83 FR 7096 - Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing of Proposed Rule Change, Security-Based Swap Submission or Advance Notice Relating to Amendments to the ICE Clear Europe CDS Clearing Stress Testing Policy (the “Stress Testing Policy”)
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 33 (February 16, 2018)
Federal Register Volume 83, Issue 33 (February 16, 2018)
| Page Range | 7096-7098 | |
| FR Document | 2018-03201 |
[Federal Register Volume 83, Number 33 (Friday, February 16, 2018)] [Notices] [Pages 7096-7098] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-03201] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82692; File No. SR-ICEEU-2018-001] Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing of Proposed Rule Change, Security-Based Swap Submission or Advance Notice Relating to Amendments to the ICE Clear Europe CDS Clearing Stress Testing Policy (the ``Stress Testing Policy'') February 12, 2018. 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 February 6, 2018, 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 to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \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 ICE Clear Europe proposes revising its Stress Testing Policy, among other matters, to recategorize certain CDS stress testing scenarios and make certain other enhancements and clarifications. These revisions do not involve any changes to the ICE Clear Europe Clearing Rules or Procedures.\3\ --------------------------------------------------------------------------- \3\ Capitalized terms used but not defined herein have the meanings specified in the ICE Clear Europe Clearing Rules (the ``Rules''). --------------------------------------------------------------------------- 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 IV 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 revising its Stress Testing Policy, among other matters, to recategorize certain CDS stress testing scenarios, address specific wrong way risk, introduce new forward looking credit event scenarios and make certain other enhancements and clarifications. These revisions do not involve any changes to the ICE Clear Europe Clearing Rules or Procedures.\4\ --------------------------------------------------------------------------- \4\ Capitalized terms used but not defined herein have the meanings specified in the ICE Clear Europe Clearing Rules (the ``Rules''). --------------------------------------------------------------------------- ICE Clear Europe currently maintains a broad array of stress testing scenarios that are applied to portfolios of positions as part of its risk management practices for the CDS product category. As part of the existing policy, the Clearing House management regularly evaluates whether to retire certain scenarios or portfolios as outdated or otherwise inapplicable, and whether to add new scenarios or portfolios for testing purposes. ICE Clear Europe is not proposing to change the frequency of stress testing or of its regular reviews of stress testing scenarios, models and underlying parameters and assumptions. The amendments generally reorganize the existing stress testing scenarios into two broad categories: Extreme but plausible market scenarios and extreme market scenarios. Extreme but plausible scenarios include both historical scenarios (such as those involving the 2008/ 2009 credit crisis, the Lehman Brothers default and discordant scenarios, where there are discordant moves among major indices) and hypothetical scenarios (such as [[Page 7097]] hypothetical inversion or steepening of credit spread curves, and scenarios that are the opposite of certain of the historical scenarios). The amendments also add a new category of forward looking credit event scenarios, which are based on historically observed extreme but plausible market scenarios augmented with the occurrence of specified adverse credit events involving both clearing member reference entities and non-clearing member reference entities. In addition it is proposed to explicitly incorporate in the range of stress test scenarios the Opposite Lehman Brothers scenario, which is derived from the existing Lehman Brothers scenario by applying a factor of -0.75 to reflect the reduced magnitude of observed price increases during the considered period. The treatment of extreme market scenarios, which generally apply certain of the base ``extreme but plausible'' scenarios but with higher magnitudes of spread widening or tightening, would be clarified to state in greater detail the approach used for scaling up such factors. In particular, the approach reflects the CDS market structure and the resulting asymmetric effects of spread widening versus tightening. The amendments also remove certain specific scenario tables from the policy as unnecessary given that they are reflected in the revised general description. The Stress Testing Policy has also been amended to expressly address specific wrong-way risk in the calculation of hypothetical losses as part of stress testing. If a portfolio being stress tested presents specific wrong way risk (i.e., the risk arising where a clearing member has provided credit protection on itself or an affiliate), the calculation takes into account the full uncollateralized loss given default (in other words, it is assumed that the clearing member whose portfolio is being analyzed will default). The provisions of the Stress Testing Policy relating to the analysis of CDS guaranty fund adequacy are being revised to clarify that stress testing is conducted for both sold and bought credit protection, in order to test the main risk drivers of clearing member portfolios which would result in full depletion of the Guaranty Fund. With respect to hypothetical spread realizations, maximum levels would similarly be set to result in full depletion of the CDS guaranty fund. The amendments also incorporate the overall Board risk appetite and limit framework, in a manner similar to other Clearing House policies. The amendments make various other drafting updates and clarifications, including updating references to relevant Clearing House personnel titles, management structures and governance policies. The amendments further address annual validation of models supporting the policy, routine review of the policy by Clearing House personnel, the CDS Risk Committee and Board Risk Committee, and procedures for escalation and notification of breaches of relevant thresholds. (b) Statutory Basis ICE Clear Europe believes that the changes described herein are consistent with the requirements of Section 17A of the Act \5\ and the regulations thereunder applicable to it, and in particular are consistent with the prompt and accurate clearance of 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 ICE Clear Europe or for which it is responsible and the protection of investors and the public interest, within the meaning of Section 17A(b)(3)(F) of the Act.\6\ ICE Clear Europe is implementing the amendments in order to clarify the stress scenarios being tested as well as make certain enhancements to elements of its stress testing practices. These include addressing specific wrong way risk, introduction of new forward looking credit event stress testing scenarios, and clarification of the scaling factors used to generate extreme spread widening and tightening scenarios. The amendments do not affect the Rules or Procedures, and do not otherwise affect the rights or obligations of clearing members. In ICE Clear Europe's view, the amendments will thus enhance its ongoing stress testing practices and strengthen its risk management infrastructure, consistent with the prompt and accurate clearance and settlement of transactions and the protection of market participants and the public interest, within the meaning of Section 17A(b)(3)(F) of the Act.\7\ In addition, the amendments are for similar reasons consistent with, and will facilitate compliance with, the specific stress testing requirements of Rule 17Ad-22(e)(4)(vi).\8\ --------------------------------------------------------------------------- \5\ 15 U.S.C. 78q-1. \6\ 15 U.S.C. 78q-1(b)(3)(F). \7\ 15 U.S.C. 78q-1(b)(3)(F). \8\ 17 CFR 240.17Ad-22(e)(4)(vi). --------------------------------------------------------------------------- (B) Clearing Agency's Statement on Burden on Competition ICE Clear Europe does not believe the proposed changes to the rules would have any impact, or impose any burden, on competition not necessary or appropriate in furtherance of the purpose of the Act. The amendments will solely affect the method and factors utilized by ICE Clear Europe for purposes of CDS stress testing. ICE Clear Europe is not changing the Rules or Procedures, or the rights or obligations of Clearing Members. As a result, ICE Clear Europe does not believe the amendments would adversely affect Clearing Members, materially affect the cost of clearing, adversely affect access to clearing in CDS Contracts for Clearing Members or their customers, or otherwise adversely affect competition in clearing services. Although revisions to stress testing could ultimately affect the required level of margin or guaranty fund contributions, any such changes would, in ICE Clear Europe's view, be appropriate in furtherance of the risk management of the Clearing House, consistent with the standards of the Act and regulations thereunder. As a result, ICE Clear Europe does not believe that the amendments would impose any impact or burden on competition that is not appropriate in furtherance of the purpose 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. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change or (B) institute proceedings to determine whether the proposed rule change should be disapproved. The proposal shall not take effect until all regulatory actions required with respect to the proposal are completed. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and [[Page 7098]] arguments concerning the foregoing, including whether the proposed rule change 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 rule-comments@sec.gov. Please include File Number SR-ICEEU-2018-001 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-2018-001. 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 website (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change 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 website viewing and printing in the Commission's Public Reference Section, 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 website at https://www.theice.com/clear-europe/regulation#rule-filings. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ICEEU-2018-001 and should be submitted on or before March 9, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\9\ --------------------------------------------------------------------------- \9\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-03201 Filed 2-15-18; 8:45 am] BILLING CODE 8011-01-P
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III. Date of Effectiveness of the inspection and copying at the principal changes to the ICE Clear Europe
Proposed Rule Change and Timing for office of the Exchange. All comments Clearing Rules or Procedures.3
Commission Action received will be posted without change. II. Clearing Agency’s Statement of the
Within 45 days of the date of Persons submitting comments are Purpose of, and Statutory Basis for, the
publication of this notice in the Federal cautioned that we do not redact or edit Proposed Rule Change
Register or within such longer period personal identifying information from
comment submissions. You should In its filing with the Commission, ICE
up to 90 days (i) as the Commission may
submit only information that you wish Clear Europe included statements
designate if it finds such longer period
to make available publicly. All concerning the purpose of and basis for
to be appropriate and publishes its
submissions should refer to File the proposed rule change and discussed
reasons for so finding or (ii) as to which
Number SR–CBOE–2018–016, and any comments it received on the
the Exchange consents, the Commission
proposed rule change. The text of these
will: should be submitted on or before March
statements may be examined at the
A. By order approve or disapprove 9, 2018.
places specified in Item IV below. ICE
such proposed rule change, or For the Commission, by the Division of Clear Europe has prepared summaries,
B. institute proceedings to determine Trading and Markets, pursuant to delegated set forth in sections (A), (B), and (C)
whether the proposed rule change authority.15 below, of the most significant aspects of
should be disapproved.
Eduardo A. Aleman, such statements.
IV. Solicitation of Comments Assistant Secretary. (A) Clearing Agency’s Statement of the
Interested persons are invited to [FR Doc. 2018–03197 Filed 2–15–18; 8:45 am] Purpose of, and Statutory Basis for, the
submit written data, views, and BILLING CODE 8011–01–P Proposed Rule Change
arguments concerning the foregoing,
including whether the proposed rule (a) Purpose
change is consistent with the Act. SECURITIES AND EXCHANGE ICE Clear Europe proposes revising its
Comments may be submitted by any of COMMISSION Stress Testing Policy, among other
the following methods: matters, to recategorize certain CDS
[Release No. 34–82692; File No. SR–ICEEU– stress testing scenarios, address specific
Electronic Comments
2018–001] wrong way risk, introduce new forward
• Use the Commission’s internet looking credit event scenarios and make
comment form (http://www.sec.gov/ Self-Regulatory Organizations; ICE certain other enhancements and
rules/sro.shtml); or Clear Europe Limited; Notice of Filing clarifications. These revisions do not
• Send an email to rule-comments@ of Proposed Rule Change, Security- involve any changes to the ICE Clear
sec.gov. Please include File Number SR– Based Swap Submission or Advance Europe Clearing Rules or Procedures.4
CBOE–2018–016 on the subject line. Notice Relating to Amendments to the ICE Clear Europe currently maintains
Paper Comments ICE Clear Europe CDS Clearing Stress a broad array of stress testing scenarios
Testing Policy (the ‘‘Stress Testing that are applied to portfolios of
• Send paper comments in triplicate positions as part of its risk management
Policy’’)
to Secretary, Securities and Exchange practices for the CDS product category.
Commission, 100 F Street NE, February 12, 2018. As part of the existing policy, the
Washington, DC 20549–1090. Clearing House management regularly
Pursuant to Section 19(b)(1) of the
All submissions should refer to File Securities Exchange Act of 1934 evaluates whether to retire certain
Number SR–CBOE–2018–016. This file scenarios or portfolios as outdated or
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
number should be included on the otherwise inapplicable, and whether to
notice is hereby given that on February
subject line if email is used. To help the add new scenarios or portfolios for
6, 2018, ICE Clear Europe Limited (‘‘ICE
Commission process and review your testing purposes. ICE Clear Europe is
Clear Europe’’) filed with the Securities
comments more efficiently, please use not proposing to change the frequency
and Exchange Commission
only one method. The Commission will of stress testing or of its regular reviews
(‘‘Commission’’) the proposed rule of stress testing scenarios, models and
post all comments on the Commission’s
internet website (http://www.sec.gov/ changes described in Items I, II, and III underlying parameters and
rules/sro.shtml). Copies of the below, which Items have been prepared assumptions.
submission, all subsequent by ICE Clear Europe. The Commission is The amendments generally reorganize
amendments, all written statements publishing this notice to solicit the existing stress testing scenarios into
with respect to the proposed rule comments on the proposed rule change two broad categories: Extreme but
change that are filed with the from interested persons. plausible market scenarios and extreme
Commission, and all written I. Clearing Agency’s Statement of the market scenarios. Extreme but plausible
communications relating to the Terms of Substance of the Proposed scenarios include both historical
proposed rule change between the Rule Change scenarios (such as those involving the
Commission and any person, other than 2008/2009 credit crisis, the Lehman
those that may be withheld from the ICE Clear Europe proposes revising its Brothers default and discordant
public in accordance with the Stress Testing Policy, among other scenarios, where there are discordant
provisions of 5 U.S.C. 552, will be matters, to recategorize certain CDS moves among major indices) and
daltland on DSKBBV9HB2PROD with NOTICES
available for website viewing and stress testing scenarios and make certain hypothetical scenarios (such as
printing in the Commission’s Public other enhancements and clarifications.
Reference Room, 100 F Street NE, These revisions do not involve any 3 Capitalized terms used but not defined herein
Washington, DC 20549 on official have the meanings specified in the ICE Clear
Europe Clearing Rules (the ‘‘Rules’’).
business days between the hours of 15 17 CFR 200.30–3(a)(12). 4 Capitalized terms used but not defined herein
10:00 a.m. and 3:00 p.m. Copies of such 1 15 U.S.C. 78s(b)(1). have the meanings specified in the ICE Clear
filing also will be available for 2 17 CFR 240.19b–4. Europe Clearing Rules (the ‘‘Rules’’).
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arguments concerning the foregoing, For the Commission, by the Division of international expositions is contained in
including whether the proposed rule Trading and Markets, pursuant to delegated Section 102(a)(3) of the Mutual
authority.9 Educational and Cultural Exchange Act
change is consistent with the Act.
Comments may be submitted by any of Eduardo A. Aleman, of 1961, as amended (22 U.S.C.
the following methods: Assistant Secretary. 2452(a)(3)), also known as the Fulbright-
[FR Doc. 2018–03201 Filed 2–15–18; 8:45 am] Hays Act. The purpose of the Act is ‘‘to
Electronic Comments BILLING CODE 8011–01–P enable the Government of the United
States to increase mutual understanding
• Use the Commission’s internet
between the people of the United States
comment form (http://www.sec.gov/ and the people of other countries . . .
DEPARTMENT OF STATE
rules/sro.shtml) or to strengthen the ties which unite us
• Send an email to rule-comments@ [Public Notice: 10310] with other nations by demonstrating the
sec.gov. Please include File Number SR– Office of the Under Secretary of State educational and cultural interests,
ICEEU–2018–001 on the subject line. for Public Diplomacy and Public developments, and achievements of the
Affairs Request for Proposal (RFP) for people of the United States and other
Paper Comments nations . . . and thus to assist in the
the Fundraising, Project Management,
• Send paper comments in triplicate development of friendly, sympathetic
Design, Construction, Operation,
and peaceful relations between the
to Secretary, Securities and Exchange Disassembly and Removal of a USA
United States and the other countries of
Commission, 100 F Street NE, Pavilion at Expo 2020 Dubai
the world.’’ Pursuant to this authority,
Washington, DC 20549–1090. the Secretary of State has authorized the
AGENCY: Department of State.
All submissions should refer to File ACTION: Request for Proposals for the Under Secretary of State for Public
Number SR–ICEEU–2018–001. This file Design, Development, Installation, Diplomacy and Public Affairs to provide
number should be included on the Operation, and Final Disposition of a for U.S. participation in international
subject line if email is used. To help the U.S. Pavilion at Expo Dubai 2020. expositions abroad. The Expo Unit, in
Commission process and review your the Office of the Under Secretary for
SUMMARY: The Expo Unit within the Public Diplomacy and Public Affairs,
comments more efficiently, please use
Office of the Under Secretary of State for will represent the U.S. Government in
only one method. The Commission will
Public Diplomacy and Public Affairs of dealings with the organizers of Expo
post all comments on the Commission’s the U.S. Department of State requests 2020 Dubai and serve as the primary
internet website (http://www.sec.gov/ proposals from private U.S. individuals, point of contact with the selected
rules/sro.shtml). Copies of the firms, associations, educational applicant.
submission, all subsequent institutions, and organizations (for
amendments, all written statements profit and non-profit) for the Background
with respect to the proposed rule fundraising, project management, Expo 2020 Dubai is a large-scale,
change that are filed with the design, construction, operation, and universal exposition (also known as a
Commission, and all written disassembly and removal of a USA World’s Fair) registered by the Bureau of
communications relating to the Pavilion at Expo 2020 Dubai, in the International Expositions (BIE). The BIE
proposed rule change between the United Arab Emirates (UAE) (https:// is an international treaty organization
Commission and any person, other than expo2020dubai.ae/). The UAE is a established to regulate certain
those that may be withheld from the strong U.S. partner, and the largest international exhibitions. The United
public in accordance with the export market for U.S. goods and States rejoined the BIE on May 10, 2017.
provisions of 5 U.S.C. 552, will be services in the Middle East. The six- Invitations to world’s fairs are extended
available for website viewing and month long Expo 2020 Dubai from from the host government to other
printing in the Commission’s Public October 2020-April 2021 will be the first governments.
Expo (also known as World’s Fair) to The Government of the United Arab
Reference Section, 100 F Street NE,
take place in the Middle East, North Emirates (UAE) has invited the United
Washington, DC 20549, on official States to participate in Expo 2020 Dubai
business days between the hours of Africa, or South Asia and is expected to
attract 25 million visitors and coincides and, on October 19, 2017, the Secretary
10:00 a.m. and 3:00 p.m. Copies of such of State informed the UAE Government
filings will also be available for with the UAE’s 50th founding
anniversary. Proposals from non-U.S. of the U.S. Government’s intention to
inspection and copying at the principal participate with an official USA
citizens or non-U.S. firms or
office of ICE Clear Europe and on ICE Pavilion, contingent upon identification
organizations shall be deemed ineligible
Clear Europe’s website at https:// of a viable private sector partner and
for consideration.
www.theice.com/clear-europe/ successful fundraising efforts. The Expo
DATES: Submit proposals on or before
regulation#rule-filings. officially opens on October 20, 2020,
April 17, 2018.
All comments received will be posted and closes on April 10, 2021.
FOR FURTHER INFORMATION CONTACT: With a projected 25 million visitors,
without change. Persons submitting Matthew Asada, Dubai Expo 2020
comments are cautioned that we do not 70 percent of whom will come from
Project Manager, at expo@state.gov or by outside of the UAE, Expo 2020 Dubai
redact or edit personal identifying phone at: (202) 647–9905. offers an excellent opportunity to
information from comment submissions. SUPPLEMENTARY INFORMATION: inform and inspire foreign audiences—
daltland on DSKBBV9HB2PROD with NOTICES
You should submit only information
I. Description of Project especially those residing in the Middle
that you wish to make available
East, South Asia, and East Asia—about
publicly. All submissions should refer Authority the United States, its people, values and
to File Number SR–ICEEU–2018–001 Overall authority for Department of foreign policies, and to promote U.S.
and should be submitted on or before State support for U.S. participation in economic and commercial interests.
March 9, 2018. Expo 2020 Dubai is the first World’s
9 17 CFR 200.30–3(a)(12). Fair hosted in the Middle East. U.S.
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Document Created: 2018-02-16 00:55:18
Document Modified: 2018-02-16 00:55:18
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 83 FR 7096 |
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