Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change to Clearing Membership Policy, 34241-34243 [2019-15137]

Download as PDF Federal Register / Vol. 84, No. 137 / Wednesday, July 17, 2019 / Notices change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: • Use the Commission’s internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeEDGX–2019–039 on the subject line. Paper Comments jbell on DSK3GLQ082PROD with NOTICES • 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–CboeEDGX–2019–039. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. 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–CboeEDGX–2019–039 and should be submitted on or before August 7, 2019. 18:05 Jul 16, 2019 [FR Doc. 2019–15135 Filed 7–16–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–86359; File No. SR–ICEEU– 2019–010] Electronic Comments VerDate Sep<11>2014 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.93 Eduardo A. Aleman, Deputy Secretary. Jkt 247001 Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change to Clearing Membership Policy July 11, 2019. I. Introduction On May 13, 2019, ICE Clear Europe Limited (‘‘ICE Clear Europe’’ or ‘‘Clearing House’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposed rule change to amend its Clearing Membership Policy. The proposed rule change was published for comment in the Federal Register on May 28, 2019.3 The Commission did not receive comments on the proposed rule change. For the reasons discussed below, the Commission is approving the proposed rule change. II. Description of the Proposed Rule Change ICE Clear Europe’s proposed rule change would make three amendments to its Clearing Membership Policy.4 First, the proposed rule change would specify that applications for membership are formally considered and, as appropriate, approved and rejected by, the Executive Risk Committee, through a delegation of authority from the ICE Clear Europe Board of Directors, rather than the F&O and CDS Product Risk Committees (collectively, the ‘‘Product Risk Committees’’). The proposed rule change would also specify that the Product Risk Committees would be notified of approved applications. The Executive Risk Committee is made up of CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Securities Exchange Act Release No. 85908 (May 21, 2019), 84 FR 24573 (May 28, 2019) (SR–ICEEU– 2019–010) (‘‘Notice’’). 4 Notice, 84 FR at 24574. Capitalized terms not otherwise defined herein have the meanings given to them in the ICE Clear Europe Rules or the Clearing Membership Policy. PO 00000 93 17 1 15 Frm 00126 Fmt 4703 Sfmt 4703 34241 ICE Clear Europe management and advises management on all key aspects of risk management and produces proposals for review by the Board Risk Committee, Product Risk Committees, and ICE Clear Europe Board, as appropriate.5 The Product Risk Committees are made up of appointees nominated by ICE Clear Europe’s Clearing Members.6 Second, the proposed rule change would add a requirement that a person applying to become a CDS Clearing Member (an ‘‘Applicant’’) prove its ability to determine and submit end-ofday prices for CDS instruments to fulfill the pricing capabilities requirements set out in ICE Clear Europe’s CDS End-OfDay Price Discovery Policy. The proposed rule change would further specify how ICE Clear Europe’s Clearing Risk Department would review and determine Applicants’ pricing capabilities. Thus, the proposed rule change would provide the Executive Risk Committee, as the delegated committee responsible for approving or rejecting an Applicant, with authority to reject an Applicant that cannot demonstrate such pricing capabilities. Finally, the proposed rule change would add an explicit requirement that, in evaluating applications for membership, the Clearing Risk Department consider the performance of Applicants in a Default Management Test and review Applicants’ internal policies and procedures to assess the efficacy of their default management process. Thus, the proposed rule change would provide the Executive Risk Committee, as the delegated committee responsible for approving or rejecting an Applicant, with authority to reject an Applicant that cannot demonstrate the efficacy of its default management process. III. 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 the proposed rule change is consistent with the requirements of the Act and the rules 5 See ICE Clear Europe Disclosure Framework, available at https://www.theice.com/publicdocs/ clear_europe/ICE_Clear_Europe_Disclosure_ Framework.pdf (‘‘The role of the ERC is to advise the management team on all key aspects of risk management and produce proposals for review by the Board Risk Committee, the Product Risk Committees, the Client Risk Committee, the Audit Committee and the Board as appropriate.’’). 6 See ICE Clear Europe Disclosure Framework, available at https://www.theice.com/publicdocs/ clear_europe/ICE_Clear_Europe_Disclosure_ Framework.pdf (‘‘The CDS PRC is comprised of appointees nominated by CDS Clearing Members, Independent Non-Executives and representatives of ICEU.’’). E:\FR\FM\17JYN1.SGM 17JYN1 34242 Federal Register / Vol. 84, No. 137 / Wednesday, July 17, 2019 / Notices jbell on DSK3GLQ082PROD with NOTICES and regulations thereunder applicable to the organization presenting it.7 For the reasons given below, the Commission finds that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act 8 and Rules 17Ad–22(e)(2) and (e)(18) thereunder.9 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, to assure the safeguarding of securities and funds which are in the custody or control of ICE Clear Europe or for which it is responsible, and, in general, to protect investors and the public interest.10 As discussed above, the proposed rule change would specify that applications for membership are formally considered, and approved and rejected by, the Executive Risk Committee, rather than the Product Risk Committees. The proposed change would also specify the procedure by which ICE Clear Europe would test and screen Applicants for their ability to satisfy end-of-day pricing and default management requirements. The Commission believes that ICE Clear Europe’s end-of-day pricing and robust and effective default management protocols both are critical to its ability to contribute to the prompt and accurate clearance and settlement of securities transactions and the safeguarding of securities and funds. For example, ICE Clear Europe relies on accurate end-ofday prices to generate margin requirements, which it uses to manage the risks associated with clearing security-based swap portfolios. Similarly, ICE Clear Europe relies on its default management tools to help manage and reduce the risks associated with a defaulting Clearing Member’s portfolio. Such risks, if not properly managed, could cause ICC to realize losses on such portfolios and could disrupt ICE Clear Europe’s ability to promptly and accurately clear security based swaps transactions and safeguard securities and funds which are in the custody or control of ICE Clear Europe or for which it is responsible. For these reasons, the Commission believes that the proposed rule change, in establishing a procedure by which ICE Clear Europe would test and screen Applicants for their ability to satisfy end-of-day pricing and default management requirements, and providing the Executive Risk Committee authority to reject Applicants that do not meet such requirements, would promote the prompt and accurate clearance and settlement of securities transactions and help assure the safeguarding of securities and funds which are in the custody or control of the ICE Clear Europe or for which it is responsible. For the same reasons, the Commission also believes the proposed rule change would, in general, protect investors and the public interest. Section 17A(b)(3)(F) of the Act further requires that the rules of ICE Clear Europe are not designed to permit unfair discrimination in the admission of participants or among participants in the use of the clearing agency.11 The Commission believes that the proposed changes discussed above would establish procedures by which ICE Clear Europe would test and screen Applicants for their ability to satisfy end-of-day pricing and default management requirements on an objective basis, without discriminating in the admission of Applicants. Therefore, the Commission finds that the proposed rule change would promote the prompt and accurate clearance and settlement of securities transactions, assure the safeguarding of securities and funds in ICE Clear Europe’s custody and control, in general, protect investors and the public interest, and not be designed to permit unfair discrimination in the admission of participants or among participants in the use of the clearing agency, consistent with the Section 17A(b)(3)(F) of the Act.12 B. Consistency With Rule 17Ad–22(e)(2) Rule 17Ad–22(e)(2) requires, among other things, that ICE Clear Europe establish, implement, maintain, and enforce written policies and procedures reasonably designed to provide for governance arrangements that are clear and transparent and that specify clear and direct lines of responsibility.13 The proposed rule change would specify that applications for membership are formally considered, and approved and rejected by, the Executive Risk Committee, rather than the Product Risk Committees and that the Product Risk Committees are notified of approved applications. The Commission believes that the proposed 7 15 U.S.C. 78s(b)(2)(C). U.S.C. 78q–1(b)(3)(F). 9 17 CFR 240.17Ad–22(e)(2) and (e)(18). 10 15 U.S.C. 78q–1(b)(3)(F). 8 15 VerDate Sep<11>2014 18:05 Jul 16, 2019 Jkt 247001 U.S.C. 78q–1(b)(3)(F). U.S.C. 78q–1(b)(3)(F). 13 17 CFR 240.17Ad–22(e)(2). rule change would help to ensure that the governance regarding approval of Applicants is clear and transparent, and establishes a clear and direct line of responsibility, by clearly specifying that the Executive Risk Committee would approve or disapprove applications. Moreover, in establishing that the Executive Risk Committee, through a delegation of authority from the ICE Clear Europe Board of Directors, is responsible for approving or rejecting Applicants, rather than the Product Risk Committees, the Commission believes the proposed rule change would consolidate, within ICE Clear Europe management, decisions regarding admission of applicants for membership at ICE Clear Europe. The Commission believes this would therefore clearly specify the responsibility of ICE Clear Europe management in approving or rejecting Applicants. Therefore, the Commission finds that the proposed rule change is consistent with Rule 17Ad–22(e)(2).14 C. Consistency With Rule 17Ad– 22(e)(18) Rule 17Ad–22(e)(18) requires, among other things, that ICE Clear Europe establish, implement, maintain, and enforce written policies and procedures reasonably designed to establish objective, risk-based, and publicly disclosed criteria for participation which permit fair and open access by direct and, where relevant, indirect participants and other financial market utilities.15 As discussed above, the proposed rule change would specify the procedure by which ICE Clear Europe would test and screen Applicants for their ability to satisfy end-of-day pricing and default management requirements. The proposed rule change also would specifically require that Applicants prove the ability to fulfill the pricing capabilities requirements set out in ICE Clear Europe’s CDS End-Of-Day Price Discovery Policy and perform acceptably in a Default Management Test. The Commission believes that, in doing so, the proposed rule change would establish objective and disclosed procedures for approving Applicants based on the risk of Applicants not being able to comply with ICE Clear Europe’s end-of-day pricing and default management requirements. Moreover, the Commission believes that these procedures represent objective criteria which any Applicant could potentially satisfy, thereby permitting fair and open access to membership at ICE Clear 11 15 12 15 PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 14 17 15 17 E:\FR\FM\17JYN1.SGM CFR 240.17Ad–22(e)(2). CFR 240.17Ad–22(e)(18). 17JYN1 Federal Register / Vol. 84, No. 137 / Wednesday, July 17, 2019 / Notices Europe. Therefore, the Commission finds that the proposed rule change is consistent with Rule 17Ad–22(e)(18).16 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 17 and Rules 17Ad–22(e)(2) and (e)(18) thereunder.18 It is therefore ordered pursuant to Section 19(b)(2) of the Act 19 that the proposed rule change (SR–ICEEU–2019– 010) be, and hereby is, approved.20 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–15137 Filed 7–16–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–86361; File No. SR–CBOE– 2019–031] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule With Respect to Expiring Fee Waivers and Incentive Programs July 11, 2019. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 28, 2019, Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II, below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit 16 17 CFR 240.17Ad–22(e)(18). U.S.C. 78q–1(b)(3)(F). 18 17 CFR 240.17Ad–22(e)(2) and (e)(18). 19 15 U.S.C. 78s(b)(2). 20 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). 21 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). jbell on DSK3GLQ082PROD with NOTICES 17 15 VerDate Sep<11>2014 18:05 Jul 16, 2019 Jkt 247001 comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) proposes to amend its Fees Schedule with respect to expiring fee waivers and incentive programs. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (http://www.cboe.com/ AboutCBOE/CBOELegalRegulatory Home.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange 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. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Fees Schedule relating to various fee waivers and incentive programs that are set to expire June 30, 2019. The Exchange proposes to implement these amendments to its Fees Schedule on July 1, 2019. Sector Indexes Facilitation Fee First, the Exchange proposes to extend the current waiver of fees for facilitation orders in Sector Index options.5 Currently, Footnote 11 of the Fees Schedule provides that for facilitation orders for Sector Index options executed in open outcry, or electronically via AIM or as a Qualified Contingent Cross order (‘‘QCC’’) or CFLEX transaction, the Exchange will assess no Clearing Trading Permit Holder Proprietary transaction fees through June 30, 2019. By way of background ‘‘facilitation orders’’ are defined as any order in which a Clearing Trading Permit Holder (‘‘F’’ origin code) PO 00000 5 See Cboe Options Fees Schedule, Footnote 47. Frm 00128 Fmt 4703 Sfmt 4703 34243 or Non-Trading Permit Holder Affiliate (‘‘L’’ origin code) is contra to any other origin code order, provided the same executing broker and clearing firm are on both sides of the transaction (for open outcry) or both sides of a paired order (for orders executed electronically).6 In adopting a waiver for facilitation fees in Sector Index options, the Exchange recognized that Clearing Trading Permit Holders can be an important source of liquidity when they facilitate their own customers’ trading activity and, as such, the Exchange applied a waiver of Clearing Trading Permit Holder Proprietary transaction fees for facilitation orders through June 30, 2019.7 The Exchange continues to recognize the important role Clearing Trading Permit Holders play with respect to facilitating their own customers’ trading activity and as such proposes to extend the waiver through December 31, 2019. Sector Indexes License Surcharge The Exchange next proposes to extend the current waiver of the Index License Surcharge of $0.10 per contract. In order to promote and encourage trading of the recently adopted Sector Index options, the Exchange adopted a waiver of the Index License Surcharge for Sector Index option transactions.8 The current waiver is set to expire on June 30, 2019. As the volume in these relatively new products is low, the Exchange does not have enough information to evaluate the impact of the waiver. However, the Exchange wishes to extend this waiver through December 31, 2019 in order to continue to encourage the trading of Sector Index options and grow the product. The proposed waiver would apply to all non-customer transactions. VIX License Index Surcharge The Exchange next proposes to extend the current waiver of the Index License Surcharge of $0.10 per contract for Clearing Trading Permit Holder Proprietary (‘‘Firm’’) (origin codes ‘‘F’’ or ‘‘L’’) VIX orders that have a premium of $0.10 or lower and have series with an expiration of seven (7) calendar days or less. The Exchange wishes to extend this waiver through December 31, 2019. The Exchange adopted the waiver to reduce transaction costs on expiring, low-priced VIX options, which the Exchange believed would encourage Firms to seek to close and/or roll over 6 See Cboe Options Fees Schedule, Footnote 11. Securities Exchange Act Release No. 85167 (February 20, 2019), 84 FR 6039 (February 25, 2019) (SR–CBOE–2019–011). 8 See Securities Exchange Act Release No. 82854 (March 12, 2018), 83 FR 11803 (March 16, 2018) (SR–CBOE–2018–012). 7 See E:\FR\FM\17JYN1.SGM 17JYN1

Agencies

[Federal Register Volume 84, Number 137 (Wednesday, July 17, 2019)]
[Notices]
[Pages 34241-34243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15137]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86359; File No. SR-ICEEU-2019-010]


Self-Regulatory Organizations; ICE Clear Europe Limited; Order 
Approving Proposed Rule Change to Clearing Membership Policy

July 11, 2019.

I. Introduction

    On May 13, 2019, ICE Clear Europe Limited (``ICE Clear Europe'' or 
``Clearing House'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend its Clearing Membership Policy. The 
proposed rule change was published for comment in the Federal Register 
on May 28, 2019.\3\ The Commission did not receive comments on the 
proposed rule change. For the reasons discussed below, the Commission 
is approving the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 85908 (May 21, 2019), 84 
FR 24573 (May 28, 2019) (SR-ICEEU-2019-010) (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    ICE Clear Europe's proposed rule change would make three amendments 
to its Clearing Membership Policy.\4\
---------------------------------------------------------------------------

    \4\ Notice, 84 FR at 24574. Capitalized terms not otherwise 
defined herein have the meanings given to them in the ICE Clear 
Europe Rules or the Clearing Membership Policy.
---------------------------------------------------------------------------

    First, the proposed rule change would specify that applications for 
membership are formally considered and, as appropriate, approved and 
rejected by, the Executive Risk Committee, through a delegation of 
authority from the ICE Clear Europe Board of Directors, rather than the 
F&O and CDS Product Risk Committees (collectively, the ``Product Risk 
Committees''). The proposed rule change would also specify that the 
Product Risk Committees would be notified of approved applications. The 
Executive Risk Committee is made up of ICE Clear Europe management and 
advises management on all key aspects of risk management and produces 
proposals for review by the Board Risk Committee, Product Risk 
Committees, and ICE Clear Europe Board, as appropriate.\5\ The Product 
Risk Committees are made up of appointees nominated by ICE Clear 
Europe's Clearing Members.\6\
---------------------------------------------------------------------------

    \5\ See ICE Clear Europe Disclosure Framework, available at 
https://www.theice.com/publicdocs/clear_europe/ICE_Clear_Europe_Disclosure_Framework.pdf (``The role of the ERC is 
to advise the management team on all key aspects of risk management 
and produce proposals for review by the Board Risk Committee, the 
Product Risk Committees, the Client Risk Committee, the Audit 
Committee and the Board as appropriate.'').
    \6\ See ICE Clear Europe Disclosure Framework, available at 
https://www.theice.com/publicdocs/clear_europe/ICE_Clear_Europe_Disclosure_Framework.pdf (``The CDS PRC is 
comprised of appointees nominated by CDS Clearing Members, 
Independent Non-Executives and representatives of ICEU.'').
---------------------------------------------------------------------------

    Second, the proposed rule change would add a requirement that a 
person applying to become a CDS Clearing Member (an ``Applicant'') 
prove its ability to determine and submit end-of-day prices for CDS 
instruments to fulfill the pricing capabilities requirements set out in 
ICE Clear Europe's CDS End-Of-Day Price Discovery Policy. The proposed 
rule change would further specify how ICE Clear Europe's Clearing Risk 
Department would review and determine Applicants' pricing capabilities. 
Thus, the proposed rule change would provide the Executive Risk 
Committee, as the delegated committee responsible for approving or 
rejecting an Applicant, with authority to reject an Applicant that 
cannot demonstrate such pricing capabilities.
    Finally, the proposed rule change would add an explicit requirement 
that, in evaluating applications for membership, the Clearing Risk 
Department consider the performance of Applicants in a Default 
Management Test and review Applicants' internal policies and procedures 
to assess the efficacy of their default management process. Thus, the 
proposed rule change would provide the Executive Risk Committee, as the 
delegated committee responsible for approving or rejecting an 
Applicant, with authority to reject an Applicant that cannot 
demonstrate the efficacy of its default management process.

III. 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 
the proposed rule change is consistent with the requirements of the Act 
and the rules

[[Page 34242]]

and regulations thereunder applicable to the organization presenting 
it.\7\ For the reasons given below, the Commission finds that the 
proposed rule change is consistent with Section 17A(b)(3)(F) of the Act 
\8\ and Rules 17Ad-22(e)(2) and (e)(18) thereunder.\9\
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    \7\ 15 U.S.C. 78s(b)(2)(C).
    \8\ 15 U.S.C. 78q-1(b)(3)(F).
    \9\ 17 CFR 240.17Ad-22(e)(2) and (e)(18).
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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, to assure the safeguarding of securities and funds which 
are in the custody or control of ICE Clear Europe or for which it is 
responsible, and, in general, to protect investors and the public 
interest.\10\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    As discussed above, the proposed rule change would specify that 
applications for membership are formally considered, and approved and 
rejected by, the Executive Risk Committee, rather than the Product Risk 
Committees. The proposed change would also specify the procedure by 
which ICE Clear Europe would test and screen Applicants for their 
ability to satisfy end-of-day pricing and default management 
requirements. The Commission believes that ICE Clear Europe's end-of-
day pricing and robust and effective default management protocols both 
are critical to its ability to contribute to the prompt and accurate 
clearance and settlement of securities transactions and the 
safeguarding of securities and funds. For example, ICE Clear Europe 
relies on accurate end-of-day prices to generate margin requirements, 
which it uses to manage the risks associated with clearing security-
based swap portfolios. Similarly, ICE Clear Europe relies on its 
default management tools to help manage and reduce the risks associated 
with a defaulting Clearing Member's portfolio. Such risks, if not 
properly managed, could cause ICC to realize losses on such portfolios 
and could disrupt ICE Clear Europe's ability to promptly and accurately 
clear security based swaps transactions and safeguard securities and 
funds which are in the custody or control of ICE Clear Europe or for 
which it is responsible. For these reasons, the Commission believes 
that the proposed rule change, in establishing a procedure by which ICE 
Clear Europe would test and screen Applicants for their ability to 
satisfy end-of-day pricing and default management requirements, and 
providing the Executive Risk Committee authority to reject Applicants 
that do not meet such requirements, would promote the prompt and 
accurate clearance and settlement of securities transactions and help 
assure the safeguarding of securities and funds which are in the 
custody or control of the ICE Clear Europe or for which it is 
responsible. For the same reasons, the Commission also believes the 
proposed rule change would, in general, protect investors and the 
public interest.
    Section 17A(b)(3)(F) of the Act further requires that the rules of 
ICE Clear Europe are not designed to permit unfair discrimination in 
the admission of participants or among participants in the use of the 
clearing agency.\11\ The Commission believes that the proposed changes 
discussed above would establish procedures by which ICE Clear Europe 
would test and screen Applicants for their ability to satisfy end-of-
day pricing and default management requirements on an objective basis, 
without discriminating in the admission of Applicants.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Therefore, the Commission finds that the proposed rule change would 
promote the prompt and accurate clearance and settlement of securities 
transactions, assure the safeguarding of securities and funds in ICE 
Clear Europe's custody and control, in general, protect investors and 
the public interest, and not be designed to permit unfair 
discrimination in the admission of participants or among participants 
in the use of the clearing agency, consistent with the Section 
17A(b)(3)(F) of the Act.\12\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

B. Consistency With Rule 17Ad-22(e)(2)

    Rule 17Ad-22(e)(2) requires, among other things, that ICE Clear 
Europe establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to provide for governance arrangements 
that are clear and transparent and that specify clear and direct lines 
of responsibility.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 240.17Ad-22(e)(2).
---------------------------------------------------------------------------

    The proposed rule change would specify that applications for 
membership are formally considered, and approved and rejected by, the 
Executive Risk Committee, rather than the Product Risk Committees and 
that the Product Risk Committees are notified of approved applications. 
The Commission believes that the proposed rule change would help to 
ensure that the governance regarding approval of Applicants is clear 
and transparent, and establishes a clear and direct line of 
responsibility, by clearly specifying that the Executive Risk Committee 
would approve or disapprove applications. Moreover, in establishing 
that the Executive Risk Committee, through a delegation of authority 
from the ICE Clear Europe Board of Directors, is responsible for 
approving or rejecting Applicants, rather than the Product Risk 
Committees, the Commission believes the proposed rule change would 
consolidate, within ICE Clear Europe management, decisions regarding 
admission of applicants for membership at ICE Clear Europe. The 
Commission believes this would therefore clearly specify the 
responsibility of ICE Clear Europe management in approving or rejecting 
Applicants. Therefore, the Commission finds that the proposed rule 
change is consistent with Rule 17Ad-22(e)(2).\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 240.17Ad-22(e)(2).
---------------------------------------------------------------------------

C. Consistency With Rule 17Ad-22(e)(18)

    Rule 17Ad-22(e)(18) requires, among other things, that ICE Clear 
Europe establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to establish objective, risk-based, and 
publicly disclosed criteria for participation which permit fair and 
open access by direct and, where relevant, indirect participants and 
other financial market utilities.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 240.17Ad-22(e)(18).
---------------------------------------------------------------------------

    As discussed above, the proposed rule change would specify the 
procedure by which ICE Clear Europe would test and screen Applicants 
for their ability to satisfy end-of-day pricing and default management 
requirements. The proposed rule change also would specifically require 
that Applicants prove the ability to fulfill the pricing capabilities 
requirements set out in ICE Clear Europe's CDS End-Of-Day Price 
Discovery Policy and perform acceptably in a Default Management Test. 
The Commission believes that, in doing so, the proposed rule change 
would establish objective and disclosed procedures for approving 
Applicants based on the risk of Applicants not being able to comply 
with ICE Clear Europe's end-of-day pricing and default management 
requirements. Moreover, the Commission believes that these procedures 
represent objective criteria which any Applicant could potentially 
satisfy, thereby permitting fair and open access to membership at ICE 
Clear

[[Page 34243]]

Europe. Therefore, the Commission finds that the proposed rule change 
is consistent with Rule 17Ad-22(e)(18).\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 240.17Ad-22(e)(18).
---------------------------------------------------------------------------

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 \17\ and Rules 17Ad-22(e)(2) and (e)(18) thereunder.\18\
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    \17\ 15 U.S.C. 78q-1(b)(3)(F).
    \18\ 17 CFR 240.17Ad-22(e)(2) and (e)(18).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\19\ that the proposed rule change (SR-ICEEU-2019-010) be, and hereby 
is, approved.\20\
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    \19\ 15 U.S.C. 78s(b)(2).
    \20\ 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.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-15137 Filed 7-16-19; 8:45 am]
BILLING CODE 8011-01-P