Is ICE Clear Europe preparing for DRS and MOASS!?? Proposed rule (OPEN for comment!) "to address the treatment of certain losses that do not result from Clearing Member default, including certain investment losses & custodial losses."

https://public-inspection.federalregister.gov/2023-14814.pdf

https://public-inspection.federalregister.gov/2023-14814.pdf

Wut mean?

The rule change is about how certain non-default losses, such as investment losses and custodial losses, are treated.

ICE Clear Europe first proposed this rule change on April 21, 2023, and then made amendments to it on May 2, 2023, and June 30, 2023. The SEC is now seeking comments from interested parties on this proposed rule change.

Custodial losses refer to losses that occur when assets held in custody (by a custodian) are lost, damaged, or stolen.

For example, if a bank holding stocks on behalf of a client suffers a loss of ownership since shared not DRS'd are not real, that would be considered a custodial loss.

The main points of the proposed rule change are:

1. It aims to address the treatment of certain losses that do not result from Clearing Member default, including certain investment losses and custodial losses.
2. The rule change clarifies that certain obligations of the Clearing House to use funds would only apply to the extent that the relevant assets are available to the Clearing House "in cleared funds."
3. The proposed amendments would also clarify that the Clearing House's obligation to reimburse for recoveries only applies to the extent the relevant assets remain available "in cleared funds" to the Clearing House.
4. The rule change also includes provisions for the return of excess Collateral Offset Obligations, again only to the extent the relevant amounts remain available to the Clearing House "in cleared funds."

How to comment:

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 (https://www.sec.gov/rules/sro.shtml) or
• Send an email to [email protected]. Please include file number SR-ICEEU-2023- 010 on the subject line.
• All submissions should refer to file number SR-ICEEU-2023-010 and should be submitted on or before August 2nd.

TLDRS:

• ICE Clear Europe is proposing a change to its rules about how they handle certain types of losses that aren't caused by a member failing to meet their obligations (a "default").
• These losses include "investment losses" (losses from investments they've made) and "custodial losses" (losses of assets they're holding for others).

The proposed rule change has a few key points:

1. It's about how non-default losses are handled.
2. It clarifies that the Clearing House's obligations to use funds only apply if those funds are readily available.
3. It also clarifies that the Clearing House's duty to reimburse for recoveries only applies if the assets are readily available.
4. It includes rules for returning excess Collateral Offset Obligations, but again, only if the funds are readily available.

The SEC (Securities and Exchange Commission), which oversees companies like ICE Clear Europe, is now asking for public comments on this proposed rule change. If you want to share your thoughts, you can:

• Use the SEC's online comment form at https://www.sec.gov/rules/sro.shtml
• Email your comments to [email protected] (include the file number SR-ICEEU-2023-010 in the subject line)

Make sure to submit your comments by August 2nd.

For example, if a bank holding stocks for a client loses those stocks because they weren't registered directly to the client (not DRS'd), that's a custodial loss?

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