[Federal Register Volume 86, Number 192 (Thursday, October 7, 2021)]
[Notices]
[Pages 55879-55881]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-21866]


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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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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.
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    \3\ 15 U.S.C. 78q-1.
    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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    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\
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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    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.
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    \6\ 17 CFR 240.17Ad-22(e)(5).
    \7\ 17 CFR 240.17Ad-22(e)(6)(iv).
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    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\
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    \8\ 17 CFR 240.17Ad-22(e)(2).
    \9\ 17 CFR 240.17Ad-22(e)(2).
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(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

     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-2021-018 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.


[[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 (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 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 https://www.theice.com/clear-europe/regulation.
    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\
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    \10\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21866 Filed 10-6-21; 8:45 am]
BILLING CODE 8011-01-P