Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filling of Proposed Rule Change To Provide for the Clearance of Additional Sovereign Contracts, 65443-65445 [2014-26120]
Download as PDF
<![CDATA[
Federal Register / Vol. 79, No. 213 / Tuesday, November 4, 2014 / Notices
to the benefit of investors and the
marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
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 (i)
as the Commission may designate up to
90 days of such date 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:
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
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–
NYSEArca–2014–120, and should be
submitted on or before November 25,
2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–26125 Filed 11–3–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
rmajette on DSK3VPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2014–120 on the subject
line.
[Release No. 34–73459; File No. SR–ICEEU–
2014–18]
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–NYSEArca–2014–120. 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
October 29, 2014.
VerDate Sep<11>2014
15:39 Nov 03, 2014
Jkt 235001
Self-Regulatory Organizations; ICE
Clear Europe Limited; Notice of Filling
of Proposed Rule Change To Provide
for the Clearance of Additional
Sovereign Contracts
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 October
20, 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
primarily prepared by ICE Clear Europe.
The Commission is publishing this
notice to solicit comments on the
proposed changes to the rules from
interested persons.
19 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
Frm 00072
Fmt 4703
Sfmt 4703
65443
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The principal purpose of the change
is to provide for the clearance of
additional CDS contracts that are
Western European sovereign CDS
contracts referencing the Kingdom of
Belgium and the Republic of Austria
(the ‘‘Additional WE Sovereign
Contracts’’).
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 Additional WE Sovereign
Contracts. 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 the proposed rule
change is for ICE Clear Europe to offer
clearing of Western European sovereign
CDS contracts referencing two
additional reference entities, the
Kingdom of Belgium and the Republic
of Austria. ICE Clear Europe currently
clears CDS contracts referencing four
other Western European sovereigns:
Ireland, the Republic of Italy, the
Portuguese Republic and the Kingdom
of Spain.3 ICE Clear Europe believes
clearance of the Additional WE
Sovereign Contracts will benefit the
markets for credit default swaps on
Western European sovereigns by
offering to market participants the
benefits of clearing, including reduction
in counterparty risk and safeguarding of
margin assets pursuant to Clearing
House rules.
The Additional WE Sovereign
Contracts will constitute ‘‘Non-STEC
Single Name Contracts’’ for purposes of
the CDS Procedures and accordingly
will be governed by Paragraph 10 of the
CDS Procedures, consistent with
treatment of the Western European
sovereign CDS contracts currently
cleared by ICE Clear Europe. Clearing of
the Additional WE Sovereign Contracts
will not require any changes to ICE
3 See Exchange Act Release No. 34–71920 (Apr.
9, 2014) (File No. SR–ICEEU–2014–04); 79 FR
21331 (Apr. 15, 2015) (order approving rule changes
to clear other Western European sovereign CDS
contracts) (the ‘‘Prior WE Sovereigns Order’’).
E:\FR\FM\04NON1.SGM
04NON1
65444
Federal Register / Vol. 79, No. 213 / Tuesday, November 4, 2014 / Notices
rmajette on DSK3VPTVN1PROD with NOTICES
Clear Europe’s existing Clearing Rules
and Procedures. In addition, clearing of
the Additional WE Sovereign Contracts
will not require any changes in ICE
Clear Europe’s risk management
framework (including relevant policies)
or margin model.4 ICE Clear Europe
believes that clearing of the proposed
Additional WE Sovereign Contracts is
consistent with the requirements of
Section 17A of the Act 5 and regulations
thereunder applicable to it, including
the standards under Rule 17Ad–22.6
The Additional WE Sovereign Contracts
are substantially similar to the other
Western European sovereign CDS
contracts currently cleared by ICE Clear
Europe. The additional contracts will be
cleared in the same manner as such
other Western European sovereign CDS
contracts, consistent with ICE Clear
Europe’s existing clearing arrangements
and related financial safeguards,
protections, risk management policies
and procedures and margin
methodology (including those
enhancements for Western European
sovereign contracts previously adopted
and approved in the Prior WE
Sovereigns Order). In ICE Clear Europe’s
view, clearing of the Additional WE
Sovereign CDS contracts, under such
terms and arrangements, is consistent
with the prompt and accurate clearance
of and settlement of securities
transactions and derivative agreements,
contracts and transactions cleared by
ICE Clear Europe, 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.7 Clearing of the
Additional WE Sovereign Contracts will
also satisfy the relevant requirements of
Rule 17Ad–22,8 as discussed below.
Financial Resources. ICE Clear Europe
will apply its existing margin
methodology for Western European
sovereign CDS contracts to the
Additional WE Sovereign Contracts. ICE
Clear Europe believes that this model
will provide sufficient margin to cover
its credit exposure to its clearing
members from clearing such contracts,
consistent with the requirements of Rule
17Ad–22(b)(2) and Rule 17Ad–
4 For a description of previously approved
changes to ICE Clear Europe’s risk management
framework to accommodate clearing of Western
European sovereign CDS contracts, see the Prior WE
Sovereigns Order. ICE Clear Europe has performed
a variety of empirical analyses related to clearing
of the Additional WE Sovereign Contracts under its
margin methodology, including back tests and
stress tests.
5 15 U.S.C. 78q–1.
6 17 CFR 240.17Ad–22.
7 15 U.S.C. 78q–1(b)(3)(F).
8 17 CFR 240.17Ad–22.
VerDate Sep<11>2014
15:39 Nov 03, 2014
Jkt 235001
22(d)(14).9 In addition, ICE Clear Europe
believes the CDS Guaranty Fund, under
its existing methodology, will, together
with the required margin, provide
sufficient financial resources to support
the clearing of Additional WE Sovereign
Contracts consistent with the
requirements of Rule 17Ad–22(b)(3).10
Operational Resources. ICE Clear
Europe will have the operational and
managerial capacity to clear the
Additional WE Sovereign Contracts as
of the commencement of clearing,
consistent with the requirements of Rule
17Ad–22(d)(4).11 ICE Clear Europe
believes that its existing systems used
for sovereign CDS contracts are
appropriately scalable to handle the
clearing of the Additional WE Sovereign
Contracts.
Settlement. ICE Clear Europe will use
its existing settlement procedures
(including for physical settlements),
account structures and approved
financial institutions as used in other
sovereign CDS clearing for the
Additional WE Sovereign Contracts. ICE
Clear Europe believes that clearing of
the Additional WE Sovereign Contracts
will therefore be consistent with the
requirements of Rule 17Ad–22(d)(5),
(12) and (15).12
Default Procedures. ICE Clear
Europe’s existing Rules and default
management policies and procedures for
CDS will apply to the Additional WE
Sovereign Contracts. ICE Clear Europe
believes that the Rules and procedures
allow for it to take timely action to
contain losses and liquidity pressures
and to continue meeting its obligations
in the event of clearing member
insolvencies or defaults, including in
respect of Additional WE Sovereign
Contracts, in accordance with Rule
17Ad–22(d)(11).13
Governance. As discussed in further
detail in the Prior WE Sovereigns Order,
although the margin model applicable to
Western European sovereign CDS
contracts, including the Additional WE
Sovereign Contracts, may result in
clearing members being subject to
different margin charges based on their
domicile and correlation with the
underlying sovereign, ICE Clear Europe
believes that the margin model properly
aligns the margin requirements to the
risks presented by particular clearing
members. Moreover, the model operates
without the need for ICE Clear Europe
(or its management, Board or CDS Risk
Committee) to exercise discretion
9 17
CFR 240.17Ad–22(b)(2), (d)(14).
CFR 240.17Ad–22(b)(3).
11 17 CFR 240.17Ad–22(d)(4).
12 17 CFR 240.17Ad–22(d)(5), (12) and (15).
13 17 CFR 240.17Ad–22(d)(11).
concerning particular clearing members
or the margin levels applicable to them.
As a result, in ICE Clear Europe’s view,
the clearing of such contracts does not
result in unfair discrimination among
clearing members within the meaning of
Section 17A(b)(3)(F) of the Act and Rule
17Ad–22(d)(8).14
B. Self-Regulatory Organization’s
Statement on Burden on Competition
ICE Clear Europe does not believe the
proposed Additional WE Sovereign
Contracts would have any impact, or
impose any burden, on competition not
necessary or appropriate in furtherance
of the purpose of the Act. ICE Clear
Europe does not anticipate that its
commencement of clearing for the
Additional WE Sovereign Contracts will
adversely affect the trading market for
those contracts or for CDS more
generally. Specifically, allowing
clearing of the Additional WE Sovereign
Contracts will provide market
participants with the additional choice
to have their transactions in these types
of contracts cleared, and should
generally promote the further
development of the market for these
contracts. Moreover, ICE Clear Europe
has established fair and objective
criteria for eligibility to clear the
Additional WE Sovereign Contracts,
consistent with its criteria for other
cleared CDS.
Although clearance of Additional WE
Sovereign Contracts may result in
higher margin requirements for some
clearing members as a result of the
general wrong way risk component of
the margin model, ICE Clear Europe
believes that the model properly aligns
margin requirements to the risks
presented by such clearing members
with respect to the Additional WE
Sovereign Contracts. As a result, ICE
Clear Europe is of the view that these
changes are necessary and appropriate
in furtherance of the purpose of the Act
and the Commission’s regulations
thereunder, including the financial
resources and risk management
requirements of Rule 17Ad–22.15
Furthermore, ICE Clear Europe does not
believe that any such increase in margin
requirements would significantly affect
the ability of clearing members or other
market participants to continue to clear
CDS, consistent with the risk
management requirements of the
Clearing House, or otherwise limit
market participants’ choices for
selecting clearing services. Accordingly
ICE Clear Europe does not believe that
10 17
PO 00000
Frm 00073
Fmt 4703
Sfmt 4703
14 15 U.S.C. 78q–1(b)(3)(F); 17 CFR 240.17Ad–
22(d)(8).
15 17 CFR 240.17Ad–22.
E:\FR\FM\04NON1.SGM
04NON1
Federal Register / Vol. 79, No. 213 / Tuesday, November 4, 2014 / Notices
clearance of the Additional WE
Sovereign Contracts will impose any
burden on competition not necessary or
appropriate 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
acceptance of the Additional WE
Sovereign Contracts for clearing 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 (https://www.sec.gov/
rules/sro.shtml) or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ICEEU–2014–18 on the subject line.
rmajette on DSK3VPTVN1PROD with NOTICES
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–2014–18. 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
VerDate Sep<11>2014
15:39 Nov 03, 2014
Jkt 235001
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–2014–18 and
should be submitted on or before
November 25, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–26120 Filed 11–3–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73463; File No. SR–MIAX–
2014–54]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Add Exchange Rule 531,
Trade Nullification and Price
Adjustment Procedure
October 29, 2014.
Pursuant to the provisions of 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 October 20, 2014, Miami
International Securities Exchange LLC
(‘‘MIAX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00074
Fmt 4703
Sfmt 4703
65445
which Items have been prepared by the
Exchange. 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 Exchange is filing a proposal to
add Rule 531, Trade Nullification and
Price Adjustment Procedure.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.miaxoptions.com/filter/
wotitle/rule_filing, at MIAX’s principal
office, and at the Commission’s Public
Reference Room.
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 and discussed
any comments it received on 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 proposes to add Rule
531, Trade Nullification and Price
Adjustment Procedure.3 As proposed,
Rule 531 will allow for transactions to
be nullified if both parties to the
transaction agree to the nullification and
allow the price of transaction [sic] and
authorized by the Exchange.4 The
proposal is based upon a recent filing of
another options exchange.5
The Exchange proposes to add Rule
531, ‘‘Trade Nullification and Price
Adjustment Procedure,’’ which would:
(a) Allow for any trades on the Exchange
3 The Exchange notes that this proposal is only
intended to be effective until the joint efforts by the
exchanges to create uniform trade nullification and
adjustment rules are approved and in effect. Once
the uniform rule has been approved and is effective,
the Exchange will amend its rules appropriately.
4 The Exchange notes that, as proposed, Rule 6.19
[sic] will only apply to trades that were executed
on the Exchange and, as such, any orders that were
either fully or partially routed to, or executed, on
another Exchange will not be subject to the
Proposed Rule 531.
5 See Securities Exchange Act Release No. 72970
(September 3, 2014), 79 FR 53498 (September 9,
2014) (SR–CBOE–2014–066).
E:\FR\FM\04NON1.SGM
04NON1
]]>Agencies
[Federal Register Volume 79, Number 213 (Tuesday, November 4, 2014)]
[Notices]
[Pages 65443-65445]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-26120]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73459; File No. SR-ICEEU-2014-18]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filling of Proposed Rule Change To Provide for the Clearance of
Additional Sovereign Contracts
October 29, 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 October 20, 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 primarily prepared by ICE Clear Europe.
The Commission is publishing this notice to solicit comments on the
proposed changes to the rules from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The principal purpose of the change is to provide for the clearance
of additional CDS contracts that are Western European sovereign CDS
contracts referencing the Kingdom of Belgium and the Republic of
Austria (the ``Additional WE Sovereign Contracts'').
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
Additional WE Sovereign Contracts. 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 the proposed rule change is for ICE Clear Europe to
offer clearing of Western European sovereign CDS contracts referencing
two additional reference entities, the Kingdom of Belgium and the
Republic of Austria. ICE Clear Europe currently clears CDS contracts
referencing four other Western European sovereigns: Ireland, the
Republic of Italy, the Portuguese Republic and the Kingdom of Spain.\3\
ICE Clear Europe believes clearance of the Additional WE Sovereign
Contracts will benefit the markets for credit default swaps on Western
European sovereigns by offering to market participants the benefits of
clearing, including reduction in counterparty risk and safeguarding of
margin assets pursuant to Clearing House rules.
---------------------------------------------------------------------------
\3\ See Exchange Act Release No. 34-71920 (Apr. 9, 2014) (File
No. SR-ICEEU-2014-04); 79 FR 21331 (Apr. 15, 2015) (order approving
rule changes to clear other Western European sovereign CDS
contracts) (the ``Prior WE Sovereigns Order'').
---------------------------------------------------------------------------
The Additional WE Sovereign Contracts will constitute ``Non-STEC
Single Name Contracts'' for purposes of the CDS Procedures and
accordingly will be governed by Paragraph 10 of the CDS Procedures,
consistent with treatment of the Western European sovereign CDS
contracts currently cleared by ICE Clear Europe. Clearing of the
Additional WE Sovereign Contracts will not require any changes to ICE
[[Page 65444]]
Clear Europe's existing Clearing Rules and Procedures. In addition,
clearing of the Additional WE Sovereign Contracts will not require any
changes in ICE Clear Europe's risk management framework (including
relevant policies) or margin model.\4\ ICE Clear Europe believes that
clearing of the proposed Additional WE Sovereign Contracts is
consistent with the requirements of Section 17A of the Act \5\ and
regulations thereunder applicable to it, including the standards under
Rule 17Ad-22.\6\ The Additional WE Sovereign Contracts are
substantially similar to the other Western European sovereign CDS
contracts currently cleared by ICE Clear Europe. The additional
contracts will be cleared in the same manner as such other Western
European sovereign CDS contracts, consistent with ICE Clear Europe's
existing clearing arrangements and related financial safeguards,
protections, risk management policies and procedures and margin
methodology (including those enhancements for Western European
sovereign contracts previously adopted and approved in the Prior WE
Sovereigns Order). In ICE Clear Europe's view, clearing of the
Additional WE Sovereign CDS contracts, under such terms and
arrangements, is consistent with the prompt and accurate clearance of
and settlement of securities transactions and derivative agreements,
contracts and transactions cleared by ICE Clear Europe, 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.\7\ Clearing of
the Additional WE Sovereign Contracts will also satisfy the relevant
requirements of Rule 17Ad-22,\8\ as discussed below.
---------------------------------------------------------------------------
\4\ For a description of previously approved changes to ICE
Clear Europe's risk management framework to accommodate clearing of
Western European sovereign CDS contracts, see the Prior WE
Sovereigns Order. ICE Clear Europe has performed a variety of
empirical analyses related to clearing of the Additional WE
Sovereign Contracts under its margin methodology, including back
tests and stress tests.
\5\ 15 U.S.C. 78q-1.
\6\ 17 CFR 240.17Ad-22.
\7\ 15 U.S.C. 78q-1(b)(3)(F).
\8\ 17 CFR 240.17Ad-22.
---------------------------------------------------------------------------
Financial Resources. ICE Clear Europe will apply its existing
margin methodology for Western European sovereign CDS contracts to the
Additional WE Sovereign Contracts. ICE Clear Europe believes that this
model will provide sufficient margin to cover its credit exposure to
its clearing members from clearing such contracts, consistent with the
requirements of Rule 17Ad-22(b)(2) and Rule 17Ad-22(d)(14).\9\ In
addition, ICE Clear Europe believes the CDS Guaranty Fund, under its
existing methodology, will, together with the required margin, provide
sufficient financial resources to support the clearing of Additional WE
Sovereign Contracts consistent with the requirements of Rule 17Ad-
22(b)(3).\10\
---------------------------------------------------------------------------
\9\ 17 CFR 240.17Ad-22(b)(2), (d)(14).
\10\ 17 CFR 240.17Ad-22(b)(3).
---------------------------------------------------------------------------
Operational Resources. ICE Clear Europe will have the operational
and managerial capacity to clear the Additional WE Sovereign Contracts
as of the commencement of clearing, consistent with the requirements of
Rule 17Ad-22(d)(4).\11\ ICE Clear Europe believes that its existing
systems used for sovereign CDS contracts are appropriately scalable to
handle the clearing of the Additional WE Sovereign Contracts.
---------------------------------------------------------------------------
\11\ 17 CFR 240.17Ad-22(d)(4).
---------------------------------------------------------------------------
Settlement. ICE Clear Europe will use its existing settlement
procedures (including for physical settlements), account structures and
approved financial institutions as used in other sovereign CDS clearing
for the Additional WE Sovereign Contracts. ICE Clear Europe believes
that clearing of the Additional WE Sovereign Contracts will therefore
be consistent with the requirements of Rule 17Ad-22(d)(5), (12) and
(15).\12\
---------------------------------------------------------------------------
\12\ 17 CFR 240.17Ad-22(d)(5), (12) and (15).
---------------------------------------------------------------------------
Default Procedures. ICE Clear Europe's existing Rules and default
management policies and procedures for CDS will apply to the Additional
WE Sovereign Contracts. ICE Clear Europe believes that the Rules and
procedures allow for it to take timely action to contain losses and
liquidity pressures and to continue meeting its obligations in the
event of clearing member insolvencies or defaults, including in respect
of Additional WE Sovereign Contracts, in accordance with Rule 17Ad-
22(d)(11).\13\
---------------------------------------------------------------------------
\13\ 17 CFR 240.17Ad-22(d)(11).
---------------------------------------------------------------------------
Governance. As discussed in further detail in the Prior WE
Sovereigns Order, although the margin model applicable to Western
European sovereign CDS contracts, including the Additional WE Sovereign
Contracts, may result in clearing members being subject to different
margin charges based on their domicile and correlation with the
underlying sovereign, ICE Clear Europe believes that the margin model
properly aligns the margin requirements to the risks presented by
particular clearing members. Moreover, the model operates without the
need for ICE Clear Europe (or its management, Board or CDS Risk
Committee) to exercise discretion concerning particular clearing
members or the margin levels applicable to them. As a result, in ICE
Clear Europe's view, the clearing of such contracts does not result in
unfair discrimination among clearing members within the meaning of
Section 17A(b)(3)(F) of the Act and Rule 17Ad-22(d)(8).\14\
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78q-1(b)(3)(F); 17 CFR 240.17Ad-22(d)(8).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
ICE Clear Europe does not believe the proposed Additional WE
Sovereign Contracts would have any impact, or impose any burden, on
competition not necessary or appropriate in furtherance of the purpose
of the Act. ICE Clear Europe does not anticipate that its commencement
of clearing for the Additional WE Sovereign Contracts will adversely
affect the trading market for those contracts or for CDS more
generally. Specifically, allowing clearing of the Additional WE
Sovereign Contracts will provide market participants with the
additional choice to have their transactions in these types of
contracts cleared, and should generally promote the further development
of the market for these contracts. Moreover, ICE Clear Europe has
established fair and objective criteria for eligibility to clear the
Additional WE Sovereign Contracts, consistent with its criteria for
other cleared CDS.
Although clearance of Additional WE Sovereign Contracts may result
in higher margin requirements for some clearing members as a result of
the general wrong way risk component of the margin model, ICE Clear
Europe believes that the model properly aligns margin requirements to
the risks presented by such clearing members with respect to the
Additional WE Sovereign Contracts. As a result, ICE Clear Europe is of
the view that these changes are necessary and appropriate in
furtherance of the purpose of the Act and the Commission's regulations
thereunder, including the financial resources and risk management
requirements of Rule 17Ad-22.\15\ Furthermore, ICE Clear Europe does
not believe that any such increase in margin requirements would
significantly affect the ability of clearing members or other market
participants to continue to clear CDS, consistent with the risk
management requirements of the Clearing House, or otherwise limit
market participants' choices for selecting clearing services.
Accordingly ICE Clear Europe does not believe that
[[Page 65445]]
clearance of the Additional WE Sovereign Contracts will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
---------------------------------------------------------------------------
\15\ 17 CFR 240.17Ad-22.
---------------------------------------------------------------------------
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments relating to the acceptance of the Additional WE
Sovereign Contracts for clearing 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 (https://www.sec.gov/rules/sro.shtml) or
Send an email to rule-comments@sec.gov. Please include
File Number SR-ICEEU-2014-18 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-2014-18. 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 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-2014-18
and should be submitted on or before November 25, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26120 Filed 11-3-14; 8:45 am]
BILLING CODE 8011-01-P
