed). According to ICE Clear Europe, series 
threshold limits are expected to be higher for the on-the-run and the 
first off-the-run index series, and are determined based on a formula 
comparing the open interest in the series to the on-the-run open 
interest.
    Intraday Margin Calls. ICE Clear Europe has proposed certain 
amendments to the intra-day risk monitoring and special margin call 
processes. Under ICE Clear Europe's proposal, intra-day margin calls 
will be made based on an ``Intraday Risk Limit.'' The Intraday Risk 
Limit will be set at the Clearing Member level and is calculated based 
on 40% of the total initial margin requirements (across all account 
classes), with a minimum amount of EUR 15 million and a maximum of EUR 
100 million. Intra-day margin calls will be made on the following 
basis: (i) Where there has been a 50% erosion of the Intraday Risk 
Limit, the Risk Department will investigate what is driving the 
shortfall and monitor the CDS Clearing Member, (ii) where the erosion 
of the Intraday Risk Limit exceeds 50%, the Risk Department will inform 
the CDS Clearing Member that its initial margin may cease to be 
sufficient and that it may be subject to an intraday margin call, and 
(iii) where there has been a 100% erosion of the Intraday Risk Limit, 
the Risk Department will issue an intraday margin call to the CDS 
Clearing Member (and will also contact it by telephone and/or email) 
for a sum

[[Page 63271]]

sufficient to reduce the level of Intraday Risk Limit erosion back to 
0%. The member intraday shortfall is the sum of intraday shortfalls at 
the account level (i.e. house and client accounts), and the account 
level shortfall represents the unrealized profit and loss from the 
aggregate change in the Mark-to-Market Margin and Initial Margin.
    Governance. ICE Clear Europe has proposed revising the CDS Risk 
Policy to address in further detail management and governance oversight 
in a new Management and Governance Oversight section. The new section 
will provide that the CDS Director of Risk is responsible for ensuring 
that the CDS Risk Policy remains up-to-date and is reviewed in 
accordance with certain guidelines. The Risk Working Group (``RWG'') 
and Trading Advisory Committee (``TAC'') will provide on-going 
consultation and support with respect to the CDS Risk Policy. The 
composition of the RWG and the TAC will include both ICE Clear Europe 
Management and Clearing Member representatives, mainly from risk, 
trading and compliance areas.
    Under ICE Clear Europe's proposal, changes to the CDS Risk Policy 
will be subject to initial approval by the Director of Risk and may be 
determined in consultation with the RWG and/or the TAC. Any changes 
that affect the risk profile of ICE Clear Europe will be subject to 
Board approval on the advice and support of the CDS Risk Committee and 
the Board Risk Committee. In addition, the CDS Risk Policy will be 
subject to at least an annual routine approval by the Board, after 
consultation with the CDS Risk Committee and the Board Risk Committee. 
CDS risk model performance testing will be subject to review by the 
Director of Risk and reported to the CDS Risk Committee and the Board 
Risk Committee.
    Additional Changes. ICE Clear Europe has proposed certain other 
clarifications and enhancements in the Risk Policy Amendments. Certain 
clarifications will be made in the CDS Risk Policy with respect to 
wrong way risk requirements. The policy will also be revised to clarify 
that the currency specific initial margin requirements must cover at 
least the specific and general wrong way risk components of the initial 
margin requirement for the relevant currency. ICE Clear Europe has also 
revised the CDS Risk Policy to incorporate (without change) from the 
its existing CDS clearing membership policy the capital-to-margin ratio 
limit (which requires that certain remedial actions be taken if the 
margin requirement for a Clearing Member's CDS positions would exceed 
three times the Clearing Member's capital as set forth on its balance 
sheet). The description of the Clearing House's Monte Carlo model will 
be revised to clarify that model parameters used are the same as those 
used in the credit spread model. Various other defined terms and 
certain obsolete references will be updated throughout the CDS Risk 
Policy and Risk Model Description.

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \7\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if the 
Commission finds that such 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 \8\ 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 and, in 
general, to protect investors and the public interest.
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    \7\ 15 U.S.C. 78s(b)(2)(C).
    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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    The Commission finds that the proposed rule change, as modified by 
Amendment No. 1, is consistent with Section 17A of the Act \9\ and the 
rules thereunder applicable to ICE Clear Europe, including the 
requirements of Rule 17Ad-22.\10\ The Commission believes that using 
devolatilized returns should enhance the credit spread response 
component of the margin model by enabling comparison of returns for 
periods with different volatilities. The Commission also believes that 
the proposed framework for establishing RRSR parameters would use a 
more robust and quantitative driven approach for establishing the RR 
stress scenarios, resulting in more dynamic and appropriate estimations 
of the RR stress levels for RRSR purposes. Additionally, the Commission 
finds that the incorporation of the Lehman Brothers default price 
scenarios into the computation of the spread response requirements 
enhances the anti-procyclical feature of ICE Clear Europe's risk 
methodology.
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    \9\ 15 U.S.C. 78q-1.
    \10\ 17 CFR 240.17Ad-22.
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    The Commission further finds that the proposed modifications to the 
CDS Guaranty Fund allocation methodology to reflect the Clearing 
Member's total uncollateralized losses across all Guaranty Fund 
components regardless of the fluctuation of the Clearing Member's 
uncollateralized losses with respect to each Guaranty Fund component 
should result in more stable attributions of GF contributions to 
individual Clearing Member or portfolios. The Commission also believes 
that the proposed rule change to establish series-specific index 
liquidity and concentration charges should generally apply a more 
conservative approach to these margin components. Additionally, the 
Commission believes that the proposed rule change to intraday margin 
calls, in conjunction with ICE Clear Europe's existing risk policies 
and other proposed changes to the risk methodology, is reasonably 
designed to allow ICE Clear Europe to collect sufficient margin to meet 
its requirements and obligations, including under scenarios where it 
may have to call for margin on an intraday basis. The Commission also 
finds that the proposed rule change with respect to governance 
appropriately engages management and Clearing Member representatives in 
the oversight of the effectiveness ICE Clear Europe's risk management 
function. The Commission believes that the proposed additional changes 
are each designed to enhance ICE Clear Europe's risk management 
functions and more accurately reflect ICE Clear Europe's current 
practices. The new provisions in the CDS Risk Policy concerning (i) the 
responsibilities of the CDS Director of Risk to ensure that the CDS 
Risk Policy remains up to date and is reviewed in accordance with 
certain guidelines, to approve changes to the CDS Risk Policy, and to 
review and report to the CDS Risk Committee and the Board Risk 
Committee concerning CDS risk model performance testing; and (ii) the 
roles of the CDS Risk Committee and Board Risk Committee in providing 
advice on and approving, respectively, changes that affect the risk 
profile of ICE Clear Europe, improve the clarity of ICE Clear Europe's 
governance arrangements and promote the effectiveness of the clearing 
agency's risk management procedures, consistent with Rule 17Ad-
22(d)(8).
    The Commission therefore believes that the proposed rule change, as 
modified by Amendment No. 1, is designed to promote the prompt and 
accurate clearance and settlement of securities transactions and 
derivative agreements, contracts and transactions cleared by ICE Clear 
Europe and, in general, to protect investors and the public interest, 
consistent with Section

[[Page 63272]]

17A(b)(3)(F) of the Act \11\ and is reasonably designed to meet the 
margin, financial resource and governance requirements of Rules 17Ad-
22(b)(2), (b)(3) and (d)(8).\12\
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    \11\ 15 U.S.C. 78q-1(b)(3)(F).
    \12\ 17 CFR 240.17Ad(22)(b)(2), (b)(3) and (d)(8).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular with the requirements of Section 17A of the Act \13\ and 
the rules and regulations thereunder.
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    \13\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-ICEEU-2015-010), as modified 
by Amendment No. 1 thereto be, and hereby is, approved.\15\
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    \14\ 15 U.S.C. 78s(b)(2).
    \15\ In approving the proposed rule change, the Commission 
considered the proposed rule change'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.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26423 Filed 10-16-15; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 80, No. 201 / Monday, October 19, 2015 / Notices 63269

Electronic Comments SECURITIES AND EXCHANGE Risk Model Description (‘‘Risk Model
COMMISSION Description’’). ICE Clear Europe did not
• Use the Commission’s Internet propose to make any changes to its
comment form (http://www.sec.gov/ [Release No. 34–76136; File No. SR–ICEEU–
2015–010] Clearing Rules or Procedures in
rules/sro.shtml); or connection with these amendments.
• Send an email to rule-comments@ Self-Regulatory Organizations; ICE ICE Clear Europe has proposed to,
sec.gov. Please include File Number SR– Clear Europe Limited; Order Approving among other matters, (i) modify the
BX–2015–058 on the subject line. Proposed Rule Change, as Modified by credit spread response component of the
Amendment No. 1 Thereto, Relating to risk model to devolatilize returns, (ii)
Paper Comments Credit Default Swap Risk Policies enhance the portfolio spread response
• Send paper comments in triplicate October 13, 2015. component of the risk model to limit
to Brent J. Fields, Secretary, Securities procyclicality, (iii) establish a new
and Exchange Commission, 100 F Street I. Introduction framework for recovery rate sensitivity
NE., Washington, DC 20549–1090. On June 25, 2015, ICE Clear Europe requirement (‘‘RRSR’’) parameters, (iv)
Limited (‘‘ICE Clear Europe’’) filed with modify the CDS Guaranty Fund
All submissions should refer to File the Securities and Exchange
Number SR–BX–2015–058. This file allocation methodology, (v) modify
Commission (‘‘Commission’’), pursuant index liquidity and concentration
number should be included on the to Section 19(b)(1) of the Securities charges and (vi) revise procedures for
subject line if email is used. To help the Exchange Act of 1934 (‘‘Act’’) 1 and Rule intraday margin calls. The Risk Policy
Commission process and review your 19b–4 thereunder,2 a proposed rule Amendments would also include
comments more efficiently, please use change to amend certain of its credit certain other clarifications and
only one method. The Commission will default swap (‘‘CDS’’) risk policies (the
conforming changes.
post all comments on the Commission’s ‘‘Risk Policy Amendments’’) in order to
Internet Web site (http://www.sec.gov/ enhance its current risk model (SR– The following is a summary of the
rules/sro.shtml). Copies of the ICEEU–2015–010). The proposed rule principal changes to be made by the
submission, all subsequent change was published for comment in Risk Policy Amendments:
amendments, all written statements the Federal Register on July 16, 2015.3 Devolatilization of Credit Spread
with respect to the proposed rule On July 21, 2015, ICE Clear Europe filed Response. Under the revised Risk Model
change that are filed with the Amendment No. 1 to the proposed rule Description, the credit spread response
Commission, and all written change solely to reflect the formal component of the margin model would
communications relating to the approval of the Risk Policy be revised to provide that the tail
proposed rule change between the Amendments by the ICE Clear Europe estimation of the relevant fitted returns
Board.4 ICE Clear Europe consented to
Commission and any person, other than distribution is based on devolatilized
an extension of the time period in
those that may be withheld from the returns. ICE Clear Europe has
which the Commission shall approve,
public in accordance with the represented that the use of devolatilized
disapprove, or institute proceedings to
provisions of 5 U.S.C. 552, will be determine whether to disapprove the returns in this manner facilitates the
available for Web site viewing and proposed rule change to October 14, comparison of returns for periods with
printing in the Commission’s Public 2015. The Commission received no different volatilities.
Reference Room, 100 F Street NE., comment letters regarding the proposed Procyclicality of Portfolio Spread
Washington, DC 20549 on official change. For the reasons discussed Response. In order to limit
business days between the hours of below, the Commission is approving the procyclicality of the spread response
10:00 a.m. and 3:00 p.m. Copies of such proposed rule change, as modified by component of the model, ICE Clear
filing also will be available for Amendment No. 1. Europe has proposed to modify the CDS
inspection and copying at the principal II. Description of the Proposed Rule Risk Policy and Risk Model Description
office of the Exchange. All comments Change to use an additional portfolio analysis
received will be posted without change; that features price changes observed
the Commission does not edit personal ICE Clear Europe has proposed
during and immediately after the
identifying information from amending certain risk policies relating
Lehman Brothers default. According to
to the CDS product category to
submissions. You should submit only ICE Clear Europe, the analysis considers
incorporate enhancements to the
information that you wish to make price scenarios derived from the greatest
existing CDS risk model. The relevant
available publicly. All submissions policies to be modified are the CDS Risk price decrease and increase during and
should refer to File Number SR–BX– Policy (‘‘CDS Risk Policy’’) and the CDS immediately after the Lehman Brothers
2015–058, and should be submitted on default. ICE Clear Europe has designed
or before November 9, 2015. 1 15 U.S.C. 78s(b)(1). these scenarios to capture the default of
For the Commission, by the Division of
2 17 CFR 240.19b–4. a major participant in the credit market
Trading and Markets, pursuant to delegated
3 Securities Exchange Act Release No. 34–75426
and the market response to the event.
(July 10, 2015), 80 FR 42146 (July 16, 2015) (SR– ICE Clear Europe has defined the
authority.13 ICEEU–2015–010).
Robert W. Errett, introduced scenarios in price terms to
asabaliauskas on DSK5VPTVN1PROD with NOTICES

4 In its filing on June 25, 2015, ICE Clear Europe

represented that the Risk Policy Amendments maintain the stress severity during
Deputy Secretary.
would be approved by the ICE Clear Europe Board periods of low credit spread levels (high
[FR Doc. 2015–26424 Filed 10–16–15; 8:45 am] before implementation. ICE Clear Europe price) when the spread response
BILLING CODE 8011–01–P subsequently filed Amendment No. 1 to state that
the ICE Clear Europe Board approved the Risk requirements, computed under the
Policy Amendments on July 8, 2015. Amendment current framework, are expected to be
No. 1 is not subject to notice and comment because lower. Furthermore, ICE Clear Europe
it is a technical amendment that does not alter the
substance of the proposed rule change or raise any
has also incorporated the Lehman
13 17 CFR 200.30–3(a)(12). novel regulatory issues. default price scenarios into the

VerDate Sep<11>2014 17:52 Oct 16, 2015 Jkt 238001 PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 E:\FR\FM\19OCN1.SGM 19OCN1
63270 Federal Register / Vol. 80, No. 201 / Monday, October 19, 2015 / Notices

calculation of CDS Guaranty Fund that the CDS Guaranty Fund size is for offsetting positions across different
requirements.5 calculated to cover losses associated series of the same index family, by
Recovery Rate Sensitivity with the default of the two Clearing applying the greater of the liquidity
Requirements. ICE Clear Europe has Members and their affiliates that create charge applicable to the long and short
proposed to revise the Risk Model the greatest cumulative uncollateralized positions in the relevant portfolio in the
Description to incorporate a more loss under extreme but plausible same index family. According to ICE
sensitive parameter estimation approach scenarios. Certain other clarifications Clear Europe, under the revised
for the RRSR computation. The RRSR will be made in the calculation of the methodology, the reduction in liquidity
factor is designed to capture the risk of various components of the overall CDS charge is greatest across positions in the
fluctuations in market expected Guaranty Fund requirement. ‘‘on-the-run’’ (current) index and first
recovery rates under CDS transactions. ICE Clear Europe has also proposed to (most recent) ‘‘off-the-run’’ indices, with
Under the current model, the RRSR is modify the procedure for allocating CDS a higher reduction during the period
determined using fixed minimum and Guaranty Fund requirements among the immediately following the index roll
maximum recovery rate stress scenarios CDS Clearing Members. Under the (when the two indices are treated as
based on sector levels. In calculating the existing model, CDS Guaranty Fund effectively the same index) and a lower
RRSR, all instruments belonging to a allocations reflect a risk ‘‘silo’’ reduction over time as the liquidity of
risk factor (‘‘RF’’) or risk sub-factor approach, in which a Clearing Member’s contracts in the two series diverge.
(‘‘RSF’’) are subjected to recovery rate contribution reflects its uncollateralized ICE Clear Europe has proposed to
stress scenarios to obtain resulting exposure for each CDS Guaranty Fund modify the concentration charge
profit/loss responses, and the worst component or ‘‘silo’’. Under the current calculation for index CDS positions.
scenario response is chosen for the approach, allocations can significantly (Again, the existing approach for single-
estimation of the RRSR. (In addition, fluctuate in response to position name CDS will not change.) ICE Clear
these same recovery rate stress scenarios changes in the portfolios of the Clearing Europe represents that the revised
are used in determination of jump-to- Members that drive the CDS Guaranty framework provides for calculation of
default requirements.) Fund size, and in response to the series-specific concentration charges,
ICE Clear Europe has proposed distribution of the total CDS Guaranty based on the direction of the 5-year
separating the recovery rate stress levels Fund size across all ‘‘silos’’. ICE Clear equivalent notional amount or the net
for these two computations in order to Europe has proposed modifying the notional amount of positions in the
introduce more dynamic and methodology, so that the allocations are particular series and a series threshold
appropriate estimations of the recovery based on the Clearing Members’ total limit (above which the concentration
rate stress levels for RRSR purposes. unconditional uncollateralized losses in charge is imposed). According to ICE
Under the revised framework, the the CDS product category.6 ICE Clear Clear Europe, series threshold limits are
recovery rate levels for RRSR purposes Europe represents that under the expected to be higher for the on-the-run
will be determined using a 5-day, 99% proposed approach, the allocations are and the first off-the-run index series,
confidence interval expected shortfall independent of the distribution of the and are determined based on a formula
risk measure assuming a distribution of uncollateralized losses across the comparing the open interest in the
recovery rate fluctuations. The proposal ‘‘silos’’. In ICE Clear Europe’s view, the series to the on-the-run open interest.
will also eliminate index RRSR, as new allocation methodology reflects an Intraday Margin Calls. ICE Clear
index recovery rates are assumed under improved and more stable approach Europe has proposed certain
relevant market convention and are thus which allows for easier attributions of amendments to the intra-day risk
not subject to market uncertainty. ICE contributions to individual CDS monitoring and special margin call
Clear Europe represents that the Clearing Member or client portfolios. processes. Under ICE Clear Europe’s
dynamic feature of the revised stress ICE Clear Europe has also proposed proposal, intra-day margin calls will be
level estimations is achieved by revising the CDS Risk Policy’s made based on an ‘‘Intraday Risk
analyzing historical time series of discussion of the initial CDS Guaranty Limit.’’ The Intraday Risk Limit will be
recovery rates in order to calibrate a Fund contribution to be consistent with set at the Clearing Member level and is
statistical model with a time varying the requirements of the Finance calculated based on 40% of the total
volatility. In ICE Clear Europe’s view, Procedures. initial margin requirements (across all
the proposed enhancements provide a Index Liquidity and Concentration account classes), with a minimum
robust and quantitative driven approach Charges. ICE Clear Europe has proposed amount of EUR 15 million and a
for establishing the recovery rate stress to modify the liquidity charge maximum of EUR 100 million. Intra-day
scenarios. calculation in the margin model as it margin calls will be made on the
Modifications to Guaranty Fund applies to index CDS positions. (The following basis: (i) Where there has been
Methodology. ICE Clear Europe has existing liquidity charge calculation for a 50% erosion of the Intraday Risk
proposed certain clarifications and single-name CDS will remain Limit, the Risk Department will
enhancements to its CDS Guaranty Fund unchanged.) ICE Clear Europe investigate what is driving the shortfall
methodology. The Risk Model represents that the revised approach and monitor the CDS Clearing Member,
Description will be revised to clarify will address calculation of liquidity (ii) where the erosion of the Intraday
charges where index CDS is traded Risk Limit exceeds 50%, the Risk
5 ICE Clear Europe has represented that this
under either price or spread terms, and Department will inform the CDS
Clearing Member that its initial margin
asabaliauskas on DSK5VPTVN1PROD with NOTICES

enhancement also addresses a regulatory
requirement in Article 30 of the Regulatory will calculate a separate liquidity charge
for positions in each series of the may cease to be sufficient and that it
Technical Standards implementing the European
Market Infrastructure Regulations (‘‘EMIR’’). relevant index. ICE Clear Europe also may be subject to an intraday margin
Commission Delegated Regulation (EU) No. 153/ represents that the revised approach call, and (iii) where there has been a
2013 of 19 December 2012 Supplementing
limits the reduction in liquidity charge 100% erosion of the Intraday Risk Limit,
Regulation (EU) No. 648/2012 of the European the Risk Department will issue an
Parliament and of the Council with regard to
Regulatory Technical Standards on Requirements 6 ICE Clear Europe has represented that the intraday margin call to the CDS Clearing
for Central Counterparties (the ‘‘Regulatory existing specific wrong way risk component of the Member (and will also contact it by
Technical Standards’’). CDS Guaranty Fund calculation is maintained. telephone and/or email) for a sum

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63272 Federal Register / Vol. 80, No. 201 / Monday, October 19, 2015 / Notices

17A(b)(3)(F) of the Act 11 and is Law 106–50, the Veterans Counties, Florida. This is formal
reasonably designed to meet the margin, entrepreneurship and Small Business cancellation of the Notice of Intent that
financial resource and governance Development Act of 1999, and the was published in the Federal Register
requirements of Rules 17Ad–22(b)(2), Military Reservist and Veteran Small on March 5, 2009.
(b)(3) and (d)(8).12 Business Reauthorization Act of 2008, FOR FURTHER INFORMATION CONTACT: Ms.
this notice establishes the application Cathy Kendall, Senior Environmental
IV. Conclusion
filing period for the Military Reservist Specialist, Federal Highway
On the basis of the foregoing, the Economic Injury Disaster Loan Program Administration, 3500 Financial Plaza,
Commission finds that the proposed (MREIDL). Suite 400, Tallahassee, Florida 32312;
rule change is consistent with the Effective 10/01/2015, small Telephone: (850) 553–2225.
requirements of the Act and in businesses employing military reservists SUPPLEMENTARY INFORMATION: The
particular with the requirements of may apply for economic injury disaster
Section 17A of the Act 13 and the rules Notice of Intent to prepare an EIS was
loans if those employees are called up to improve access between Port Manatee
and regulations thereunder. to active duty during a period of
It is therefore ordered, pursuant to and Interstate 75 (I–75). The Notice of
military conflict or have received notice Intent to prepare an EIS is rescinded.
Section 19(b)(2) of the Act,14 that the of an expected call-up, and those
proposed rule change (SR–ICEEU–2015– employees are essential to the success of (Catalog of Federal Domestic Assistance
010), as modified by Amendment No. 1 the small business daily operations. Program Number 20.205, Highway Research,
thereto be, and hereby is, approved.15 Planning and Construction. The regulations
The purpose of the MREIDL program implementing Executive Order 12372
For the Commission, by the Division of is to provide funds to an eligible small regarding intergovernmental consultation on
Trading and Markets, pursuant to delegated business to meet its ordinary and Federal programs and activities apply to this
authority.16 necessary operating expenses that it program.)
Robert W. Errett, could have met, but is unable to meet,
because an essential employee was Cathy Kendall,
Deputy Secretary.
called-up or expects to be called-up to Senior Environmental Specialist, Tallahassee,
[FR Doc. 2015–26423 Filed 10–16–15; 8:45 am]
active duty in his or her role as a Florida.
BILLING CODE 8011–01–P
military reservist. These loans are [FR Doc. 2015–26443 Filed 10–16–15; 8:45 am]
intended only to provide the amount of BILLING CODE 4910–22–P

SMALL BUSINESS ADMINISTRATION working capital needed by a small
business to pay its necessary obligations
[Disaster Declaration #14494 Disaster #ZZ– as they mature until operations return to DEPARTMENT OF TRANSPORTATION
00011] normal after the essential employee is Federal Railroad Administration
released from active duty. For
The Entire United States and U.S. [Docket No. FRA 2015–0007–N–26]
information/applications contact 1–
Territories
800–659–2955 or visit www.sba.gov.
AGENCY: U.S. Small Business Applications for the Military Reservist Proposed Agency Information
Administration. Economic Injury Disaster Loan Program Collection Activities; Comment
may be filed at the above address. Request
ACTION: Notice.
The Interest Rate for eligible small AGENCY: Federal Railroad
SUMMARY: This is a notice of the Military businesses is 4.000. Administration, DOT.
Reservist Economic Injury Disaster Loan The number assigned is 14494 0.
ACTION: Notice.
Program (MREIDL), dated 10/01/2015.
(Catalog of Federal Domestic Assistance
Effective Date: 10/01/2015. Number 59008) SUMMARY: In accordance with the
MREIDL Loan Application Deadline
Paperwork Reduction Act of 1995 and
Date: 1 year after the essential employee James E. Rivera,
its implementing regulations, the
is discharged or released from active Associate Administrator for Disaster Federal Railroad Administration (FRA)
duty. Assistance.
hereby announces that it is seeking an
ADDRESSES: Submit completed loan [FR Doc. 2015–26043 Filed 10–16–15; 8:45 am]
extension of the following currently
applications to: U.S. Small Business BILLING CODE 8025–01–P approved information collection
Administration Processing And activities. On May 7, 2014, the Secretary
Disbursement Center 14925 Kingsport of Transportation issued Emergency
Road, Fort Worth, TX 76155. DEPARTMENT OF TRANSPORTATION Order (EO) Docket No. DOT–OST–
FOR FURTHER INFORMATION CONTACT: A. 2014–0067 requiring affected railroad
Escobar, Office of Disaster Assistance, Federal Highway Administration carriers to provide certain information
U.S. Small Business Administration, to the State Emergency Response
Environmental Impact Statement;
409 3rd Street, Suite 6050, Washington, Commissions (SERCs) for each State in
Manatee and Hillsborough Counties,
DC 20416. which their trains carrying 1 million
Florida
SUPPLEMENTARY INFORMATION: Notice is gallons or more of Bakken crude oil
hereby given that as a result of Public AGENCY: Federal Highway travel. The information collection
Administration (FHWA), DOT. activities associated with the Secretary’s
asabaliauskas on DSK5VPTVN1PROD with NOTICES

11 15 U.S.C. 78q–1(b)(3)(F). ACTION: Notice of Intent. Emergency Order originally received a
12 17 CFR 240.17Ad(22)(b)(2), (b)(3) and (d)(8). six-month emergency approval from
13 15 U.S.C. 78q–1.
SUMMARY: The FHWA is issuing this OMB on May 10, 2014. On July 10,
14 15 U.S.C. 78s(b)(2).
notice of cancellation to advise the 2015, OMB again approved the
15 In approving the proposed rule change, the
public that we are no longer preparing information collection activities
Commission considered the proposed rule change’s
impact on efficiency, competition and capital an Environmental Impact Statement associated with the Secretary’s
formation. 15 U.S.C. 78c(f). (EIS) for the proposed Port Manatee Emergency Order until March 31, 2016.
16 17 CFR 200.30–3(a)(12). Connector in Manatee and Hillsborough FRA is now requesting to continue these

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Document Created: 2015-12-15 08:35:43
Document Modified: 2015-12-15 08:35:43
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 63269