[Federal Register Volume 77, Number 92 (Friday, May 11, 2012)]
[Notices]
[Pages 27825-27827]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-11368]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66936; File No. SR-ICEEU-2012-06]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Order Granting Accelerated Approval of Proposed Rule 
Change to Membership Qualifications for CDS Clearing Members That Are 
Us CDS Clearing Members

May 7, 2012.
    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 May 5, 2012, ICE Clear Europe Limited (``ICEEU'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared primarily by ICEEU. The Commission is publishing this Notice 
and Order to solicit comments on the proposed rule change from 
interested persons and to approve the proposed rule change on an 
accelerated basis.
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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

    ICEEU proposes to conform the ICEEU membership qualifications with 
Commodity Futures Trading Commission (``CFTC'') Regulations 
39.12(a)(2)(ii) and 39.12(a)(2)(iii) no later than the May 7, 2012, 
effective date of CFTC Regulations 39.12(a)(2)(ii) and 
39.12(a)(2)(iii).
    As discussed in more detail in Item II(A) below, the changes to 
Parts 1 and 2 of the ICEEU CDS Procedures provide for amendments to the 
membership qualifications for US credit default swap (``CDS'') clearing 
members.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, ICEEU included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any

[[Page 27826]]

comments it received on the proposed rule change. The text of these 
statements may be examined at the places specified in Item III below. 
ICEEU has prepared summaries, set forth in sections (A), (B), and (C) 
below, of the most significant aspects of these statements.\3\
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    \3\ The Commission has modified the text of the summaries 
prepared by ICEEU.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    ICEEU is registered as a derivatives clearing organization 
(``DCO'') with the CFTC and clears CDS contracts subject to the 
jurisdiction of the CFTC. CFTC Regulation 39.12(a)(2)(ii) provides that 
``the participant requirements shall set forth capital requirements 
that are based on objective, transparent, and commonly accepted 
standards that appropriately match capital to risk. Capital 
requirements shall be scalable to the risks posed by clearing 
members.'' Accordingly, ICEEU proposes to revise its CDS Procedures 2.6 
to provide that, if at any time and for so long as a CDS Clearing 
Member that is an FCM has a required contribution to the ICEEU CDS 
guaranty fund that exceeds 25% of its ``excess net capital'', ICEEU may 
(in addition to other rights) require such US CDS Clearing Member to 
provide additional margin and/or prepay and maintain with ICEEU an 
amount up to the US CDS Clearing Member's CDS guaranty fund assessment 
obligation. ICEEU CDS Procedures 1.1 (Additional Definitions), the 
definitional section of ICEEU's Rules, would be amended to define 
``excess net capital'' as the amount reported on Form 1-FR-FCM or FOCUS 
Report or as otherwise reported to the CFTC under CFTC Rule 1.12 (or an 
equivalent amount for US CDS Clearing Members that are not futures 
commission merchants).
    CFTC Regulation 39.12(a)(2)(iii) provides that ``a derivatives 
clearing organization shall not set a minimum capital requirement of 
more than $50 million for any person that seeks to become a clearing 
member in order to clear swaps.'' Accordingly, ICEEU proposes to revise 
CDS Procedure 2.2(b) to incorporate the CFTC mandated $50 million 
minimum adjusted net capital requirement for US CDS clearing members. 
ICEEU proposes to define the term ``US CDS Clearing Member'' to mean 
``a CDS Clearing Member or applicant that would become a CDS Clearing 
Member that is (i) an FCM or (ii) any other Person organised or 
incorporated under the laws of the United States of America or a state 
thereof.'' ICEEU also proposes to amend CDS Procedure 2.2(b)(ii) and 
(iii) to eliminate references to external credit ratings as part of the 
membership qualifications for US CDS Clearing Members. In addition, CDS 
Procedure 2.2(b)(iv) would be added which states one additional 
membership qualification for US CDS clearing members. It requires that 
the US CDS Clearing Member be regulated ``for capital adequacy (the 
``Regulatory Capital Requirement'') by a competent authority such as 
the FSA, CFTC, SEC, Banque de France, Bundesbank, Bundesanstalt 
f[uuml]r Finanzdienstleistungsaufsicht, Swiss Federal Banking 
Commission, U.S. Federal Reserve Board, U.S. Office of the Comptroller 
of the Currency, or any other Regulatory Authority the Clearing House 
designates from time to time for this purpose, or it is an Affiliate of 
an entity that satisfies the Regulatory Capital Requirement and is 
subject to consolidated holding company group supervision.''
    Further, CDS Procedure 2.7 would be added to clarify that a ``US 
CDS Clearing Member that is not an FCM Clearing Member shall provide to 
the Clearing House a copy of such forms as the Clearing House may 
determine to be necessary on a comparable schedule to that which an FCM 
Clearing Member would be required to follow in filing such forms with 
its Regulatory Authorities.''
    ICEEU argues that the proposed rule changes are consistent with the 
requirements of Section 17A of the Act and the regulations thereunder 
applicable to it and that the proposed membership requirements will 
comply with the Act and the rules and regulations thereunder.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    ICEEU does not believe the proposed rule change would have any 
impact, or impose any burden, on competition.

(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. ICEEU represented that it will notify the 
Commission of any written comments it receives.

III. 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 may be submitted by using the 
Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) 
or by sending an email to [email protected]. Please include File 
Number SR-ICEEU-2012-06 on the subject line.
     Paper comments may be sent in triplicate to Elizabeth M. 
Murphy, Secretary, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ICEEU-2012-06. 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 Section, 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 ICEEU 
and on ICEEU'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-ICEEU-2012-06 
and should be submitted on or before June 1, 2012.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    Section 19(b)(2)(C) of the Act \4\ 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

[[Page 27827]]

rules and regulations thereunder applicable to such organization. 
Section 17A(b)(3)(F) of the Act \5\ 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.
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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 proposed change would allow ICEEU to expand the base of 
potential clearing members by lowering the net capital threshold for 
membership, thereby promoting the prompt and accurate clearance and 
settlement of securities transactions, and derivative agreements, 
contracts, and transactions. It would also allow ICEEU to comply with 
new CFTC regulatory requirements, thereby promoting the prompt and 
accurate clearance and settlement of derivative agreements, contracts, 
and transactions.
    Further, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Act,\6\ for approving the proposed rule change prior to 
the 30th day after the date of publication of notice in the Federal 
Register because, as a registered DCO, ICEEU is required to comply with 
the new CFTC regulations by the time they become effective on May 7, 
2012.\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).
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V. Conclusion

    It is therefore ordered, pursuant to 19(b)(2) of the Act,\8\ that 
the proposed rule change (SR-ICEEU-2012-06) is approved on an 
accelerated basis.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-11368 Filed 5-10-12; 8:45 am]
BILLING CODE 8011-01-P