[Federal Register Volume 79, Number 61 (Monday, March 31, 2014)]
[Notices]
[Pages 18098-18099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-07036]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71791; File No. SR-ICEEU-2014-02]
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'')
[[Page 18099]]
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-ICEEU-2014-02 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. 34-71519 (February 11,
2014), 79 FR 9296 (February 18, 2014) (SR-ICEEU-2014-02).
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II. Description
ICE Clear Europe is proposing to permit Clearing Members of ICE
Clear Europe to post certain KfW Euro Benchmark Bonds (``KfWs'') and
European Investment Bank Euro Area Reference Notes (``EIBs'', together
with KfWs, 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 25% of a Clearing
Member's total initial and original margin requirement, up to a maximum
amount of EUR 30 million. The New Permitted Cover will be subject to a
valuation haircut of 3%, except that New Permitted Cover 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.
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-2014-02) 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. 2014-07036 Filed 3-28-14; 8:45 am]
BILLING CODE 8011-01-P