ICE Clear Netherlands Regulation Investment policy

Transcription

1 ICE Clear Netherlands Regulation Investment policy This material may not be reproduced or redistributed in whole or in part without the express, prior written consent of Intercontinental Exchange, Inc. Copyright Intercontinental Exchange, Inc All Rights Reserved.

2 REGULATION pursuant to article 6.2 (d) and 7.2 (c) of the Rulebook INVESTMENT POLICY Capitalised terms used in this Regulation, and not otherwise defined, shall have the meaning as set out in the Rulebook. This Regulation comes into force on 11 November General This regulation describes how ICE Clear Netherlands B.V. (ICNL) invests its own financial resources, the contributions to the Clearing Fund and the Collateral that is deposited with ICNL for the purpose of meeting Margin requirements. 2. Basic principles The basic principles underlying ICNL s investment policy are: Capital preservation - the main principle of this policy is to ensure that the value of the invested assets is preserved and as far as possible protected from losses through investment activity. Investments should generate a reasonable return. Risk minimization - the assets that are invested must be placed with counterparties and via financial instruments with a minimal level of credit, market and liquidity risk. ICNL should at all times be able to determine the value of its investments and to realize that value promptly. Sufficient (historical) price information must be available. As liquid as possible - the assets have to be held in such a manner that their timely availability is assured if a customer needs to draw on them or if ICNL needs them for other purposes. The investments may need to be realized quickly so they should be of a type that would enable ICNL to liquidate them with very little if any adverse price effect. Financial Instruments posted shall, where available, be deposited with operators of securities settlement systems that ensure full protection of those instruments. Alternatively, other highly secure arrangements with authorized financial institutions may be used. Where ICNL posts assets with a third party, it shall ensure that the assets belonging to the Clearing Participants can at all times be distinguished and easily separated from the assets belonging to ICNL and from assets belonging to that third party by means of differently titled accounts or other equivalent measures that achieve the same level of protection. ICNL does not invest its own financial resources, clearing fund contributions or collateral in its own securities or those of its parent undertaking or its subsidiary. ICNL shall take into account its overall credit risk exposures to individual obligors in making its investment decisions. ICNL shall only invest in euro denominated Financial Instruments and shall only maintain Euro denominated arrangements to deposit cash. Regulation Investment policy v Page 2

3 Investments should be secured by collateral (repo) and/or should be claims on high quality obligors to mitigate the credit risk. 3. Approved Investments ICNL may invest via the following transaction types: Euro denominated cash. ICNL should be able to withdraw funds instantaneously and deposits overnight. Euro denominated Repurchase Agreements with an internally approved authorized credit institution as defined under Directive 2006/48/EC or a third country financial institution which is considered by the regulator to be supervised just as stringent (as outlined in Directive 2006/48/EC). The bond leg of the repo should consist of eligible securities issued by a central government. Annex 1 provides the list of eligible securities. For repurchase agreements a maximum tenor will be specified per counterparty in the review, but the following guidelines will apply: Time to final maturity must not exceed 37 calendar days where the counterparty has a short-term rating of any one of the following: A-1 or better by S&P, P-1 by Moody s or F1 or better by Fitch. Time to final maturity must not exceed 37 calendar days where the counterparty has a short-term rating of any one of the following: A-2 by S&P, P-2 by Moody s or F2 by Fitch. 4. Counterparty eligibility criteria Only approved counterparties can be used for investment related transactions. For each new counterparty a credit risk review including investment limits has to be drawn up by Risk Management (RM). This credit review has to be approved by the Management Team (MT). The MT can, based on an advice from RM, approve investments on an ad-hoc basis but a full review should be in place two weeks after the investments has been made at the latest. Exposures under a limit will be measured in accordance with the methodologies outlined in Regulation (EU) 575/2013. As stated in Regulation (EU) Article 44 1) ICNL should deposit financial instruments with the operator of a securities settlement system that ensures the full protection of those instruments. If that s not possible the following alternatives are permissible provided that full segregation and protection of the securities is guaranteed: The Dutch Central Bank or any other Eurozone Central Bank An authorized credit institution or third country financial institution with an investment grade rating, in both cases by using arrangements that prevent any losses to ICNL in case of default or insolvency. The full segregation and protection condition does not apply to cash placements. Cash can be placed on deposit with an Eurozone central bank, an authorized credit institution or a third country financial institution for which a credit review has been done. However the limits defined in Annex 2: Applicable investment limits bullet point 2 should be taken into account. Cash cannot be placed with a clearing participant. Annex 2 illustrates the limits that apply with respect to the investments and counterparties. Regulation Investment policy v Page 3

4 5. Legal documentation ICNL shall not enter into approved transactions or maintain cash or custody accounts without legal documentation governing these transactions and accounts. Market standard agreements will be used to the extent possible. All repo transactions should be conducted under Repurchase Securities Agreement (RSA) or Global Master Repurchase Agreement (GMRA). A list of the agreements will be maintained as Annex 3 to this policy. 6. Monitoring and control procedures and responsibilities This policy will be reviewed and updated by ICNL Risk Management and ICNL Compliance when deemed necessary but at least on an annual basis. No material changes will be made to this policy without approval from the ICNL Board of Directors after having consulted the ICNL Risk Committee. The application of the policy - and the documentation and the exceptions to it is performed by ICNL Risk Management. The policy will be subject to review by an independent auditor. The audit report will be sent to the ICNL Audit Committee for its review. 7. Interest ICNL will pay the Clearing Participant interest which ICNL receives from its investments in deposits to the Clearing Participant at a rate as published from time to time in the Regulation Fees and Penalties. Regulation Investment policy v Page 4

5 Annex 1: Approved countries, eligible products and counterparties Eligible securities by the central government and debt securities issued by central banks from Austria Belgium Finland France Germany Luxemburg The Netherlands Regulation Investment policy v Page 5

6 Annex 2: Applicable investment limits The following limits apply to ICNL s investments: Of the cash that has not been deposited with the central bank and which is maintained overnight, no less than 95%, calculated over an average period of one calendar month, shall be deposited through arrangements that ensure the collateralization of the cash with highly liquid financial instruments. This as outlined in article 45 of Regulation (EU) No 153/2013. However, for operational purposes ICNL is allowed to hold an amount of at maximum in a cash account with a(n) (group of) authorized credit institution(s) and/or a third country financial institution(s) as defined in article 45 of Regulation (EU) No 153/2013 paragraph 1b.The amount of cash or securities that can be placed unsecured with one single institution as defined in article 45 of Regulation (EU) No 153/2013 paragraph 1b (or a group of related institutions) cannot be higher than 25% of the total financial resources of ICNL (margin contributions, default fund contributions and other financial resources as defined in article 43 of Regulation (EU) No 648/2012). And this amount can also not be higher than the limit amount specified in a counterparty risk review approved by the MT. Cash accounts held at a central bank are exempt from the aforementioned limits. Where two counterparties belong to the same group, the individual limits are applied per counterparty according to their individual rating, but the exposure to the group as a whole is restricted to the One Obligor Exposure limit. In order to be admitted to the list of approved Credit Institutions, ICNL is required to perform a due diligence on a Credit Institution. For the approval information is required of the institutions such as the annual report. The minimum rating for an authorized credit institution is investment grade 1. The following counterparties are approved by the Board of Directors ICNL: ABN AMRO Bank NV. ABN AMRO Clearing Bank NV. De Nederlandsche Bank. Interactive Brokers UK Ltd. 1 If a counterparty is downgraded, resulting in being no longer able to meet the eligibility criteria any existing exposure held with that counterparty will be unwound the next day. No new exposures should be entered into with the counterparty which would breach the new limit. Regulation Investment policy v Page 6

7 Annex 3: Agreements Regulation Investment policy v Page 7