Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change Relating to Amendments to the ICE Clear Europe Collateral and Haircut Policy, 6660-6662 [2018-02974]
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Federal Register / Vol. 83, No. 31 / Wednesday, February 14, 2018 / Notices
organizational documents would be
expressly identified in the GSD Rules
and the MBSD Rules to which members
are subject. FICC does not believe that
this proposal would affect any of its
current practices regarding the rights or
obligations of its members. Therefore,
FICC believes that the proposal would
not have any effect on its members and
thus, would not have any impact or
burden on competition.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants, or Others
FICC has not received any written
comments relating to this proposal.
FICC will notify the Commission of any
written comments received by it.
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
such 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:
daltland on DSKBBV9HB2PROD 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–
FICC–2018–002 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–FICC–2018–002. 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
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internet website (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 website 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 FICC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FICC–
2018–002 and should be submitted on
or before March 7, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–02985 Filed 2–13–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82659; File No. SR–ICEEU–
2017–011]
Self-Regulatory Organizations; ICE
Clear Europe Limited; Order Approving
Proposed Rule Change Relating to
Amendments to the ICE Clear Europe
Collateral and Haircut Policy
February 8, 2018.
I. Introduction
On November 2, 2017, ICE Clear
Europe Limited (‘‘ICE Clear Europe’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’),1 and
Rule 19b–4 thereunder,2 a proposed rule
change to modify the ICE Clear Europe
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00154
Fmt 4703
Sfmt 4703
Collateral and Haircut Policy to
incorporate certain changes to the
calculation of absolute collateral limits
for bonds provided as Permitted Cover
by Clearing Members and make certain
clarifications and updates and add
certain general provisions.3 The
proposed rule change was published for
comment in the Federal Register on
November 17, 2017.4 The Commission
did not receive comments regarding the
proposed rule change. On December 27,
2017, the Commission designated a
longer period for Commission action on
the proposed rule change.5 For the
reasons discussed below, the
Commission is approving the proposed
rule change.
II. Description of the Proposed Rule
Change
The proposed rule change would
amend ICE Clear Europe’s Collateral and
Haircut Policy to set the absolute
collateral limits for bonds provided as
Permitted Cover by Clearing Members
so as to more accurately capture the
trading liquidity of each bond. The
proposal would also take into account
ICE Clear Europe’s committed repo
facilities to permit Clearing Members to
maintain collateral in excess of normal
absolute limits.6 In addition, the
proposed rule change would revise the
haircut calculation. Finally, the
proposed rule change would update the
Collateral and Haircut Policy to add
certain general provisions designed to
enhance ICE Clear Europe’s governance.
These changes are further described
below.
With respect to setting absolute
collateral limits for bonds provided as
Permitted Cover by Clearing Members,
ICE Clear Europe proposed to set limits
for each bond issuer and collateral type
at 10% of the average daily volume over
the past three months, rounded to the
nearest million.7 The proposed rule
change would also change the
underlying data used in the calculation
of the absolute limit from a repo survey
of market participants to actual
secondary market trading volume data
provided by ICE Data Services, except
where official trading volume data is
3 Capitalized terms used in this order but not
defined herein have the same meanings specified in
the ICE Clear Europe Clearing Rules.
4 Securities Exchange Act Release No. 82063
(Nov. 13, 2017), 82 FR 54423 (Nov. 17, 2017) (SR–
ICEEU–2017–011) (‘‘Notice’’).
5 Securities Exchange Act Release No. 82405 (Dec.
27, 2017), 83 FR 181 (Jan. 2, 2018).
6 As used herein, the term ‘‘absolute limit’’ refers
to the maximum amount of bonds from an
individual issuer that ICE Clear Europe will accept
from a Member Group. See Notice, 82 FR at 54424.
7 Id.
E:\FR\FM\14FEN1.SGM
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Federal Register / Vol. 83, No. 31 / Wednesday, February 14, 2018 / Notices
available from a primary source, such as
a governmental agency or central bank.8
To complement the changes to the
absolute collateral limits described
above, ICE Clear Europe proposed
changes to its haircut methodology. In
particular, the proposed rule change
would amend the haircut methodology
to include a two-sided VaR estimation
based on the largest absolute returns.9
The proposed rule change would also
amend the Collateral and Haircut Policy
to note scenarios in which the ICE Clear
Europe Clearing Risk Department may
consider other factors in setting
haircuts, such as the effects caused by
changes in the different underlying
bonds used to build bond price timeseries or the impact of unexpected
currency events on the calculation of
cross-currency FX haircuts.10
In addition, the proposed rule change
would also amend the Collateral and
Haircut Policy to account for ICE Clear
Europe’s committed repo facilities. For
example, in certain circumstances, ICE
Clear Europe permits a Clearing Member
to maintain a collateral bond position
that otherwise exceeds the applicable
absolute collateral limits if ICE Clear
Europe is able to determine that it
would be able to use its committed repo
facility to convert the excess collateral
securities into cash. In addition, to
permit the use of repo facilities in this
way, the proposed rule change also
clarifies that the repo facilities are
available at any time there is an intraday liquidity need and not just in case
of Clearing Member default.11
Finally, the proposed rule change
would amend the Collateral and Haircut
Policy to update references to internal
ICE Clear Europe personnel,
departments and committees and to
explain the process for validation and
oversight of the models used to support
the Collateral and Haircut Policy.
daltland on DSKBBV9HB2PROD with NOTICES
III. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Act directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that such
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to such organization.12 For
the reasons given below, the
Commission finds that the proposal is
consistent with Section 17A(b)(3)(F) of
the Act 13 and Rules 17Ad–22(e)(2) and
(5) thereunder.14
A. Consistency With Section
17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act
requires, among other things, that the
rules of a registered clearing agency be
designed 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, in
general, to protect investors and the
public interest.15 The proposed rule
change will enhance ICE Clear Europe’s
ability to control the credit, liquidity,
and market risks stemming from the
collateral it accepts by establishing a
maximum amount of bonds from an
individual issuer that ICE Clear Europe
will accept from a Member Group as
collateral. These new maximum
amounts will be derived from actual
secondary market trading volume data,
and therefore should be more reliable
than the prior absolute limits, which as
noted above, were based on a repo
survey of market participants as a proxy
for trading liquidity. Therefore, these
limits should be more accurate, and
consequently, enhance ICE Clear
Europe’s ability to liquidate the bond
collateral in a timely manner. Further,
the proposed rule change also proposes
to incorporate a two-sided VaR
estimation based on the largest absolute
returns for purposes of setting haircuts.
Taken together these two changes
should enhance ICE Clear Europe’s
ability to manage the credit, liquidity,
and market risks it faces from posted
collateral, and therefore enhance ICE
Clear Europe’s ability to safeguard
securities and funds which are in its
custody or control or for which it is
responsible. Therefore, the Commission
finds that the proposed rule change is
designed to assure the safeguarding of
securities and funds which are in the
custody or control of ICE Clear Europe
or for which it is responsible and, in
general, protects investors and the
public interest, and is therefore
consistent with Section 17A(b)(3)(F) of
the Act.16
B. Consistency With Rule 17Ad–22(e)(5)
The Commission further finds that the
proposed rule change is consistent with
Rule 17Ad–22(e)(5). Rule 17Ad–22(e)(5)
requires that a covered clearing agency
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to limit the assets
8 Id.
9 Id.
14 17
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(e)(2), (5).
15 15 U.S.C. 78q-1(b)(3)(F).
16 Id.
it accepts as collateral to those with low
credit, liquidity, and market risks, and
set and enforce appropriately
conservative haircuts and concentration
limits if the covered clearing agency
requires collateral to manage its or its
participants’ credit exposure; and
require a review of the sufficiency of its
collateral haircuts and concentration
limits to be performed not less than
annually.17
The proposed rule change will
enhance ICE Clear Europe’s ability to
control the liquidity and market risks
stemming from the posting of collateral
by establishing a maximum amount of
bonds from an individual issuer that ICE
Clear Europe will accept from a Member
Group as collateral. The proposed rule
change will improve the accuracy of the
Collateral and Haircut Policy by taking
into account the trading liquidity of the
bond using secondary market trading
volume data provided by ICE Data
Services. Moreover, by updating the
Collateral and Haircut Policy to
incorporate a two-sided VaR estimation
based on the largest absolute returns,
the proposed rule change will capture a
broader range of price volatility
information, thereby enhancing ICE
Clear Europe’s ability to liquidate the
bond collateral in a timely manner
without losses beyond the given
haircuts. The Commission finds that
these aspects of the proposed rule
change are intended to limit the assets
ICE Clear Europe accepts as collateral to
those with low credit, liquidity, and
market risks, and to set and enforce
appropriately conservative haircuts.
Therefore, the proposed rule change is
consistent with Rule 17Ad-22(e)(5).18
C. Consistency with Rule 17Ad–22(e)(2)
Rule 17Ad–22(e)(2) requires that a
covered clearing agency establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to provide for
governance arrangements that are clear
and transparent and support the public
interest requirements in Section 17A of
the Act applicable to clearing agencies,
and the objectives of owners and
participants.19 The proposed rule
change will update references to
internal ICE Clear Europe personnel,
departments and committees and will
explain the process for validation and
oversight of the models used to support
the Collateral and Haircut Policy.
Therefore, the Commission finds that
the proposed rule change is consistent
with the requirement in Rule 17Ad–
13 15
10 Id.
11 Id.
12 15
U.S.C. 78s(b)(2)(C).
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6661
17 17
CFR 240.17Ad–22(e)(5).
18 Id.
19 17
E:\FR\FM\14FEN1.SGM
CFR 240.17Ad–22(e)(2)(i) and (iii).
14FEN1
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Federal Register / Vol. 83, No. 31 / Wednesday, February 14, 2018 / Notices
22(e)(2) concerning governance
arrangements that are clear and
transparent and that support the public
interest requirements of Section 17A of
the Act applicable to clearing agencies
and the objectives of participants.20
IV. 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 21 and Rules 17Ad–22(e)(2) and (5)
thereunder.
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 22 that the
proposed rule change (SR–ICEEU–2017–
011) be, and hereby is, approved.23
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–02974 Filed 2–13–18; 8:45 am]
BILLING CODE 8011–01–P
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to decrease
the Options Regulatory Fee (‘‘ORF’’)
from $.0081 per contract to $.0049 per
contract in order to help ensure that
revenue collected from the ORF, in
combination with other regulatory fees
and fines, meets the Exchange’s total
regulatory costs. The proposed fee
change will be operative on February 1,
2018.
The ORF is assessed by Cboe Options
to each Trading Permit Holder (‘‘TPH’’)
for options transactions cleared by the
TPH that are cleared by the Options
Clearing Corporation (‘‘OCC’’) in the
customer range, regardless of the
exchange on which the transaction
occurs.3 In other words, the Exchange
imposes the ORF on all customer-range
transactions cleared by a TPH, even if
the transactions do not take place on the
Exchange. The ORF is collected by OCC
on behalf of the Exchange from the
Clearing Trading Permit Holder
(‘‘CTPH’’) or non-CTPH that ultimately
clears the transaction. With respect to
linkage transactions, Cboe Options
reimburses its routing broker providing
Routing Services pursuant to Cboe
Options Rule 6.14B for options
regulatory fees it incurs in connection
with the Routing Services it provides.
Revenue generated from ORF, when
combined with all of the Exchange’s
other regulatory fees and fines, is
designed to recover a material portion of
the regulatory costs to the Exchange of
the supervision and regulation of TPH
customer options business. Regulatory
costs include direct regulatory expenses
and certain indirect expenses for work
allocated in support of the regulatory
function. The direct expenses include
in-house and third party service
provider costs to support the day to day
regulatory work such as surveillances,
investigations and examinations. The
indirect expenses include support from
such areas as human resources, legal,
information technology and accounting.
These indirect expenses are estimated to
be approximately 10% of Cboe Options’
total regulatory costs for 2018. Thus,
direct expenses are estimated to be
approximately 90% of total regulatory
costs for 2018. In addition, it is Cboe
Options’ practice that revenue generated
from ORF not exceed more than 75% of
total annual regulatory costs. These
expectations are estimated, preliminary
and may change. These expectations are
estimated, preliminary and may change.
[sic] There can be no assurance that our
final costs for 2018 will not differ
materially from these expectations and
prior practice; however, the Exchange
believes that revenue generated from the
ORF, when combined with all of the
Exchange’s other regulatory fees and
fines, will cover a material portion, but
not all, of the Exchange’s regulatory
costs.
The Exchange also notes that its
regulatory responsibilities with respect
to TPH compliance with options sales
practice rules have largely been
allocated to FINRA under a 17d–2
agreement.4 The ORF is not designed to
cover the cost of that options sales
practice regulation.
The Exchange will continue to
monitor the amount of revenue
collected from the ORF to ensure that it,
in combination with its other regulatory
fees and fines, does not exceed the
Exchange’s total regulatory costs. The
Exchange monitors its regulatory costs
and revenues at a minimum on a semiannual basis. If the Exchange
determines regulatory revenues exceed
or are insufficient to cover a material
portion of its regulatory costs, the
Exchange will adjust the ORF by
submitting a fee change filing to the
Commission. The Exchange notifies
3 The ORF also applies to customer-range
transactions executed during Extended Trading
Hours.
4 See Securities Exchange Act Release No. 76309
(October 29, 2015), 80 FR 68361 (November 4,
2015).
The Exchange seeks to amend its Fees
Schedule. The text of the proposed rule
change is available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegalRegulatory
Home.aspx), at the Exchange’s Office of
the Secretary, 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.
SECURITIES AND EXCHANGE
COMMISSION
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–82664; File No. SR–CBOE–
2018–014]
1. Purpose
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to the Options
Regulatory Fee
February 8, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
31, 2018, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) 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 Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
daltland on DSKBBV9HB2PROD with NOTICES
20 Id.
21 15
U.S.C. 78q–1.
U.S.C. 78s(b)(2).
23 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
24 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
22 15
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]]>Agencies
[Federal Register Volume 83, Number 31 (Wednesday, February 14, 2018)]
[Notices]
[Pages 6660-6662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-02974]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82659; File No. SR-ICEEU-2017-011]
Self-Regulatory Organizations; ICE Clear Europe Limited; Order
Approving Proposed Rule Change Relating to Amendments to the ICE Clear
Europe Collateral and Haircut Policy
February 8, 2018.
I. Introduction
On November 2, 2017, ICE Clear Europe Limited (``ICE Clear
Europe'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to modify the ICE Clear Europe Collateral and
Haircut Policy to incorporate certain changes to the calculation of
absolute collateral limits for bonds provided as Permitted Cover by
Clearing Members and make certain clarifications and updates and add
certain general provisions.\3\ The proposed rule change was published
for comment in the Federal Register on November 17, 2017.\4\ The
Commission did not receive comments regarding the proposed rule change.
On December 27, 2017, the Commission designated a longer period for
Commission action on the proposed rule change.\5\ For the reasons
discussed below, the Commission is approving the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Capitalized terms used in this order but not defined herein
have the same meanings specified in the ICE Clear Europe Clearing
Rules.
\4\ Securities Exchange Act Release No. 82063 (Nov. 13, 2017),
82 FR 54423 (Nov. 17, 2017) (SR-ICEEU-2017-011) (``Notice'').
\5\ Securities Exchange Act Release No. 82405 (Dec. 27, 2017),
83 FR 181 (Jan. 2, 2018).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The proposed rule change would amend ICE Clear Europe's Collateral
and Haircut Policy to set the absolute collateral limits for bonds
provided as Permitted Cover by Clearing Members so as to more
accurately capture the trading liquidity of each bond. The proposal
would also take into account ICE Clear Europe's committed repo
facilities to permit Clearing Members to maintain collateral in excess
of normal absolute limits.\6\ In addition, the proposed rule change
would revise the haircut calculation. Finally, the proposed rule change
would update the Collateral and Haircut Policy to add certain general
provisions designed to enhance ICE Clear Europe's governance. These
changes are further described below.
---------------------------------------------------------------------------
\6\ As used herein, the term ``absolute limit'' refers to the
maximum amount of bonds from an individual issuer that ICE Clear
Europe will accept from a Member Group. See Notice, 82 FR at 54424.
---------------------------------------------------------------------------
With respect to setting absolute collateral limits for bonds
provided as Permitted Cover by Clearing Members, ICE Clear Europe
proposed to set limits for each bond issuer and collateral type at 10%
of the average daily volume over the past three months, rounded to the
nearest million.\7\ The proposed rule change would also change the
underlying data used in the calculation of the absolute limit from a
repo survey of market participants to actual secondary market trading
volume data provided by ICE Data Services, except where official
trading volume data is
[[Page 6661]]
available from a primary source, such as a governmental agency or
central bank.\8\
---------------------------------------------------------------------------
\7\ Id.
\8\ Id.
---------------------------------------------------------------------------
To complement the changes to the absolute collateral limits
described above, ICE Clear Europe proposed changes to its haircut
methodology. In particular, the proposed rule change would amend the
haircut methodology to include a two-sided VaR estimation based on the
largest absolute returns.\9\ The proposed rule change would also amend
the Collateral and Haircut Policy to note scenarios in which the ICE
Clear Europe Clearing Risk Department may consider other factors in
setting haircuts, such as the effects caused by changes in the
different underlying bonds used to build bond price time-series or the
impact of unexpected currency events on the calculation of cross-
currency FX haircuts.\10\
---------------------------------------------------------------------------
\9\ Id.
\10\ Id.
---------------------------------------------------------------------------
In addition, the proposed rule change would also amend the
Collateral and Haircut Policy to account for ICE Clear Europe's
committed repo facilities. For example, in certain circumstances, ICE
Clear Europe permits a Clearing Member to maintain a collateral bond
position that otherwise exceeds the applicable absolute collateral
limits if ICE Clear Europe is able to determine that it would be able
to use its committed repo facility to convert the excess collateral
securities into cash. In addition, to permit the use of repo facilities
in this way, the proposed rule change also clarifies that the repo
facilities are available at any time there is an intra-day liquidity
need and not just in case of Clearing Member default.\11\
---------------------------------------------------------------------------
\11\ Id.
---------------------------------------------------------------------------
Finally, the proposed rule change would amend the Collateral and
Haircut Policy to update references to internal ICE Clear Europe
personnel, departments and committees and to explain the process for
validation and oversight of the models used to support the Collateral
and Haircut Policy.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\12\ For the reasons given below, the Commission finds
that the proposal is consistent with Section 17A(b)(3)(F) of the Act
\13\ and Rules 17Ad-22(e)(2) and (5) thereunder.\14\
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(2)(C).
\13\ 15 U.S.C. 78q-1(b)(3)(F).
\14\ 17 CFR 240.17Ad-22(e)(2), (5).
---------------------------------------------------------------------------
A. Consistency With Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of a registered clearing agency be designed 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, in
general, to protect investors and the public interest.\15\ The proposed
rule change will enhance ICE Clear Europe's ability to control the
credit, liquidity, and market risks stemming from the collateral it
accepts by establishing a maximum amount of bonds from an individual
issuer that ICE Clear Europe will accept from a Member Group as
collateral. These new maximum amounts will be derived from actual
secondary market trading volume data, and therefore should be more
reliable than the prior absolute limits, which as noted above, were
based on a repo survey of market participants as a proxy for trading
liquidity. Therefore, these limits should be more accurate, and
consequently, enhance ICE Clear Europe's ability to liquidate the bond
collateral in a timely manner. Further, the proposed rule change also
proposes to incorporate a two-sided VaR estimation based on the largest
absolute returns for purposes of setting haircuts. Taken together these
two changes should enhance ICE Clear Europe's ability to manage the
credit, liquidity, and market risks it faces from posted collateral,
and therefore enhance ICE Clear Europe's ability to safeguard
securities and funds which are in its custody or control or for which
it is responsible. Therefore, the Commission finds that the proposed
rule change is designed to assure the safeguarding of securities and
funds which are in the custody or control of ICE Clear Europe or for
which it is responsible and, in general, protects investors and the
public interest, and is therefore consistent with Section 17A(b)(3)(F)
of the Act.\16\
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78q-1(b)(3)(F).
\16\ Id.
---------------------------------------------------------------------------
B. Consistency With Rule 17Ad-22(e)(5)
The Commission further finds that the proposed rule change is
consistent with Rule 17Ad-22(e)(5). Rule 17Ad-22(e)(5) requires that a
covered clearing agency establish, implement, maintain and enforce
written policies and procedures reasonably designed to limit the assets
it accepts as collateral to those with low credit, liquidity, and
market risks, and set and enforce appropriately conservative haircuts
and concentration limits if the covered clearing agency requires
collateral to manage its or its participants' credit exposure; and
require a review of the sufficiency of its collateral haircuts and
concentration limits to be performed not less than annually.\17\
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\17\ 17 CFR 240.17Ad-22(e)(5).
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The proposed rule change will enhance ICE Clear Europe's ability to
control the liquidity and market risks stemming from the posting of
collateral by establishing a maximum amount of bonds from an individual
issuer that ICE Clear Europe will accept from a Member Group as
collateral. The proposed rule change will improve the accuracy of the
Collateral and Haircut Policy by taking into account the trading
liquidity of the bond using secondary market trading volume data
provided by ICE Data Services. Moreover, by updating the Collateral and
Haircut Policy to incorporate a two-sided VaR estimation based on the
largest absolute returns, the proposed rule change will capture a
broader range of price volatility information, thereby enhancing ICE
Clear Europe's ability to liquidate the bond collateral in a timely
manner without losses beyond the given haircuts. The Commission finds
that these aspects of the proposed rule change are intended to limit
the assets ICE Clear Europe accepts as collateral to those with low
credit, liquidity, and market risks, and to set and enforce
appropriately conservative haircuts. Therefore, the proposed rule
change is consistent with Rule 17Ad-22(e)(5).\18\
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\18\ Id.
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C. Consistency with Rule 17Ad-22(e)(2)
Rule 17Ad-22(e)(2) requires that a covered clearing agency
establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide for governance arrangements
that are clear and transparent and support the public interest
requirements in Section 17A of the Act applicable to clearing agencies,
and the objectives of owners and participants.\19\ The proposed rule
change will update references to internal ICE Clear Europe personnel,
departments and committees and will explain the process for validation
and oversight of the models used to support the Collateral and Haircut
Policy. Therefore, the Commission finds that the proposed rule change
is consistent with the requirement in Rule 17Ad-
[[Page 6662]]
22(e)(2) concerning governance arrangements that are clear and
transparent and that support the public interest requirements of
Section 17A of the Act applicable to clearing agencies and the
objectives of participants.\20\
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\19\ 17 CFR 240.17Ad-22(e)(2)(i) and (iii).
\20\ Id.
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IV. 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 \21\ and
Rules 17Ad-22(e)(2) and (5) thereunder.
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\21\ 15 U.S.C. 78q-1.
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\22\ that the proposed rule change (SR-ICEEU-2017-011) be, and hereby
is, approved.\23\
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\22\ 15 U.S.C. 78s(b)(2).
\23\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
\24\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-02974 Filed 2-13-18; 8:45 am]
BILLING CODE 8011-01-P
