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
Federal Register / Vol. 77, No. 58 / Monday, March 26, 2012 / Notices 17537 

5 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

percentage basis than at traditional 

futures clearinghouses. 

Modification #1 reduces the level of 

default resources held in the mutualized 

ICC guaranty fund and increases the 

level of resources held in initial margin 

(collateral). 

The ICC guaranty fund is relatively 

much larger, as compared to traditional 

futures clearinghouses, in part because 

the guaranty fund model is currently 

designed to cover the uncollateralized 

losses that would result from the three 

single names that would cause the 

greatest losses when entering a state of 

default. Modification #1 incorporates 

into the initial margin risk model the 

single name that causes the greatest loss 

when entering a state of default (i.e., the 

single name that results in the greatest 

amount of loss when stress-tested). This 

change effectively collateralizes the loss 

that would occur from the single name 

that causes the greatest loss entering a 

state of default. Consequently, the 

amount of uncollateralized loss that 

would result from the three single 

names causing the greatest losses when 

entering a state of default is reduced, 

thereby reducing the amount of required 

guaranty fund contributions. 

This change to the guaranty fund and 

initial margin risk model will, as noted 

above, result in a reduction of the 

guaranty fund requirements and an 

increase in the initial margin 

requirements. However, it is important 

to note that the decrease in the guaranty 

fund and the increase in initial margin 

requirements are not symmetrical. 

Instead, based upon current portfolios, 

for every $1 decrease to the guaranty 

fund there will be a corresponding 

increase to the initial margin 

requirements of approximately $5. 

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 the 

Recovery Rate assumptions and their 

impact on the Net Asset Value of the 

Credit Default Swap portfolio. This 

modification will make it easier for 

market participants to measure their 

risk. 

ICC believes that the proposed rule 

change is consistent with the 

requirements of Section 17A of the Act 

and the rules and regulations 

thereunder applicable to it. ICC believes 

that by reducing the level of default 

resources held in the guaranty fund and 

increasing the level of default resources 

held as initial margin and by modifying 

the initial margin risk model as 

described above, it is able to safeguard 

securities and funds in its custody or 

control or for which it is responsible. 

(B) Self-Regulatory Organization’s 

Statement on Burden on Competition 

ICC 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. ICC will notify the 

Commission of any written comments 

received by ICC. 

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 

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–ICC–2012–03 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–ICC–2012–03. 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 Section, 100 F Street NE., 

Washington, DC 20549, 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 ICC 

and on ICC’s Web site at https:// 

www.theice.com/publicdocs/ 

regulatory_filings/ 

ICEClearCredit_030812.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–ICC–2012–03 and should 

be submitted on or before April 16, 

2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.5

Kevin O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–7206 Filed 3–23–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66629; File No. SR–ICEEU– 

2012–05] 

Self-Regulatory Organizations; ICE 

Clear Europe Limited; Notice of Filing 

of Proposed Rule Change To Amend 

the ICE Clear Europe CDS Procedures, 

Finance Procedures, and Rules With 

Respect to the Calculation and 

Payment of Interest on Mark-To-Market 

Margin on CDS Transactions 

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 12, 

2012, ICE Clear Europe Limited (‘‘ICE 

Clear Europe’’) filed with the Securities 


tkelley on DSK3SPTVN1PROD with NOTICES