Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change To Provide for a Customer Clearing Model for CDS Products and To Amend, Clarify, and Consolidate Certain Rules and Procedures, 9088-9090 [2013-02711]
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Federal Register / Vol. 78, No. 26 / Thursday, February 7, 2013 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change
does not (i) Significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 10 and Rule 19b–4(f)(6)(iii)
thereunder.11
A proposed rule change filed under
Rule 19b–4(f)(6) 12 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii) 13 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
immediately upon filing.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest, as it
will allow the pilot program to continue
uninterrupted, thereby avoiding the
investor confusion that could result
from a temporary interruption in the
pilot program. For this reason, the
Commission designates the proposed
rule change to be operative upon
filing.14
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
10 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6)(iii). As required under
Rule 19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
12 17 CFR 240.19b–4(f)(6).
13 17 CFR 240.19b–4(f)(6)(iii).
14 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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:
2013–06 and should be submitted on or
before February 28, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–02746 Filed 2–6–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–68812; File No. SR–ICEEU–
2012–09]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–EDGX–2013–06 on the
subject line.
Self-Regulatory Organizations; ICE
Clear Europe Limited; Order Approving
Proposed Rule Change To Provide for
a Customer Clearing Model for CDS
Products and To Amend, Clarify, and
Consolidate Certain Rules and
Procedures
Paper Comments
February 1, 2013.
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
I. Introduction
On October 22, 2012, ICE Clear
Europe Limited (‘‘ICE Clear Europe’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change SR–ICEEU–
2012–09 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 November 9, 2012.3 The
Commission received one comment
letter to the proposed rule change.4 This
order approves the proposed rule
change.
All submissions should refer to File
Number SR–EDGX–2013–06. 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 (https://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 the
filing also will be available for
inspection and copying at the principal
office of the Exchange. 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–EDGX–
PO 00000
Frm 00062
Fmt 4703
Sfmt 4703
II. Description of the Proposed Rule
Change
The principal purpose of the
proposed rule change is to provide for
a Customer CDS Clearing Model
whereby customers of ICE Clear Europe
Clearing Members have the ability to
clear CDS products through ICE Clear
Europe. In addition, ICE Clear Europe is
amending its Rules and CDS Procedures
in order to implement certain rule
changes that are unrelated to Customer
CDS Clearing Model.
Currently, ICE Clear Europe Clearing
Members may clear CDS products at ICE
Clear Europe through their proprietary
accounts only and not on behalf of their
customers. The Customer CDS Clearing
Model extends ICE Clear Europe’s
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 68152
(November 5, 2012), 77 FR 67427 (November 9,
2012).
4 Letter from Kermit Kubitz (November 30, 2012).
1 15
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Federal Register / Vol. 78, No. 26 / Thursday, February 7, 2013 / Notices
customer clearing models that are
currently available for other products to
CDS products, with certain
modifications appropriate for the nature
of the product.
The Customer CDS Clearing Model
builds on the customer clearing
framework available for other products
at ICE Clear Europe. US customers must
clear through a registered futures
commission merchant and/or brokerdealer (depending on whether the
product is an index CDS or single-name
CDS), consistent with the requirements
of the Commodity Exchange Act and the
Act, as applicable. Non-US customers
may clear through a non-US clearing
member in accordance with applicable
local laws or through a registered
futures commission merchant and/or
broker-dealer.
The terms of the Customer CDS
Clearing Model, as well as various
related enhancements to the clearing
model, were proposed as amendments
to the ICE Clear Europe Rules and CDS
Procedures. Changes to Part 1 of the
Rules clarify and conform existing
definitions to the Customer CDS
Clearing Model, create new CDSspecific definitions used in new
operative provisions, clarify customer
and proprietary account class
definitions that are relevant to CDS, and
clarify general standards of Clearing
Member responsibility and liability.
Other changes reflect the incorporation
into the Rules of provisions that had
been in a separate master agreement
entered into between the Clearing
Member and ICE Clear Europe. Changes
to Part 2 of the Rules provide updates
related to anti-money laundering
legislation applicable to customers,
clarify membership standards for
Clearing Members, clarify the
obligations of Clearing Members with
respect to customer accounts and
proprietary accounts and clarify and/or
restate certain provisions relating to
Clearing Member default and
termination of clearing membership.
Changes to Part 3 of the Rules clarify
certain payment mechanics for Clearing
Members with respect to amounts owed
by their customers and include a waiver
of set-off by Clearing Members. Changes
to Part 4 of the Rules reflect
amendments to the contract rights and
obligations of ICE Clear Europe and
Clearing Members, particularly in the
context of the clearing of CDS on behalf
of customers. Changes to Part 5 of the
Rules address the delivery of margin
from customers to Clearing Members
and add provisions dealing with transfer
of margin by security interest rather
than title transfer. Changes to Part 6 of
the Rules clarify the procedures for
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providing notice of position limits and
clarify further how position limits apply
in instances where contracts arise due to
firm trades, voiding, or error policies.
Changes to Parts 7 and 8 of the Rules
clarify that references in those parts of
the Rules (covering Settlement and
Delivery of Futures (Part 7) and Options
(Part 8)), which relate solely to Energy
contracts, do not apply to CDS Customer
Accounts or customers in the context of
CDS clearing. Changes to Part 9 of the
Rules consolidate and clarify the
respective rights and obligations of ICE
Clear Europe and Clearing Members in
the case of a Clearing Member or ICE
Clear Europe default and the procedures
to be followed in determining a net sum
payable to or receivable from a
defaulting Clearing Member. Changes to
Part 10 of the Rules provide more detail
regarding how a disciplinary or appeals
panel could impose a sanction on a
customer and determine liability or
responsibility in any instance where
there is joint misfeasance. Changes to
Part 11 relate to the operation of the ICE
Clear Europe guaranty funds, including
changes relating to the introduction of
customer clearing. ICE Clear Europe will
continue to operate separate guaranty
funds for CDS products and for energy
products. Changes to Part 12 of the
Rules conform to the new terms and
definitions that are part of the Customer
CDS Customer Model. Changes to Part
15 of the Rules provide provisions
dealing with CDS contracts cleared in
the customer account (including the
representation of customer transactions
in relevant books and records and
treatment of customer transactions in
the case of credit events) and the
elimination of the separate master
agreement previously entered into
between CDS Clearing Members and ICE
Clear Europe. Changes to Part 16 of the
Rules address the addition of CDS
clearing to the ICE Clear Europe FCM
customer clearing model and certain
other clarifications and enhancements
requested by CDS Clearing Members.
ICE Clear Europe is also establishing
in Exhibit 1 of the Rules certain
standard terms (the Customer-CM CDS
Transactions Standard Terms) that will
be applicable to Customer-CM CDS
Transactions, which are CDS
transactions between a Non-FCM/BD
Clearing Member and a non-U.S.
customer. Under the changes to Rule
1516, all Non-FCM/BD Clearing
Members must agree to the applicability
of these terms as between them and
each of their customers. The Standard
Terms provisions, among other things,
ensure that the terms of Customer-CM
CDS Transactions mirror the terms of
PO 00000
Frm 00063
Fmt 4703
Sfmt 4703
9089
the cleared transaction, enable a
clearing member to pass on clearinghouse performance (or nonperformance) to their customers,
facilitate the provision of margin to ICE
Clear Europe, and amend provisions in
underlying agreements relating to events
of default and close-out in order to
ensure that the porting of contracts and
margin under the default rules will be
effective. In addition, various consents
must be supplied for ICE Clear Europe
to update customer records in DTCC
and receive other information as
required relating to customers.5
ICE Clear Europe is also modifying its
CDS Procedures. Changes to Part 1 of
the CDS Procedures clarify and conform
existing definitions to the Customer
CDS Clearing Model, as well as add new
definitions used in new operative
provisions. Changes to Part 2 of the CDS
Procedures clarify and conform
membership requirements to standards
implemented as a result of the DoddFrank Act. Changes to Part 3 of the CDS
Procedures delete a reference to CDS
Operational Procedures, which
document has become obsolete in light
of the changes related to customer
clearing. Changes to Part 4 of the CDS
Procedures update information that
must be provided with respect to CDS
contracts and procedures for submission
of CDS contracts for clearing. Changes to
Part 5 of the CDS Procedures address
customer clearing in the context of the
CDS Default Committee procedures. Part
6 of the CDS Procedures was removed
because it is no longer necessary in light
of ICE Clear Europe’s use of
determinations made by the ISDA
Determinations Committees with
respect to credit and succession events.
Changes to Part 7 address restructuring
as a credit event with respect to CDS
contracts cleared in the customer
account, including the processing for
triggering settlement of such contracts.
Changes to Part 8 of the CDS Procedures
clarify the procedures for listing new
CDS Contracts, in particular to enable
ICE Clear Europe to respond in timely
fashion to any prohibition on trading in
CDS imposed under the EU Short
Selling Regulation (Regulation 236/2012
dated 14 March 2012). Changes to Part
9 of the CDS Procedures include various
provisions previously included in the
separate master agreement between CDS
Clearing Members and ICE Clear Europe
as well as certain tax provisions relevant
to customer clearing. These updated
provisions apply to both customer
5 As noted above, US customers must clear
through an FCM/BD Clearing Member. The
Customer-CM CDS Transactions Standard Terms
will not apply to that relationship.
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9090
Federal Register / Vol. 78, No. 26 / Thursday, February 7, 2013 / Notices
positions and proprietary positions of
CDS Clearing Members. Changes to Part
10 of the CDS Procedures update the
cross-references and definitions relevant
to customer clearing as they relate to
Index CDS Contracts. Changes to Part 11
of the CDS Procedures update the crossreferences and definitions relevant to
customer clearing as they relate to
Single Name CDS Contracts. Changes to
Part 12 of the CDS Procedures update
the cross-references and the definitions
relevant to customer clearing with
respect to Sovereign Contracts. Changes
to Part 13 of the CDS Procedures add
certain general procedures relating to
customer clearing of CDS contracts.
III. Comment
The Commission received one
comment to the proposed rule change.
The comment concerned ICE Clear
Europe’s requirements under the
Exchange Act, including but not limited
to recordkeeping and reporting
requirements that are outside of the
scope of this proposal. The Commission
notes, however, that ICE Clear Europe,
as a clearing agency registered with the
Commission, is fully subject to the
Exchange Act and all applicable rules
and regulations promulgated thereto.
mstockstill on DSK4VPTVN1PROD with NOTICES
IV. Discussion
Section 17A(b)(3)(F) of the Act 6
requires that, among other things, a
clearing agency be organized and its
rules 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
protect investors and the public interest.
After careful consideration, the
Commission finds that the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder. The implementation of the
Customer CDS Clearing Model may
promote the prompt and accurate
clearance of securities transactions,
derivatives agreements, contracts, and
transactions by extending clearing to a
broader segment of the CDS market.
V. 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 7
and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,8 that the
6 15
U.S.C. 78q–1(b)(3)(F).
U.S.C. 78q–1.
8 15 U.S.C. 78s(b)(2).
7 15
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proposed rule change (File No. SR–
ICEEU–2012–09) be, and hereby is,
approved.9
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.10
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–02711 Filed 2–6–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68799; File No. SR–
NASDAQ–2013–015]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
NASDAQ Rule 4120
February 1, 2013.
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 January
24, 2013, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by NASDAQ. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The NASDAQ Stock Market LLC
proposes to correct an erroneous
deletion from NASDAQ Rule
4120(c)(7)(B) related to the
randomization period conducted prior
to the IPO Cross under NASDAQ Rule
4753. The Exchange has designated the
proposed changes herein as
immediately effective.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.cchwallstreet.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
9 In approving this proposed rule change the
Commission has considered the proposed rule’s
impact of efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
10 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b-4.
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange 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.
The Exchange 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 Exchange hereby amends
NASDAQ Rule 4120(c)(7)(B) which
governs the orderly launch of trading in
initial public offerings (‘‘IPOs’’) of
NASDAQ-listed securities. Specifically,
NASDAQ is amending Rule
4120(c)(7)(B) to insert language that
describes the randomization period of
zero to fifteen seconds that
automatically occurs prior to the IPO
Cross set forth in NASDAQ Rule 4753.
The randomization period is designed to
prevent gaming of the IPO Cross by
delaying for a variable amount of time
the precise moment of execution of each
IPO Cross. Although NASDAQ’s
execution system currently includes and
for years has included a randomization
period for each IPO Cross, the language
describing the randomization period
was erroneously removed from Rule
4120(c)(7)(B).
On August 20, 2007, NASDAQ filed
SR–NASDAQ–2007–073 (‘‘Original Halt
Cross Filing’’) which, among other
things, removed from Rule 4120(b)(7)(A)
the rule language accurately describing
the randomization period prior to the
launch of the NASDAQ Halt Cross. The
purpose section of the Original Halt
Cross Filing stated as a rationale that:
The randomization period was designed to
deter market participants from timing their
participation in a way that harmed other
participants. This provision, however, results
in other markets trading after the issue has
re-opened but prior to NASDAQ restarting
trading using the Halt Cross. NASDAQ
believe[s] that it is confusing and disruptive
to market participants for NASDAQ, the
listing market, to continue a halt after other
market centers have resumed trading and,
therefore, proposes to eliminate the random
period prior to the execution of the Halt
Cross.
This explanation focuses on Halt
Crosses that NASDAQ initiates
following halts of stocks that have
E:\FR\FM\07FEN1.SGM
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]]>Agencies
[Federal Register Volume 78, Number 26 (Thursday, February 7, 2013)]
[Notices]
[Pages 9088-9090]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02711]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68812; File No. SR-ICEEU-2012-09]
Self-Regulatory Organizations; ICE Clear Europe Limited; Order
Approving Proposed Rule Change To Provide for a Customer Clearing Model
for CDS Products and To Amend, Clarify, and Consolidate Certain Rules
and Procedures
February 1, 2013.
I. Introduction
On October 22, 2012, ICE Clear Europe Limited (``ICE Clear
Europe'') filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change SR-ICEEU-2012-09 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 November 9, 2012.\3\ The
Commission received one comment letter to the proposed rule change.\4\
This order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 68152 (November 5,
2012), 77 FR 67427 (November 9, 2012).
\4\ Letter from Kermit Kubitz (November 30, 2012).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The principal purpose of the proposed rule change is to provide for
a Customer CDS Clearing Model whereby customers of ICE Clear Europe
Clearing Members have the ability to clear CDS products through ICE
Clear Europe. In addition, ICE Clear Europe is amending its Rules and
CDS Procedures in order to implement certain rule changes that are
unrelated to Customer CDS Clearing Model.
Currently, ICE Clear Europe Clearing Members may clear CDS products
at ICE Clear Europe through their proprietary accounts only and not on
behalf of their customers. The Customer CDS Clearing Model extends ICE
Clear Europe's
[[Page 9089]]
customer clearing models that are currently available for other
products to CDS products, with certain modifications appropriate for
the nature of the product.
The Customer CDS Clearing Model builds on the customer clearing
framework available for other products at ICE Clear Europe. US
customers must clear through a registered futures commission merchant
and/or broker-dealer (depending on whether the product is an index CDS
or single-name CDS), consistent with the requirements of the Commodity
Exchange Act and the Act, as applicable. Non-US customers may clear
through a non-US clearing member in accordance with applicable local
laws or through a registered futures commission merchant and/or broker-
dealer.
The terms of the Customer CDS Clearing Model, as well as various
related enhancements to the clearing model, were proposed as amendments
to the ICE Clear Europe Rules and CDS Procedures. Changes to Part 1 of
the Rules clarify and conform existing definitions to the Customer CDS
Clearing Model, create new CDS-specific definitions used in new
operative provisions, clarify customer and proprietary account class
definitions that are relevant to CDS, and clarify general standards of
Clearing Member responsibility and liability. Other changes reflect the
incorporation into the Rules of provisions that had been in a separate
master agreement entered into between the Clearing Member and ICE Clear
Europe. Changes to Part 2 of the Rules provide updates related to anti-
money laundering legislation applicable to customers, clarify
membership standards for Clearing Members, clarify the obligations of
Clearing Members with respect to customer accounts and proprietary
accounts and clarify and/or restate certain provisions relating to
Clearing Member default and termination of clearing membership. Changes
to Part 3 of the Rules clarify certain payment mechanics for Clearing
Members with respect to amounts owed by their customers and include a
waiver of set-off by Clearing Members. Changes to Part 4 of the Rules
reflect amendments to the contract rights and obligations of ICE Clear
Europe and Clearing Members, particularly in the context of the
clearing of CDS on behalf of customers. Changes to Part 5 of the Rules
address the delivery of margin from customers to Clearing Members and
add provisions dealing with transfer of margin by security interest
rather than title transfer. Changes to Part 6 of the Rules clarify the
procedures for providing notice of position limits and clarify further
how position limits apply in instances where contracts arise due to
firm trades, voiding, or error policies. Changes to Parts 7 and 8 of
the Rules clarify that references in those parts of the Rules (covering
Settlement and Delivery of Futures (Part 7) and Options (Part 8)),
which relate solely to Energy contracts, do not apply to CDS Customer
Accounts or customers in the context of CDS clearing. Changes to Part 9
of the Rules consolidate and clarify the respective rights and
obligations of ICE Clear Europe and Clearing Members in the case of a
Clearing Member or ICE Clear Europe default and the procedures to be
followed in determining a net sum payable to or receivable from a
defaulting Clearing Member. Changes to Part 10 of the Rules provide
more detail regarding how a disciplinary or appeals panel could impose
a sanction on a customer and determine liability or responsibility in
any instance where there is joint misfeasance. Changes to Part 11
relate to the operation of the ICE Clear Europe guaranty funds,
including changes relating to the introduction of customer clearing.
ICE Clear Europe will continue to operate separate guaranty funds for
CDS products and for energy products. Changes to Part 12 of the Rules
conform to the new terms and definitions that are part of the Customer
CDS Customer Model. Changes to Part 15 of the Rules provide provisions
dealing with CDS contracts cleared in the customer account (including
the representation of customer transactions in relevant books and
records and treatment of customer transactions in the case of credit
events) and the elimination of the separate master agreement previously
entered into between CDS Clearing Members and ICE Clear Europe. Changes
to Part 16 of the Rules address the addition of CDS clearing to the ICE
Clear Europe FCM customer clearing model and certain other
clarifications and enhancements requested by CDS Clearing Members.
ICE Clear Europe is also establishing in Exhibit 1 of the Rules
certain standard terms (the Customer-CM CDS Transactions Standard
Terms) that will be applicable to Customer-CM CDS Transactions, which
are CDS transactions between a Non-FCM/BD Clearing Member and a non-
U.S. customer. Under the changes to Rule 1516, all Non-FCM/BD Clearing
Members must agree to the applicability of these terms as between them
and each of their customers. The Standard Terms provisions, among other
things, ensure that the terms of Customer-CM CDS Transactions mirror
the terms of the cleared transaction, enable a clearing member to pass
on clearing-house performance (or non-performance) to their customers,
facilitate the provision of margin to ICE Clear Europe, and amend
provisions in underlying agreements relating to events of default and
close-out in order to ensure that the porting of contracts and margin
under the default rules will be effective. In addition, various
consents must be supplied for ICE Clear Europe to update customer
records in DTCC and receive other information as required relating to
customers.\5\
---------------------------------------------------------------------------
\5\ As noted above, US customers must clear through an FCM/BD
Clearing Member. The Customer-CM CDS Transactions Standard Terms
will not apply to that relationship.
---------------------------------------------------------------------------
ICE Clear Europe is also modifying its CDS Procedures. Changes to
Part 1 of the CDS Procedures clarify and conform existing definitions
to the Customer CDS Clearing Model, as well as add new definitions used
in new operative provisions. Changes to Part 2 of the CDS Procedures
clarify and conform membership requirements to standards implemented as
a result of the Dodd-Frank Act. Changes to Part 3 of the CDS Procedures
delete a reference to CDS Operational Procedures, which document has
become obsolete in light of the changes related to customer clearing.
Changes to Part 4 of the CDS Procedures update information that must be
provided with respect to CDS contracts and procedures for submission of
CDS contracts for clearing. Changes to Part 5 of the CDS Procedures
address customer clearing in the context of the CDS Default Committee
procedures. Part 6 of the CDS Procedures was removed because it is no
longer necessary in light of ICE Clear Europe's use of determinations
made by the ISDA Determinations Committees with respect to credit and
succession events. Changes to Part 7 address restructuring as a credit
event with respect to CDS contracts cleared in the customer account,
including the processing for triggering settlement of such contracts.
Changes to Part 8 of the CDS Procedures clarify the procedures for
listing new CDS Contracts, in particular to enable ICE Clear Europe to
respond in timely fashion to any prohibition on trading in CDS imposed
under the EU Short Selling Regulation (Regulation 236/2012 dated 14
March 2012). Changes to Part 9 of the CDS Procedures include various
provisions previously included in the separate master agreement between
CDS Clearing Members and ICE Clear Europe as well as certain tax
provisions relevant to customer clearing. These updated provisions
apply to both customer
[[Page 9090]]
positions and proprietary positions of CDS Clearing Members. Changes to
Part 10 of the CDS Procedures update the cross-references and
definitions relevant to customer clearing as they relate to Index CDS
Contracts. Changes to Part 11 of the CDS Procedures update the cross-
references and definitions relevant to customer clearing as they relate
to Single Name CDS Contracts. Changes to Part 12 of the CDS Procedures
update the cross-references and the definitions relevant to customer
clearing with respect to Sovereign Contracts. Changes to Part 13 of the
CDS Procedures add certain general procedures relating to customer
clearing of CDS contracts.
III. Comment
The Commission received one comment to the proposed rule change.
The comment concerned ICE Clear Europe's requirements under the
Exchange Act, including but not limited to recordkeeping and reporting
requirements that are outside of the scope of this proposal. The
Commission notes, however, that ICE Clear Europe, as a clearing agency
registered with the Commission, is fully subject to the Exchange Act
and all applicable rules and regulations promulgated thereto.
IV. Discussion
Section 17A(b)(3)(F) of the Act \6\ requires that, among other
things, a clearing agency be organized and its rules 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 protect investors and the public
interest. After careful consideration, the Commission finds that the
proposed rule change is consistent with the Act and the rules and
regulations thereunder. The implementation of the Customer CDS Clearing
Model may promote the prompt and accurate clearance of securities
transactions, derivatives agreements, contracts, and transactions by
extending clearing to a broader segment of the CDS market.
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\6\ 15 U.S.C. 78q-1(b)(3)(F).
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V. 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 \7\ and the
rules and regulations thereunder.
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\7\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (File No. SR-ICEEU-2012-09) be,
and hereby is, approved.\9\
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\8\ 15 U.S.C. 78s(b)(2).
\9\ In approving this proposed rule change the Commission has
considered the proposed rule's impact of efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02711 Filed 2-6-13; 8:45 am]
BILLING CODE 8011-01-P
