Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing and Immediate Effectiveness of Proposed Rule Change, as Modified by Amendment No. 1, Relating to Amendments of the ICE Clear Europe Delivery Procedures

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Published

April 6, 2023

Issuing agencies

Securities and Exchange Commission

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<title>Federal Register, Volume 88 Issue 66 (Thursday, April 6, 2023)</title>
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[Federal Register Volume 88, Number 66 (Thursday, April 6, 2023)]
[Notices]
[Pages 20595-20597]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-07139]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97230; File No. SR-ICEEU-2023-007]

Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change, as
Modified by Amendment No. 1, Relating to Amendments of the ICE Clear
Europe Delivery Procedures

March 31, 2023.
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 March 20, 2023, 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 primarily prepared 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. On March 27, 2023, ICE Clear
Europe filed Amendment No. 1 to the proposed rule change. The
Commission is publishing this notice to solicit comments on the
proposed rule change, as modified by Amendment No. 1 (hereafter the
``proposed rule change''),\5\ 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).
\5\ Amendment No. 1 amended and restated in its entirety the
Form 19b-4 and Exhibit 1A in order to correct the narrative
description of the proposed rule change.
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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 its Delivery Procedures (``Delivery
Procedures'' or ``Procedures'') to add a new Part N2 thereto (``Part
N2''), which will apply to certain ICE Futures Europe Deliverable
Carbon Credit Contracts (together the ``Contracts''), for which
delivery will be made through a registry account of the Clearing
House.\6\
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\6\ 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 add a new Part N2 to the Delivery
Procedures. Part N2 would apply to the Contracts, which are to be
traded on ICE Futures Europe and cleared at ICE Clear Europe, and would
address settlement that will occur through a Registry Account of the
Clearing House. The proposed Delivery Procedures are intended to become
operative on March 28, 2023, subject to regulatory approval. ICE Clear
Europe will announce by Circular the specific Contracts to which Part
N2 of the Delivery Procedures will apply. ICE Clear Europe currently
expects that Part N2 will apply to all ICE Futures Europe physically
deliverable carbon credit contracts.
Pursuant to Part N2, delivery under the Contracts, in the case of
the Seller, would be effected upon the transfer of the relevant Carbon
Credits from the Registry Account of the Seller into the Registry
Account of the Clearing House and acceptance of the Carbon Credits by
the Clearing House. In the case of the Buyer, delivery would be
effected upon transfer of the relevant Carbon Credits from the relevant
Registry Account of the Clearing House to the relevant Registry Account
of the Buyer, and there would not be a prerequisite for the Buyer to
accept the Carbon Credits. Part N2 would set out the Clearing House's
ability not to accept a transfer from the Seller in the event the
transferred carbon credits are not in accordance with the contract
specifications. Delivery would take place during the Delivery Period
for the relevant Contracts in accordance with the contract
specifications, and neither delivery by Seller nor receipt by Buyer
would require performance by the other to occur simultaneously.
Consistent with the foregoing, the amendments would also state that
both the Buyer and Seller would deal directly with the Clearing House
in the settlement.
The amendments would set out relevant definitions related to
delivery under the contract, including as to the underlying deliverable
Carbon Credits. The amendments provide that the Carbon Credits must
conform to the specification described in the Contract and the
specifications of the Registry to and from which delivery may be made
under the relevant Contract. In cases where the Seller effected the
transfer of carbon credits that are not in accordance with the relevant
Contract specifications, the Clearing House would reserve the right to
reject the transfer and return the respective carbon credits. In such
scenario the Seller would remain under an obligation to deliver the
Carbon Credits of the specified quantity along with the Contract within
the appropriate timeline. The amendments would further specify certain
details of the delivery process for the Contracts including quantity,
settlement price, and timing of cessation of trading.
The amendments would state that the Contracts would be based on
Open Contract Positions after expiration of the relevant Contract Set
and the delivery process would occur over a three consecutive Business
Day period. In addition, the amendments would include delivery
timetables with detailed timeframes and descriptions of the processes
for delivery under Contracts. Such timetables would set out, among
other processes, the time for cessation of trading, submission of
delivery intentions, confirmation reports, confirmations of delivery
position/expiry, payment by the Buyer, payment and return of delivery
margin, Seller's delivery to the Clearing House, payment to Seller, and
Clearing House delivery to the Buyer.
The amendments would also address the responsibilities of the
Clearing House and relevant parties for delivery under Contracts, as
well as certain limitations of liability for the Clearing House.
Specifically, the Clearing House would not be responsible for the
performance or non-performance of, or any delay or error in performance
by any Registry or Registry Operator; the compliance or lack of
compliance of any Seller or Buyer or their respective

[[Page 20596]]

Transferors or Transferees with any rules of the relevant Registry or
any laws applicable to it; any errors in the Registry Account details
entered into the relevant Registry systems or provided to the Clearing
House by a Seller, Transferor, Buyer or Transferee in respect of a
delivery; closure of any Registry Accounts; or the compliance with the
contractual obligations owed to the Registry in respect of any Clearing
House Registry Accounts, among other matters. Additionally, neither the
Buyer or Seller would have any claim against the Clearing House for any
loss, cost, damage or expense incurred or suffered as a result of the
condition or operation of any Registry Operator or the performance or
non-performance of any Registry Operator. The amendments would state
that the section on liability would be without prejudice to the
generality of and subject to the provisions of the Rules relating to
liability and would be in addition to the general requirements of the
Delivery Procedures. Furthermore, the Clearing House would not make any
representation regarding the authenticity, validity or accuracy of any
delivery tender notice, description of a Registry, market tracking
system or any other Registry instructions, confirmations of transfer or
any other notice, document, file, record or instrument used or
delivered pursuant to the Contract Terms or pursuant to the procedures
of any Registry.
The amendments would provide details related to delivery contract
security, which is the delivery margin to be provided by Buyer and
Seller, and which would take into account the Finance Procedures. The
Clearing House would retain the Seller's security until the full
contract value is released to the Seller following the delivery
timetables.
The amendments would outline the use of the relevant Registry.
Clearing Members would have to ensure their Transferors/Transferees
have established the appropriate Registry Accounts at the relevant
Registry for the Contracts in question and provide necessary
instructions or confirmations to the Registry. Furthermore, Clearing
Members making or taking delivery of the Contracts for their own
account would be required to have established Registry Accounts in the
relevant Registry for the Contract in question. In addition, it would
be the responsibility of the Clearing Members to comply, and ensure
their Transferors/Transferees also comply, with the rules, regulations
and laws applicable to the Registry. The Clearing Members would also
have to provide, and ensure their respective Transferors/Transferees
also provide, correct Registry account details at all times.
The amendments would also provide for the use of an Alternative
Delivery Procedure (``ADP'') in the event of a failure to transfer
carbon credits in the manner and on the terms specified in the
Contract. In such case, a Clearing Member may request agreement of the
Clearing House to enter into an ADP to provide for delivery outside the
terms of the Contract. In such case, settlement of the Contract would
be dealt with in the manner specified in the ADP, and the affected
parties and the Clearing House would be released from their rights and
obligations in respect of the existing Contract. If the existing
Contract would be liquidated under the ADP Agreement, it would be on
the basis of the Exchange Delivery Settlement Price. A new Contract or
Contracts would then be formed for purposes of the Rules, and delivery
under an ADP Agreement would be subject to the specified requirements
of the Delivery Procedures, the same Contract Terms as the Contracts
replaced by the ADP Agreement (subject to the terms agreed in the ADP),
the directions by the Clearing House that it may issue under its
discretion, and the terms of the ADP Agreement. Any Clearing Member
that enters into an ADP agreement would be deemed to have agreed to
indemnify the Clearing House in respect of all and any of the Clearing
House's costs, losses, charges and expenses incurred by the Clearing
House in connection with the ADP. If a Clearing Member and the Clearing
House are unable to enter into an ADP Agreement or effect delivery
under an ADP within a reasonable time period after the failed delivery,
the Clearing House may refer the matter to ICE Futures Europe and it
will consider in its discretion what other reasonable next steps it
should take, if any, under applicable exchange rules.
(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 \7\ and the regulations thereunder applicable to it. In
particular, Section 17A(b)(3)(F) of the Act \8\ 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 establish delivery
procedures relating to ICE Futures Europe Deliverable Carbon Credit
Contracts under which delivery will be made through a Registry Account
of the Clearing House. The amendments would set out the role,
responsibilities and liabilities of the Clearing House, Clearing
Members and designated transferors and transferees in the delivery
process, in line with Delivery Procedures for other types of carbon
credit futures contracts. Contracts providing for delivery under Part
N2 will be cleared by the Clearing House in the substantially same
manner as other types of deliverable carbon credit contracts that have
been settled bilaterally rather than through a Clearing House Registry
Account, and will be supported by ICE Clear Europe's existing F&O
financial resources, risk management, systems and operational
arrangements. Accordingly, ICE Clear Europe believes that its financial
resources, risk management, systems and operational arrangements are
sufficient to support clearing of such contracts and to manage the
risks associated with such contracts. 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, and the protection
of investors and the public interest consistent with the requirements
of Section 17A(b)(3)(F) of the Act.\9\ (In ICE Clear Europe's view, the
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).\10\)
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\7\ 15 U.S.C. 78q-1.
\8\ 15 U.S.C. 78q-1(b)(3)(F).
\9\ 15 U.S.C. 78q-1(b)(3)(F).
\10\ 15 U.S.C. 78q-1(b)(3)(F).
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In addition, Rule 17Ad-22(e)(10) \11\ 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 amendments would establish a new
set of procedures applicable to the delivery and settlement of ICE
Futures Europe Deliverable Carbon Credit Contracts that are to be
settled by

[[Page 20597]]

delivery through the Clearing House's Registry Account. The procedures
would address, among other matters, delivery specifications for such
contracts, the obligations and roles of Clearing Members and the
Clearing House, certain limitations of liability for the Clearing
House, and certain other documentation and timing matters. Clearance of
the Contracts would otherwise be supported by ICE Clear Europe's
existing financial resources, risk management, systems and operational
arrangements. The amendments thus appropriately clarify 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).\12\
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\11\ 17 CFR 240.17Ad-22(e)(10).
\12\ 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 establish a new
set of procedures applicable to the delivery and settlement of ICE
Futures Europe Deliverable Carbon Credit Contracts under which delivery
will be made through a Registry Account of the Clearing House. In ICE
Clear Europe's view, the amendments will thus enhance the settlement
process, and would not otherwise materially affect the terms of the
contract. 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.

Written comments relating to the proposed amendment 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 \13\ and paragraph (f) of Rule 19b-4 \14\
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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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>) or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#4f3d3a232a622c2022222a213b3c0f3c2a2c61282039"><span class="__cf_email__" data-cfemail="b0c2c5dcd59dd3dfddddd5dec4c3f0c3d5d39ed7dfc6">[email&#160;protected]</span></a>. Please include
File Number SR-ICEEU-2023-007 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-2023-007. 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="https://www.sec.gov/rules/sro.shtml">https://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-2023-007 and should be
submitted on or before April 27, 2023.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-07139 Filed 4-5-23; 8:45 am]
BILLING CODE 8011-01-P

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