Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change to Clearing Membership Policy, 34241-34243 [2019-15137]
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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 (https://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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 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.
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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
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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.’’).
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Federal Register / Vol. 84, No. 137 / Wednesday, July 17, 2019 / Notices
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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
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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
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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).
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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).
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17 15
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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 (https://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)
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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
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]]>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]
-----------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
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\11\ 15 U.S.C. 78q-1(b)(3)(F).
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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\
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\12\ 15 U.S.C. 78q-1(b)(3)(F).
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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\
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\13\ 17 CFR 240.17Ad-22(e)(2).
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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\
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\14\ 17 CFR 240.17Ad-22(e)(2).
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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\
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\15\ 17 CFR 240.17Ad-22(e)(18).
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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\
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\16\ 17 CFR 240.17Ad-22(e)(18).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act,
and in particular, with the requirements of Section 17A(b)(3)(F) of the
Act \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
