[Federal Register Volume 88, Number 121 (Monday, June 26, 2023)]
[Notices]
[Pages 41439-41441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-13452]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97766; File No. SR-ICEEU-2023-013]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing of Proposed Rule Change Relating to Amendments the Collateral 
and Haircut Procedures

June 20, 2023.
    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 June 9, 2023, 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 primarily prepared by ICE Clear 
Europe. The Commission is publishing this notice to solicit comments on 
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.

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[[Page 41440]]

I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    ICE Clear Europe Limited (``ICE Clear Europe'' or the ``Clearing 
House'') proposes to modify its Collateral and Haircut Procedures (the 
``Collateral and Haircut Procedures'' or ``Procedures'') \3\ to modify 
the type of gold that may be accepted as collateral.
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    \3\ Capitalized terms used but not defined herein have the 
meanings specified in the ICE Clear Europe Clearing Rules and the 
Collateral and Haircut Procedures.
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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 revise Appendix A to the 
Collateral and Haircut Procedures to modify the eligibility criteria 
for accepting gold as collateral. As revised, to be eligible, gold 
would have to be held on an ``allocated'' basis \4\ by the relevant 
custodian in the name of the Clearing House. Specifically, the change 
would provide that for the purposes of margin, gold transferred by a 
Clearing Member would first be held in an unallocated account and in 
the name of the Clearing House. Such gold would only be recognized as 
Permitted Cover or eligible collateral when it is transferred from the 
unallocated accounts to an allocated account of the custodian held in 
the name of the Clearing House and thereupon deemed allocated pure gold 
bullion of recognized good delivery.
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    \4\ Allocated gold held by a custodian is specifically 
identified for a particular owner. Unallocated gold represents a 
claim against the relevant custodian for an amount of metal held in 
bulk.
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    The amendments would remove existing provisions that would permit 
unallocated gold to serve as Permitted Cover or eligible collateral. 
The amendment is intended to clarify that only allocated (as opposed to 
unallocated) pure gold bullion is capable of being accepted as 
Permitted Cover or eligible collateral, and thereby better align ICE 
Clear Europe's rules with applicable requirements under the European 
Market Infrastructure Regulation (EMIR) which stipulate that gold as 
collateral must be held in allocated form (only).\5\ While ICE Clear 
Europe's current rules technically permit the acceptance of gold as 
collateral, ICE Clear Europe has not in practice accepted gold as 
collateral, as the level of potential interest on the part of Clearing 
Members has to date been insufficient to justify the completion on ICE 
Clear Europe's part of certain operational testing processes that would 
be required to support the full implementation of the process for 
accepting gold as Permitted Cover or eligible collateral. As a result, 
ICE Clear Europe does not believe the amendment would require any 
Clearing Members to change their current margin postings.
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    \5\ 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, 
Annex I, Section 3 (the ``EMIR RTS'').
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(b) Statutory Basis
    ICE Clear Europe believes that the proposed amendments to the 
Collateral and Haircut Procedures are consistent with the requirements 
of Section 17A of the Securities Exchange Act of 1934 (the ``Act'') \6\ 
and the regulations thereunder applicable to it. In particular, Section 
17A(b)(3)(F) of the Act \7\ 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.
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    \6\ 15 U.S.C. 78q-1.
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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    The proposed changes to the Procedures are designed to limit gold 
that may be accepted as margin to allocated gold, rather than 
permitting unallocated gold. As noted above, the level of potential 
interest on the part of Clearing Members in being able to post gold 
(whether in allocated or unallocated form) as margin has to date been 
insufficient to justify the completion on ICE Clear Europe's part of 
certain operational testing processes that would be required to support 
the full implementation of the process for accepting gold as Permitted 
Cover or eligible collateral, and ICE Clear Europe therefore does not 
believe the amendment will result in a change in current activity of 
Clearing Members. The amendment is intended to ensure that the 
Collateral and Haircut Procedures are better aligned with the 
applicable requirements under the EMIR RTS that gold accepted as margin 
be in allocated rather than unallocated form. As such, the amendments 
would clarify the operation of the Clearing House's margin framework in 
accordance with applicable law, and thereby promote the stability of 
the Clearing House and the prompt and accurate clearance and settlement 
of cleared contracts. Removing the option of unallocated gold will also 
not adversely affect the safeguarding of property in the custody or 
control of the Clearing House or for which it is responsible. The 
amendments are for these reasons also generally consistent with the 
protection of investors and the public interest in the safe operation 
of the Clearing House. Accordingly, the amendments satisfy the 
requirements of Section 17A(b)(3)(F).\8\
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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    The amendments to the Collateral and Haircut Procedures are also 
consistent with relevant provisions of Rule 17Ad-22. Rule 17Ad-22(e)(5) 
requires the clearing agency to ``establish, implement, maintain and 
enforce written policies and procedures reasonably designed to, as 
applicable . . . [l]imit the assets it accepts as collateral to those 
with low credit, liquidity, and market risks, and set and enforce 
appropriately conservative haircuts and concentration limits if [it] 
requires collateral to manage its or its participants' credit exposure. 
. . .'' \9\ The amendments would require that any gold posted as margin 
be in allocated form, rather than unallocated form. Limiting margin to 
allocated gold (which is generally viewed as being subject to reduced 
risks from custodian failure) is consistent with the requirement to 
limit collateral to that with low credit, liquidity, and market risks, 
and accordingly the amendments would not increase the risk of the 
Clearing House from such collateral. The amendments would not otherwise 
change the Clearing House's current application of haircuts or 
concentration limits for Permitted Cover. As such, the amendments are 
consistent with the requirements of Rule 17Ad-22(e)(5).\10\
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    \9\ 17 CFR 240.17Ad-22(e)(5).
    \10\ 17 CFR 240.17Ad-22(e)(5).
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    Rule 17Ad-22(e)(1) requires the clearing agency to ``establish, 
implement, maintain and enforce written policies and procedures

[[Page 41441]]

reasonably designed to, as applicable . . . provide for a well-founded, 
clear, transparent and enforceable legal basis for each aspect of its 
activities in all relevant jurisdictions.'' \11\ As noted above, the 
amendments are intended to better align the Collateral and Haircut 
Procedures with the requirements of the EMIR RTS, which limits gold 
accepted as margin to gold held in allocated form. As such, the 
amendments will support the Clearing House's compliance with applicable 
law in all relevant jurisdictions, and therefore are consistent with 
the requirements of Rule 17Ad-22(e)(1).\12\
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    \11\ 17 CFR 240.17Ad-22(e)(1).
    \12\ 17 CFR 240.17Ad-22(e)(1).
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(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 amendments 
are being adopted to require that any gold posted as margin be held in 
allocated form, consistent with applicable law. As noted above, the 
level of potential interest on the part of Clearing Members in being 
able to post gold (whether in allocated or unallocated form) as margin 
has to date been insufficient to justify the completion of ICE Clear 
Europe's part of certain operational testing processes that would be 
required to support the full implementation of the process for 
accepting gold as Permitted Cover or eligible collateral. As a result, 
ICE Clear Europe does not believe the amendments will affect current 
margin practices or affect the current costs of posting margin for 
Clearing Members. To the extent that Clearing Members in the future may 
seek to post gold as margin, and to incur additional costs to do so 
from the requirement that such margin be in allocated form, ICE Clear 
Europe believes that such costs would be appropriate in light of the 
requirements of the EMIR RTS. ICE Clear Europe does not believe the 
amendments would otherwise affect the ability to market participants to 
access clearing, or the market for clearing services generally. 
Therefore, ICE Clear Europe does not believe the proposed rule change 
imposes any burden on competition that is inappropriate 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 amendment 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 such 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 (https://www.sec.gov/rules/sro.shtml) or
     Send an email to [email protected]. Please include 
file number SR-ICEEU-2023-013 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-2023-013. 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 website (https://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 
a.m. and 3 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.
    Do not include personal identifiable information in submissions; 
you should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-ICEEU-2023-013 and 
should be submitted on or before July 17, 2023.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-13452 Filed 6-23-23; 8:45 am]
BILLING CODE 8011-01-P


