[Federal Register Volume 78, Number 48 (Tuesday, March 12, 2013)]
[Notices]
[Pages 15775-15776]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-05572]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69044; File No. SR-ICEEU-2013-03]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Order Granting Accelerated Approval of Proposed Rule 
Change Relating to Clearing of Foreign Exchange Transactions

March 5, 2013.
    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 February 28, 2013, ICE Clear Europe Limited (``ICE Clear Europe'') 
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 ICE Clear Europe. The Commission is 
publishing this notice 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

    The purpose of the proposed rule change is to implement new Part 17 
of ICE Clear Europe's Rules, new FX Procedures, and new OTC FX Product 
Guide and Published Terms to facilitate the clearing of foreign 
exchange (``foreign exchange'' or ``FX'') transactions, initially non-
deliverable FX forward transactions.

II. Self-Regulatory Organization'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 III below. ICE Clear Europe 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 ICE Clear Europe.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    ICE Clear Europe submits new Part 17 of its Rules, new FX 
Procedures and new OTC FX Product Guide and Published Terms to 
facilitate the clearing of foreign exchange transactions, initially 
non-deliverable FX forward transactions. The other proposed changes in 
the Rules reflect conforming changes to definitions and related 
provisions and other drafting clarifications, and do not affect the 
substance of the Rules.
    The amendments adopt a new Part 17 of the Rules, which provides for 
the basic terms and conditions on which foreign exchange transactions 
will be cleared. Initially, ICE Clear Europe proposes to clear a series 
of contracts that are non-deliverable forward (``NDF'') transactions in 
the following currency pairs: USD/Brazilian Real, USD/Korean Won, USD/
China Yuan, USD/Indian Rupee, USD/Indonesian Rupiah, USD/Chilean Peso 
and USD/Russian Ruble. The contract specifications for the cleared NDF 
transactions are set forth in the new FX Procedures and related OTC FX 
Product Guide and Published Terms.
    The amendments also provide for the establishment of a separate 
guaranty fund for FX transactions (including a separate assessment 
right applicable to Clearing Members that clear FX transactions (``FX 
Clearing Members'')), to be applied to losses resulting from the 
default of an FX Clearing Member. ICE Clear Europe will also have a 
limited right of assessment, as set forth in Part 11 of the ICE Clear 
Europe Rules, against non-defaulting FX Clearing Members in an amount 
up to two times their required FX guaranty fund contribution as in 
effect prior to the relevant default.
    Specifically, Rule 1701 sets forth definitions related to the 
clearing of FX Contracts. Rule 1702 addresses the determination of 
settlement prices for FX Contracts. Rule 1703 provides for the payment 
of interest on mark-to-market margin for FX Contracts. Rule 1704 
provides for the separate treatment of reference currency buyer and 
seller positions for each category of proprietary or customer account. 
New Rule 1705 addresses the settlement of FX contracts. Rules 1706 and 
1707 establish an FX default committee to address defaults by FX 
Clearing Members and default related policies and procedures. Rule 1708 
addresses permitted use of certain FX-related data. Rule 1709 
establishes certain requirements for guarantors of FX Clearing Members. 
Rule 1710 sets out procedures for the termination of FX clearing 
membership.
    Conforming and related amendments are also proposed to other parts 
of the ICE Clear Europe Rules, including changes to definitions in Part 
1 of the ICE Clear Europe Rules. Part 2 of the Rules has been amended 
to address the inclusion of FX Clearing Members (including provisions 
relating to the termination of FX Clearing Member status). Proposed 
amendments to Parts 3 and 4 of the Rules contain various conforming and 
clarifying changes, and Rule 406 contains special rules relating to the 
netting of FX Contracts. Part 5 of the Rules has been amended to 
address margin for FX Contracts. Part 9 of the Rules has been revised 
to address defaults of FX Clearing Members and close-out of FX 
Contracts on default, in addition to various clarifying changes. Part 
11 of the Rules has been amended to reflect the creation of a separate 
FX guaranty fund and to provide for contributions to and use of the FX 
guaranty fund in various default scenarios. Revised Part 11 also 
addresses ICE Clear Europe's power of assessment of additional FX 
guaranty fund contributions from FX Clearing Members.
    ICE Clear Europe is also adopting a set of FX Procedures, which 
address certain additional issues for FX Contracts and FX Clearing 
Members, including (i) additional membership standards for FX Clearing 
Members (beyond those set out generally in the Rules), (ii) procedures 
for submission and acceptance of FX Contracts for clearing, (iii) 
provision of FX Contract pricing data by FX Clearing Members to ICE 
Clear Europe, (iv) settlement procedures for FX Contracts, (v) 
determination of market prices for FX Contracts and interest on mark-
to-market margin and (vi) FX default committee procedures. The contract 
specifications and terms for FX Contracts are set out in the FX 
Procedures together with the OTC FX Product Guide and Published Terms 
for FX Contracts.
    As part of the rule change, ICE Clear Europe will establish a 
separate FX Risk Committee with up to 15 members, including up to 10 
representatives from clearing members of ICE Clear Europe.
    ICE Clear Europe believes that the proposed rule change is 
consistent with the requirements of Section 17A of the

[[Page 15776]]

Act \4\ and the regulations thereunder applicable to it. The rule 
amendments will provide for clearing of an additional class of contract 
and thereby promote the prompt and accurate clearance of transactions 
and the protection of investors and the public interests. The proposed 
amendments do not impact ICE Clear Europe's financial resources devoted 
to its security-based swap related (i.e., credit default swap) clearing 
business. In particular, ICE Clear Europe notes that it has established 
three separate mutualized guaranty funds, one for energy products, one 
for credit default swaps, and one for foreign exchange swaps.
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    \4\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    ICE Clear Europe 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 change have been 
solicited, but no comments have been received to date. ICE Clear Europe 
will notify the Commission of any written comments received by ICE 
Clear Europe.

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

     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-ICEEU-2013-03 on the subject line.

Paper Comments

     Send paper comments 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-2013-03. 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 the filing also will be available 
for inspection and copying at the principal office of ICE Clear Europe 
and on ICE Clear Europe'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-2013-03 
and should be submitted on or before April 2, 2013.

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

    Section 19(b) of the Act \5\ 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. The Commission finds that the proposed rule change is 
consistent with the requirements of the Act, in particular the 
requirements of Section 17A of the Act,\6\ and the rules and 
regulations thereunder applicable to ICE Clear Europe. Specifically, 
the Commission finds that the proposed rule change is consistent with 
Section 17A(b)(3)(F) of the Act,\7\ which 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 proposed rule change is designed to permit ICE Clear 
Europe to clear promptly and accurately foreign exchange transactions, 
beginning with non-deliverable FX forward transactions.
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    \5\ 15 U.S.C. 78s(b).
    \6\ 15 U.S.C. 78q-1. In approving this proposed rule change, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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    In its filing, ICE Clear Europe requested that the Commission 
approve the proposed rule change on an accelerated basis for good cause 
shown. The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\8\ for approving the proposed rule change prior to the 30th 
day after the date of publication of notice of filing in the Federal 
Register because the proposed rule change implements new rules, 
procedures, and other provisions related to the clearing of products 
that are swaps subject to regulation by the Commodity Futures Trading 
Commission (``CFTC'').\9\ ICE Clear Europe has represented that the 
proposed rule change does not affect ICE Clear Europe's security-based 
swap clearing activities. The proposed rule and procedure changes have 
been submitted to the CFTC.
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    \8\ 15 U.S.C. 78s(b)(2).
    \9\ See e.g., Further Definition of ``Swap,'' ``Security-Based 
Swap,'' and ``Security-Based Swap Agreement''; Mixed Swaps; 
Security-Based Swap Agreement Recordkeeping, Exchange Act Release 
No. 67453 (Jul. 18, 2012), 77 FR 48207, 48254-48255, 48349 (Aug. 13, 
2012) (Joint Final Rule with the CFTC) defining non-deliverable 
forward contracts involving foreign exchange as swaps under Section 
1a(47) of the Commodity Exchange Act.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-ICEEU-2013-03) be, and 
hereby is, approved on an accelerated basis.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary .
[FR Doc. 2013-05572 Filed 3-11-13; 8:45 am]
BILLING CODE 8011-01-P