Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Gross Margining for Certain Categories of Customer Accounts, 77032-77035 [2015-31176]
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Federal Register / Vol. 80, No. 238 / Friday, December 11, 2015 / Notices
Effective date: December 11,
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[FR Doc. 2015–31180 Filed 12–10–15; 8:45 am]
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[FR Doc. 2015–31432 Filed 12–9–15; 4:15 pm]
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SECURITIES AND EXCHANGE
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[Release No. 34–76565; File No. SR–ICEEU–
2015–019]
Self-Regulatory Organizations; ICE
Clear Europe Limited; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change Relating to
Gross Margining for Certain
Categories of Customer Accounts
December 7, 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 November
24, 2015, ICE Clear Europe Limited
(‘‘ICE Clear Europe’’ or the ‘‘Clearing
House’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change described in
Items I, II and III below, which Items
have been prepared primarily by ICE
Clear Europe. ICE Clear Europe filed the
proposal pursuant to Section 19(b)(3)(A)
of the Act,3 and Rule 19b–4(f)(4)(i) and
(ii) 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 change
from interested persons.
AGENCY:
ACTION:
1 15
The Postal Service gives
notice of filing a request with the Postal
SUMMARY:
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(4)(i) and (ii).
2 17
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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 changes is to amend certain
provisions relating to gross margining
for various categories of Customer
Accounts.
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
i. Purpose
ICE Clear Europe submits certain
proposed amendments to its Clearing
Rules (the ‘‘Rules’’) and Clearing
Procedures relating to the margining of
Customer Accounts. The amendments
provide additional options for Clearing
Members to use so-called ‘‘gross
margined’’ Customer Accounts (and will
require use of such accounts for certain
F&O products as discussed below). The
amendments further clarify which types
of Customer Accounts are margined on
a gross as opposed to a net basis, as well
as related procedures for the collection
and transfer of margin for such accounts
and certain related information
requirements, as discussed herein. For
this purpose, for a Customer Account
margined on a ‘‘gross’’ basis, initial or
original margin requirements are
determined separately with respect to
the positions of each customer of the
relevant Clearing Member (i.e., without
netting of different positions across
multiple customers). By contrast, for a
Customer Account margined on a ‘‘net’’
basis, initial or original margin
requirements are determined for the
entire account on a net basis across the
positions of all customers in that
account.
The proposed changes are principally
relevant to the Customer Accounts of
Non-FCM/BD Clearing Members with
respect to F&O Contracts. ICE Clear
Europe’s existing rules provide several
types of Customer Accounts for such
Clearing Members in light of relevant
regulatory requirements and
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permissions. Currently, most such
accounts for F&O Contracts are
margined on a net basis, which is
permitted under the European Market
Infrastructure Regulation (‘‘EMIR’’).5
ICE Clear Europe is proposing to revise
its account structure to allow Clearing
Members to use Customer Accounts of
the same types but which are margined
on a gross basis for certain products.
Once the rule amendments are effective,
ICE Clear Europe will require the use of
such gross margined accounts for NonFCM/BD Clearing Members in relation
to certain F&O products in the energy
category that are margined using a oneday period of risk, as specified below,
such as oil contracts traded on ICE
Futures Europe. Gross or net margined
accounts would be available on an
optional basis for other categories of
F&O Contracts (which are margined
using a two-day period of risk). As a
result of these changes, ICE Clear
Europe will no longer permit net
margining of contracts for which margin
is calculated using a one-day period of
risk.
ICE Clear Europe is adopting the
requirement for the use of gross
margining to align the margin
framework for certain energy contracts
cleared by Non-FCM/BD Clearing
Members more closely with the
requirements that apply to FCM
Clearing Members under CFTC rules
and the Clearing House’s rules for FCM
Customer Accounts, as implemented in
2012 when certain cleared OTC
contracts were converted to
economically-equivalent futures
contracts admitted to trading on ICE
Futures US. Such contracts are
margined using a one-day period of risk.
In this regard, ICE Clear Europe also
notes that the European Securities and
Markets Authority has issued a
discussion paper for consultation as to
the use of gross margined customer
accounts under certain circumstances
(and in particular, whether a gross
margined account using a one-day
margin period of risk (of the type being
provided under the rule amendments)
should be a permitted alternative to an
account using a two-day margin period
of risk in order to satisfy requirements
under EMIR, in light of the fact that
EMIR is currently silent on whether
accounts should be net or gross
margined).6
5 Regulation (EU) No 648/2012 of the European
Parliament and of the Council of 4 July 2012 on
OTC derivatives, central counterparties and trade
repositories, as well as various implementing
regulations and technical standards.
6 ESMA, Review of Article 26 of RTS No. 153/
2013 with respect to client accounts (26 August
2015) (Discussion Paper).
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For Customer Accounts with respect
to CDS Contracts, the current practice of
margining on a gross basis would be
maintained.
The status of the DCM Customer
Account and Swap Customer Account
of FCM/BD Clearing Members (which
are currently gross margined, consistent
with U.S. regulatory requirements)
would not be affected by the proposed
amendments. The amendments would
clarify the option for FCM/BD Clearing
Members to use their Non-DCM/Swap
Customer Account or General Customer
Account on either a gross margined or
net margined basis, to the extent
permitted by applicable law. Certain
other clarifications and updates are
made in the Rules and Clearing
Procedures as well, as discussed herein.
Specifically, ICE Clear Europe
proposes to make amendments to Parts
3, 4, 6, 7 and 16 of its Rules and to the
Clearing Procedures.
In Part 3 of the Rules, Rule 302, which
addresses the procedures for payments
to and from the Clearing House in
respect of various categories of
Customer Accounts, has been revised to
take into account the new set of gross
margined accounts and to simplify some
of the drafting. As revised, the Rule
clarifies that the Clearing House will
determine the required margin amount
based on the relevant margin model for
that account type (net or gross). The
Clearing House will then calculate the
net amount owed to or by the Clearing
House for that account based on that
requirement. With respect to the Swap
Customer Account, Rule 302 has been
revised to add a cross-reference to the
appropriate provisions in Rule 1605(h),
which address the calculation and
settlement of margin for that account
more specifically. In Rule 304, which
addresses payments with respect to
Sponsored Principal accounts, certain
changes have been made to conform to
the changes made in Rule 302.
Rule 401(g) is amended to require
each Clearing Member to submit on a
daily basis (or more frequently, if
requested by ICE Clear Europe) a
breakdown of the open positions in each
Customer Account on a per customer
basis, in order to permit the Clearing
House to calculate gross margin for that
account, if applicable. Rule 406 is
amended to clarify that positions in a
Customer Account of one customer are
not to be netted against opposite
positions of another customer, and that
positions in separate Customer
Accounts are not to be netted against
each other, consistent with other
existing provisions of the Rules.
Rule 702(c) is amended to set out
more clearly how the cash settlement
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77033
amount for futures contracts is
calculated based on the positions held
in different accounts, in light of the use
of gross or net margining discussed
above. As revised, the rule refers to the
difference between the exchange
settlement price and the price at which
the contract is recorded on the Clearing
House’s books (or, for new contracts
entered into on the day of settlement,
the price at which the contract was
bought or sold). This is consistent with
current practice for such contracts.
Similar clarifications are made in Rule
705(a) to reflect the treatment of
contracts entered into on the day of
settlement. In Rule 803(a), a similar
change is made to reflect the treatment
of option contracts entered into on the
same day as the exercise date. Rule
810(d) is amended to set out more
clearly the calculation of the cash
settlement amount for an option
contract (based on the difference
between the relevant reference price and
the price at which the contract is
recorded on the Clearing House’s books
(or, for new contracts entered into on
the day of exercise, the price at which
the contract was bought or sold). This is
also consistent with current practice for
such option contracts.
In Rule 1605(h), which addresses
margin for the Swap Customer Account
of FCM/BD Clearing Members, certain
amendments have been made to refer
more specifically to the relevant Rules
and procedures used for the transfer of
relevant amounts to and from the
Clearing House (in line with the
procedures applicable to transfers of
Margin for other accounts under the
Rules and Finance Procedures). The
amendments do not materially change
the operation of the Swap Customer
Account, but reflect the addition of the
cross reference to Rule 1605(h) in Rule
302, which is intended to provide
greater clarity to Clearing Members and
market participants.
The Clearing Procedures have been
amended to add the relevant new
account designations and to distinguish
more clearly between net margined and
gross margined Customer Accounts,
along with various conforming and
clarifying changes. In paragraph
2.3(b)(2), for FCM/BD Clearing
Members, the amendments state
explicitly that the S, W and Z accounts
use gross margin models, and add a new
E account that can be used as a net
margined account under the Non-DCM/
Swap Customer Account or General
Customer Account category, to the
extent permissible under applicable
law. In paragraphs 2.3(b)(3) and (4), for
Non-FCM/BD Clearing Members, the
amendments state explicitly that the S,
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jstallworth on DSK7TPTVN1PROD with NOTICES
C, F, and T accounts use a gross margin
model, and the E, R and K accounts use
a net margin model. A change is made
in paragraph 2.4(b) to conform to the
changes made in Rule 406. Conforming
changes to the relevant account
designations have been made in
paragraphs 3.1 and 3.2. Amendments to
paragraph 4.4 of the Clearing Procedures
address the difference between the
calculation of net and gross margin for
relevant Customer Accounts, consistent
with the account designations under
paragraph 2.3.
ICE Clear Europe has made available
to F&O Clearing Members, pursuant to
a member transition plan and the
electronic GSPD file provided to
clearing members on a daily basis, the
details of the particular F&O Contracts
that will be required to be held in gross
margined Customer Accounts, as well as
those that may be held in either gross or
net margined Customer Accounts, in
accordance with the amended Rules and
Procedures described above, upon
implementation of the amendments.
Specifically, those ICE Futures Europe
and ICE Futures US energy contracts
that currently are margined using a oneday margin period of risk will be
required to be carried in gross margined
Customer Accounts. These include
contracts relating to coal, crude oil and
refined crude products, petrochemicals,
US electricity, US emissions, US natural
gas and natural gas liquids. Other F&O
Contracts (including Financials & Softs
contracts and certain energy contract
traded on ICE Futures Europe and ICE
Endex that are currently margined using
a two-day margin period of risk) may be
carried in either net or gross margined
Customer Accounts. ICE Clear Europe
will notify F&O Clearing Members by
circular of the date of implementation of
the amendments and gross margining
requirements discussed herein.
ii. Statutory Basis
ICE Clear Europe believes that the
proposed amendments to the Rules and
Clearing Procedures are consistent with
the requirements of Section 17A of the
Act 7 and the regulations thereunder
applicable to it.8 Section 17A(b)(3)(F) of
the Act 9 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, to assure the
safeguarding of securities and funds
which are in the custody or control of
7 15
U.S.C. 78q–1.
CFR 240.17Ad–22.
9 15 U.S.C. 78q–1(b)(3)(F).
the clearing agency or for which it is
responsible and to protect investors and
the public interest.
The amendments are designed
principally to facilitate the use by NonFCM/BD Clearing Members of gross
margined Customer Accounts for the
F&O product category. The amendments
also more clearly distinguish between
net margined and gross margined
accounts in the Rules and Procedures,
and clarify and simplify the rules and
procedures relating to the calling and
return of initial and original margin for
all accounts. The amendments thus
build on the existing customer account
structure established in the ICE Clear
Europe rules. By facilitating gross
margining, and providing the Clearing
House with customer-by-customer
position data that supports such
margining, the amendments will also
enhance the Clearing House’s risk
management infrastructure with respect
to Customer Accounts. As described
above, the amendments are principally
relevant to Non-FCM/BD Clearing
Members for F&O Contracts; the DCM
Customer Account and Swap Customer
Account structures for FCM/BD Clearing
Members (which are gross margined
accounts) are prescribed by applicable
U.S. law and are not materially
changing as a result of the amendments.
As a result, in ICE Clear Europe’s view,
the amendments will promote the
prompt and accurate clearance and
settlement of derivative transactions, are
consistent with the safeguarding of
funds and securities in the custody or
control of ICE Clear Europe, and
generally further the public interest. The
amendments are therefore consistent
with the requirements of Section
17A(b)(3)(F) of the Act 10 and the
regulations thereunder.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
ICE Clear Europe does not believe the
proposed changes to the Rules
discussed herein would have any
adverse impact, or impose any burden,
on competition not necessary or
appropriate in furtherance of the
purposes of the Act. The proposed
amendments are intended to provide
Clearing Members with additional
ability to use gross margined Customer
Accounts. Such accounts will be
available on the same terms to all NonFCM/BD Clearing Members. ICE Clear
Europe does not believe the proposed
amendments would adversely affect
access to clearing by Clearing Members
or their customers, adversely affect
competition among Clearing Members
8 17
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14:55 Dec 10, 2015
or adversely affect the market for
clearing services or limit market
participants’ choices for clearing
transactions. Rather, competition among
Clearing Members, and access to
clearing, may be facilitated through the
possibility of Clearing Members offering
a choice of net or gross margining,
where permitted (in all cases subject to
applicable legal requirements and
Clearing Rules). Although the proposed
amendments may impose additional
compliance costs on Clearing Members,
including because of the requirements
to provide customer-related data to the
Clearing House, ICE Clear Europe
believes that such costs are appropriate
in light of the benefits (to each of the
Clearing House, Clearing Members and
customers) from facilitating gross
margining for Customer Accounts. As a
result, ICE Clear Europe does not
believe that the proposed amendments
to the Rules will impose any burden on
competition not 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
On October 30, 2015, ICE Clear
Europe solicited written comments
relating to the proposed Rule and
Procedure changes via a circular.
Comments were due by November 13,
2015, and no comments had been
received as of the time of this filing. 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 change has become
effective upon filing pursuant to Section
19(b)(3)(A) 11 of the Act and Rule 19b–
4(f)(4)(i) and (ii) 12 thereunder. The
amendments principally effect a change
in an existing service of a registered
clearing agency that primarily affects
the clearing operations of the clearing
agency with respect to products that are
not securities, including futures that are
not security futures, swaps that are not
security-based swaps or mixed swaps,
and forwards that are not security
forwards, and does not significantly
affect any securities clearing operations
of the clearing agency or any rights or
obligations of the clearing agency with
respect to securities clearing or persons
using such securities-clearing service.
Certain other aspects of the amendments
effect a change in an existing service of
11 15
10 Id.
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U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(4)(i) and (ii).
11DEN1
Federal Register / Vol. 80, No. 238 / Friday, December 11, 2015 / Notices
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 change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such 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:
jstallworth on DSK7TPTVN1PROD 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–
ICEEU–2015–019 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–2015–019. 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
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14:55 Dec 10, 2015
Jkt 238001
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–2015–019 and
should be submitted on or before
January 4, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Brent J. Fields,
Secretary.
[FR Doc. 2015–31176 Filed 12–10–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76580; File No. SR–
NYSEMKT–2015–99]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending Exchange
Rules To Prescribe the Securities
Traders Examination as the Qualifying
Examination for Persons Associated
With a Member Organization Engaged
Solely in Proprietary Trading, and
Amend Continuing Education
Requirement Applicable to Such
Members
December 8, 2015.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on November
23, 2015, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. 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 Substance of
the Proposed Rule Change
The Exchange proposes to amend
Exchange rules to prescribe the
Securities Traders examination (Series
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
77035
57) (the ‘‘Series 57 Examination’’) as the
qualifying examination for persons
associated with a member organization
(‘‘Member’’) engaged solely in
proprietary trading, and amend
Exchange rules regarding continuing
education requirement applicable to
such Member. The proposed rule
change is available on the Exchange’s
Web site at www.nyse.com, at the
principal office of the Exchange, 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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Rule 345—Equities currently states
that no Member shall permit any natural
person to perform the duties
customarily performed by a securities
lending representative or a direct
supervisor of such, unless such person
is registered with, qualified by and is
acceptable to the Exchange. The rule
further states that Members shall
comply with NASD Rule 1031
concerning the registration and approval
of registered representatives and their
supervisors. Under the current rule,
each associated person of a Member
who is included within the definition of
‘‘representative’’ in NASD Rule 1031 is
required to appropriately register with
the Exchange if such person is engaged
in proprietary trading or directly
supervises such activity. In order to
engage in proprietary trading on the
Exchange, an associated person must be
registered as a General Securities
Representative (Series 7) as NYSE MKT
does not recognize the Series 56
Examination as an acceptable
qualification standard for associated
persons engaged in equities proprietary
trading.4
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4 While the Series 7 Examination is required for
associated persons engaged in proprietary trading,
Continued
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]]>Agencies
[Federal Register Volume 80, Number 238 (Friday, December 11, 2015)]
[Notices]
[Pages 77032-77035]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31176]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76565; File No. SR-ICEEU-2015-019]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Gross Margining for Certain Categories of Customer Accounts
December 7, 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 November 24, 2015, ICE Clear Europe Limited (``ICE Clear Europe'' or
the ``Clearing House'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change described in Items
I, II and III below, which Items have been prepared primarily by ICE
Clear Europe. ICE Clear Europe filed the proposal pursuant to Section
19(b)(3)(A) of the Act,\3\ and Rule 19b-4(f)(4)(i) and (ii) \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 change 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) and (ii).
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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 changes is to amend certain
provisions relating to gross margining for various categories of
Customer Accounts.
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
i. Purpose
ICE Clear Europe submits certain proposed amendments to its
Clearing Rules (the ``Rules'') and Clearing Procedures relating to the
margining of Customer Accounts. The amendments provide additional
options for Clearing Members to use so-called ``gross margined''
Customer Accounts (and will require use of such accounts for certain
F&O products as discussed below). The amendments further clarify which
types of Customer Accounts are margined on a gross as opposed to a net
basis, as well as related procedures for the collection and transfer of
margin for such accounts and certain related information requirements,
as discussed herein. For this purpose, for a Customer Account margined
on a ``gross'' basis, initial or original margin requirements are
determined separately with respect to the positions of each customer of
the relevant Clearing Member (i.e., without netting of different
positions across multiple customers). By contrast, for a Customer
Account margined on a ``net'' basis, initial or original margin
requirements are determined for the entire account on a net basis
across the positions of all customers in that account.
The proposed changes are principally relevant to the Customer
Accounts of Non-FCM/BD Clearing Members with respect to F&O Contracts.
ICE Clear Europe's existing rules provide several types of Customer
Accounts for such Clearing Members in light of relevant regulatory
requirements and
[[Page 77033]]
permissions. Currently, most such accounts for F&O Contracts are
margined on a net basis, which is permitted under the European Market
Infrastructure Regulation (``EMIR'').\5\ ICE Clear Europe is proposing
to revise its account structure to allow Clearing Members to use
Customer Accounts of the same types but which are margined on a gross
basis for certain products. Once the rule amendments are effective, ICE
Clear Europe will require the use of such gross margined accounts for
Non-FCM/BD Clearing Members in relation to certain F&O products in the
energy category that are margined using a one-day period of risk, as
specified below, such as oil contracts traded on ICE Futures Europe.
Gross or net margined accounts would be available on an optional basis
for other categories of F&O Contracts (which are margined using a two-
day period of risk). As a result of these changes, ICE Clear Europe
will no longer permit net margining of contracts for which margin is
calculated using a one-day period of risk.
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\5\ Regulation (EU) No 648/2012 of the European Parliament and
of the Council of 4 July 2012 on OTC derivatives, central
counterparties and trade repositories, as well as various
implementing regulations and technical standards.
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ICE Clear Europe is adopting the requirement for the use of gross
margining to align the margin framework for certain energy contracts
cleared by Non-FCM/BD Clearing Members more closely with the
requirements that apply to FCM Clearing Members under CFTC rules and
the Clearing House's rules for FCM Customer Accounts, as implemented in
2012 when certain cleared OTC contracts were converted to economically-
equivalent futures contracts admitted to trading on ICE Futures US.
Such contracts are margined using a one-day period of risk. In this
regard, ICE Clear Europe also notes that the European Securities and
Markets Authority has issued a discussion paper for consultation as to
the use of gross margined customer accounts under certain circumstances
(and in particular, whether a gross margined account using a one-day
margin period of risk (of the type being provided under the rule
amendments) should be a permitted alternative to an account using a
two-day margin period of risk in order to satisfy requirements under
EMIR, in light of the fact that EMIR is currently silent on whether
accounts should be net or gross margined).\6\
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\6\ ESMA, Review of Article 26 of RTS No. 153/2013 with respect
to client accounts (26 August 2015) (Discussion Paper).
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For Customer Accounts with respect to CDS Contracts, the current
practice of margining on a gross basis would be maintained.
The status of the DCM Customer Account and Swap Customer Account of
FCM/BD Clearing Members (which are currently gross margined, consistent
with U.S. regulatory requirements) would not be affected by the
proposed amendments. The amendments would clarify the option for FCM/BD
Clearing Members to use their Non-DCM/Swap Customer Account or General
Customer Account on either a gross margined or net margined basis, to
the extent permitted by applicable law. Certain other clarifications
and updates are made in the Rules and Clearing Procedures as well, as
discussed herein.
Specifically, ICE Clear Europe proposes to make amendments to Parts
3, 4, 6, 7 and 16 of its Rules and to the Clearing Procedures.
In Part 3 of the Rules, Rule 302, which addresses the procedures
for payments to and from the Clearing House in respect of various
categories of Customer Accounts, has been revised to take into account
the new set of gross margined accounts and to simplify some of the
drafting. As revised, the Rule clarifies that the Clearing House will
determine the required margin amount based on the relevant margin model
for that account type (net or gross). The Clearing House will then
calculate the net amount owed to or by the Clearing House for that
account based on that requirement. With respect to the Swap Customer
Account, Rule 302 has been revised to add a cross-reference to the
appropriate provisions in Rule 1605(h), which address the calculation
and settlement of margin for that account more specifically. In Rule
304, which addresses payments with respect to Sponsored Principal
accounts, certain changes have been made to conform to the changes made
in Rule 302.
Rule 401(g) is amended to require each Clearing Member to submit on
a daily basis (or more frequently, if requested by ICE Clear Europe) a
breakdown of the open positions in each Customer Account on a per
customer basis, in order to permit the Clearing House to calculate
gross margin for that account, if applicable. Rule 406 is amended to
clarify that positions in a Customer Account of one customer are not to
be netted against opposite positions of another customer, and that
positions in separate Customer Accounts are not to be netted against
each other, consistent with other existing provisions of the Rules.
Rule 702(c) is amended to set out more clearly how the cash
settlement amount for futures contracts is calculated based on the
positions held in different accounts, in light of the use of gross or
net margining discussed above. As revised, the rule refers to the
difference between the exchange settlement price and the price at which
the contract is recorded on the Clearing House's books (or, for new
contracts entered into on the day of settlement, the price at which the
contract was bought or sold). This is consistent with current practice
for such contracts. Similar clarifications are made in Rule 705(a) to
reflect the treatment of contracts entered into on the day of
settlement. In Rule 803(a), a similar change is made to reflect the
treatment of option contracts entered into on the same day as the
exercise date. Rule 810(d) is amended to set out more clearly the
calculation of the cash settlement amount for an option contract (based
on the difference between the relevant reference price and the price at
which the contract is recorded on the Clearing House's books (or, for
new contracts entered into on the day of exercise, the price at which
the contract was bought or sold). This is also consistent with current
practice for such option contracts.
In Rule 1605(h), which addresses margin for the Swap Customer
Account of FCM/BD Clearing Members, certain amendments have been made
to refer more specifically to the relevant Rules and procedures used
for the transfer of relevant amounts to and from the Clearing House (in
line with the procedures applicable to transfers of Margin for other
accounts under the Rules and Finance Procedures). The amendments do not
materially change the operation of the Swap Customer Account, but
reflect the addition of the cross reference to Rule 1605(h) in Rule
302, which is intended to provide greater clarity to Clearing Members
and market participants.
The Clearing Procedures have been amended to add the relevant new
account designations and to distinguish more clearly between net
margined and gross margined Customer Accounts, along with various
conforming and clarifying changes. In paragraph 2.3(b)(2), for FCM/BD
Clearing Members, the amendments state explicitly that the S, W and Z
accounts use gross margin models, and add a new E account that can be
used as a net margined account under the Non-DCM/Swap Customer Account
or General Customer Account category, to the extent permissible under
applicable law. In paragraphs 2.3(b)(3) and (4), for Non-FCM/BD
Clearing Members, the amendments state explicitly that the S,
[[Page 77034]]
C, F, and T accounts use a gross margin model, and the E, R and K
accounts use a net margin model. A change is made in paragraph 2.4(b)
to conform to the changes made in Rule 406. Conforming changes to the
relevant account designations have been made in paragraphs 3.1 and 3.2.
Amendments to paragraph 4.4 of the Clearing Procedures address the
difference between the calculation of net and gross margin for relevant
Customer Accounts, consistent with the account designations under
paragraph 2.3.
ICE Clear Europe has made available to F&O Clearing Members,
pursuant to a member transition plan and the electronic GSPD file
provided to clearing members on a daily basis, the details of the
particular F&O Contracts that will be required to be held in gross
margined Customer Accounts, as well as those that may be held in either
gross or net margined Customer Accounts, in accordance with the amended
Rules and Procedures described above, upon implementation of the
amendments. Specifically, those ICE Futures Europe and ICE Futures US
energy contracts that currently are margined using a one-day margin
period of risk will be required to be carried in gross margined
Customer Accounts. These include contracts relating to coal, crude oil
and refined crude products, petrochemicals, US electricity, US
emissions, US natural gas and natural gas liquids. Other F&O Contracts
(including Financials & Softs contracts and certain energy contract
traded on ICE Futures Europe and ICE Endex that are currently margined
using a two-day margin period of risk) may be carried in either net or
gross margined Customer Accounts. ICE Clear Europe will notify F&O
Clearing Members by circular of the date of implementation of the
amendments and gross margining requirements discussed herein.
ii. Statutory Basis
ICE Clear Europe believes that the proposed amendments to the Rules
and Clearing Procedures are consistent with the requirements of Section
17A of the Act \7\ and the regulations thereunder applicable to it.\8\
Section 17A(b)(3)(F) of the Act \9\ 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, to assure the safeguarding of securities and funds which
are in the custody or control of the clearing agency or for which it is
responsible and to protect investors and the public interest.
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\7\ 15 U.S.C. 78q-1.
\8\ 17 CFR 240.17Ad-22.
\9\ 15 U.S.C. 78q-1(b)(3)(F).
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The amendments are designed principally to facilitate the use by
Non-FCM/BD Clearing Members of gross margined Customer Accounts for the
F&O product category. The amendments also more clearly distinguish
between net margined and gross margined accounts in the Rules and
Procedures, and clarify and simplify the rules and procedures relating
to the calling and return of initial and original margin for all
accounts. The amendments thus build on the existing customer account
structure established in the ICE Clear Europe rules. By facilitating
gross margining, and providing the Clearing House with customer-by-
customer position data that supports such margining, the amendments
will also enhance the Clearing House's risk management infrastructure
with respect to Customer Accounts. As described above, the amendments
are principally relevant to Non-FCM/BD Clearing Members for F&O
Contracts; the DCM Customer Account and Swap Customer Account
structures for FCM/BD Clearing Members (which are gross margined
accounts) are prescribed by applicable U.S. law and are not materially
changing as a result of the amendments. As a result, in ICE Clear
Europe's view, the amendments will promote the prompt and accurate
clearance and settlement of derivative transactions, are consistent
with the safeguarding of funds and securities in the custody or control
of ICE Clear Europe, and generally further the public interest. The
amendments are therefore consistent with the requirements of Section
17A(b)(3)(F) of the Act \10\ and the regulations thereunder.
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\10\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition
ICE Clear Europe does not believe the proposed changes to the Rules
discussed herein would have any adverse impact, or impose any burden,
on competition not necessary or appropriate in furtherance of the
purposes of the Act. The proposed amendments are intended to provide
Clearing Members with additional ability to use gross margined Customer
Accounts. Such accounts will be available on the same terms to all Non-
FCM/BD Clearing Members. ICE Clear Europe does not believe the proposed
amendments would adversely affect access to clearing by Clearing
Members or their customers, adversely affect competition among Clearing
Members or adversely affect the market for clearing services or limit
market participants' choices for clearing transactions. Rather,
competition among Clearing Members, and access to clearing, may be
facilitated through the possibility of Clearing Members offering a
choice of net or gross margining, where permitted (in all cases subject
to applicable legal requirements and Clearing Rules). Although the
proposed amendments may impose additional compliance costs on Clearing
Members, including because of the requirements to provide customer-
related data to the Clearing House, ICE Clear Europe believes that such
costs are appropriate in light of the benefits (to each of the Clearing
House, Clearing Members and customers) from facilitating gross
margining for Customer Accounts. As a result, ICE Clear Europe does not
believe that the proposed amendments to the Rules will impose any
burden on competition not 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
On October 30, 2015, ICE Clear Europe solicited written comments
relating to the proposed Rule and Procedure changes via a circular.
Comments were due by November 13, 2015, and no comments had been
received as of the time of this filing. 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 change has become effective upon filing pursuant
to Section 19(b)(3)(A) \11\ of the Act and Rule 19b-4(f)(4)(i) and (ii)
\12\ thereunder. The amendments principally effect a change in an
existing service of a registered clearing agency that primarily affects
the clearing operations of the clearing agency with respect to products
that are not securities, including futures that are not security
futures, swaps that are not security-based swaps or mixed swaps, and
forwards that are not security forwards, and does not significantly
affect any securities clearing operations of the clearing agency or any
rights or obligations of the clearing agency with respect to securities
clearing or persons using such securities-clearing service. Certain
other aspects of the amendments effect a change in an existing service
of
[[Page 77035]]
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 change, the Commission
summarily may temporarily suspend such rule change if it appears to the
Commission that such action is necessary or appropriate in the public
interest, for the protection of investors, or otherwise in furtherance
of the purposes of the Act.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(4)(i) and (ii).
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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
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-2015-019 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-2015-019. 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/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-2015-019
and should be submitted on or before January 4, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-31176 Filed 12-10-15; 8:45 am]
BILLING CODE 8011-01-P
