Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change Relating to the Capital Replenishment Plan, 14412-14414 [2023-04682]

Download as PDF 14412 Federal Register / Vol. 88, No. 45 / Wednesday, March 8, 2023 / Notices subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–EMERALD–2023–06, and should be submitted on or before March 29, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–04685 Filed 3–7–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97018; File No. SR–ICEEU– 2022–027] Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change Relating to the Capital Replenishment Plan lotter on DSK11XQN23PROD with NOTICES1 March 2, 2023. I. Introduction On December 29, 2022, ICE Clear Europe Limited (‘‘ICEEU’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(2) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and 29 17 1 15 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). VerDate Sep<11>2014 16:48 Mar 07, 2023 Jkt 259001 Rule 19b–4 thereunder,2 a proposed rule change to adopt a capital replenishment plan. The proposed rule change was published for comment in the Federal Register on January 17, 2023.3 The Commission did not receive comments regarding the proposed rule change. For the reasons discussed below, the Commission is approving the proposed rule change. II. Description of the Proposed Rule Change A. Background ICE Clear Europe is registered with the Commission as a clearing agency for the purpose of clearing security-based swaps. In its role as a clearing agency for security-based swaps, ICE Clear Europe maintains certain financial resources as capital. A number of different laws and regulations require ICEEU to maintain capital, as doing so promotes ICE Clear Europe’s resiliency and helps it withstand periods of market stress. In the proposed rule change, ICEEU would adopt a new Capital Replenishment Plan (‘‘CRP’’) 4 to explain how ICEEU would replenish its capital following a loss. The proposed adoption of the CRP is designed to address ICEEU’s need to replenish capital because of a Clearing Member default, the occurrence of sudden extraordinary one-off losses, net losses resulting from custody or investment risks, or from recurring losses which may arise from general business risks.5 The CRP would consist of five sections, and would include two appendices and two annexes. Each of these sections is described below. ICEEU would review the CRP annually and would include capital replenishment within its annual default management test schedule. B. Section 1—Introduction and Background Section 1 of the CRP introduces the plan, describes the purpose of the plan, and explains ICEEU’s approach in developing the plan. As mentioned above, the overall purpose of the plan is to replenish capital following a loss. The proposed CRP: (i) describes actions that ICEEU could take to replenish its capital, for both its own resources contribution to the guaranty fund and 2 17 CFR 240.19b–4. Organizations; ICE Clear Europe Limited; Notice of Filing of Proposed Rule Change Relating to the Capital Replenishment Plan; Exchange Act Release No. 96634 (Jan. 11, 2023), 88 FR 2668 (Jan. 17, 2023) (File No. SR–ICEEU–2022– 027) (‘‘Notice’’). 4 Capitalized terms not otherwise defined herein have the meanings assigned to them in the CRF or ICEEU’s rulebook, as applicable. 5 See Notice, 88 FR 2668. 3 Self-Regulatory PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 for its capital requirement under EMIR; (ii) explains ICEEU’s approach to capital management and maintaining capital; and (iii) identifies associated stakeholders and responsibilities. Section 1 outlines the steps ICEEU would expect to take to replenish capital, including (i) first assessing and using available accumulated financial resources, (ii) then looking to use reasonably calculated forecasts as to future profits, (iii) if those resources are insufficient to restore capital to the legal requirement, by seeking resources from its parent company in the ICE group, and (iv) thereafter, with the approval of its parent and subject to the rights of existing shareholders, by seeking additional capital from third parties. ICEEU may also bypass the first two steps outlined above and immediately request capital from its parent company. Finally, Section 1 of the CRP assigns the overall accountability for the CRP to the ICEEU President, the ICEEU Finance Director, and the ICEEU Board. C. Section 2—Responsibilities While Section 1 of the CRP assigns overall accountability to the President, Finance Director, and Board, Section 2 provides further details on that accountability. Specifically, under Section 2, ICEEU’s Finance Director is responsible for monitoring ICEEU’s compliance with the applicable regulatory capital requirements, reporting capital adequacy internally and to regulators, escalating matters relating to capital adequacy to ICEEU’s President where appropriate, and contributing to the development of plans to increase and/or replenish Eligible Capital as required for ICEEU to continue to meet its regulatory capital requirements. ICEEU’s Finance Director also prepares forward-looking calculations of capital adequacy and dividend recommendations. ICEEU’s President is responsible for ensuring ICEEU meets its capital adequacy obligations under relevant laws and regulations. ICEEU’s President is also responsible for developing and executing any plans to increase and/or replenish capital as required in order for ICEEU to continue to meet its regulatory capital requirements, where necessary. The Board Risk Committee is responsible for reviewing and recommending to the Board the principles underlying the capital planning process as well as the Plan itself, and the Board itself would be responsible for approving the principles and the Plan. The Board is also responsible for holding the President accountable for demonstrating adherence to ICEEU capital policies and E:\FR\FM\08MRN1.SGM 08MRN1 Federal Register / Vol. 88, No. 45 / Wednesday, March 8, 2023 / Notices for reviewing and approving any capital transactions. The Board is also responsible for reviewing and recommending the principles that underpin the capital planning process and reviewing and approving any capital transactions. D. Section 3—Target Capital Amount Section 3 of the CRP explains how ICEEU determines its target capital amount in excess of the legal minimum capital requirement. ICEEU is required to maintain capital under a number of different laws and regulations, including regulations issued by the Bank of England and the Commission. ICEEU considers its capital, as calculated in accordance with Article 1(1) of EMIR Capital RTS, to be its Base Capital Requirement.6 Section 3 of CRP explains that ICEEU seeks to maintain capital above the threshold at which ICEEU would be required to notify the Bank of England (which is generally 10% above the required capital level). In addition, ICEEU also endeavors to maintain additional capital, on a voluntary basis, approximately equal to an additional 10% of the required capital level plus the 10% buffer referenced above. E. Section 4—Capital Replenishment Tools Section 4 of the CRP provides further detail regarding the use of the capital replenishment tools referenced above in different default loss and non-default loss scenarios and related actions to be taken for each tool, including as to the key individuals and departments involved and approvals required, the estimated timing for various actions, relevant documentation requirements, the procedure for determination of the relevant amount of additional resources to be sought or applied from the relevant sources, and the process for consultation with Clearing Members and regulators, among other matters. F. Section 5, Appendices, and Annexes lotter on DSK11XQN23PROD with NOTICES1 Section 5 of the CRP provides a version history. Appendix A provides additional detail on replenishment actions, including the timings for the actions and the personnel that are involved. Appendix B is a glossary of defined terms found in the CRP. Annex 1 consists of template corporate 6 Commission Delegated Regulation (EU) No. 152/ 2013 of 19 December 2012 supplementing Regulation (EU) No. 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on capital requirements for central counterparties, as onshored into UK law following the end of the Brexit transition period. VerDate Sep<11>2014 16:48 Mar 07, 2023 Jkt 259001 resolutions for ICEEU to use in carrying out certain replenishment actions, while Annex 2 consists of template corporate resolutions for ICEEU’s parent company to use in authorizing ICE Clear Europe’s replenishment actions. III. Discussion and Commission Findings Section 19(b)(2)(C) of the Act directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization.7 For the reasons discussed below, the Commission finds that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act,8 and Rules 17Ad–22(e)(2)(v), (3)(ii), and (e)(15) thereunder.9 A. Consistency With Section 17A(b)(3)(F) of the Act Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of ICEEU be designed to promote the prompt and accurate clearance and settlement of securities transactions.10 Based on its review of the record, and for the reasons discussed below, the Commission believes the proposed rule change is consistent with the promotion of the prompt and accurate clearance and settlement of securities transactions at ICEEU because it would adopt the CRP, which establishes ICEEU’s procedures for replenishing capital. The proposed rule is intended to document procedures for replenishing capital. The proposed CRP would facilitate the continued operation of ICEEU following a significant loss from one or more Clearing Member defaults or a non-default loss (including investment or custodial losses and losses from general business risk) by replenishing needed financial resources. The proposed rule would address replenishment to both the minimum legal capital requirement and the higher target level intended to provide additional resources as an operating buffer. The proposed CRP would therefore help enable ICEEU to continue operations, including clearing and settling transactions, following a significant loss that affects ICEEU’s capital. The proposed rule change is therefore consistent with the continued prompt and accurate clearance and settlement of securities transactions, consistent with the requirements of Section 17A(b)(3)(F) of the Act.11 B. Consistency With Rule 17Ad– 22(e)(2)(v) Under the Exchange Act Rule 17Ad–22(e)(2)(v) 12 provides that the ‘‘covered clearing agency shall establish, implement, maintain and enforce written policies and procedures reasonable designed to, as applicable [. . .] provide for governance arrangements’’ that ‘‘specify clear and direct lines of responsibility.’’ 13 The Commission believes the proposed rule change is consistent with 17Ad–22(e)(2)(v). The CRP identifies responsibilities of key ICEEU personnel, including the Board, the President, and other stakeholders with respect to ongoing compliance with capital requirements and for capital replenishment when necessary. The proposed CRP also provides for annual review by ICEEU’s President, Finance Director, and Board to ensure that it remains up-to-date and is reviewed in accordance with the Clearing House’s internal governance processes. C. Consistency With Rule 17Ad– 22(e)(3)(ii) Under the Exchange Act Rule 17Ad–22(e)(3)(ii) 14 provides that the ‘‘covered clearing agency shall establish, implement, maintain and enforce written policies and procedures reasonable designed to, as applicable [. . .] maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody and other risks that arise in or are borne by the covered clearing agency, which . . . includes plans for the recovery or orderly winddown of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses.’’ 15 The Commission believes that the proposed rule is consistent with Rule 17Ad–22(e)(3)(ii). The proposed CRP serves as a recovery tool and part of ICEEU’s broader Recovery Plan because it documents tools, arrangements and procedures for replenishing capital resulting from default losses or nondefault losses, including losses from general business risk. The proposed CRP further sets out the roles and functions of the Board, ICEEU management and other internal personnel and committees 7 15 11 15 8 15 12 17 U.S.C. 78s(b)(2)(C). U.S.C. 78q–1(b)(3)(F). 9 17 CFR 240.17Ad–22(e)(2)(v), (e)(3)(ii), and (e)(15). 10 15 U.S.C. 78q–1(b)(3)(F). PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 14413 U.S.C. 78q–1(b)(3)(F). CFR 240.17 Ad–22(e)(2). 13 17 CFR 240.17 Ad–22(e)(2)(v). 14 17 CFR 240.17Ad–22(e)(3)(ii). 15 17 CFR 240.17Ad–22(e)(3)(ii). E:\FR\FM\08MRN1.SGM 08MRN1 14414 Federal Register / Vol. 88, No. 45 / Wednesday, March 8, 2023 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Sherry R. Haywood, Assistant Secretary. in taking such steps to replenish financial resources. D. Consistency With Rule 17Ad– 22(e)(15) Under the Exchange Act Rule 17Ad–22(e)(15) 16 states that a clearing agency shall ‘‘identify, monitor, and manage, the covered clearing agency’s general business risk and hold sufficient liquid net assets funded by equity to cover potential general business losses . . .’’ by ‘‘[m]aintaining a viable plan, approved by the board of directors and updated at least annually, for raising additional equity should its equity fall close to or below the amount required under paragraph (e)(15)(ii) of this section.’’ 17 The Commission believes the proposed rule is consistent with Rule 17Ad–22(e)(15). The proposed rule has been approved by the ICEEU Board of Directors, would be reviewed and updated annually, and would outline the tools available to restore additional capital if needed. Specifically, the proposed rule serves as a part of a broader recovery plan and is intended to document tools, arrangements and procedures for replenishing capital when needed, including as a result of losses from general business risk. The capital restoration levels detailed in the proposed rule are based on ICEEU’s legal capital requirements and its own target capital level. These are designed to exceed the amount required under Rule 17Ad–22(e)(15)(ii).18 IV. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act, and in particular, with the requirements of Section 17A(b)(3)(F) of the Act 19 and Rules 17Ad–22(e)(2)(v), (e)(3)(ii), and (e)(15) thereunder.20 It is therefore ordered pursuant to Section 19(b)(2) of the Act 21 that the proposed rule change (SR–ICEEU–2022– 027), be, and hereby is, approved.22 16 17 CFR 240.17Ad–22(e)(15). CFR 240.17 Ad–22(e)(15)(iii). 18 17 CFR 240.17 Ad–22(e)(15)(ii). 19 15 U.S.C. 78q–1(b)(3)(F). 20 17 CFR 240.17Ad–22(e)(2)(v), (e)(3)(ii), and (e)(15). 21 15 U.S.C. 78s(b)(2). 22 In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). lotter on DSK11XQN23PROD with NOTICES1 17 17 VerDate Sep<11>2014 16:48 Mar 07, 2023 Jkt 259001 [FR Doc. 2023–04682 Filed 3–7–23; 8:45 am] of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97026; File No. SR– NYSEARCA–2023–19] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend Rule 6.76AP– O March 2, 2023. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on February 23, 2023, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 6.76AP–O (Order Execution and Routing) regarding the treatment of routable orders. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 1. Purpose The Exchange proposes to amend Rule 6.76AP–O (Order Execution and Routing) regarding the treatment of routable orders. Background Rule 6.76AP–O describes the Exchange’s process for order execution and routing. First, subject to certain pricing parameters and allocation guarantees, the Exchange will match eligible interest (i.e., an Aggressing Order or Aggressing Quote) 4 against contra-side interest according to the price-time priority ranking of the resting interest, per Rule 6.76P–O (Order Ranking and Display).5 Per Rule 6.76AP–O(b), after being matched to the extent possible with local interest (on the Consolidated Book) per paragraph (a) of this Rule, routable orders (or portions thereof) may be routed to Away Market(s) if marketable.6 The Exchange proposes to amend Rule 6.76AP–O(b) to add new text regarding the handling of such orders as set forth below. Proposed Rule Change The Exchange’s current order handling and routing system was recently implemented in connection with the Exchange’s migration to the Pillar trading platform in July 2022.7 The Exchange has been operating on Pillar for approximately six months and has identified a performance optimization that will reduce unnecessary processing by Pillar. Specifically, the Exchange proposes that once an order needs to be routed to an Away Market, Pillar will then determine the venue(s) to which the order should be routed. Currently, this evaluation of price(s) and volume(s) on Away Markets is constantly available in 4 See Rule 6.76P–O(a)(5) defining ‘‘Aggressing Order’’ or ‘‘Aggressing Quote’’ as referring to ‘‘a buy (sell) order or quote that is or becomes marketable against sell (buy) interest on the Consolidated Book.’’ 5 See Rule 6.76AP–O(a)(1)(A)–(D) (setting forth the criteria for executing incoming interest against the quote of an LMM, up to 40% of the incoming interest, up to the size of the LMM’s quote (the ‘‘LMM Guarantee’’)). 6 See Rule 6.76AP–O(b)(2) (providing that orders with an instruction not to route are processed per Rule 6.62P–O (Orders and Modifiers)). 7 The Exchange announced the migration of the fifth and final tranche of symbols to the Pillar trading platform, via Trader Update, available here: https://www.nyse.com/trader-update/history# 110000440092. E:\FR\FM\08MRN1.SGM 08MRN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 45 (Wednesday, March 8, 2023)]
[Notices]
[Pages 14412-14414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04682]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97018; File No. SR-ICEEU-2022-027]


Self-Regulatory Organizations; ICE Clear Europe Limited; Order 
Approving Proposed Rule Change Relating to the Capital Replenishment 
Plan

March 2, 2023.

I. Introduction

    On December 29, 2022, ICE Clear Europe Limited (``ICEEU'') filed 
with the Securities and Exchange Commission (``Commission''), pursuant 
to Section 19(b)(2) of the Securities Exchange Act of 1934 (the 
``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
adopt a capital replenishment plan. The proposed rule change was 
published for comment in the Federal Register on January 17, 2023.\3\ 
The Commission did not receive comments regarding the proposed rule 
change. For the reasons discussed below, the Commission is approving 
the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Self-Regulatory Organizations; ICE Clear Europe Limited; 
Notice of Filing of Proposed Rule Change Relating to the Capital 
Replenishment Plan; Exchange Act Release No. 96634 (Jan. 11, 2023), 
88 FR 2668 (Jan. 17, 2023) (File No. SR-ICEEU-2022-027) 
(``Notice'').
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II. Description of the Proposed Rule Change

A. Background

    ICE Clear Europe is registered with the Commission as a clearing 
agency for the purpose of clearing security-based swaps. In its role as 
a clearing agency for security-based swaps, ICE Clear Europe maintains 
certain financial resources as capital. A number of different laws and 
regulations require ICEEU to maintain capital, as doing so promotes ICE 
Clear Europe's resiliency and helps it withstand periods of market 
stress. In the proposed rule change, ICEEU would adopt a new Capital 
Replenishment Plan (``CRP'') \4\ to explain how ICEEU would replenish 
its capital following a loss. The proposed adoption of the CRP is 
designed to address ICEEU's need to replenish capital because of a 
Clearing Member default, the occurrence of sudden extraordinary one-off 
losses, net losses resulting from custody or investment risks, or from 
recurring losses which may arise from general business risks.\5\ The 
CRP would consist of five sections, and would include two appendices 
and two annexes. Each of these sections is described below. ICEEU would 
review the CRP annually and would include capital replenishment within 
its annual default management test schedule.
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    \4\ Capitalized terms not otherwise defined herein have the 
meanings assigned to them in the CRF or ICEEU's rulebook, as 
applicable.
    \5\ See Notice, 88 FR 2668.
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B. Section 1--Introduction and Background

    Section 1 of the CRP introduces the plan, describes the purpose of 
the plan, and explains ICEEU's approach in developing the plan. As 
mentioned above, the overall purpose of the plan is to replenish 
capital following a loss. The proposed CRP: (i) describes actions that 
ICEEU could take to replenish its capital, for both its own resources 
contribution to the guaranty fund and for its capital requirement under 
EMIR; (ii) explains ICEEU's approach to capital management and 
maintaining capital; and (iii) identifies associated stakeholders and 
responsibilities.
    Section 1 outlines the steps ICEEU would expect to take to 
replenish capital, including (i) first assessing and using available 
accumulated financial resources, (ii) then looking to use reasonably 
calculated forecasts as to future profits, (iii) if those resources are 
insufficient to restore capital to the legal requirement, by seeking 
resources from its parent company in the ICE group, and (iv) 
thereafter, with the approval of its parent and subject to the rights 
of existing shareholders, by seeking additional capital from third 
parties. ICEEU may also bypass the first two steps outlined above and 
immediately request capital from its parent company.
    Finally, Section 1 of the CRP assigns the overall accountability 
for the CRP to the ICEEU President, the ICEEU Finance Director, and the 
ICEEU Board.

C. Section 2--Responsibilities

    While Section 1 of the CRP assigns overall accountability to the 
President, Finance Director, and Board, Section 2 provides further 
details on that accountability. Specifically, under Section 2, ICEEU's 
Finance Director is responsible for monitoring ICEEU's compliance with 
the applicable regulatory capital requirements, reporting capital 
adequacy internally and to regulators, escalating matters relating to 
capital adequacy to ICEEU's President where appropriate, and 
contributing to the development of plans to increase and/or replenish 
Eligible Capital as required for ICEEU to continue to meet its 
regulatory capital requirements. ICEEU's Finance Director also prepares 
forward-looking calculations of capital adequacy and dividend 
recommendations.
    ICEEU's President is responsible for ensuring ICEEU meets its 
capital adequacy obligations under relevant laws and regulations. 
ICEEU's President is also responsible for developing and executing any 
plans to increase and/or replenish capital as required in order for 
ICEEU to continue to meet its regulatory capital requirements, where 
necessary.
    The Board Risk Committee is responsible for reviewing and 
recommending to the Board the principles underlying the capital 
planning process as well as the Plan itself, and the Board itself would 
be responsible for approving the principles and the Plan. The Board is 
also responsible for holding the President accountable for 
demonstrating adherence to ICEEU capital policies and

[[Page 14413]]

for reviewing and approving any capital transactions. The Board is also 
responsible for reviewing and recommending the principles that underpin 
the capital planning process and reviewing and approving any capital 
transactions.

D. Section 3--Target Capital Amount

    Section 3 of the CRP explains how ICEEU determines its target 
capital amount in excess of the legal minimum capital requirement. 
ICEEU is required to maintain capital under a number of different laws 
and regulations, including regulations issued by the Bank of England 
and the Commission. ICEEU considers its capital, as calculated in 
accordance with Article 1(1) of EMIR Capital RTS, to be its Base 
Capital Requirement.\6\
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    \6\ Commission Delegated Regulation (EU) No. 152/2013 of 19 
December 2012 supplementing Regulation (EU) No. 648/2012 of the 
European Parliament and of the Council with regard to regulatory 
technical standards on capital requirements for central 
counterparties, as on-shored into UK law following the end of the 
Brexit transition period.
---------------------------------------------------------------------------

    Section 3 of CRP explains that ICEEU seeks to maintain capital 
above the threshold at which ICEEU would be required to notify the Bank 
of England (which is generally 10% above the required capital level). 
In addition, ICEEU also endeavors to maintain additional capital, on a 
voluntary basis, approximately equal to an additional 10% of the 
required capital level plus the 10% buffer referenced above.

E. Section 4--Capital Replenishment Tools

    Section 4 of the CRP provides further detail regarding the use of 
the capital replenishment tools referenced above in different default 
loss and non-default loss scenarios and related actions to be taken for 
each tool, including as to the key individuals and departments involved 
and approvals required, the estimated timing for various actions, 
relevant documentation requirements, the procedure for determination of 
the relevant amount of additional resources to be sought or applied 
from the relevant sources, and the process for consultation with 
Clearing Members and regulators, among other matters.

F. Section 5, Appendices, and Annexes

    Section 5 of the CRP provides a version history. Appendix A 
provides additional detail on replenishment actions, including the 
timings for the actions and the personnel that are involved. Appendix B 
is a glossary of defined terms found in the CRP. Annex 1 consists of 
template corporate resolutions for ICEEU to use in carrying out certain 
replenishment actions, while Annex 2 consists of template corporate 
resolutions for ICEEU's parent company to use in authorizing ICE Clear 
Europe's replenishment actions.

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act directs the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
such proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to such 
organization.\7\ For the reasons discussed below, the Commission finds 
that the proposed rule change is consistent with Section 17A(b)(3)(F) 
of the Act,\8\ and Rules 17Ad-22(e)(2)(v), (3)(ii), and (e)(15) 
thereunder.\9\
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    \7\ 15 U.S.C. 78s(b)(2)(C).
    \8\ 15 U.S.C. 78q-1(b)(3)(F).
    \9\ 17 CFR 240.17Ad-22(e)(2)(v), (e)(3)(ii), and (e)(15).
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A. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, among other things, that 
the rules of ICEEU be designed to promote the prompt and accurate 
clearance and settlement of securities transactions.\10\ Based on its 
review of the record, and for the reasons discussed below, the 
Commission believes the proposed rule change is consistent with the 
promotion of the prompt and accurate clearance and settlement of 
securities transactions at ICEEU because it would adopt the CRP, which 
establishes ICEEU's procedures for replenishing capital.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78q-1(b)(3)(F).
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    The proposed rule is intended to document procedures for 
replenishing capital. The proposed CRP would facilitate the continued 
operation of ICEEU following a significant loss from one or more 
Clearing Member defaults or a non-default loss (including investment or 
custodial losses and losses from general business risk) by replenishing 
needed financial resources. The proposed rule would address 
replenishment to both the minimum legal capital requirement and the 
higher target level intended to provide additional resources as an 
operating buffer. The proposed CRP would therefore help enable ICEEU to 
continue operations, including clearing and settling transactions, 
following a significant loss that affects ICEEU's capital. The proposed 
rule change is therefore consistent with the continued prompt and 
accurate clearance and settlement of securities transactions, 
consistent with the requirements of Section 17A(b)(3)(F) of the 
Act.\11\
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    \11\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(e)(2)(v) Under the Exchange Act

    Rule 17Ad-22(e)(2)(v) \12\ provides that the ``covered clearing 
agency shall establish, implement, maintain and enforce written 
policies and procedures reasonable designed to, as applicable [. . .] 
provide for governance arrangements'' that ``specify clear and direct 
lines of responsibility.'' \13\
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    \12\ 17 CFR 240.17 Ad-22(e)(2).
    \13\ 17 CFR 240.17 Ad-22(e)(2)(v).
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    The Commission believes the proposed rule change is consistent with 
17Ad-22(e)(2)(v). The CRP identifies responsibilities of key ICEEU 
personnel, including the Board, the President, and other stakeholders 
with respect to ongoing compliance with capital requirements and for 
capital replenishment when necessary. The proposed CRP also provides 
for annual review by ICEEU's President, Finance Director, and Board to 
ensure that it remains up-to-date and is reviewed in accordance with 
the Clearing House's internal governance processes.

C. Consistency With Rule 17Ad-22(e)(3)(ii) Under the Exchange Act

    Rule 17Ad-22(e)(3)(ii) \14\ provides that the ``covered clearing 
agency shall establish, implement, maintain and enforce written 
policies and procedures reasonable designed to, as applicable [. . .] 
maintain a sound risk management framework for comprehensively managing 
legal, credit, liquidity, operational, general business, investment, 
custody and other risks that arise in or are borne by the covered 
clearing agency, which . . . includes plans for the recovery or orderly 
wind-down of the covered clearing agency necessitated by credit losses, 
liquidity shortfalls, losses from general business risk, or any other 
losses.'' \15\
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    \14\ 17 CFR 240.17Ad-22(e)(3)(ii).
    \15\ 17 CFR 240.17Ad-22(e)(3)(ii).
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    The Commission believes that the proposed rule is consistent with 
Rule 17Ad-22(e)(3)(ii). The proposed CRP serves as a recovery tool and 
part of ICEEU's broader Recovery Plan because it documents tools, 
arrangements and procedures for replenishing capital resulting from 
default losses or non-default losses, including losses from general 
business risk. The proposed CRP further sets out the roles and 
functions of the Board, ICEEU management and other internal personnel 
and committees

[[Page 14414]]

in taking such steps to replenish financial resources.

D. Consistency With Rule 17Ad-22(e)(15) Under the Exchange Act

    Rule 17Ad-22(e)(15) \16\ states that a clearing agency shall 
``identify, monitor, and manage, the covered clearing agency's general 
business risk and hold sufficient liquid net assets funded by equity to 
cover potential general business losses . . .'' by ``[m]aintaining a 
viable plan, approved by the board of directors and updated at least 
annually, for raising additional equity should its equity fall close to 
or below the amount required under paragraph (e)(15)(ii) of this 
section.'' \17\
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    \16\ 17 CFR 240.17Ad-22(e)(15).
    \17\ 17 CFR 240.17 Ad-22(e)(15)(iii).
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    The Commission believes the proposed rule is consistent with Rule 
17Ad-22(e)(15). The proposed rule has been approved by the ICEEU Board 
of Directors, would be reviewed and updated annually, and would outline 
the tools available to restore additional capital if needed. 
Specifically, the proposed rule serves as a part of a broader recovery 
plan and is intended to document tools, arrangements and procedures for 
replenishing capital when needed, including as a result of losses from 
general business risk. The capital restoration levels detailed in the 
proposed rule are based on ICEEU's legal capital requirements and its 
own target capital level. These are designed to exceed the amount 
required under Rule 17Ad-22(e)(15)(ii).\18\
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    \18\ 17 CFR 240.17 Ad-22(e)(15)(ii).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act, 
and in particular, with the requirements of Section 17A(b)(3)(F) of the 
Act \19\ and Rules 17Ad-22(e)(2)(v), (e)(3)(ii), and (e)(15) 
thereunder.\20\
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    \19\ 15 U.S.C. 78q-1(b)(3)(F).
    \20\ 17 CFR 240.17Ad-22(e)(2)(v), (e)(3)(ii), and (e)(15).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\21\ that the proposed rule change (SR-ICEEU-2022-027), be, and hereby 
is, approved.\22\
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    \21\ 15 U.S.C. 78s(b)(2).
    \22\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04682 Filed 3-7-23; 8:45 am]
BILLING CODE 8011-01-P

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