81 FR 35401 - Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing of Amendment No. 1 and Order Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to Additions to Permitted Cover

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 106 (June 2, 2016)

Page Range		35401-35402
FR Document		2016-13042
Federal Register, Volume 81 Issue 106 (Thursday, June 2, 2016)
[Federal Register Volume 81, Number 106 (Thursday, June 2, 2016)]
[Notices]
[Pages 35401-35402]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-13042]



[[Page 35401]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77943; File No. SR-ICEEU-2016-004]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing of Amendment No. 1 and Order Approving Proposed Rule Change, 
as Modified by Amendment No. 1 Thereto, Relating to Additions to 
Permitted Cover

May 27, 2016.

I. Introduction

    On February 10, 2016, ICE Clear Europe Limited (``ICE Clear 
Europe'' or the ``Clearing House'') filed with the Securities and 
Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act (``Act'') \1\ and Rule 19b-4 thereunder,\2\ 
a proposed rule change relating to additions to Permitted Cover. The 
proposed rule change was published for comment in the Federal Register 
on March 2, 2016.\3\ The Commission did not receive comments on the 
proposed rule change. On April 15, 2016, the Commission extended the 
time period in which to either approve, disapprove, or institute 
proceedings to determine whether to disapprove the proposed rule change 
to May 31, 2016.\4\ On May 13, 2016, ICEEU filed Amendment No. 1 to the 
proposal.\5\ 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. 34-77234 (February 25, 
2016), 81 FR 10949
    (Mar. 2, 2016).
    \4\ Securities Exchange Act Release No. 34-77634 (April 15, 
2016), 81 FR 23531
    (April 21, 2016).
    \5\ ICE Clear Europe filed Amendment No. 1 to clarify in its 
List of Permitted Cover that the operation of the relative limits 
applicable to certain Permitted Cover apply across an individual 
Clearing Member's total initial margin and guaranty fund 
requirement, as described in ICE Clear Europe's Collateral and 
Haircut Policy. The List of Permitted Cover incorrectly described 
the relative limit as applying only to the initial margin 
requirement. The amendment is intended to ensure that the 
description of relative limits in the List of Permitted Cover is 
consistent with the approach set forth in ICE Clear Europe's 
Collateral and Haircut Policy, but does not substantively change any 
policies or procedures. Amendment No. 1 is not subject to 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

    The purpose of the proposed rule change is to permit Clearing 
Members of ICE Clear Europe to provide additional categories of 
securities, including treasury bills and floating and inflation-linked 
government bonds (the ``Additional Permitted Cover'') to ICE Clear 
Europe to satisfy certain margin and guaranty fund requirements.
    Specifically, the Additional Permitted Cover will include the 
following types of government securities: (i) U.S. Treasury floating-
rate notes (``UST FRNs''), (ii) Canadian government treasury bills and 
Canadian government real return bonds, (iii) Spanish government 
treasury bills (Letras del Tesoro), (iv) Swedish government treasury 
bills, (v) German government inflation-linked bonds (of two types: 
Deutsche Bundesrepublik Inflation-Linked Bonds and Bundesobligationen 
I/L), (vi) Japanese government CPI-linked bonds, and (vii) Swedish 
government inflation index-linked bonds.
    ICE Clear Europe represents that it believes that the Additional 
Permitted Cover is of minimal credit risk, comparable to that of other 
sovereign debt currently accepted by ICE Clear Europe as Permitted 
Cover. ICE Clear Europe also represents that other debt obligations of 
the same governments that issue the Additional Permitted Cover are 
currently eligible as Permitted Cover. According to ICE Clear Europe, 
the Additional Permitted Cover consisting of treasury bills is 
substantially similar to existing forms of treasury bill Permitted 
Cover currently accepted by the Clearing House. In terms of the 
Additional Permitted Cover consisting of inflation-linked government 
bonds, ICE Clear Europe represents that it currently accepts similar 
bonds issued by other governments. As a result, ICE Clear Europe does 
not believe that such bonds would pose any additional or novel risks 
for the Clearing House. ICE Clear Europe further believes that the 
Additional Permitted Cover has demonstrated low volatility, including 
in stressed market conditions.
    ICE Clear Europe represents that it will initially apply to the 
Additional Permitted Cover the same valuation haircuts as currently 
applied to currently accepted bonds of the same issuer and within the 
same maturity bucket. ICE Clear Europe also asserts that it will review 
and modify such haircuts from time to time, in accordance with Clearing 
House's Collateral and Haircut Policy and will impose both absolute 
limits and relative limits for each type of Additional Permitted Cover 
(other than U.S. Treasury obligations), consistent with the existing 
issuer limits for Permitted Cover and the Collateral and Haircut 
Policy. As part of that policy, ICE Clear Europe asserts that an 
additional haircut will apply where Additional Permitted Cover is used 
to cover a margin requirement denominated in a different currency, to 
cover the exchange rate risk.
    ICE Clear Europe represents that it will accept the Additional 
Permitted Cover in respect of original margin requirements for F&O 
Contracts and initial margin requirements for CDS Contracts. In 
addition, ICE Clear Europe represents that the UST FRNs will be 
accepted as Permitted Cover in respect of F&O and CDS guaranty fund 
contribution requirements and the Spanish and German securities 
constituting Additional Permitted Cover will also be accepted for the 
Euro-denominated component of the CDS guaranty fund. According to ICE 
Clear Europe, the other types of Additional Permitted Cover will not be 
accepted in respect of guaranty fund requirements and the Additional 
Permitted Cover cannot be used to satisfy variation margin requirements 
because variation margin must be paid in cash in the currency of the 
contract.

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 the 
Commission finds that the 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 \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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    The Commission finds that the proposed rule change is consistent 
with the requirements of Section 17A of the Act \8\ and the rules and 
regulations thereunder applicable to ICE Clear Europe. The proposed 
rule change will permit Clearing Members of ICE Clear Europe to provide 
additional categories of securities to satisfy certain margin and 
guaranty fund requirements. The

[[Page 35402]]

Additional Permitted Cover is substantially similar to existing forms 
of Permitted Cover, will be subject to the same valuation haircuts as 
currently applied to currently accepted bonds of the same issuer and 
within the same maturity bucket, and will be subject to both absolute 
limits and relative limits, consistent with the existing issuer limits 
for Permitted Cover and the Collateral and Haircut Policy. The 
Commission believes that the proposed rule change is intended to allow 
Clearing Members more flexibility in meeting their margin and guaranty 
fund requirements without compromising ICE Clear Europe's risk 
management function.
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    \8\ 15 U.S.C. 78q-1.
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    The Commission therefore finds that the proposed rule change is 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions and, to the extent applicable, derivative 
agreements, contracts, and transactions, and 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.

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 \9\ and the 
rules and regulations thereunder.
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    \9\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (File No. SR-ICEEU-2016-004) as 
amended by Amendment No. 1, be, and hereby is, approved.\11\
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    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 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.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-13042 Filed 6-1-16; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices 35401

SECURITIES AND EXCHANGE categories of securities, including Policy. As part of that policy, ICE Clear
COMMISSION treasury bills and floating and inflation- Europe asserts that an additional haircut
linked government bonds (the will apply where Additional Permitted
[Release No. 34–77943; File No. SR–ICEEU–
2016–004]
‘‘Additional Permitted Cover’’) to ICE Cover is used to cover a margin
Clear Europe to satisfy certain margin requirement denominated in a different
Self-Regulatory Organizations; ICE and guaranty fund requirements. currency, to cover the exchange rate
Clear Europe Limited; Notice of Filing Specifically, the Additional Permitted risk.
of Amendment No. 1 and Order Cover will include the following types ICE Clear Europe represents that it
Approving Proposed Rule Change, as of government securities: (i) U.S. will accept the Additional Permitted
Modified by Amendment No. 1 Thereto, Treasury floating-rate notes (‘‘UST Cover in respect of original margin
Relating to Additions to Permitted FRNs’’), (ii) Canadian government requirements for F&O Contracts and
Cover treasury bills and Canadian government initial margin requirements for CDS
real return bonds, (iii) Spanish Contracts. In addition, ICE Clear Europe
May 27, 2016. government treasury bills (Letras del represents that the UST FRNs will be
I. Introduction Tesoro), (iv) Swedish government accepted as Permitted Cover in respect
treasury bills, (v) German government of F&O and CDS guaranty fund
On February 10, 2016, ICE Clear inflation-linked bonds (of two types: contribution requirements and the
Europe Limited (‘‘ICE Clear Europe’’ or Deutsche Bundesrepublik Inflation- Spanish and German securities
the ‘‘Clearing House’’) filed with the Linked Bonds and Bundesobligationen constituting Additional Permitted Cover
Securities and Exchange Commission I/L), (vi) Japanese government CPI- will also be accepted for the Euro-
(‘‘Commission’’), pursuant to Section linked bonds, and (vii) Swedish denominated component of the CDS
19(b)(1) of the Securities Exchange Act government inflation index-linked guaranty fund. According to ICE Clear
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a bonds. Europe, the other types of Additional
proposed rule change relating to ICE Clear Europe represents that it Permitted Cover will not be accepted in
additions to Permitted Cover. The believes that the Additional Permitted respect of guaranty fund requirements
proposed rule change was published for Cover is of minimal credit risk, and the Additional Permitted Cover
comment in the Federal Register on comparable to that of other sovereign cannot be used to satisfy variation
March 2, 2016.3 The Commission did debt currently accepted by ICE Clear margin requirements because variation
not receive comments on the proposed Europe as Permitted Cover. ICE Clear margin must be paid in cash in the
rule change. On April 15, 2016, the Europe also represents that other debt currency of the contract.
Commission extended the time period obligations of the same governments
in which to either approve, disapprove, that issue the Additional Permitted III. Discussion and Commission
or institute proceedings to determine Cover are currently eligible as Permitted Findings
whether to disapprove the proposed Cover. According to ICE Clear Europe, Section 19(b)(2)(C) of the Act 6 directs
rule change to May 31, 2016.4 On May the Additional Permitted Cover the Commission to approve a proposed
13, 2016, ICEEU filed Amendment No. consisting of treasury bills is rule change of a self-regulatory
1 to the proposal.5 For the reasons substantially similar to existing forms of organization if the Commission finds
discussed below, the Commission is treasury bill Permitted Cover currently that the proposed rule change is
approving the proposed rule change, as accepted by the Clearing House. In consistent with the requirements of the
modified by Amendment No. 1. terms of the Additional Permitted Cover Act and the rules and regulations
II. Description of the Proposed Rule consisting of inflation-linked thereunder applicable to such self-
Change government bonds, ICE Clear Europe regulatory organization. Section
represents that it currently accepts 17A(b)(3)(F) of the Act 7 requires, among
The purpose of the proposed rule similar bonds issued by other other things, that the rules of a clearing
change is to permit Clearing Members of governments. As a result, ICE Clear agency are designed to promote the
ICE Clear Europe to provide additional Europe does not believe that such bonds prompt and accurate clearance and
1 15
would pose any additional or novel settlement of securities transactions
U.S.C. 78s(b)(1).
2 17
risks for the Clearing House. ICE Clear and, to the extent applicable, derivative
CFR 240.19b–4.
3 Securities Exchange Act Release No. 34–77234 Europe further believes that the agreements, contracts, and transactions,
(February 25, 2016), 81 FR 10949 Additional Permitted Cover has to assure the safeguarding of securities
(Mar. 2, 2016). demonstrated low volatility, including and funds which are in the custody or
4 Securities Exchange Act Release No. 34–77634 in stressed market conditions. control of the clearing agency or for
(April 15, 2016), 81 FR 23531 ICE Clear Europe represents that it which it is responsible and, in general,
(April 21, 2016). will initially apply to the Additional
5 ICE Clear Europe filed Amendment No. 1 to to protect investors and the public
Permitted Cover the same valuation interest.
clarify in its List of Permitted Cover that the
operation of the relative limits applicable to certain haircuts as currently applied to The Commission finds that the
Permitted Cover apply across an individual currently accepted bonds of the same proposed rule change is consistent with
Clearing Member’s total initial margin and guaranty issuer and within the same maturity
fund requirement, as described in ICE Clear
the requirements of Section 17A of the
Europe’s Collateral and Haircut Policy. The List of
bucket. ICE Clear Europe also asserts Act 8 and the rules and regulations
Permitted Cover incorrectly described the relative that it will review and modify such thereunder applicable to ICE Clear
haircuts from time to time, in
asabaliauskas on DSK3SPTVN1PROD with NOTICES

limit as applying only to the initial margin Europe. The proposed rule change will
requirement. The amendment is intended to ensure accordance with Clearing House’s
that the description of relative limits in the List of
permit Clearing Members of ICE Clear
Permitted Cover is consistent with the approach set
Collateral and Haircut Policy and will Europe to provide additional categories
forth in ICE Clear Europe’s Collateral and Haircut impose both absolute limits and relative of securities to satisfy certain margin
Policy, but does not substantively change any limits for each type of Additional and guaranty fund requirements. The
policies or procedures. Amendment No. 1 is not Permitted Cover (other than U.S.
subject to comment because it is a technical
amendment that does not alter the substance of the
Treasury obligations), consistent with 6 15 U.S.C. 78s(b)(2)(C).
proposed rule change or raise any novel regulatory the existing issuer limits for Permitted 7 15 U.S.C. 78q–1(b)(3)(F).
issues. Cover and the Collateral and Haircut 8 15 U.S.C. 78q–1.

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35402 Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices

Additional Permitted Cover is SECURITIES AND EXCHANGE in Item IV below. OCC has prepared
substantially similar to existing forms of COMMISSION summaries, set forth in sections (A), (B),
Permitted Cover, will be subject to the and (C) below, of the most significant
[Release No. 34–77938; File No. SR–OCC– aspects of these statements.
same valuation haircuts as currently
2016–007]
applied to currently accepted bonds of
(A) Clearing Agency’s Statement of the
the same issuer and within the same Self-Regulatory Organizations; The Purpose of, and Statutory Basis for, the
maturity bucket, and will be subject to Options Clearing Corporation; Notice Proposed Rule Change
both absolute limits and relative limits, of Filing of Proposed Rule Change
consistent with the existing issuer limits Related to The Options Clearing (1) Purpose
for Permitted Cover and the Collateral Corporation’s Membership Approval
and Haircut Policy. The Commission Process The purpose of this proposed rule
believes that the proposed rule change change is to streamline OCC’s
May 27, 2016. membership approval process by: (i)
is intended to allow Clearing Members
Pursuant to Section 19(b)(1) of the Allowing OCC’s Executive Chairman or
more flexibility in meeting their margin
Securities Exchange Act of 1934 President to approve pro forma
and guaranty fund requirements without
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 applications for clearing membership,
compromising ICE Clear Europe’s risk
notice is hereby given that on May 16, and (ii) to vest ultimate authority with
management function.
2016, The Options Clearing Corporation OCC’s Risk Committee, not its Board, to
The Commission therefore finds that (‘‘OCC’’) filed with the Securities and approve or disapprove applications for
the proposed rule change is designed to Exchange Commission (‘‘Commission’’) clearing membership that are not
promote the prompt and accurate the proposed rule change as described approved by either OCC’s Executive
clearance and settlement of securities in Items I, II, and III below, which Items Chairman or President. To this end,
transactions and, to the extent have been prepared primarily by OCC. OCC is proposing to: (i) Vest the
applicable, derivative agreements, The Commission is publishing this authority to approve or disapprove new
contracts, and transactions, and to notice to solicit comments on the membership applications with OCC’s
assure the safeguarding of securities and proposed rule change from interested Risk Committee, and (ii) delegate
funds which are in the custody or persons. authority to the Executive Chairman or
control of the clearing agency or for I. Clearing Agency’s Statement of the President of OCC to approve new
which it is responsible and, in general, Terms of Substance of the Proposed membership applications provided that:
to protect investors and the public Rule Change (a) It is not recommended by the Risk
interest. Committee’s designated delegates or
The purpose of this proposed rule agents that the Risk Committee impose
IV. Conclusion change is to: (i) Vest the authority to additional membership criteria upon the
approve or disapprove new membership applicant pursuant to Section 1,
On the basis of the foregoing, the applications with OCC’s Risk
Commission finds that the proposal is Interpretation and Policy .06 of Article
Committee,3 and (ii) delegate authority V of OCC’s By-Laws, and (b) the Risk
consistent with the requirements of the to the Executive Chairman or President Committee is given not less than five
Act and in particular with the of OCC to approve new membership business days to determine that the
requirements of Section 17A of the Act 9 applications provided that: (a) It is not application should be reviewed at a
and the rules and regulations recommended that the Risk Committee
meeting of the Risk Committee and the
thereunder. impose additional membership criteria
Risk Committee has not requested that
It is therefore ordered, pursuant to upon the applicant pursuant to Section
the application be reviewed at a meeting
Section 19(b)(2) of the Act,10 that the 1, Interpretation and Policy .06 of
of the Risk Committee within such five
proposed rule change (File No. SR– Article V of OCC’s By-Laws, and (b) the
day period. The practical effect of the
ICEEU–2016–004) as amended by Risk Committee is given not less than
proposed rule change is that either
five business days to determine that the
Amendment No. 1, be, and hereby is, OCC’s Executive Chairman or President
application should be reviewed at a
approved.11 would be approving most applications
meeting of the Risk Committee and the
For the Commission, by the Division of for clearing membership at OCC since
Risk Committee has not requested that
Trading and Markets, pursuant to delegated most applicants for clearing
the application be reviewed at a meeting
authority.12 membership choose to have their
of the Risk Committee within such five
day period. application presented for approval only
Robert W. Errett,
when such approval is pro forma in
Deputy Secretary. II. Clearing Agency’s Statement of the nature (i.e., the applicant meets all of
[FR Doc. 2016–13042 Filed 6–1–16; 8:45 am] Purpose of, and Statutory Basis for, the the clearing membership requirements
BILLING CODE 8011–01–P Proposed Rule Change at OCC and there is no need to impose
In its filing with the Commission, additional membership requirements).
OCC included statements concerning OCC believes that the proposed rule
the purpose of and basis for the change would better allocate the time
proposed rule change and discussed any and resources of the Board and Risk
asabaliauskas on DSK3SPTVN1PROD with NOTICES

comments it received on the proposed Committee and ensure applications for
rule change. The text of these statements clearing membership are considered in
9 15 U.S.C. 78q–1.
may be examined at the places specified a timely manner.
10 15 U.S.C. 78s(b)(2).
11 In approving the proposed rule change, the
1 15
Background
U.S.C. 78s(b)(1).
Commission considered the proposal’s 2 17 CFR 240.19b–4.
impact on efficiency, competition and capital 3 OCC’s Risk Committee is a committee of OCC’s
OCC believes that its membership
formation. 15 U.S.C. 78c(f). Board of Directors. See OCC’s By-Laws Article III,
criteria are objective standards that are
12 17 CFR 200.30–3(a)(12). Section 9. designed not to unfairly discriminate in

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Document Created: 2016-06-02 01:22:33
Document Modified: 2016-06-02 01:22:33
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		81 FR 35401