Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to the ICE Clear Europe Delivery Procedures, 5878-5881 [2022-02078]
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5878
Federal Register / Vol. 87, No. 22 / Wednesday, February 2, 2022 / Notices
Submitted by the Office of Science
and Technology Policy on January 28,
2022.
Stacy Murphy,
Operations Manager, White House Office of
Science and Technology Policy.
[FR Doc. 2022–02161 Filed 2–1–22; 8:45 am]
BILLING CODE 3270–F1–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94082; File No. SR–CBOE–
2021–071]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Designation
of Longer Period for Commission
Action on a Proposed Rule Change To
Adopt a New Trading Session That Will
Operate After the Close of the Regular
Trading Hours Session
jspears on DSK121TN23PROD with NOTICES1
January 27, 2022.
On December 15, 2021, Cboe
Exchange, Inc. 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
adopt a new forty-five-minute trading
session that will operate after the close
of the Regular Trading Hours session.
The proposed rule change was
published for comment in the Federal
Register on December 23, 2021.3 The
Commission has received no comment
letters on the proposed rule change.
Section 19(b)(2) of the Act 4 provides
that, within 45 days of the publication
of notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is February 6,
2022.
The Commission hereby is extending
the 45-day time period for Commission
action on the proposed rule change. The
Commission finds that it is appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change.
Accordingly, pursuant to Section
19(b)(2) of the Act,5 the Commission
designates March 23, 2022, as the date
by which the Commission shall either
approve or disapprove, or institute
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–CBOE–2021–071).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–02079 Filed 2–1–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94079; File No. SR–ICEEU–
2022–002]
Self-Regulatory Organizations; ICE
Clear Europe Limited; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Relating to
Amendments to the ICE Clear Europe
Delivery Procedures
January 27, 2022.
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 January
18, 2022, 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. ICE Clear Europe filed the
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(4)(ii) thereunder,4 such that the
proposed rule change was immediately
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
(a) The principal purpose of the
proposed amendments is for ICE Clear
Europe to amend its Delivery
Procedures (‘‘Delivery Procedures’’) on
5 Id.
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 93819
(December 17, 2021), 86 FR 73038.
4 15 U.S.C. 78s(b)(2).
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6 17
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(4)(ii).
1 15
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the basis of certain settlement discipline
requirements under the European
Union’s Central Securities Depositories
Regulation 5 (the ‘‘CSDR’’) and
Settlement Discipline Regulatory
Technical Standards 6 (the ‘‘RTS’’).
These requirements are set to come into
force on 1 February 2022.7 A copy of the
proposed amendments to the Delivery
Procedures is attached [sic] as Exhibit 5.
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 proposing to
amend its Delivery Procedures due to
new settlement discipline requirements
contained in the CSDR and RTS, which
take effect on 1 February 2022. The
settlement discipline requirements,
which include settlement failure
reporting and cash penalties for
settlement failures, would impose
certain requirements on ICE Clear
Europe as a central counterparty and
market participant in its interaction
with EU-based settlement facilities.
Specifically, the requirements apply to
securities that the Clearing House settles
on a European Union (‘‘EU’’) central
securities depository (‘‘CSD’’) under
F&O Contracts that are equity or bond
futures and options, where the
underlying is traded on an EU trading
venue or cleared by another EU-based
CCP.
The settlement discipline
requirements that will come into effect
5 Regulation (EU) 909/2014 of the European
Parliament and of the Council of 23 July 2014 on
improving securities settlement in the European
Union and on central securities depositories and
amending Directives 98/26/EC and 2014/65/EU and
Regulation (EU) No 236/2012.
6 Commission Delegated Regulation (EU) 2018/
1229 of 25 May 2018 supplementing Regulation
(EU) No 909/2014 of the European Parliament and
of the Council with regard to regulatory technical
standards on settlement discipline.
7 Capitalized terms used but not defined herein
have the meanings specified in the Delivery
Procedures or, if not defined therein, the ICE Clear
Europe Clearing Rules.
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Federal Register / Vol. 87, No. 22 / Wednesday, February 2, 2022 / Notices
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on 1 February 2022 will include
settlement failure reporting and cash
penalties for settlement failures.8 In the
context of ICE Clear Europe, the
requirements will apply with respect to
Euro-Denominated Government Bond
Futures and Options Contracts (covered
in Part W of the Delivery Procedures)
and Financials & Softs Equity Futures
and Options (covered in Part Z of the
Delivery Procedures), where the
underlying deliverable is listed on an
EU exchange or cleared via an EU CCP
and settlement occurs through an EU
settlement system.9
A change would also be introduced as
regards the holding accounts for
deliveries of deliverable EU emissions
allowances pursuant to futures contracts
on such allowances, to ensure that the
CSDR regime does not inadvertently
interfere with emissions deliveries.
Given the anticipated entry into force
and application of elements of the CSDR
and the RTS, ICE Clear Europe proposes
to update its Delivery Procedures as
described below.
8 Although the CSDR and RTS provide for
additional settlement discipline measures,
including certain mandatory buy-in requirements,
relevant EU authorities have indicated that the
entry into force of such provisions will be delayed.
See press statement from the European Commission
dated 25 November 2021, available here: https://
ec.europa.eu/commission/presscorner/detail/en/
mex_21_6293.
The European Securities and Markets Authorities
(‘‘ESMA’’) issued a public statement which notes
that although the legislators have agreed upon an
amendment to the CSDR that could give effect to
the delay described in the foregoing paragraph, it
is anticipated that this will not enter into force prior
to the settlement discipline rules becoming
applicable on 1 February 2022. Given this situation,
ESMA has indicated that it expects national
regulators to not prioritize supervisory actions in
relation to the buy-in regime. ESMA, Public
Statement, Supervisory approach on the
implementation of the CSDR buy-in provisions, 17
December 2021, ESMA70–156–5153.
A number of major trade associations have also
issued a public statement confirming that in their
view EU legislators do not expect market
participants to take further action towards
implementation of the mandatory buy-in
requirements, but that other CSDR settlement
discipline measures will be implemented by 1
February 2022. Joint Statement, Industry Approach
to CSDR Settlement Discipline Regime dated 22
December 2021, available here: https://
www.afme.eu/Portals/0/DispatchFeaturedImages/
Industry%20Approach%20to%20
CSDR%20Settlement%20Discipline%20
Regime%20FINAL%2022122021.pdf.
Accordingly, ICE Clear Europe is not proposing
to make amendments to its Delivery Procedures
with respect to the CSDR buy-in regime at this time.
9 Although the UK has adopted some aspects of
the CSDR under the European Union (Withdrawal)
Act 2018, none of the EU settlement discipline
provisions that were meant to come into force by
1 February 2022 will be implemented in the UK.
Financial Services Update, Statement made on 23
June 2020, available here: https://questionsstatements.parliament.uk/written-statements/
detail/2020-06-23/HCWS309.
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General Provisions of Delivery
Procedures
The General Provisions section of the
Delivery Procedures would be amended
to add new Paragraphs 22 and 23.
Paragraph 22 would address the
liabilities for penalties or costs assessed
under the CSDR because of a delay or
failure in matching for settlement.
Specifically, it would provide that the
Buyer and Seller would each indemnify
the Clearing House in accordance with
Rule 111 in respect of costs or penalties
for any delay or failure in matching
arising under the CSDR or otherwise,
save to the extent that the Clearing
House or its settlement agent is at fault
for such failure or delay. The amount of
such cost or penalty would be charged
to such Clearing Member. Paragraph 23
would address penalties or costs
assessed under CSDR in respect of late
settlement. Specifically, it would
provide that the Seller would indemnify
the Clearing House in accordance with
Rule 111 in respect of costs or penalties
for any delay or failure in settlement
arising under the CSDR or otherwise,
save to the extent that the Clearing
House or its settlement agent is at fault
in respect of such failure or delay. The
amount of such costs or penalties would
be charged to such Clearing Member.
The CSDR and RTS feature a two-tier
scheme for penalty collection and
distribution in respect of settlement
fails, which is as follows: (1) Where the
failing or receiving participant is a CCP,
CCPs are to collect and distribute
penalties using information provided by
CSDs; and (2) in all other circumstances,
CSDs collect and distribute the
penalties. ICE Clear Europe holds
securities at EU CSDs through
nominees, rather than as a direct
participant. As such, ICE Clear Europe
is not necessarily known by or
identified to the CSDs as a CCP.
Therefore, CSDs would collect penalties
in respect of securities to be delivered
under F&O Contracts that ICE Clear
Europe clears in accordance with
scenario 2. It is possible that when
Buyers or Sellers are late to match or
Sellers are late to settle (as applicable);
this would have run-on impacts on the
Clearing House’s ability to onwards
deliver securities. If the Clearing House
does not deliver in a timely fashion
because of this late matching, it could
be subject to a cash penalty under
CSDR. In these circumstances, the late
Clearing Member would be required to
indemnify ICE Clear Europe. These
amendments reflect the existing
position under the general indemnity in
Rule 111, but provide clarity that such
indemnity will be applicable in the
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particular circumstances described in
these paragraphs.
Part A: ICE Endex Deliverable EU
Emissions Contracts
Amendments would be made to Part
A of the Delivery Procedures to ensure
that the new settlement discipline
procedures under the CSDR and RTS
will not apply to the physical delivery
of Carbon Emissions Allowances
(‘‘EUA’’) or Aviation Emissions
Allowances (‘‘EUAA’’). The
amendments are intended to preserve
the Clearing House’s current approach
with respect to settlement of emissions
futures contracts and ensure that CSDR
will not interfere with deliveries under
such contracts.
The definition of ‘‘Registry Account’’
would be amended, to set down the
national administrators of registry
accounts that may be used, and to
confirm that no registry account may be
held by or through a CSD as
intermediary or account holder.
Paragraph 9 of Part A of the Delivery
Procedures would be added to provide
that no Clearing Member, Customer,
Transferor or Transferee to whom or
from whom delivery is to be made of an
EUA or EUAA may be registered as a
CSD under the CSDR. Additionally,
Paragraph 9 would provide that
pursuant to the definition of ‘‘Registry
Account’’, no EUAs or EUAAs may be
settled by or through a CSD.
Accordingly, Buyers and Sellers would
not be bound by the settlement
discipline provisions set out in the
CSDR and, accordingly, the Clearing
House would not administer buy-ins,
cash penalties, cash compensation or
other requirements under the CSDR and
its delegated regulations in respect of
EUAs or EUAAs. The amendments
would provide that Buyers and Sellers
acknowledge that neither the Clearing
House nor any other Person would offer
them the protections related to
settlement set forth under CSDR and
their sole remedies in the case of
settlement failure would be as set forth
in the Delivery Procedures. In
connection with these changes, ICE
Clear Europe would also add new
definitions of ‘‘CSD’’ and ‘‘CSDR’’.
Part W: Euro-Denominated Government
Bonds Contracts
The Delivery Timetable in Part W of
the Delivery Procedures would be
amended to provide that Clearing
Members who have failed to deliver
(including those whose Customer or
Transferor has failed to deliver) by 8:00
on the Delivery Day would be required
to contact the Clearing House to provide
reasons for such failures and confirm
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any measures taken to facilitate
delivery. Such information would notify
the Clearing House of such delivery
failure and allow it to take any action it
deems necessary under the Rules and
Procedures.
A new Paragraph 1.9 would be added
to Part W which would empower ICE
Clear Europe to debit cash penalties
imposed by the relevant settlement
system from Clearing Members in
delivery default and to credit cash
penalties to the account of the Clearing
Member that is affected by the
settlement fail. Although, as described
above, it is anticipated that CSDs will
administer cash penalties for ICE Clear
Europe-cleared trades, the Clearing
House will retain this power in case its
account structure changes and it would
be required to administer penalties
under the CSDR.
Part Z: Financials and Softs Equity
Futures/Options
Part Z of the Delivery Procedures
would be amended to add a similar new
provision to Paragraph 3.3 which
empowers ICE Clear Europe to debit
cash penalties imposed by a relevant
settlement system from Clearing
Members in delivery default and to
credit cash penalties to the account of
the Clearing Member that is affected by
the settlement fail. Although, as
described above, it is anticipated that
CSDs will administer cash penalties for
ICE Clear Europe-cleared trades, ICE
Clear Europe will retain this power in
case its account structure changes and it
would be required to administer
penalties under the CSDR.
Paragraph 5 of Part Z would also be
amended to expand the categories of
information that would be made
available by the Clearing House upon
Clearing members’ early exercise or
expiry of a physically delivered Equity
Future or Option Contract, or the
execution of a stock contingent trade.
Specifically, the amendments would
add the following information to the
report for early exercise or expiry: (i)
Cash consideration to be delivered or
received, (ii) stock identifying ISIN code
to be delivered and (iii) CSD settlement
location. For stock contingent trades,
the relevant report would be expanded
to include certain information about the
associated option. These amendments
are intended to reflect what is generally
included in the report already in
practice.
(b) Statutory Basis
ICE Clear Europe believes that the
proposed amendments to the Delivery
Procedures are consistent with the
requirements of Section 17A of the
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Act 10 and the regulations thereunder
applicable to it. In particular, Section
17A(b)(3)(F) of the Act 11 requires,
among other things, that the rules of a
clearing agency be designed to promote
the prompt and accurate clearance and
settlement of securities transactions
and, to the extent applicable, derivative
agreements, contracts, and transactions,
the safeguarding of securities and funds
in the custody or control of the clearing
agency or for which it is responsible,
and the protection of investors and the
public interest. The proposed changes to
the Delivery Procedures are designed to
address and accommodate certain
settlement discipline provisions under
the CSDR and RTS that will come into
effect on 1 February 2022. Principally,
the proposed amendments would
address potential fines that may be
imposed under the CSDR and RTS in
connection with settlement failures
relating to deliveries of certain
securities underlying F&O Contracts,
and enhance reporting to the Clearing
House in the case of certain settlement
failures under such contracts. In
particular, the proposed amendments
explicitly address the possibility of fines
for settlement failures in the context of
settlement of government bond futures
and options and equity futures and
options cleared by the Clearing House,
where the underlying is listed or cleared
on an EU facility and settlement occurs
through an EU settlement facility. The
proposed amendments also clarify that
the CSDR settlement discipline
provisions would not apply to
settlement of certain emissions futures
contracts. The proposed amendments
will thus clarify the role,
responsibilities and liabilities of the
Clearing House, Clearing Members and
designated transferors and transferees in
the context of settlement failures that
may occur with respect to securities
delivered in settlement of specified F&O
Contracts. The proposed amendments
would not otherwise change the manner
in which such contracts are cleared and
settled. As a result, in ICE Clear
Europe’s view, the proposed
amendments would be consistent with
the prompt and accurate clearance and
settlement of the contracts and the
protection of investors, consistent with
the requirements of Section 17A(b)(3)(F)
of the Act.12 The proposed amendments
are also consistent with the public
interest, including as reflected in the
policies of the CSDR and RTS. (In ICE
Clear Europe’s view, the proposed
amendments would not affect the
safeguarding of funds or securities in
the custody or control of the clearing
agency or for which it is responsible,
within the meaning of Section
17A(b)(3)(F).13)
Rule 17Ad–22(e)(1) requires that a
clearing agency ‘‘establish, implement,
maintain and enforce written policies
and procedures reasonably designed to,
as applicable, provide for a wellfounded, clear, transparent and
enforceable legal basis for each aspect of
its activities in all relevant
jurisdictions.’’ 14 The proposed
amendments are intended to address
new requirements under EU law
applicable to settlement activity
conducted by the Clearing House with
EU settlement facilities relating to
underlying securities traded or cleared
on EU facilities. As such, the proposed
amendments support the Clearing
House’s legal framework for operation
in the EU, consistent with the
requirements of Rule 17Ad–22(e)(1).15
In addition, Rule 17Ad–22(e)(10) 16
provides that ‘‘[e]ach covered clearing
agency shall establish, implement,
maintain and enforce written policies
and procedures reasonably designed to,
as applicable [. . .] 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.’’ As discussed
above, the proposed amendments would
revise the Delivery Procedures for
affected F&O Contracts as a result of the
applicable CSDR and RTS settlement
discipline provisions, particularly as
they relate to fines for settlement
failures and provision of additional
information regarding settlement
failures. The proposed amendments
thus clarify the obligations of the
Clearing House, Clearing Members and
others with respect to settlement
failures under such contracts. The
proposed amendments also clarify that
the CSDR settlement discipline
provisions will not affect settlement
under certain emissions contracts. The
proposed amendments do not otherwise
affect the procedures for delivery under
such contracts. As a result, ICE Clear
Europe believes the amendments are
consistent with the requirements of Rule
17Ad–22(e)(10).17
13 15
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(e)(1).
15 17 CFR 240.17Ad–22(e)(1).
16 17 CFR 240.17Ad–22(e)(10).
17 17 CFR 240.17Ad–22(e)(10).
14 17
10 15
U.S.C. 78q–1.
U.S.C. 78q–1(b)(3)(F).
12 15 U.S.C. 78q–1(b)(3)(F).
11 15
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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
purposes of the Act. The proposed
amendments to the Delivery Procedures
are intended to address new settlement
discipline procedures applicable to
certain contracts as provided in the
CSDR and RTS. Although the
procedures could result in certain
additional costs to Clearing Members, if
certain fines were imposed as a result of
a settlement failure, those additional
costs result from the requirements of
relevant EU legislation applicable to
settlements in the affected underlying
securities which would be applicable to
all market participants for the relevant
contracts and it would be inappropriate
for the Clearing House to bear the cost
of late delivery fines, which should
reasonably be passed on to the Clearing
Members responsible for delivery
failures. Furthermore, any such
additional costs would result from a
failure by the relevant Clearing Member
or its customer to comply in a timely
manner with its settlement obligations
as specified under EU legislation.
Accordingly, ICE Clear Europe does not
believe the amendments would
adversely affect competition among
Clearing Members, materially affect the
cost of clearing, adversely affect access
to clearing for Clearing Members or their
customers, or otherwise adversely affect
competition in clearing services.
Accordingly, ICE Clear Europe does not
believe that the amendments would
impose any impact or burden on
competition that is not appropriate in
furtherance of the purpose of the Act.
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(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants or Others
Written comments relating to the
proposed amendments have not been
solicited or received by ICE Clear
Europe. ICE Clear Europe will notify the
Commission of any comments received
with respect to the proposed rule
change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 18 and paragraph (f) of Rule
19b–4 19 thereunder. At any time within
18 15
19 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
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 rule-comments@
sec.gov. Please include File Number SR–
ICEEU–2022–002 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–2022–002. 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/notices/Notices.shtml?
regulatoryFilings.
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.
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5881
You should submit only information
that you wish to make available
publicly. All submissions should refer
to File Number SR–ICEEU–2022–002
and should be submitted on or before
February 23, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–02078 Filed 2–1–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94092; File No. SR–BOX–
2021–06]
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Filing of
Amendment Nos. 2 and 3 and Order
Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendment Nos. 2 and 3, To Adopt
Rules Governing the Trading of Equity
Securities on the Exchange Through a
Facility of the Exchange Known as
BSTX LLC
January 27, 2022.
Introduction
On May 12, 2021, BOX Exchange LLC
(‘‘Exchange’’ or ‘‘BOX’’) 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
19b–4 thereunder,2 a proposed rule
change to adopt rules governing the
listing and trading of equity securities
on the Exchange through a facility of the
Exchange to be known as BSTX LLC
(‘‘BSTX’’). The proposed rule change
was published for comment in the
Federal Register on June 2, 2021.3 On
July 13, 2021, the Commission extended
the time period within which to
approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to approve or disapprove the
proposed rule change, to August 31,
2021.4 On August 18, 2021, the
Exchange filed Amendment No. 1 to the
proposed rule change, which replaced
and superseded the proposed rule
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 92017
(May 25, 2021), 86 FR 29634 (‘‘Notice’’). Comments
on the proposed rule change can be found at:
https://www.sec.gov/comments/sr-box-2021-06/
srbox202106.htm.
4 See Securities Exchange Act Release No. 92387
(July 13, 2021), 86 FR 38140 (July 19, 2021).
1 15
E:\FR\FM\02FEN1.SGM
02FEN1
Agencies
[Federal Register Volume 87, Number 22 (Wednesday, February 2, 2022)]
[Notices]
[Pages 5878-5881]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-02078]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94079; File No. SR-ICEEU-2022-002]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change Relating
to Amendments to the ICE Clear Europe Delivery Procedures
January 27, 2022.
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 January 18, 2022, 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. ICE Clear Europe filed the proposed rule change
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(4)(ii)
thereunder,\4\ such that the proposed rule change was immediately
effective upon filing with the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(4)(ii).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
(a) The principal purpose of the proposed amendments is for ICE
Clear Europe to amend its Delivery Procedures (``Delivery Procedures'')
on the basis of certain settlement discipline requirements under the
European Union's Central Securities Depositories Regulation \5\ (the
``CSDR'') and Settlement Discipline Regulatory Technical Standards \6\
(the ``RTS''). These requirements are set to come into force on 1
February 2022.\7\ A copy of the proposed amendments to the Delivery
Procedures is attached [sic] as Exhibit 5.
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\5\ Regulation (EU) 909/2014 of the European Parliament and of
the Council of 23 July 2014 on improving securities settlement in
the European Union and on central securities depositories and
amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No
236/2012.
\6\ Commission Delegated Regulation (EU) 2018/1229 of 25 May
2018 supplementing Regulation (EU) No 909/2014 of the European
Parliament and of the Council with regard to regulatory technical
standards on settlement discipline.
\7\ Capitalized terms used but not defined herein have the
meanings specified in the Delivery Procedures or, if not defined
therein, the ICE Clear Europe Clearing 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 proposing to amend its Delivery Procedures due
to new settlement discipline requirements contained in the CSDR and
RTS, which take effect on 1 February 2022. The settlement discipline
requirements, which include settlement failure reporting and cash
penalties for settlement failures, would impose certain requirements on
ICE Clear Europe as a central counterparty and market participant in
its interaction with EU-based settlement facilities. Specifically, the
requirements apply to securities that the Clearing House settles on a
European Union (``EU'') central securities depository (``CSD'') under
F&O Contracts that are equity or bond futures and options, where the
underlying is traded on an EU trading venue or cleared by another EU-
based CCP.
The settlement discipline requirements that will come into effect
[[Page 5879]]
on 1 February 2022 will include settlement failure reporting and cash
penalties for settlement failures.\8\ In the context of ICE Clear
Europe, the requirements will apply with respect to Euro-Denominated
Government Bond Futures and Options Contracts (covered in Part W of the
Delivery Procedures) and Financials & Softs Equity Futures and Options
(covered in Part Z of the Delivery Procedures), where the underlying
deliverable is listed on an EU exchange or cleared via an EU CCP and
settlement occurs through an EU settlement system.\9\
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\8\ Although the CSDR and RTS provide for additional settlement
discipline measures, including certain mandatory buy-in
requirements, relevant EU authorities have indicated that the entry
into force of such provisions will be delayed. See press statement
from the European Commission dated 25 November 2021, available here:
https://ec.europa.eu/commission/presscorner/detail/en/mex_21_6293.
The European Securities and Markets Authorities (``ESMA'')
issued a public statement which notes that although the legislators
have agreed upon an amendment to the CSDR that could give effect to
the delay described in the foregoing paragraph, it is anticipated
that this will not enter into force prior to the settlement
discipline rules becoming applicable on 1 February 2022. Given this
situation, ESMA has indicated that it expects national regulators to
not prioritize supervisory actions in relation to the buy-in regime.
ESMA, Public Statement, Supervisory approach on the implementation
of the CSDR buy-in provisions, 17 December 2021, ESMA70-156-5153.
A number of major trade associations have also issued a public
statement confirming that in their view EU legislators do not expect
market participants to take further action towards implementation of
the mandatory buy-in requirements, but that other CSDR settlement
discipline measures will be implemented by 1 February 2022. Joint
Statement, Industry Approach to CSDR Settlement Discipline Regime
dated 22 December 2021, available here: https://www.afme.eu/Portals/0/DispatchFeaturedImages/Industry%20Approach%20to%20CSDR%20Settlement%20Discipline%20Regime%20FINAL%2022122021.pdf.
Accordingly, ICE Clear Europe is not proposing to make
amendments to its Delivery Procedures with respect to the CSDR buy-
in regime at this time.
\9\ Although the UK has adopted some aspects of the CSDR under
the European Union (Withdrawal) Act 2018, none of the EU settlement
discipline provisions that were meant to come into force by 1
February 2022 will be implemented in the UK. Financial Services
Update, Statement made on 23 June 2020, available here: https://questions-statements.parliament.uk/written-statements/detail/2020-06-23/HCWS309.
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A change would also be introduced as regards the holding accounts
for deliveries of deliverable EU emissions allowances pursuant to
futures contracts on such allowances, to ensure that the CSDR regime
does not inadvertently interfere with emissions deliveries.
Given the anticipated entry into force and application of elements
of the CSDR and the RTS, ICE Clear Europe proposes to update its
Delivery Procedures as described below.
General Provisions of Delivery Procedures
The General Provisions section of the Delivery Procedures would be
amended to add new Paragraphs 22 and 23. Paragraph 22 would address the
liabilities for penalties or costs assessed under the CSDR because of a
delay or failure in matching for settlement. Specifically, it would
provide that the Buyer and Seller would each indemnify the Clearing
House in accordance with Rule 111 in respect of costs or penalties for
any delay or failure in matching arising under the CSDR or otherwise,
save to the extent that the Clearing House or its settlement agent is
at fault for such failure or delay. The amount of such cost or penalty
would be charged to such Clearing Member. Paragraph 23 would address
penalties or costs assessed under CSDR in respect of late settlement.
Specifically, it would provide that the Seller would indemnify the
Clearing House in accordance with Rule 111 in respect of costs or
penalties for any delay or failure in settlement arising under the CSDR
or otherwise, save to the extent that the Clearing House or its
settlement agent is at fault in respect of such failure or delay. The
amount of such costs or penalties would be charged to such Clearing
Member.
The CSDR and RTS feature a two-tier scheme for penalty collection
and distribution in respect of settlement fails, which is as follows:
(1) Where the failing or receiving participant is a CCP, CCPs are to
collect and distribute penalties using information provided by CSDs;
and (2) in all other circumstances, CSDs collect and distribute the
penalties. ICE Clear Europe holds securities at EU CSDs through
nominees, rather than as a direct participant. As such, ICE Clear
Europe is not necessarily known by or identified to the CSDs as a CCP.
Therefore, CSDs would collect penalties in respect of securities to be
delivered under F&O Contracts that ICE Clear Europe clears in
accordance with scenario 2. It is possible that when Buyers or Sellers
are late to match or Sellers are late to settle (as applicable); this
would have run-on impacts on the Clearing House's ability to onwards
deliver securities. If the Clearing House does not deliver in a timely
fashion because of this late matching, it could be subject to a cash
penalty under CSDR. In these circumstances, the late Clearing Member
would be required to indemnify ICE Clear Europe. These amendments
reflect the existing position under the general indemnity in Rule 111,
but provide clarity that such indemnity will be applicable in the
particular circumstances described in these paragraphs.
Part A: ICE Endex Deliverable EU Emissions Contracts
Amendments would be made to Part A of the Delivery Procedures to
ensure that the new settlement discipline procedures under the CSDR and
RTS will not apply to the physical delivery of Carbon Emissions
Allowances (``EUA'') or Aviation Emissions Allowances (``EUAA''). The
amendments are intended to preserve the Clearing House's current
approach with respect to settlement of emissions futures contracts and
ensure that CSDR will not interfere with deliveries under such
contracts.
The definition of ``Registry Account'' would be amended, to set
down the national administrators of registry accounts that may be used,
and to confirm that no registry account may be held by or through a CSD
as intermediary or account holder. Paragraph 9 of Part A of the
Delivery Procedures would be added to provide that no Clearing Member,
Customer, Transferor or Transferee to whom or from whom delivery is to
be made of an EUA or EUAA may be registered as a CSD under the CSDR.
Additionally, Paragraph 9 would provide that pursuant to the definition
of ``Registry Account'', no EUAs or EUAAs may be settled by or through
a CSD. Accordingly, Buyers and Sellers would not be bound by the
settlement discipline provisions set out in the CSDR and, accordingly,
the Clearing House would not administer buy-ins, cash penalties, cash
compensation or other requirements under the CSDR and its delegated
regulations in respect of EUAs or EUAAs. The amendments would provide
that Buyers and Sellers acknowledge that neither the Clearing House nor
any other Person would offer them the protections related to settlement
set forth under CSDR and their sole remedies in the case of settlement
failure would be as set forth in the Delivery Procedures. In connection
with these changes, ICE Clear Europe would also add new definitions of
``CSD'' and ``CSDR''.
Part W: Euro-Denominated Government Bonds Contracts
The Delivery Timetable in Part W of the Delivery Procedures would
be amended to provide that Clearing Members who have failed to deliver
(including those whose Customer or Transferor has failed to deliver) by
8:00 on the Delivery Day would be required to contact the Clearing
House to provide reasons for such failures and confirm
[[Page 5880]]
any measures taken to facilitate delivery. Such information would
notify the Clearing House of such delivery failure and allow it to take
any action it deems necessary under the Rules and Procedures.
A new Paragraph 1.9 would be added to Part W which would empower
ICE Clear Europe to debit cash penalties imposed by the relevant
settlement system from Clearing Members in delivery default and to
credit cash penalties to the account of the Clearing Member that is
affected by the settlement fail. Although, as described above, it is
anticipated that CSDs will administer cash penalties for ICE Clear
Europe-cleared trades, the Clearing House will retain this power in
case its account structure changes and it would be required to
administer penalties under the CSDR.
Part Z: Financials and Softs Equity Futures/Options
Part Z of the Delivery Procedures would be amended to add a similar
new provision to Paragraph 3.3 which empowers ICE Clear Europe to debit
cash penalties imposed by a relevant settlement system from Clearing
Members in delivery default and to credit cash penalties to the account
of the Clearing Member that is affected by the settlement fail.
Although, as described above, it is anticipated that CSDs will
administer cash penalties for ICE Clear Europe-cleared trades, ICE
Clear Europe will retain this power in case its account structure
changes and it would be required to administer penalties under the
CSDR.
Paragraph 5 of Part Z would also be amended to expand the
categories of information that would be made available by the Clearing
House upon Clearing members' early exercise or expiry of a physically
delivered Equity Future or Option Contract, or the execution of a stock
contingent trade. Specifically, the amendments would add the following
information to the report for early exercise or expiry: (i) Cash
consideration to be delivered or received, (ii) stock identifying ISIN
code to be delivered and (iii) CSD settlement location. For stock
contingent trades, the relevant report would be expanded to include
certain information about the associated option. These amendments are
intended to reflect what is generally included in the report already in
practice.
(b) Statutory Basis
ICE Clear Europe believes that the proposed amendments to the
Delivery Procedures are consistent with the requirements of Section 17A
of the Act \10\ and the regulations thereunder applicable to it. In
particular, Section 17A(b)(3)(F) of the Act \11\ requires, among other
things, that the rules of a clearing agency be designed to promote the
prompt and accurate clearance and settlement of securities transactions
and, to the extent applicable, derivative agreements, contracts, and
transactions, the safeguarding of securities and funds in the custody
or control of the clearing agency or for which it is responsible, and
the protection of investors and the public interest. The proposed
changes to the Delivery Procedures are designed to address and
accommodate certain settlement discipline provisions under the CSDR and
RTS that will come into effect on 1 February 2022. Principally, the
proposed amendments would address potential fines that may be imposed
under the CSDR and RTS in connection with settlement failures relating
to deliveries of certain securities underlying F&O Contracts, and
enhance reporting to the Clearing House in the case of certain
settlement failures under such contracts. In particular, the proposed
amendments explicitly address the possibility of fines for settlement
failures in the context of settlement of government bond futures and
options and equity futures and options cleared by the Clearing House,
where the underlying is listed or cleared on an EU facility and
settlement occurs through an EU settlement facility. The proposed
amendments also clarify that the CSDR settlement discipline provisions
would not apply to settlement of certain emissions futures contracts.
The proposed amendments will thus clarify the role, responsibilities
and liabilities of the Clearing House, Clearing Members and designated
transferors and transferees in the context of settlement failures that
may occur with respect to securities delivered in settlement of
specified F&O Contracts. The proposed amendments would not otherwise
change the manner in which such contracts are cleared and settled. As a
result, in ICE Clear Europe's view, the proposed amendments would be
consistent with the prompt and accurate clearance and settlement of the
contracts and the protection of investors, consistent with the
requirements of Section 17A(b)(3)(F) of the Act.\12\ The proposed
amendments are also consistent with the public interest, including as
reflected in the policies of the CSDR and RTS. (In ICE Clear Europe's
view, the proposed amendments would not affect the safeguarding of
funds or securities in the custody or control of the clearing agency or
for which it is responsible, within the meaning of Section
17A(b)(3)(F).\13\)
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\10\ 15 U.S.C. 78q-1.
\11\ 15 U.S.C. 78q-1(b)(3)(F).
\12\ 15 U.S.C. 78q-1(b)(3)(F).
\13\ 15 U.S.C. 78q-1(b)(3)(F).
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Rule 17Ad-22(e)(1) requires that a clearing agency ``establish,
implement, maintain and enforce written policies and procedures
reasonably designed to, as applicable, provide for a well-founded,
clear, transparent and enforceable legal basis for each aspect of its
activities in all relevant jurisdictions.'' \14\ The proposed
amendments are intended to address new requirements under EU law
applicable to settlement activity conducted by the Clearing House with
EU settlement facilities relating to underlying securities traded or
cleared on EU facilities. As such, the proposed amendments support the
Clearing House's legal framework for operation in the EU, consistent
with the requirements of Rule 17Ad-22(e)(1).\15\
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\14\ 17 CFR 240.17Ad-22(e)(1).
\15\ 17 CFR 240.17Ad-22(e)(1).
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In addition, Rule 17Ad-22(e)(10) \16\ provides that ``[e]ach
covered clearing agency shall establish, implement, maintain and
enforce written policies and procedures reasonably designed to, as
applicable [. . .] 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.'' As discussed above, the proposed amendments would revise
the Delivery Procedures for affected F&O Contracts as a result of the
applicable CSDR and RTS settlement discipline provisions, particularly
as they relate to fines for settlement failures and provision of
additional information regarding settlement failures. The proposed
amendments thus clarify the obligations of the Clearing House, Clearing
Members and others with respect to settlement failures under such
contracts. The proposed amendments also clarify that the CSDR
settlement discipline provisions will not affect settlement under
certain emissions contracts. The proposed amendments do not otherwise
affect the procedures for delivery under such contracts. As a result,
ICE Clear Europe believes the amendments are consistent with the
requirements of Rule 17Ad-22(e)(10).\17\
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\16\ 17 CFR 240.17Ad-22(e)(10).
\17\ 17 CFR 240.17Ad-22(e)(10).
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[[Page 5881]]
(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 purposes of the Act. The proposed
amendments to the Delivery Procedures are intended to address new
settlement discipline procedures applicable to certain contracts as
provided in the CSDR and RTS. Although the procedures could result in
certain additional costs to Clearing Members, if certain fines were
imposed as a result of a settlement failure, those additional costs
result from the requirements of relevant EU legislation applicable to
settlements in the affected underlying securities which would be
applicable to all market participants for the relevant contracts and it
would be inappropriate for the Clearing House to bear the cost of late
delivery fines, which should reasonably be passed on to the Clearing
Members responsible for delivery failures. Furthermore, any such
additional costs would result from a failure by the relevant Clearing
Member or its customer to comply in a timely manner with its settlement
obligations as specified under EU legislation. Accordingly, ICE Clear
Europe does not believe the amendments would adversely affect
competition among Clearing Members, materially affect the cost of
clearing, adversely affect access to clearing for Clearing Members or
their customers, or otherwise adversely affect competition in clearing
services. Accordingly, ICE Clear Europe does not believe that the
amendments would impose any impact or burden on competition that is not
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
Written comments relating to the proposed amendments have not been
solicited or received by ICE Clear Europe. ICE Clear Europe will notify
the Commission of any comments received with respect to the proposed
rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \18\ and paragraph (f) of Rule 19b-4 \19\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f).
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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-2022-002 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-2022-002. 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/notices/Notices.shtml?regulatoryFilings.
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-2022-002 and should be
submitted on or before February 23, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-02078 Filed 2-1-22; 8:45 am]
BILLING CODE 8011-01-P