82 FR 45339 - Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to Amendments to the ICE Clear Europe CDS Risk Policy
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 187 (September 28, 2017)
Federal Register Volume 82, Issue 187 (September 28, 2017)
| Page Range | 45339-45342 | |
| FR Document | 2017-20750 |
[Federal Register Volume 82, Number 187 (Thursday, September 28, 2017)] [Notices] [Pages 45339-45342] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-20750] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81680; File No. SR-ICEEU-2017-010] Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to Amendments to the ICE Clear Europe CDS Risk Policy September 22, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on September 15, 2017, ICE Clear Europe Limited (``ICE Clear Europe'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule changes described in Items I, II, and III below, which Items have been prepared by ICE Clear Europe. The Commission is publishing this notice and order to solicit comments on the proposed rule change from interested persons and to approve the proposed rule change on an accelerated basis. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change The principal purpose of the proposed rule change is to amend ICE Clear Europe's CDS Risk Policy relating to portfolio margining, as described below, to comply with Article 27 of Commission Delegated Regulation (EU) No. 153/2013 \3\ (the ``Portfolio Margining Limitation''). --------------------------------------------------------------------------- \3\ Commission Delegated Regulation (EU) No. 153/2013 dated 23 February 2013. --------------------------------------------------------------------------- II. Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, ICE Clear Europe included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III below. ICE Clear Europe has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of such statements. (A) Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (a) Purpose ICE Clear Europe proposes to adopt amendments to the CDS Risk Policy relating to portfolio margining. The changes discussed herein apply to all cleared credit default swap (``CDS'') products. The amendments are intended to comply with the Portfolio Margining Limitation implementing the European Market Infrastructure Regulation (``EMIR''),\4\ which requires that where portfolio margining covers multiple different instruments, the amount of margin reduction that the clearing house may offer can be no greater than 80% of the difference between the sum of the margins for each product calculated on an individual basis and the margin calculated based on a estimation of the exposure for the combined portfolio. By contrast, where the margin reduction relates to positions in the same instrument, the clearing house may apply a margin reduction of up to 100% of that difference. The European Securities and Markets Authority (``ESMA''), the competent authority with respect to this requirement under EMIR, has issued an opinion interpreting this requirement in the context of CDS to provide \5\ that (i) credit derivatives on different underlying names or indexes (including two series of the same index) should be considered different products; and (ii) credit derivatives on the same underlying name or index with different maturities or coupons may be considered as the same product. According to ICE Clear Europe, the effect of this is to require that credit derivatives on different index series of the same index family be considered different instruments under the Portfolio Margining Limitation and that therefore portfolio margining for such instruments must be limited to 80% of the gross margins. --------------------------------------------------------------------------- \4\ Regulation (EU) No. 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories. \5\ Section 3.1.2.C of the ESMA Opinion On Portfolio Margining Requirements under Article 27 of Commission Delegated Regulation (EU) No. 153/2013 dated 10 April 2017 (the ``ESMA Opinion''). --------------------------------------------------------------------------- To implement the Portfolio Margining Limitation, ICE Clear Europe is amending its CDS Risk Policy such that when calculating the spread response charge (which provides portfolio margin [[Page 45340]] reductions across a variety of correlated positions, including positions in different series of the same index), the 99.5% Value-at- Risk (``VaR'') Monte Carlo (``MC'') benchmark \6\ used in the calculation will have a minimum amount equal to 20% of the portfolio gross 99.5% MC VaR requirements. The gross requirement is defined for this purpose as the sum of the requirements at risk factor level for single names (for single-name CDS) and index series level (for index CDS) (i.e., without portfolio margin offsets across such products). ICE Clear Europe is required to implement the Portfolio Margining Limitation by September 30, 2017. --------------------------------------------------------------------------- \6\ The 99.5% VaR MC benchmark serves as a minimum initial margin level. --------------------------------------------------------------------------- (b) Statutory Basis ICE Clear Europe believes that the proposed amendments are consistent with the requirements of Section 17A of the Act \7\ and the regulations thereunder applicable to it, including the standards under Rule 17Ad-22.\8\ Section 17A(b)(3)(F) of the Act \9\ requires, among other things, that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions, the safeguarding of securities and funds in the custody or control of the clearing agency or for which it is responsible, and the protection of investors and the public interest. In addition, Rule 17Ad-22(b)(2) \10\ requires that a registered clearing agency that performs central counterparty services establish, implement, maintain and enforce written policies and procedures reasonably designed to use margin requirements to limit its credit exposures to participants under normal market conditions and use risk- based models and parameters to set margin requirements. Furthermore, Rule 17Ad-22(e)(6)(v) \11\ requires that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to cover, if the covered clearing agency provides central counterparty services, its credit exposures to its participants by establishing a risk-based margin system that, at a minimum uses an appropriate method for measuring credit exposure that accounts for relevant product risk factors and portfolio effects across products. --------------------------------------------------------------------------- \7\ 15 U.S.C. 78q-1. \8\ 17 CFR 240.17Ad-22. \9\ 15 U.S.C. 78q-1(b)(3)(F). \10\ 17 CFR 240.17Ad-22(b)(2). \11\ 17 CFR 240.17Ad-22(e)(6)(v). --------------------------------------------------------------------------- The proposed amendments to the CDS Risk Policy would apply a 20% floor to the 99.5% VaR MC aspect of ICE Clear Credit's spread response margin component calculation, based on the gross margin requirement without portfolio offsets. The amendments are being made in order to comply with the Portfolio Margin Limitation imposed under EMIR, as set out in the ESMA Opinion, and may in some cases result in higher initial margin requirements for market participants. ICE Clear Europe believes that the amended requirement (as with the current methodology) represents an appropriate risk-based margin framework to take into account portfolio risk reduction and related portfolio effects in a manner that will continue to enable the clearing house to mitigate the risk of clearing member default. In ICE Clear Europe's view, the amendments are therefore consistent with the requirements of the Act and Commission regulations set forth above. (B) Clearing Agency's Statement on Burden on Competition ICE Clear Europe does not believe the proposed rule changes would have any impact, or impose any burden, on competition not necessary or appropriate in furtherance of the purposes of the Act. The changes are being proposed in order to implement that Portfolio Margining Limitation under EMIR. The amendments will affect all CDS Clearing Members and CDS market participants. ICE Clear Europe does not believe the amendments will impact competition among CDS Clearing Members or other market participants, or affect the ability of market participants to access clearing generally. As noted above, the amendments may increase initial margin requirements with respect to some portfolios, because of the limitation on margin reductions as compared to the current methodology. Although this may affect the cost of clearing for some market participants, any increased costs will reflect the requirements imposed under the EMIR Portfolio Margining Limitation and the risk management benefits for the clearing house that are designed to be obtained through the Portfolio Margining Limitation. As a result, ICE Clear Europe believes that any impact on competition is appropriate in furtherance of the purposes of the Act. (C) Clearing Agency's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments relating to the proposed amendments have not been solicited or received by ICE Clear Europe. ICE Clear Europe will notify the Commission of any comments received with respect to the proposed rule change. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, security-based swap submission or advance notice is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or Send an email to [email protected]. Please include File Number SR-ICEEU-2017-010 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-ICEEU-2017-010. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change, security- based swap submission or advance notice that are filed with the Commission, and all written communications relating to the proposed rule change, security-based swap submission or advance notice between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filings will also be available for inspection and copying at the principal office of ICE Clear Europe and on ICE Clear Europe's Web site at https://www.theice.com/notices/Notices.shtml?regulatoryFilings. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that [[Page 45341]] you wish to make available publicly. All submissions should refer to File Number SR-ICEEU-2017-010 and should be submitted on or before October 19, 2017. IV. Commission's Findings and Order Granting Accelerated Approval of the Proposed Rule Change Section 19(b)(2)(C) of the Act \12\ 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 Exchange Act and the rules and regulations thereunder applicable to such organization. Section 17A(b)(3)(F) of the Act \13\ requires, among other things, that the rules of a clearing agency be designed 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. Rule 17Ad-22(b)(2) \14\ requires that a registered clearing agency that performs central counterparty services establish, implement, maintain and enforce written policies and procedures reasonably designed to use margin requirements to limit its credit exposures to participants under normal market conditions and use risk- based models and parameters to set margin requirements. Furthermore, Rule 17Ad-22(e)(6)(v) \15\ requires that each covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to cover, if the covered clearing agency provides central counterparty services, its credit exposures to its participants by establishing a risk-based margin system that, at a minimum uses an appropriate method for measuring credit exposure that accounts for relevant product risk factors and portfolio effects across products. --------------------------------------------------------------------------- \12\ 15 U.S.C. 78s(b)(2)(C). \13\ 15 U.S.C. 78q-1(b)(3)(F). \14\ 17 CFR 240.17Ad-22(b)(2). \15\ 17 CFR 240.17Ad-22(e)(6)(v). --------------------------------------------------------------------------- The Commission finds that the proposed rule change is consistent with Section 17A of the Act and the relevant rules thereunder.\16\ The proposed rule change is designed to comply with the Portfolio Margining Limitation of Article 27 of Commission Delegated Regulation (EU) No. 153/2013.\17\ As interpreted by ESMA, this limitation will not permit complete margin offsets between different cleared instruments, which in the CDS context means CDS with different reference entities, including different versions of the same index. Instead, any margin reductions resulting from the portfolio margining of different CDS instruments must be limited to 80% of the difference between the sum of the margins for each instrument calculated on an individual basis and the margin calculated based on a combined estimation of the exposure for the combined portfolio. Margin reductions from portfolio margining of the same CDS instruments, i.e. on the same underlying name or index, even with different maturities or coupons, can be applied without limitation. ICE Clear Europe has chosen to implement this requirement by limiting the margin reductions calculated from the 99.5% VaR MC aspect of its spread response methodology to 20% of the gross margin requirement without portfolio offsets. --------------------------------------------------------------------------- \16\ 15 U.S.C. 78q-1. \17\ Commission Delegated Regulation (EU) No. 153/2013 dated 23 February 2013. --------------------------------------------------------------------------- The Commission has reviewed the proposed rule change, including the changes to ICE Clear Europe's policies and procedures, as well as data on the estimated impact of the proposed rule change on margin requirements. Based on this review, the Commission finds that the proposed rule change is designed to implement a more conservative approach to portfolio margining reductions than under ICE Clear Europe's existing spread response calculation methodology and is therefore consistent with assuring the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible. The approach is risk-based and does not impose unduly conservative margin requirements that would impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act.\18\ --------------------------------------------------------------------------- \18\ See 15 U.S.C. 78q-1(b)(3)(I). --------------------------------------------------------------------------- For the same reasons, the Commission further finds that the proposed rule change is consistent with Rule 17Ad-22(b)(2),\19\ in that any additional margin collected based on this more conservative approach should support ICE Clear Europe's risk management functions and ability to limit its credit exposures, consistent with Rule 17Ad- 22(b)(2).\20\ --------------------------------------------------------------------------- \19\ 17 CFR 240.17Ad-22(b)(2). \20\ 17 CFR 240.17Ad-22(b)(2). --------------------------------------------------------------------------- Similarly, the Commission further finds that the proposed rule change is consistent with Rule 17Ad-22(e)(6)(v).\21\ The proposed rule change does not eliminate portfolio margin reductions. The proposed rule change allows for portfolio margin reductions of 100% where the margin reduction relates to positions in the same instrument. Where the portfolio margining covers multiple different instruments, the proposed rule change limits the margin reduction to no greater than 80%, consistent with EMIR. The Commission finds that this is a reasonably designed method for measuring credit exposure that accounts for relevant product risk factors and portfolio effects across different products consistent with Rule 17Ad-22(e)(6)(v).\22\ --------------------------------------------------------------------------- \21\ 17 CFR 240.17Ad-22(e)(6)(v). \22\ 17 CFR 240.17Ad-22(e)(6)(v). --------------------------------------------------------------------------- In its filing, ICE Clear Europe requested that the Commission grant accelerated approval of the proposed rule change pursuant to Section 19(b)(2)(C)(iii) of the Exchange Act.\23\ Under Section 19(b)(2)(C)(iii) of the Act,\24\ the Commission may grant accelerated approval of a proposed rule change if the Commission finds good cause for doing so. ICE Clear Europe believes that accelerated approval is warranted because the proposed rule change is required as of September 30, 2017 in order to comply with the Portfolio Margin Limitation under EMIR, as interpreted by ESMA. --------------------------------------------------------------------------- \23\ 15 U.S.C. 78s(b)(2)(C)(iii). \24\ 15 U.S.C. 78s(b)(2)(C)(iii). --------------------------------------------------------------------------- The Commission finds good cause, pursuant to Section 19(b)(2)(C)(iii) of the Act,\25\ for approving the proposed rule change on an accelerated basis, prior to the 30th day after the date of publication of notice in the Federal Register, because the proposed rule change is required as of September 30, 2017 in order to comply with EMIR. --------------------------------------------------------------------------- \25\ 15 U.S.C. 78s(b)(2)(C)(iii). --------------------------------------------------------------------------- V. 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 \26\ and the rules and regulations thereunder. --------------------------------------------------------------------------- \26\ 15 U.S.C. 78q-1. --------------------------------------------------------------------------- It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\27\ that the proposed rule change (File No. SR-ICEEU-2017-010) be, and hereby is, approved on an accelerated basis.\28\ --------------------------------------------------------------------------- \27\ 15 U.S.C. 78s(b)(2). \28\ 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). [[Page 45342]] --------------------------------------------------------------------------- For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\29\ --------------------------------------------------------------------------- \29\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-20750 Filed 9-27-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 45339
advisory agreements with the Regulated For the Commission, by the Division of set forth in sections (A), (B), and (C)
Funds and the Affiliated Funds, be Investment Management, under delegated below, of the most significant aspects of
shared by the Regulated Funds and the authority. such statements.
participating Affiliated Funds in Eduardo A. Aleman,
Assistant Secretary.
(A) Clearing Agency’s Statement of the
proportion to the relative amounts of the Purpose of, and Statutory Basis for, the
securities held or being acquired or [FR Doc. 2017–20757 Filed 9–27–17; 8:45 am]
Proposed Rule Change
disposed of, as the case may be. BILLING CODE 8011–01–P
(a) Purpose
14. Transaction Fees.29 Any
transaction fee (including break-up, ICE Clear Europe proposes to adopt
SECURITIES AND EXCHANGE amendments to the CDS Risk Policy
structuring, monitoring or commitment COMMISSION relating to portfolio margining. The
fees but excluding brokerage or
[Release No. 34–81680; File No. SR–ICEEU– changes discussed herein apply to all
underwriting compensation permitted
2017–010] cleared credit default swap (‘‘CDS’’)
by Section 17(e) or 57(k)) received in products.
connection with any Co-Investment Self-Regulatory Organizations; ICE The amendments are intended to
Transaction will be distributed to the Clear Europe Limited; Notice of Filing comply with the Portfolio Margining
participants on a pro rata basis based on and Order Granting Accelerated Limitation implementing the European
the amounts they invested or Approval of a Proposed Rule Change Market Infrastructure Regulation
committed, as the case may be, in such Relating to Amendments to the ICE (‘‘EMIR’’),4 which requires that where
Co-Investment Transaction. If any Clear Europe CDS Risk Policy portfolio margining covers multiple
transaction fee is to be held by an different instruments, the amount of
Adviser pending consummation of the September 22, 2017. margin reduction that the clearing house
transaction, the fee will be deposited Pursuant to Section 19(b)(1) of the may offer can be no greater than 80% of
into an account maintained by the Securities Exchange Act of 1934 the difference between the sum of the
Adviser at a bank or banks having the (‘‘Act’’),1 and Rule 19b–4 thereunder,2 margins for each product calculated on
qualifications prescribed in Section notice is hereby given that on an individual basis and the margin
26(a)(1), and the account will earn a September 15, 2017, ICE Clear Europe calculated based on a estimation of the
Limited (‘‘ICE Clear Europe’’) filed with exposure for the combined portfolio. By
competitive rate of interest that will also
the Securities and Exchange contrast, where the margin reduction
be divided pro rata among the
Commission (‘‘Commission’’) the relates to positions in the same
participants. None of the Advisers, the proposed rule changes described in instrument, the clearing house may
Affiliated Funds, the other Regulated Items I, II, and III below, which Items apply a margin reduction of up to 100%
Funds or any affiliated person of the have been prepared by ICE Clear of that difference. The European
Affiliated Funds or the Regulated Funds Europe. The Commission is publishing Securities and Markets Authority
will receive any additional this notice and order to solicit (‘‘ESMA’’), the competent authority
compensation or remuneration of any comments on the proposed rule change with respect to this requirement under
kind as a result of or in connection with from interested persons and to approve EMIR, has issued an opinion
a Co-Investment Transaction other than the proposed rule change on an interpreting this requirement in the
(i) in the case of the Regulated Funds accelerated basis. context of CDS to provide 5 that (i)
and the Affiliated Funds, the pro rata credit derivatives on different
I. Clearing Agency’s Statement of the
transaction fees described above and underlying names or indexes (including
Terms of Substance of the Proposed
fees or other compensation described in two series of the same index) should be
Rule Change
Condition 2(c)(iii)(B)(z), (ii) brokerage or considered different products; and (ii)
underwriting compensation permitted The principal purpose of the credit derivatives on the same
by Section 17(e) or 57(k) or (iii) in the proposed rule change is to amend ICE underlying name or index with different
case of the Advisers, investment Clear Europe’s CDS Risk Policy relating maturities or coupons may be
advisory compensation paid in to portfolio margining, as described considered as the same product.
accordance with investment advisory below, to comply with Article 27 of According to ICE Clear Europe, the
agreements between the applicable Commission Delegated Regulation (EU) effect of this is to require that credit
Regulated Fund(s) or Affiliated Fund(s) No. 153/2013 3 (the ‘‘Portfolio Margining derivatives on different index series of
Limitation’’). the same index family be considered
and its Adviser.
different instruments under the
15. Independence. If the Holders own II. Clearing Agency’s Statement of the
Portfolio Margining Limitation and that
in the aggregate more than 25 percent of Purpose of, and Statutory Basis for, the
therefore portfolio margining for such
the Shares of a Regulated Fund, then the Proposed Rule Change
instruments must be limited to 80% of
Holders will vote such Shares as In its filing with the Commission, ICE the gross margins.
directed by an independent third party Clear Europe included statements To implement the Portfolio Margining
when voting on (1) the election of concerning the purpose of and basis for Limitation, ICE Clear Europe is
directors; (2) the removal of one or more the proposed rule change and discussed amending its CDS Risk Policy such that
directors; or (3) any other matter under any comments it received on the when calculating the spread response
either the Act or applicable State law proposed rule change. The text of these charge (which provides portfolio margin
affecting the Board’s composition, size statements may be examined at the
or manner of election. places specified in Item III below. ICE 4 Regulation (EU) No. 648/2012 of the European
Clear Europe has prepared summaries, Parliament and of the Council of 4 July 2012 on
OTC derivatives, central counterparties and trade
repositories.
29 Applicants are not requesting and the 1 15U.S.C. 78s(b)(1). 5 Section 3.1.2.C of the ESMA Opinion On
Commission is not providing any relief for 2 17CFR 240.19b–4. Portfolio Margining Requirements under Article 27
transaction fees received in connection with any 3 Commission Delegated Regulation (EU) No. 153/ of Commission Delegated Regulation (EU) No. 153/
Co-Investment Transaction. 2013 dated 23 February 2013. 2013 dated 10 April 2017 (the ‘‘ESMA Opinion’’).
VerDate Sep<11>2014 18:44 Sep 27, 2017 Jkt 241001 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 E:\FR\FM\28SEN1.SGM 28SEN1](https://thefederalregister.org/doc/82_FR_45526/page/1.svg)
![45342 Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices
For the Commission, by the Division of set forth in sections A, B, and C below, by the London-based Baltic Exchange
Trading and Markets, pursuant to delegated of the most significant parts of such Ltd 6 and measures the charter rate for
authority.29 statements. shipping dry bulk freight in a specific
Eduardo A. Aleman, size category of cargo ship—Capesize,
A. Self-Regulatory Organization’s
Assistant Secretary. Panamax or Supramax. The three
Statement of the Purpose of, and the
[FR Doc. 2017–20750 Filed 9–27–17; 8:45 am] Reference Indexes are as follows:
Statutory Basis for, the Proposed Rule
BILLING CODE 8011–01–P Capesize: the Capesize 5TC Index;
Change
Panamax: the Panamax 4TC Index; and
1. Purpose Supramax: the Supramax 6TC Index.7
SECURITIES AND EXCHANGE The Exchange proposes to list and The Fund will seek to achieve its
COMMISSION trade shares (‘‘Shares’’) of the following investment objective by investing
under NYSE Arca Rule 8.200–E, substantially all of its assets in the
[Release No. 34–81681; File No. SR–
Commentary .02, which governs the Freight Futures currently constituting
NYSEArca–2017–107]
listing and trading of Trust Issued the Benchmark Portfolio. The
Self-Regulatory Organizations; NYSE Receipts: Breakwave Dry Bulk Shipping Benchmark Portfolio will include all
Arca, Inc.; Notice of Filing of Proposed ETF (the ‘‘Fund’’).4 existing positions to maturity and settle
Rule Change Relating to Listing and The Fund will be a series of ETF them in cash. During any given calendar
Trading of Shares of Breakwave Dry Managers Group Commodity Trust I (the quarter, the Benchmark Portfolio will
Bulk Shipping ETF Under NYSE Arca ‘‘Trust).5 The Fund and the Trust will be progressively increase its position to the
Rule 8.200–E, Commentary .02 managed and controlled by their next calendar quarter three-month strip,
sponsor and investment manager, ETF thus maintaining constant exposure to
September 22, 2017. Managers Capital LLC (the ‘‘Sponsor’’). the Freight Futures market as positions
Pursuant to Section 19(b)(1) 1 of the The Sponsor is registered with the mature.
Securities Exchange Act of 1934 (the Commodity Futures Trading The Benchmark Portfolio will
‘‘Act’’) 2 and Rule 19b–4 thereunder,3 Commission (‘‘CFTC’’) as a commodity maintain long-only positions in Freight
notice is hereby given that, on pool operator (‘‘CPO’’) and is a member Futures. The Benchmark Portfolio will
September 8, 2017, NYSE Arca, Inc. (the of the National Futures Association hold a combination of Capesize,
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with (‘‘NFA’’). Breakwave Advisors LLC Panamax and Supramax Freight
the Securities and Exchange (‘‘Breakwave’’) is registered as a Futures. More specifically, the
Commission (the ‘‘Commission’’) the commodity trading advisor with the Benchmark Portfolio will hold 50%
proposed rule change as described in CFTC and will serve as the Fund’s exposure in Capesize Freight Futures
Items I and II below, which Items have commodity trading advisor. ETFMG contracts, 40% exposure in Panamax
been substantially prepared by the self- Financial LLC will be the Fund’s Freight Futures contracts and 10%
regulatory organization. The distributor (‘‘Distributor’’ or ‘‘Marketing exposure in Supramax Freight Futures
Commission is publishing this notice to Agent’’). US Bancorp Fund Services LLC contracts. The Benchmark Portfolio will
solicit comments on the proposed rule will be the Fund’s ‘‘Administrator’’ and not include and the Fund will not invest
change from interested persons. ‘‘Transfer Agent’’. in swaps, non-cleared dry bulk freight
forwards or other over-the-counter
I. Self-Regulatory Organization’s The Fund’s Investment Objective and
Statement of the Terms of Substance of Strategy 6 The Baltic Exchange, which is a wholly owned
the Proposed Rule Change According to the Registration
subsidiary of the Singapore Exchange Ltd (‘‘SGX’’),
is a membership and an independent source of
The Exchange proposes to list and Statement, the Fund’s investment maritime market information for the trading and
trade the shares of Breakwave Dry Bulk objective will be to provide investors settlement of physical and derivative shipping
Shipping ETF under NYSE Arca Rule with exposure to the daily change in the contracts. According to the Baltic Exchange, this
information is used by shipbrokers, owners and
8.200–E, Commentary .02 (‘‘Trust Issued price of dry bulk freight futures, before operators, traders, financiers and charterers as a
Receipts’’). The proposed change is expenses and liabilities of the Fund, by reliable and independent view of the dry and tanker
available on the Exchange’s Web site at tracking the performance of a portfolio markets.
7 The Reference Indexes are published by the
www.nyse.com, at the principal office of (the ‘‘Benchmark Portfolio’’) consisting
Baltic Exchange’s subsidiary company, Baltic
the Exchange, and at the Commission’s of a three-month strip of the nearest Exchange Information Services Ltd (‘‘Baltic’’),
Public Reference Room. calendar quarter of futures contracts on which publishes a wide range of market reports,
specified indexes (each a ‘‘Reference fixture lists and market rate indicators on a daily
II. Self-Regulatory Organization’s Index’’) that measure rates for shipping and (in some cases) weekly basis. The Baltic
Statement of the Purpose of, and dry bulk freight (‘‘Freight Futures’’). indices, which include the Reference Indexes, are
Statutory Basis for, the Proposed Rule an assessment of the price of moving the major raw
Each Reference Index is published daily materials by sea. The indices are based on
Change assessments of the cost of transporting various bulk
In its filing with the Commission, the 4 Commentary .02 to NYSE Arca Rule 8.200–E cargoes, both wet (e.g., crude oil and oil products)
applies to Trust Issued Receipts that invest in and dry (e.g., coal and iron ore), made by leading
self-regulatory organization included shipbroking houses located around the world on a
‘‘Financial Instruments.’’ The term ‘‘Financial
statements concerning the purpose of, Instruments,’’ as defined in Commentary .02(b)(4) to per tonne and daily hire basis. The information is
and basis for, the proposed rule change NYSE Arca Rule 8.200–E, means any combination collated and published by the Baltic Exchange.
and discussed any comments it received of investments, including cash; securities; options Procedures relating to administration of the Baltic
on securities and indices; futures contracts; options indices are set forth in ‘‘The Baltic Exchange, Guide
on the proposed rule change. The text on futures contracts; forward contracts; equity caps, to Market Benchmarks’’ November 2016 (the
of those statements may be examined at collars, and floors; and swap agreements. ‘‘Guide’’), including production methods,
the places specified in Item IV below. 5 On June 2, 2017, the Trust filed with the calculation, confidentiality and transparency,
The Exchange has prepared summaries, Commission a registration statement on Form S–1 duties of panelists, code of conduct, audits and
under the Securities Act of 1933 (15 U.S.C. 77a) quality control. According to the Guide, these
29 17
(‘‘Securities Act’’) relating to the Fund (File No. procedures are in compliance with the ‘‘Principles
CFR 200.30–3(a)(12). 333–218453) (the ‘‘Registration Statement’’). The for Financial Benchmarks’’ issued by the
1 15 U.S.C.78s(b)(1). description of the operation of the Trust and the International Organization of Securities
2 15 U.S.C. 78a.
Fund herein is based, in part, on the Registration Commissioners (‘‘IOSCO’’). The Guide is available
3 17 CFR 240.19b–4. Statement. at www.balticexchange.com.
VerDate Sep<11>2014 18:44 Sep 27, 2017 Jkt 241001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\28SEN1.SGM 28SEN1](https://thefederalregister.org/doc/82_FR_45526/page/4.svg)
Document Created: 2017-09-28 01:32:32
Document Modified: 2017-09-28 01:32:32
| 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 | 82 FR 45339 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR