
[Federal Register Volume 80, Number 247 (Thursday, December 24, 2015)]
[Notices]
[Pages 80414-80416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32390]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76696; File No. SR-ICEEU-2015-020]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to ICC End-of-Day Price Discovery Policy

December 18, 2015.
    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 December 3, 2015, ICE Clear Europe Limited (``ICE Clear Europe'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule changes as described in Items I, II, and III below, which 
Items have been prepared primarily by ICE Clear Europe. ICE Clear 
Europe filed the proposed rule changes pursuant to Section 19(b)(3)(A) 
of the Act,\3\ and Rule 19b-4(f)(4)(i) \4\ thereunder, so that the 
proposal was effective upon filing with the Commission. The Commission 
is publishing this notice to solicit comments on the proposed rule 
changes from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(4)(i).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The principal purpose of the proposed rule changes is to revise the 
ICE Clear Europe End-of-Day Price Discovery Policy (the ``Price 
Discovery Policy'') to accommodate industry changes regarding the 
reduction of the frequency for which Single Name (``SN'') Credit 
Default Swap (``CDS'') contracts roll to the new on-the-run-contract.

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

1. Purpose
    ICE Clear Europe proposes revising its Price Discovery Policy to 
accommodate industry change regarding the reduction of the frequency 
for which SN CDS contracts roll to the new on-the-run-contract. The 
changes affect the labeling convention for cleared SN CDS contracts for 
price reporting purposes, but will not alter the terms of the contracts 
or the range of tenors of SN CDS contracts currently cleared by ICE 
Clear Europe.
    ICE Clear Europe believes such revisions will facilitate the prompt 
and accurate clearance and settlement of securities transactions and 
derivative agreements, contracts, and transactions cleared by ICE Clear 
Europe. The proposed revisions are described in detail as follows.
    As part of ICE Clear Europe's end-of-day price discovery process, 
ICE Clear Europe Clearing Members are required to submit end-of-day 
prices for specific instruments related to their open interest at ICE 
Clear Europe, in accordance with Rule 503(g) and the ICE Clear Europe 
Procedures. These end-of-day price submissions are used by ICE Clear 
Europe in its calculation of settlement prices.
    ICE Clear Europe refers to a group of SN instruments with the same 
risk sub-factor and coupon as a ``curve.'' Each point, or tenor, along 
the curve is labeled with a tenor name. Currently for SN instruments, 
the market convention is to describe tenors based on the period 
remaining until the scheduled termination date of the contract. Under 
this convention, the nearest-to-expiring contract is referred to as the 
0M tenor, the next nearest to expiring is referred to as the three 
month (3M) tenor, and so on (with scheduled termination dates spaced at 
3 month intervals), up to ten years (10Y). ICE Clear Europe supports 
the clearing of all 41 SN tenors from 0M to 10Y. As such, ICE Clear 
Europe also calculates settlement prices for the 41 SN tenors on the 
curve. However, ICE Clear Europe defines a subset of the 41 tenors as 
``benchmark-tenors'', which are tenors for which Clearing Members 
provide submissions in the end-of-day price discovery process. The nine 
benchmark tenors are 0M, 6M, 1Y, 2Y, 3Y, 4Y, 5Y, 7Y, and 10Y, which 
correspond to so-called ``on-the-run'' contracts.
    Currently, as a matter of CDS market practice, the on-the-run 
contract for a particular tenor is the contract expiring

[[Page 80415]]

on the next following quarterly International Money Market (``IMM'') 
dates (i.e., March 20, June 20, September 20, and December 20) for the 
relevant year. For example, the SN CDS contract expiring December 20, 
2020 will be considered the five-year on-the-run contract until 
December 20, 2015, from which time the contract expiring March 20, 2021 
will be viewed as the 5Y on-the-run contract, until the next quarterly 
roll date, etc. Accordingly, market participants seeking to maintain 
exposure at a particular CDS tenor will typically ``roll'' SN CDS 
contracts into the new on-the-run contract (i.e., terminate positions 
in the old on-the-run contract and establish positions in the new on-
the-run contract) on a quarterly basis on the IMM dates. To account for 
this practice, at each quarterly roll date, ICE Clear Europe re-labels 
the 41 SN tenors to reflect the rolling and expiration of contracts.
    The CDS industry has proposed reducing the frequency at which SN 
CDS contracts roll to the new on-the-run contract. Specifically, the 
CDS industry has proposed moving from quarterly roll dates to semi-
annual roll dates for SN CDS contracts. Under the revised approach, 
market participants are expected to roll SN CDS contracts only on the 
March 20 and September 20 IMM dates, and the on-the-run contracts will 
be determined based on the next following June 20 and December 20 
expiration dates. As a result, a particular contract tenor will 
generally remain the on-the-run contract for six months, rather than 
three.
    ICE Clear Europe proposes changes to its Price Discovery Policy to 
accommodate the change in roll frequency for on-the-run contracts. 
Under the revised policy, ICE Clear Europe will re-label scheduled 
termination dates with benchmark tenor names every six months, on the 
March 20 and September 20 IMM dates for CDS contracts (i.e., the on-
the-run roll dates). The re-labeling is based on the remaining time to 
maturity that will apply to a given scheduled termination date on the 
next quarterly IMM date (i.e. the next December 20 or June 20 standard 
maturity date). Upon the semi-annual re-labeling, the nearest to 
maturity contract is referred to as the 0M tenor, and the tenor label 
for each longer-date contract is based on that contract's time to 
maturity relative to the scheduled termination date labeled as the 0M 
tenor.
    The new nine benchmark tenors will be the 0/3M, 6M, 1Y, 2Y, 3Y, 4Y, 
5Y, 7Y and 10Y, which correspond to the on-the-run contracts for those 
tenors. Eight of the nine benchmark tenors remain constant and refer to 
individual scheduled termination dates that are fixed for the six-month 
periods between semi-annual re-labeling, specifically the 6M, 1Y, 2Y, 
3Y, 4Y, 5Y, 7Y, and 10Y. However, the 0M tenor matures three months 
after a semi-annual labeling, and ICE Clear Europe defines the first 
(shortest-dated) benchmark tenor as the 0M tenor from a semi-annual re-
labeling until the maturity of that tenor, and defines the first 
benchmark tenor as the 3M tenor from the maturity of the 0M tenor 
through the next semi-annual re-labeling. The label 0/3M tenor refers 
to this re-mapping of the first benchmark tenor to different IMM dates 
on a quarterly basis. Throughout the policy, references to the 0M SN 
tenor have been updated to 0/3M to reflect this change.
    Consistent with the approach being taken throughout the CDS market, 
the changes to accommodate the change in SN roll frequency will take 
effect with the December 20, 2015 roll.
2. Statutory Basis
    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 and to comply with the provisions of the Act and the rules 
and regulations thereunder. ICE Clear Europe believes that the proposed 
rule changes are consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to ICE Clear Europe, 
including Section 17(A)(b)(3)(F).\6\ ICE Clear Europe's end of day 
price discovery process allows ICE Clear Europe to determine reliable, 
market-driven prices for the CDS instruments it clears, which are in 
turn necessary to facilitate accurate daily settlement in such 
instruments. The proposed revisions to the Price Discovery Policy will 
accommodate industry changes regarding the reduction of the frequency 
for which SN CDS contracts roll to the new on-the-run contract, and in 
particular will enable ICE Clear Europe to continue to perform its end 
of day price discovery process in an effective manner in light of such 
industry changes. As such, the proposed changes are designed to promote 
the prompt and accurate clearance and settlement of securities 
transactions, derivatives agreements, contracts, and transactions 
within the meaning of Section 17A(b)(3)(F) \7\ of the Act.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ Id.
    \7\ Id.
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B. Self-Regulatory Organization'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 proposed 
changes are designed to accommodate industry changes regarding the 
reduction of the frequency for which SN CDS contracts roll to the new 
on-the-run-contract, and will apply uniformly across all market 
participants. ICE Clear Europe is not changing the products or tenors 
of SN CDS offered, and does not believe that the amendments will 
adversely affect access to clearing or the cost of clearing for 
Clearing Members or other market participants. Therefore, ICE Clear 
Europe does not believe the proposed rule changes impose any burden on 
competition that is inappropriate in furtherance of the purposes of the 
Act.

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.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule changes have become effective upon filing 
pursuant to Section 19(b)(3)(A) \8\ of the Act and Rule 19b-4(f)(4)(i) 
\9\ thereunder. The amendments principally effect a change in an 
existing service of a registered clearing agency that does not 
adversely affect the safeguarding of securities or funds in the custody 
or control of the clearing agency or for which it is responsible, and 
does not significantly affect the respective rights or obligations of 
the clearing agency or persons using the service. At any time within 60 
days of the filing of the proposed rule changes, the Commission 
summarily may temporarily suspend such rule changes if it appears to 
the Commission that such action is necessary or appropriate in the 
public interest, for the protection of investors, or otherwise

[[Page 80416]]

in furtherance of the purposes of the Act.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(4)(i).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
changes are consistent with the Act. Comments may be submitted by any 
of the following methods:

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-2015-020 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-2015-020. 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/clear-europe/regulation#rule-filings.
    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-2015-020 
and should be submitted on or before January 14, 2016.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-32390 Filed 12-23-15; 8:45 am]
 BILLING CODE 8011-01-P


