Notice2022-19675
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 and the ICE Clear Europe Clearing Procedures
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Published
September 13, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 176 (Tuesday, September 13, 2022)</title>
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[Federal Register Volume 87, Number 176 (Tuesday, September 13, 2022)]
[Notices]
[Pages 56118-56120]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-19675]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95682; File No. SR-ICEEU-2022-018]
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 and the ICE
Clear Europe Clearing Procedures
September 7, 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 August 30, 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
ICE Clear Europe Limited (``ICE Clear Europe'' or the ``Clearing
House'') proposes to amend (i) Parts C, D, F, H, K, L, AA, EE, and HH
of its Delivery Procedures (``Delivery Procedures'') and (ii) Part I of
its Clearing Procedures (``Clearing Procedures''), in each case to
implement the use of Contingent Variation Margin for certain UK and
European energy futures contracts.
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
Background
The amendments are intended to extend the Clearing House's use of
Contingent Variation Margin (``CVM'') requirements during the tender or
delivery period to certain additional UK and European natural gas and
electricity futures contracts. Under the existing Rules and Procedures
(including paragraph 4.6 of the Clearing Procedures), CVM can be
imposed by the Clearing House on specified F&O Contracts to account for
the difference, during the delivery period, between the final
settlement price for the relevant contract (typically established on
the last trading day of the contract, before the commencement of the
delivery period) and the price of the relevant contract for the next
contract month. CVM is intended to provide additional protection to the
Clearing House against potential exposure to Clearing Member default
from movements in the market price of the underlying commodity during
the delivery period. CVM is collected by the Clearing House from the
applicable Clearing Members but not paid out to the opposite Clearing
Members, although the opposite Clearing Member may apply the amount as
a credit against other margin requirements.
ICE Clear Europe is proposing to amend the Clearing Procedures and
the Delivery Procedures chapters for the relevant Contracts in order to
implement the extension to specified UK and European energy futures
contracts.
Clearing Procedures
Paragraph 4.6 of the Clearing Procedures would be updated to remove
the two listed examples of contracts for which CVM would be required.
Given the Clearing House's proposed extension of the use of CVM, the
examples would be incomplete and are in any event unnecessary.
Additionally, the amendments would make a clarification that Clearing
Members will not receive payment of CVM in cash (as opposed to
referring to repayment) but instead may credit CVM against other margin
requirements, as discussed above. Paragraph 4.7, which described a
prior contingent credit approach for sellers under natural gas and
electricity futures, would be removed as it will be superseded by the
extension of CVM to such contracts.
Delivery Procedures
ICE Clear Europe is proposing to amend Parts C, D, F, H, K, L, AA,
EE, and HH of its Delivery Procedures to implement CVM for physically-
settled monthly European and UK electricity and natural gas futures
contracts.
The delivery timetable for routine deliveries of ICE UK Electricity
Futures in Part C of the Delivery Procedures would be updated to
provide that on the Delivery Day of such contract the Clearing House
will apply CVM to the Buyer's and the Seller's remaining units of the
underlying to be delivered. The amendments would further provide on the
Business Day following the Delivery Day, the Clearing House will
continue to apply CVM to the Buyer's and Seller's remaining units of
the underlying to be delivered. The same updates would be made to the
delivery timetable for routine deliveries of each of (i) ICE Futures UK
Natural Gas Futures (Part D of the Delivery Procedures), (ii) ICE Endex
TTF Natural Gas Futures (Part F of the Delivery Procedures), (iii) ICE
Endex German THE Natural Gas Futures (Part H of the Delivery
Procedures), (iv) ICE Endex Dutch Power Futures (Part K of the Delivery
Procedures), (v) ICE Endex Belgian Power Base Load Futures (Part L of
the Delivery Procedures), and (vi) ICE Endex French PEG Natural Gas
Futures (Part HH of the Delivery Procedures). In respect of the
delivery timetable for routine delivery of ICE Endex PSV Natural Gas
Futures (Part AA of the Delivery Procedures) and ICE Endex VTP Natural
Gas Futures (Part EE of the Delivery Procedures), similar updates would
be made taking into account the delivery characteristics of those
contracts: each such timetable would provide that on the first Business
Day immediately preceding the first day of the month in which the
Delivery Day specified in the relevant contract commenced, the Clearing
House will apply CVM to the Buyer's and the Seller's remaining natural
gas units. The amendments would further provide that on the Business
Day following the Delivery Day, the Clearing House will continue to
apply CVM to the Buyer's and Seller's remaining natural gas units.
The amendments would make certain other clarifications updates to
the Delivery Procedures unrelated to the
[[Page 56119]]
implementation of CVM. Specifically, references to ICE Futures UK
Natural Gas (EUR/MWh) Futures Contracts in Part D of the Delivery
Procedures would be removed as such contracts are no longer traded. In
Part F of the Delivery Procedures (ICE Endex TTF Natural Gas Futures),
references to weekly contracts (and related defined terms such as
``Delivery Week'' and ``W+'' and ``W-'' would be removed as no such TTF
natural gas contracts of this type are traded. The remaining provisions
would apply to the continuing monthly contracts (with some references
to ``monthly'' removed as no longer necessary to distinguish from
weekly contracts). In Part K of the Delivery Procedures (ICE Endex Base
Load Futures), references to the ICE Endex Dutch Power Base Load Week
Futures and related references to weekly contracts and related defined
terms are being removed since such weekly contract will no longer be
listed for trading. The remaining provisions would apply to the
continuing monthly contracts (with some references to ``monthly''
removed as no longer necessary to distinguish from weekly contracts).
In Part HH of the Delivery Procedures (ICE Endex PEG Natural Gas
Futures) references to the applicable ICE Endex confirmation reports
are being corrected.
(b) Statutory Basis
ICE Clear Europe believes that the proposed amendments to the
Delivery Procedures and the Clearing Procedures are consistent with the
requirements of Section 17A of the Act \5\ and the regulations
thereunder applicable to it. In particular, Section 17A(b)(3)(F) of the
Act \6\ 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 are intended to apply CVM to
certain additional UK and European electricity and natural gas futures
contracts to enhance the protections for the Clearing House against the
risk of market movements in the underlying commodity during the
delivery period. The amendments to the Delivery Procedures are designed
to add applicable references to CVM requirements in respect of the
routine delivery of certain physically-settled European and UK Natural
Gas futures contracts in order to reflect the Clearing House's
application of CVM. The changes to the Clearing Procedures are intended
to align with such updates to the Delivery Procedures. Certain
additional updates and clarifications would be made to the Delivery
Procedures. The amendments would not otherwise affect the manner in
which such contracts are cleared and settled. As a result, in ICE Clear
Europe's view, the amendments would be consistent with the prompt and
accurate clearance and settlement of the contracts, the safeguarding of
funds or securities in the custody or control of the clearing agency or
for which it is responsible, and the protection of investors and the
public interest, consistent with the requirements of Section
17A(b)(3)(F) of the Act.\7\
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\5\ 15 U.S.C. 78q-1.
\6\ 15 U.S.C. 78q-1(b)(3)(F).
\7\ 15 U.S.C. 78q-1(b)(3)(F).
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Rule 17Ad-22(e)(6) provides that ``[e]ach covered clearing agency
shall establish, implement, maintain and enforce written policies and
procedures reasonable designed to, as applicable [. . .] cover, if the
covered clearing agency provides central counterparty services, its
credit exposures to its participants by establishing a risk-based
margin system that, at a minimum (i) considers, and produces margin
levels commensurate with the risks and particular attributes of each
relevant product, portfolio and market. . . .''.\8\ As discussed above,
ICE Clear Europe has determined to apply CVM to certain additional UK
and European natural gas and electricity futures contracts to address
the particular risks faced by the Clearing House with respect to such
contracts as a result of price movements during the delivery period. As
a result, in ICE Clear Europe's view, the amendments are consistent
with the requirements of Rule 17Ad-22(e)(6).\9\
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\8\ 17 CFR 240.17Ad-22(e)(6).
\9\ 17 CFR 240.17Ad-22(e)(6).
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In addition, Rule 17Ad-22(e)(10) \10\ provides that ``[e]ach
covered clearing agency shall establish, implement, maintain and
enforce written policies and procedures reasonable 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.'' The proposed changes to the Delivery Procedures are
designed to amend delivery specifications in respect of the routine
delivery of certain physically-settled European and UK Natural Gas
futures contracts to reflect the application of CVM. Clearance of such
contracts would not otherwise be affected. As amended, the Delivery
Procedures thus appropriately state the role and responsibilities of
the Clearing House and Clearing Members with respect to physical
delivery. As a result, ICE Clear Europe believes the amendments are
consistent with the requirements of Rule 17Ad-22(e)(10).\11\
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\10\ 17 CFR 240.17Ad-22(e)(10).
\11\ 17 CFR 240.17Ad-22(e)(10).
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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 implement the
Clearing House's application of CVM in respect of certain physically-
settled European and UK electricity and natural gas futures contracts.
The imposition of CVM may impose certain costs on market participants
trading such contracts, as they may be required to provide CVM amounts
to the Clearing House during the delivery period. ICE Clear Europe
believes that such costs are appropriate, however, to account for the
risks to the Clearing House from market movements during the delivery
period, and reflect the particular positions of the market participant
that have gone to delivery. The CVM requirements will apply in the same
way to all similarly situated market participants. ICE Clear Europe
does not believe the amendments would otherwise materially affect the
cost of clearing, adversely affect competition among Clearing Members,
adversely affect access to clearing in the relevant contracts 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 amendment has not been
solicited or received by ICE Clear Europe. ICE Clear Europe will notify
the Commission of any comments received
[[Page 56120]]
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 \12\ and paragraph (f) of Rule 19b-4 \13\
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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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>) or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#9eecebf2fbb3fdf1f3f3fbf0eaeddeedfbfdb0f9f1e8"><span class="__cf_email__" data-cfemail="ddafa8b1b8f0beb2b0b0b8b3a9ae9daeb8bef3bab2ab">[email protected]</span></a>. Please include
File Number SR-ICEEU-2022-018 on the subject line.
Paper Comments
<bullet> 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-2022-018. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 <a href="https://www.theice.com/clear-europe/regulation">https://www.theice.com/clear-europe/regulation</a>.
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-2022-018 and should be
submitted on or before October 4, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19675 Filed 9-12-22; 8:45 am]
BILLING CODE 8011-01-P
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