
[Federal Register Volume 88, Number 177 (Thursday, September 14, 2023)]
[Notices]
[Pages 63149-63157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19844]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98337; File No. SR-ICEEU-2023-020]


Self-Regulatory Organizations; ICE Clear Europe Limited; Order 
Approving Proposed Rule Change Relating to Amendments to Recovery Plan

September 8, 2023.

I. Introduction

    On July 10, 2023, ICE Clear Europe Limited (``ICE Clear Europe'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4,\2\ a proposed rule change to amend 
its Recovery Plan (the ``Plan''). The proposed rule change was 
published for comment in the Federal Register on July 26, 2023.\3\ The 
Commission did not receive comments regarding the proposed rule change. 
For the reasons discussed below, the Commission is approving the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Self-Regulatory Organizations; ICE Clear Europe Limited; 
Notice of Filing of Proposed Rule Change Relating to Amendments to 
Recovery Plan, Exchange Act Release No. 97955 (July 20, 2023); 88 FR 
48273 (July 26, 2023) (SR-ICEEU-2023-020) (``Notice'').
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II. Description of the Proposed Rule Change

A. Background

    ICE Clear Europe is registered with the Commission as a clearing 
agency for the purpose of clearing security-based swaps. In its role as 
a clearing agency for security-based swaps, ICE Clear Europe maintains 
the Plan.\4\ The Plan provides the relevant information, the steps to 
take, and the options available to restore ICE Clear Europe to normal 
operation and recover in the event of severe financial stress and 
losses. The Plan describes, among other things, the following 
information: (i) ICE Clear Europe's critical services, service 
providers, and interdependencies; (ii) scenarios in which ICE Clear 
Europe may need to use the Plan, triggers for invoking the Plan in 
those scenarios, and early indicators of those scenarios; (iii) options 
for recovering from severe financial stress and losses; and (iv) 
decision-making, governance, and communications processes relevant to 
ICE Clear Europe's recovery.
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    \4\ Capitalized terms not otherwise defined herein have the 
meanings assigned to them in the Plan or the ICE Clear Europe 
Clearing Rules.
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    The proposed rule change would make various updates and amendments 
to the Plan. ICE Clear Europe is making these changes to implement the 
results of internal and external reviews of the Plan. These changes are 
described below according to the section of the Plan in which they 
appear.

A. Section 1, Executive Summary

    Section 1 summarizes the Plan. Among other things, Section 1 gives 
an overview of (i) ICE Clear Europe's options for recovery as well as 
(ii) how it governs, tests, and reviews the Plan.
Options for Recovery
    ICE Clear Europe's options for recovery include tools that it could 
use to recover losses, such as powers of assessment,\5\ reduced gains 
distribution,\6\ and partial tear-ups.\7\ Currently, the Plan also 
lists as a recovery option ICE Clear Europe's Capital Replenishment 
Framework. The proposed rule change would keep the reference to capital 
replenishment, but would rename it as the Capital Replenishment Plan, 
instead of Framework. ICE Clear Europe is making this particular change 
because it changed the name of the Capital Replenishment Framework to 
the Capital Replenishment Plan.\8\
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    \5\ Following the default of a Clearing Member, and if certain 
other conditions are satisfied, ICE Clear Europe Rule 909 allows ICE 
Clear Europe to assess Clearing Members for additional amounts as 
needed to resolve any shortfall resulting from the default.
    \6\ Following the default of a Clearing Member, and if certain 
other conditions are satisfied, ICE Clear Europe Rule 914 allows ICE 
Clear Europe to reduce variation margin payments, as needed to 
retain cash and resolve any shortfall resulting from the default.
    \7\ Following the default of a Clearing Member, and if certain 
other conditions are satisfied, ICE Clear Europe Rule 915 allows ICE 
Clear Europe to terminate open contracts that offset the defaulting 
Clearing Member's open contracts.
    \8\ See Self-Regulatory Organizations; ICE Clear Europe Limited; 
Order Approving Proposed Rule Change Relating to the Capital 
Replenishment Plan, Exchange Act Release No. 97018 (Mar. 2, 2023); 
88 FR 14412 (Mar. 8, 2023) (SR-ICEEU-2022-027).
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    Section 1 of the Plan also describes the coverage of ICE Clear 
Europe's recovery options. Section 1 explains why ICE Clear Europe 
would be able to fully cover default losses, liquidity shortfalls, and 
investment losses, should it need to do so. With respect to default 
losses in particular, the Plan currently explains that with the use of 
partial tear-ups, ICE Clear Europe can eliminate variation margin 
obligations by, in effect, cancelling any remaining positions, and 
therefore default losses can be fully covered. The proposed rule change 
would keep this explanation, but it would delete the statement, 
``Therefore default losses can be fully covered.'' ICE Clear Europe is 
deleting this statement because it believes the statement is redundant 
considering the overall explanation that ICE Clear Europe would be able 
to fully cover default losses.\9\
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    \9\ Notice, 88 FR at 48273.
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    Similar to the description of partial tear-ups, Section 1 of the 
Plan also describes the coverage of ICE Clear Europe's powers of 
assessment. The Plan currently explains that under powers of assessment 
for its Futures and Options clearing service, ICE Clear Europe would 
have sufficient capital to cover all Clearing Members defaulting 
simultaneously under extreme but plausible market scenarios, meaning 
the maximum exposures from all Clearing Members with same directional 
positions defaulting simultaneously. Moreover, for its Credit Default 
Swap clearing service, the Plan currently describes the scenario in 
which ICE Clear Europe would exhaust its

[[Page 63150]]

prefunded resources and powers of assessment.
    The proposed rule change would delete this description of ICE Clear 
Europe's powers of assessment and replace it with a more concise 
explanation. The revised description would state that, under ICE Clear 
Europe's powers of assessment, it can immediately recover losses that 
exceed the pre-funded resources to cover the default of the largest 
Clearing Members under extreme but plausible stress scenarios because 
ICE Clear Europe has the authority to collect resources from non-
defaulting Clearing Members intraday and in cash. The revised 
description also would explain that ICE Clear Europe can confirm the 
capacity of its powers of assessment using reverse stress testing. 
Although the proposed rule change would not amend ICE Clear Europe's 
powers of assessment, ICE Clear Europe does not believe it is necessary 
to specify the expected coverage of assessment powers in the Plan.\10\
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    \10\ Notice, 88 FR at 48273.
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Governance, Testing, and Review
    As mentioned above, Section 1 also provides an overview of how ICE 
Clear Europe governs, tests, and reviews the Plan. With respect to 
governance under the existing Plan, ICE Clear Europe's President must 
attempt to convene the ICE Clear Europe Board for approval in advance 
of making each material decision under the Plan. If the Board cannot be 
convened in advance of making the decision, however, it must be 
convened afterwards. The proposed rule change would clarify that the 
Board must be convened afterwards ``as soon as reasonably possible'' 
and updated on steps taken.
    Section 1 currently explains that in exercising its options under 
the Plan, ICE Clear Europe does not need the approval of Clearing 
Members or any other external stakeholders. The proposed rule change 
would maintain this statement but would add a further caveat to explain 
that ICE Clear Europe would seek to communicate its plans and/or 
intentions to relevant external stakeholders where possible, and as 
soon as reasonably practicable, to ensure appropriate transparency.
    Section 1 also explains how ICE Clear Europe conducts testing of 
the Plan. Currently, Section 1 states that the Plan is tested annually 
through a tabletop exercise. The proposed rule change would amend this 
description to provide that the Plan is tested at least annually. 
Moreover, the proposed rule change would delete the phrase ``tabletop 
exercise'' and replace it with a more detailed description of how ICE 
Clear Europe would test the Plan. Specifically, ICE Clear Europe would 
test at least one default and one non-default scenario each year, with 
all recovery options tested over a three-year cycle. ICE Clear Europe's 
Executive Risk Committee would approve the testing schedule and review 
the results of the testing. ICE Clear Europe's testing strategy would 
use tabletop exercises, including simulated tabletop exercises where 
possible.
    Moreover, Section 1 currently provides that where appropriate, 
elements of the Plan are included in ICE Clear Europe's annual default 
fire drills. The proposed rule change would retain this statement but 
would add further description of the elements that ICE Clear Europe 
could test in the fire drills. Specifically, ICE Clear Europe could 
test default-related recovery scenarios, including coordination with 
other covered clearing agencies.
    Section 1 currently provides that a key focus of the annual test of 
the Plan is to work through specific scenarios as they might develop 
and to consider, among other things, how ICE Clear Europe would 
implement recovery options and which communication pathways it would 
use. The proposed rule change would retain this description but would 
revise it slightly. Under the proposed rule change, ICE Clear Europe 
would consider which communication and governance pathways to use, 
instead of just communication pathways. Moreover, the proposed rule 
change would add another consideration: whether all services can 
continue to be provided, including those provided to affiliates.
    Finally, Section 1 currently includes a statement that ICE Clear 
Europe will review the Plan after each test. The proposed rule change 
would retain this statement but would further add that any proposed 
changes would follow the relevant governance schedule for the Plan.

B. Section 2, Critical Services, Service Providers, and 
Interdependencies

    Section 2 of the Plan describes (i) ICE Clear Europe's Critical 
Services; (ii) entities that rely on ICE Clear Europe's Critical 
Services; (iii) providers of services to ICE Clear Europe; (iv) how ICE 
Clear Europe mitigates its dependencies on these service providers; (v) 
ICE Clear Europe's technology infrastructure that supports its Critical 
Services; (vi) and interdependencies between ICE Clear Europe and other 
entities in the financial markets.
Critical Services
    The Plan currently identifies three services as ICE Clear Europe's 
Critical Services: (i) futures and options clearing; (ii) credit-
default swap clearing; and (iii) treasury and banking services. The 
proposed rule change would not alter this description, but it would add 
further explanation of the meaning of the term ``Critical Services.'' 
Specifically, the proposed rule change would add a footnote to explain 
that ``Critical Services'' are defined at the highest level for the 
purposes of the Plan and should not be confused with ``Important 
Business Services,'' which form part of the Operational Resilience 
framework and are defined within the Operational Risk and Resilience 
Policy.
    Moreover, the proposed rule change would revise a description of 
the products that ICE Clear Europe clears. Currently, Section 2 
provides that ICE Clear Europe clears certain financial instruments 
including CDS instruments, futures contracts, and options on futures 
contracts. The proposed rule change would revise the description of the 
last category, from options on futures contracts to just options 
contracts.
    Finally, Section 2 currently contains a table that identifies the 
markets and exchanges for each of ICE Clear Europe's Critical Services. 
For example, futures and options clearing applies to contracts on soft 
commodities and covers exchanges such as ICE Futures Europe and ICE 
Futures US. The proposed rule change would update the names of the 
exchanges in this table, changing ICE Futures US to ICE Futures US 
(Energy Division). The proposed rule change also would add ICE Futures 
Abu Dhabi to the list of exchanges.
Entities That Rely on Critical Services
    Section 2 describes in further detail how market participants and 
exchanges depend on ICE Clear Europe's Critical Services. For example, 
if ICE Clear Europe were unable to provide its Critical Services, 
market participants would be unable to manage their positions with ICE 
Clear Europe. Moreover, the Plan notes that in stressed market 
conditions, when Clearing Members themselves may already be under 
additional financial stress, actions that ICE Clear Europe takes to 
recover from losses may increase the stresses on Clearing Members' 
capital and liquidity resources. Given that, the Plan currently states 
that capital and liquidity impacts on market participants (including 
Clearing Members and their clients) would be taken into account when 
assessing which recovery options to use. The proposed rule change would

[[Page 63151]]

maintain this provision but would add a caveat that impacts on market 
participants would be taken into account as far as reasonably possible 
when assessing which recovery options to use.
Service Providers
    Section 2 further describes the entities upon which ICE Clear 
Europe relies when providing its Critical Services. ICE Clear Europe 
relies on both affiliates and third parties when providing its Critical 
Services. For example, ICE Clear Europe relies on third-party banks in 
providing its treasury and banking services, and it relies on 
affiliates, such as other ICE Clearing Houses and Exchanges, for 
settlement prices and intraday margin collection. With respect to 
services provided by ICE affiliates, the Plan currently states that 
these services are contractually governed by master outsourcing 
agreements. The proposed rule change would revise the name of these 
agreements to inter-company service agreements.
    Section 2 currently contains a table that lists categories of 
service providers, identifies the Critical Services they support, and 
describes the services that they provide. This table currently 
identifies investment agents as supporting treasury and banking 
services. The proposed rule change would expand this category to 
include both investment agents and repo counterparties. The proposed 
rule change also would add another category to the table to cover 
default brokers. Default brokers support all three of ICE Clear 
Europe's Critical Services. Default brokers do so by hedging the 
positions of a defaulting Clearing Member and liquidating the 
defaulter's non-cash collateral.
Mitigation
    Section 2 next describes how ICE Clear Europe mitigates its 
dependencies on these service providers. ICE Clear Europe mitigates its 
dependencies with three mechanisms: (i) using multiple service 
providers, so it is not overly dependent on one provider alone; (ii) 
engaging with service providers who place high levels of importance on 
continuity of operations through multiple levels of resilience; and 
(iii) ensuring its contracts with providers do not have provisions that 
allow the providers to alter or terminate the contracts when ICE Clear 
Europe is under financial stress. With respect to the first point, the 
proposed rule change would maintain the current provision found in the 
Plan but would add further explanation as to how ICE Clear Europe 
confirms it is using multiple service providers. ICE Clear Europe would 
regularly test its assumptions regarding multiple providers as part of 
its operational resilience framework.
    On the second point, resilience within providers, the proposed rule 
change would add a similar explanation. ICE Clear Europe would conduct 
regular testing of its assumptions regarding resilience within services 
providers as part of its operational resilience framework.
    With respect to the third point, contractual provisions, the 
proposed rule change would amend the description of this mechanism. 
Currently, the Plan provides that ICE Clear Europe ensures that its 
contracts with services providers have appropriate termination periods 
and do not include covenants, material adverse change clauses, or other 
provisions that would permit service providers to alter or terminate 
the contracts if it were under financial stress. The proposed rule 
change would revise this slightly to state that ICE Clear Europe 
ensures that its contracts do not include covenants, material adverse 
change clauses, or other provisions that would permit service providers 
to unduly alter or terminate the contracts. Moreover, the Plan 
currently provides that ICE Clear Europe has analyzed its contracts in 
the context of the Plan and has not found any issues that would impact 
the Critical Services in recovery. The proposed rule change would 
revise this slightly to state that ICE Clear Europe periodically 
analyzes the relevant contracts in the context of the Plan (and any 
other relevant factors).
    Section 2 also describes ICE Clear Europe's dependencies on 
particular service providers. Specifically, the Plan describes ICE 
Clear Europe's particular dependencies with respect to custodians, 
physical delivery agents, ICE's exchanges, ICE's other clearing houses, 
and ICE's technology and operations groups.
    In the description of dependencies on custodians, the proposed rule 
change would revise a reference to the Business Continuity and Disaster 
Recovery plans to be a general reference to ICE Clear Europe's 
operational resilience plans.
    In the description of ICE Clear Europe's dependencies on physical 
delivery agents, the Plan currently provides that if there were a 
significant issue with a Physical Delivery Agent that could not be 
resolved then ICE Clear Europe could fall back to financial settlement, 
and therefore it does not ultimately have a dependency on physical 
delivery agents. The proposed rule change would retain the statement 
that ICE Clear Europe could fallback to financial settlement but would 
delete the statement that ICE Clear Europe does not ultimately have a 
dependency on physical delivery agents. Instead, the proposed rule 
change would add a statement that ICE Clear Europe for certain markets 
at this time, regularly tests its ability to perform the functions 
usually performed by those delivery agents itself under certain 
disruption scenarios. ICE Clear Europe is making this change to 
recognize that despite the mitigation of financial settlement, its 
relationship with physical delivery agents could still be considered a 
dependency.
    With respect to dependencies on ICE's Exchanges, the Plan currently 
provides that ICE Clear Europe's dependency on ICE's Exchanges for the 
provision of settlement prices is mitigated through its ability under 
to generate its own settlement prices if needed, and therefore ICE 
Clear Europe does not ultimately have a dependency on ICE's Exchanges. 
The proposed rule change would delete the statement that ICE Clear 
Europe does not ultimately have a dependency on ICE's Exchanges. 
Instead, the proposed rule change would add that ICE Clear Europe's 
dependencies are mitigated via the ICE Exchanges' own resilience 
testing. Like the dependency on physical delivery agents, ICE Clear 
Europe is making this change to recognize that despite the mitigation 
of generating its own settlement prices, its relationship with ICE's 
Exchanges could still be considered a dependency.
    With respect to dependencies on ICE's Clearing Houses, the Plan 
currently provides that ICE Clear Europe's dependency on ICE's Clearing 
Houses for operational or risk processes is mitigated through ICE Clear 
Europe's ability to run the processes itself, if needed, and therefore 
ICE Clear Europe does not ultimately have a dependency on ICE's 
Clearing Houses. The proposed rule change would delete the statement 
that ICE Clear Europe does not ultimately have a dependency on ICE's 
Clearing Houses. Instead, the proposed rule change would explain that 
the processes in question are generally the processes that ICE Clear 
Europe does already perform during business as usual London hours (such 
as intraday margin calls), which therefore validates the assumption 
that ICE Clear Europe can run the processes itself, if needed.
    With respect to dependencies on ICE's technology and operations 
groups, the Plan notes that ICE Clear Europe relies on these groups for 
certain operational processes and for technology infrastructure. 
Moreover, the Plan provides that ICE Clear Europe's

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dependency is mitigated through its ability to run the processes 
itself, if needed. The proposed rule change would add language to note 
that ICE Clear Europe periodically tests its ability to run the 
processes itself as part of its operational resilience framework.
    Finally, the Plan identifies certain service providers that ICE 
Clear Europe does not depend on. Section currently provides the 
following types of service providers are not considered as dependencies 
for ICE Clear Europe: Investment Agents, APS Banks, Central Banks, Data 
Providers. Section 2 provides that these service providers are not 
dependencies because ICE Clear Europe would be able to substitute the 
providers as needed. The proposed rule change would delete this 
provision. ICE Clear Europe is making this particular change to 
recognize that despite being able to substitute these providers, its 
relationship with these providers could still be considered a 
dependency.\11\
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    \11\ Notice, 88 FR at 48274.
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Technology Infrastructure
    Section 2 also contains a table that describes ICE Clear Europe's 
technology systems that support its Critical Services. The table 
identifies and describes each system, identifies which Critical Service 
it supports, and the entity that provides the system. The proposed rule 
change would maintain this table largely as it is currently written in 
the Plan. In certain entries, the proposed rule change would clarify 
that a specific system relates to either credit-default swap trades or 
futures and options trades.
    After the table, Section 2 describes how ICE Clear Europe mitigates 
the risks associated with its dependency on these technology systems. 
For example, the Plan states that ICE Clear Europe ensures that systems 
are run with multiple live redundancies and there are in place 
effective business continuity and disaster recovery arrangements. The 
proposed rule change would revise the description of these mitigation 
techniques. For example, in addition to ensuring that systems are run 
with multiple live redundancies, ICE Clear Europe would test these 
redundancies periodically. Further, the proposed rule change would, 
going forward, refer to business continuity and disaster recovery 
arrangements as operational resilience arrangements. Finally, the 
proposed rule change would note that, given these technology systems 
are provided by ICE Inc. or ICE Clear Credit, ICE Clear Europe is a 
direct participant in defining and ensuring operational and regulatory 
requirements are met when new capabilities are developed.
Interdependencies
    Finally, Section 2 describes the interdependencies between ICE 
Clear Europe and other financial market infrastructures. For example, 
the Plan states that some of ICE Clear Europe's Clearing Members are 
participants in other central counterparties. While ICE Clear Europe 
does not provide interoperability with other central counterparties, 
default of a Clearing Member at ICE Clear Europe may cause the Clearing 
Member to default at another central counterparty, and vice versa. The 
proposed rule change would maintain this description but would add 
explanation regarding ICE Clear Europe's interdependencies with other 
ICE, Inc. affiliates. Specifically, ICE Clear Europe provides certain 
intercompany services to certain affiliates within the ICE group and 
operates on the assumption that those services will continue to be 
provided during execution of the Plan. Because the services in question 
are typically operational or almost fully automated, ICE Clear Europe 
anticipates having relevant resources available outside of those 
required for recovery activities to continue the intercompany services. 
For those services that are not automated, and therefore do require ICE 
Clear Europe resources even under business-as-usual circumstances, ICE 
Clear Europe has, and periodically tests, backup arrangements.

C. Section 3, Recovery Scenarios, Triggers, and Early Warning 
Indicators

    Section 3 of the Plan describes the scenarios where ICE Clear 
Europe is likely to invoke the Plan and triggers for when ICE Clear 
Europe would invoke the Plan in those scenarios, as well as early 
warning indicators of when those scenarios might occur.
Recovery Scenarios and Triggers
    Currently the Plan describes two scenarios that could lead to 
recovery (each a ``Recovery Scenario''): (i) losses caused by a 
defaulting Clearing Member and (ii) all other non-default losses caused 
by investments, operational incidents, or other business activities. 
The trigger for the default loss scenario is when ICE Clear Europe's 
Guaranty Fund is or is likely to be exhausted and there are still 
losses to cover. The trigger for the non-default loss scenario is when 
ICE Clear Europe's Base Capital is or is likely to be breached.
    The proposed rule change would retain this description but would 
add explanation with respect to the trigger for the second scenario. 
The Plan would be triggered in the non-default loss scenario when ICE 
Clear Europe's Base Capital is or is likely to be breached by holding 
insufficient EMIR eligible capital.
    Section 3 also explains the distinction between business-as-usual 
risk management and recovery under the Plan. Business-as-usual risk 
management options, such as the default waterfall, are designed to 
incentivize effective risk management and participation from Clearing 
Members and ICE Clear Europe, to maximize the likelihood that losses 
are managed through business-as-usual processes.
    ICE Clear Europe invokes the Plan when it has been unable to cover 
its losses using business-as-usual risk management. In an appendix to 
the Plan, ICE Clear Europe describes certain scenarios that would 
stress its financial and operational resources and analyzes how these 
stress scenarios could become Recovery Scenarios (in other words, when 
such stress scenarios could lead ICE Clear Europe to invoke the Plan). 
The proposed rule change would add a statement to explain that with 
respect to these scenarios analyzed in Appendix A, each scenario is 
mapped to key risks contained within ICE Clear Europe's risk appetite 
statements, ensuring that each key risk type is covered within those 
scenarios. Also in this section, the proposed rule change would add a 
footnote to clarify that ICE Clear Europe's Guaranty Fund contribution 
is otherwise known as ``Skin in the Game.''
    Finally, Section 3 explains the distinction between ICE Clear 
Europe's management of operational risks and recovery under the Plan. 
ICE Clear Europe has established Business Continuity and Disaster 
Recovery Plans, which it uses to manage service issues caused by 
operational or technology problems. Such an operational or 
technological scenario could still trigger the Plan if it causes ICE 
Clear Europe to hit the non-default loss trigger. As discussed above, 
the Plan is triggered in the non-default loss scenario when ICE Clear 
Europe's Base Capital is or is likely to be breached by holding 
insufficient EMIR eligible capital.
    The proposed rule change would update this description. For 
example, it would add references to ICE Clear Europe's operational 
resilience framework. The proposed rule change also would add 
references to ICE Clear Europe's incident management processes, which 
are part of its operational resilience framework.

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Early Warning Indicators
    Section 3 also describes certain early warning indicators. These 
are qualitative and quantitative metrics that ICE Clear Europe monitors 
to determine if it might hit the recovery triggers. These indicators 
are categorized according to whether they relate to the default loss or 
non-default loss scenarios discussed above.
    For the default loss trigger, the early warning indicators are the 
default management information which is produced if a counterparty is 
potentially going be called into default. For example, ICE Clear Europe 
would consider the size of a Clearing Member's positions, its 
collateral, and market volatility. The proposed rule change would 
revise this description slightly to state that the early warning is 
default management information that is produced if a counterparty is 
potentially going to fail to meet an obligation and may therefore be 
called into default.
    For the non-default loss trigger, ICE Clear Europe monitors its 
eligible capital against certain target thresholds each day, as an 
early warning indicator. The proposed rule change would revise this 
description slightly. The revised language would explain that, in that 
in order to identify warning indicators for non-default loss scenarios 
as early as possible, ICE Clear Europe monitors its eligible capital 
against target thresholds and the continued suitability of the target 
thresholds each day.

D. Section 4, Recovery Options

    Section 4 of the Plan describes and analyzes the tools that ICE 
Clear Europe could use to recover from losses. The Plan refers to these 
tools as ICE Clear Europe's Recovery Options. ICE Clear Europe's 
Recovery Options include, among others, powers of assessment, reduced 
gains distribution, and allocation of investment losses.
    Section 4 of the Plan currently describes these tools in detail, 
and the proposed rule change would make minor updates to this 
description. For example, the Plan currently states that ICE Clear 
Europe can call any amount of assessments up to the maximums and can 
call assessments multiple times. The proposed rule change would 
maintain this description but would add a phrase to clarify that if ICE 
Clear Europe were to call assessments multiple times, it would do so in 
accordance with the Rules. The proposed rule change also would correct 
a reference to the Capital Replenishment Framework, changing the name 
of that document to the Capital Replenishment Plan. In Section 4, the 
proposed rule change also would delete language that references 
Appendix A to the Plan. Appendix A to the Plan is a chart showing ICE 
Clear Europe's committee structure. As discussed further below, the 
proposed rule change would delete this Appendix A. Accordingly, the 
proposed rule change would remove a reference to Appendix A that is 
currently found in Section 4. Finally, the proposed rule change would 
delete a reference stating that ICE Clear Europe is responsible for the 
first $90 million of investment losses. This figure is no longer 
correct, and the amount is subject to change, so ICE Clear Europe 
believes it should not be set out in the Plan.\12\
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    \12\ Notice, 88 FR at 48273. ICE Clear Europe recently adopted a 
new framework for allocating non-default losses generally and 
modified its liability with respect to investment losses. For more 
information, see Self-Regulatory Organizations; ICE Clear Europe 
Limited; Order Granted Accelerated Approval of Proposed Rule Change, 
as Modified by Amendment No. 1 and Amendment No. 2, to the ICE Clear 
Europe Clearing Rules Relating to Non-Default Losses, Exchange Act 
Release No. 98071 (Aug. 7, 2023); 88 FR 54690 (Aug. 11, 2023) (SR-
ICEEU-2023-010).
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    Section 4 of the Plan also describes how ICE Clear Europe's 
Recovery Options are comprehensive and effective. For example, Section 
4 currently states that using partial tear-ups, ICE Clear Europe can 
eliminate any remaining Variation Margin and mark-to-market payment 
obligations by cancelling any remaining positions. The proposed rule 
change would delete this description from Section 4 because this 
language is identical to, and therefore duplicative of, language found 
in Section 1.
    Finally, Section 4 contains a table that lays out all of ICE Clear 
Europe's Recovery Options, the scope of those Recovery Options, and 
some decision-making considerations associated with them. In the 
portion of the table describing the scope of powers of assessment, the 
proposed rule change would delete a statement that powers of assessment 
are potentially able to cover all Clearing Members defaulting 
simultaneously. As discussed above, ICE Clear Europe is making this 
change because it does not think the Plan should specify the expected 
coverage of assessment.\13\ Finally, in the portion of the table 
discussing capital replenishment, the proposed rule change would add, 
as a decision-making consideration, timing and ability of future 
profits to replenish capital.
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    \13\ Notice, 88 FR at 48273.
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E. Section 5, Decision-Making, Governance, and Communications

    Section 5 describes the decision-making, governance, and 
communications process related to the Plan. Generally, when taking 
actions related to the Plan, ICE Clear Europe's President will attempt 
to convene the Board for approval in advance of making each material 
decision provided the Board can be convened in a timely manner. If the 
Board cannot be convened in advance, then it will be convened 
afterwards. The proposed rule change would maintain this provision but 
would explain that if the Board cannot be convened in advance, then it 
will be convened afterwards as soon as reasonably possible and updated 
on steps taken.
    Moreover, Section 5 currently states that exercising options under 
the Plan does not require the approval of Clearing Members, Exchanges, 
or any other external stakeholders. The proposed rule change would 
maintain this provision largely as is but would change the word 
``exercising'' to ``implementing.'' Similarly, the proposed rule change 
would change the word ``exercising'' to ``implementing'' in another 
part of Section 5 concerning communication with regulators.
    Section 5 also describes how ICE Clear Europe will communicate and 
coordinate with external stakeholders when taking actions under the 
Plan. Currently, the Plan provides that ICE Clear Europe's overall 
communication and coordination objectives in recovery are to (i) 
provide Clearing Members, regulators, and the wider market with timely 
and accurate information and (ii) ensure effective coordination and 
escalation across affiliated ICE exchanges, clearing houses, and other 
financial market intermediaries. The Plan further provides that ICE 
Clear Europe manages this communication and coordination by using its 
Crisis Communication and Management Plan and Major Incident Response 
Plan. The proposed rule change would maintain these provisions but 
would change the Crisis Communication and Management Plan to the 
Communications Plan (or CP) and the Major Incident Response Plan to the 
Crisis Management Plan (or CMP). In other parts of Section 5, the 
proposed rule change similarly would update the name of each plan to 
the Communications Plan/CP and the Crisis Management Plan/CMP, 
respectively. Finally, the proposed rule change would add language that 
notes that the CP and CMP should be consulted when using the Plan.
    Section 5 contains a table that describes certain personnel at ICE 
Clear Europe and their responsibilities with respect to communicating 
with stakeholders. For example, ICE Clear Europe's Head of Regulation 
and

[[Page 63154]]

Compliance and President both serve as a regulatory liaison, 
responsible for communicating with, and giving status updates to, ICE 
Clear Europe's regulators. The proposed rule change would update the 
responsibilities associated with certain personnel at ICE Clear Europe. 
For example, ICE Clear Europe's Communications Department, along with 
the Board of Directors, is currently responsible for discussion and 
approval of decisions. The proposed rule change would replace 
Communications Department here with ICE Clear Europe's President. The 
proposed rule change also would remove the Communications Department 
from the list of ICE Clear Europe departments that are responsible for 
operational coordination during recovery. The proposed rule change 
would add ICE Clear Europe's President and Head of Corporate 
Development to the list of ICE Clear Europe departments that are 
responsible for giving status updates to ICE Group. In the list of ICE 
Clear Europe departments that are responsible for communicating with 
Clearing Members and Customers, the proposed rule change would replace 
ICE Clear Europe's Exchange Heads of Sales with its President.
    Finally, throughout Section 5, the proposed rule change would 
replace references to ``bridge calls'' with references to ``conference 
calls.''

F. Section 6, Recovery Playbook

    Section 6 of the Plan is a recovery playbook. Section 6 describes 
how ICE Clear Europe might use the Plan, including how ICE Clear Europe 
might incur losses and the steps it would take in response to those 
losses. Section 6 provides this information for both the default loss 
and non-default loss Recovery Scenarios.
    In this section the proposed rule change would make updates and 
amendments like those discussed above. Specifically, the proposed rule 
change would update the name of the Capital Replenishment Framework to 
the Capital Replenishment Plan or CRP. The proposed rule change also 
would update the name of the Crisis Communications and Management Plan 
to the Communications Plan/CP and the Major Incident Response Plan to 
the Crisis Management Plan/CMP, in accordance with the changes discuss 
above.
    The proposed rule change also would revise certain responsibilities 
of ICE Clear Europe's President. Section 6 describes a number of 
responsibilities and actions required of ICE Clear Europe's President 
under the Plan. For example, Section 6 notes that the President, 
together with the Default Management Committee, must assess whether 
default losses are, or are likely to, exhaust ICE Clear Europe's 
Guaranty Fund. Similarly, the President must consult with the Board for 
their approval of the decision to trigger the Plan, provided they can 
be convened on a timely basis. Given these responsibilities assigned to 
the President, the proposed rule change would add a general caveat at 
the beginning of Section 6 that would apply where the President is 
unavailable or incapacitated. In that situation, ICE Clear Europe would 
refer to its Delegation of Authority Framework to determine if another 
person at ICE Clear Europe could substitute for the President.
    The proposed rule change also would clarify when the President 
would take certain steps under the Plan. For example, the Plan 
currently provides that if the Board cannot be convened on a timely 
basis, then the President will decide on whether to trigger the Plan 
and will convene the Board afterwards. The proposed rule change would 
maintain this requirement but would add a note to the effect that the 
President will convene the Board as soon as reasonably possible and 
update the Board on steps taken. The proposed rule change would add 
this same explanation to the requirement that if the Board cannot be 
convened on a timely basis, then the President will decide on which 
Recovery Options to use and convene the Board afterwards.
    The proposed rule change would make similar amendments to certain 
responsibilities of ICE Clear Europe generally, rather than the 
President in particular. Section 6 of the Plan currently requires that 
ICE Clear Europe inform its regulators as to its intention to trigger 
the Plan and the reasons for triggering, provided that the regulators 
can be contacted on a timely basis. If its regulators cannot be 
contacted on a timely basis, then the President will proceed with 
triggering the Plan. The proposed rule change would maintain this 
requirement but would add a note that notification to regulators will 
take place as soon as reasonably possibly thereafter. The proposed rule 
change would add this same explanation to the requirement that ICE 
Clear Europe inform its regulators as to its intended use of Recovery 
Options. In that case, if ICE Clear Europe cannot contact its 
regulators on a timely basis, then the President will proceed with the 
chosen Recovery Options, and notification to regulators will take place 
as soon as reasonably possibly thereafter.
    Finally, the proposed rule change would update the description of 
the non-default loss scenario that is currently found in Section 6. 
Currently Section 6 describes a non-default loss scenario as 
significant financial loss that has occurred, or is about to occur, 
that does not involve the default of any Clearing Members. The proposed 
rule change would update this description to a significant financial 
losses that has occurred, or is about to occur, that is not caused by 
the default of any Clearing Members. Moreover, the Plan currently 
provides that if a non-default loss event has occurred, then the 
President, together with the Executive Risk Committee, will assess 
whether there are, or are likely to be losses that breach ICE Clear 
Europe's Base Capital, and this assessment will be based on ICE Clear 
Europe's Regulatory Capital metrics. The proposed rule change would 
update this slightly. Under the proposed rule change, the President, 
together with the Executive Risk Committee, will assess whether there 
are, or are likely to be losses that breach ICE Clear Europe's Base 
Capital by holding insufficient EMIR eligible capital. In addition, 
this assessment will be based on relevant management information 
generally, rather than ICE Clear Europe's Regulatory Capital metrics 
specifically.

G. Section 7

    Section 7 of the Plan describes certain key limitations and 
assumptions associated with the Plan. In Section 7 the proposed rule 
change would make a minor typographical change and would change a 
reference to the Capital Replenishment Framework to the Capital 
Replenishment Plan, or CRP.

H. New Section 8, Document Governance and Exception Handling

    The proposed rule change would add Section 8 to the Plan. Section 8 
would be titled Document Governance and Exception Handling. Under this 
section, the owner of the Plan would be responsible for ensuring that 
the Plan remains up-to-date and is reviewed in accordance with ICE 
Clear Europe's governance processes. Such reviews would encompass, at a 
minimum, regulatory compliance; documentation and purpose; 
implementation; use; and open items from previous validations or 
reviews (where appropriate). The results of the review, including any 
findings, would be reported to ICE Clear Europe's Executive Risk 
Committee along with the priority of findings, proposed remediations 
and target due date to remediate the findings.
    The document owner also would be responsible for reporting material 
breaches or unapproved deviations from

[[Page 63155]]

the Plan to their Head of Department, the Chief Risk Officer, and the 
Head of Regulation and Compliance (or, as applicable, their respective 
delegates). Those individuals together would determine if further 
escalation should be made to relevant senior executives, the Board, 
and/or competent authorities.
    Finally, under Section 8, exceptions to the Plan would be approved 
in accordance with ICE Clear Europe's governance process for the 
approval of changes, and changes to the Plan would have to be approved 
in in accordance with ICE Clear Europe's governance process. Such 
changes only would take effect after completion of all necessary 
internal and regulatory approvals.

I. Appendices

    The Plan currently has two appendices. Appendix A is a depiction of 
ICE Clear Europe's governance structure. The Board of Directors is at 
the top, followed by Board-level governance committees, and then 
executive-level governance committees. The proposed rule change would 
delete Appendix A. ICE Clear Europe believes the committee structure is 
fully defined in other documentation and does not need to be included 
in the Plan.\14\
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    \14\ Notice, 88 FR at 48274.
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    Appendix B is a table that describes certain scenarios that could 
lead ICE Clear Europe to invoking the Plan. Appendix B describes these 
scenarios as ``stress scenarios.'' The table contains entries for 
eleven different stress scenarios, with three related to losses 
stemming from a Clearing Member's default and eight related to non-
default losses. For each scenario, the table summarizes the 
circumstances leading to losses at ICE Clear Europe, analyzes how such 
a scenario could trigger the Plan and thus become a Recovery Scenario, 
and explains how ICE Clear Europe would use the Plan to respond to the 
scenario. The proposed rule change would maintain the substance of this 
table while making minor updates to the language. For example, the 
proposed rule change would change the title of the first column to 
``Scenario Category (Key Risk).'' The proposed rule change also would 
change the title of the last column to ``Scenario Analysis'' from just 
``Analysis.''
    With respect to each of the scenarios, the proposed rule change 
would specify which key risk the scenario relates to. For example, the 
proposed rule change would specify that each of the default loss 
scenarios relates to financial risk, while the non-default loss 
scenarios relate to legal, regulatory, operational, information 
security, and business risk, respectively. ICE Clear Europe is making 
this change to identify each scenario with the key risks contained 
within its risk appetite statements, thus ensuring that each key risk 
type is covered within those scenarios. This is consistent with the 
change to Section 3 described above.
    Finally, the proposed rule change would make a minor typographical 
correction in one part of the table, by deleting certain duplicative 
words.

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the 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 
Act and the rules and regulations thereunder applicable to such 
organization.\15\ For the reasons discussed below, the Commission finds 
that the proposed rule change is consistent with section 17A(b)(3)(F) 
of the Act,\16\ Rule 17Ad-22(e)(2)(i) and (v), and Rule 17Ad-
22(e)(3)(ii) thereunder.\17\
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    \15\ 15 U.S.C. 78s(b)(2)(C).
    \16\ 15 U.S.C. 78q-1(b)(3)(F).
    \17\ 17 CFR 240.17Ad-22(e)(2)(i), (v), and (3)(ii).
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A. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the 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.\18\ As discussed above, the proposed rule change would 
amend various sections of the Plan, as well as adding a new Section 8 
to the Plan. The Commission believes the proposed rule change would 
help to improve the governance and communication of actions taken under 
the Plan; improve testing of the Plan; ensure that information found in 
the Plan is accurate and current; and make the Plan more concise. Based 
on its review of the record, and for the reasons discussed below, the 
Commission therefore believes the proposed rule change would be 
consistent with the promotion of the prompt and accurate clearance and 
settlement of securities transactions.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    With respect to the governance and communication of actions taken 
under the Plan, among other things, the proposed rule change would 
clarify that where the President cannot convene the Board in advance of 
making a material decision, the Board will be convened afterwards. The 
proposed rule change also would specify that where the Board cannot be 
convened on a timely basis prior to deciding which Recovery Options to 
use, the President will decide on which Recovery Options to use and 
convene the Board afterwards. With respect to communications, the 
proposed rule change would, among other things, explain that ICE Clear 
Europe would seek to communicate its plans and/or intentions to 
relevant external stakeholders where possible, and as soon as 
reasonably practicable, to ensure appropriate transparency. The 
proposed rule change also would require that ICE Clear Europe notify 
its regulators as soon as reasonably possibly after triggering the Plan 
and using Recovery Options. The Commission believes that the proposed 
rule change therefore would help to ensure that ICE Clear Europe's 
Board is fully apprised of actions taken under the Plan and further 
that ICE Clear Europe communicates its actions to regulators and other 
external stakeholders.
    The proposed rule change also would amend ICE Clear Europe's 
testing of the plan, as found in Section 1. Under the proposed rule 
change, ICE Clear Europe could test default-related recovery scenarios, 
including coordination with other covered clearing agencies, as part of 
its annual default fire drill. The proposed rule change also would 
require that ICE Clear Europe specifically test at least one default 
and one non-default scenario each year, with all recovery options 
tested over a three-year cycle. Moreover, the proposed rule change 
would add, as a key focus for testing, whether all services can 
continue to be provided, including those provided to affiliates. The 
Commission believes the proposed rule change therefore would improve 
testing of the plan and help ensure that ICE Clear Europe tests the 
plan in its entirety over a three-year cycle. The Commission further 
believes that testing of the plan can reveal potential errors and other 
issues, and therefore can help ICE Clear Europe to resolve potential 
problems prior to entering a Recovery Scenario or engaging its recovery 
options.
    The Commission believes that other changes discussed above would 
help ensure that information found in the Plan is accurate and current. 
Among other things, the proposed rule change would correct 
typographical errors, thereby improving the accuracy of the information 
found in the Plan. The proposed rule change also would delete internal 
references to Appendix A because ICE Clear Europe is deleting that 
appendix. The proposed rule

[[Page 63156]]

change would remove references to the amount of ICE Clear Europe's 
liability for investment losses, given that ICE Clear Europe recently 
changed that amount and the amount is subject to further change. The 
proposed rule change would update the name of the Capital Replenishment 
Framework to the Capital Replenishment Plan, the Crisis Communication 
and Management Plan to the Communications Plan, the Major Incident 
Response Plan to the Crisis Management Plan, and references to business 
continuity and disaster recovery to operational resilience. The 
proposed rule change also would update the description of ICE Clear 
Europe's critical service providers, ICE Clear Europe's dependencies on 
these providers, and its mitigation of these dependencies. Finally, the 
proposed rule change would update the description of Recovery 
Scenarios, the early warning indicators of those scenarios, and note 
that each scenario is mapped to key risks contained within ICE Clear 
Europe's risk appetite statements. The Commission believes that these 
proposed changes would help ensuring those utilizing the Plan have 
information necessary to carry out recovery. The Commission therefore 
believes that the proposed rule change would strengthen the Plan by 
ensuring those utilizing it have information necessary to carry out 
recovery, which in turn should help ICE Clear Europe to continue 
promptly and accurately clearing and settling transactions during 
recovery.
    The Commission believes that the proposed rule change also would 
help make the Plan more concise. For example, the proposed rule change 
would delete from Section 4 a description of how ICE Clear Europe's 
Recovery Options are comprehensive and effective because this 
description duplicates language already found in Section 1. The 
proposed rule change similarly would remove discussion of the expected 
coverage of partial tear-ups and powers of assessment. The proposed 
rule change also would remove Appendix A, given that ICE Clear Europe's 
committee structure is defined in other documentation and does not need 
to be included in the Plan. The Commission therefore believes that the 
proposed rule change, by making the Plan more concise, should improve 
the usability and readability of the Plan.
    Thus, the Commission believes the proposed rule change would 
strengthen the Plan. Improving governance and communication of actions 
should help ensure that internal and external stakeholders are fully 
apprised of actions ICE Clear Europe takes during recovery, therefore 
enabling these stakeholders to assist in carrying out the actions or 
otherwise prepare for them. Requiring ICE Clear Europe to test on a 
three-year cycle should help reveal any potential deficiencies in the 
Plan ahead of when ICE Clear Europe would need to use it. Updating 
information should help ensure those utilizing the Plan have current 
information necessary to carry out recovery. Finally, making the plan 
more concise should make it easier and more efficient to use, by 
removing unnecessary or repetitive information. Overall, the Commission 
believes that the proposed rule change would strengthen the Plan and 
that in doing so, the proposed rule change should help ICE Clear Europe 
to continue promptly and accurately clearing and settling transactions 
during recovery.
    Therefore, the Commission finds that the proposed rule change is 
consistent with section 17A(b)(3)(F) of the Act.\19\
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    \19\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

B. Consistency With Rule 17Ad-22(e)(2)(i) and (v) Under the Act

    Rule 17Ad-22(e)(2)(i) and (v) require that ICE Clear Europe 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to provide governance arrangements that, 
among other things, are clear and transparent and specify clear and 
direct lines of responsibility.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
---------------------------------------------------------------------------

    As discussed above, the proposed rule change would add a new 
Section 8 regarding document governance. Among other things, Section 8 
would make the document owner responsible for ensuring that the Plan 
remains up-to-date and is reviewed in accordance with ICE Clear 
Europe's governance processes. The document owner also would be 
responsible for reporting material breaches or unapproved deviations 
from the Plan to their Head of Department, the Chief Risk Officer, and 
the Head of Regulation and Compliance (or, as applicable, their 
respective delegates). The Commission believes these changes would 
establish clear and direct responsibilities for the document owner of 
the Plan consistent with Rule 17Ad-22(e)(2)(v).\21\
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    \21\ 17 CFR 240.17Ad-22(e)(2)(v).
---------------------------------------------------------------------------

    The proposed rule change also would add language to clarify what 
would happen where the ICE Clear Europe President is unavailable or 
incapacitated. In that situation, ICE Clear Europe would refer to its 
Delegation of Authority Framework to determine if another person at ICE 
Clear Europe could substitute for the President. This is an important 
clarification because, as discussed above, the President is responsible 
for significant actions under the Plan, such as making material 
decisions and triggering the Plan. The Commission believes that 
specifying what ICE Clear Europe would do when the President is 
incapacitated would therefore help clarify how ICE Clear Europe would 
use the Plan in such a situation, consistent with Rule 17Ad-
22(e)(2)(i).\22\
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    \22\ 17 CFR 240.17Ad-22(e)(2)(i).
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C. Consistency With Rule 17Ad-22(e)(3)(ii) Under the Act

    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.\23\
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    \23\ 17 CFR 240.17Ad-22(e)(3)(ii).
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    The Commission believes the proposed change rule, as described 
above, would strengthen the Plan by adding details regarding the 
governance and communication processes associated with the Plan. The 
proposed rule change also would establish a three-year cycle for 
testing the Plan, update information in the Plan, and otherwise make 
the Plan more concise. The Commission believes that the proposed rule 
change, in strengthening the Plan, overall would help ICE Clear Europe 
to maintain a plan for recovery, consistent with Rule 17Ad-
22(e)(3)(ii).\24\
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    \24\ 17 CFR 240.17Ad-22(e)(3)(ii).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act, 
and in particular, with the requirements of section 17A(b)(3)(F) of the 
Act,\25\ Rule 17Ad-22(e)(2)(i) and (v), and Rule 17Ad-22(e)(3)(ii).\26\
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    \25\ 15 U.S.C. 78q-1(b)(3)(F).
    \26\ 17 CFR 240.17Ad-22(e)(2)(i), (v), and (3)(ii).
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    It is therefore ordered pursuant to section 19(b)(2) of the Act 
\27\ that the

[[Page 63157]]

proposed rule change (SR-ICEEU-2023-020), be, and hereby is, 
approved.\28\
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    \27\ 15 U.S.C. 78s(b)(2).
    \28\ In approving the proposed rule change, the Commission 
considered the proposal's impact 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.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-19844 Filed 9-13-23; 8:45 am]
BILLING CODE 8011-01-P


