Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change as Modified by Partial Amendment No. 1 Relating to Amendments to the ICE Clear Europe CDS Procedures and CDS Default Management Policy., 10610-10613 [2021-03493]
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Federal Register / Vol. 86, No. 33 / Monday, February 22, 2021 / Notices
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
meeting will consist of the following
topics:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations
and enforcement proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Dated: February 18, 2021.
Vanessa A. Countryman,
Secretary.
19b–4 thereunder,2 a proposed rule
change to authorize for trading flexible
exchange options on full-value indexes
with a contract multiplier of one.
The proposed rule change was
published for comment in the Federal
Register on July 20, 2020.3 On
September 2, 2020, pursuant to Section
19(b)(2) of the Exchange Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 On October 15,
2020, the Commission instituted
proceedings under Section 19(b)(2)(B) of
the Exchange Act 6 to determine
whether to approve or disapprove the
proposed rule change.7 On January 12,
2021, the Exchange submitted
Amendment No. 1 to the proposed rule
change.8 On January 14, 2021, the
Commission designated a longer period
for Commission action on proceedings
to determine whether to approve or
disapprove the proposed rule change, as
modified by Amendment No. 1.9 On
February 4, 2021, the Exchange
submitted Amendment No. 2 to the
proposed rule change.10 On February
12, 2021, the Exchange withdrew the
proposed rule change (SR–CBOE–2020–
034).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–03459 Filed 2–19–21; 8:45 am]
[FR Doc. 2021–03637 Filed 2–18–21; 4:15 pm]
BILLING CODE 8011–01–P
BILLING CODE 8011–01–P
2 17
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91135; File No. SR–CBOE–
2020–034]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Withdrawal
of a Proposed Rule Change, as
Modified by Amendment Nos. 1 and 2,
to Authorize for Trading Flexible
Exchange Options on Full-Value
Indexes With a Contract Multiplier of
One
tkelley on DSKBCP9HB2PROD with NOTICES
February 16, 2021.
On June 30, 2020, Cboe Exchange, Inc.
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Exchange Act’’) 1 and Rule
1 15
U.S.C. 78s(b)(1).
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CFR 240.19b–4.
Securities Exchange Act Release No. 89308
(July 14, 2020), 85 FR 43923. Comments received
on the proposed rule change are available on the
Commission’s website at: https://www.sec.gov/
comments/sr-cboe-2020-034/srcboe2020034.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 89743,
85 FR 55717 (September 9, 2020).
6 15 U.S.C. 78s(b)(2)(B).
7 See Securities Exchange Act Release No. 90204,
85 FR 67037 (October 21, 2020).
8 In Amendment No. 1, the Exchange provided
additional support for the proposal. The full text of
Amendment No. 1 is available on the Commission’s
website at: https://www.sec.gov/comments/sr-cboe2020-034/srcboe2020034.htm.
9 See Securities Exchange Act Release No. 89743,
86 FR 6718 (January 22, 2021). The Commission
designated March 17, 2021 as the date by which the
Commission shall either approve or disapprove the
proposed rule change, as modified by Amendment
No. 1.
10 In Amendment No. 2, the Exchange provided
further support and rationale for the proposal. The
full text of Amendment No. 2 is available on the
Commission’s website at: https://www.sec.gov/
comments/sr-cboe-2020-034/srcboe2020034.htm.
11 17 CFR 200.30–3(a)(12).
3 See
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91141; File No. SR–ICEEU–
2020–018]
Self-Regulatory Organizations; ICE
Clear Europe Limited; Order Approving
Proposed Rule Change as Modified by
Partial Amendment No. 1 Relating to
Amendments to the ICE Clear Europe
CDS Procedures and CDS Default
Management Policy.
February 17, 2021.
I. Introduction
On December 14, 2020, ICE Clear
Europe Limited (‘‘ICE Clear Europe’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend its CDS Procedures
and CDS Default Management Policy.
The proposed rule change was
published for comment in the Federal
Register on January 4, 2021.3 On
December 31, 2020, ICE Clear Europe
filed Partial Amendment No. 1 to the
proposed rule change. Notice of Partial
Amendment No. 1 was published in the
Federal Register on January 12, 2021.4
The Commission did not receive
comments on the proposed rule change,
as modified by Partial Amendment No.
1. For the reasons discussed below, the
Commission is approving the proposed
rule change, as modified by Partial
Amendment No. 1 (hereinafter, the
‘‘proposed rule change’’).
II. Description of the Proposed Rule
Change
As described below, the proposed rule
change would amend the CDS
Procedures and CDS Default
Management Policy primarily related to
CDS Default Committee participation.
The proposed changes would also
clarify certain other provisions to better
reflect current practices. 5
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 90806
(December 28, 2020), 86 FR 169 (January 4, 2021)
(SR–ICEEU–2020–018) (‘‘Notice’’).
4 Securities Exchange Act Release No. 90861
(January 6, 2021), 86 FR 2472 (January 12, 2021)
(SR–ICEEU–2020–018) (‘‘Partial Amendment No.
1’’). ICE Clear Europe filed Partial Amendment No.
1 to amend Item 3(a) of the original filing to add
an explanation as to the circumstances pursuant to
which ICE Clear Europe may permit a CDS
Committee-Eligible Clearing Member to postpone
participation in the CDS Default Committee. Partial
Amendment No. 1 did not otherwise make changes
to the substance of the filing, nor did it raise any
novel regulatory issues
5 Capitalized terms not otherwise defined herein
have the meanings assigned to them in the CDS
2 17
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Federal Register / Vol. 86, No. 33 / Monday, February 22, 2021 / Notices
A. CDS Procedures
The proposed rule change would
amend the CDS Procedures’ definitions
to clarify that the term ‘‘CDS
Committee-Eligible Clearing Members’’
must be approved in accordance with
paragraph 5.2 of the Procedures and
continue to meet the criteria of such
Paragraph. Paragraph 5.2 would thus be
amended to specify the requirements for
a Clearing Member to be approved to be
a CDS Committee-Eligible Clearing
Member. Specifically, the Clearing
Member would need to meet the
following conditions in order to be
eligible: (a) In the event that it has one
or more Affiliates that are CDS Clearing
Members, it has the longest period of
membership of the Clearing House
among such Affiliates; (b) it has a
London-based CDS trading desk; and (c)
it is deemed appropriate to be a CDS
Default Committee Member by the
Clearing House at its discretion. The
amendments to paragraph 5.2 would
also be amended to note that the
Clearing House would maintain a list of
all CDS Committee-Eligible Clearing
Members. The procedure for
maintaining the CDS Default Committee
Participant List (including adding CDS
Clearing Members to, removing CDS
Clearing Members from or changing the
order of Clearing Members on the CDS
Default Committee Participant List)
would be determined from time to time
by the Clearing House at its discretion.
(Certain such matters would be
addressed in further detail in the Policy,
as discussed below.) CDS Clearing
Members would be able to provide
information of relevance to the Clearing
House with respect to their own
inclusion or omission or order on the
list, but such information would not be
binding on the Clearing House.
Additionally, the Procedures would
state that ICE Clear Europe may also
share the CDS Default Committee
Participant List with any other clearing
house.
Other amendments to section 5
include proposed amendments to
paragraph 5.3, which would add that if
a CDS Committee-Eligible Clearing
Member considers that it is unable to
take part in the CDS Default Committee
for the Relevant CDS Default Committee
Period for which it is due to take part,
it may request to postpone its
participation for that period. ICE Clear
Europe could, at its discretion, approve
such request. As described in Partial
Amendment No. 1, an acceptable excuse
Procedures, CDS Default Management Policy or the
ICE Clear Europe Rulebook, as applicable. The
description that follows is excerpted from the
Notice.
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would most likely relate to temporary
resource constraints at the Clearing
Member. For example, if the committee
member were already serving on the
default committee of another clearing
house during the relevant period or if a
committee member otherwise had
limited staffing resources to commit to
the committee during that period, this
may be considered satisfactory. ICE
Clear Europe would expect to discuss
the particular situation with the
Clearing Member in question and would
respond to any request for
postponement to let the Clearing
Member know whether its rationale was
satisfactory. Once postponement is
approved, the following events would
take place: that CDS Committee-Eligible
Clearing Member would be identified to
take part in the CDS Default Committee
for the next Relevant CDS Default
Committee Period as one of the three
CDS Default Committee Participants;
and one of the next three CDS
Committee-Eligible Clearing Members
on the CDS Default Committee
Participant List would be selected by
the Clearing House at its discretion to
take part in the CDS Default Committee
during that Relevant CDS Default
Committee Period. The CDS Default
Committee Participant List would be
amended accordingly.
Paragraph 5.4 would be amended to
add that if a CDS Clearing Member
becomes a defaulter or is suspended or
receives a termination notice with
respect to its Clearing Membership, it
would be removed from the CDS Default
Committee Participant List. Paragraphs
5.4 and 5.5 would be amended to clarify
that the CDS Default Committee
Participant List would be amended to
take into account any Clearing Member
that becomes (or resumes being) a CDS
Committee-Eligible Clearing Member or
is removed from being a CDS Default
Committee Participant because the
Clearing House determines that such
Clearing Member has a conflict or lacks
impartiality.
The amendments in paragraph 5.6
would provide that the Clearing House
would give notice that, since CDS
Default Committee Members and CDS
Default Committee Participants act as
part of the governance of ICE Clear
Europe, such CDS Default Committee
Members and CDS Default Committee
Participants would take the benefit of all
exclusions and limitations of liability
available to the Clearing House under
the Rules or Applicable Laws. The
change is intended to make the
exclusions and limitations on liability
for such persons consistent with those
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10611
generally applicable to Clearing House
governance process.6
The amendments in paragraph 5.8
would provide that CDS Clearing
Members agree and acknowledge that
each CDS Default Committee Member
and CDS Default Committee Participant
(each a ‘‘Covered Party’’) would be
subject to the provisions of Rule 106
(regarding confidentiality of information
received and permitted disclosures) as if
that Covered Party were the Clearing
House. Furthermore, each CDS Clearing
Member would be required to ensure
that each such Covered Party nominated
by it would not use any Confidential
Material for its own benefit or the
benefit of any of its Affiliates and, if so
requested by the Clearing House, would
execute any documentation specified by
the Clearing House acknowledging the
same. The procedures that would apply
in the event that a Covered Party is
served with or otherwise subject to legal
process have been removed as
unnecessary in light of the referenced
provisions of Rule 106. Paragraph 5.9
would be amended to clarify that each
CDS Clearing Member agrees that each
Covered Party would be responsible for
its own costs associated with its service
in such position.
The proposal would also make several
changes to the CDS Procedures not
related to CDS Default Committee
participation. Specifically, the rule
proposal would also amend paragraph
4.4 of the Procedures, which describes
the timing requirements for submitting
CDS Trade Particulars, to clarify that
with respect to CDS Trade Particulars
submitted after 6:00 p.m. on a Business
Day or on a day that is not a Business
Day, unless a revocation right exists and
is exercised or unless otherwise stated
in circular, among other existing
exceptions, such CDS Trade Particulars
would be deemed to have been
submitted at 8:00 a.m. on the following
Business Day. Furthermore, the
Procedures would provide that if the
Trade Date specified in the CDS Trade
Particulars is not a Business Day, then
the relevant CDS Trade Particulars
would be rejected. According to ICE
Clear Europe, this reflects current
Clearing House practice.7
B. CDS Default Management Policy
ICE Clear Europe is proposing to make
amendments to its CDS Default
Management Policy related to the
Default Committee consistent with the
CDS Procedures as well as several
general clarification amendments to the
Policy. First, under the section CDS
6 Notice,
7 Notice,
E:\FR\FM\22FEN1.SGM
86 Federal Register at 170.
86 Federal Register at 169.
22FEN1
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Default Committee Activation,
consistent with the changes to the CDS
Procedures, the proposal would amend
the Policy to provide that a Clearing
Member would only be defined as
Committee-Eligible if such Clearing
Member (i) is deemed appropriate by
the Clearing House, (ii) is the primary
clearing entity of an affiliate group, and
(iii) has a London based trading desk.
The Policy would also clarify that the
Clearing House maintains a list of all
CDS Committee-Eligible Clearing
Members and that the relevant term for
the committee is six calendar months or
until the end of any active Default
event.
Additionally, the Policy would be
amended to provide that in the event
that a CDS Default Committee
Participant is unable to fulfill its
upcoming rotation obligation for any
reason including serving in the CDS
Default Committee of another clearing
house, such CDS Default Committee
Participant would have the option to
request to postpone their Relevant CDS
Default Committee for a Relevant CDS
Default Committee Period. If the
Clearing House finds the reason for
postponement satisfactory, the CDS
Default Committee Participant would be
substituted for a CDS CommitteeEligible Clearing Member from the next
three members on the CDS Default
Committee Participant List. Prior to
commencement of a rotation, CDS
Default Committee Members would be
required to have signed all
documentation required by the Clearing
House (including but not limited to a
Seconded Trader Agreement), and the
Clearing House would use reasonable
efforts to ensure that such requirement
is enforced. The amendments would
also clarify that CDS Default Committee
Members would be responsible for
assisting in executing any CDS
transactions (with respect to Rules 902
or 903) on behalf of the Clearing House
only if needed. Under the Committee
Activation Procedures section, the
procedure for use of an alternate CDS
Default Committee Member contact
would be revised to refer generally to a
situation where the designated primary
representative cannot be reached in a
reasonable amount of time, and to
remove specific examples of reasons a
member could not be reached.
With respect to the Secondment
Facilities section, the proposed
amendments would clarify that upon
arrival at the ICE Clear Europe offices,
each CDS Default Committee Member
would be assigned a PC with the ICE
Clear Europe risk reports concerning the
defaulter’s portfolio and a third-party
data provider application. References to
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19:48 Feb 19, 2021
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how the CDS Default Committee
Member would be able to login to the
PC and view certain information sent to
ICE Clear Europe by the non-defaulting
Clearing Members would be removed as
unnecessary. The amendments would
also clarify that CDS Default Committee
Members would only execute the
hedging and liquidating transactions
that the Head of Clearing Risk and the
team deem necessary.
The amendments would also remove
the requirement that seconded traders
sign an additional confidentiality
agreement pertaining to their role
within a given member default (as ICE
Clear Europe believes the existing single
secondment agreement is sufficient).8
Instead, the Policy would provide that
CDS Default Committee Members would
be reminded of ongoing confidentiality
obligations by the ICE Clear Europe
Compliance department.
The amendments would provide that
details of the auction and relevant
position data will be made available
through the ICE Default Management
System, consistent with the ICE Clear
Europe auction procedures. The
amendments would also clarify that
following the close of an auction for
sub-portfolio, the Clearing House would
publish the new trades to be booked to
the winning bidders through the ICE
Default Management System. The
Clearing House would no longer notify
the point of contact for the winning
bidders verbally. The change is
intended to conform to the ICE Clear
Europe auction procedures.9
The amendments would provide
additional detail with respect to default
management testing. Specifically,
pursuant to the amendments, the Policy
would state that the Clearing House
would test and review its default
procedures at least quarterly and
perform simulation exercises at least
annually. The default test would be
conducted in coordination with
Clearing Members by engaging all the
internal and external stakeholders that
would be involved in the default
management process (for example, the
Clearing Risk Department, ICE Clear
Europe Senior Management Team, CDS
Default Committee Members, regulators,
etc.). Each default test would be
planned in accordance with the ICE
Clear Europe Multi-Years Default Plan,
which would list several different
default scenarios that would need to be
tested by the Clearing House on a
regular basis. The ICE Clear Europe
Senior Management Team would be
responsible for approving the scope of
8 Notice,
9 Notice,
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86 Federal Register at 171.
Frm 00083
Fmt 4703
Sfmt 4703
the annual default test by choosing
different scenarios outlined in the Plan.
The Plan and changes to it would need
to be approved by the Executive Risk
Committee.
The rule proposal would also amend
the Policy with general drafting
clarifications and improvements.
Specifically, the amendments to the
Policy would remove Appendices A and
B, which contain various forms of notice
and examples, as well as references
thereto. In ICE Clear Europe’s view,
these appendices do not need to be
included in the Policy and, to the extent
they remain relevant, forms of notice
can be maintained by the Clearing
House separately.10 Certain terminology
would be updated throughout the Policy
as follows: (i) The term, Employee,
would be updated to Eligible Employee;
and (ii) the terms, Defaulting Clearing
Member or Defaulting Member, would
be updated to defaulter in certain
instances in order to avoid repetition
and aid with readability. Certain
provisions relating to the Clearing
House ceasing to clear new trades for a
Defaulting Clearing Member would be
moved and renumbered.
III. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Act directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that such
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to such organization.11 For
the reasons given below, the
Commission finds that the proposed
rule change is consistent with Section
17A(b)(3)(F) of the Act 12 and Rules
17Ad–22(e)(3)(i) and (e)(13)
thereunder.13
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, as well as 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.14
10 Notice,
86 Federal Register at 170.
U.S.C. 78s(b)(2)(C).
12 15 U.S.C. 78q–1(b)(3)(F).
13 17 CFR 240.17 Ad–22(e)(3)(i), (e)(13).
14 15 U.S.C. 78q–1(b)(3)(F).
11 15
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Federal Register / Vol. 86, No. 33 / Monday, February 22, 2021 / Notices
tkelley on DSKBCP9HB2PROD with NOTICES
As noted above, ICE Clear Europe
utilizes seconded representatives of
Clearing Members to serve on ICE Clear
Europe’s CDS Default Committee to
manage the portfolios of defaulting
clearing members. The proposed rule
changes would update and clarify the
requirements for a Clearing Member to
be eligible to serve on the CDS Default
Committee as well as clarify the
procedures to be used by the CDS
Default Committee if such Clearing
Member is unable to fulfill its upcoming
rotation obligation. The proposed rule
changes also describe the process ICE
Clear Europe follows when a CDS
Committee-Eligible Clearing Member is
unable to take part in the CDS Default
Committee. The proposed changes also
make various changes to the procedures
clarifying the fact that CDS Default
Committee Members and participants
are subject to confidentiality
requirements and that these participants
have the benefit of all exclusions and
limitations of liability available to ICE
Clear Europe. Further, the CDS Policy
changes clarify the detailed resources
available to CDS Default Committee
Members necessary for carrying out
their functions.
Taken together, the Commission
believes that these changes and
clarifications with respect to CDS
Default Committee participation and the
process for when a CDS CommitteeEligible Clearing Member cannot
participate in the CDS Default
Committee should allow ICE Clear
Europe to better ensure that the
committee is comprised of participants
who possess the requisite knowledge
and experience to assist in a default
management process. The Commission,
in turn, believes that this should help
ICE Clear Europe more effectively
manage defaults, ensuring ICEEU’s
ability to continue functioning, thereby
promoting the prompt and accurate
clearance and settlement of transactions.
For the reasons stated above, the
Commission finds that the proposed
rule change is consistent with the
Section 17A(b)(3)(F) of the Act.15
B. Consistency With Rule 17Ad–
22(e)(13)
Rule 17Ad–22(e)(13) requires that ICE
Clear Europe establish, implement,
maintain and enforce written policies
and procedures reasonably designed, as
applicable, to ensure ICE Clear Europe
has the authority and operational
capacity to take timely action to contain
losses and liquidity demands and
continue to meet its obligations by, at a
minimum, requiring its Clearing
15 15
U.S.C. 78q–1(b)(3)(F).
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Members and, when practicable, other
stakeholders to participate in the testing
and review of its default procedures,
including any close-out procedures, at
least annually and following material
changes thereto.16
As noted above, the proposed changes
to the CDS Procedures would define the
requirements for Clearing Members to
become eligible to participate in the
CDS Default Committee as well as the
process for addressing situations when
parties postpone their participation will
ensure that the committee is staffed
with appropriate representatives. The
Commission believes that these changes
should help to ensure ICE Clear Europe
has the operational capacity to take
timely action to contain losses.
In addition, as noted above, the
proposed rule change would revise the
CDS Default Management Policy to
specify that it will engage in testing and
review of its default procedures at least
quarterly and perform simulation
exercises as least annually, which is
conducted in coordination with its
clearing members as well as internal
stakeholders such as the Clearing Risk
Department, senior clearing house
management, and the CDS Default
Committee. Further, the Policy would
be amended to state that these default
tests would be planned to take into
account various scenarios that are tested
and approved by the stakeholders,
including senior management. The
Commission believes that this
additional detail regarding the testing of
ICE Clear Europe’s default procedures
would support ICE Clear Europe’s
ability to meet its obligations through
regular testing and review of its default
procedures with the requisite
stakeholders.
For these reasons, the Commission
finds that the proposed rule change is
consistent with Rule 17Ad–22(e)(13).17
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 18 and
Rules 17Ad-22(e)(3)(i) and (e)(13).19
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 20 that the
proposed rule change, as modified by
Partial Amendment No. 1 (SR–ICEEU–
16 15
U.S.C. 17Ad–22(e)(13).
U.S.C. 17Ad–22(e)(13).
18 15 U.S.C. 78q–1(b)(3)(F).
19 17 CFR 240.17Ad–22(e)(3)(i) and (e)(13).
20 15 U.S.C. 78s(b)(2).
17 15
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10613
2020–018), be, and hereby is,
approved.21
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–03493 Filed 2–19–21; 8:45 am]
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The notice
of an Administrative declaration for the
Commonwealth of Pennsylvania, dated
12/18/2020 is hereby amended to
extend the deadline for filing
applications for physical damages as a
result of this disaster to 03/18/2021.
All other information in the original
declaration remains unchanged.
SUPPLEMENTARY INFORMATION:
(Catalog of Federal Domestic Assistance
Number 59008)
Tami Perriello,
Acting Administrator.
[FR Doc. 2021–03530 Filed 2–19–21; 8:45 am]
BILLING CODE 8026–03–P
21 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).
22 17 CFR 200.30–3(a)(12).
E:\FR\FM\22FEN1.SGM
22FEN1
]]>Agencies
[Federal Register Volume 86, Number 33 (Monday, February 22, 2021)]
[Notices]
[Pages 10610-10613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03493]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91141; File No. SR-ICEEU-2020-018]
Self-Regulatory Organizations; ICE Clear Europe Limited; Order
Approving Proposed Rule Change as Modified by Partial Amendment No. 1
Relating to Amendments to the ICE Clear Europe CDS Procedures and CDS
Default Management Policy.
February 17, 2021.
I. Introduction
On December 14, 2020, ICE Clear Europe Limited (``ICE Clear
Europe'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend its CDS Procedures and CDS Default
Management Policy. The proposed rule change was published for comment
in the Federal Register on January 4, 2021.\3\ On December 31, 2020,
ICE Clear Europe filed Partial Amendment No. 1 to the proposed rule
change. Notice of Partial Amendment No. 1 was published in the Federal
Register on January 12, 2021.\4\ The Commission did not receive
comments on the proposed rule change, as modified by Partial Amendment
No. 1. For the reasons discussed below, the Commission is approving the
proposed rule change, as modified by Partial Amendment No. 1
(hereinafter, the ``proposed rule change'').
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 90806 (December 28,
2020), 86 FR 169 (January 4, 2021) (SR-ICEEU-2020-018) (``Notice'').
\4\ Securities Exchange Act Release No. 90861 (January 6, 2021),
86 FR 2472 (January 12, 2021) (SR-ICEEU-2020-018) (``Partial
Amendment No. 1''). ICE Clear Europe filed Partial Amendment No. 1
to amend Item 3(a) of the original filing to add an explanation as
to the circumstances pursuant to which ICE Clear Europe may permit a
CDS Committee-Eligible Clearing Member to postpone participation in
the CDS Default Committee. Partial Amendment No. 1 did not otherwise
make changes to the substance of the filing, nor did it raise any
novel regulatory issues
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II. Description of the Proposed Rule Change
As described below, the proposed rule change would amend the CDS
Procedures and CDS Default Management Policy primarily related to CDS
Default Committee participation. The proposed changes would also
clarify certain other provisions to better reflect current practices.
\5\
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\5\ Capitalized terms not otherwise defined herein have the
meanings assigned to them in the CDS Procedures, CDS Default
Management Policy or the ICE Clear Europe Rulebook, as applicable.
The description that follows is excerpted from the Notice.
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[[Page 10611]]
A. CDS Procedures
The proposed rule change would amend the CDS Procedures'
definitions to clarify that the term ``CDS Committee-Eligible Clearing
Members'' must be approved in accordance with paragraph 5.2 of the
Procedures and continue to meet the criteria of such Paragraph.
Paragraph 5.2 would thus be amended to specify the requirements for a
Clearing Member to be approved to be a CDS Committee-Eligible Clearing
Member. Specifically, the Clearing Member would need to meet the
following conditions in order to be eligible: (a) In the event that it
has one or more Affiliates that are CDS Clearing Members, it has the
longest period of membership of the Clearing House among such
Affiliates; (b) it has a London-based CDS trading desk; and (c) it is
deemed appropriate to be a CDS Default Committee Member by the Clearing
House at its discretion. The amendments to paragraph 5.2 would also be
amended to note that the Clearing House would maintain a list of all
CDS Committee-Eligible Clearing Members. The procedure for maintaining
the CDS Default Committee Participant List (including adding CDS
Clearing Members to, removing CDS Clearing Members from or changing the
order of Clearing Members on the CDS Default Committee Participant
List) would be determined from time to time by the Clearing House at
its discretion. (Certain such matters would be addressed in further
detail in the Policy, as discussed below.) CDS Clearing Members would
be able to provide information of relevance to the Clearing House with
respect to their own inclusion or omission or order on the list, but
such information would not be binding on the Clearing House.
Additionally, the Procedures would state that ICE Clear Europe may also
share the CDS Default Committee Participant List with any other
clearing house.
Other amendments to section 5 include proposed amendments to
paragraph 5.3, which would add that if a CDS Committee-Eligible
Clearing Member considers that it is unable to take part in the CDS
Default Committee for the Relevant CDS Default Committee Period for
which it is due to take part, it may request to postpone its
participation for that period. ICE Clear Europe could, at its
discretion, approve such request. As described in Partial Amendment No.
1, an acceptable excuse would most likely relate to temporary resource
constraints at the Clearing Member. For example, if the committee
member were already serving on the default committee of another
clearing house during the relevant period or if a committee member
otherwise had limited staffing resources to commit to the committee
during that period, this may be considered satisfactory. ICE Clear
Europe would expect to discuss the particular situation with the
Clearing Member in question and would respond to any request for
postponement to let the Clearing Member know whether its rationale was
satisfactory. Once postponement is approved, the following events would
take place: that CDS Committee-Eligible Clearing Member would be
identified to take part in the CDS Default Committee for the next
Relevant CDS Default Committee Period as one of the three CDS Default
Committee Participants; and one of the next three CDS Committee-
Eligible Clearing Members on the CDS Default Committee Participant List
would be selected by the Clearing House at its discretion to take part
in the CDS Default Committee during that Relevant CDS Default Committee
Period. The CDS Default Committee Participant List would be amended
accordingly.
Paragraph 5.4 would be amended to add that if a CDS Clearing Member
becomes a defaulter or is suspended or receives a termination notice
with respect to its Clearing Membership, it would be removed from the
CDS Default Committee Participant List. Paragraphs 5.4 and 5.5 would be
amended to clarify that the CDS Default Committee Participant List
would be amended to take into account any Clearing Member that becomes
(or resumes being) a CDS Committee-Eligible Clearing Member or is
removed from being a CDS Default Committee Participant because the
Clearing House determines that such Clearing Member has a conflict or
lacks impartiality.
The amendments in paragraph 5.6 would provide that the Clearing
House would give notice that, since CDS Default Committee Members and
CDS Default Committee Participants act as part of the governance of ICE
Clear Europe, such CDS Default Committee Members and CDS Default
Committee Participants would take the benefit of all exclusions and
limitations of liability available to the Clearing House under the
Rules or Applicable Laws. The change is intended to make the exclusions
and limitations on liability for such persons consistent with those
generally applicable to Clearing House governance process.\6\
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\6\ Notice, 86 Federal Register at 170.
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The amendments in paragraph 5.8 would provide that CDS Clearing
Members agree and acknowledge that each CDS Default Committee Member
and CDS Default Committee Participant (each a ``Covered Party'') would
be subject to the provisions of Rule 106 (regarding confidentiality of
information received and permitted disclosures) as if that Covered
Party were the Clearing House. Furthermore, each CDS Clearing Member
would be required to ensure that each such Covered Party nominated by
it would not use any Confidential Material for its own benefit or the
benefit of any of its Affiliates and, if so requested by the Clearing
House, would execute any documentation specified by the Clearing House
acknowledging the same. The procedures that would apply in the event
that a Covered Party is served with or otherwise subject to legal
process have been removed as unnecessary in light of the referenced
provisions of Rule 106. Paragraph 5.9 would be amended to clarify that
each CDS Clearing Member agrees that each Covered Party would be
responsible for its own costs associated with its service in such
position.
The proposal would also make several changes to the CDS Procedures
not related to CDS Default Committee participation. Specifically, the
rule proposal would also amend paragraph 4.4 of the Procedures, which
describes the timing requirements for submitting CDS Trade Particulars,
to clarify that with respect to CDS Trade Particulars submitted after
6:00 p.m. on a Business Day or on a day that is not a Business Day,
unless a revocation right exists and is exercised or unless otherwise
stated in circular, among other existing exceptions, such CDS Trade
Particulars would be deemed to have been submitted at 8:00 a.m. on the
following Business Day. Furthermore, the Procedures would provide that
if the Trade Date specified in the CDS Trade Particulars is not a
Business Day, then the relevant CDS Trade Particulars would be
rejected. According to ICE Clear Europe, this reflects current Clearing
House practice.\7\
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\7\ Notice, 86 Federal Register at 169.
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B. CDS Default Management Policy
ICE Clear Europe is proposing to make amendments to its CDS Default
Management Policy related to the Default Committee consistent with the
CDS Procedures as well as several general clarification amendments to
the Policy. First, under the section CDS
[[Page 10612]]
Default Committee Activation, consistent with the changes to the CDS
Procedures, the proposal would amend the Policy to provide that a
Clearing Member would only be defined as Committee-Eligible if such
Clearing Member (i) is deemed appropriate by the Clearing House, (ii)
is the primary clearing entity of an affiliate group, and (iii) has a
London based trading desk. The Policy would also clarify that the
Clearing House maintains a list of all CDS Committee-Eligible Clearing
Members and that the relevant term for the committee is six calendar
months or until the end of any active Default event.
Additionally, the Policy would be amended to provide that in the
event that a CDS Default Committee Participant is unable to fulfill its
upcoming rotation obligation for any reason including serving in the
CDS Default Committee of another clearing house, such CDS Default
Committee Participant would have the option to request to postpone
their Relevant CDS Default Committee for a Relevant CDS Default
Committee Period. If the Clearing House finds the reason for
postponement satisfactory, the CDS Default Committee Participant would
be substituted for a CDS Committee-Eligible Clearing Member from the
next three members on the CDS Default Committee Participant List. Prior
to commencement of a rotation, CDS Default Committee Members would be
required to have signed all documentation required by the Clearing
House (including but not limited to a Seconded Trader Agreement), and
the Clearing House would use reasonable efforts to ensure that such
requirement is enforced. The amendments would also clarify that CDS
Default Committee Members would be responsible for assisting in
executing any CDS transactions (with respect to Rules 902 or 903) on
behalf of the Clearing House only if needed. Under the Committee
Activation Procedures section, the procedure for use of an alternate
CDS Default Committee Member contact would be revised to refer
generally to a situation where the designated primary representative
cannot be reached in a reasonable amount of time, and to remove
specific examples of reasons a member could not be reached.
With respect to the Secondment Facilities section, the proposed
amendments would clarify that upon arrival at the ICE Clear Europe
offices, each CDS Default Committee Member would be assigned a PC with
the ICE Clear Europe risk reports concerning the defaulter's portfolio
and a third-party data provider application. References to how the CDS
Default Committee Member would be able to login to the PC and view
certain information sent to ICE Clear Europe by the non-defaulting
Clearing Members would be removed as unnecessary. The amendments would
also clarify that CDS Default Committee Members would only execute the
hedging and liquidating transactions that the Head of Clearing Risk and
the team deem necessary.
The amendments would also remove the requirement that seconded
traders sign an additional confidentiality agreement pertaining to
their role within a given member default (as ICE Clear Europe believes
the existing single secondment agreement is sufficient).\8\ Instead,
the Policy would provide that CDS Default Committee Members would be
reminded of ongoing confidentiality obligations by the ICE Clear Europe
Compliance department.
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\8\ Notice, 86 Federal Register at 170.
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The amendments would provide that details of the auction and
relevant position data will be made available through the ICE Default
Management System, consistent with the ICE Clear Europe auction
procedures. The amendments would also clarify that following the close
of an auction for sub-portfolio, the Clearing House would publish the
new trades to be booked to the winning bidders through the ICE Default
Management System. The Clearing House would no longer notify the point
of contact for the winning bidders verbally. The change is intended to
conform to the ICE Clear Europe auction procedures.\9\
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\9\ Notice, 86 Federal Register at 171.
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The amendments would provide additional detail with respect to
default management testing. Specifically, pursuant to the amendments,
the Policy would state that the Clearing House would test and review
its default procedures at least quarterly and perform simulation
exercises at least annually. The default test would be conducted in
coordination with Clearing Members by engaging all the internal and
external stakeholders that would be involved in the default management
process (for example, the Clearing Risk Department, ICE Clear Europe
Senior Management Team, CDS Default Committee Members, regulators,
etc.). Each default test would be planned in accordance with the ICE
Clear Europe Multi-Years Default Plan, which would list several
different default scenarios that would need to be tested by the
Clearing House on a regular basis. The ICE Clear Europe Senior
Management Team would be responsible for approving the scope of the
annual default test by choosing different scenarios outlined in the
Plan. The Plan and changes to it would need to be approved by the
Executive Risk Committee.
The rule proposal would also amend the Policy with general drafting
clarifications and improvements. Specifically, the amendments to the
Policy would remove Appendices A and B, which contain various forms of
notice and examples, as well as references thereto. In ICE Clear
Europe's view, these appendices do not need to be included in the
Policy and, to the extent they remain relevant, forms of notice can be
maintained by the Clearing House separately.\10\ Certain terminology
would be updated throughout the Policy as follows: (i) The term,
Employee, would be updated to Eligible Employee; and (ii) the terms,
Defaulting Clearing Member or Defaulting Member, would be updated to
defaulter in certain instances in order to avoid repetition and aid
with readability. Certain provisions relating to the Clearing House
ceasing to clear new trades for a Defaulting Clearing Member would be
moved and renumbered.
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\10\ Notice, 86 Federal Register at 170.
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III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\11\ For the reasons given below, the Commission finds
that the proposed rule change is consistent with Section 17A(b)(3)(F)
of the Act \12\ and Rules 17Ad-22(e)(3)(i) and (e)(13) thereunder.\13\
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\11\ 15 U.S.C. 78s(b)(2)(C).
\12\ 15 U.S.C. 78q-1(b)(3)(F).
\13\ 17 CFR 240.17 Ad-22(e)(3)(i), (e)(13).
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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, as well as 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.\14\
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\14\ 15 U.S.C. 78q-1(b)(3)(F).
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[[Page 10613]]
As noted above, ICE Clear Europe utilizes seconded representatives
of Clearing Members to serve on ICE Clear Europe's CDS Default
Committee to manage the portfolios of defaulting clearing members. The
proposed rule changes would update and clarify the requirements for a
Clearing Member to be eligible to serve on the CDS Default Committee as
well as clarify the procedures to be used by the CDS Default Committee
if such Clearing Member is unable to fulfill its upcoming rotation
obligation. The proposed rule changes also describe the process ICE
Clear Europe follows when a CDS Committee-Eligible Clearing Member is
unable to take part in the CDS Default Committee. The proposed changes
also make various changes to the procedures clarifying the fact that
CDS Default Committee Members and participants are subject to
confidentiality requirements and that these participants have the
benefit of all exclusions and limitations of liability available to ICE
Clear Europe. Further, the CDS Policy changes clarify the detailed
resources available to CDS Default Committee Members necessary for
carrying out their functions.
Taken together, the Commission believes that these changes and
clarifications with respect to CDS Default Committee participation and
the process for when a CDS Committee-Eligible Clearing Member cannot
participate in the CDS Default Committee should allow ICE Clear Europe
to better ensure that the committee is comprised of participants who
possess the requisite knowledge and experience to assist in a default
management process. The Commission, in turn, believes that this should
help ICE Clear Europe more effectively manage defaults, ensuring
ICEEU's ability to continue functioning, thereby promoting the prompt
and accurate clearance and settlement of transactions.
For the reasons stated above, the Commission finds that the
proposed rule change is consistent with the Section 17A(b)(3)(F) of the
Act.\15\
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\15\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(e)(13)
Rule 17Ad-22(e)(13) requires that ICE Clear Europe establish,
implement, maintain and enforce written policies and procedures
reasonably designed, as applicable, to ensure ICE Clear Europe has the
authority and operational capacity to take timely action to contain
losses and liquidity demands and continue to meet its obligations by,
at a minimum, requiring its Clearing Members and, when practicable,
other stakeholders to participate in the testing and review of its
default procedures, including any close-out procedures, at least
annually and following material changes thereto.\16\
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\16\ 15 U.S.C. 17Ad-22(e)(13).
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As noted above, the proposed changes to the CDS Procedures would
define the requirements for Clearing Members to become eligible to
participate in the CDS Default Committee as well as the process for
addressing situations when parties postpone their participation will
ensure that the committee is staffed with appropriate representatives.
The Commission believes that these changes should help to ensure ICE
Clear Europe has the operational capacity to take timely action to
contain losses.
In addition, as noted above, the proposed rule change would revise
the CDS Default Management Policy to specify that it will engage in
testing and review of its default procedures at least quarterly and
perform simulation exercises as least annually, which is conducted in
coordination with its clearing members as well as internal stakeholders
such as the Clearing Risk Department, senior clearing house management,
and the CDS Default Committee. Further, the Policy would be amended to
state that these default tests would be planned to take into account
various scenarios that are tested and approved by the stakeholders,
including senior management. The Commission believes that this
additional detail regarding the testing of ICE Clear Europe's default
procedures would support ICE Clear Europe's ability to meet its
obligations through regular testing and review of its default
procedures with the requisite stakeholders.
For these reasons, the Commission finds that the proposed rule
change is consistent with Rule 17Ad-22(e)(13).\17\
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\17\ 15 U.S.C. 17Ad-22(e)(13).
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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 \18\ and Rules 17Ad-22(e)(3)(i) and (e)(13).\19\
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\18\ 15 U.S.C. 78q-1(b)(3)(F).
\19\ 17 CFR 240.17Ad-22(e)(3)(i) and (e)(13).
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\20\ that the proposed rule change, as modified by Partial Amendment
No. 1 (SR-ICEEU-2020-018), be, and hereby is, approved.\21\
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\20\ 15 U.S.C. 78s(b)(2).
\21\ 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.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-03493 Filed 2-19-21; 8:45 am]
BILLING CODE 8011-01-P
