2012-31125. Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Position Allocation Methodology to Margin Calculations for Two Additional OTC Spread Swap Futures ...

December 20, 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 December 19, 2012, ICE Clear Europe Limited (“ICE Clear Europe”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described Items I, II and III below, which Items have been prepared primarily by ICE Clear Europe. ICE Clear Europe filed the proposal pursuant to Section 19(b)(3)(A)(iii) ^[3] of the Act, and Rule 19b-4(f)(4)(ii) ^[4] thereunder so that the proposal was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change

The purpose of the change is to extend the Position Allocation Methodology to margin calculations for two additional OTC spread swap futures contracts. Position Allocation Methodology is an enhancement to the SPAN for the ICE Margining algorithm employed to calculate Original Margin. All capitalized terms not defined herein are defined in the ICE Clear Europe Rules.

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.^[5]

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In addition to providing clearing services for credit default swaps, ICE Clear Europe also provides clearing services for non-securities contracts in energy and emissions markets (“Energy Futures Products”). Position Allocation Methodology is an enhancement to the SPAN® ^[6] for the ICE Margining algorithm employed to calculate Original Margin. This feature is applied for certain products where the position in such a product can be better represented as one or more positions in alternate products for the purposes of calculating Original Margin. This Position Allocation Methodology will result in new enhanced positions, but the SPAN margin calculation algorithm itself has not been changed. As of August 30, 2011, Position Allocation Methodology was applied also to:

• GOC: Gasoil Crack—Gasoil 1st Line vs. Brent 1st Line Swap Future (in Metric Tons); and
• GDC: Gasoil Crack—Gasoil 1st Line vs. Brent 1st Line Swap Future (in Barrels).

Application of Position Allocation Methodology means that positions in the above OTC spread swap futures contracts will be decomposed into the following new positions:

• 2 legs of the underlying spread, in this case into Gasoil 1st Line (GSP) and Brent 1st Line (BSP) swap futures; and
• 1 original spread swap future, which will capture the remaining risk.

Energy Clearing Members were advised that the current “Scanning ranges and tiering” margin file will contain an additional column specifying whether a logical commodity is subject to Position Allocation Methodology (Yes/No). Also, the scanning ranges published for the original swap futures contracts will represent the remaining risk parameter and not the price risk parameter. Price risk will be covered by the positions allocated in the spread legs. In addition, for contracts to which a Position Allocation is applied, further details of the position Allocation can be found in the new “Position Allocation” file.

Energy Clearing Members were also advised that ICE Clear Europe will change the SPAN margin parameters for the following contracts:

• Brent 1st Line Swap Future (BSP); and
• Gasoil 1st Line Swap Future (GSP).

All updated SPAN® margin parameters can be found at: https://www.theice.com/​clear_​europe_​span_​parameters.jhtml.

Section 17A(b)(3)(F) of the Act ^[7] 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. ICE Clear Europe believes that the proposed change with respect to Energy Futures Products is consistent with the requirements of the Act and the rules and regulations thereunder applicable to ICE Clear Europe, in particular, with Section 17A(b)(3)(F),^[8] because improved margining of OTC spread swap futures contracts protects investors and the public interest.

(B) Clearing Agency's Statement on Burden on Competition

ICE Clear Europe does not believe the proposed change would have any impact, or impose any burden, on competition.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others

Written comments relating to the proposed change have not been solicited or received. ICE Clear Europe will notify the Commission of any written comments received by ICE Clear Europe.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A)(iii) ^[9] of the Act and Rule 19b-4(f)(4)(ii) ^[10] thereunder because it primarily affects the futures clearing operations of the clearing agency with respect to futures that are not security futures, and does not significantly affect the securities clearing operations of the clearing agency or any related rights or obligations of the clearing agency or persons using such service. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.

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 [e-mail]. Please include File Number SR-ICEEU-2012-17 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-2012-17. 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 such filings will also be available for inspection and copying at the principal office of ICE Clear Europe and on ICE Clear Europe's Web site (https://www.theice.com/​publicdocs/​regulatory_​filings/​ICEU_​SEC_​121912_​2012-17.pdf).

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-2012-17 and should be submitted on or before January 17, 2013.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.^[11]

Kevin M. O'Neill,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  15 U.S.C. 78s(b)(3)(A)(iii).

4.  17 CFR 240.19b-4(f)(4)(ii).

5.  The Commission has modified the text of the summaries prepared by ICE Clear Europe.

6.  SPAN is a registered trademark of Chicago Mercantile Exchange Inc., used herein under license. Chicago Mercantile Exchange Inc. assumes no responsibility in connection with the use of SPAN by any person or entity. SPAN is a risk evaluation and margin framework algorithm.

7.  15 U.S.C. 78q-1(b)(3)(F).

8.  15 U.S.C. 78q-1(b)(3)(F).

9.  15 U.S.C. 78s(b)(3)(A)(iii).

10.  17 CFR 240.19b-4(f)(4)(ii).

11.  17 CFR 200.30-3(a)(12).