[Federal Register Volume 83, Number 141 (Monday, July 23, 2018)]
[Notices]
[Pages 34891-34896]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-15644]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83651; File Nos. SR-ICEEU-2017-016 and SR-ICEEU-2017-
017]


Self-Regulatory Organizations; ICE Clear Europe Limited; Order 
Approving Proposed Rule Changes Related to the ICE Clear Europe 
Recovery and Wind-Down Plans

July 17, 2018.

I. Introduction

    On December 29, 2017, ICE Clear Europe Limited (``ICE Clear 
Europe'') filed with the Securities and Exchange Commission, pursuant 
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Exchange 
Act''),\1\ and Rule 19b-4 thereunder,\2\ proposed rule changes related 
to its Recovery Plan and Wind-Down Plan. The proposed rule changes were 
published for comment in the Federal Register on January 19, 2018.\3\ 
On February 27, 2018, the Commission designated a longer period for 
Commission action on the proposed rule changes.\4\ On April 17, 2018, 
the Commission instituted proceedings

[[Page 34892]]

under Section 19(b)(2)(B) \5\ of the Exchange Act to determine whether 
to approve or disapprove the proposed rule changes.\6\ The Commission 
did not receive comments regarding the proposed rule changes. For the 
reasons discussed below, the Commission is approving the proposed rule 
changes.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Exchange Act Release No. 82496 (Jan. 12, 2018), 83 FR 2855 
(Jan. 19, 2018) (SR-ICEEU-2017-016) (``Recovery Plan Notice''); 
Exchange Act Release No. 82497 (Jan. 12, 2018), 83 FR 2847 (Jan. 19, 
2018) (SR-ICEEU-2017-017) (``Wind-Down Plan Notice'').
    \4\ Exchange Act Release No. 82786 (Feb. 27, 2018), 83 FR 9345 
(Mar. 5, 2018) (SR-ICEEU-2017-016); Exchange Act Release No. 82782 
(Feb. 27, 2018), 83 FR 9351 (Mar. 5, 2018) (SR-ICEEU-2017-017).
    \5\ 15 U.S.C. 78s(b)(2)(B).
    \6\ Exchange Act Release No. 83055 (Apr. 17, 2018), 83 FR 17575 
(Apr. 20, 2018) (SR-ICEEU-2017-016 and SR-ICEEU-2017-017).
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II. Description of the Proposed Rule Changes

    As a ``covered clearing agency,'' \7\ ICE Clear Europe is required 
to, among other things, ``establish, implement, maintain and enforce 
written policies and procedures reasonably designed to . . . maintain a 
sound risk management framework for comprehensively managing legal, 
credit, liquidity, operational, general business, investment, custody, 
and other risks that arise in or are borne by the covered clearing 
agency, which . . . includes plans for the recovery and orderly wind-
down of the covered clearing agency necessitated by credit losses, 
liquidity shortfalls, losses from general business risk, or any other 
losses.'' \8\ The Commission has previously clarified that it believes 
that such recovery and wind-down plans are ``rules'' within the meaning 
of Exchange Act Section 19(b) and Rule 19b-4 thereunder because such 
plans would constitute changes to a stated policy, practice, or 
interpretation of a covered clearing agency.\9\ Accordingly, a covered 
clearing agency, such as ICE Clear Europe, is required to file its 
plans for recovery and orderly wind-down with the Commission.
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    \7\ The term ``covered clearing agency'' is defined in Rule 
17Ad-22(a)(5), 17 CFR 240.17Ad-22(a)(5).
    \8\ 17 CFR 240.17Ad-22(e)(3)(ii).
    \9\ Standards for Covered Clearing Agencies, Exchange Act 
Release No. 78961 (Sep. 28, 2016), 81 FR 70786, 70809 (Oct. 13, 
2016) (``CCA Standards Adopting Release'').
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A. Recovery Plan (ICEEU-2017-016) \10\
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    \10\ The description of the Recovery Plan is substantially 
excerpted from the Recovery Plan Notice.
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    ICE Clear Europe's Recovery Plan, among other things, (a) 
identifies the critical services that ICE Clear Europe provides, (b) 
outlines a number of stress scenarios that may result in significant 
losses, a liquidity shortfall, suspension or failure of its critical 
services and related functions and systems, and damage to other market 
infrastructures, and (c) describes the recovery tools, mechanisms, and 
options that ICE Clear Europe may use to address a stress scenario and 
continue to provide its critical services.\11\ The Recovery Plan also 
addresses the roles and responsibility of the ICE Clear Europe Board of 
Directors (``Board''), management, and other personnel, including with 
respect to development, review and approval, testing and maintenance, 
and liaison with relevant regulatory authorities. Notably, the Recovery 
Plan is based on, and intended to be consistent with, ICE Clear 
Europe's Clearing Rules (``Rules''), Procedures, and existing risk 
management frameworks, policies, and procedures.\12\ The elements of 
the Recovery Plan are described in further detail below.
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    \11\ In the Recovery Plan, ICE Clear Europe refers to its 
recovery tools, mechanisms, and options as ``Recovery Options.'' The 
Commission has generally referred to these items as ``recovery 
tools.'' See CCA Standards Adopting Release, 81 FR at 70810. For the 
purposes of this Order, the term ``recovery tools'' is used to refer 
to Recovery Options.
    \12\ Capitalized terms used but not defined herein have the 
meanings specified in the Rules.
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    Critical Services and Functions. ICE Clear Europe determined that 
its futures and options (``F&O'') and credit default swap (``CDS'') 
product category clearing services, as well as its related treasury and 
banking services, are critical services.\13\ The Recovery Plan 
describes the methodology used by ICE Clear Europe to assess the 
criticality of services for the purpose of recovery planning.
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    \13\ The Commission's analysis of the Recovery Plan is limited 
to the CDS clearing services provided by ICE Clear Europe, as the 
F&O clearing services are outside the Commission's jurisdiction.
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    ICE Clear Europe also identified its ``front-end business 
functions'' (i.e., those that are essential to the provision of its 
critical services) and the functions that support these critical 
services, including information technology services. Specifically, the 
Recovery Plan identifies the particular information technology systems 
and services used by ICE Clear Europe in providing its clearing 
services, including trade management systems, risk systems, and 
delivery systems. It also identifies the locations from which these 
services are provided and the party that provides the services, in 
cases where the services are provided by an affiliate or other third 
party. The Recovery Plan also identifies other key service providers on 
which ICE Clear Europe relies, including custodians, Concentration 
Banks, other approved payment banks, investment managers, and delivery 
services providers. Notably, the Recovery Plan considers the key 
services provided by ICE affiliates in support of ICE Clear Europe's 
clearing activities, including information technology and risk 
management services.
    Stress Scenarios. The Recovery Plan analyzes different stress 
scenarios that may affect ICE Clear Europe's ability to continue to 
provide its critical services. The two categories of stress scenarios 
in the Recovery Plan are default losses and non-default losses. ICE 
Clear Europe considers default losses to be losses suffered by ICE 
Clear Europe as a result of the default of one or more Clearing 
Members, and it considers non-default losses to be losses suffered by 
ICE Clear Europe from identified general business and operational risk 
events, investment losses, system outages, or world-wide or regional 
political or macroeconomic events. In both categories, ICE Clear Europe 
considers the effect of such losses on liquidity and the resulting risk 
of contagion.
    ICE Clear Europe uses a risk-based approach to analyzing its 
scenarios, which consists of different impact categories and severity 
levels. The Recovery Plan contemplates that the range of responses to a 
loss scenario, including the potential recovery tools used, will depend 
on the severity level. A low severity loss event would involve limited 
or no use of recovery tools, while a severe loss scenario would require 
use of all available recovery tools.
    Recovery Tools. The Recovery Plan identifies the likely recovery 
tools that ICE Clear Europe may implement depending upon the severity 
of the impact of the scenario at issue. The Recovery Plan is intended 
to be flexible and provide structure and guidance to management. It is 
not designed to be prescriptive, recognizing that the actions to be 
taken by ICE Clear Europe may vary depending on the circumstances which 
lead to the implementation of the Recovery Plan. The Recovery Plan 
outlines the situations and sequence in which each of the recovery 
tools is likely to be used, recognizing that ICE Clear Europe has 
discretion as to the particular actions to take in any particular loss 
scenarios. The Recovery Plan specifies the expected bases for using 
particular recovery tools. In general, ICE Clear Europe expects that 
the use of recovery tools will be in extreme circumstances where losses 
exceed its prefunded resources.
    The Recovery Plan considers a non-exhaustive list of available 
recovery tools in terms of a number of factors, including the speed 
with which each tool can be implemented, the impact of each tool on ICE 
Clear Europe, the impact of each tool on Clearing Members and their 
customers, and the effect of each tool on other market infrastructures. 
In general, for default

[[Page 34893]]

losses arising in CDS clearing, the relevant recovery tools include, 
consistent with the Rules, (i) power of assessment, (ii) Default 
Auctions, (iii) forced allocation, and (iv) porting of client 
positions. The power of assessment would permit ICE Clear Europe to 
charge non-defaulting CDS Clearing Members up to one times the amount 
of their Guaranty Fund Contributions at the end of the waterfall of 
financial resources for a CDS Clearing Member Default.\14\ A Default 
Auction would take place in accordance with the CDS Default Auction 
Procedures to remove a defaulting CDS Clearing Member's positions and 
with the goal of regaining a matched book.\15\ To the extent the CDS 
Contracts of a defaulting CDS Clearing Member are not terminated, 
transferred, or closed out, ICE Clear Europe has the discretion to 
force allocation of those contracts by requiring the entry into new CDS 
Contracts between ICE Clear Europe and non-defaulting CDS Clearing 
Members.\16\ For a CDS Clearing Member with client-related positions, 
ICE Clear Europe may transfer or port those positions to a non-
defaulting CDS Clearing Member.\17\
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    \14\ See ICE Clear Europe Rules 908(c); 910.
    \15\ ICE Clear Europe Rules related to clearing member default 
generally discuss Default Auctions. See generally ICE Clear Europe 
Rules, Part 9.
    \16\ See ICE Clear Europe Rule 905(c).
    \17\ See ICE Clear Europe Rule 904.
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    For non-default losses, recovery tools include (i) emergency 
liquidity facilities, (ii) investment loss allocation to Clearing 
Members, and (iii) service closure. With respect to investment loss 
allocation, pursuant to its Rules, ICE Clear Europe generally would be 
responsible for the first $90 million in investment losses, and any 
further investment losses would be mutualized among Clearing 
Members.\18\ With respect to service closure, because ICE Clear Europe 
provides separate clearing services for two product categories, it 
considers the closure of one service, and continuation of the other, as 
a possible recovery scenario.\19\
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    \18\ See ICE Clear Europe Rule 919; see also Exchange Act 
Release 72551 (Jul. 8, 2014), 79 FR 40805 (Jul. 14, 2014) (SR-ICEEU-
2014-06).
    \19\ By contrast, as described in the Wind-Down Plan Notice, ICE 
Clear Europe considers that a wind-down would result in the transfer 
or termination of both clearing services. See Wind-Down Plan Notice, 
83 FR at 2847.
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    The Recovery Plan specifies the decision-making process for the use 
of the recovery tools separately for default and non-default loss 
scenarios. In most cases, under the Rules and Procedures, the ICE Clear 
Europe President and Managing Director (``President''), pursuant to 
authority delegated by the Board, is responsible for such decisions. In 
the case of default events, the decision making would consider the 
advice of the Default Management Committee. In practice, the President, 
where appropriate and time permitting, would be expected to consult 
with the Board or with individual Board members before taking 
significant actions. The President may also call an emergency Board 
meeting or make Board members aware of the current position. The 
President will report decisions to the Board at the next formal Board 
meeting. If the President is absent, the ICE Clear Europe Chief 
Operating Officer will act in the President's place.
    The Recovery Plan also identifies early warning indicators and 
tools intended to notify ICE Clear Europe management that use of 
recovery tools may be required, and where possible, avoid the need for 
such actions. Such potential early warning indications of a potential 
loss scenario include repeated non-compliance by a Clearing Member with 
membership or other requirements, actions taken by regulators or other 
governmental authorities with respect to a Clearing Member, certain 
quantitative factors, restructuring, and similar events. The Recovery 
Plan also identifies particular means of monitoring for potential loss 
scenarios following such indications. The tools to potentially avoid 
the need for such actions include liquidity forecasting and monitoring, 
use of a conservative approach to counterparty credit analyses and 
establishment of margin and Guaranty Fund requirements, use of 
comprehensives risk metrics to monitor Clearing Member financial 
performance, back-testing and stress testing, and other assessments.
    Governance. The President is ultimately responsible for the 
Recovery Plan. The Recovery Plan was prepared with the active 
involvement of the management of ICE Clear Europe, and the Board has 
reviewed and approved the Recovery Plan. The ICE Clear Europe Head of 
Regulation is responsible for facilitating the overall production, 
implementation, and maintenance of the Recovery Plan. The ICE Clear 
Europe Board Audit Committee, Chief Risk Officer, Chief Operating 
Officer, and Executive Risk Committee also have roles in the 
implementation of the Recovery Plan.
    Relevant business units are responsible for ensuring that the 
Recovery Plan remains up-to-date and reviewed in accordance with 
internal review and governance control arrangements. On an annual 
basis, the ICE Clear Europe Head of Regulation will revise the Recovery 
Plan. Material changes to the Recovery Plan must be reviewed by ICE 
Clear Europe management and be subject to appropriate governance. The 
Recovery Plan is subject to annual review by the Board Audit Committee 
and the Board. The scenarios and actions that support the Recovery Plan 
are subject to Board approval annually.
    Ad hoc reviews of the Recovery Plan may be commissioned if the 
business materially changes, such as the introduction of a new service. 
Material changes to the Recovery Plan or the scenarios, including those 
brought about by market events, are subject to Board approval, 
following their review and discussion by the Board Audit Committee. 
Deviations from the Recovery Plan are required to be reported to the 
Board.

B. Wind-Down Plan (ICEEU-2017-017) \20\
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    \20\ The description of the Wind-Down Plan is substantially 
excerpted from the Wind-Down Plan Notice.
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    ICE Clear Europe's Wind-Down Plan is intended to address scenarios 
in which ICE Clear Europe determines to wind-down, in an orderly 
fashion, its clearing services. The Wind-Down Plan is based on, and 
intended to be consistent with, the Rules and Procedures, as well as 
its existing risk management frameworks, policies, and procedures.
    The Wind-Down Plan addresses three particular categories of 
scenarios in which wind-down may occur. First, in a non-insolvency 
scenario, the Board would voluntarily decide to wind-down the clearing 
business. For example, the Board may determine that ICE Clear Europe's 
business model has become unviable. Second, in an insolvency scenario 
not linked to a Clearing Member default, ICE Clear Europe would be 
wound down as a result of a severe loss unrelated to Clearing Member 
default that could not be addressed through the Recovery Plan or other 
means that permit continued operations. Third, in an insolvency 
scenario linked to a Clearing Member default, ICE Clear Europe would be 
wound down as a result of losses from the default of one or more 
Clearing Members that could not be addressed through the Recovery Plan 
or other means that permit continued operation, in accordance with 
relevant default rules.
    The Wind-Down Plan identifies a variety of options for wind-down, 
depending on the scenario involved. In the case of an insolvency of ICE 
Clear

[[Page 34894]]

Europe as a result of non-default losses, the Wind-Down Plan 
contemplates that all open contracts will be terminated and net sums 
calculated to be payable to or from each Clearing Member for each 
account category.
    For a voluntary wind-down or a wind-down following a Clearing 
Member default, the Wind-Down Plan contemplates that, for each product 
category, ICE Clear Europe will either transfer clearing to another 
clearing house or terminate clearing.\21\ The ability to transfer 
clearing will depend on whether the relevant market and market 
participants desire, and are able, to continue trading and clearing of 
the relevant product through another clearing house, and on whether 
another clearing house can be found to take the product. Following the 
transfer and/or termination of clearing, ICE Clear Europe will wind-
down the remaining aspects of its business and contractual 
relationships.
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    \21\ ICE Clear Europe can take different actions with respect to 
its two product categories, and in the event of a transfer, F&O 
clearing need not be transferred to the same clearing house as CDS 
clearing.
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    Once there is a possibility of wind-down, or the Board has agreed 
in principle to a wind-down, a Wind-Down Planning Committee, including 
senior management, would be established. The committee would be tasked 
with exploring with Clearing Members, exchanges, alternative clearing 
houses, and regulators the relevant approaches to wind-down, with a 
goal of minimizing adverse impact on Clearing Members. The Wind-Down 
Plan outlines a number of considerations for both termination and 
transfer options that the committee should consider. The committee 
would report to the Board. This consultation process is designed to 
reflect the fact that, in a wind-down situation, the Wind-Down Plan 
would likely be affected by numerous additional considerations and 
could require adjustment and modification to match specific 
circumstances.
    Any decision to wind-down is expected to be considered over a 
period of months. Such a decision would involve consultation with 
members, potential alternative clearing houses, exchanges, and 
regulators, and it would require Board approval. The Wind-Down Plan 
contemplates that a specific execution plan will be developed for any 
wind-down, based on the relevant situation.

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Exchange Act directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that such proposed rule change is consistent with the 
requirements of the Exchange Act and the rules and regulations 
thereunder applicable to such organization.\22\ For the reasons given 
below, the Commission finds that the proposed rule changes are 
consistent with Section 17A(b)(3)(F) of the Exchange Act \23\ and Rules 
17Ad-22(e)(2), 17Ad-22(e)(3)(ii), and 17Ad-22(e)(15)(i)-(ii) 
thereunder.\24\
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    \22\ 15 U.S.C. 78s(b)(2)(C).
    \23\ 15 U.S.C. 78q-1(b)(3)(F).
    \24\ 17 CFR 240.17Ad-22(e)(2); (e)(3)(ii); (e)(15)(i)-(ii).
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A. Consistency With Section 17A(b)(3)(F) of the Exchange Act

    Section 17A(b)(3)(F) of the Exchange Act requires, among other 
things, that the rules of ICE Clear Europe be designed to promote the 
prompt and accurate clearance and settlement of securities transactions 
and, to the extent applicable, derivative agreements, contracts, and 
transactions, as well as to assure the safeguarding of securities and 
funds which are in the custody or control of ICE Clear Europe or for 
which it is responsible, and, in general, to protect investors and the 
public interest.\25\
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    \25\ 15 U.S.C. 78q-1(b)(3)(F).
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    As described above, the Recovery Plan would identify the steps that 
ICE Clear Europe could take in recovery and the governance framework 
applicable to taking such steps. It would analyze the anticipated 
impact of the recovery tools, the incentives created by such tools, and 
the risks associated with using such tools. The Recovery Plan would 
also explain how the tools used in the plan are transparent, 
measurable, manageable, and controllable. The Commission believes that 
by identifying the steps ICE Clear Europe could take and the tools it 
would use to bring about recovery in the face of losses, the Recovery 
Plan would increase the likelihood that recovery would be orderly, 
efficient, and successful. By increasing the likelihood of an orderly, 
efficient, and successful recovery, the Commission believes that the 
Recovery Plan would enhance ICE Clear Europe's ability to maintain the 
continuity of its critical services (including its clearance of CDS 
transactions) during, through, and following periods of extreme stress 
giving rise to the need for recovery, thereby promoting the prompt and 
accurate settlement of CDS transactions. The Commission also believes 
that the Recovery Plan would help assure the safeguarding of securities 
or funds in the custody or control of ICE Clear Europe by reducing the 
likelihood of a disorderly or unsuccessful recovery that could disrupt 
access to such securities or funds. For the same reason, the Commission 
believes the Recovery Plan would be consistent with the protection of 
investors and the public interest.
    Similarly, the Commission believes that the Wind-Down Plan would 
enhance ICE Clear Europe's ability to promote the prompt and accurate 
clearance and settlement of securities transactions and to safeguard 
securities and funds in its control by establishing a plan to 
effectuate an orderly wind-down. Specifically, the Wind-Down Plan's 
governance process and notice provisions would facilitate the orderly 
close-out of positions and potential transfer of positions to other 
clearing houses, which the Commission believes would enhance ICE Clear 
Europe's ability to maintain and continue the prompt and accurate 
clearance and settlement of CDS transactions by assuring that such 
transactions are closed-out and transferred to other clearing houses in 
an orderly and transparent manner. Moreover, by specifying in advance 
the steps ICE Clear Europe would take in a wind-down, the Wind-Down 
Plan would help assure an efficient and orderly wind-down of ICE Clear 
Europe. The Commission believes that this, in turn, would help assure 
the safeguarding of securities or funds in the custody or control of 
ICE Clear Europe by reducing the likelihood of an inefficient or 
disorderly wind-down, which could disrupt access to such securities or 
funds.
    Therefore, the Commission finds that the proposed rule changes 
would promote the prompt and accurate clearance and settlement of 
securities transactions, assure the safeguarding of securities and 
funds in ICE Clear Europe's custody and control, and, in general, 
protect investors and the public interest, consistent with the Section 
17A(b)(3)(F) of the Exchange Act.\26\
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    \26\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(e)(2)

    Rule 17Ad-22(e)(2) requires that ICE Clear Europe establish, 
implement, maintain, and enforce written policies and procedures 
reasonably designed to provide for governance arrangements that are 
clear and transparent and support the public interest requirements in 
Section 17A of the Exchange Act

[[Page 34895]]

applicable to clearing agencies, and the objectives of owners and 
participants.\27\
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    \27\ 17 CFR 240.17Ad-22(e)(2).
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    The Recovery Plan would identify clear lines of responsibility for 
its preparation and final approval. The Recovery Plan would also 
provide specificity and a sound process for receiving input from 
various parties at ICE Clear Europe. The Commission believes that these 
lines of control and the transparency about the implementation and 
preparation of the Recovery Plan will contribute to establishing, 
implementing, maintaining, and enforcing clear and transparent 
governance arrangements that support the public interest requirements 
in Section 17A of the Exchange Act applicable to clearing agencies, and 
the objectives of owners and participants.
    The Wind-Down Plan similarly would identify clear lines of 
responsibility for the invocation, monitoring, and approval of the 
Wind-Down Plan and, ultimately, a wind-down. It would enhance 
transparency as well by providing for communication to and consultation 
with Clearing Members and other users of ICE Clear Europe's services. 
The Commission believes that this aspect of the Wind-Down Plan would 
represent clear and transparent governance arrangements.
    Therefore, the Commission finds that the proposed rule changes 
would establish clear and transport governance arrangements for the 
Recovery Plan and the Wind-Down Plan, consistent with Rule 17Ad-
22(e)(2).\28\
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    \28\ 17 CFR 240.17Ad-22(e)(2).
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C. Consistency With Rule 17Ad-22(e)(3)(ii)

    Rule 17Ad-22(e)(3)(ii) requires that ICE Clear Europe establish, 
implement, maintain, and enforce written policies and procedures 
reasonably designed to maintain a sound risk management framework for 
comprehensively managing legal, credit, liquidity, operational, general 
business, investment, custody, and other risks that arise in or are 
borne by ICE Clear Europe, which includes plans for the recovery and 
orderly wind-down of ICE Clear Europe necessitated by credit losses, 
liquidity shortfalls, losses from general business risk, or any other 
losses.\29\
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    \29\ 17 CFR 240.17Ad-22(e)(3)(ii).
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    The information the Recovery Plan would provide about the steps 
that ICE Clear Europe would take, and the tools it would use, to 
effectuate a recovery of ICE Clear Europe would enhance ICE Clear 
Europe's ability to recover from credit losses, liquidity shortfalls, 
general business risk losses, or other losses, consistent with Rule 
17Ad-22(e)(3)(ii).\30\ Specifically, the Recovery Plan information 
would enable ICE Clear Europe to prepare in advance for and practice 
the use of such tools, which the Commission believes would enhance ICE 
Clear Europe's ability to use such tools effectively to carry-out a 
successful recovery. In addition, by establishing a single source of 
information about, and steps needed to effectuate, a recovery of ICE 
Clear Europe, the Recovery Plan would allow ICE Clear Europe personnel 
to effectuate a recovery in a consistent and coordinated fashion, which 
could thereby increase the likelihood of a successful recovery. 
Moreover, the Commission believes that by identifying and assessing 
available recovery tools, the Recovery Plan would enhance ICE Clear 
Europe's ability to use such tools effectively to bring about a 
recovery by identifying in advance which tools may be most effective 
for different situations or needs, consistent with Rule 17Ad-
22(e)(3)(ii).\31\
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    \30\ 17 CFR 240.17Ad-22(e)(3)(ii).
    \31\ 17 CFR 240.17Ad-22(e)(3)(ii).
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    Similarly, in providing detailed information about the governance 
requirements related to triggering and implementing the Wind-Down Plan, 
as noted above, the Wind-Down Plan would enhance ICE Clear Europe's 
ability to effectuate an orderly wind-down, consistent with Rule 17Ad-
22(e)(3)(ii).\32\ Specifically, by setting out in advance the steps ICE 
Clear Europe would take to trigger and effectuate a wind-down, the 
Wind-Down Plan would enable ICE Clear Europe to prepare in advance for 
and practice the steps needed to effectuate a wind-down, which the 
Commission believes would enhance ICE Clear Europe's ability to use the 
Wind-Down Plan effectively to carry-out an orderly wind-down. In 
addition, by establishing a single source of information about, and 
steps needed to effectuate, a wind-down of ICE Clear Europe, the Wind-
Down Plan would allow ICE Clear Europe personnel to effectuate a wind-
down in a consistent and coordinated fashion, and would thereby 
increase the likelihood of an orderly wind-down. Finally, the Wind-Down 
Plan would identify the legal basis for ICE Clear Europe's actions with 
respect to a potential wind-down, including relevant Rule citations, 
which the Commission believes would further facilitate a well-reasoned, 
legal, and orderly wind-down process by providing ICE Clear Europe with 
a single source of information and steps needed for a wind-down, 
consistent with Rule 17Ad-22(e)(3)(ii).\33\
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    \32\ 17 CFR 240.17Ad-22(e)(3)(ii).
    \33\ 17 CFR 240.17Ad-22(e)(3)(ii).
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    Therefore, the Commission finds that the proposed rule changes 
would be plans for the orderly recovery and wind-down of ICE Clear 
Europe, consistent with Rule 17Ad-22(e)(3)(ii).\34\
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    \34\ 17 CFR 240.17Ad-22(e)(3)(ii).
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D. Consistency With Rule 17Ad-22(e)(15)(i)-(ii)

    Rules 17Ad-22(e)(15)(i)-(ii) require ICE Clear Europe to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to identify, monitor, and manage its general 
business risk and hold sufficient liquid net assets funded by equity to 
cover potential general business losses so that ICE Clear Europe can 
continue operations and services as a going concern if those losses 
materialize, including by (i) determining the amount of liquid net 
assets funded by equity based upon its general business risk profile 
and the length of time required to achieve a recovery or orderly wind-
down, as appropriate, of its critical operations and services if such 
action is taken and (ii) holding liquid net assets funded by equity 
equal to the greater of either (x) six months of ICE Clear Europe's 
current operating expenses, or (y) the amount determined by the board 
of directors to be sufficient to ensure a recovery or orderly wind-down 
of critical operations and services.\35\
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    \35\ 17 CFR 240.17Ad-22(e)(15)(i)-(ii).
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    The Recovery Plan would include quantitative information to 
demonstrate how ICE Clear Europe would determine the amount of equity 
capital that would be at least sufficient to cover the costs of a 
recovery of its critical clearing services under the Recovery Plan, and 
ICE Clear Europe stated in the Recovery Plan Notice that it holds that 
amount of equity capital.\36\ Similarly, the Wind-Down Plan 
contemplates that any wind-down could be completed within six months 
and discusses how ICE Clear Europe would be able to meet its liquidity 
requirements during a wind-down. Further, in the Wind-Down Plan Notice, 
ICE Clear Europe states that it holds equity capital at least 
sufficient to cover the costs of a wind-down of its clearing services 
under the Wind-Down Plan during that six-month period.\37\ Based on 
these determinations and its review of the underlying information and 
analysis in the plans, the Commission finds that the plans would

[[Page 34896]]

indicate the potential cost and length of recovery, as well as the 
ability to effectuate a wind-down within six months of the decision at 
a lower cost than the amount of its liquid resources, consistent with 
Rule 17Ad-22(e)(15)(i)-(ii).\38\
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    \36\ See Recovery Plan Notice, 83 FR at 2858.
    \37\ See Wind-Down Plan Notice, 83 FR at 2849.
    \38\ 17 CFR 240.17Ad-22(e)(15)(i)-(ii).
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    Therefore, the Commission finds that the proposed rule changes 
would determine the length of time required to achieve a recovery or 
orderly wind-down of ICE Clear Europe and the associated costs and 
would further ensure that ICE Clear Europe holds liquid net assets 
greater than these costs, consistent with Rule 17Ad-22(e)(15)(i)-
(ii).\39\
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    \39\ 17 CFR 240.17Ad-22(e)(15)(i)-(ii).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule changes are consistent with the requirements of the 
Exchange Act, and in particular, Section 17A(b)(3)(F) of the Exchange 
Act \40\ and Rules 17Ad-22(e)(2), 17Ad-22(e)(3)(ii), 17Ad-22(e)(15)(i)-
(ii) thereunder.\41\
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    \40\ 15 U.S.C. 78q-1(b)(3)(F).
    \41\ 17 CFR 240.17Ad-22(e)(2); (e)(3)(ii); (e)(15)(i)-(ii).
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    It is therefore ordered pursuant to Section 19(b)(2) of the 
Exchange Act that the proposed rule change (SR-ICEEU-2017-016) be, and 
hereby is, approved.\42\
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    \42\ In approving the proposed rule change, the Commission 
considered the proposal's impacts on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
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    It is therefore ordered pursuant to Section 19(b)(2) of the 
Exchange Act that the proposed rule change (SR-ICEEU-2017-017) be, and 
hereby is, approved.\43\
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    \43\ In approving the proposed rule change, the Commission 
considered the proposal's impacts on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\44\
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    \44\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-15644 Filed 7-20-18; 8:45 am]
 BILLING CODE 8011-01-P


