
[Federal Register Volume 77, Number 85 (Wednesday, May 2, 2012)]
[Notices]
[Pages 26066-26067]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-10539]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66862; File No. SR-ICEEU-2012-04]


Self-Regulatory Organizations; ICE Clear Europe Limited; Order 
Approving Proposed Rule Change to Provide for a T+1 Settlement of the 
Initial Payment Related to the CDS Contracts Cleared by ICE Clear 
Europe Limited

April 26, 2012.

I. Introduction

    On March 6, 2012, ICE Clear Europe Limited (``ICE Clear Europe'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change SR-ICEEU-2012-04 pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'').\1\ The proposed rule 
change was published for comment in the Federal Register on March 19, 
2012.\2\ The Commission received no comment letters. For the reasons 
discussed below, the Commission is granting approval of the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 34-66581 (March 13, 
2012), 77 FR 16105 (March 19, 2012).
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II. Description

    ICE Clear Europe proposed rule amendments that were intended to 
modify the terms of each of the various CDS Contracts cleared by ICE 
Clear Europe (iTraxx Contracts, Standard European Corporate, and 
Sovereign Contracts) to make the Initial Payment \3\ date the first 
business day immediately following the trade date, provided that with 
respect to CDS Contracts that are accepted for clearing after the trade 
date, the Initial Payment date will be the date that is the first 
business day following the date when the CDS Contract is accepted for 
clearing. The

[[Page 26067]]

Initial Payment under a CDS Contract is established at the time the 
contract is executed and may be payable from either the protection 
buyer to the protection seller or vice versa. Under the current ICE 
Clear Europe Rules (by way of the incorporated ISDA Credit Derivatives 
Definitions), and consistent with practice in the market for uncleared 
credit default swaps, the Initial Payment is required to be made on the 
third business day following the trade date. ICE Clear Europe proposed 
to amend the definition of Initial Payment in its Clearing Rules to 
provide instead that the Initial Payment is to be made on the first 
business day following the trade date (or, if the transaction is 
accepted for clearing after the trade date, the Initial Payment is to 
be made on the first business day following the date of acceptance for 
clearing). ICE Clear Europe believes that this change from T+3 
settlement to T+1 settlement will reduce settlement risk for the 
clearinghouse and clearing members and improve margin efficiency (as 
margin requirements will no longer need to take into account the 
additional risk from a T+3 as opposed to a T+1 settlement rule). ICE 
Clear Europe's CDS Risk Committee approved the proposed rule changes.
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    \3\ Initial Payment means, in relation to a CDS Contract, the 
payment, if any, specified as the ``Initial Payment Amount'' (or, in 
relation to certain CDS Contracts relating to indices, as the 
``Additional Amount'') under the Contract Terms for such CDS 
Contract and, in relation to a Bilateral CDS Transaction, the 
payment, usually described therein as the ``Initial Payment Amount'' 
or ``Additional Amount,'' payable by one party thereto to the other 
on the third business day after the trade date of such Bilateral CDS 
Transaction. See ICE Clear Europe Clearing Rules, Section 1, Rule 
101.
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    The other proposed changes in the ICE Clear Europe Rules reflect 
updates to cross-references and defined terms and similar drafting 
clarifications, and do not affect the substance of the ICE Clear Europe 
Rules or cleared products.

III. Discussion

    Section 19(b)(2)(B) of the Act \4\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that such proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such organization. Section 17A(b)(3)(F) of the Act \5\ 
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.
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    \4\ 15 U.S.C. 78s(b)(2)(B).
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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    By accelerating the Initial Payment date, the proposed rule change 
will reduce settlement risk for the clearinghouse and clearing members 
and improve margin efficiency (as margin requirements will no longer 
need to take into account the additional risk from a T+3 as opposed to 
a T+1 settlement rule), thereby promoting the prompt and accurate 
clearance and settlement of derivative agreements, contracts, and 
transactions, and assuring the safeguarding of securities and funds 
which are in the custody or control of ICE Clear Europe. As a result, 
the proposed rule change is consistent with the requirements of Section 
17A(b)(3)(F) of the Act.

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 \6\ and the 
rules and regulations thereunder.
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    \6\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (File No. SR-ICEEU-2012-04) be, 
and hereby is, approved.\8\
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ 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).
    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Kevin O'Neill,
Deputy Secretary.
[FR Doc. 2012-10539 Filed 5-1-12; 8:45 am]
BILLING CODE 8011-01-P


