[Federal Register Volume 79, Number 61 (Monday, March 31, 2014)]
[Notices]
[Page 18098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-07035]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71790; File No. SR-ICEEU-2014-01]
Self-Regulatory Organizations; ICE Clear Europe Limited; Order
Approving Proposed Rule Change Regarding New Permitted Cover
March 25, 2014.
I. Introduction
On February 4, 2014, ICE Clear Europe Limited (``ICE Clear
Europe'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change SR-ICEEU-2014-01 pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder.\2\ The proposed rule change was published
for comment in the Federal Register on February 18, 2014.\3\ The
Commission received no comment letters regarding the proposed changes.
For the reasons discussed below, the Commission is granting approval of
the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 34-71518 (February 11,
2014), 79 FR 9304 (February 18, 2014) (SR-ICEEU-2014-01).
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II. Description
ICE Clear Europe is proposing to permit Clearing Members of ICE
Clear Europe to post certain Japanese Government Bonds (``JGBs''),
Japanese Treasury Bills (``JTBs'') and Japanese Treasury Discount Bills
(``JTDBs'' together with JGBs and JTBs, the ``New Permitted Cover'') to
ICE Clear Europe in order to meet initial margin, original margin and
certain other margin requirements, including delivery margin
requirements. The New Permitted Cover will not be accepted to satisfy
variation margin requirements or guaranty fund requirements.
ICE Clear Europe has stated that the New Permitted Cover will
provide its Clearing Members with a greater range of high-quality
collateral that can be posted to ICE Clear Europe. Furthermore, ICE
Clear Europe has stated that (1) the New Permitted Cover is of minimal
credit risk comparable to that of other sovereign debt currently
accepted by ICE Clear Europe as permitted cover for margin obligations,
and (2) the New Permitted Cover has demonstrated low volatility in
stressed and normal market conditions.
ICE Clear Europe has established initial valuation haircut levels
and concentration limitations for the New Permitted Cover, and proposes
to review and modify such haircuts and limitations from time to time in
accordance with the Rules and procedures.
The New Permitted Cover may only constitute up to 10% of a Clearing
Member's total initial and original margin requirement, up to a maximum
amount of JPY 100 billion. The New Permitted Cover will be subject to a
valuation haircut of 3%, except that JGBs with a maturity of more than
eleven years will be subject to a valuation haircut of 5%. The
concentration limitations apply on an aggregate basis across all
product categories. Upon a Clearing Member's use of New Permitted Cover
to cover a margin requirement denominated in a different currency, ICE
Clear Europe has stated than an additional haircut will apply, in
accordance with existing rules, in order to cover exchange rate risk.
ICE Clear Europe has also stated that it has commenced accepting
the New Permitted Cover as of June 28, 2013.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act \4\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if the
Commission finds that such proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to such self-regulatory organization. Section 17A(b)(3)(F)
of the Act \5\ requires, among other things, that the rules of a
clearing agency are 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 and for which it is
responsible and, in general, to protect investors and the public
interest.
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\4\ 15 U.S.C. 78s(b)(2)(C).
\5\ 15 U.S.C. 78q-1(b)(3)(F).
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The Commission finds that the proposed rule change is consistent
with the requirements of Section 17A of the Act,\6\ as Clearing Members
of ICE Clear Europe will have access to a greater range of collateral
that ICE Clear Europe has determined to be of high quality to satisfy
certain margin requirements, and the New Permitted Cover will be
subject to appropriate valuation haircuts and concentration limits,
which will be reviewed and modified periodically by ICE Clear Europe in
accordance with its Rules and procedures. The proposed rule changes
will thereby (1) promote the prompt and accurate clearance and
settlement of securities transactions and, to the extent applicable,
derivatives agreements, contracts, and transactions; and (2) help to
protect investors and the public interest, consistent with the
requirements of Section 17A(b)(3)(F) of the Act.\7\
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\6\ 15 U.S.C. 78q-1.
\7\ 15 U.S.C. 78q-1(b)(3)(F).
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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 \8\ and the
rules and regulations thereunder.
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\8\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (File No. SR-ICEEU-2014-01) be,
and hereby is, approved.\10\
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\9\ 15 U.S.C. 78s(b)(2).
\10\ 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).
\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-07035 Filed 3-28-14; 8:45 am]
BILLING CODE 8011-01-P