[Federal Register Volume 78, Number 2 (Thursday, January 3, 2013)]
[Notices]
[Pages 332-333]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-31570]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68542; File No. SR-ICEEU-2012-20]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change Related
to SPAN Margin Methodology Enhancements to Inter-Contract Credits and
Average Option Pricing Model for Energy Clearing Members
December 27, 2012.
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 December 19, 2012, ICE Clear Europe Limited (``ICE Clear Europe'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as 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)(iii) of the
Act,\3\ and Rule 19b-4(f)(4)(ii) thereunder,\4\ so that the proposal
was effective upon filing with the Commission. The Commission is
publishing this notice to solicit comments on the proposed change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(4)(ii).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of the change is to implement changes to the
SPAN[supreg] for ICE Margining algorithm employed to calculate Original
Margin (``Margin'') on Clearing Member positions. All capitalized terms
not defined herein are defined in the ICE Clear Europe Rules.
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 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. ICE Clear Europe has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of these statements.\5\
---------------------------------------------------------------------------
\5\ The Commission has modified the text of the summaries
prepared by ICE Clear Europe.
---------------------------------------------------------------------------
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In addition to providing clearing services for credit default
swaps, ICE Clear Europe also provides clearing services for non-
securities contracts in energy and emissions markets (``Energy Futures
Products''). Position Allocation Methodology is an enhancement to the
SPAN[supreg] \6\ for the ICE Margining algorithm employed to calculate
Original Margin for certain Energy Futures Products. This feature is
applied for certain Energy Futures Products where the position in such
a product can be better represented as one or more positions in
alternate products for the purposes of calculating Original Margin.
This Position Allocation Methodology will result in new enhanced
positions, but the SPAN margin calculation algorithm itself has not
been changed. These changes will impact both the algorithm employed and
the format of SPAN for ICE Array Files (``SPAN Array Files'') published
by ICE Clear Europe and will necessitate changes to the applications
used by Energy Clearing Members to calculate margin on their
Proprietary and Customer positions. ICE Clear Europe has updated the
original technical specification, at the request of Clearing Members,
in order to provide further clarification and examples relating to
implementation of Volatility Credit.
---------------------------------------------------------------------------
\6\ SPAN is a registered trademark of Chicago Mercantile
Exchange Inc., used herein under license. Chicago Mercantile
Exchange Inc. assumes no responsibility in connection with the use
of SPAN by any person or entity. SPAN is a risk evaluation and
margin framework algorithm.
---------------------------------------------------------------------------
As of April 2, 2012, a change to the calculation of the inter-
contract credit that implements an additional credit, the Volatility
Credit, was made. The change to the Inter-Contract Credit algorithm
yields an additional credit that is included in the existing inter-
contract credit. Since April 2, 2012, the SPAN Arrays published by ICE
Clear Europe include the Volatility Risk Credit Rate (the Offset Rate)
within the type 14 records.
Since March 30 2012, the Volatility Credit is introduced in respect
of the following SPAN Combined Contract pairings:
BRN/BSP, Brent Futures/Brent Option vs. Brent First Line
Swap/Brent Average Price Option.
GAS/GSP, Gas Oil Futures/Gas Oil Option vs. Gas Oil Front
Line Swap/Gas Oil Average Price Option.
ULS/ULA, Low-Sulphur Gas Oil Futures/Low Sulphur Gas Oil
Option vs. Low Sulphur Gas Oil Front Line Swap/Low-Sulphur Gas Oil
Average Price Option.
WBS/WSP, WTI Future/WTI Option vs. WTI First Line Swap/WTI
Average Price Option.
Going forward, ICE Clear Europe will notify Clearing Members of the
applicable Volatility Credit rates in due course. Inter-contract
spreads in respect of all other products are unaffected.
At end of day on April 6, 2012, the Clearing House enabled the
Average Price Option model for Options on Brent, Gas Oil, Low-Sulphur
Gas Oil and WTI First Line Swaps (Commodity Codes I, GSP, ULA and R).
As of April 9, 2012, a modified Black 76 pricing model has been
used to determine scanning losses in respect of Average Price Options.
This model reflects the risk reduction inherent within these options
during the averaging period prior to final settlement. This change has
no impact on Clearing Member systems as this change is reflected within
the SPAN Array Files and requires no changes to any software or
algorithms within the SPAN methodology.
All updated SPAN[supreg] margin parameters can be found at: https://www.theice.com/clear_europe_span_parameters.jhtml.
ICE Clear Europe has also published test SPAN Array Files
conforming to the new SPAN Array File Format, v2.5, which incorporates
credit rates in respect of the product pairings identified above. The
test files are available from the file download service (AFTS) and are
located in the ``/test'' sub-directory of the standard SPAN Array
download location on AFTS.
These files are named according to the test file naming convention
below:
IPEmmddT.csv.zip or IPEmmddT.sp5.zip, where,
mmdd represents the business month and day;
The sp5 file is of the same format as the pa5 format file
that Members might download from the CME ftp site.
Section 17A(b)(3)(F) of the Act \7\ requires, among other things,
that the rules of a clearing agency be designed to promote the prompt
and accurate
[[Page 333]]
clearance and settlement of securities transactions and, to the extent
applicable, derivative agreements, contracts, and transactions. ICE
Clear Europe believes that the proposed change with respect to Energy
Futures Products is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to ICE Clear Europe, in
particular, with Section 17A(b)(3)(F),\8\ because improved margining
protects investors and the public interest.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78q-1(b)(3)(F).
\8\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
ICE Clear Europe does not believe the proposed change would have
any impact, or impose any burden, on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments relating to the proposed change 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
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(4)(ii)
\10\ thereunder because it primarily affects the futures clearing
operations of the clearing agency with respect to futures that are not
security futures, and does not significantly affect any securities
clearing operations of the clearing agency or any related rights or
obligations of the clearing agency or persons using such 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.\11\
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(4)(ii).
\11\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
Send an email to [email protected]. Please include
File Number SR-ICEEU-2012-20 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-ICEEU-2012-20. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filings will also be available
for inspection and copying at the principal office of ICE Clear Europe
and on ICE Clear Europe's Web site at https://www.theice.com/publicdocs/regulatory_filings/ICEU_SEC_121912_2012-20.pdf.
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-2012-20
and should be submitted on or before January 24, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-31570 Filed 1-2-13; 8:45 am]
BILLING CODE 8011-01-P