17534 Federal Register / Vol. 77, No. 58 / Monday, March 26, 2012 / Notices 

5 15 U.S.C. 78s(b)(2)(B). 

6 15 U.S.C. 78q–1(b)(3)(F). 

7 15 U.S.C. 78q–1. 

8 15 U.S.C. 78s(b)(2). 

9 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). 

10 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The text of the proposed rule change is attached 

as Exhibit 5 to DTC’s filing, which is available at 

www.dtcc.com/downloads/legal/rule_filings/2012/ 

dtc/2012-02.pdf. 

4The Commission has modified the text of the 

summaries prepared by DTC. 

5The term ‘‘Maturity Presentment’’ is defined in 

Rule 1 of DTC’s Rules and Procedures as a Delivery 

Versus Payment of matured MMI securities from the 

account of a presenting participant to the 

designated paying agent account for that issue as 

provided for in Rule 9(C) and as specified in DTC’s 

procedures. 

6Rule 1 of DTC’s Rules and Procedures defines 

the term ‘‘MMI Issuing Agent’’ generally as a 

participant acting as an issuing agent for an issuer 

with respect to a particular issue of MMI securities 

of that issuer and an ‘‘MMI Paying Agent’’ generally 

as a participant acting as a paying agent for an 

clearing agency affiliate of ICE Clear 

Europe. 

The third category of changes 

involves various cross-reference and 

typographical amendments to the 

processes for submission of CDS 

Contracts. The typographical changes 

are as follows: (i) Section 4.2 of the CDS 

Procedures, the words ‘‘Bilateral CDS 

Contract’’ are changed to ‘‘Bilateral CDS 

Transaction’’, and (ii) Section 8.4 of the 

CDS Procedures, the words ‘‘submission 

of’’ are added. According to ICE Clear 

Europe, these changes are made solely 

to correct typographical and crossreference drafting in the text of the 

Rules and make no substantive changes 

to the Rules. 

In its filing with the Commission, ICE 

Clear Europe indicated that it has 

engaged in extensive private 

consultation with its CDS Clearing 

Members involving both operational 

and legal consultation groups and has 

presented the changes to its CDS Risk 

Committee, which approved the 

changes. ICE Clear Europe has also 

engaged in a public consultation process 

in relation to all the changes, pursuant 

to the Circulars referred to above, and as 

required under applicable U.K. 

legislation. This public consultation 

involved the publication of such 

Circulars on a publicly accessible 

portion of the Internet Web site of ICE 

Clear Europe. ICE Clear Europe has 

received no opposing views from its 

Clearing Members in relation to the 

proposed rule amendments and 

received no responses to its public 

consultations during the consultation 

period. 

III. Discussion 

Section 19(b)(2)(B) of the Act 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.5 For 

example, Section 17A(b)(3)(F) of the 

Act 6 requires, among other things, that 

the rules of a clearing agency be 

designed to remove impediments to and 

perfect the mechanism of a national 

system for the prompt and accurate 

clearance and settlement of securities 

transactions and to assure the 

safeguarding of securities and funds in 

the custody or control of the clearing 

agency or for which it is responsible. 

If approved, the proposed rule change 

would allow ICE Clear Europe to 

implement certain operational changes 

related to the processing of CDS 

contracts, including with respect to (i) 

CDS Contracts that arise as a result of 

the end-of-day pricing process and (ii) 

and the process by which settlement 

and coupon payments under CDS 

Contracts will be made. After 

considering these changes, the 

Commission believes that the proposed 

rule change is consistent with Section 

17A(b)(3)(F) of the Act, including ICE 

Clear Europe’s obligation to ensure that 

its rules be designed to remove 

impediments to and perfect the 

mechanism of a national system for the 

prompt and accurate clearance and 

settlement of securities transactions. 

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 7

and the rules and regulations 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,8 that the 

proposed rule change (File No. SR– 

ICEEU–2012–01) be, and hereby is, 

approved.9

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–7203 Filed 3–23–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66630; File No. SR–DTC– 

2012–02] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing of Proposed Rule Change To 

Amend Rules Relating to the Issuance 

of and Maturity Presentment 

Processing for Money Market 

Instruments 

March 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 March 8, 

2012, The Depository Trust Company 

(‘‘DTC’’) 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 DTC. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The purpose of DTC’s proposed rule 

change is to amend DTC’s Settlement 

Service Guide to change certain 

deadlines associated with processing 

issuances and maturity presentments of 

money market instruments.3

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

DTC 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. DTC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements.4

(A) Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

The Maturity Presentment 5

processing for money market 

instruments (‘‘MMIs’’) is initiated 

automatically by DTC each morning for 

all of the MMIs maturing that day. The 

automatic process electronically sweeps 

all maturing positions of MMI CUSIPs 

from a participant’s accounts against 

credits in the amount of the payments 

to be received with respect to such 

presentments. The matured MMIs are 

delivered to the applicable issuing or 

paying agent (‘‘IPA’’),6 also a DTC 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 58 / Monday, March 26, 2012 / Notices 17535 

issuer with respect to a particular issue of MMI 

securities of that issuer. Since MMI Issuing Agents 

and MMI Paying Agents are often a single entity, 

this filing refers to both entities collectively as 

‘‘IPAs.’’ 

7 DTC employs a four-character acronym to 

designate an issuer’s MMI program. An issuer can 

have multiple acronyms. The IPA uses the 

acronym(s) when submitting an instruction of its 

refusal to pay for a given issuer’s program(s). 

8The other MMI related industry members 

include the Commercial Paper Issuers Working 

Group, which is comprised of both bank and 

corporate commercial paper issuers, and the Asset 

Managers Forum, whose whole membership is buyside investors. 

9The Task Force’s short-term recommendations 

focused on addressing the credit risk exposure that 

IPAs face because of a lack of transparency around 

the amount an issuer must fund to cover its 

maturities. The recommendations called for funding 

maturities by 1 p.m. if there is a net debit and for 

establishing new deadlines of 1:30 p.m. for the 

submission of all new valued issuance to DTC and 

of 2:15 p.m. for receivers of new valued issuance 

to accept delivery. By implementing these new 

deadlines, the IPA should have sufficient time to 

calculate its exposure and if a funding shortfall 

exists work with the issuer to resolve the deficiency 

before 3 p.m., which is the deadline at DTC for the 

IPA to fund the maturities or to issue an RTP. For 

more information, see DTCC Press Release ‘‘DTCC 

and SIFMA Release Task Force Report Identifying 

Opportunities to Mitigate Systemic and Credit Risk 

in Processing of Money Market Instruments’’ 

(March 31, 2011), which can be found at 

www.dtcc.com/news/press/releases/2011/ 

dtcc_sifma_task_force_report.php. 

10 In addition to the changes described in this 

filing, DTC is also making unrelated technical 

changes to its Settlement Service Guide in order to 

conform its rules to current practice and to a prior 

rule filing, SR–DTC–2011–01, approved in January 

2011. Securities Exchange Release Act No. 34– 

63775 (January 26, 2011), 76 FR 5843 (February 2, 

2011). 

11This change will eliminate the ability for a 

receiver to ‘‘force’’ a reclaim upon an IPA close to 

or after the 3 p.m. RTP cutoff that would alter the 

amount of funding an issuer needs to provide late 

in the day and would also eliminate matched 

reclaims that currently override participant risk 

management controls. 

12 If a transaction is not approved in RAD by 2:45 

p.m. E.T., the transaction will drop and will need 

to be resubmitted. 

participant, the IPA’s account is debited 

for the amount of the maturity proceeds. 

The debited amount will be included in 

the IPA’s net settlement amount. 

Similarly, the credits of participants that 

presented maturing MMIs will be 

included in those participants’ net 

settlement amount. 

MMI issuers and IPAs commonly 

view the primary source of funding for 

payments of MMI maturity 

presentments as flowing from new 

issuances of MMIs in the same program 

by that MMI issuer on that day. If the 

MMI issuer issues more new MMIs than 

the number of MMIs maturing, there 

would be no net funds payment to the 

IPA on that day. When an issuer has 

more maturing MMIs than new 

issuances, it will have an obligation to 

pay to the IPA the net amount of the 

MMIs maturing that day over the new 

issuance. When net maturity 

presentments exceed issuances on a 

day, IPAs at their discretion may 

provide significant intraday credit to 

issuers for the excess. However, the IPA 

as an agent of an issuer is not obligated 

to fund the presentments unless 

payment is received from the issuer. 

The business relationships between 

IPAs and their MMI issuers play a key 

role in determining if an IPA will 

execute a refusal to pay at DTC with 

respect to an MMI issuance. Because 

maturity presentments of an issuer’s 

MMIs for which the IPA acts are 

processed automatically and randomly 

against the IPA’s account, IPAs are 

permitted to refuse to pay for all of an 

issuer’s maturities in an MMI program.7

An IPA that refuses payment on an MMI 

maturity must communicate its 

intention to DTC using the DTC 

Participant Terminal/Browser Service 

(PTS/PBS) MMRP function. This 

communication, referred to as an Issuer 

Failure/Refusal to Pay (‘‘RTP’’), allows 

the Paying Agent to enter a refusal to 

pay instruction for a particular issuer up 

to 3 p.m. Eastern Time (‘‘ET’’) on the 

date of the affected maturity 

presentment. Such an instruction causes 

DTC to reverse all transactions related to 

any new issuances in that issuer’s 

program, including the maturity 

presentments. An IPA RTP may have a 

significant market impact on the issuer’s 

reputation and credit standing. 

In late 2009, DTC and the Securities 

Industry and Financial Markets 

Association (‘‘SIFMA’’) formed the MMI 

Blue-Sky Task Force (‘‘Task Force’’) to 

address systemic and unique market 

risks associated with the MMI process, 

including those related to DTC’s 

maturity presentment processing. The 

Task Force, along other money market 

industry members,8 determined that 

DTC’s current MMI processing schedule 

permits issuance and other transaction 

activity that can affect an issuer’s net 

funding amount or proceeds after the 3 

p.m. E.T. deadline for RTP 

instructions.9 Accordingly, DTC is 

proposing to amend certain provisions 

in its Settlement Service Guide in order 

to provide increased transparency for 

IPAs before the 3 p.m. RTP deadline, 

which should in turn assist IPAs in 

making better informed credit decisions 

when an issuer has more maturities than 

issuances.10 The proposed changes to 

DTC’s Settlement Service Guide 

include: 

1. Making all MMI issuance and 

deliver order transactions subject to 

DTC’s Receiver Authorized Delivery 

(‘‘RAD’’) function for approval 

regardless of transaction value.11

2. Adjusting the MMI valued new 

issuance cut-off time from 3:20 p.m. E.T. 

to 2 p.m. E.T. 

3. Creating a new MMI RAD approval 

of new valued issuance transactions at 

2:45 p.m. E.T. instead of 3:30 p.m. E.T.12

DTC is proposing to implement the 

changes described above on the date the 

proposed rule change is approved. 

DTC believes that the proposed rule 

change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

DTC because the earlier cutoffs and the 

elimination of MMI matched reclaims 

should reduce potential late day 

reversals due to non-payment 

instructions from IPAs, which should in 

turn allow IPAs to determine before the 

3 p.m. RTP deadline if there is a funding 

shortfall with respect to an issuer. 

Additionally, the changes to the 

Settlement Service Guide, as proposed, 

should serve to reinforce consistent 

MMI business practices by 

implementing earlier deadlines for 

issuances processing and receiver 

approvals. DTC expects these proposed 

changes to make the processing of MMI 

issuances and maturities more efficient. 

Finally, the proposed rule change is 

consistent with the CPSS/IOSCO 

Recommendations for Securities 

Settlement Systems applicable to DTC. 

(B) Self-Regulatory Organization’s 

Statement on Burden on Competition 

DTC does not believe that the 

proposed rule change would impose any 

burden on competition. 

(C) Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The proposed rule change was 

developed in consultation with the Task 

Force and other securities industry 

organizations. Written comments 

relating to the proposed rule change 

have not been solicited or received. DTC 

will notify the Commission of any 

written comments received by DTC. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within forty-five days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

ninety days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 


tkelley on DSK3SPTVN1PROD with NOTICES
17536 Federal Register / Vol. 77, No. 58 / Monday, March 26, 2012 / Notices 

13 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The Commission has modified the text of the 

summaries prepared by ICC. 

4 ICC has also contributed a total of $50 million 

to the guaranty fund. $25 million of ICC’s 

contribution is exposed prior to the mutualization 

of the non-defaulting clearing participants’ 

contributions and the second $25 million of ICC’s 

contribution is mutualized along with the nondefaulting clearing participants’ contributions to the 

guaranty fund on a pro rata basis. 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

the 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 rulecomments@sec.gov. Please include File 

Number SR–DTC–2012–02 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 submission should refer to File 

Number SR–DTC–2012–02. 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 20549–1090, on official 

business days between the hours of 

10 a.m. and 3 p.m. Copies of such filings 

will also be available for inspection and 

copying at the principal office of DTC 

and on DTC’s Web site at http:// 

www.dtcc.com/downloads/legal/ 

rule_filings/2012/dtc/2012-02.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–DTC–2012–02 and should 

be submitted on or before April 16, 

2012. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–7205 Filed 3–23–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66631; File No. SR–ICC– 

2012–03] 

Self-Regulatory Organizations; ICE 

Clear Credit LLC; Notice of Filing of 

Proposed Rule Change to Its Risk 

Model To Reduce the Current Level of 

Risk Mutualization Among Its Clearing 

Participants and To Modify the Initial 

Margin Risk Model so That It Is Easier 

for Market Participants To Measure 

Their Risk 

March 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 March 8, 

2012, ICE Clear Credit LLC (‘‘ICC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared primarily by ICC. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The purpose of the proposed rule 

change (i.e., modifications to the ICC 

risk model) is to (1) reduce the current 

level of risk mutualization among ICC’s 

clearing participants (Modification #1) 

and (2) modify the initial margin risk 

model approach in a manner that will 

make it easier for market participants to 

measure their risk (Modification #2). 

As discussed in more detail in Item II 

below, Modification #1 reduces the 

level of default resources held in the 

mutualized ICC guaranty fund and 

significantly increases the level of 

resources held in initial margin. 

Modification #2 modifies the initial 

margin risk model by removing the 

conditional Recovery Rate stressscenarios and adding a new Recovery 

Rate sensitivity component that is 

computed by considering changes in 

Recovery Rate assumptions that impact 

the Net Asset Value of the portfolio. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, ICC 

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. ICC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements.3

(A) Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

The counterparty risk brought to ICC 

by any of its clearing participants is 

‘‘collateralized’’ in the first instance by 

the clearing participant counterparty 

through its initial margin. In the event 

that any defaulting clearing participant’s 

initial margin and guaranty fund 

contributions are insufficient to cover 

its obligations, any such deficit is 

mutualized across all non-defaulting 

clearing participants through their 

respective guaranty fund contributions.4

The respective initial margin 

contributions of non-defaulting clearing 

participants are not mutualized and 

would not be used to satisfy the deficit 

of another clearing participant’s default. 

Since its launch, ICC has maintained 

a very high percentage of its default 

resources in the mutualized guaranty 

fund. On average, the size of the 

guaranty fund has been roughly 50% of 

the initial margin held by ICC. Whereas, 

historically, traditional futures 

clearinghouse have maintained guaranty 

funds in an amount equal to roughly 

5–7% of the initial margin held. In other 

words, at ICC, the clearing participant 

resources available to be mutualized in 

the guaranty fund versus the resources 

available as initial margin have been 

approximately ten times greater on a 


tkelley on DSK3SPTVN1PROD with NOTICES