
[Federal Register Volume 79, Number 61 (Monday, March 31, 2014)]
[Notices]
[Pages 18098-18099]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-07036]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71791; File No. SR-ICEEU-2014-02]


Self-Regulatory Organizations; ICE Clear Europe Limited; Order 
Approving Proposed Rule Change Regarding New Permitted Cover

March 25, 2014.

I. Introduction

    On February 4, 2014, ICE Clear Europe Limited (``ICE Clear 
Europe'')

[[Page 18099]]

filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change SR-ICEEU-2014-02 pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder.\2\ The proposed rule change was published for comment in 
the Federal Register on February 18, 2014.\3\ The Commission received 
no comment letters regarding the proposed changes. 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\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-71519 (February 11, 
2014), 79 FR 9296 (February 18, 2014) (SR-ICEEU-2014-02).
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II. Description

    ICE Clear Europe is proposing to permit Clearing Members of ICE 
Clear Europe to post certain 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 in order 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.
    ICE Clear Europe has stated that the New Permitted Cover will 
provide its Clearing Members with a greater range of high-quality 
collateral that can be posted to ICE Clear Europe. Furthermore, ICE 
Clear Europe has stated that (1) 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, 
and (2) the New Permitted Cover has demonstrated low volatility in 
stressed and normal market conditions.
    ICE Clear Europe has established initial valuation haircut levels 
and concentration limitations for the New Permitted Cover, and proposes 
to review and modify such haircuts and limitations from time to time in 
accordance with the Rules and procedures.
    The New Permitted Cover 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 3%, except that New Permitted Cover with a 
maturity of more than eleven years will be subject to a valuation 
haircut of 5%. The concentration limitations apply on an aggregate 
basis across all product categories. Upon a Clearing Member's use of 
New Permitted Cover to cover a margin requirement denominated in a 
different currency, ICE Clear Europe has stated than an additional 
haircut will apply, in accordance with existing rules, in order to 
cover exchange rate risk.

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \4\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if the 
Commission finds that such 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 \5\ 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 and for which it is 
responsible and, in general, to protect investors and the public 
interest.
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    \4\ 15 U.S.C. 78s(b)(2)(C).
    \5\ 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,\6\ as Clearing Members 
of ICE Clear Europe will have access to a greater range of collateral 
that ICE Clear Europe has determined to be of high quality to satisfy 
certain margin requirements, and the New Permitted Cover will be 
subject to appropriate valuation haircuts and concentration limits, 
which will be reviewed and modified periodically by ICE Clear Europe in 
accordance with its Rules and procedures. The proposed rule changes 
will thereby (1) promote the prompt and accurate clearance and 
settlement of securities transactions and, to the extent applicable, 
derivatives agreements, contracts, and transactions; and (2) help to 
protect investors and the public interest, consistent with the 
requirements of Section 17A(b)(3)(F) of the Act.\7\
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    \6\ 15 U.S.C. 78q-1.
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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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 \8\ and the 
rules and regulations thereunder.
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    \8\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (File No. SR-ICEEU-2014-02) be, 
and hereby is, approved.\10\
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    \9\ 15 U.S.C. 78s(b)(2).
    \10\ 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).
    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-07036 Filed 3-28-14; 8:45 am]
BILLING CODE 8011-01-P


