
[Federal Register Volume 81, Number 41 (Wednesday, March 2, 2016)]
[Notices]
[Pages 10949-10951]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04504]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77234; File No. SR-ICEEU-2016-004]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing of a Proposed Rule Change Relating to Additions to Permitted 
Cover

February 25, 2016.
    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 10, 2016, ICE Clear Europe Limited (``ICE Clear Europe'' or 
the ``Clearing House'') 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 primarily by 
ICE Clear Europe. The Commission is publishing this notice to solicit 
comments on the proposed rule change 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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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The principal purpose of the changes is to permit Clearing Members 
of ICE Clear Europe to provide additional categories of securities, 
including treasury bills and floating and inflation-linked government 
bonds (the ``Additional Permitted Cover'') to ICE Clear Europe to 
satisfy certain margin 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 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. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of ICE Clear Europe accepting the Additional 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.
    Specifically, the Additional Permitted Cover will include the 
following types of government securities: (i) U.S. Treasury floating-
rate notes (``UST FRNs''), (ii) Canadian government treasury bills and 
Canadian government real return bonds,\3\ (iii) Spanish government 
treasury bills (Letras del Tesoro), (iv) Swedish government treasury 
bills, (v) German government inflation-linked bonds (of two types: 
Deutsche Bundesrepublik Inflation-Linked Bonds and Bundesobligationen 
I/L), (vi) Japanese government CPI-linked bonds, and (vii) Swedish 
government inflation index-linked bonds.
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    \3\ Pursuant to confirmation via telephone and email with ICE 
Clear Europe's outside counsel on February 19 and 23, 2016, staff in 
the Division of Trading and Markets modified this sentence to add 
the reference to Canadian government real return bonds to conform to 
the proposed rule text.
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    ICE Clear Europe believes that the Additional Permitted Cover is of 
minimal credit risk, comparable to that of other sovereign debt 
currently accepted by ICE Clear Europe as Permitted Cover. 
Significantly, other debt obligations of the same governments that 
issue the Additional Permitted Cover are currently eligible as 
Permitted Cover. The Additional Permitted Cover consisting of treasury 
bills is substantially similar to existing forms of treasury bill 
Permitted Cover currently accepted by the Clearing House. In terms of 
the Additional Permitted Cover consisting of inflation-linked 
government bonds, ICE Clear Europe currently accepts similar bonds 
issued by other governments. As a result, ICE Clear Europe does not 
believe that such bonds would pose any additional or novel risks for 
the Clearing House. ICE Clear Europe further believes that the 
Additional Permitted Cover has demonstrated low volatility, including 
in stressed market conditions.
    Based on its analysis of the Additional Permitted Cover and its 
volatility and other characteristics, ICE Clear Europe will initially 
apply to the Additional Permitted Cover the same valuation haircuts as 
currently applied to currently accepted bonds of the same issuer and 
within the same maturity bucket. The Clearing House will review and 
modify such haircuts from time to time, in accordance with Clearing 
House's Collateral and Haircut Policy. In addition, ICE Clear Europe 
will impose both absolute limits and relative limits for each type of 
Additional Permitted Cover (other than U.S. Treasury obligations), 
consistent with the existing issuer limits for Permitted

[[Page 10950]]

Cover and the Collateral and Haircut Policy. As part of that policy, an 
additional haircut will apply where Additional Permitted Cover is used 
to cover a margin requirement denominated in a different currency, to 
cover the exchange rate risk.
    ICE Clear Europe will accept the Additional Permitted Cover in 
respect of original margin requirements for F&O Contracts and initial 
margin requirements for CDS Contracts. In addition, the UST FRNs will 
be accepted as Permitted Cover in respect of F&O and CDS guaranty fund 
contribution requirements. The Spanish and German securities 
constituting Additional Permitted Cover will also be accepted for the 
Euro-denominated component of the CDS guaranty fund. The other types of 
Additional Permitted Cover will not be accepted in respect of guaranty 
fund requirements. The Additional Permitted Cover cannot be used to 
satisfy variation margin requirements because variation margin must be 
paid in cash in the currency of the contract.
2. Statutory Basis
    ICE Clear Europe has identified Additional Permitted Cover as types 
of assets that are appropriate for Clearing Members to post in order to 
meet initial margin and original margin requirements for all product 
categories (and, to the extent noted above, guaranty fund 
requirements). ICE Clear Europe believes that accepting the Additional 
Permitted Cover is consistent with the requirements of Section 17A of 
the Act \4\ and the regulations thereunder applicable to it, and is 
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,\5\ in 
the same manner as other collateral currently accepted by ICE Clear 
Europe.
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    \4\ 15 U.S.C. 78q-1.
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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    ICE Clear Europe has determined, through analysis of the credit 
risk, liquidity, market risk, volatility and other trading 
characteristics of the Additional Permitted Cover, that such assets are 
appropriate for use as Permitted Cover for Clearing Members' 
obligations under the Rules, subject to the haircuts and limits to be 
imposed under the Collateral and Haircut Policy, consistent with the 
risk management of the Clearing House. In particular, the Additional 
Permitted Cover is a stable collateral type that presents minimal 
credit risk and low volatility. In this regard, the Additional 
Permitted Cover is similar to the other categories of sovereign debt 
that ICE Clear Europe currently accepts as permitted cover. Pursuant to 
the Collateral and Haircut Policy, haircuts for the Additional 
Permitted Cover will be established and reviewed by ICE Clear Europe 
periodically and modified as necessary. Use of Additional Permitted 
Cover will also be subject to absolute and relative limits, as 
discussed above, under the Collateral and Haircut Policy.
    For the reasons noted above, ICE Clear Europe believes that the 
acceptance of the Additional Permitted Cover is 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 amendments 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 will provide additional flexibility to Clearing Members by 
allowing the use, on an optional basis, of additional types of 
Permitted Cover. As a result, ICE Clear Europe does not believe the 
changes will adversely affect the cost to clearing members or other 
market participants of clearing services. The changes will otherwise 
not affect the terms or conditions of any cleared contract or the 
standards or requirements for participation in or use of the Clearing 
House. Accordingly, the changes should not, in the Clearing House's 
view, affect the availability of clearing or access to clearing 
services.

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

    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:

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-2016-004 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-2016-004. 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

[[Page 10951]]

should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-ICEEU-2016-004 
and should be submitted on or before March 23, 2016.
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    \6\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-04504 Filed 3-1-16; 8:45 am]
BILLING CODE 8011-01-P


