Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing of Proposed Rule Change, Security-Based Swap Submission or Advance Notice Relating to the ICE Clear Europe Recovery Plan, 24549-24553 [2019-10986]
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Federal Register / Vol. 84, No. 102 / Tuesday, May 28, 2019 / Notices
deadline(s) for each request appear in
section II.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change, Security-Based
Swap Submission or Advance Notice
II. Docketed Proceeding(s)
1. Docket No(s).: MC2019–141 and
CP2019–156; Filing Title: USPS Request
to Add Priority Mail & First-Class
Package Service Contract 101 to
Competitive Product List and Notice of
Filing Materials Under Seal; Filing
Acceptance Date: May 21, 2019; Filing
Authority: 39 U.S.C. 3642, 39 CFR
3020.30 et seq., and 39 CFR 3015.5;
Public Representative: Christopher C.
Mohr; Comments Due: May 29, 2019.
This Notice will be published in the
Federal Register.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change, Security-Based
Swap Submission or Advance Notice
Stacy L. Ruble,
Secretary.
[FR Doc. 2019–11037 Filed 5–24–19; 8:45 am]
BILLING CODE 7710–FW–P
(a) Purpose
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85907; File No. SR–ICEEU–
2019–013]
Self-Regulatory Organizations; ICE
Clear Europe Limited; Notice of Filing
of Proposed Rule Change, SecurityBased Swap Submission or Advance
Notice Relating to the ICE Clear
Europe Recovery Plan
May 21, 2019.
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 May 10,
2019, ICE Clear Europe Limited (‘‘ICE
Clear Europe’’ or the ‘‘Clearing House’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule changes described in
Items I, II and III below, which Items
have been prepared 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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I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change, Security-Based Swap
Submission, or Advance Notice
ICE Clear Europe proposes to adopt a
new Recovery Plan (the ‘‘Revised
Recovery Plan’’). The revisions do not
involve any changes to the ICE Clear
Europe Clearing Rules or Procedures.3
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Capitalized terms used but not defined herein
have the meanings specified in the ICE Clear
Europe Clearing Rules (the ‘‘Rules’’).
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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.
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ICE Clear Europe is proposing to
adopt the Revised Recovery Plan, which
would supersede its current recovery
plan (the ‘‘Existing Recovery Plan’’) in
order to make certain overall
enhancements, as discussed herein. The
Revised Recovery Plan, among other
aspects, identifies certain critical
clearing services and addresses the
Clearing House’s tools, procedures and
options for addressing recovery from
scenarios that threaten its ability to
continue to provide clearing services.
The Recovery Plan is based on, and is
intended to be consistent with, the
Rules and Procedures, as well as
Clearing House’s existing risk
management frameworks, policies and
procedures.4
I. Summary of Revisions
The proposed Revised Recovery Plan
is intended to enhance the Clearing
House’s recovery plan in the following
general respects:
• Specify more clearly ICE Clear
Europe’s framework for governance and
decision making in recovery scenarios;
• More clearly link the different
elements of the plan;
• Present the assessment of recovery
tools in a way that clearly and
comprehensively addresses the
characteristics set out in the Committee
on Payments and Market Infrastructures
and the International Organization of
Securities Commissions Final Report on
Resilience of Central Counterparties
(CCPs): Further guidance on the PFMI
4 The Revised Recovery Plan reflects the
amendments to the Rules and Procedures submitted
to the Commission with respect to default
management, recovery and wind-down for the CDS
Contract Category, SR–ICEEU–2019–003 (submitted
April 29, 2019).
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dated June 2017 (the ‘‘CPMI–IOSCO
recovery guidance’’);
• Focus on recovery-specific
scenarios and tools, as opposed to the
business as usual (‘‘BAU’’) management
of risks, which is addressed in other
procedures and policies;
• Address intragroup and external
interdependencies in greater depth;
• Address ICE Clear Europe’s plan for
communication and coordination of
action to regulators and other
stakeholders; and
• Provide for periodic testing of the
recovery plan.
The proposed Revised Recovery Plan
would make certain specific
modifications to the Existing Recovery
Plan in furtherance of these general
goals, as follows:
1. The appendices in the Existing
Recovery Plan would be removed as
unnecessary, except for the appendices
on committee and organizational
structure and stress scenario analysis.
2. The Revised Recovery Plan would
more clearly address decision-making
during recovery. More specifically:
a. The role and interaction with the
Board would be clarified, requiring (i)
the Board to convene before enacting
the Revised Recovery Plan and before
deciding to exercise recovery options, or
(ii) if the Board could not be convened
in a timely manner, then the President
to convene the Board after the decision
for ratification;
b. Decision-making considerations for
each recovery option would be
included, including the management
information that would be used, such as
relevant regulatory capital information
in a non-default loss scenario; and
c. Plans relating to communication
with regulators would be incorporated,
including the manner in which ICE
Clear Europe would inform regulators
before enacting the plan or exercising
recovery options.
3. The Revised Recovery Plan would
be restructured for ease of use of the
plan by management and the Board in
a recovery situation. In particular:
a. The plan would include a playbook
setting out the progression of actions in
recovery for default loss and non-default
loss scenarios, which would be subject
to annual testing; and
b. The triggers for recovery would be
made clear and central to the plan.
4. The Revised Recovery Plan would
present an assessment of its recovery
tools in a manner that more explicitly
and comprehensively addresses the
characteristics set out in the CPMI–
IOSCO recovery guidance.
5. The Revised Recovery Plan would
more clearly focus on recovery-specific
scenarios and tools and would make the
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boundary between BAU tools and
recovery tools clearer by:
a. Focusing on situations in which the
firm’s viability would be under threat;
and
b. Excluding the operational risk
scenarios to ensure the focus is on
recovery, not other business continuity
scenarios.
6. The Revised Recovery Plan would
provide increased focus on intragroup
and external interdependencies for
critical services and would document its
plans for related communication and
coordination of action through:
a. Addressing the implications of
interdependencies on its critical
services, which primarily relate to its
capital replenishment framework which
depends upon continued financial
support from the Intercontinental
Exchange, Inc. group (‘‘ICE Group’’);
b. Including further analysis of its
dependencies on third-party services
and mitigations, which largely relate to
services provided through ICE Group,
but also include SWIFT access;
c. Describing how potential
coordination with other CCPs and
financial market infrastructures
(‘‘FMIs’’) would be approached (both for
ICE Group CCPs and FMIs and non-ICE
Group CCPs and FMIs); and
d. Giving greater consideration to
procyclicality and financial stability
implications for Clearing Members due
to ICE Clear Europe’s exercise of its
recovery options.
7. The Revised Recovery Plan would
require annual testing of the plan via a
table-top exercise to ensure ICE Clear
Europe staff’s understanding of the plan
and its implementation. The testing
would work through specific scenarios
which would take into consideration the
playbook, management information,
practical implementation of recovery
options, communication pathways to be
used, the necessity of additional
resources and which systems would be
involved in each recovery option.
II. Summary of the Revised Recovery
Plan
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(i) Overview
As with the Existing Recovery Plan,
the Revised Recovery Plan would
identify the critical services that ICE
Clear Europe provides, and the business
functions that support those services. In
ICE Clear Europe’s view, its clearing
services (for both the F&O and CDS
product categories), and its related
treasury and banking services, represent
its critical services. The Revised
Recovery Plan would also identify the
market participants that rely on ICE
Clear Europe’s services and the service
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providers supporting its critical
services. The Revised Recovery Plan
would also address recovery triggers,
scenarios, early-warning indicators,
recovery options, decision-making
governance, limitations, assumptions
and testing of the plan. The Revised
Recovery Plan would not incorporate
day-to-day risk management processes
and tools already in place in the Rules
and Procedures, as those do not relate
to recovery scenarios. Wind-down and
resolution scenarios would be covered
in separate policies and procedures. The
Revised Recovery Plan would not
address recovery plans for exchanges or
markets cleared by ICE Clear Europe, or
the recovery of other FMIs that it
interacts with.
The recovery options set out in the
Revised Recovery Plan are intended to
be extensive, giving the Clearing House
the ability to cover default losses
(through eliminating any remaining
variation margin and mark-to-market
payment obligations by, in effect,
margin haircutting and tear-up of
remaining positions), liquidity shortfalls
(by delaying payment obligations) and
investment losses (after a $90 million
threshold, by allocating such losses up
to the level of margin and guaranty fund
across all Clearing Members). The
Revised Recovery Plan would also take
into account the Clearing House’s
powers of assessment as well as prefunded resources.
(ii) Critical Services, Service Providers,
and Interdependencies
The Revised Recovery Plan would
identify ICE Clear Europe’s critical
services: F&O clearing; CDS clearing;
and treasury and banking services
(‘‘TBS’’). The plan would describe the
entities that depend on ICE Clear
Europe’s critical services, the need to
consider capital and liquidity impacts
on market participants when assessing
the appropriate recovery options, and
the importance of early and ongoing
communication with regulators and
other FMIs via regulators.
The Revised Recovery Plan would
also describe the critical services that
the Clearing House relies upon from
investment agents, APS banks, central
banks, data providers, custodians,
physical delivery agents, ICE Group
exchanges, ICE Group clearing houses
and ICE technology and operations
groups. It would detail how the Clearing
House mitigates dependence on service
providers through using multiple
substitutable providers, providers who
prioritize operational continuity
through multiple levels of resilience and
redundancy, and contractual protections
through appropriate termination periods
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and limiting clauses that would permit
service providers to alter or terminate
contracts if ICE Clear Europe were
under financial stress. In general, under
the plan, investment agents, APS banks,
central banks and data providers would
not be dependencies because of their
substitutability. If necessary, for such
service providers, ICE Clear Europe
could run certain processes itself or
apply alternative processes to achieve
similar results.
The Revised Recovery Plan would
address the Clearing House’s
dependencies on custodians, physical
delivery agents, ICE Group exchanges,
other ICE Group clearing houses, and
ICE Group technology and operations
services. The plan would also address
key systems and technological
infrastructure on which the Clearing
House relies. The plan would detail
how the risk of these services being
withdrawn are mitigated through
multiple redundancies, business
continuity and disaster recovery
arrangements that are regularly tested,
incident follow-up, regular performance
metrics, veto rights over proposed
changes and long notice periods. The
plan would further address the
possibility of Clearing Members
defaulting on obligations to other ICE
Group CCPs or third party CCPs and
would note that ICE Clear Europe would
coordinate with other CCPs through
various means.
(iii) Recovery Scenarios, Triggers and
Early Warning Indicators
The Revised Recovery Plan would
address two principal recovery
scenarios: (i) Default losses, in which
case the plan would be triggered when
the guaranty fund is (or is likely to be)
exhausted and there are still losses to
cover; and (ii) non-default losses, in
which case the plan would be triggered
when ICE Clear Europe’s base capital is
(or is likely to be) breached.
The Revised Recovery Plan would
distinguish between BAU risk
management and recovery scenarios (in
which, by definition, BAU risk
management is insufficient to address
the relevant losses), and relevant
options and tools available for each. The
Revised Recovery Plan would also
address scenarios in which operational
events (which are normally addressed
through business continuity and
disaster recovery plans) could trigger
operation of the recovery plan, such as
if the capital that ICE Clear Europe
needs to fix an operational or
technology problem breaches, or is
likely to breach, its base capital and hit
the non-default loss trigger.
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The Revised Recovery Plan considers
cases where ICE Clear Europe’s early
warning metrics and indicators may
indicate that a recovery trigger would be
hit. Early warning indicators for default
loss scenarios would be based on
default management information
showing the size of the Clearing
Members’ exposures compared to the
collateral ICE Clear Europe holds
against them and the size and
complexity of their positions, which,
together with market volatility
information, would help ICE Clear
Europe assess whether auctions would
be likely to be successful in balancing
the book before running the auctions.
With respect to non-default losses, ICE
Clear Europe would monitor its eligible
capital against target thresholds each
day through risk appetite metrics, which
provide alerts and escalation to
management or the ICE Clear Europe
Board before ICE Clear Europe breaches
its base capital.
(iv) Recovery Options
ICE Clear Europe’s recovery options
are generally set out in the Rules and
Procedures. The Revised Recovery Plan
would describe key aspects of these
options as follows:
• Powers of assessment (‘‘PoA’’)
(Rules 909)—which enables ICE Clear
Europe to require Clearing Members to
pay additional funds to further
mutualize default losses, up to the cap
specified in the Rules. PoA can only be
used in a default loss scenario.
• Reduced Gains Distribution
(‘‘RGD’’) (Rule 914)—which allows ICE
Clear Europe to withhold mark-tomarket margin gains instead of paying
them out to the relevant Clearing
Members, in order to cover losses. This
would likely need to be used in
conjunction with other recovery options
as it would not remove the source of the
risk. This could only be used in a
default loss scenario and only after PoA
have been called.
• Partial Tear-Ups (Rule 915)—which
allows ICE Clear Europe to ‘tear up’
positions, in effect cancelling them or
reducing or removing the payment
obligations due on those positions. This
could only be used in a default loss
scenario and only after an auction has
been attempted.
• Payment Delays (Rule 110)—which
allows ICE Clear Europe to delay
transfers, deposits and payments to help
alleviate liquidity shortfalls and likely
needs to be used in conjunction with
other recovery options. This could be
used in both default and non-default
loss scenarios.
• Investment Loss Allocation (Rule
919)—which allows ICE Clear Europe to
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allocate investment losses to Clearing
Members provided it has invested in
accordance with its investment
management policy. This could only be
used where there are investment losses.
• Invoicing Back (Rule 104)—which
allows ICE Clear Europe to cancel
positions in certain non-default loss
situations, limited to force majeure,
illegality and impossibility.
• Capital Replenishment Framework
(‘‘CRF’’)—which covers ICE Clear
Europe’s options for replenishing
capital, including raising additional
capital through the ICE Group and third
parties, as well as insurance coverage.
This could be used in both default and
non-default loss scenarios. The timing
of receipt of additional capital would
depend on the specific source of
additional capital and would not be
guaranteed.
The proposed Revised Recovery Plan
would describe the goals and
procedures for designing recovery
options, including that recovery options
are designed to be comprehensive,
effective, transparent, measurable,
manageable and controllable. They are
intended to create appropriate
incentives and minimize negative
impact. The plan would also describe
the governance process for development
of recovery options that impact Clearing
Members. The process would include
input from stakeholders, including
Clearing Members, customers, regulators
and ICE Clear Europe’s shareholder. The
plan also reflects the existing
governance procedures for changes to
the Rules (including recovery options
therein).
The Revised Recovery Plan would
discuss the manner in which ICE Clear
Europe’s recovery options meet its
standards for being comprehensive and
effective, reliable, enforceable,
transparent and measurable and for
creating appropriate incentives and
minimizing negative impact both
individually and collectively, as they
would give ICE Clear Europe the ability
to fully cover default losses, liquidity
shortfalls and investment losses (above
the relevant threshold).
The plan would also set out in detail
the decision-making considerations for
each recovery option. These include the
scenarios in which recovery options
may be used and the expected
effectiveness or scope of coverage for
those options, whether the option can
be used alone or in conjunction with
other options, the time at which use of
the option may be considered, expected
impacts on market participants and
others and effects on confidence in ICE
Clear Europe or its clearing system,
among other considerations.
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24551
(v) Decision-Making, Governance and
Communications
The Revised Recovery Plan would
require that the President attempt to
convene the Board for approval of
material recovery decisions and keep
regulators informed in advance of
material decisions, assuming this could
be done in a timely manner. If the Board
could not be convened in advance of
such a decision, it would be convened
thereafter to ratify or modify the
decision. The President would be
supported by the Default Management
Committees in a default loss scenario
and by the Executive Risk Committee in
a non-default loss scenario. Consistent
with the Rules and Procedures,
exercising the recovery options would
not require the approval of Clearing
Members, exchanges or any other
external stakeholders. In making
decisions regarding the use of recovery
options, however, the President and the
Board would need to take into
consideration the interests of ICE Clear
Europe, Clearing Members, customers,
other stakeholders and the broader goal
of providing safe and sound CCP
services to reduce systemic risk in an
efficient and legally compliant manner.
The Revised Recovery Plan would
state ICE Clear Europe’s communication
and coordination objectives in recovery
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 Group
exchanges, clearing houses and FMIs.
The Revised Recovery Plan would also
address coordination with other ICE
Group exchanges, clearing houses and
FMIs. The plan would also contemplate
wider communications with Clearing
Members and other market participants.
ICE Clear Europe would aim to keep
regulators informed in advance of
triggering the Revised Recovery Plan or
exercising recovery options, while being
mindful of the need to take timely
action. ICE Clear Europe would seek to
maintain close and continuous
engagement with the regulators during
the implementation of the Revised
Recovery Plan until ICE Clear Europe
returns to normal operational conditions
or activates the Wind-Down Plan (in
which case other regulatory
coordination procedures apply). ICE
Clear Europe would participate in
coordination and communication with
other relevant stakeholders organized by
the regulators.
(vi) Recovery Playbook
The Revised Recovery Plan would set
out the recovery approach in a default
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loss and non-default loss scenario
through a recovery playbook. The
playbook is intended as an example for
how recoveries might progress, rather
than a prescriptive instruction manual
for all recovery situations. The playbook
identifies key steps in the recovery
process, including declaring a default
event and determining the likely scope
of losses, Board consultation, triggering
the plan, communicating with
regulators, and selecting the particular
recovery options.
(vii) Limitations and Assumptions
The Revised Recovery Plan would
identify the key assumptions and
limitations that could reduce its
effectiveness and may fall outside of ICE
Clear Europe’s control. These include
the following: (i) The plan is based on
legal certainty of the framework in
which the Clearing House operates; (ii)
the plan relies on market infrastructure
ICE Clear Europe does not control and
for which there are no practical
alternatives; (iii) the plan assumes (for
the most part) the continued support of
ICE Inc.; and (iv) certain recovery
options are time limited or time
dependent. The plan would review the
reasons why these assumptions and
limitations are appropriate, and certain
determinations it has made in respect
thereof.
(viii) Appendices
The Revised Recovery Plan would
include the following appendices: (i)
ICE Clear Europe Committee Structure
setting out board and executive level
governance; and (ii) stress scenario
analysis.
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(b) Statutory Basis
ICE Clear Europe believes that the
Revised Recovery Plan is consistent
with the requirements of Section 17A of
the Act 5 and the regulations thereunder
applicable to it, including the standards
under Rule 17Ad–22.6
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. In addition, Rule 17Ad–
U.S.C. 78q–1.
CFR 240.17Ad–22.
7 15 U.S.C. 78q–1(b)(3)(F).
22(e)(3)(ii) 8 requires that each covered
clearing agency shall establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to, as applicable,
maintain a sound risk management
framework for comprehensively
managing legal, credit, liquidity,
operational, general business,
investment, custody, and other risks
that arise in or are borne by the covered
clearing agency, which includes plans
for the recovery and orderly wind-down
of the covered clearing agency
necessitated by credit losses, liquidity
shortfalls, losses from general business
risk, or any other losses.
The Revised Recovery Plan is
intended to meet the requirements of
Rule 17Ad–22(e)(3)(ii), and be
consistent with the requirements of
Section 17A(b)(3)(F) of the Act. The
Revised Recovery Plan is designed to
enhance the Clearing House’s Existing
Recovery Plan, among other matters, by
being clearer and easier to apply, more
clearly distinguishing recovery
scenarios from BAU scenarios,
addressing governance requirements
generally and for particular recovery
options, and more clearly addressing
certain critical dependencies faced by
the Clearing House. The Revised
Recovery Plan does not itself modify the
recovery options themselves, which are
largely set out in the Clearing House’s
Rules and Procedures. The Revised
Recovery Plan, like the Existing
Recovery Plan, would build on these
provisions of the Rules and Procedures
to set out the recovery options that may
be used to address both default loss
scenarios and non-default loss scenarios
(such as liquidity shortfalls, investment
losses and losses from general business
risk), so that the Clearing House could
restore normal clearing operations. The
plan would address coordination with
regulators and other stakeholders.
Overall, the plan would form a key part
of the risk management of the Clearing
House, and build on the existing risk
management processes and procedures
applicable to BAU scenarios. As a
result, in ICE Clear Europe’s view, the
Revised Recovery Plan would satisfy the
requirements of Rule 17Ad–22(e)(3)(ii).9
The plan would also further the
Clearing House’s ability to maintain the
prompt and accurate clearance and
settlement of transactions and the
safeguarding of securities and funds in
the custody or control of the Clearing
House or for which it is responsible,
including in severe default and nondefault loss scenarios, and thereby
5 15
6 17
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8 17
9 17
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CFR 240.17Ad–22(e)(3)(ii).
CFR 270.17Ad–22(e)(3)(ii).
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promote the protection of investors and
the public interest, within the meaning
of Section 17A(b)(3)(F) of the Act.10
ICE Clear Europe further notes the
requirement in Rule 17Ad–22(e)(15) 11
to hold sufficient liquid net assets
funded by equity to cover potential
general business losses so that the
covered clearing agency can continue
operations and services as a going
concern if those losses materialize,
including by (i) determining the amount
of liquid net assets funded by equity
based upon its general business risk
profile and the length of time required
to achieve a recovery or orderly winddown, as appropriate, of its critical
operations and services if such action is
taken, and (ii) holding liquid net assets
funded by equity equal to the greater of
either (x) six months of the covered
clearing agency’s current operating
expenses, or (y) the amount determined
by the board of directors to be sufficient
to ensure a recovery or orderly winddown of critical operations and services
of the covered clearing agency, as
contemplated by the recovery and winddown plans established under Rule
17Ad–22(e)(3)(ii).
ICE Clear Europe has determined that
it holds equity capital at least sufficient
to cover the costs of a recovery of its
critical clearing services under the
Revised Recovery Plan, consistent with
the requirements of Rule 17Ad–
22(e)(15).12
In compliance with Rules 17Ad–
22(e)(2),13 the proposed Revised
Recovery Plan would provide greater
detail with respect to decision-making
during recovery as well as the role and
interaction with the Board, other
executives, regulators and other
stakeholders, providing greater clarity
with respect to ICE Clear Europe’s
governance arrangements and lines of
10 15
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(e)(15).
12 17 CFR 240.17Ad–22(e)(15).
13 17 CFR 270.17Ad–22(e)(2). Rule 17Ad–22(e)(2)
requires the covered clearing agency to establish,
implement, maintain and enforce written policies
and procedures reasonably designed to provide for
governance arrangements that:
(i) Are clear and transparent;
(ii) Clearly prioritize the safety and efficiency of
the covered clearing agency;
(iii) Support the public interest requirements in
Section 17A of the Act (15 U.S.C. 78q–1) applicable
to clearing agencies, and the objectives of owners
and participants;
(iv) Establish that the board of directors and
senior management have appropriate experience
and skills to discharge their duties and
responsibilities;
(v) Specify clear and direct lines of responsibility;
and
(vi) Consider the interests of participants’
customers, securities issuers and holders, and other
relevant stakeholders of the covered clearing
agency.
11 17
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responsibility and ensuring that the
interests of other stakeholders are
considered.
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
to File Number SR–ICEEU–2019–013
and should be submitted on or before
June 18, 2019.
(B) Clearing Agency’s Statement on
Burden on Competition
ICE Clear Europe does not believe the
proposed Revised Recovery Plan would
have any impact, or impose any burden,
on competition not necessary or
appropriate in furtherance of the
purposes of the Act. The Revised
Recovery Plan would provide greater
clarity and make certain enhancements
with respect to ICE Clear Europe’s
recovery planning. The plan does not
itself change the rights or obligations of
the Clearing House or Clearing
Members, and is based on the recovery
options established in the Rules and
Procedures. The Revised Recovery Plan
has been designed to meet specific
regulatory requirements concerning
recovery planning, and is applicable to
all clearing activities. ICE Clear Europe
does not believe the amendments would
impact competition among Clearing
Members or other market participants,
or affect the ability of market
participants to access clearing generally.
While implementation of the Recovery
Plan, and in particular implementation
of the plan in a severe loss scenario,
would likely impose costs on Clearing
Members or other market participants,
such costs are consistent with the Rules
and Procedures, and are, in ICE Clear
Europe’s view, appropriate in light of
the goals of recovery and maintenance
of critical clearing service in accordance
with applicable regulations.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, security-based swap submission
or advance notice is consistent with the
Act. Comments may be submitted by
any of the following methods:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Deputy Secretary.
(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.
jbell on DSK3GLQ082PROD with NOTICES
24553
III. Date of Effectiveness of the
Proposed Rule Change, Security-Based
Swap Submission and Advance Notice
and Timing for Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change or
VerDate Sep<11>2014
20:49 May 24, 2019
Jkt 247001
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml) or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ICEEU–2019–013 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–2019–013. 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, security-based swap submission
or advance notice that are filed with the
Commission, and all written
communications relating to the
proposed rule change, security-based
swap submission or advance notice
between the Commission and any
person, other than those that may be
withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will
be available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filings will also be available for
inspection and copying at the principal
office of ICE Clear Europe and on ICE
Clear Europe’s website at https://
www.theice.com/clear-credit/regulation.
All comments received will be posted
without change. Persons submitting
comments are cautioned that we do not
redact or edit personal identifying
information from comment submissions.
You should submit only information
that you wish to make available
publicly. All submissions should refer
PO 00000
Frm 00092
Fmt 4703
Sfmt 4703
[FR Doc. 2019–10986 Filed 5–24–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33480; 812–14955]
BlackRock Capital Investment
Corporation, et al.
May 21, 2019.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
Notice of application for an order
under sections 17(d) and 57(i) of the
Investment Company Act of 1940 (the
‘‘Act’’) and rule 17d–1 under the Act to
permit certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and rule 17d–1
under the Act.
SUMMARY OF APPLICATION: Applicants
request an order to permit certain
business development companies and
closed-end management investment
companies to co-invest in portfolio
companies with each other and with
affiliated investment funds.
APPLICANTS: Blackrock Capital
Investment Corporation (‘‘BCIC’’),
BlackRock Credit Strategies Fund
(‘‘BCSF’’), Blackrock Capital Investment
Advisors, LLC (‘‘Blackrock Capital
Advisor’’), BlackRock Advisors, LLC
(‘‘BAL’’), Middle Market Senior Fund,
L.P., BlackRock TCP Capital Corp.
(‘‘TCPC’’), Special Value Continuation
Partners LLC (‘‘SVCP’’), Tennenbaum
Opportunities Partners V, LP,
Tennenbaum Opportunities Fund V,
LLC, SVOF/MM, LLC (‘‘SVOF/MM’’),
Tennenbaum Capital Partners, LLC
(‘‘TCP’’), Tennenbaum Heartland CoInvest, LP, SEB DIP Investor, LP, Special
Value Expansion Fund, LLC, Special
Value Opportunities Fund, LLC, TCP
Direct Lending Fund VIII—L (Ireland),
TCP Direct Lending Fund VIII—U
(Ireland), TCP Direct Lending Fund
VIII–S, LLC, TCP Direct Lending Fund
VIII–T, LLC, TCP DLF VIII 2018 CLO
LLC, TCP Enhanced Yield Funding I,
LLC, TCP Rainier, LLC, TCP Direct
Lending Fund VIII, LLC, TCP Direct
14 17
E:\FR\FM\28MYN1.SGM
CFR 200.30–3(a)(12).
28MYN1
]]>Agencies
[Federal Register Volume 84, Number 102 (Tuesday, May 28, 2019)]
[Notices]
[Pages 24549-24553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-10986]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85907; File No. SR-ICEEU-2019-013]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing of Proposed Rule Change, Security-Based Swap Submission or
Advance Notice Relating to the ICE Clear Europe Recovery Plan
May 21, 2019.
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 May 10, 2019, ICE Clear Europe Limited (``ICE Clear Europe'' or the
``Clearing House'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule changes described in Items I, II and
III below, which Items have been prepared by ICE Clear Europe. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change, Security-Based Swap Submission, or Advance Notice
ICE Clear Europe proposes to adopt a new Recovery Plan (the
``Revised Recovery Plan''). The revisions do not involve any changes to
the ICE Clear Europe Clearing Rules or Procedures.\3\
---------------------------------------------------------------------------
\3\ Capitalized terms used but not defined herein have the
meanings specified in the ICE Clear Europe Clearing Rules (the
``Rules'').
---------------------------------------------------------------------------
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change, Security-Based Swap Submission or
Advance Notice
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, Security-Based Swap Submission or
Advance Notice
(a) Purpose
ICE Clear Europe is proposing to adopt the Revised Recovery Plan,
which would supersede its current recovery plan (the ``Existing
Recovery Plan'') in order to make certain overall enhancements, as
discussed herein. The Revised Recovery Plan, among other aspects,
identifies certain critical clearing services and addresses the
Clearing House's tools, procedures and options for addressing recovery
from scenarios that threaten its ability to continue to provide
clearing services. The Recovery Plan is based on, and is intended to be
consistent with, the Rules and Procedures, as well as Clearing House's
existing risk management frameworks, policies and procedures.\4\
---------------------------------------------------------------------------
\4\ The Revised Recovery Plan reflects the amendments to the
Rules and Procedures submitted to the Commission with respect to
default management, recovery and wind-down for the CDS Contract
Category, SR-ICEEU-2019-003 (submitted April 29, 2019).
---------------------------------------------------------------------------
I. Summary of Revisions
The proposed Revised Recovery Plan is intended to enhance the
Clearing House's recovery plan in the following general respects:
Specify more clearly ICE Clear Europe's framework for
governance and decision making in recovery scenarios;
More clearly link the different elements of the plan;
Present the assessment of recovery tools in a way that
clearly and comprehensively addresses the characteristics set out in
the Committee on Payments and Market Infrastructures and the
International Organization of Securities Commissions Final Report on
Resilience of Central Counterparties (CCPs): Further guidance on the
PFMI dated June 2017 (the ``CPMI-IOSCO recovery guidance'');
Focus on recovery-specific scenarios and tools, as opposed
to the business as usual (``BAU'') management of risks, which is
addressed in other procedures and policies;
Address intragroup and external interdependencies in
greater depth;
Address ICE Clear Europe's plan for communication and
coordination of action to regulators and other stakeholders; and
Provide for periodic testing of the recovery plan.
The proposed Revised Recovery Plan would make certain specific
modifications to the Existing Recovery Plan in furtherance of these
general goals, as follows:
1. The appendices in the Existing Recovery Plan would be removed as
unnecessary, except for the appendices on committee and organizational
structure and stress scenario analysis.
2. The Revised Recovery Plan would more clearly address decision-
making during recovery. More specifically:
a. The role and interaction with the Board would be clarified,
requiring (i) the Board to convene before enacting the Revised Recovery
Plan and before deciding to exercise recovery options, or (ii) if the
Board could not be convened in a timely manner, then the President to
convene the Board after the decision for ratification;
b. Decision-making considerations for each recovery option would be
included, including the management information that would be used, such
as relevant regulatory capital information in a non-default loss
scenario; and
c. Plans relating to communication with regulators would be
incorporated, including the manner in which ICE Clear Europe would
inform regulators before enacting the plan or exercising recovery
options.
3. The Revised Recovery Plan would be restructured for ease of use
of the plan by management and the Board in a recovery situation. In
particular:
a. The plan would include a playbook setting out the progression of
actions in recovery for default loss and non-default loss scenarios,
which would be subject to annual testing; and
b. The triggers for recovery would be made clear and central to the
plan.
4. The Revised Recovery Plan would present an assessment of its
recovery tools in a manner that more explicitly and comprehensively
addresses the characteristics set out in the CPMI-IOSCO recovery
guidance.
5. The Revised Recovery Plan would more clearly focus on recovery-
specific scenarios and tools and would make the
[[Page 24550]]
boundary between BAU tools and recovery tools clearer by:
a. Focusing on situations in which the firm's viability would be
under threat; and
b. Excluding the operational risk scenarios to ensure the focus is
on recovery, not other business continuity scenarios.
6. The Revised Recovery Plan would provide increased focus on
intragroup and external interdependencies for critical services and
would document its plans for related communication and coordination of
action through:
a. Addressing the implications of interdependencies on its critical
services, which primarily relate to its capital replenishment framework
which depends upon continued financial support from the
Intercontinental Exchange, Inc. group (``ICE Group'');
b. Including further analysis of its dependencies on third-party
services and mitigations, which largely relate to services provided
through ICE Group, but also include SWIFT access;
c. Describing how potential coordination with other CCPs and
financial market infrastructures (``FMIs'') would be approached (both
for ICE Group CCPs and FMIs and non-ICE Group CCPs and FMIs); and
d. Giving greater consideration to procyclicality and financial
stability implications for Clearing Members due to ICE Clear Europe's
exercise of its recovery options.
7. The Revised Recovery Plan would require annual testing of the
plan via a table-top exercise to ensure ICE Clear Europe staff's
understanding of the plan and its implementation. The testing would
work through specific scenarios which would take into consideration the
playbook, management information, practical implementation of recovery
options, communication pathways to be used, the necessity of additional
resources and which systems would be involved in each recovery option.
II. Summary of the Revised Recovery Plan
(i) Overview
As with the Existing Recovery Plan, the Revised Recovery Plan would
identify the critical services that ICE Clear Europe provides, and the
business functions that support those services. In ICE Clear Europe's
view, its clearing services (for both the F&O and CDS product
categories), and its related treasury and banking services, represent
its critical services. The Revised Recovery Plan would also identify
the market participants that rely on ICE Clear Europe's services and
the service providers supporting its critical services. The Revised
Recovery Plan would also address recovery triggers, scenarios, early-
warning indicators, recovery options, decision-making governance,
limitations, assumptions and testing of the plan. The Revised Recovery
Plan would not incorporate day-to-day risk management processes and
tools already in place in the Rules and Procedures, as those do not
relate to recovery scenarios. Wind-down and resolution scenarios would
be covered in separate policies and procedures. The Revised Recovery
Plan would not address recovery plans for exchanges or markets cleared
by ICE Clear Europe, or the recovery of other FMIs that it interacts
with.
The recovery options set out in the Revised Recovery Plan are
intended to be extensive, giving the Clearing House the ability to
cover default losses (through eliminating any remaining variation
margin and mark-to-market payment obligations by, in effect, margin
haircutting and tear-up of remaining positions), liquidity shortfalls
(by delaying payment obligations) and investment losses (after a $90
million threshold, by allocating such losses up to the level of margin
and guaranty fund across all Clearing Members). The Revised Recovery
Plan would also take into account the Clearing House's powers of
assessment as well as pre-funded resources.
(ii) Critical Services, Service Providers, and Interdependencies
The Revised Recovery Plan would identify ICE Clear Europe's
critical services: F&O clearing; CDS clearing; and treasury and banking
services (``TBS''). The plan would describe the entities that depend on
ICE Clear Europe's critical services, the need to consider capital and
liquidity impacts on market participants when assessing the appropriate
recovery options, and the importance of early and ongoing communication
with regulators and other FMIs via regulators.
The Revised Recovery Plan would also describe the critical services
that the Clearing House relies upon from investment agents, APS banks,
central banks, data providers, custodians, physical delivery agents,
ICE Group exchanges, ICE Group clearing houses and ICE technology and
operations groups. It would detail how the Clearing House mitigates
dependence on service providers through using multiple substitutable
providers, providers who prioritize operational continuity through
multiple levels of resilience and redundancy, and contractual
protections through appropriate termination periods and limiting
clauses that would permit service providers to alter or terminate
contracts if ICE Clear Europe were under financial stress. In general,
under the plan, investment agents, APS banks, central banks and data
providers would not be dependencies because of their substitutability.
If necessary, for such service providers, ICE Clear Europe could run
certain processes itself or apply alternative processes to achieve
similar results.
The Revised Recovery Plan would address the Clearing House's
dependencies on custodians, physical delivery agents, ICE Group
exchanges, other ICE Group clearing houses, and ICE Group technology
and operations services. The plan would also address key systems and
technological infrastructure on which the Clearing House relies. The
plan would detail how the risk of these services being withdrawn are
mitigated through multiple redundancies, business continuity and
disaster recovery arrangements that are regularly tested, incident
follow-up, regular performance metrics, veto rights over proposed
changes and long notice periods. The plan would further address the
possibility of Clearing Members defaulting on obligations to other ICE
Group CCPs or third party CCPs and would note that ICE Clear Europe
would coordinate with other CCPs through various means.
(iii) Recovery Scenarios, Triggers and Early Warning Indicators
The Revised Recovery Plan would address two principal recovery
scenarios: (i) Default losses, in which case the plan would be
triggered when the guaranty fund is (or is likely to be) exhausted and
there are still losses to cover; and (ii) non-default losses, in which
case the plan would be triggered when ICE Clear Europe's base capital
is (or is likely to be) breached.
The Revised Recovery Plan would distinguish between BAU risk
management and recovery scenarios (in which, by definition, BAU risk
management is insufficient to address the relevant losses), and
relevant options and tools available for each. The Revised Recovery
Plan would also address scenarios in which operational events (which
are normally addressed through business continuity and disaster
recovery plans) could trigger operation of the recovery plan, such as
if the capital that ICE Clear Europe needs to fix an operational or
technology problem breaches, or is likely to breach, its base capital
and hit the non-default loss trigger.
[[Page 24551]]
The Revised Recovery Plan considers cases where ICE Clear Europe's
early warning metrics and indicators may indicate that a recovery
trigger would be hit. Early warning indicators for default loss
scenarios would be based on default management information showing the
size of the Clearing Members' exposures compared to the collateral ICE
Clear Europe holds against them and the size and complexity of their
positions, which, together with market volatility information, would
help ICE Clear Europe assess whether auctions would be likely to be
successful in balancing the book before running the auctions. With
respect to non-default losses, ICE Clear Europe would monitor its
eligible capital against target thresholds each day through risk
appetite metrics, which provide alerts and escalation to management or
the ICE Clear Europe Board before ICE Clear Europe breaches its base
capital.
(iv) Recovery Options
ICE Clear Europe's recovery options are generally set out in the
Rules and Procedures. The Revised Recovery Plan would describe key
aspects of these options as follows:
Powers of assessment (``PoA'') (Rules 909)--which enables
ICE Clear Europe to require Clearing Members to pay additional funds to
further mutualize default losses, up to the cap specified in the Rules.
PoA can only be used in a default loss scenario.
Reduced Gains Distribution (``RGD'') (Rule 914)--which
allows ICE Clear Europe to withhold mark-to-market margin gains instead
of paying them out to the relevant Clearing Members, in order to cover
losses. This would likely need to be used in conjunction with other
recovery options as it would not remove the source of the risk. This
could only be used in a default loss scenario and only after PoA have
been called.
Partial Tear-Ups (Rule 915)--which allows ICE Clear Europe
to `tear up' positions, in effect cancelling them or reducing or
removing the payment obligations due on those positions. This could
only be used in a default loss scenario and only after an auction has
been attempted.
Payment Delays (Rule 110)--which allows ICE Clear Europe
to delay transfers, deposits and payments to help alleviate liquidity
shortfalls and likely needs to be used in conjunction with other
recovery options. This could be used in both default and non-default
loss scenarios.
Investment Loss Allocation (Rule 919)--which allows ICE
Clear Europe to allocate investment losses to Clearing Members provided
it has invested in accordance with its investment management policy.
This could only be used where there are investment losses.
Invoicing Back (Rule 104)--which allows ICE Clear Europe
to cancel positions in certain non-default loss situations, limited to
force majeure, illegality and impossibility.
Capital Replenishment Framework (``CRF'')--which covers
ICE Clear Europe's options for replenishing capital, including raising
additional capital through the ICE Group and third parties, as well as
insurance coverage. This could be used in both default and non-default
loss scenarios. The timing of receipt of additional capital would
depend on the specific source of additional capital and would not be
guaranteed.
The proposed Revised Recovery Plan would describe the goals and
procedures for designing recovery options, including that recovery
options are designed to be comprehensive, effective, transparent,
measurable, manageable and controllable. They are intended to create
appropriate incentives and minimize negative impact. The plan would
also describe the governance process for development of recovery
options that impact Clearing Members. The process would include input
from stakeholders, including Clearing Members, customers, regulators
and ICE Clear Europe's shareholder. The plan also reflects the existing
governance procedures for changes to the Rules (including recovery
options therein).
The Revised Recovery Plan would discuss the manner in which ICE
Clear Europe's recovery options meet its standards for being
comprehensive and effective, reliable, enforceable, transparent and
measurable and for creating appropriate incentives and minimizing
negative impact both individually and collectively, as they would give
ICE Clear Europe the ability to fully cover default losses, liquidity
shortfalls and investment losses (above the relevant threshold).
The plan would also set out in detail the decision-making
considerations for each recovery option. These include the scenarios in
which recovery options may be used and the expected effectiveness or
scope of coverage for those options, whether the option can be used
alone or in conjunction with other options, the time at which use of
the option may be considered, expected impacts on market participants
and others and effects on confidence in ICE Clear Europe or its
clearing system, among other considerations.
(v) Decision-Making, Governance and Communications
The Revised Recovery Plan would require that the President attempt
to convene the Board for approval of material recovery decisions and
keep regulators informed in advance of material decisions, assuming
this could be done in a timely manner. If the Board could not be
convened in advance of such a decision, it would be convened thereafter
to ratify or modify the decision. The President would be supported by
the Default Management Committees in a default loss scenario and by the
Executive Risk Committee in a non-default loss scenario. Consistent
with the Rules and Procedures, exercising the recovery options would
not require the approval of Clearing Members, exchanges or any other
external stakeholders. In making decisions regarding the use of
recovery options, however, the President and the Board would need to
take into consideration the interests of ICE Clear Europe, Clearing
Members, customers, other stakeholders and the broader goal of
providing safe and sound CCP services to reduce systemic risk in an
efficient and legally compliant manner.
The Revised Recovery Plan would state ICE Clear Europe's
communication and coordination objectives in recovery 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 Group exchanges, clearing houses and
FMIs. The Revised Recovery Plan would also address coordination with
other ICE Group exchanges, clearing houses and FMIs. The plan would
also contemplate wider communications with Clearing Members and other
market participants.
ICE Clear Europe would aim to keep regulators informed in advance
of triggering the Revised Recovery Plan or exercising recovery options,
while being mindful of the need to take timely action. ICE Clear Europe
would seek to maintain close and continuous engagement with the
regulators during the implementation of the Revised Recovery Plan until
ICE Clear Europe returns to normal operational conditions or activates
the Wind-Down Plan (in which case other regulatory coordination
procedures apply). ICE Clear Europe would participate in coordination
and communication with other relevant stakeholders organized by the
regulators.
(vi) Recovery Playbook
The Revised Recovery Plan would set out the recovery approach in a
default
[[Page 24552]]
loss and non-default loss scenario through a recovery playbook. The
playbook is intended as an example for how recoveries might progress,
rather than a prescriptive instruction manual for all recovery
situations. The playbook identifies key steps in the recovery process,
including declaring a default event and determining the likely scope of
losses, Board consultation, triggering the plan, communicating with
regulators, and selecting the particular recovery options.
(vii) Limitations and Assumptions
The Revised Recovery Plan would identify the key assumptions and
limitations that could reduce its effectiveness and may fall outside of
ICE Clear Europe's control. These include the following: (i) The plan
is based on legal certainty of the framework in which the Clearing
House operates; (ii) the plan relies on market infrastructure ICE Clear
Europe does not control and for which there are no practical
alternatives; (iii) the plan assumes (for the most part) the continued
support of ICE Inc.; and (iv) certain recovery options are time limited
or time dependent. The plan would review the reasons why these
assumptions and limitations are appropriate, and certain determinations
it has made in respect thereof.
(viii) Appendices
The Revised Recovery Plan would include the following appendices:
(i) ICE Clear Europe Committee Structure setting out board and
executive level governance; and (ii) stress scenario analysis.
(b) Statutory Basis
ICE Clear Europe believes that the Revised Recovery Plan is
consistent with the requirements of Section 17A of the Act \5\ and the
regulations thereunder applicable to it, including the standards under
Rule 17Ad-22.\6\
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78q-1.
\6\ 17 CFR 240.17Ad-22.
---------------------------------------------------------------------------
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. In addition, Rule
17Ad-22(e)(3)(ii) \8\ requires that each covered clearing agency shall
establish, implement, maintain and enforce written policies and
procedures reasonably designed to, as applicable, maintain a sound risk
management framework for comprehensively managing legal, credit,
liquidity, operational, general business, investment, custody, and
other risks that arise in or are borne by the covered clearing agency,
which includes plans for the recovery and orderly wind-down of the
covered clearing agency necessitated by credit losses, liquidity
shortfalls, losses from general business risk, or any other losses.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78q-1(b)(3)(F).
\8\ 17 CFR 240.17Ad-22(e)(3)(ii).
---------------------------------------------------------------------------
The Revised Recovery Plan is intended to meet the requirements of
Rule 17Ad-22(e)(3)(ii), and be consistent with the requirements of
Section 17A(b)(3)(F) of the Act. The Revised Recovery Plan is designed
to enhance the Clearing House's Existing Recovery Plan, among other
matters, by being clearer and easier to apply, more clearly
distinguishing recovery scenarios from BAU scenarios, addressing
governance requirements generally and for particular recovery options,
and more clearly addressing certain critical dependencies faced by the
Clearing House. The Revised Recovery Plan does not itself modify the
recovery options themselves, which are largely set out in the Clearing
House's Rules and Procedures. The Revised Recovery Plan, like the
Existing Recovery Plan, would build on these provisions of the Rules
and Procedures to set out the recovery options that may be used to
address both default loss scenarios and non-default loss scenarios
(such as liquidity shortfalls, investment losses and losses from
general business risk), so that the Clearing House could restore normal
clearing operations. The plan would address coordination with
regulators and other stakeholders. Overall, the plan would form a key
part of the risk management of the Clearing House, and build on the
existing risk management processes and procedures applicable to BAU
scenarios. As a result, in ICE Clear Europe's view, the Revised
Recovery Plan would satisfy the requirements of Rule 17Ad-
22(e)(3)(ii).\9\ The plan would also further the Clearing House's
ability to maintain the prompt and accurate clearance and settlement of
transactions and the safeguarding of securities and funds in the
custody or control of the Clearing House or for which it is
responsible, including in severe default and non-default loss
scenarios, and thereby promote the protection of investors and the
public interest, within the meaning of Section 17A(b)(3)(F) of the
Act.\10\
---------------------------------------------------------------------------
\9\ 17 CFR 270.17Ad-22(e)(3)(ii).
\10\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
ICE Clear Europe further notes the requirement in Rule 17Ad-
22(e)(15) \11\ to hold sufficient liquid net assets funded by equity to
cover potential general business losses so that the covered clearing
agency can continue operations and services as a going concern if those
losses materialize, including by (i) determining the amount of liquid
net assets funded by equity based upon its general business risk
profile and the length of time required to achieve a recovery or
orderly wind-down, as appropriate, of its critical operations and
services if such action is taken, and (ii) holding liquid net assets
funded by equity equal to the greater of either (x) six months of the
covered clearing agency's current operating expenses, or (y) the amount
determined by the board of directors to be sufficient to ensure a
recovery or orderly wind-down of critical operations and services of
the covered clearing agency, as contemplated by the recovery and wind-
down plans established under Rule 17Ad-22(e)(3)(ii).
---------------------------------------------------------------------------
\11\ 17 CFR 240.17Ad-22(e)(15).
---------------------------------------------------------------------------
ICE Clear Europe has determined that it holds equity capital at
least sufficient to cover the costs of a recovery of its critical
clearing services under the Revised Recovery Plan, consistent with the
requirements of Rule 17Ad-22(e)(15).\12\
---------------------------------------------------------------------------
\12\ 17 CFR 240.17Ad-22(e)(15).
---------------------------------------------------------------------------
In compliance with Rules 17Ad-22(e)(2),\13\ the proposed Revised
Recovery Plan would provide greater detail with respect to decision-
making during recovery as well as the role and interaction with the
Board, other executives, regulators and other stakeholders, providing
greater clarity with respect to ICE Clear Europe's governance
arrangements and lines of
[[Page 24553]]
responsibility and ensuring that the interests of other stakeholders
are considered.
---------------------------------------------------------------------------
\13\ 17 CFR 270.17Ad-22(e)(2). Rule 17Ad-22(e)(2) requires the
covered clearing agency to establish, implement, maintain and
enforce written policies and procedures reasonably designed to
provide for governance arrangements that:
(i) Are clear and transparent;
(ii) Clearly prioritize the safety and efficiency of the covered
clearing agency;
(iii) Support the public interest requirements in Section 17A of
the Act (15 U.S.C. 78q-1) applicable to clearing agencies, and the
objectives of owners and participants;
(iv) Establish that the board of directors and senior management
have appropriate experience and skills to discharge their duties and
responsibilities;
(v) Specify clear and direct lines of responsibility; and
(vi) Consider the interests of participants' customers,
securities issuers and holders, and other relevant stakeholders of
the covered clearing agency.
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(B) Clearing Agency's Statement on Burden on Competition
ICE Clear Europe does not believe the proposed Revised Recovery
Plan would have any impact, or impose any burden, on competition not
necessary or appropriate in furtherance of the purposes of the Act. The
Revised Recovery Plan would provide greater clarity and make certain
enhancements with respect to ICE Clear Europe's recovery planning. The
plan does not itself change the rights or obligations of the Clearing
House or Clearing Members, and is based on the recovery options
established in the Rules and Procedures. The Revised Recovery Plan has
been designed to meet specific regulatory requirements concerning
recovery planning, and is applicable to all clearing activities. ICE
Clear Europe does not believe the amendments would impact competition
among Clearing Members or other market participants, or affect the
ability of market participants to access clearing generally. While
implementation of the Recovery Plan, and in particular implementation
of the plan in a severe loss scenario, would likely impose costs on
Clearing Members or other market participants, such costs are
consistent with the Rules and Procedures, and are, in ICE Clear
Europe's view, appropriate in light of the goals of recovery and
maintenance of critical clearing service in accordance with applicable
regulations.
(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, Security-Based
Swap Submission and Advance Notice and Timing for Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, security-based swap submission or advance notice 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-2019-013 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-2019-013. 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, security-based
swap submission or advance notice that are filed with the Commission,
and all written communications relating to the proposed rule change,
security-based swap submission or advance notice between the Commission
and any person, other than those that may be withheld from the public
in accordance with the provisions of 5 U.S.C. 552, will be available
for website viewing and printing in the Commission's Public Reference
Room, 100 F Street NE, Washington, DC 20549, on official business days
between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filings
will also be available for inspection and copying at the principal
office of ICE Clear Europe and on ICE Clear Europe's website at https://www.theice.com/clear-credit/regulation. All comments received will be
posted without change. Persons submitting comments are cautioned that
we do not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
ICEEU-2019-013 and should be submitted on or before June 18, 2019.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-10986 Filed 5-24-19; 8:45 am]
BILLING CODE 8011-01-P
