[Federal Register Volume 77, Number 90 (Wednesday, May 9, 2012)]
[Notices]
[Pages 27254-27255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-11129]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66911; File No. SR-ICEEU-2012-05]


Self-Regulatory Organizations; ICE Clear Europe Limited; Order 
Approving Proposed Rule Change To Amend the ICE Clear Europe Limited 
CDS Procedures, Finance Procedures, and Rules With Respect to the 
Calculation and Payment of Interest on Mark-To-Market Margin on CDS 
Transactions

May 3, 2012.

I. Introduction

    On March 12, 2012, ICE Clear Europe Limited (``ICE Clear Europe'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change SR-ICEEU-2012-05 pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'').\1\ The proposed rule 
change was published for comment in the Federal Register on March 26, 
2012.\2\ The Commission received no comment letters. 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\ Securities Exchange Act Release No. 34-66629 (March 20, 
2012), 77 FR 17537 (March 26, 2012).
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II. Description

    ICE Clear Europe proposed rule and CDS procedural amendments 
intended to modify the terms of the calculation and payment of interest 
on mark-to-market margin for CDS transactions. The amendments will 
provide further detail for calculation of interest on mark-to-market 
margin for CDS at the position level, but will not change the overall

[[Page 27255]]

calculation of that interest. The amendments will also move payment of 
such interest from a monthly to a daily basis.
    The proposed rule changes consist of operational changes to the 
Rules, CDS Procedures and Finance Procedures in relation to the 
calculation and payment of interest on the mark-to-market margin for 
CDS transactions on a daily basis. The amendments also clarify, 
consistent with ICE Clear Europe's current practice, that mark-to-
market margin and variation margin may be required to be provided by 
the clearing member to the clearing house or vice versa. ICE Clear 
Europe consulted on the proposed rule changes with its CDS Risk 
Committee, which supports the proposed rule changes.
    ICE Clear Europe proposed to update Parts 1 and 3 of its CDS 
Procedures to state more clearly the daily calculation of interest on 
mark-to-market margin for CDS transactions and to provide further 
detail about such calculations. The new definitions of ``Daily 
Aggregate MTM Interest Amount,'' ``Mark-to-Market Interest,'' and 
``Mark-to-Market Margin Balance'' and the provisions of Part 3 of the 
CDS Procedures reflect these changes. ``Daily Aggregate MTM Interest 
Amount'' means for any Clearing Member for a currency on any day the 
sum of the Mark-to-Market Margin Balances in such currency for that day 
in respect of that Clearing Member. The Daily Aggregate MTM Interest 
Amount will be determined separately in respect of the Clearing 
Member's Proprietary Account and any relevant customer account. Where 
the Daily Aggregate MTM Interest Amount is positive, it will be owed by 
ICE Clear Europe to the relevant Clearing Member; where it is negative, 
the relevant Clearing Member will owe the absolute value of the Daily 
Aggregate MTM Interest Amount to ICE Clear Europe. ``Mark-to-Market 
Interest'' will mean interest calculated daily in accordance with the 
market convention for the relevant currency by applying the applicable 
overnight rate. ``Mark-to-Market Margin Balance'' will mean the sum of 
all Mark-to-Market Margin delivered up to, but excluding that day, by 
the relevant Clearing Member in respect of such CDS Contract to ICE 
Clear Europe less all Mark-to-Market Margin delivered up to, but 
excluding that day, by ICE Clear Europe in respect of such CDS Contract 
to such Clearing Member, as determined at the close of business on such 
day. Pursuant to the amendments to Section 3.1 of the CDS Procedures 
and 6.11(h)(iv) of the Finance Procedures, interest on Mark-to-Market 
Margin will be payable on a daily, rather than a monthly basis, 
although the interest calculation is substantially unchanged.

III. Discussion

    Section 19(b)(2)(C) of the Act \3\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that such proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such organization. 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 safeguarding of securities and funds, which are 
in the custody or control of the clearing agency or for which it is 
responsible.
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    \3\ 15 U.S.C. 78s(b)(2)(C).
    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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    By amending rules and procedures which allow ICE Clear Europe to 
effectively manage risk, the proposed rule change will assure the 
safeguarding of securities and funds, which are in the custody or 
control of ICE Clear Europe or for which it is responsible. As a 
result, the proposed rule change is consistent with the requirements of 
Section 17A(b)(3)(F) of the Act.

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 \5\ and the 
rules and regulations thereunder.
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    \5\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\6\ that the proposed rule change (File No. SR-ICEEU-2012-05) be, 
and hereby is, approved.\7\
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    \6\ 15 U.S.C. 78s(b)(2).
    \7\ 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).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin O'Neill,
Deputy Secretary.
[FR Doc. 2012-11129 Filed 5-8-12; 8:45 am]
BILLING CODE 8011-01-P