[Federal Register Volume 86, Number 157 (Wednesday, August 18, 2021)]
[Notices]
[Pages 46290-46292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17671]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92652; File No. SR-ICEEU-2021-014]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing of Proposed Rule Change, as Modified by Partial Amendment No. 
1, Relating to the ICE Clear Europe Clearing Membership Policy and 
Clearing Membership Procedures

August 12, 2021.
    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 August 2, 2021, ICE Clear Europe Limited (``ICE Clear Europe'' or 
the ``Clearing House'') 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. On August 11, 2021, ICE Clear Europe filed Partial 
Amendment No. 1 to the proposed rule change.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as modified by Partial Amendment No. 1 (hereafter referred to as the 
``proposed rule change''), from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Partial Amendment No. 1 amended the filing to delete from 
the filed Exhibit 5B, Clearing Membership Procedures, certain 
statements in sections 2.4.1 and 2.4.2 of such Procedures concerning 
the termination of clearing membership by a Clearing Member. 
Specifically, ICE Clear Europe proposes to remove the statements 
that it will define a minimum notice period and may publish a 
Circular confirming that a Termination Notice has been issued, 
because the appropriate minimum notice period and requirements for 
publishing a Circular are set forth in existing Clearing Rule 209, 
which is not proposed to be amended.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    ICE Clear Europe proposes to adopt a new Clearing Membership Policy 
(the ``Policy'') and new Clearing Membership Procedures (the 
``Procedures'', and collectively with the Policy, the ``Documents''). 
The revisions would not involve any changes to the ICE Clear Europe 
Clearing Rules.\4\
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    \4\ Capitalized terms used but not defined herein have the 
meanings specified in the ICE Clear Europe Clearing Rules (the 
``Rules'').
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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
    ICE Clear Europe is proposing to adopt the new Policy and 
Procedures to consolidate and summarize its existing clearing 
membership criteria and to document certain existing processes and 
procedures concerning the membership application process.
Clearing Membership Policy
    ICE Clear Europe is proposing to adopt the new Policy which would 
describe its clearing membership criteria (which are set forth in full 
detail in the Rules). The Policy would not change existing membership 
criteria. The Policy would also address related processes for assessing 
applicants for membership, variations of permissions and termination of 
membership.
    The Policy would describe clearing membership criteria, starting 
with a description of the objectives, which accounts for membership 
risk and ensures that such risks are properly managed and that 
admission criteria is non-discriminatory, transparent and objective to 
ensure fair and open access, as well as consistent with relevant 
regulatory requirements. The Policy would describe how these objectives 
are met through setting and monitoring appropriate membership criteria, 
establishing a due diligence process and requiring notifications 
regarding changes to Clearing Member business. The core clearing 
membership criteria, including holding sufficient capital, being a 
party to a Clearing Membership Agreement and others, would be 
summarized in the Policy (with the full criteria set out in Rule 201 
and the CDS Procedures).
    The Policy would provide that ICE Clear Europe has established 
processes for clearing membership application, permission variations 
and clearing membership termination which are set out in further detail 
in the Procedures. The Policy would also address monitoring in respect 
of membership criteria, including periodic in-depth counterparty 
reviews, periodic review of financial positions and use of its

[[Page 46291]]

counterparty rating system, maintenance of a watch list, requiring an 
annual member return, and other operational monitoring.
    The Policy would also provide arrangements for breach management, 
ongoing reviews and exception handling. This section is consistent with 
other ICE Clear Europe policies and governance processes. In 
particular, it would provide that (i) the document owner would be 
responsible for ensuring that documents remain up-to-date and are 
reviewed in accordance with the Clearing House's governance processes, 
(ii) the document owner would report material breaches or unapproved 
deviations from the Framework to their Head of Department, the Chief 
Risk Officer and the Head of Compliance (or their delegates) who would 
determine if further escalation would be made to relevant senior 
executives, the Board and/or competent authorities, and (iii) 
exceptions to the Policy would be approved in accordance with the 
Clearing House's governance process for the approval of changes to such 
document.
Procedures
    The Procedures would describe in further detail the processes for 
reviewing applications for clearing membership, variations of 
membership permissions, on-going monitoring and membership termination. 
The objective would be to establish a due diligence process to ensure 
applicants meet ICE Clear Europe membership criteria and, once members, 
provide notifications of any changes to their business that could 
impact their ability to meet the criteria.
    The Procedures would describe the Clearing Member application 
process, the consideration by relevant ICE Clear Europe departments, 
the process for approval or rejection of applications by the Executive 
Risk Committee under authority delegated by the Board and the right to 
appeal to the Board, additional membership conditions or criteria that 
the Clearing House may, at its discretion, require prior to approval 
and additional information requests that ICE Clear Europe may make 
during the application process. The Procedures would also describe the 
process for a Clearing Member to obtain membership to a different 
membership class and the procedure through which a Clearing Member may 
resign or be terminated by the Clearing House (both of which would be 
in accordance with Rule 209).
    The Procedures would detail the core membership requirements, which 
would include minimum capital requirements as well as a description of 
additional financial requirements ICE Clear Europe may impose and of 
certain aspects of the calculation of member capital, including the use 
of subordinated debt and controller guarantees where approved by ICE 
Clear Europe and the disallowance of certain assets from the 
calculation. The Procedures also reference Guaranty Fund contributions 
for CDS and F&O clearing services, including replenishments in the 
event of application of the funds; the margin-to-capital ratio 
requirement; (iv) default management capabilities; and (v) EOD price 
submissions (for CDS Clearing Members only) as required by the CDS EOD 
Price Discovery Policy.
    The Procedures would further provide for a description of ongoing 
monitoring which would include: (i) Periodic review of the financial 
position and compliance with the relevant membership requirements of 
each Clearing Member; (ii) quarterly review of Clearing Member capital 
situation and monthly review of FCM/BD Clearing Members; (iii) the 
quarterly counterparty rating system report, which aggregates risk 
factors covering credit, market price, liquidity and operational risk 
for each Clearing Member; (iv) the watch list highlighting Clearing 
Members with special risk situations; (v) annual member returns 
pursuant to which Clearing Members must provide certain information to 
ICE Clear Europe; (vi) daily monitoring of Clearing Member performance 
in relation to fulfilment of obligations to cover cash payments, margin 
collateral and Guaranty Fund contributions as well as delivery 
obligations.
    The Procedures would also set out the same governance requirements 
as those described above with respect to the Policy.
(b) Statutory Basis
    ICE Clear Europe believes that the proposed amendments are 
consistent with the requirements of Section 17A of the Act \5\ and the 
regulations thereunder applicable to it. In particular, Section 
17A(b)(3)(F) of the Act \6\ 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 
Documents are intended generally to more clearly document and 
consolidate the Clearing House's criteria for admitting and monitoring 
Clearing Members. In ICE Clear Europe's view the new documentation 
would facilitate implementation of the Clearing House's existing 
membership criteria as well as ongoing risk management with respect to 
Clearing Members by the Clearing House through monitoring of their 
particular situations. These amendments would therefore promote overall 
Clearing House risk management and facilitate the prompt and accurate 
clearing of cleared contracts and protect investors and the public 
interest in the sound operations of the Clearing House, consistent with 
the requirements of Section 17A(b)(3)(F).\7\ Further, the amendments 
will not affect the safeguarding of securities and funds in the custody 
or control of the Clearing House or for which it is responsible, within 
the meaning of Section 17A(b)(3)(F).
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    \5\ 15 U.S.C. 78q-1.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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    The proposed amendments to the Documents are further consistent 
with the risk management requirements of Rule 17Ad-22(e)(3)(i) \8\ as 
they relate to clearing membership. As noted above, the amendments 
would formalize and consolidate membership application and monitoring 
processes to ensure that Clearing Members meet admission criteria upon 
initial membership and continue to meet such criteria throughout their 
membership. The amendments will facilitate the Clearing House's ability 
to manage the potential risks posed by such Clearing Members.
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    \8\ 17 CFR 240.17Ad-22(e)(3)(i)-(ii). The rule states that 
``[e]ach covered clearing agency shall establish, implement, 
maintain and enforce written policies and procedures reasonably 
designed to, as applicable: [m]aintain 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:
    (i) Includes risk management policies, procedures, and systems 
designed to identify, measure, monitor, and manage the range of 
risks that arise in or are borne by the covered clearing agency, 
that are subject to review on a specified periodic basis and 
approved by the board of directors annually;''
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    Rule 17Ad-22(b)(7) \9\ requires clearing agencies to provide the 
ability to obtain

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membership to persons that maintain net capital equal to or greater 
than $50 million, providing such persons can comply with other 
reasonable membership standards and that any net capital requirements 
be scalable so that they are proportional to the risks posed by the 
member's activities to the clearing agency. The Procedures do not 
change ICE Clear Europe's existing membership and minimum capital 
standards in this regard, but more clearly document those requirements 
and the process for monitoring compliance. The amendments are thus 
consistent with Rule 17Ad-22(b)(7).\10\
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    \9\ 17 CFR 240.17 Ad-22(b)(7). The rule states that ``[a] 
registered clearing agency that performs central counterparty 
services shall establish, implement, maintain and enforce written 
policies and procedures reasonably designed to:
    . . .
    (7) Provide a person that maintains net capital equal to or 
greater than $50 million with the ability to obtain membership at 
the clearing agency, provided that such persons are able to comply 
with other reasonable membership standards, with any net capital 
requirements being scalable so that they are proportional to the 
risks posed by the participant's activities to the clearing agency; 
provided, however, that the clearing agency may provide for a higher 
net capital requirement as a condition for membership at the 
clearing agency if the clearing agency demonstrates to the 
Commission that such a requirement is necessary to mitigate risks 
that could not otherwise be effectively managed by other measures 
and the Commission approves the higher net capital requirement as 
part of a rule filing or clearing agency registration application.''
    \10\ 17 CFR 240.17 Ad-22(b)(7).
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    Rule 17Ad-22(e)(2)(i) and (v) \11\ requires clearing agencies to 
establish reasonably designed policies and procedures to provide for 
governance arrangements that are clear and transparent and specify 
clear and direct lines of responsibility. The proposed Documents 
clearly define the roles and responsibilities of the document owner, 
the Head of Department, the senior members of the Risk Oversight 
Department and the senior members of the Compliance Department, 
consistent with governance arrangement for other ICE Clear Europe 
policies and procedures. ICE Clear Europe believes that the amendments 
to the Documents are therefore consistent with the requirements of Rule 
17Ad-22(e)(2)(i) and (v).\12\
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    \11\ 17 CFR 240.17 Ad-22(e)(2). The rule states that ``[e]ach 
covered clearing agency shall establish, implement, maintain and 
enforce written policies and procedures reasonably designed to, as 
applicable:
    (2) Provide for governance arrangements that:
    (i) Are clear and transparent . . .
     (v) Specify clear and direct lines of responsibility . . .''
    \12\ 17 CFR 240.17 Ad-22(e)(2).
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(B) Clearing Agency's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed Documents would have 
any impact, or impose any burden, on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The Documents 
are not changing existing membership criteria and would apply uniformly 
to all Clearing Members. As a result, ICE Clear Europe does not believe 
the amendments would affect the cost of clearing for Clearing Members 
or other market participants, the market for cleared services generally 
or access to clearing by Clearing Members or other market participants, 
or otherwise affect competition among Clearing Members or market 
participants in a manner not necessary or 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 Documents have not been 
solicited or received by ICE Clear Europe. ICE Clear Europe will notify 
the Commission of any written comments received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    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.

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-2021-014 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-2021-014. 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 website (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 website 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 website at https://www.theice.com/clear-europe/regulation. 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-2021-014 and should be 
submitted on or before September 8, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17671 Filed 8-17-21; 8:45 am]
BILLING CODE 8011-01-P


