
[Federal Register Volume 88, Number 167 (Wednesday, August 30, 2023)]
[Notices]
[Pages 60001-60005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18676]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98217; File No. SR-ICEEU-2023-011]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing of Proposed Rule Change, as Modified by Amendment No. 1, 
Relating to Amendments to the Wind Down Framework and Plan

August 24, 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 August 11, 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. On August 22, 2023, ICE Clear Europe filed Amendment 
No. 1 to the proposed rule change to make certain changes to the 
Exhibit 5.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as modified by Amendment No. 1 
(hereafter ``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\ Amendment No. 1 updates the Exhibit 5 to correct the 
presentation of three of the proposed changes to the Wind Down 
Framework and Plan that were filed with the Commission on August 11, 
2023. The proposed rule change includes an Exhibit 4. Exhibit 4 
shows the change that Amendment No. 1 makes to the Exhibit 5.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    ICE Clear Europe proposes to amend its Wind Down Framework and Plan 
(to be renamed the ``Wind Down Plan'') (the ``Plan'') \4\ to address 
the operation of a wind-down planning committee, update certain 
procedures and make certain other clarifications relating to the 
potential winding down for the Clearing House.
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    \4\ Capitalized terms used but not defined herein have the 
meanings specified in the Wind Down Framework and Plan or, if not 
defined therein, the ICE Clear Europe Clearing 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 amend its Wind Down Framework and 
Plan to make certain updates and enhancements. The proposed changes 
would rename the plan as the ``Wind Down Plan'' and make conforming 
changes throughout. The amendments would remove the Overview section 
and the Context section as those sections contain background 
information that is not necessary to the Plan as well as certain 
unnecessary references to regulatory requirements and particular 
regulators in certain jurisdictions. A new executive summary section 
would restate the purposes and objectives of the Plan as setting out 
relevant information, steps to take and options available with respect 
to winding down the business and compliance with all relevant 
regulatory obligations with

[[Page 60002]]

respect to wind-down. The amendment would remove as unnecessary a non-
exclusive description of certain circumstances that might necessitate 
wind-down and a statement of the benefits of the successful operation 
of the Clearing House's Recovery Plan. A reference to certain specific 
approval requirements under EMIR that are no longer applicable to ICE 
Clear Europe has been removed, and reference to other EMIR requirements 
would be clarified to refer to such legislation as on-shored in the 
United Kingdom under applicable legislation following the withdrawal of 
the United Kingdom from the European Union.
    The summary of the Plan would be revised to provide that in 
considering exiting of contractual obligations in the case of wind-
down, the Clearing House would also consider other services that it may 
be providing (including intra-group services). The discussion of the 
structure of the Plan would remove as unnecessary a statement that the 
Plan reflects feedback that was received from certain regulators. A 
reference to consultation with other relevant stakeholders before 
making final decisions in connection with execution of the Plan would 
be revised to state that such consultation is likely rather than 
necessary in all cases, to reflect that different forms and extents of 
consultation with particular stakeholders may be appropriate for 
different circumstances and proposed actions. The proposed amendments 
would move into the summary a section relating to the execution of the 
plan, which discusses the establishment and responsibilities of the 
Wind Down Planning Committee. The amendments would describe the 
potential membership of the committee, which would be considered to 
include a chair by a non-executive director and senior officers and 
other advisors as appropriate.
    In the discussion of planning options, certain non-substantive 
clarifications would be made as to the choice between transfer of 
clearing to another CCP or termination of clearing. References to 
``Continuing CDS Rule Provisions'' applying, including in lieu of Rule 
105(c) of the Clearing Rules, in the context of CDS product category 
termination would be removed as such provisions have been previously 
deleted from the Rules. The discussion of analysis, consultation and 
planning would update the composition of the Planning Committee (as 
discussed above) and clarify that the impact of plans on stakeholders 
other than members should be considered. The amendments would also 
clarify that in considering alternative CCPs, the committee would 
consider such matters as jurisdictional complications, materially 
differing membership requirements and the factoring of relevant 
regulatory processes into the proposed timelines. The amendments would 
remove a consideration as to whether members would accept a particular 
contract not being available for clearing at the time of transfer, as 
the Clearing House believes transfer would likely not be feasible in 
that scenario. Similarly, for the termination option, the amendments 
would add a reference to consideration of whether regulators would 
likely accept the termination and the timeline for the related 
regulatory process.
    The amendments would also state that the Clearing House would 
assess the impact of services received and provided and describe 
certain of the factors that are relevant, including timing and cost. 
The amendments would also state an assumption that ICE Clear Europe can 
continue to call and receive margin and otherwise operate during the 
wind-down period. However, the amended Plan would acknowledge that in 
the event of an unplanned disruption from a Clearing Member default, or 
in the event of a material nondefault event or loss, revised timelines 
and other actions may be required.
    The amendments would make a number of clarifications to the 
discussion of execution plans in the context of the transfer of F&O 
clearing. Changes to the list of assumptions and activities of the 
Execution Plans as well as timelines for transfer would note 
jurisdictional considerations and the fact that ICE Clear Europe 
currently clears a diverse profile of products (which may necessitate 
transfer of different products to different alternative CCPs). In this 
regard, the amendments would remove an assumption that there would be a 
maximum of two recipient clearing house for situations. In the 
situation where the transferee clearing house does not clear a relevant 
contract, and development of such clearing is not possible within an 
acceptable timeframe, the amendments would remove a statement 
suggesting that transfer would be delayed until clearing is available. 
ICE Clear Europe does not believe such a delay would be feasible, and 
accordingly the relevant positions in that contract would be 
terminated. References to the novation agreement to be used in a 
transfer would be amended to address transfer of related collateral in 
addition to positions. Similarly, the amended Plan would, in the 
scenario of a transfer to another clearing house, address the testing 
of collateral migration (in addition to position migration) and provide 
for the transfer of all relevant collateral (not only margin) to the 
recipient clearing house, in addition to the clearing members 
positions. Additional changes would update references to Clearing House 
position management and other systems such as FEC and ECS (or 
successors to such systems). The anticipated timeline for the transfer 
of F&O markets clearing to recipient clearing houses would be revised 
to be approximately six months (instead of no more than six months), in 
recognition of the difficulty of predicting a maximum timeline. In 
addition, the Clearing House has acknowledged that the timeline may be 
affected because the diverse product groups currently cleared, may need 
to involve more than one recipient clearing house in a transfer. 
Amendments would make other minor non-substantive changes.
    In the context of termination, the amendments would clarify certain 
arrangements around notice to Clearing Members, consistent with the 
Rules. The amendments would contemplate a Withdrawal Date to be 
designated by the Clearing House pursuant to the Rules, rather than 
assuming a period of 5 months, to allow for more flexibility for the 
timeframe to reflect the particular circumstances of the termination. 
(In ICE Clear Europe's view, the time period will not necessarily be 
exactly five months, and that time period would better be described as 
an approximation.) The proposed amendments would also adopt a revised 
maturity profile for different product groups based on expiration date. 
The maturity profile may be materially different between product 
groups; thus it is appropriate for the Plan to consider the profile 
based on the relevant group. The amendments would revise percentage of 
the total open contracts expected to wind down naturally via an 
expiration date within three months from 35% to 30% based on the 
revised maturity profile. The changes would also clarify that new 
trades would be accepted until the Withdrawal Date, with the 
expectation that they serve to reduce risk and reduce open interest. 
The amendments would provide additional clarifications about the 
process of terminating an open position at a Withdrawal Date, in 
accordance with the Rules. The amendments will also clarify the process 
by which clearing members can close out open positions themselves prior 
to the Withdrawal Date, as well as clarify that

[[Page 60003]]

all related margin (and not merely initial margin) would be returned at 
contract termination, consistent with the Rules and Procedures. With 
respect to the timeline for termination, the amendments would clarify 
that the anticipated timeline is approximately (rather than exactly) 
five months, reflecting the fact that the actual timeline may depend on 
the particular positions of Clearing Members at the time. As discussed 
above, the amendments would note that a differing maturity profile for 
contracts may require a different approach or timeline by product group 
(even though the termination process is common across all maturities 
and product groups). Conforming and clarifying changes would be made to 
the lists of assumptions and activities and the timeline in this 
section.
    Similar clarifications would be made to sections of the Plan 
relating to transfer and/or termination of the CDS clearing business. 
These would include references to consideration of jurisdictional 
issues, recognition that in the case of transfer an alternative CCP may 
have different membership requirements, recognition of the regulatory 
and new product approval processes that may apply, clarification that 
termination through re-bilateralisation may (rather than will) occur if 
an alternative CCP is not available in an acceptable timeframe, 
clarification that in certain transfer scenarios backloading of 
terminated contracts once a new CCP is ready could (rather than would) 
be done, and clarification that all relevant collateral (and not just 
margin) will be transferred to recipient clearing house, among others. 
The amendments would also revise the expected timeline for a transfer 
to be approximately 6 months, rather than no more than six months, in 
recognition of the difficulty of predicting a maximum timeline. The 
amendments would note that the timeline is likely to be affected by 
whether the open positions can be transferred to a single clearing 
house, or whether a transfer to multiple clearing houses would be 
required. In several places, the timeline for termination, wind-down or 
re-bilateralisation of CDS clearing would similarly be described as 
approximately five months rather than exactly five months. In the 
discussion of continuation of CDS clearing services until the time of 
termination, a clarification would be made that such clearing would 
continue on the basis of reducing open interest (as opposed to reducing 
volume).
    In the discussion of terminating service arrangements, the notice 
timeline would be revised to be approximately (rather than exactly) 6 
months and also to state that appropriate notice would be given for 
termination of employee contracts. The amendments would note that the 
list of relevant services and contracts is a summary, and that the 
Clearing House maintains a more complete inventory of this service 
arrangements that should be referenced in wind-down planning. As 
amended, the Plan would also note that IT services and licenses are 
largely provided by other ICE Clear Europe affiliates and that IT 
services provided by third parties generally are not expected to have a 
material impact to wind-down planning. The changes to the summary table 
would consolidate the treatment of several clearing services agreements 
with different affiliated ICE markets into a single category for 
consistency. The amendments would also clarify that exit provisions 
regarding the use of buildings and building facilities provided by 
affiliates are not part of intra-group agreements, but would rather be 
managed by the relevant boards and management of the entities involved. 
Other changes would include the addition of the Clearing and Settlement 
Services Agreement with Intercontinental Exchange Holdings, the 
replacement of Dutch National Bank with European Central Bank to 
reflect the use of the latter as a concentration bank, the change in 
reference to the ``relevant ICE Exchanges,'' and the change in the 
Clearing and Settlement Services Agreements notice time period from 12 
months to 24 months. Certain non-substantive drafting clarifications 
would also be made.
    ICE Clear Europe has also proposed to update the description of the 
Clearing House's current liquidity profile in order to be consistent 
with (and explicitly reference) the Clearing House's current Liquidity 
and Investment Management Policy. (Relevant sections of the Liquidity 
and Investment Policy define the objective and key strategy for the 
investment of Cash. As per the policy, ICE Clear Europe aims to only 
invest in cash or highly liquid financial instruments with minimal 
market and credit risk and which are capable of being liquidated 
quickly and with minimal losses). Among other changes, the amendments 
would clarify that collateral held as cash from Clearing Members should 
be immediately accessible or available at short notice, with the vast 
majority of funds being invested in high-quality short-term instruments 
in accordance. (Specific references to a maximum maturity and weighted 
average life would be removed). Outright purchases should be limited to 
high quality and liquid government debt that can be liquidated on short 
notice in the secondary market. Amendments would also address 
availability of non-cash assets for liquidity needs, consistent with 
liquidity policies, and reference the Clearing House's liquidity stress 
testing.
    Consistent with the changes discussed above, the overall 
conclusions for the Plan would be revised to reflect that the 
lengthiest time anticipated for wind-down would be approximately 
(rather than exactly) six months. Additionally, the proposed amendments 
would note that this estimate could be affected by various external 
factors, including the potential need to transfer positions to multiple 
clearing venues given the Clearing House's product scope, which could 
be more complicated (and take more time) than a transfer to a single 
venue. The impact of regulatory approvals and processes could also 
affect the timeline.
    The discussion of governance and oversight in the Plan would be 
replaced with a new Document Governance and Exception Handling section 
that is consistent with other Clearing House policies recently adopted 
or modified.\5\ This section would describe the responsibilities for 
the document owners in accordance with ICEU's governance processes, as 
well as breach management, exception handling, and document governance.
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    \5\ See, e.g., The Counterparty Credit Risk Policy and 
Procedures as described in Exchange Act Release No. 34-97169, SR 
ICEEU-2023-004 (March 20, 2023) 88 FR 17886 (March 24, 2023); the 
Investment Management Procedures as described in Exchange Act 
Release No. 34-97528, SR ICEEU-2023-009 (May 19, 2023) 88 FR 33949 
(May 25, 2023; the Futures and Options Default Management Policy as 
described in Exchange Act Release No. 34-97383, SR ICEEU-2023-012 
(Apr. 26, 2023) 88 FR 27539 (May 2, 2023).
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    The proposed changes also make a number of non-substantive changes 
to the Plan throughout such as formatting and typographical and similar 
corrections.
(b) Statutory Basis
    ICE Clear Europe believes that the proposed amendments to the Plan 
are consistent with the requirements of Section 17A of the Securities 
Exchange Act of 1934 \6\ (``Act'') 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

[[Page 60004]]

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 changes to the Plan are intended to update and 
clarify the Plan, including to address more clearly the operation of 
the planning committee. The amendments would also update expected 
procedures relating to transfer or termination of the F&O and CDS 
clearing businesses, respectively, in order to provide appropriate 
flexibility and better take into account certain characteristics of the 
products cleared. The amendments will help the Clearing House 
facilitate an orderly transition or shut-down of a clearing business in 
the event it is unable to continue operations. As a result, in ICE 
Clear Europe's view, the amendments would be consistent with the prompt 
and accurate clearance and settlement of the contracts, the 
safeguarding of funds or securities in the custody or control of the 
clearing agency or for which it is responsible, and the protection of 
investors and the public interest, consistent with the requirements of 
Section 17A(b)(3)(F) of the Act.\8\
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    \6\ 15 U.S.C. 78q-1.
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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    Rule 17Ad-22(e)(2) provides that ``[e]ach covered clearing agency 
shall establish, implement, maintain and enforce written policies and 
procedures reasonably designed to, as applicable [. . .] provide for 
governance arrangements that are clear and transparent'' \9\ and 
``[s]pecify clear and direct lines of responsibility.'' \10\ The 
amendments to the Plan would more clearly state the responsibilities of 
the Clearing House's planning committee, management and the Board in 
relation to the Plan. In ICE Clear Europe's view, the amendments are 
therefore consistent with the requirements of Rule 17Ad-22(e)(2).\11\
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    \9\ 17 CFR 240.17 Ad-22(e)(2)(i).
    \10\ 17 CFR 240.17 Ad-22(e)(2)(v).
    \11\ 17 CFR 240.17 Ad-22(e)(2).
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    The proposed amendments are also consistent with Rule 17Ad-
22(e)(17)(i), which provides that ``[e]ach covered clearing agency 
shall establish, implement, maintain and enforce written policies and 
procedures reasonably designed to, as applicable [. . .] manage the 
covered clearing agency's operational risks by identifying the 
plausible sources of operational risk, both internal and external, and 
mitigating their impact through the use of appropriate systems, 
policies, procedures, and controls.'' \12\ As discussed above, the 
amendments update and clarify various aspects of the wind-down Plan to 
enhance the planning process and take into account the characteristics 
of the cleared products in planning procedures for transfer or 
termination. These amendments are intended to help mitigate the impact 
to market participants of a potential wind-down. In ICE Clear Europe's 
view, the amendments are therefore consistent with the requirements of 
Rule 17Ad-22(e)(17)(i).).\13\
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    \12\ 17 CFR 240.17 Ad-22(e)(17)(i).
    \13\ 17 CFR 240.17 Ad-22(e)(17)(i).
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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 proposed 
amendments are being adopted to update and clarify the Plan, all of 
which relate to the Clearing House's processes for the wind down of the 
Clearing House in the unlikely event that the recovery plan does not 
succeed in restoring normal operations after significant loss events or 
the Clearing House decides for business reasons it no longer wishes to 
operate. ICE Clear Europe does not believe the amendments would affect 
in the ordinary course of business the costs of clearing, the ability 
of 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 amendments 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-2023-011 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-2023-011. 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

[[Page 60005]]

publication submitted material that is obscene or subject to copyright 
protection. All submissions should refer to File Number SR-ICEEU-2023-
011 and should be submitted on or before September 20, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-18676 Filed 8-29-23; 8:45 am]
BILLING CODE 8011-01-P


