
[Federal Register Volume 79, Number 32 (Tuesday, February 18, 2014)]
[Notices]
[Pages 9296-9298]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-03375]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71519; File No. SR-ICEEU-2014-02]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing of Proposed Rule Change Regarding New Permitted Cover

February 11, 2014.
    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 11, 2014, ICE Clear Europe Limited (``ICE Clear Europe'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed changes to the rules as described in Items I, II, and III 
below, which Items have been prepared primarily by ICE Clear Europe. 
The Commission is publishing this notice to solicit comments on the 
proposed changes to the rules from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 9297]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The principal purpose of the change is to permit ICE Clear Europe 
Clearing Members to post additional categories of securities, including 
KfW Euro Benchmark Bonds (``KfWs'') and European Investment Bank Euro 
Area Reference Notes (``EIBs'', together with KfWs, the ``New Permitted 
Cover'') to ICE Clear Europe as permitted cover to meet initial margin, 
original margin and certain other margin requirements, including 
delivery margin requirements. The New Permitted Cover will not be 
accepted to satisfy variation margin requirements or guaranty fund 
requirements.

II. Self-Regulatory Organization'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 proposing the New 
Permitted Cover. 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 these statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of ICE Clear Europe accepting the New Permitted Cover 
is to provide its Clearing Members with a greater range of high-quality 
collateral that can be posted to ICE Clear Europe to satisfy certain 
margin requirements.
    ICE Clear Europe believes that the New Permitted Cover is of 
minimal credit risk comparable to that of other sovereign debt 
currently accepted by ICE Clear Europe as permitted cover for margin 
obligations. ICE Clear Europe further believes that the New Permitted 
Cover has demonstrated low volatility, including in stressed market 
conditions. Based on its analysis of the New Permitted Cover and its 
volatility and other characteristics, ICE Clear Europe has established 
initial valuation haircut levels for the New Permitted Cover, and will 
review and modify such haircuts from time to time in accordance with 
the Rules and procedures. In addition, each type of New Permitted Cover 
may only be used to satisfy margin requirements up to a specified 
concentration limit, which is subject to review and modification from 
time to time in accordance with the Rules and procedures. The 
concentration limit applies on an aggregate basis across all product 
categories.
    Specifically, KfWs and EIBs may only constitute up to 25% of a 
Clearing Member's total initial and original margin requirement, up to 
a maximum amount of EUR 30 million. The New Permitted Cover will be 
subject to a valuation haircut of three percent (3%), except that the 
New Permitted Cover with a maturity of more than eleven (11) years will 
be subject to a valuation haircut of five percent (5%).
    Consistent with existing ICE Clear Europe haircut policies, an 
additional haircut will apply where New Permitted Cover is used to 
cover a margin requirement denominated in a different currency, to 
cover the exchange rate risk.
    For the avoidance of doubt, the New Permitted Cover cannot be used 
to satisfy variation margin requirements because variation margin must 
be paid in cash in the currency of the contract. In addition, the New 
Permitted Cover will not be accepted in respect of guaranty fund 
requirements.
    ICE Clear Europe has identified New Permitted Cover as types of 
assets that would be appropriate for Clearing Members to post in order 
to meet initial margin and original margin requirements. ICE Clear 
Europe believes that accepting the New Permitted Cover is consistent 
with the requirements of Section 17A of the Act \3\ and the regulations 
thereunder applicable to it, including the standards under Rule 17Ad-
22,\4\ and is consistent with the prompt and accurate clearance of and 
settlement of securities transactions, the safeguarding of securities 
and funds in the custody or control of ICE Clear Europe and the 
protection of investors and the public interest, within the meaning of 
Section 17A(b)(3)(F) of the Act in the same manner as other collateral 
accepted by ICE Clear Europe.\5\ In addition, in ICE Clear Europe's 
view, acceptance of the New Permitted Cover will satisfy the financial 
resources requirements of Rule 17Ad-22. ICE Clear Europe has 
determined, through analysis of the credit risk, liquidity, market 
risk, volatility and other trading characteristics of the New Permitted 
Cover, that such assets are appropriate for use as permitted cover for 
Clearing Member's obligations under the Rules, subject to the haircuts 
and limits described above, consistent with the risk management of the 
clearing house. In particular, the New Permitted Cover is a stable 
collateral type that presents minimal credit risk and low volatility. 
In this regard, the New Permitted Cover is similar to the other 
categories of sovereign debt that ICE Clear Europe currently accepts as 
permitted cover. Pursuant to ICE Clear Europe Rule 502, haircuts will 
be reviewed by ICE Clear Europe periodically and ICE Clear Europe may 
modify the haircuts in its discretion as it determines to be 
appropriate. Use of New Permitted Cover will also be subject to 
concentration limits, as discussed above.
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    \3\ 15 U.S.C. 78q-1.
    \4\ 17 CFR 240.17Ad-22.
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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    For the reasons noted above, ICE Clear Europe believes that the 
proposed rule change and the New Permitted Cover are consistent with 
the requirements of Section 17A of the Act and regulations thereunder 
applicable to it.

B. Self-Regulatory Organization'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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments relating to the proposed changes to the rules have 
not been solicited or received. ICE Clear Europe will notify the 
Commission of any written comments received by ICE Clear Europe. The 
New Permitted Cover has been approved by both the Futures & Options and 
CDS Risk Committees.

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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
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:

[[Page 9298]]

Electronic Comments

     Use 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-2014-02 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

    All submissions should refer to File Number SR-ICEEU-2014-02. 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 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 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 you wish to make available 
publicly. All submissions should refer to File Number SR-ICEEU-2014-02 
and should be submitted on or before March 11, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-03375 Filed 2-14-14; 8:45 am]
BILLING CODE 8011-01-P


