[Federal Register Volume 79, Number 89 (Thursday, May 8, 2014)]
[Notices]
[Pages 26490-26491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-10537]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72083; File No. SR-ICC-2014-05]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change To Update ICC's Policy Regarding
Valuation of Maturing U.S. Treasury Securities and Update ICC's
Collateral Asset Haircut Methodology
May 2, 2014.
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 April 22, 2014, ICE Clear Credit LLC (``ICC'') 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 ICC. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of this proposed rule change is to amend the ICC
Clearing Rules (the ``Rules'') in order to update ICC's policy
regarding valuation of maturing U.S. Treasury securities and update
ICC's collateral asset haircut methodology.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, ICC 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. ICC has prepared summaries, set forth in sections A, B,
and C below, of the most significant aspects of these statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The proposed changes are intended to update ICC's policy regarding
valuation of maturing U.S. Treasury securities and update ICC's
collateral asset haircut methodology.
ICC believes such changes will facilitate the prompt and accurate
clearance and settlement of securities transactions and derivative
agreements, contracts, and transactions for which it is responsible.
The proposed changes are described in detail as follows.
ICC is updating its policy regarding the valuation of maturing U.S.
Treasury securities deposited to satisfy margin and guaranty fund
requirements. ICC will reduce the collateral valuation of maturing
securities to $0 two business days prior to maturity. This timing
allows for collection of additional margin or guaranty fund, if
required, prior to maturity. Clearing Participants will receive notice
the week prior to any collateral maturity dates and will be encouraged
to replace maturing securities with other acceptable collateral. If
collateral matures while on deposit with ICC, proceeds will be credited
to the margin or guaranty fund account, as appropriate, when received
by ICC on the maturity day. In the past, ICC and other
IntercontinentalExchange, Inc. clearing houses have applied this
methodology when nearing the U.S. debt ceiling, and this update will
provide consistent collateral valuation certainty at all times.
Implementation of this policy will align ICC with other
IntercontinentalExchange, Inc. clearing houses. ICC's Treasury
Operations Policies and Procedures have been updated to reflect this
change, and Clearing Participants will be notified via circular.
In order to provide consistency in the calculation of collateral
asset haircuts among the IntercontinentalExchange, Inc. clearing
houses, ICC is updating its Risk Management Framework. Currently at
ICC, haircuts for relevant assets (e.g. U.S. Treasury securities and
currencies) are calculated using a five-day liquidation period and a
99% confidence interval expected shortfall calculation. Under the
updated collateral asset haircut methodology, the
IntercontinentalExchange, Inc. clearing houses will calculate haircuts
for relevant assets using the greater (which may be rounded to the
nearest 1%), and hence more conservative, of: (i) The haircut
determined using a five-day liquidation period and a 99% confidence
interval expected shortfall calculation (currently used at ICC), and
(ii) the haircut determined using a two day holding period and 99.9%
confidence interval Value-at-Risk calculation. In practice, the more
conservative five-day liquidation period and a 99% confidence interval
expected shortfall calculation, currently used at ICC, will continue to
be the driver of haircuts. Thus, the updated collateral asset haircut
methodology will have no practical impact on ICC's haircut values.
Furthermore, as applied to currencies, should ICC choose to use one
haircut for a given foreign exchange pair (e.g. USD v. Euro, Euro v.
USD), ICC will apply the more conservative haircut. The changes to the
methodology for calculation of collateral asset haircuts do not require
any operational changes.
Section 17A(b)(3)(F) of the Act \3\ 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 and to comply with the provisions of the Act and the rules
and regulations thereunder. ICC believes that the proposed rule changes
are consistent with the requirements of the Act and the rules and
regulations thereunder applicable to ICC, in particular, to Section
17(A)(b)(3)(F),\4\ because ICC believes that the proposed rule changes
will facilitate the prompt and accurate settlement of swaps and
contribute to the safeguarding of securities and funds associated with
swap transactions which are in the custody or control of ICC or for
which it is responsible. The update to ICC's policy regarding valuation
of maturing U.S. Treasury securities and the update to ICC's collateral
asset haircut methodology provide consistency across the
IntercontinentalExchange, Inc. clearing houses. ICC considers the
update to its policy regarding valuation of maturing U.S. Treasury
securities to be a risk reducing measure, providing consistent
collateral valuation certainty at all times. ICC believes the update to
its collateral asset haircut methodology assures that ICC will continue
to apply the more conservative haircut of the two methodologies
included in ICC's policy. As such, the proposed rule changes will
facilitate the prompt and accurate settlement of swaps and contribute
to the safeguarding of customer funds and securities within the control
of ICC
[[Page 26491]]
within the meaning of Section 17A(b)(3)(F) \5\ of the Act.
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\3\ 15 U.S.C. 78q-1(b)(3)(F).
\4\ Id.
\5\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition
ICC does not believe the proposed rule changes would have any
impact, or impose any burden, on competition. The update to ICC's
policy regarding valuation of maturing U.S. Treasury securities and the
update to ICC's collateral asset haircut methodology apply uniformly
across all market participants. Therefore, ICC does not believe the
proposed rule changes impose any burden on competition that is
inappropriate 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
Written comments relating to the proposed rule change have not been
solicited or received. ICC will notify the Commission of any written
comments received by ICC.
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:
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-ICC-2014-05 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-ICC-2014-05. 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 Credit
and on ICE Clear Credit's Web site at https://www.theice.com/notices/Notices.shtml?regulatoryFilings.
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-ICC-2014-05
and should be submitted on or before May 29, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10537 Filed 5-7-14; 8:45 am]
BILLING CODE 8011-01-P