Notice2021-21866
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing of Proposed Rule Change Relating to Amendments to the ICE Clear Europe Collateral and Haircut Procedures
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 7, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 86 Issue 192 (Thursday, October 7, 2021)</title>
</head>
<body><pre>
[Federal Register Volume 86, Number 192 (Thursday, October 7, 2021)]
[Notices]
[Pages 55879-55881]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-21866]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93236; File No. SR-ICEEU-2021-018]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing of Proposed Rule Change Relating to Amendments to the ICE
Clear Europe Collateral and Haircut Procedures
October 1, 2021.
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 September 20, 2021, ICE Clear Europe Limited (``ICE Clear Europe''
or the ``Clearing House'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule changes described in
Items I, II and III below, which Items have been prepared primarily by
ICE Clear Europe. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The principal purpose of the proposed amendments is for ICE Clear
Europe to modify its Collateral and Haircut Procedures (the
``Collateral and Haircut Procedures'' or ``Procedures'') to (i) include
explicitly the formula used for calculating Permitted Cover value, and
(ii) provide further details on the Clearing House's procedures for
monitoring data related to collateral valuations, including the
responsibilities of its different teams.
II. Clearing Agency'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 such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
(a) Purpose
ICE Clear Europe is proposing to revise the Collateral and Haircut
Procedures to state explicitly the formula used by the Clearing House
for calculating the value of Permitted Cover provided by Clearing
Members in respect of margin and guaranty fund requirements. The
formula would provide that cover value is equal to Nominal * Price/100
* (1-Haircut) + Nominal * Accrued, where price is clean and accrued is
expressed in %. Further to this description of the Permitted Cover
value calculation, the changes would also state that as a matter of
standard practice at the Clearing House, Treasuries would be given no
cover value 2 business days prior to maturity and a cash call would be
issued if a Member's account is in deficit. Additionally, the
amendments would state that accrued interest would lose value one day
prior to the coupon pay date. These changes reflect existing practice
at ICE Clear Europe with respect to the valuation of Permitted Cover
and are intended only to document that practice more clearly.
The amendments would also update the Clearing House's processes for
monitoring data related to collateral pricing and would describe the
roles of
[[Page 55880]]
various teams tasked with such monitoring. Specifically, the amendments
would reflect that the System Operations team checks end of day
collateral pricing. The amendments would state that the Credit team has
the controls to monitor End of Day market data that the System
Operations team uses to value collateral against thresholds to ensure
that the data is not ``stale''. Additionally, the amendment would
provide that the Treasury team reconciles and confirms the daily
bilateral collateral positions (nominal amounts). These amendments
would not reflect a change in current practice, but are intended to
clarify relevant documentation.
Finally, the description of the scope of the Collateral and Haircut
Procedures would be revised to remove an incorrect statement that the
Procedures do not address intraday and end of day valuation of
collateral.
(b) Statutory Basis
ICE Clear Europe believes that the proposed amendments to the
Collateral and Haircut Procedures are consistent with the requirements
of Section 17A of the Act \3\ and the regulations thereunder applicable
to it. In particular, Section 17A(b)(3)(F) of the Act \4\ 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, the safeguarding of securities and funds
in the custody or control of the clearing agency or for which it is
responsible, and the protection of investors and the public interest.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78q-1.
\4\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The proposed changes to the Procedures are designed to clarify the
documentation of certain existing practices of the Clearing House
around valuation of Permitted Cover. Specifically, the amendments would
update and clarify the processes, controls and escalations with respect
to collateral valuation data monitoring as well as outline the
responsibilities of the Clearing House's teams in relation to such
monitoring. They would also state the formula used by the Clearing
House for calculating Permitted Cover value. The amendments would thus
facilitate the operation of the Clearing House's margin framework and
overall risk management procedures, and thereby promote the stability
of the Clearing House and the prompt and accurate clearance and
settlement of cleared contracts. The amendments are for these reasons
also generally consistent with the protection of investors and the
public interest in the safe operation of the Clearing House. (ICE Clear
Europe would not expect the amendments to affect the safeguarding of
securities and funds in ICE Clear Europe's custody or control or for
which it is responsible.) Accordingly, the amendments satisfy the
requirements of Section 17A(b)(3)(F).\5\
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The amendments to the Collateral and Haircut Procedures are also
consistent with relevant provisions of Rule 17Ad-22. Rule 17Ad-22(e)(5)
requires the clearing agency to ``set and enforce appropriately
conservative haircuts and concentration limits if [it] requires
collateral to manage its or its participants' credit exposure.'' \6\
Rule 17Ad-22(e)(6)(iv) \7\ requires clearing agencies to maintain a
risk-based margin model that, among other things, ``uses reliable
sources of timely price data and uses procedures and sound valuation
models for addressing circumstances in which pricing data are not
readily available or reliable'' The amendments would clarify the
documentation of the Clearing House's procedures for valuing collateral
and monitoring relevant valuation and pricing data. As such, the
amendments are consistent with the requirements of Rule 17Ad-22.
---------------------------------------------------------------------------
\6\ 17 CFR 240.17Ad-22(e)(5).
\7\ 17 CFR 240.17Ad-22(e)(6)(iv).
---------------------------------------------------------------------------
Rule 17Ad-22(e)(2) \8\ requires clearing agencies to establish
reasonably designed policies and procedures to provide for governance
arrangements that are clear and transparent and specify clear and
direct lines of responsibility. The amendments to the Collateral and
Haircut Procedures would clarify the responsibilities of the Clearing
House's teams in relation to collateral valuation data monitoring. In
ICE Clear Europe's view, the amendments are therefore consistent with
the requirements of Rule 17Ad-22(e)(2).\9\
---------------------------------------------------------------------------
\8\ 17 CFR 240.17Ad-22(e)(2).
\9\ 17 CFR 240.17Ad-22(e)(2).
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
ICE Clear Europe does not believe the proposed amendments would
have any impact, or impose any burden, on competition not necessary or
appropriate in furtherance of the purposes of the Act. The amendments
are being adopted to update the Clearing House's Collateral and Haircut
Procedures, which describe the Clearing House's internal processes for
collateral and haircut risk management as presented in the ICE Clear
Europe's Collateral and Haircut Policy. The amendments are intended to
more clearly document certain valuation practices and are not intended
to change Clearing House practices. ICE Clear Europe does not believe
the amendments would affect the costs of clearing, the ability to
market participants to access clearing, or the market for clearing
services generally. Therefore, ICE Clear Europe does not believe the
proposed rule change imposes any burden on competition that is
inappropriate in furtherance of the purposes of the Act.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants or Others
Written comments relating to the proposed amendments have not been
solicited or received by ICE Clear Europe. ICE Clear Europe will notify
the Commission of any written comments received with respect to the
proposed rule change and adoption.
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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>) or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#5220273e377f313d3f3f373c2621122137317c353d24"><span class="__cf_email__" data-cfemail="8ffdfae3eaa2ece0e2e2eae1fbfccffceaeca1e8e0f9">[email protected]</span></a>. Please include
File Number SR-ICEEU-2021-018 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
[[Page 55881]]
All submissions should refer to File Number SR-ICEEU-2021-018. 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 website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 such filings will also be available for inspection
and copying at the principal office of ICE Clear Europe and on ICE
Clear Europe's website at <a href="https://www.theice.com/clear-europe/regulation">https://www.theice.com/clear-europe/regulation</a>.
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-ICEEU-2021-018 and should be
submitted on or before October 28, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21866 Filed 10-6-21; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on October 7, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.