Federal Register / Vol. 79, No. 229 / Friday, November 28, 2014 / Notices 70905 

10 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). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(4)(ii). 

proposed rule change (SR–ICC–2014– 

16) be, and hereby is, approved.10

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28079 Filed 11–26–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73667; File No. SR–ICEEU– 

2014–23] 

Self-Regulatory Organizations; ICE 

Clear Europe Limited; Notice of Filing 

of Proposed Rule Change to Finance 

Procedures 

November 21, 2014. 

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 November 

14, 2014, ICE Clear Europe Limited 

(‘‘ICE Clear Europe’’ or the ‘‘Clearing 

House’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change described in 

Items I, II and III below, which Items 

have been primarily prepared by ICE 

Clear Europe. ICE Clear Europe filed the 

proposal pursuant to Section 19(b)(3)(A) 

of the Act,3 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. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The principal purpose of the 

proposed change is to permit certain 

third party collateral purchase 

arrangements. 

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 IV below. ICE 

Clear Europe has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant aspects of these 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to modify the Finance 

Procedures to permit certain third party 

collateral purchase arrangements with 

respect to Triparty Collateral provided 

by F&O Clearing Members in respect of 

a Proprietary Account. Under such an 

arrangement, an F&O Clearing Member 

would, with the permission of the 

Clearing House, enter into a third party 

collateral purchase agreement (a 

‘‘Purchase Agreement’’) with the 

Clearing House and a third party 

collateral purchaser (the ‘‘TPCP’’) 

designated by the Clearing Member. The 

TPCP may be an affiliate of the Clearing 

Member. Under the terms of the 

Purchase Agreement, if the Clearing 

House declares the Clearing Member to 

be a Defaulter under the Rules, then the 

Clearing House will offer to sell that 

Clearing Member’s Triparty Collateral to 

the TPCP, for a specified price 

established by the Clearing House based 

on its determination of the market value 

of the collateral. The TPCP will have a 

specified period (expected to be two 

hours) to accept or reject the offer to 

sell. If the TPCP accepts the offer, the 

Clearing House will sell the Triparty 

Collateral to the TPCP at the specified 

price. The proceeds of such sale would 

be applied by the Clearing House in the 

default management process and net 

sum calculation in the same manner as 

any other liquidation of margin of a 

Defaulter. If the TPCP rejects the offer to 

sell, or does not respond within the 

specified period, the offer will expire, 

and the Clearing House will apply or 

liquidate the Triparty Collateral 

pursuant to the Rules as part of its usual 

default management process. 

These arrangements would not apply 

to (i) margin, collateral or permitted 

cover provided by F&O Clearing 

Members other than Triparty Collateral, 

(ii) any margin, collateral or permitted 

cover provided with respect to a 

customer account, or (iii) any margin, 

collateral or permitted cover provided 

by CDS or FX Clearing Members in 

respect of CDS or FX Contracts, 

respectively. 

The Clearing House proposes to 

permit third party collateral purchase 

arrangements to provide a pre-arranged 

alternative to collateral liquidation in 

the default management process for F&O 

Clearing Members. Certain F&O Clearing 

Members have requested that such 

arrangements be made available in order 

to facilitate their own collateral 

management activities. For example, 

ICE Clear Europe understands that for 

certain corporate groups, collateral to be 

transferred to the Clearing House may 

have been acquired by an affiliated 

entity (rather than the Clearing Member 

itself) through repurchase or similar 

transactions, and such entity may want 

to have the ability to reacquire the 

relevant collateral in order to settle such 

other transactions, even following a 

Clearing Member default. ICE Clear 

Europe has determined that the 

proposed collateral purchase 

arrangement is consistent with its own 

default management requirements. In 

this regard, if the TPCP accepts the 

offer, the Clearing House will be able to 

sell the relevant Triparty Collateral at 

the current market price, as determined 

by the Clearing House. The ability to 

sell such collateral to a willing buyer 

may avoid the need to liquidate such 

collateral in the market, and accordingly 

reduce time and transaction costs. In 

addition, the TPCP is granted only a 

short period of time (currently expected 

to be two hours) to respond to the 

Clearing House’s offer, and if it rejects 

the offer or does not respond within 

such period, the Clearing House retains 

all of its existing rights and remedies 

with respect to the Triparty Collateral. 

ICE Clear Europe thus does not believe 

the proposed two-hour delay would 

adversely affect its ability to liquidate 

collateral or otherwise manage the 

default of an F&O Clearing Member. 

To implement these arrangements, 

ICE Clear Europe proposes to adopt a 

new Paragraph 3.32 of the Finance 

Procedures, the text of which is as 

follows (new text underlined): 

3.32 At the request of an F&O 

Clearing Member, the Clearing House 

may, in its sole discretion, agree to enter 

into a collateral purchase agreement 

with a third party collateral purchaser 

and such F&O Clearing Member, under 

which the Clearing House will agree to 

offer for sale to the third party collateral 

purchaser Triparty Collateral deposited 

by such F&O Clearing Member for a 

Proprietary Account in respect of F&O 

Contracts, in the event of the F&O 

Clearing Member being declared a 

Defaulter under the Rules. The Clearing 

House shall have no obligation to enter 

into any such agreement, and the 

identity of any such third party 


tkelley on DSK3SPTVN1PROD with NOTICES
70906 Federal Register / Vol. 79, No. 229 / Friday, November 28, 2014 / Notices 

5 15 U.S.C. 78q–1. 

6 17 CFR 240.17Ad–22. 

7 15 U.S.C. 78q–1(b)(3)(F). 

8 17 CFR 240.17Ad–22(d)(11). 

9 15 U.S.C. 78q–1(b)(3)(F). 

10See Rules 903–906. 

11 17 CFR 240.17Ad–22(d)(11). 

12 17 CFR 240.17Ad–22(d)(6). 

13 15 U.S.C. 78s(b)(3)(A). 

14 17 CFR 240.19b–4(f). 

collateral purchaser must be approved 

by the Clearing House pursuant to 

criteria established by the Clearing 

House. Any such collateral purchase 

agreement must be in the form approved 

by the Clearing House for such purposes 

from time to time. 

Paragraph 3.32 will thus authorize, 

but not require, the Clearing House to 

enter into a Purchase Agreement at the 

request of an F&O Clearing Member 

relating to Triparty Collateral provided 

with respect to a Proprietary Account. 

The Clearing House would need to 

approve the particular arrangement, 

including the TPCP. Paragraph 3.32 also 

contemplates that the Clearing House 

will develop and approve its own form 

of agreement to be used for this purpose 

(subject to modification in particular 

cases) that is consistent with the 

Clearing House’s default management 

requirements. With respect to approval 

of TPCPs, the Clearing House will 

establish criteria focusing on the credit 

standing of the entity as well as 

considerations relating to legal 

enforceability of the arrangement, 

treatment of the arrangement in relevant 

insolvency proceedings and similar 

matters relevant to maintaining the 

integrity of the Clearing House’s default 

management process. 

2. Statutory Basis 

ICE Clear Europe believes that the 

proposed rule change is consistent with 

the requirements of Section 17A of the 

Act 5 and the regulations thereunder 

applicable to it, including the standards 

under Rule 17Ad–22.6 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 

and to assure the safeguarding of 

securities and funds which are in the 

custody or control of the clearing agency 

or for which it is responsible. In 

addition, Rule 17Ad–22(d)(11) 8 requires 

that the clearing agency establish 

default procedures that ensure that the 

clearing agency can take timely action to 

contain losses and liquidity pressures 

and to continue meeting its obligations 

in the event of a clearing member 

default. 

The third party collateral purchase 

arrangements will use the existing 

Clearing House procedures for Triparty 

Collateral, which is held with a triparty 

collateral service provider such as 

Euroclear Bank. As a result, the 

proposed rule change will not adversely 

affect the manner in which collateral 

provided by a Clearing Member is 

currently held, prior to default, and 

accordingly will not adversely affect the 

safeguarding of securities or funds in 

the custody or control of ICE Clear 

Europe or for which it is responsible, 

within the meaning of Section 

17A(b)(3)(F) of the Act.9 It bears noting 

in this regard that the proposed 

arrangements are limited to the 

Proprietary Accounts of F&O Clearing 

Members, and would not apply to any 

Customer Account. The arrangement 

also would not apply to CDS Clearing 

Members or FX Clearing Members 

acting in their capacities as such. 

In terms of default management, as 

discussed above, ICE Clear Europe 

believes that the proposed amendments 

would not interfere with its ability to 

manage a Clearing Member default, 

consistent with the standards in the Act 

and Rule 17Ad–22. Under its existing 

Rules, the Clearing House has broad 

rights to apply and liquidate collateral 

provided by a Clearing Member 

following its default.10 In ICE Clear 

Europe’s view, the proposed 

arrangements provide an additional 

means by which Triparty Collateral can 

be liquidated following default. In this 

regard, the arrangements may provide 

certain default management benefits if 

the collateral purchase option is 

exercised, as the collateral purchase 

option will provide the Clearing House 

with the cash value of the relevant 

collateral promptly, without the need 

for the Clearing House to undertake the 

liquidation of the collateral in the 

market (and incur related expenses). 

The proposed third party collateral 

purchase arrangement would provide 

only a brief period (expected to be two 

hours) in which the TPCP would have 

the right to purchase the Triparty 

Collateral. ICE Clear Europe does not 

believe this delay, even in the event the 

TPCP did not elect to purchase the 

collateral, would materially impact the 

Clearing House’s ability to manage a 

default or liquidate collateral following 

expiration of the period. As a result, ICE 

Clear Europe believes that the proposed 

amendments are consistent with the 

requirements of Rule 17Ad–22(d)(11).11

As discussed above, ICE Clear Europe 

is proposing these arrangements at the 

request of F&O Clearing Members 

seeking to improve their own collateral 

management. In this respect, ICE Clear 

Europe believes that the proposed 

amendments are also consistent with 

the requirements of Rule 17Ad– 

22(d)(6),12 which requires that clearing 

agency procedures be cost-effective in 

meeting the requirements of participants 

while maintaining safe and secure 

operations. 

B. Self-Regulatory Organization’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 proposed 

changes will provide additional 

flexibility by permitting the use, on a 

voluntary basis, of third party collateral 

purchase arrangements for those F&O 

Clearing Members that are interested in 

such arrangements. No Clearing Member 

will be required to use these 

arrangements, and the changes will thus 

not affect those Clearing Members that 

do not participate in such arrangements. 

In addition, the amendments will not 

otherwise affect the terms or conditions 

of any cleared contract or the standards 

or requirements for participation in or 

use of the Clearing House. Accordingly, 

the changes should not, in the Clearing 

House’s view, affect the availability of 

clearing, access to clearing services or 

the costs of clearing for clearing 

members or other market participants. 

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 to the rules 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 pursuant to Section 

19(b)(3)(A) 13 of the Act and Rule 19b– 

4(f)(4)(ii) 14 thereunder because it effects 

a change in an existing service of a 

registered clearing agency that primarily 

affects the operations of the clearing 

agency with respect to products that are 

not securities, including futures that are 

not security futures, swaps that are not 

security-based swaps or mixed swaps, 

and forwards that are not security 

forwards, and does not significantly 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 229 / Friday, November 28, 2014 / Notices 70907 

15 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The Exchange intends to require firms to 

identify Professional Customer orders submitted 

electronically to the system by identifying them 

with the number ‘‘8’’ in the customer type field— 

a mandatory field required for order entry. Manual 

orders submitted outside the electronic system 

would be marked with an origin code ‘‘PC.’’ 

5Orders for any customer that had an average of 

more than 390 orders per day during any month of 

a calendar quarter must be represented as 

Professional Customer orders for the next calendar 

quarter. OTP Holders would be required to conduct 

a quarterly review and make any appropriate 

changes to the way in which they are representing 

orders within five business days after the end of 

each calendar quarter. While members only would 

be required to review their accounts on a quarterly 

Continued 

affect any securities clearing operations 

of the clearing agency or any rights or 

obligations of the clearing agency with 

respect to securities clearing or persons 

using such securities clearing service, 

within the meaning of Rule 19b– 

4(f)(4)(ii). 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 rule-comments@

sec.gov. Please include File Number SR– 

ICEEU–2014–23 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–ICEEU–2014–23. 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 at https://

www.theice.com/clear-europe/

regulation#rule-filings. 

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–2014–23 and 

should be submitted on or before 

December 19, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28080 Filed 11–26–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73665; File No. SR– 

NYSEArca–2014–133] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending Rule 6.1A To 

Adopt a Definition of ‘‘Professional 

Customer’’ on the Exchange 

November 21, 2014. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that on November 

17, 2014, NYSE Arca, Inc. (‘‘Exchange’’ 

or ‘‘NYSE Arca’’) 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 

by the self-regulatory organization. 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 Exchange proposes to amend 

Rule 6.1A (Definitions and References— 

OX) to adopt a definition of 

‘‘Professional Customer’’ on the 

Exchange. The text of the proposed rule 

change is available on the Exchange’s 

Web site at www.nyse.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization 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 those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is proposing to amend 

Rule 6.1A (Definitions and References— 

OX) to include a definition of 

‘‘Professional Customer’’ and to amend 

Commentary .03 of Rule 6.69 to specify 

how all Professional Customer orders 

should be marked. 

As proposed, the new term, 

‘‘Professional Customer’’ would be 

defined in Exchange Rule 6.1A(a)(4A), 

as a person or entity that (i) is not a 

broker or dealer in securities, and (ii) 

places more than 390 orders in listed 

options per day on average during a 

calendar month for its own beneficial 

account(s). In connection with this new 

definition, the Exchange proposes to 

add to Commentary of Rule 6.69 the 

origin code OTP Holders would be 

required to use to properly represent 

orders of a ‘‘Professional Customer.’’ 4

To determine whether an order is a 

Professional Customer order, OTP 

Holders would be required to review 

their customers’ activity on at least a 

quarterly basis to determine whether 

orders that are not for the account of a 

broker or dealer should be represented 

as Customer orders or Professional 

Customer orders.5


tkelley on DSK3SPTVN1PROD with NOTICES