Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing of Proposed Rule Change Relating to the Clearing Rules, Clearing Procedures, Finance Procedures, Delivery Procedures, CDS Procedures, Membership Procedures, Complaint Resolution Procedures and General Contract Terms, 29612-29623 [2021-11529]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 104 (Wednesday, June 2, 2021)]
[Notices]
[Pages 29612-29623]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11529]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92020; File No. SR-ICEEU-2021-010]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing of Proposed Rule Change Relating to the Clearing Rules, 
Clearing Procedures, Finance Procedures, Delivery Procedures, CDS 
Procedures, Membership Procedures, Complaint Resolution Procedures and 
General Contract Terms

May 26, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 13, 2021, ICE Clear Europe Limited (``ICE Clear Europe'' or the 
``Clearing House'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule changes described in Items I, II and 
III below, which Items have been prepared primarily by ICE Clear 
Europe. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    ICE Clear Europe Limited proposes to amend its Clearing Rules (the 
``Rules'') \3\ (including to the CDS Standard Terms, F&O Standard Terms 
and FX Standard Terms annexed thereto), Clearing Procedures, Finance 
Procedures, Delivery Procedures, CDS Procedures, Membership Procedures, 
Complaint Resolution Procedures and General Contract Terms 
(collectively, the ``Amended Documents'') to make various updates and 
enhancements.
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    \3\ Capitalized terms used but not defined herein have the 
meanings specified in the Rules.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, ICE Clear Europe included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. ICE Clear Europe has prepared summaries, 
set forth in sections (A), (B), and (C) below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

(a) Purpose
    ICE Clear Europe is submitting proposed amendments to the Amended 
Documents that are intended to make a variety of improvements and 
changes, including to (1) update various Rules and procedures to 
reflect current laws and regulations such as those relating to post-
default porting, capital requirements, and anti-money laundering 
requirements, (2) update various defined terms, (3) update certain 
product and Clearing Member termination rules, (4) update certain 
notice provisions, (5) clarify membership criteria and obligations for 
Clearing Members, (6) clarify how open contract positions are 
aggregated and netted, (7) update certain systems references to reflect 
current systems and delete obsolete references, (8) amend and clarify 
the Complaint Resolution Procedures, (9) update various provisions of 
the Delivery Procedures, (10) introduce a summary disciplinary process 
and clarify disciplinary processes and (11) make various other drafting 
improvements, clarifications and updates, in each case as described in 
further detail herein.
a. Removal of ``Default Portability Preference''
    Various amendments are proposed to remove the process whereby Non-
FCM/BD Clearing Members are able to deliver a ``Default Portability 
Preference'', with advance, pre-default, porting information to the 
Clearing House. This process and mechanism had been developed by ICE 
Clear Europe as part of its default planning processes prior to post-
crisis legislation such as EMIR coming into force. EMIR requires post-
default porting notices to be served as a pre-condition to porting, 
rendering the default portability preference structure to be of limited 
assistance. In addition, and in practice, ICE Clear Europe did not 
receive many notices of Default Portability Preferences. After EMIR, 
other clearing houses did not use or ceased to use such notices and 
potential transferee clearing members are often unwilling to commit to 
receive porting in advance. As part of default management planning and 
following default drills with industry participation, it was determined 
to remove this structure from the Rules. Various changes will be made 
to the Rules to remove references to pre-default Porting Notice and, 
where appropriate, replace these references

[[Page 29613]]

with post-default Porting Notices, as discussed herein.
    This proposal results in a number of proposed changes. In Rule 101, 
the definition of ``Default Portability Preference'' definition would 
be deleted. The related concept of ``Non-Transfer Positions'' in Rule 
101 would be deleted as this defined term would no longer be used 
following removal of the Default Portability Preference concept. A new 
definition of ``Porting Notice'' (which refers to a post-default 
indication of a porting preference) would be introduced in Rule 101, 
with a cross-reference to the existing definition of that term in the 
Standard Terms Annex.
    In Rule 904, which addresses procedures for post-default transfer 
of contracts and margin, various changes are proposed to implement the 
remove of Default Portability Preferences. Specifically, changes are 
proposed to Rules 904(g) and 904(j) to remove the references to Default 
Portability Preference and instead refer to the process around the use 
of Porting Notices. Rule 904(g) would be amended to state that consent 
to become a Transferee Clearing Member can only be evidenced in a 
Porting Notice where that Clearing Member has countersigned the notice 
or otherwise agreed in writing. This clarifies that simply being named 
by a customer as a potential Transferee Clearing Member is 
insufficient. The changes proposed at Rules 904(m), 904(p), 904(u) and 
904(w) reflect the deletion of the definition of Default Portability 
Preference.
    Related changes are proposed in Rule 907(d), which relates to the 
Clearing House's ability to rely on certain information provided to it. 
References to Default Portability Preference and Non-Transfer Positions 
have been deleted. Instead, in connection with porting the Clearing 
House will be entitled to rely on any information provided to it by a 
defaulter prior to declaration of default in respect of Contracts, 
Customer-CM Transactions, Margin and the Accounts in which Contracts 
and Margin were recorded or which relate to particular Customers or 
particular groups of Customers. This would allow the Clearing House to 
continue to be able to act efficiently in default scenarios, and be 
able to rely on more of the relevant information available to it in 
relation to the Defaulter. Amendments would also clarify that the 
Clearing House has no obligation to inquire of any person as to any 
Porting Notice.
    The CDS Standard Terms (paragraph 6), F&O Standard Terms (paragraph 
6) and FX Standard Terms (paragraph 6) would be amended to remove 
references to Default Portability Preferences and include reference to 
Porting Notices.
b. Introducing Consistency to the Definitions Relating to Energy 
Transactions
    A series of amendments are proposed to certain definitions relating 
to Energy transactions, simplifying and making such terms consistent 
with certain amendments previously made to definitions for other F&O 
Products.\4\
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    \4\ See Exchange Act Release No. 34-87275 (File No. SR-ICEEU-
2019-020) (Oct. 10, 2019), 84 FR 55649 (Oct. 17, 2019) (changes to 
definitions using the term Market).
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    Consistent with such prior amendments, in Rule 101, the ``Energy'' 
definition would be shortened to refer to the term ``Market'' rather 
than naming all specific ICE markets. New definitions would be 
introduced for ``Energy Matched Transaction'' (referencing an energy 
transaction conducted on a Market) and a revised definition of ``Energy 
Transaction'' would be added (covering an Energy Matched Transaction or 
an Energy Block Transaction meeting specified criteria). The changes 
are consistent with the approach used in the definitions of Financials 
& Softs Matched Transaction and Financials & Softs Transactions.
    The introduction to the General Contract Terms would similarly be 
amended to remove references to named ICE markets and instead use the 
more generic term ``relevant Market''.
c. EFRP (Exchange for Related Position) Definition Amendments
    Several changes to the Rules are proposed to address more clearly 
exchange for related position transactions (referred to as EFRPs) under 
applicable Market rules, including to revise defined terms and clarify 
that such transactions are available on exchanges for products other 
than soft commodities.
    In Rule 101, a new ``EFRP'' definition would be added, to be 
defined using a similar structure to that for EFP and EFS transactions. 
Also in Rule 101, in the ``EFS'' definition would be clarified to refer 
only to exchange for swaps or similar transactions under Market Rules 
and to remove an existing reference to exchange for related positions, 
which would now be covered by the EFRP definition. In the ``Financials 
& Softs Block Transaction'' definition, reference to ``Soft Commodity 
EFRPs'' would be widened to include all ``EFRP''s under all Market 
Rules, as Soft Commodity EFRPs are specific to ICE Futures Europe. This 
would be in line with the definitions for EFP and EFS transactions. 
Accordingly, the ``Soft Commodity EFRP'' definition (which is not 
otherwise used) would be deleted.
d. Amendments to Product Termination Rules
    Rule 105 would be amended to shorten the termination period 
(generally from four months to one month) for a service withdrawal for 
a product in circumstances in which there is no open interest in the 
relevant Set. In such circumstances, in ICE Clear Europe's view, a 
longer termination period is unnecessary, since no action is required 
by Clearing Members to close out their positions. Proposed amendments 
would also clarify that where a product termination occurs following 
actions of the relevant exchange (e.g., a de-listing), the notice 
period required under the exchange's rules would instead apply and the 
exchange would be responsible for providing such notice.
e. Amendments to the Termination Rules for Clearing Members
    Amendments are proposed to Rule 209(d) to facilitate membership 
terminations in the context of a corporate group reorganization where a 
new Clearing Member that is an Affiliate will be receiving the 
terminating Clearing Member's Open Contract Positions. The amendment 
would establish an exception to the requirement for terminating 
Clearing Members to immediately upon service of a Termination Notice 
pay to the Clearing House Assessment Contributions equal to three times 
the required relevant guaranty fund contribution. In ICE Clear Europe's 
view, such an exception is warranted since all positions would be 
received by an affiliated Clearing Member in good standing that would 
remain liable with respect to any obligations arising from or related 
to the holding of such positions under the Rules (including as to 
future Assessment Contributions).
    Rule 209(d) would be further amended to clarify that references in 
the Clearing Rules to Assessment Contributions being called or to 
Guaranty Fund Contributions being replenished or applied, where the 
Clearing Member has provided Permitted Cover to the Clearing House 
(whether under Rule 209(d) or prior to the Clearing Member serving its 
termination notice or the Termination Date), would be interpreted as a 
reference to that Permitted Cover being applied. The new reference to 
Permitted Cover which has been provided prior to the serving of a 
termination notice or a Termination Date would clarify that, as is 
currently intended, the Cover

[[Page 29614]]

provided at that earlier stage could also be included as part of, for 
example, any applications of Guaranty Fund by the Clearing House under 
Part 9 or Part 11.
    Further amendments to Rule 209(d) would clarify for the avoidance 
of doubt that the following obligations would apply to a terminating 
Clearing Member until Open Contract Positions have been closed, the 
Termination Date has passed and all Guaranty Fund Contributions have 
been returned under Rule 1102(g): Application of Guaranty Fund 
Contributions, application of Assessment Contributions (to the extent 
paid under Rule 209(d) or otherwise prior to the Termination Date), 
position limits under Part 6, disciplinary actions under Part 10 and 
the declaration and consequences of an Event of Default under Part 9 of 
the Rules. This amendment is not intended to change the current 
requirements under the Rules, but rather to state those requirements 
more clearly in a single provision and thereby facilitate the Clearing 
House's enforcing its rules during a termination period.
    The proposed amendments to Rule 209(d) overall reflect the Clearing 
House's experience with both default planning and recent Clearing 
Member terminations involving group reorganizations.
f. Notice Provisions
    These proposed changes are designed to clarify and provide greater 
flexibility as to delivery of notices under the Rules. The changes have 
been informed by default simulation planning and in particular the 
requirements around default notices under Rule 901, but are not limited 
to that context. Rules 113(a) and 113(a)(i) would be amended to delete 
the references to telephone as a valid mode of service of notices 
(since this is not supported operationally) and to replace it with 
email. The email address last notified to the Clearing House by a 
Clearing Member would become an option for service of notices. The 
addition of new Rule 113(a)(ii) would clarify that the Clearing House 
may also validly deliver notices to a process agent nominated by the 
Clearing Member to act as its agent. Rule 113(e) already referred to 
such agents for service of process, and would be expanded to explicitly 
refer to service of other contractual notices and communications. A 
further change to Rule 113(a) clarifies that delivery in accordance 
with this section would be deemed made to the Clearing Member or 
Sponsored Principal (also if made to an agent appointed by the Clearing 
Member or Sponsored Principal).
    Rule 113(c) and 113(d) would be amended to clarify the precise time 
when effective service is deemed to be made for communications by fax, 
email and courier, and that effective service and delivery can be 
achieved outside of opening hours on a business day, consistent with 
current operational practices.
    Rule 1901(n) is similarly proposed to be amended to make clear that 
process agents for Sponsored Principals will act as agents for service 
of process of any notice, order or other communication under the Rules 
and the Sponsored Principal Agreement.
    To conform to the Rules, amendments to paragraph 4.2E of the 
summary table at paragraph 4.2 of the Membership Procedures would 
provide that termination of a Clearing Membership Agreement or 
membership as a Clearing Member would become effective no less than 30 
Business Days after the date of the Termination Notice Time or pursuant 
to Rule 917(c) instead of no less than three months' advance notice if 
termination is not for cause and otherwise as specified in and allowed 
pursuant to the Rules.
    Additionally, updates would be made throughout the summary table at 
paragraph 4.2 of the Membership Procedures to the email address to 
which Clearing Members should send certain notifications.
g. Clarifying Clearing Membership Criteria and Clearing Member 
Obligations
    Rule 201(a)(ix) would be amended to reference that under existing 
Rule 201(b), the Clearing House may require that potential Clearing 
Members enter into additional annexes or agreements to the Clearing 
Membership Agreement in order to be, and remain, eligible for Clearing 
Membership. Some such annexes have had to be developed to cater for 
local law issues arising in certain EU member states as part of 
Clearing Members' post-Brexit group legal structuring. This change 
would clarify the basis in the Rules for the Clearing House to require 
such additional documentation to be executed, where necessary.
    Rule 202(a)(xxii) would be amended to extend the requirement for 
Clearing Members to have competent persons accessible to the Clearing 
House, to also include two hours prior to the start of the business 
day. This is consistent with current operational practice and is 
necessary to ensure that staff are available to process and deal with 
queries in relation to morning margin calls.
    New Rule 301(o) would allow the Clearing House to request 
information when needed on account balances of nominated accounts of 
the Clearing Member at financial institutions, including for the 
purpose of calling on available cash where the Clearing Member has 
failed to meet a payment obligation or determining whether the Clearing 
Member is or is likely to be in default. This change would address 
issues that have arisen in practice where payment banks have refused to 
provide such information to the Clearing House. This consent, as part 
of the Rules, should promote the sharing of this important information.
h. Greater flexibility in Financial Reporting by Clearing Members
    It is proposed that Rule 205(a)(ii) be amended to give the Clearing 
House greater flexibility to accept different kinds of financial 
statements (for example, semi-annual accounts) from Clearing Members as 
part of their financial reporting obligations, in circumstances where 
that Clearing Member does not produce a quarterly financial statement 
for its regulators. This amendment would also result in a conforming 
change to the summary table at paragraph 4.2 of the Membership 
Procedures.
    The amendment would formalize current operational practice for 
those Clearing Members who do not draw up regulatory quarterly 
financials and means that the basis for accepting such reporting would 
be set forth in the Rules rather than pursuant to a separate 
arrangement, increasing transparency.
    In addition, Rule 205(a)(ii) as well as the summary table at 
paragraph 4.2 of the Membership Procedures would be amended to change 
the deadline for submitting financial statements from 30 to 45 days 
after the relevant period so that the deadline aligns with other 
regulatory reporting deadlines (for example, the FCA deadlines).
i. Clarifying CDS Contract Formation
    Rule 401(o) would be amended to make clear that where a CDS 
Contract of a Non-FCM/BD Clearing Member for a customer account arises 
pursuant to Rule 401, a Customer-CM CDS Transaction arises between the 
Customer and the Non-FCM/BD Clearing Member at the same time as the 
Contract. The current rule does not specify the timing of the Customer-
CM CDS Transaction, and the amendment would reflect the equivalent rule 
for F&O in Rule 401(n) and eliminate an unintended drafting 
distinction.

[[Page 29615]]

j. Clarifying How Open Contract Positions Are Aggregated and Netted
    The proposed amendments at Rule 406(b) and (c) address contractual 
netting for F&O contracts. The proposed changes would align the 
provisions for F&O Contracts more closely with the corresponding rule 
on contractual netting for CDS contracts in Rule 406(d) et seq.
    In particular, the changes would address aggregation of open 
contract positions of an F&O Clearing Member in addition to netting of 
such positions, and would clarify that the process for aggregation or 
netting takes place via contractual novation.
k. Clarifying How the Clearing House May Amend Contract Terms
    It is proposed that Rule 409(a) be amended so that the Clearing 
House can evidence its consent to amendments, waivers and variations of 
the Contract Terms by way of Circular. This has been the usual way of 
issuing such amendments, waivers and variations, and would conform the 
Rules with operational practice.
l. Pledged Collateral Not for Settlement Payments
    It is proposed that Rule 1603(c) be amended to clarify that only 
``original'' or ``initial'' types of Margin payments be provided in the 
form of Pledged Collateral, and that such collateral excludes Variation 
Margin, Mark-to-Market Margin and FX Mark-to-Market Margin, which is 
provided to or by the Clearing House by outright transfer of cash as a 
settlement payment. The change is intended to be consistent with 
amendments previously made to the Rules to clarify that such variation 
and mark-to-market margin are settlement payments rather than 
collateral, and was inadvertently omitted from such prior 
amendments.\5\
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    \5\ Exchange Act Release No. 34-88665 (File No. SR-ICEEU-2020-
003) (Apr. 16, 2020), 85 FR 22892 (Apr. 23, 2020).
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m. Hedging Following an Event of Default
    Rule 903(c) would be amended to clarify that the Clearing House's 
right to authorize hedging transactions in a Default scenario would 
include transactions on a Market, any other Exchange or over the 
counter. The amendments would also provide that such transactions 
taking place on an exchange which is not a Market, or where requested 
or directed otherwise by the Clearing House, need not themselves be 
cleared. These amendments come out of default event simulations and 
planning.
n. Affiliate Cross-Defaults
    It is proposed that Rule 901(a)(iv) be amended to clarify that the 
declaration of an Event of Default in respect of one Clearing Member is 
a circumstance in which the Clearing House can declare an Event of 
Default in respect of another Clearing Member that is a Group Company. 
In the Clearing House's view, this is the effect of Rule 901(a) as it 
stands already, but the Clearing House has decided to clarify this 
expressly in light of questions raised in default planning exercises.
o. ``Eligible Contract Participant'' Status
    Rule 201(a)(xx) would be amended to provide that the requirement 
that a Clearing Member be an ``eligible contract participant'' \6\ only 
applies if it is to be a CDS Clearing member or an FX Clearing member. 
Such status would not be required under U.S. law for a Clearing Member 
that is only an F&O Clearing Member. The amendment reflects that such 
status is required under applicable U.S. law for persons that trade 
swaps and security-based swaps (such as CDS), but not for futures.\7\ 
Section 10 of the F&O Standard Terms would for similar reasons be 
amended to remove a requirement that an F&O Clearing Member and 
Customer be an eligible contract participant. Rule 1901(b)(xv) would 
also be amended to provide that the requirement that a Sponsored 
Principal be an eligible contract participant only applies in relation 
to CDS Contracts and FX Contracts.
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    \6\ Commodity Exchange Act Section 1a(18), 7 U.S.C. 1a(18).
    \7\ See Section 6(l) of the Act, 15 U.S.C. 78f(l); Commodity 
Exchange Act Section 2(e), 7 U.S.C. 2(e).
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p. Corrected Names of Internal Risk Committees
    It is proposed that Rule 916(d) be amended to change the term 
``Risk Committee'' to ``relevant product risk committee''. This 
reflects that there are different product risk committees addressing 
topics specific to F&O and CDS which take on this role. The Risk 
Committee established under EMIR has different competencies. The 
changes clarify and align the Rules to current Clearing House 
governance processes.
    In the Finance Procedures paragraph 14(2) and 14(3), reference to 
the CDS Risk Committee and FX Risk Committee would be corrected to 
``CDS Product Risk Committee'' and ``FX Product Risk Committee'' to 
reflect the correct committee names. The same change would be made 
throughout the CDS Procedures where ``CDS Risk Committee'' is currently 
used.
q. Amendments to Complaint Resolution Procedures
    Various clarifications and amendments are proposed throughout the 
Complaint Resolution Procedures.
    Paragraph 1.1 would be amended to reframe the Complaint Resolution 
Procedures based on ICE Clear Europe's obligations as a CCP under 
EMIR.\8\
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    \8\ As a result of ICE Clear Europe Circular C20/163, this 
reference to EMIR is to be interpreted as including a reference to 
EMIR as applicable in the United Kingdom under the European Union 
(Withdrawal) Act 2018. See Exchange Act Release No. 34-90746 (File 
No. SR-ICEEU-2020-016) (Dec. 21, 2020), 85 FR 85704 (Dec. 29, 2020).
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    Throughout the procedures, the term ``Complaints Resolution 
Procedure'' would be replaced with ``Complaint Resolution Procedures'' 
to correct a typographical error and for consistency with the term used 
in Rule 101.
    Paragraph 1.1 would be amended to use the defined term ``Person'' 
(which is defined in Rule 101) rather than ``person''. This would be 
reflected as a global change throughout the Complaint Resolution 
Procedures. Further amendments in paragraphs 1.1 and 1.2 would be made 
to provide for an independent ``Commissioner,'' who is responsible for 
the investigation of complaints generally, and for the appointment of 
an ``Investigator'' to investigate a particular complaint. Minor 
drafting updates would be made in paragraph 1.3 to improve clarity.
    Additional drafting changes throughout the procedures would be made 
to refer where appropriate to ``Eligible Complaint'' instead of 
complaint. This would clarify that only Eligible Complaints (and not 
other complaints) would be subject to this process. As a result, the 
defined term ``Complaint'' has been replaced globally by the undefined 
term ``complaint'', to allow a distinction between complaints generally 
speaking and those that qualify as ``Eligible Complaints'' within the 
scope of the procedures.
    The definition of ``Eligible Complaints'' in paragraph 2.1 would be 
broadened to include complaints against any Directors, officers, 
employees or committees (or committee members) of the Clearing House, 
which ICE Clear Europe believes is the proper scope for the Complaint 
Resolution Procedures. The amendments would also clarify that Eligible 
Complaints may relate to the manner in which the Clearing House has 
failed to perform applicable regulatory functions.

[[Page 29616]]

    Minor drafting amendments would be made in paragraph 2.2 to correct 
typographical errors and use of defined terms.
    Paragraph 3.6 would be amended to include ``investigation of the'' 
before ``Eligible Complaint'' for drafting clarity.
    A drafting improvement would be made in paragraph 4.1 to clarify 
that acknowledgment of the complaint by the Clearing House must be made 
promptly, and in any case within 5 Business Days of receipt.
    New paragraph 4.2 would be added to allow the Clearing House to 
refer complaints to another recognized body or authorized person where 
they consider that such entity is entirely or partly responsible for 
the subject matter of the complaint. For example, a complaint might 
better be administered by an exchange for which the Clearing House 
clears. New paragraph 4.3 would be added to set out the process whereby 
the Clearing House would be able to refer such a complaint. The 
amendments are intended to clarify existing procedures, and avoid a 
situation where the Clearing House would be forced to address a 
duplicative complaint or a complaint better handled by another entity.
    Paragraph 4.4 would be amended to correct minor typographical 
errors.
    The amendments to paragraph 4.5 would clarify that the Investigator 
must be an individual who has no personal interest or involvement in 
the matter of the Eligible Complaint. The amendments to that paragraph 
would also make typographical corrections and similar drafting 
improvements.
    Paragraph 4.7 would be amended to make clear that the Investigator 
would not be required to disclose any information about the 
Complainant's identity when drafting their report of the Eligible 
Complaint. This paragraph would also be amended to correct minor 
typographical errors and to update cross-references.
    Paragraph 4.8 would be amended to include delivery disputes and 
appeals in the list of potential ongoing matters that could warrant 
delay in the consideration of an Eligible Complaint. A similar change 
would also be made in paragraph 4.12. Certain typographical errors 
would also be corrected.
    Paragraph 4.11 would be amended to clarify that where the Clearing 
House objects to the referral of a complaint to the Commissioner under 
specified circumstances (such that the Clearing House can conclude its 
own investigation), it must submit to the Commissioner the reasons for 
that determination. Several cross-references in the paragraph would 
also be updated.
    Paragraph 4.12 would be amended to expand the list of ongoing 
matters that would justify delay in the Commissioner's consideration of 
an Eligible Complaint to be consistent with the list at paragraph 4.8, 
and also reference other processes under Part 10 of the Rules.
    Paragraph 4.14 would be amended with minor non-substantive drafting 
improvements.
    Paragraph 5 would be amended to clarify that the Investigator 
recommends rather than takes remedial action himself.
    Paragraph 6.3 would be amended to add ``appeal process'' to the 
list of dispute resolution procedures that a Complainant cannot use if 
it requires the referral of any Eligible Complaint to the Commissioner 
pursuant to the Complaint Resolution Procedures. Reference to 
``mediation'' has also been deleted (as unnecessary in light of the 
other listed types of dispute resolution).
    Paragraph 7.2 would be amended to clarify that the Commissioner 
does not have to continue investigating a complaint if the complaint is 
not an Eligible Complaint. Paragraph 7.3 would be amended to make clear 
that the Commissioner would only be required to produce a final 
response where the complaint is an Eligible Complaint.
    Paragraph 7.6 would be amended to ensure that the Commissioner has 
access to all relevant personnel (including directors, officers and 
other persons to whom functions have been outsourced) that may be 
needed for the purposes of the Eligible Complaint.
    Paragraph 7.8 would be amended to obligate the Clearing House to 
inform the Complainant of an alternative Commissioner, when one is 
appointed, within five Business Days of the date of appointment.
    Paragraph 8.1 would be amended to state explicitly that the 
Clearing House is required to consider the Commissioner's report and 
recommendations, in addition to informing the Commissioner of any 
proposed steps it would take in response to the report and 
recommendations. Certain other non-substantive drafting clarifications 
would be made as well.
    Paragraphs 8.2 and 8.3 would be amended to correct typographical 
errors.
    Paragraph 11 would be amended to include the Investigator as a 
person subject to the confidentiality obligations with respect to the 
complaint, and make certain drafting clarifications.
r. Amendments to CDS Procedures Relating to List of Eligible Single 
Name Reference Entities
    Paragraph 11.4 would be amended such that the Clearing House be 
required to update certain relevant information relating to CDS 
Contracts on its website after making certain updates relating to 
Permitted Single Name Fixed Rates and Eligible Single Name Reference 
Entities instead of giving notice by Circular of such actions.
s. Amendments to CDS Procedures To Allow Clearing Members To Nominate 
Affiliates
    Paragraph 4.4(f) of the CDS Procedures would be amended to clarify 
that CDS Clearing Members could designate an Affiliate that is also a 
CDS Clearing Member to accept CDS Contracts in lieu of it for CDS 
Contracts arising as a result of the existing CDS end-of-day pricing 
process pursuant to Rule 401(a)(xi).
    A similar same change would be made at paragraph 11.5, to allow 
designation of an Affiliate to accept transactions arising out of the 
existing auction process to be used in the case of self-referencing CDS 
transactions. This reflects existing practice for CDS Clearing Members, 
as documented in certain arrangements between the Clearing House and 
certain CDS Clearing Members allowing this to take place, but was 
unintentionally omitted from the CDS Procedures.
t. Clarifications to CDS Clearing Member Sign Off of Weekly Cycles
    It is proposed that new paragraph 3.5 be added to the CDS 
Procedures to require CDS Clearing Members to provide sign off via 
email on weekly cycles by the time specified by the Clearing House. 
This change would document existing operational processes.
u. Adjustments to Clearing Member Capital Requirements
    It is proposed that paragraph 3.5(a) of the Membership Procedures 
would be amended to lower, from 50% to 25%, the portion of a Clearing 
Member's Capital requirement that may be covered by subordinated loans 
before the Clearing House would require a written undertaking from the 
Clearing Member to not repay subordinated loans without the consent of 
the Clearing House. This change would align the Clearing Member capital 
requirement more closely with Basel III requirements. The Basel II 
standard for ``tier 2'' instruments was set at 50% of total capital, 
i.e., Tier 2 capital including

[[Page 29617]]

certain subordinated debt instruments could be of an amount equal to 
tier 1 (essentially share capital) (Section B, Annex 1a, Basel II). 
This was changed in Basel III (LEX 20.1) to involve greater 
restrictions on the usage of subordinated debt in general subject, 
where subordinated debt may be used, to an upper limit of 25%. This 
proposed change in capital requirements promotes greater consistency 
with its existing operational implementation of capital requirements 
for Clearing Members, albeit remaining more liberal than Basel III. All 
of the Clearing Members are located in countries which have implemented 
Basel III and this change is not considered to be material for any of 
them, whilst at the same time making the Clearing House's capital 
requirements more robust.
    It is further proposed that paragraph 3.5 of the Membership 
Procedures would be amended to remove irrevocable letters of credit as 
a potential method that Clearing Members or Sponsored Principals may 
use to satisfy capital requirements. Instead, the Clearing House could, 
at its discretion, require a Clearing Member to post additional cash or 
collateral in addition to the normal margin requirements pursuant to 
the amendments.
v. Replacement of Prospectus Directive
    Amendments are proposed to Part 1501 of the Rules to change the 
definition of ``Prospectus Directive'' to ``Prospectus Regulation'' as 
the EU Prospectus Directive has been repealed and replaced with the 
Prospectus Regulation. Conforming changes would be made to the 
definitions of ``Offer to the Public'', ``Relevant Member State'' and 
``Securities''. The definition of ``2010 PD Amending Directive'' (and 
references thereto) would be deleted as this is also no longer in 
force. Conforming changes would be made in Rule 1503 to remove obsolete 
legislative references.
w. Changes to Clearing Member Account Requirements
    Amendments to the Finance Procedures in paragraphs 4.1(a)(i) and 
(iv) and 4.4(a)(i) and (iv) are proposed to the account requirements 
for members to reflect that ICE Clear Europe clears both EUR and USD 
denominated CDS contracts and as such all CDS Clearing Members are 
required to have both EUR and USD accounts (and need not have a GBP 
account).
x. Updates for Changes to Applicable Anti-Money Laundering Law
    Amendments are proposed in Rule 101 to update the definition of 
``Money Laundering Directive'' to reflect the implementation of the 
fifth EU Anti-Money Laundering Directive. A definition of ``Money 
Laundering Regulations'' is also proposed to be added to the rules to 
reference the applicable UK regulations corresponding to that Directive 
(including after its exit from the European Union).
    In Rule 201(a)(xxix) and 1901(d)(xi), the reference to `simplified 
due diligence' is proposed to be removed. This reflects the repeal and 
restatement of the former U.K.'s Money Laundering Regulations 2007 
pursuant to the Money Laundering, Terrorist Financing and Transfer of 
Funds (Information on the Payer) Regulations 2017, which removed 
simplified due diligence as the default option for a defined list of 
entities and replaced this with a discretion on in-scope firms to apply 
risk-based levels of due diligence.
    Rule 201(a)(xxxi) is proposed to be amended to include anti-money 
laundering laws to the list of applicable laws that are required to be 
acceptable to the Clearing House in a jurisdiction for Clearing 
Members.
    New Rule 201(a)(xxxiii) is proposed to be added to require Clearing 
Members to have adequate policies, procedures, systems and controls 
relating to Applicable Laws, including relating to anti-money 
laundering and the prevention of financial crime.
    Amendments are proposed to Rules 202(a)(xii) and 1901(m) to update 
relevant references to relevant laws, clarify that the Clearing Member 
is required to make certain representations and warranties to the 
Clearing House with respect to the matters in those subsections, 
require the Clearing Member to have the necessary authority from 
customers and others to disclose the necessary information about 
beneficial owners in order to comply with requirements under Applicable 
Laws, and to retain copies of documents required to be retained under 
anti-money laundering laws.
    A similar amendment is proposed to Rule 1607(g) to require FCM/BD 
Customers to also obtain the authority from ``beneficial owners'' to 
disclose information to the Clearing Member and Clearing House 
necessary for anti-money laundering due diligence.
    Similar amendments are also proposed to the CDS Standard Terms 
3(q), F&O Standard Terms 3(r) and FX Standard Terms 3(q) to require 
Customers to obtain the necessary authority from beneficial owners to 
make disclosure to the Clearing Member and Clearing House necessary for 
anti-money laundering due diligence.
    A new paragraph 1.1(d) of the Delivery Procedures would obligate 
Clearing Members to conduct appropriate AML due diligence for any 
transferors/transferees and provide relevant documentation to the 
Clearing House and/or Clearing Member. The amendments at paragraphs 5.4 
and 5.5 of the Delivery Procedures would clarify that transferors and 
transferees that are customers would be bound by the F&O Standard 
Terms, including with respect to delivery of information, and also 
clarify that transferors/transferees are not customers of the Clearing 
House for purposes of relevant anti-money laundering laws and other 
Applicable Law.
y. Amendments To Reflect Updates to ICE Clear Europe Systems
    New definitions of ``ECS'', ``MFT'', ``ICE FEC'' and ``MPFE'', 
reflecting various existing ICE Clear Europe systems, are proposed in 
the Delivery Procedures so that there is consistent usage across the 
Procedures.
    An amendment is proposed to Clearing Procedures paragraph 1.1(a) as 
the referenced PTMS/ACT systems are legacy systems no longer used by 
the Clearing House, and have been replaced with ICE FEC.
    Amendments are proposed to Clearing Procedures paragraphs 1.1(f) 
and 3.1(c) to remove the definitions of MFT and ECS as these terms 
would now be defined in the Delivery Procedures.
    Similar amendments are proposed to Finance Procedures paragraphs 
3.10, 3.11, 3.21 and 4.5 to ensure that the use of defined term ``ECS'' 
is consistent.
z. Clarifications Relating to Negative EDSP
    The definition of ``Exchange Delivery Settlement Price'' in Rule 
101 would be amended to clarify, for the avoidance of doubt, that the 
EDSP can be positive, negative or zero.
    Rule 703(b) would be revised to clarify the process for payment 
obligations if the EDSP is a negative number.
aa. Clarification to the Finance Procedures
    Amendments are proposed to paragraph 6.1(i)(ix) of the Finance 
Procedures to clarify that the additional margin requirement that 
applies where payment of variation or mark-to-market margin is made in 
a currency other than the contractual currency would apply on a 
Currency Holiday. This reflects current Clearing House practice.

[[Page 29618]]

bb. Amendments to Delivery Procedures
    Various changes are proposed to the Delivery Procedures to update 
provisions to update various operational practices and make other 
drafting improvements.
    It is proposed that a new paragraph 7 be added to the Delivery 
Procedures to reference the alternative delivery procedure for Emission 
Contracts as set out in paragraph A.7 of the Delivery Procedures. 
Subsequent paragraphs would be renumbered and conforming amendments to 
cross-references would be made.
    Various changes would made throughout to remove references to the 
legacy ICE System Crystal, and update this to refer to ECS, MFT and ICE 
FEC which are the systems now used by the Clearing House. Similarly, 
changes are proposed to delete Delivery Documentation Summaries and 
form references where ECS has replaced the manual submission of forms 
to the Clearing House. These changes are made throughout the Delivery 
Procedures, including in relation to ICE Gasoil Futures (in Part B), 
and ICE Futures UK Natural Gas Contracts (in Part D), ICE Endex TTF 
Natural Gas Contracts (in Part F), ICE Endex Gaspool Natural Gas 
Contracts (in Part G), ICE Endex NCG Natural Gas (in Part H), ICE Endex 
ZTP Natural Gas Contracts (in Part I), ICE Deliverable US Emissions 
Contracts (in Part N), Financials & Softs White Sugar Contracts (in 
Part Q), Financials & Softs Gilt Contract (in Part U) and Equity 
Futures/Options (in Part Z).
    In Part A (ICE Deliverables EU Emissions Contracts), references to 
``Account'', which is no longer a defined term in the Delivery 
Procedures, would be corrected to reference the defined term, 
``Registry Account''. The defined term, ``Contract Date'', would be 
amended such that it would no longer include a Business Day on which 
the Delivery Period commences for those trades executed on a Business 
Day. Section 9.3 would be deleted as unnecessary as Part A no longer 
references auction contracts.
    Also in Part A, the procedures following the entry into an EADP 
Agreement by a Clearing Member and the Clearing House would be amended 
such that the existing Contract would no longer be liquidated, but 
instead dealt with in the manner specified in the EADP. If the existing 
Contract were to be liquidated under the EADP, this would be done on 
the basis of the Exchange Delivery Settlement Price. Delivery under the 
EADP Agreement would be subject to the requirements set out in the 
entirety of paragraph 7 instead of just paragraph 7.3. The amendments 
would provide that the Clearing Members and Clearing House would have a 
reasonable period of time after the Failed Delivery to enter into an 
EADP Agreement or effect delivery under EADP instead of only until the 
close of business on the Business Day following the day of the Failed 
Delivery before the Clearing House refers the matter to the relevant 
exchange. Pursuant to the amendments, the Clearing House would also 
consider what reasonable next steps it should take. The Clearing House 
could decide to take one of the listed steps, but pursuant to the 
amendments would not be limited by the list and would not be required 
to Invoice Back affected Contracts.
    Part M (ICE Endex German Power Futures) would be deleted as these 
contracts have been delisted from the relevant exchange.
    In Part N, outdated references to ICE OTC Contracts would be 
deleted.
    In Part U, new provisions relating to failed settlement and non-
delivery of securities under a Financials & Softs Gilt Contract would 
be added, including as to the steps the Clearing House can take to 
promote settlement in accordance with the contract terms and the 
requirements of the CREST central securities depository and allocation 
of the costs of such steps to the Clearing Member that failed to make 
delivery. These changes are intended to reflect existing practices and 
provide consistency with provisions of the Delivery Procedures for 
other contracts, including Part Z.
    In Part Z, relating to Equity Futures and Options, various updates 
would be made to reference the correct settlement facilities and 
relevant settlement details and settlement procedures. The treatment of 
corporate events relating to underlying securities would be clarified 
through reference to the relevant Exchange corporate action policy. 
Provisions dealing with failed deliveries and partial deliveries would 
also be clarified, including as to the steps the Clearing House may 
take to facilitate delivery, the rights and responsibilities of the 
buying clearing member with respect to onward deliveries under other 
contracts and the allocation of costs to clearing members. The buying-
in timetable would also be clarified. Other typographical corrections 
and similar drafting clarifications would be made throughout Part Z.
    In the first table in Part FF, with respect to the receipt of 
documents by the Clearing House, the statement that in the event of 
non-availability of any of the listed delivery documents, Seller may 
substitute a letter of indemnity in favor of the Buyer would be 
removed.
    Various other typographical corrections and updates to use of 
defined terms and cross-references are made throughout the Delivery 
Procedures.
cc. Introduction of a Summary Disciplinary Process and Other 
Disciplinary Process Updates
    Amendments would be made to the Rules to introduce a summary fining 
power for the Clearing House (in line with other ICE exchanges for 
which ICE Clear Europe provides clearing services) and to make certain 
minor drafting improvements to the disciplinary process provisions of 
the Rules. The intention behind these provisions is to introduce a more 
streamlined sanctioning process for clear-cut and minor rules 
violations, examples of which are cited in the rule itself and 
discussed further below, rather than having these subject to the formal 
and more cumbersome proceedings of a disciplinary committee.
    In Rule 101, the definition of ``Appeal Panel'' would be amended to 
include reference to the new Summary Disciplinary Process. Also in Rule 
101, a new definition of ``Summary Disciplinary Process'' would be 
introduced.
    A minor amendment is proposed to Rule 102(j) to refer to new Rule 
1008 in the context of disciplinary proceedings under the Rules. An 
amendment is proposed to Rule 102(p) to clarify that Disciplinary 
Panels, Summary Disciplinary Committees and Appeal Panels are also able 
to exercise discretion in the same way as the Clearing House.
    Amendments are proposed to 1002(i) and 1003(b) to make reference to 
the new Summary Disciplinary Process. In 1005(c), the word 
``exclusive'' would be deleted in relation to discretion, as Rule 
102(p) now governs this matter.
    New Rule 1005(g) would be added to make clear that Rule 1005 
applies as the appeal process for the Summary Disciplinary Process.
    Proposed Rule 1008 would be introduced to set out the new summary 
disciplinary process against a Clearing Member, clarifying the 
situations in which these new Rules apply, the sanctioning power of the 
Summary Disciplinary Process and the process by which the Summary 
Disciplinary Process would be conducted. The Summary Disciplinary 
Process may be applied in relation to: The late filing or submission of 
any document, notice or information; the late making of any payment; 
any failure to record a

[[Page 29619]]

Contract in the correct Account; the late making or taking of any 
delivery; any breach of Rule 202(a)(xix) (participation in default 
management simulations, new technology testing and other exercises); 
any breach of Rule 503(g) (the submission of end-of-day prices relating 
to Sets of CDS Contracts required of Clearing Members to aid in the 
establishment of Mark-to-Market Prices); any breach of a position limit 
under Part 6 of the Rules; any breach of any provision of the Rules or 
Procedures considered by the Clearing House to be of a factual nature 
where the Clearing House holds sufficient evidence of such facts; any 
breach of any provision of the Rules or Procedures considered by the 
Clearing House to be minor in nature; or any breach of the Rules or 
Procedures which the Clearing House considered would be appropriately 
addressed by the Summary Disciplinary Process.
    Sanctions pursuant to proposed Rule 1008 would be limited to the 
following: Issuance of a private warning or reprimand naming the 
Clearing Member or a Clearing Member Customer, client or 
Representative; a fine of up to [pound]50,000; or any combination of 
the foregoing.
    Proposed Rule 1008 would also specify the process of imposing any 
sanction, including the notice process by the Clearing House, the 
opportunity for a Clearing Member to appeal, the grounds for appeal and 
the actions the appeal panel may take (i.e., to affirm, vary or revoke 
a sanction). It would also allow the Clearing House to provide further 
guidance by way of Circular in relation to the operation of the Summary 
Disciplinary Process.
dd. Other Proposed Drafting Enhancements and Improvements
    A number of other drafting enhancements, clarifications and 
improvements are proposed.
    This includes a number of amendments to the definitions in Rule 
101. A new definition of ``Acceptance Time'' would be added. The 
definition is consistent with the definitions currently in the CDS 
Procedures and FX Procedures, and would be added to the Rules for 
clarity given that the term is used in the Rules, e.g., Rule 1204 and 
also in paragraph 10 of Standard Terms annexes.
    In the definition of ``Applicable Law'', a reference to ``the 
FSMA'' would be added. This important piece of UK legislation for CCPs, 
such as ICE Clear Europe, was unintentionally omitted from the 
``Applicable Law'' definition.
    In the ``Clearing Organisation'' definition, a reference to 
``securities clearing agency'' would be added, to ensure that the 
defined term includes securities clearing agencies regulated by the 
SEC.
    In the ``Defaulter'' definition, amendments would clarify that the 
defined term refers to a person in respect of whom an Event of Default 
has occurred, rather than a person in respect of whom a Default Notice 
has been issued.
    A new definition of ``FINRA'' referencing the U.S. Financial 
Industry Regulatory Authority, the self-regulatory body of several US 
clearing members, would be added. The term is currently used but in the 
definition of Regulatory Authority, but is not defined.
    The definition of ``Original Margin'' would be amended to clarify 
that buyer's security, seller's security and delivery margin would all 
be included.
    The ``Regulatory Authority'' definition would also be updated to 
include reference to ``National Futures Association'', a self-
regulatory body in the U.S. which supervises several clearing members.
    The definition of ``Rule Change'' would be amended expressly to 
include changes to the Contract Terms. Rule 109(b)(vii) and (viii) and 
109(k) already assume that the definition ``Rule Change'' covers 
changes to Contract Terms, but the definition itself is inconsistently 
narrower. The cross reference to Rule 109 would be clarified to reflect 
that it is not the sole provision governing the process for Rule 
Changes.
    In the definition of ``Segregated Customer'', typographical 
corrections would be made.
    The definitions of ``Transferee'' and ``Transferor'' would be 
revised to clarify that the subject of a transfer or delivery is a 
Deliverable (as defined in the Rules).
    Rule 201(a)(v) is proposed to be amended to correct an erroneous 
use of the singular ``Contract'' when the plural ``Contracts'' should 
be used.
    Rules 304(a)(ii)(A), 304(a)(ii)(B) and 1901(e) would be amended to 
correctly reference the term ``Nominated Bank Account''.
    A clarification is proposed to Rule 401(g) to reflect that under 
existing practice and as stated and assumed elsewhere in the Rules 
(e.g., Rule 906, Clearing Procedures), Clearing Members can have 
multiple Proprietary Position Accounts.
    Rule 406(a) would be amended to remove an erroneous reference to 
the legacy term ``Clearing Processing System'' and replace it with the 
correct defined term ``ICE System''.
    Rule 904(b) would be amended to correct the use of an incorrect 
term ``Market-to-Market Value'' to the correct definition ``Mark-to-
Market Price''. A change would similarly be made at Rule 905(g) to 
delete a reference to ``Market-to-Market Value'' as well as the unused 
term Reference Price.
    An amendment is proposed to Rule 905(b)(ix) to reflect that there 
may be multiple Defaulters rather than just one.
    Amendments to Rule 908(i) would correct typographical errors and an 
incorrect cross-reference.
    Rule 908(ii) would be amended to reflect that the applicable 
modifications would be set out in the Default Auction Procedures as 
opposed to a Circular.
    In the definition of ``MTM/VM'' in Rule 913(a)(xxxi), amendments 
would be proposed to reflect that MTM/VM is transferred to rather than 
held as a deposit by the Clearing House.
    The definition of ``Product Termination Amount'' in Rule 
913(a)(xxxviii) is proposed to be deleted as this term is already 
defined in Rule 916.
    A minor amendment is proposed to Rule 913(a)(lviii) to clarify for 
the avoidance of doubt that amounts payable in respect of transfers are 
included in the definition of ``Transfer Cost''.
    A correction would be made to Rule 915(e) to refer to correctly 
reference all categories of mark-to-market or variation margin for all 
product categories.
    Clarifications would be made to Rule 916(i) to be clear that 
Guaranty Fund and Assessment contributions due pursuant to Rule 916(i) 
are subject to the provisions of Rule 917 (including the limitations 
thereon during a Cooling-off Period).
    Rule 918(d) would be clarified to refer to any Event of Default 
rather than multiple Events of Default.
    It is proposed to incorporate references to Rules 916 and 918 into 
Rule 1102(g) to reflect that these Rules are also applicable in certain 
cases to determining the return of Guaranty Fund contributions.
    Rule 1901(d)(vi) would be deleted because the Council Directive 
referenced by this provision has been repealed. Subsequent provisions 
would be renumbered and cross-references in other provisions updated.
    A typographical error in the title of Part 23 would be corrected.
    Other typographical and similar corrections would be made in 
various provisions of the Rules, including 102(q), 202(a)(xxi), 
203(a)(xx) and 504(c)(vi).
    Part 3(b) of the F&O Standard Terms would be amended to more 
clearly state that Customer-CM F&O Transactions would arise in 
accordance with Part 4 of the Rules. This change would align

[[Page 29620]]

with the drafting used in the other Standard Terms.
    Proposed clarifications would be made to Rule 1607(d)(iii), CDS 
Standard Terms 7(iii), F&O Standard Terms 7(iii) and FX Standard Terms 
7(iii) to refer to ``Personal Data'' rather than ``Personal Data of its 
Data Subjects''. This change eliminates unnecessary language.
    A minor change is proposed to paragraph 15.4(b) of the Finance 
Procedures to delete an outdated reference to the Continuing CDS Rule 
Provisions, which are no longer in effect.
(b) Statutory Basis
    ICE Clear Europe believes that the proposed rule changes are 
consistent with the requirements of Section 17A of the Act \9\ and the 
regulations thereunder applicable to it, including the standards under 
Rule 17Ad-22.\10\ In particular, Section 17A(b)(3)(F) of the Act 
requires that that rule changes be consistent with the prompt and 
accurate clearance and settlement of securities transactions and 
derivative agreements, contracts and transactions cleared by ICE Clear 
Europe, the safeguarding of securities and funds in the custody or 
control of ICE Clear Europe or for which it is responsible, and the 
protection of investors and the public interest.\11\ As discussed 
herein, the proposed rule changes are principally designed to clarify 
various aspects of the Rules and Procedures to improve drafting and to 
update the Rules and Procedures to ensure consistency with current 
operational practices and processes as well as current applicable laws 
and regulations. In ICE Clear Europe's view, these changes would 
therefore facilitate the prompt and accurate clearance and settlement 
of transactions through the Clearing House and would generally be 
consistent with the protection of investors and the public interest. 
Furthermore, ensuring that the Rules and Procedures are clear, 
including with respect to matters such as portability, will enhance the 
safeguarding of securities and funds in the custody or control of the 
Clearing House or for which it is responsible. As such, ICE Clear 
Europe believes the amendments are consistent with the requirements of 
Section 17A(b)(3)(F) of the Act.\12\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78q-1.
    \10\ 17 CFR 240.17Ad-22.
    \11\ 15 U.S.C. 78q-1(b)(3)(F).
    \12\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Further, Section 17A(b)(3)(G) of the Act \13\ requires that 
clearing agency rules provide that its participants shall be 
appropriately disciplined for violations of the rules including by 
fine, censure or any other fitting sanction. Section 17A(b)(3)(H) of 
the Act \14\ requires that a clearing agency provide a fair procedure 
with respect to the disciplining of participants. The addition of the 
new Summary Disciplinary Process would enable the Clearing House to 
impose appropriate fines or to censure appropriate parties in the event 
of a rule violation. It would also specify the process of imposing any 
sanction, including the notice process by the Clearing House, the 
opportunity for a Clearing Member to appeal, the grounds for appeal and 
the actions the appeal panel may take (i.e., to affirm, vary or revoke 
a sanction). As such, by enabling appropriate disciplining of 
participants and providing a fair procedure relating to this process, 
ICE Clear Europe believes the amendments are consistent with the 
requirements of Section 17A(b)(3)(G) and (H) of the Act.\15\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78q-1(b)(3)(G).
    \14\ 15 U.S.C. 78q-1(b)(3)(H).
    \15\ 15 U.S.C. 78q-1(b)(3)(G) and (H).
---------------------------------------------------------------------------

    The amendments are also consistent with the relevant specific 
requirements of Rule 17Ad-22,\16\ as set forth in the following 
discussion:
---------------------------------------------------------------------------

    \16\ 17 CFR 240.17Ad-22.
---------------------------------------------------------------------------

(i) Portability
    Rule 17Ad-22(e)(14) \17\ requires that clearing agencies maintain 
policies and procedures which enable the segregation and portability of 
customer's positions and collateral. The amendments provide greater 
clarity with respect to providing porting instructions. The amendments 
would remove the existing process whereby Non-FCM/BD Clearing Members 
may deliver a ``Default Portability Preference'', with advance porting 
information, to the Clearing House, an option that was rarely used and 
that has proven to be impractical and has been superseded by 
requirements under EMIR that post-default porting notices be served 
prior to porting, which limited the value of instructions provided 
prior to default. The amendments will also clarify the process for 
providing post-default porting notices. The amendments will thus 
facilitate the process of post-default porting in a manner consistent 
with applicable regulations, including the requirements of Rule 17Ad-
22(e)(14),\18\ while avoiding the concerns created by the existing 
process.
---------------------------------------------------------------------------

    \17\ 17 CFR 240.17Ad-22(e)(14) which states that ``[e]ach 
covered clearing agency shall establish, implement, maintain and 
enforce written policies and procedures reasonably designed to, as 
applicable: (14) Enable, when the covered clearing agency provides 
central counterparty services for security-based swaps or engages in 
activities that the Commission has determined to have a more complex 
risk profile, the segregation and portability of positions of a 
participant's customers and the collateral provided to the covered 
clearing agency with respect to those positions and effectively 
protect such positions and related collateral from the default or 
insolvency of that participant.''
    \18\ 17 CFR 240.17Ad-22(e)(14).
---------------------------------------------------------------------------

    Further, proposed amendments to Rule 209(d) would facilitate the 
process of porting positions, pre-default, in the context of a 
corporate group reorganization where a new Clearing Member that is an 
Affiliate will be receiving the terminating Clearing Member's Open 
Contract Positions, and thereby facilitate the Clearing House's 
compliance with requirements of Rule 17Ad-22(e)(14) \19\ to enable 
portability of customer positions and collateral.
---------------------------------------------------------------------------

    \19\ 17 CFR 240.17Ad-22(e)(14).
---------------------------------------------------------------------------

(ii) Operational Risk
    Rule 17Ad-22(e)(17)(i) \20\ requires that a clearing agency manage 
its operational risks through appropriate policies and procedures. The 
amendments to the notices provisions would facilitate electronic 
notice, including for default notices under Rule 901 and other notices 
more generally under Rule 113. These clarifications better ensure 
appropriate and timely notices will be provided, reducing operational 
risks relating to timely receipt of notices.
---------------------------------------------------------------------------

    \20\ 17 CFR 240.17Ad-22(e)(17)(i) which states that ``[e]ach 
covered clearing agency shall establish, implement, maintain and 
enforce written policies and procedures reasonably designed to, as 
applicable: (17) Manage the covered clearing agency's operational 
risks by: (i) Identifying the plausible sources of operational risk, 
both internal and external, and mitigating their impact through the 
use of appropriate systems, policies, procedures, and controls.''
---------------------------------------------------------------------------

    Further, proposed amendments to Rule 202(a)(xxii) would extend the 
requirement for Clearing Members to have competent persons accessible 
to the Clearing House to also include the two hours prior to the start 
of the business day, to ensure that operational policies are consistent 
with consistent with operational practices and ensures that staff are 
available to process and deal with questions in relation to morning 
margin calls. The amendment would thus reduce the operational risks of 
not being able to address such calls in a timely manner.
    The proposed changes at Rule 301(o) enhance the Clearing House's 
ability to request information when needed on account balances, 
including for the purpose of calling on available cash where the 
Clearing Member has failed to meet a payment obligation, and are 
expected to reduce operational risks that may arise where the Clearing 
House may not otherwise have access to such information.

[[Page 29621]]

(iii) Legal Basis
    Rule 17Ad-22(e)(1) \21\ requires that a clearing agency provide for 
a well-founded legal basis for each aspect of its activities in all 
relevant jurisdictions. The amendments to Rule 201(a)(ix) would clarify 
that the Clearing House may require that potential Clearing Members 
enter into additional annexes/agreements to the Clearing Membership 
Agreement in accordance with Rule 201(b) in order to be, and remain, 
eligible for Clearing Membership. The Clearing House would expect to 
impose such requirements where necessary to comply with or address 
post-Brexit local law group structuring issues, including as applicable 
to its Clearing Members located in certain EU member states. This 
change would clarify the legal basis under the Rules for the Clearing 
House to require additional documentation to be executed, where 
necessary.
---------------------------------------------------------------------------

    \21\ 17 CFR 240.17Ad-22(e)(1) which states that ``[e]ach covered 
clearing agency shall establish, implement, maintain and enforce 
written policies and procedures reasonably designed to, as 
applicable: (1) Provide for a well-founded, clear, transparent, and 
enforceable legal basis for each aspect of its activities in all 
relevant jurisdictions.''
---------------------------------------------------------------------------

    The proposed amendments to Rule 1901(b)(xv), Rule 1901(d)(ix), Rule 
201(a)(xx) and Section 10 of the F&O Standard Terms, which would remove 
the requirement for Clearing Members, Customer and Sponsored Principals 
to be ``eligible contract participants'' if they are solely engaging in 
F&O Contracts, is intended to remove an unnecessary requirement for 
such Contracts while ensuring that the membership requirements remain 
compliant with applicable US laws.
    The amendments to paragraph 3.5(a) of the Membership Procedures to 
lower the threshold at which the Clearing House will require a written 
undertaking from a Clearing Member to not repay subordinated loans will 
align the Rules more closely with Basel III requirements applicable to 
Clearing Members.
    The various amendments to address applicable anti-money laundering 
laws in the EU and UK, including to address requirements to provide 
necessary information for due diligence checks, are intended to 
facilitate compliance by the Clearing House, Clearing Members, 
Sponsored Principals and Customers with applicable anti-money 
laundering laws. Similarly, amendments to the Delivery Procedures would 
obligate Clearing Members to conduct appropriate anti-money laundering 
AML due diligence for any transferors/transferees and provide relevant 
documentation to the Clearing House and/or Clearing Member. These 
requirements support the well-founded basis for the Clearing House's 
operation under applicable anti-money laundering laws.
    Overall, these changes, as well the numerous other changes to 
improve the drafting and clarity of the Rules and Procedures, are 
generally consistent with establishing a well-founded legal framework 
for the Clearing House's operations, within the meaning of Rule 17Ad-
22(e)(1).\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 240.17Ad-22(e)(1).
---------------------------------------------------------------------------

(iv) Margin
    Rule 17Ad-22(e)(6) require that a covered clearing agency establish 
a risk-based margin system that, among other matters, ``[m]arks 
participant positions to market and collects margin, including 
variation margin . . ., at least daily.'' \23\ Rule 1603(c) would be 
amended to clarify that only ``original'' or ``initial'' types of 
Margin payments would be provided in the form of Pledged Collateral, 
and that such collateral excludes Variation Margin, Mark-to-Market 
Margin and FX Mark-to-Market Margin which is provided to or by the 
Clearing House by outright transfer of cash as a settlement payment. 
This amendment is consistent with the treatment of variation and mark-
to-market margin as settlement payments,\24\ as provided elsewhere in 
the Rules and Procedures, and in ICE Clear Europe's view is consistent 
with the margin framework requirements under Rule 17Ad-22(e)(6).\25\
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    \23\ 17 CFR 240.17Ad-22(e)(6).
    \24\ As discussed above, the amendments are also consistent with 
the approach provided for in Exchange Act Release No. 34-88665 (File 
No. SR-ICEEU-2020-003) (Apr. 16, 2020), 85 FR 22892 (Apr. 23, 2020).
    \25\ 17 CFR 240.17Ad-22(e)(6).
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(v) Settlement and Physical Delivery
    Rule 17Ad-22(e)(10) requires that a covered clearing agency 
``establish and maintain transparent written standards that state its 
obligations with respect to the delivery of physical instruments, and 
establish and maintain operational practices that identify, monitor, 
and manage the risks associated with such physical deliveries.'' \26\ 
The proposed amendment to the definition of ``Exchange Delivery 
Settlement Price'' in the Rules will clarify for the avoidance of doubt 
that the EDSP can be positive, negative or zero. The amendments will 
also clarify the procedure for payment of the EDSP in a physical 
settlement where the EDSP is negative. The amendments will thus clarify 
and enhance the settlement process in such case, consistent with Rule 
17Ad-22(e)(10).\27\
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    \26\ 17 CFR 240.17Ad-22(e)(10).
    \27\ 17 CFR 240.17Ad-22(e)(10).
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    Proposed amendments to the Delivery Procedures will clarify other 
aspects of the physical settlement process. Proposed new paragraph 7 to 
the Delivery Procedures will contemplate an alternative delivery 
procedure for certain Emission Contracts in the event of a failed 
delivery. In Part U, new provisions relating to failed settlement and 
non-delivery of securities under a Financials & Softs Gilt Contract 
would be added, including as to the steps the Clearing House can take 
to promote settlement in accordance with the contract terms and the 
requirements of the CREST central securities depository and allocation 
of the costs of such steps to the Clearing Member that failed to make 
delivery. Updates to Part Z would be made to reference the correct 
settlement facilities and relevant settlement details and settlement 
procedures. Part Z provisions dealing with failed deliveries and 
partial deliveries would also be clarified. Throughout the Delivery 
Procedures, the delivery documentation summaries, timetables and other 
relevant provisions will be updated and clarified to reflect current 
operational processes and Clearing House systems and to remove outdated 
references and language. Taken together, these changes will establish 
and update transparent written standards associated with physical 
deliveries, consistent with the requirements of Rule 17Ad-
22(e)(10).\28\
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    \28\ 17 CFR 240.17Ad-22(e)(10).
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(vi) Governance Arrangements
    Rule 17Ad-22(e)(2)(i) \29\ requires that a clearing agency have 
governance arrangements that are clear and transparent. The proposed 
amendments to Rule 916(d) would change ``Risk Committee'' to ``relevant 
product risk committee'' to reflect the different product risk 
committees addressing topics specific to F&O and CDS Contracts. Similar 
changes would be made to references to relevant risk committees in 
certain Procedures, as discussed above. In ICE Clear Europe's view, 
these amendments would clarify governance descriptions in the Rules and 
Procedures to more clearly and accurately reflect established 
arrangements, and are thus consistent with Rule 17Ad-22(e)(2)(i).
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    \29\ 17 CFR 240.17Ad-22(e)(2)(i) which states that ``[e]ach 
covered clearing agency shall establish, implement, maintain and 
enforce written policies and procedures reasonably designed to, as 
applicable: (2) Provide for governance arrangements that: (i) Are 
clear and transparent;''.

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[[Page 29622]]

(vii) Membership Criteria
    Rule 17Ad-22(e)(18) requires covered clearing agencies to establish 
criteria for participation which ensures participants have sufficient 
financial resources and robust operational capacity to meet obligations 
arising from participation and to monitor compliance.\30\ Proposed 
amendments would extend the hours during which staff are available to 
process and deal with questions in relation to morning margin calls, 
which strengthen operational capacity to meet obligations arising from 
participation. The amendments would also clarify certain requirements 
as to member Capital, including to reference updated capital standards 
and to limit the use of certain subordinated debt as capital. These 
amendments are intended to be consistent with the requirements of the 
Basel III capital framework applicable to most Clearing Members. In ICE 
Clear Europe view, the amendments accordingly set appropriate Capital 
requirements for Clearing Members, consistent with the requirements of 
Rule 17Ad-22(e)(18).
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    \30\ 17 CFR 240.17Ad-22(e)(18).
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(viii) Default Management
    Rule 17Ad-22(e)(13) \31\ requires a covered clearing agency to 
ensure that it ``has the authority and operational capacity to take 
timely action to contain losses and liquidity demands'' in the case of 
default.
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    \31\ 17 CFR 240.17Ad-22(e)(13).
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    The amendments would, as noted above, clarify certain aspects of 
the Clearing House's default management procedures, including the use 
of post-default porting notices and the manner of delivering default 
notices. The amendments would clarify the ability of the Clearing House 
to use hedging post-default, and clarify certain aspects of the 
definition of Event of Default, particularly in connection with 
defaults of affiliated Clearing Members. A number of other drafting 
improvements would be made in the Part 9 of the Rules, as discussed 
above. In ICE Clear Europe's view, these amendments will generally 
enhance the Clearing House's default management procedures and 
facilitate its ability to take timely action in the case of a default 
to contain losses, consistent with the requirements of Rule 17Ad-
22(e)(13).\32\
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    \32\ 17 CFR 240.17Ad-22(e)(13).
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(B) Clearing Agency's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed amendments would 
have any impact, or impose any burden, on competition not necessary or 
appropriate in furtherance of the purpose of the Act. The amendments 
are generally intended to improve drafting clarity in the Rules and 
Procedures and update various provisions to refer to current laws and 
operational and other processes, including with respect to such matters 
as portability, settlement and delivery procedures, updated system 
references, anti-money laundering procedures and similar matters. 
Overall, ICE Clear Europe does not expect the amendments would impose 
any material new obligations on Clearing Member. Further, ICE Clear 
Europe does not expect that the proposed changes will adversely affect 
access to clearing or the ability of Clearing Members, their customers 
or other market participants to continue to clear contracts. ICE Clear 
Europe also does not believe the amendments would materially affect the 
cost of clearing or otherwise limit market participants' choices for 
selecting clearing services. Accordingly, ICE Clear Europe does not 
believe the amendments would impose any burden on competition not 
necessary or appropriate in furtherance of the purpose of the Act.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    ICE Clear Europe conducted a consultation with respect to the 
proposed amendments to the Rules set forth herein.\33\ No written 
comments relating to the proposed amendments have been received by ICE 
Clear Europe. ICE Clear Europe will notify the Commission of any 
comments received with respect to the proposed rule change.
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    \33\ ICE Clear Europe Circular C21/013 (Feb. 2, 2021).
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml) or
     Send an email to [email protected]. Please include 
File Number SR-ICEEU-2021-010 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-ICEEU-2021-010. 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 such filings will also be available for inspection 
and copying at the principal office of ICE Clear Europe and on ICE 
Clear Europe's website at https://www.theice.com/clear-europe/regulation.
    All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ICEEU-2021-010 and should be 
submitted on or before June 23, 2021.


[[Page 29623]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-11529 Filed 6-1-21; 8:45 am]
BILLING CODE 8011-01-P