Federal Register / Vol. 82, No. 214 / Tuesday, November 7, 2017 / Notices 51663 

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

2 17 CFR 240.19b–4. 

3Regulation (EU) No 648/2012 of the European 

Parliament and of the Council of 4 July 2012 on 

OTC derivatives, central counterparties and trade 

repositories, as well as various implementing 

regulations and technical standards. 

4Article 28 of Commission Delegated Regulation 

(EU) No 153/2013 of 19 December 2012 

supplementing Regulation (EU) No 648/2012 of the 

European Parliament and of the Council with regard 

to regulatory technical standards on requirements 

for central counterparties. 

5The CPMI–IOSCO Principles for Financial 

Market Infrastructures (‘‘PFMIs’’) similarly provide 

that a clearing house should limit procyclicality for 

margin requirements and haircuts. See Principles 5 

(Collateral) and 6 (Margin). 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

CONTACT PERSON FOR MORE INFORMATION: 

For further information and to ascertain 

what, if any, matters have been added, 

deleted or postponed; please contact 

Brent J. Fields from the Office of the 

Secretary at (202) 551–5400. 

Dated: November 2, 2017. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2017–24260 Filed 11–3–17; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81994; File No. SR–ICEEU– 

2017–013] 

Self-Regulatory Organizations; ICE 

Clear Europe Limited; Notice of Filing 

of Proposed Rule Change, SecurityBased Swap Submission or Advance 

Notice Relating to the ICE Clear 

Europe Procyclicality Framework 

November 1, 2017. 

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 October 

23, 2017, ICE Clear Europe Limited 

(‘‘ICE Clear Europe’’) 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. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The principal purpose of the changes 

is to adopt a new policy framework for 

addressing the procyclicality of its risk 

management policies by establishing 

such a framework that addresses the risk 

appetite, model design, monitoring and 

assessment and management of 

procyclicality in the risk models used 

by ICE Clear Europe to manage default 

risk. 

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 

The purpose of the Procyclicality 

Framework is to establish an overall 

framework for the risk appetite, model 

design, monitoring and assessment and 

management of procyclicality in the risk 

models used by ICE Clear Europe to 

manage default risk. The European 

Market Infrastructure Regulation 3

(‘‘EMIR’’) and related implementing 

standards require that a central 

counterparty (‘‘CCP’’) ensure that its 

margin framework provides, among 

other matters, stable and prudent 

margin requirements that limit 

procyclicality to the extent that the 

soundness and financial security of the 

central counterparty is not negatively 

affected.4 Those standards also require 

that central counterparties implement at 

least one of several specified options for 

mitigating procyclicality with respect to 

margin requirements.5

Although ICE Clear Europe’s current 

margin policies incorporate the antiprocyclicality (‘‘APC’’) measures 

required by EMIR (and ICE Clear Europe 

does not propose to change such 

measures at this time), it is proposing to 

adopt the Procyclicality Framework in 

order to provide a more defined 

framework for considering the impact of 

procyclicality on margining, 

membership, collateral haircuts, stress 

testing and concentration risk policies. 

The framework is designed to set out (1) 

the aspects of ICE Clear Europe risk 

policies relevant to procyclicality 

considerations, (2) how the clearing 

house will assess procyclicality (both as 

a qualitative and a quantitative matter) 

and (3) how the clearing house will 

factor considerations of procyclicality 

into its response to emerging risks. 

Although ‘‘procyclicality’’ is not 

expressly defined in EMIR, ICE Clear 

Europe considers procyclicality for 

purposes of the proposed framework to 

be the extent to which changes in 

market conditions can have an effect on 

a clearing member’s ability to manage 

its liquidity to meet ICE Clear Europe’s 

changing margin requirements. For 

example, a typical initial margin model 

would require increased margin in 

stressed margin conditions, and such 

increases may potentially occur rapidly 

and/or over-react to the change in 

conditions. Such margin increases, in 

turn, may stress a clearing member’s 

ability to obtain liquidity to meet the 

increased requirements. 

The framework identifies sources of 

procyclicality, in particular in margin 

models, stress testing, and collateral 

haircut policies, and references existing 

mitigation strategies and stress testing 

arrangements used by the clearing 

house. Stress testing scenarios that are 

based on models similar to margin 

models but targeting a higher 

confidence quantile may also be 

procyclical due to changing market 

conditions, which may lead to increased 

stress shock results and therefore in 

default fund requirements. The 

framework also addresses how ICE Clear 

Europe intends to address procyclicality 

on an ongoing basis. Under the 

framework, ICE Clear Europe will assess 

procyclicality by monitoring the 95th 

percentile expected shortfall of the 5- 

day percentage change in initial margin 

(or other relevant risk mitigant) over a 

rolling 250-day window. ICE Clear 

Europe established this period, in 

consultation with Clearing Members, as 

an appropriate period to reflect shortterm spikes in margin. ICE Clear Europe 

will also monitor the largest percentage 

changes to facilitate observation of both 

the maximum and a tail estimate to 

remove extreme outliers. A red-ambergreen (‘‘R–A–G’’) escalation framework 

will be used with respect to 

implementing APC measures based on 

certain defined thresholds for expected 

95th percentile expected shortfall 

metric, which are detailed in an 

appendix to the framework. The 

escalation framework specifies 

appropriate responses where the 

expected shortfall level is at an amber 

or green level. ICE Clear Europe will 

assess procyclicality both on a regular 

basis in monitoring model performance 

and making margin rate adjustments as 

part of risk model design. 

The framework requires that the 

model design process take into 

consideration the procyclicality 


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51664 Federal Register / Vol. 82, No. 214 / Tuesday, November 7, 2017 / Notices 

6 15 U.S.C. 78q–1. 

7 17 CFR 240.17Ad–22. 

8 15 U.S.C. 78q–1(b)(3)(F). 

9 15 U.S.C. 78q–1(b)(3)(F). 

10 17 CFR 240.17Ad–22(e)(2). 11 17 CFR 240.17Ad–22(e)(3) and (6). 

characteristics of the model. This 

should include analysis of the 

performance of APC measures during 

periods of increasing volatility (in light 

of defined threshold conditions 

specified in the framework), in a range 

of market conditions, including stress 

periods. 

In addition to the quantitative 

metrics, there are a number of 

qualitative inputs that are given 

consideration under the framework. For 

example, ICE Clear Europe will take into 

consideration the periodicity of margin 

updates and will attempt to mitigate the 

effect of such updates by 

communicating any such updates to the 

cleared markets up to a week in 

advance. The framework also includes 

procedures for considering the impact of 

prospective margin changes on the 

portfolios of Clearing Members and 

communicating with Clearing Members 

that may be significantly affected by 

such changes. The framework also takes 

into account the activities of other CCPs 

in the relevant market (including 

whether they are implementing APC 

measures), expectations of market 

participants, the potential for moral 

hazard created by an expectation of 

gradual margin changes (which may not 

be possible in extreme situations), and 

the ability of the clearing house to 

override normal APC measures in 

extreme circumstances. The framework 

recognizes that different APC measures 

and thresholds may be appropriate in 

different markets based on their 

historical performance. ICE Clear 

Europe also takes into account the 

different liquidity resources and 

practices of different types of Clearing 

Members, including banks, brokerdealers and other traders, and the need 

for margin add-ons to mitigate particular 

liquidity and/or concentration risks. 

The framework also sets out APC 

considerations for new products and 

material changes in existing products. 

Appendices to the framework set out 

more specific analysis of procyclicality 

for F&O and CDS products. These 

analyses are calculated using several 

different measures of procyclicality, on 

both whole period and stressed period 

bases, and both taking into account 

price change effects and without price 

change effects, among other factors. The 

appendices also detail an ICE Clear 

Europe approach to back testing initial 

margin calculations, both with and 

without anti-procyclicality measures 

under its existing margin policies. 

Pursuant to the framework, ICE Clear 

Europe will disclose its APC 

methodology on its Web site. The 

framework further provides for ongoing 

governance, including the role of the 

chief risk officer, and review by the 

relevant product risk committees and 

board risk committee, as appropriate. 

(b) Statutory Basis 

ICE Clear Europe believes that the 

proposed APC framework is consistent 

with the requirements of Section 17A of 

the Act 6 and the regulations thereunder 

applicable to it, including the standards 

under Rule 17Ad–22.7 Section 

17A(b)(3)(F) of the Act 8 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. The proposed 

amendments are designed to enhance 

and formalize the overall assessment 

and management of procyclicality in the 

clearing house’s margin and haircut 

models, among other matters, consistent 

with regulatory requirements under 

EMIR. The model is thus intended to 

strengthen the risk models and 

procedures already used by the clearing 

house, particularly the margin model, 

and limit on an ongoing basis the risks 

of procyclicality for Clearing Members 

and the clearing house itself. The 

framework will also provide greater 

clarity and transparency for Clearing 

Members and others as to the clearing 

house’s approach to managing 

procyclicality. As a result, ICE Clear 

Europe believes that the proposed 

changes will promote the prompt and 

accurate clearance and settlement of 

cleared transactions, and in general 

protect investors and the public interest, 

within the meaning of Section 

17A(b)(3)(F).9 In addition, the changes 

are consistent with the requirements of 

Rule 17Ad–22(e)(2),10 which requires 

that a clearing agency have governance 

arrangements that are clear and 

transparent, prioritize the safety and 

efficiency of the clearing agency and 

support the public interest requirements 

of Section 17A of the Act applicable to 

clearing agencies and the objectives of 

owners and participants, among other 

matters. The amendments also generally 

strengthen the clearing house’s risk 

management procedures, consistent 

with the requirements of Rule 17Ad– 

22(e)(3) and (6).11

(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 proposed 

changes are designed to provide 

additional protections against the effects 

of procyclicality by setting forth a 

methodology to identify and mitigate 

such risks, consistent with the 

requirements of EMIR. As such, the 

changes are intended to reduce the 

potential liquidity burden for Clearing 

Members of increases in margin 

requirements during stressed scenarios. 

As a result, ICE Clear Europe does not 

believe the changes will adversely affect 

the cost to clearing members or other 

market participants of clearing services. 

The changes will otherwise not affect 

the terms or conditions of any cleared 

contract or the standards or 

requirements for participation in or use 

of the Clearing House. The changes 

should not, in the Clearing House’s 

view, adversely affect competition 

among Clearing Members, or the ability 

of market participants to access clearing 

services generally. As a result, ICE Clear 

Europe believes that any impact on 

competition is appropriate 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 changes 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 

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. 


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Federal Register / Vol. 82, No. 214 / Tuesday, November 7, 2017 / Notices 51665 

12 17 CFR 200.30–3(a)(12). 

1Applicants request that the order apply to (1) 

each existing series of the Trust that currently is 

part of the same ‘‘group of investment companes’’ 

as the Trust and is advised by the Adviser, (2) to 

any future series of the Trust, and any other existing 

or future registered open-end management 

investment companies and any series thereof that 

are, or may in the future be, advised by the Advisor 

and that are part of the same group of investment 

companies (each, a ‘‘Fund’’ and collectively the 

‘‘Funds’’), and (3) any principal underwriter and 

distributor for a Fund. Certain of the Funds may 

have obtained exemptions from the Commission 

necessary to permit their shares to be listed and 

traded on a national securities exchange at 

negotiated prices and, accordingly, to operate as an 

exchange-traded fund (‘‘ETF’’). For purposes of the 

request for relief, the term ‘‘group of investment 

companies’’ means any two or more registered 

investment companies that hold themselves out to 

investors as related companies for purposes of 

investment and investor services. 

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–2017–013 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. 

All submissions should refer to File 

Number SR–ICEEU–2017–013 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, security-based swap submission 

or advance notice that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change, security-based 

swap submission or advance notice 

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/notices/ 

Notices.shtml?regulatoryFilings. 

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–2017–013 

and should be submitted on or before 

November 28, 2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–24130 Filed 11–6–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

32894; File No. 812–14776] 

Princeton Fund Advisors, LLC. et al. 

November 2, 2017. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice. 

Notice of an application for an order 

under section 12(d)(1)(J) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) for an exemption from sections 

12(d)(1)(A) and (B) of the Act and under 

sections 6(c) and 17(b) of the Act for an 

exemption from sections 17(a)(1) and (2) 

of the Act. The requested order would 

permit open-end management 

investment companies registered under 

the Act to acquire shares of open-end 

management investment companies 

registered under the Act that are outside 

of the same group of investment 

companies as the acquiring companies. 

APPLICANTS: Northern Lights Fund 

Trust, a Delaware statutory trust 

registered under the Act as an open-end 

management investment company with 

multiple series (the ‘‘Trust’’); Princeton 

Fund Advisors, LLC, a Deleware limited 

liability company (the ‘‘Adviser’’), 

registered as an investment adviser 

under the Investment Advisers Act of 

1940; and Foreside Distribution 

Services, L.P., a Delaware limited 

liability company, and Northern Lights 

Distributors, LLC, a Nebraska limited 

liability company (together the 

‘‘Distributors’’), each registered as a 

broker-dealer under the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’). 

FILING DATES: The application was filed 

on May 16, 2017 and amended on 

August 16, 2017. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the requested relief will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on November 28, 2017 and 

should be accompanied by proof of 

service on the applicants, in the form of 

an affidavit, or, for lawyers, a certificate 

of service. Pursuant to Rule 0–5 under 

the Act, hearing requests should state 

the nature of the writer’s interest, any 

facts bearing upon the desirability of a 

hearing on the matter, the reason for the 

request, and the issues contested. 

Persons who wish to be notified of a 

hearing may request notification by 

writing to the Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

Applicants: Thompson Hine LLP, 41 

South High Street, Suite 1700, 

Columbus, OH 43215. 

FOR FURTHER INFORMATION CONTACT: 

Rochelle Kauffman Plesset, Senior 

Counsel, at (202) 551–6840 or David 

Marcinkus, Branch Chief, at (202) 551– 

6882 (Division of Investment 

Management, Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

Web site by searching for the file 

number, or for an applicant using the 

Company name box, at http://

www.sec.gov/search/search.htm, or by 

calling (202) 551–8090. 

Summary of the Application 

1. Applicants request an order to 

permit (a) registered open-end 

management investment companies (the 

‘‘Investing Funds’’) that are not part of 

the same ‘‘group of investment 

companies,’’ within the meaning of 

section 12(d)(1)(G)(ii) of the Act, as the 

Trust, to acquire shares in series of the 

Trust 1 advised by the Adviser in excess 

of the limits in sections 12(d)(1)(A) of 

the Act and (b) the Funds, their 

principal underwriters and any broker 


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