Notice2023-18551
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Relating to Amendments to the Clearing Membership Policy and Clearing Membership Procedures
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Published
August 29, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 166 (Tuesday, August 29, 2023)</title>
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[Federal Register Volume 88, Number 166 (Tuesday, August 29, 2023)]
[Notices]
[Pages 59547-59550]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-18551]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98207; File No. SR-ICEEU-2023-022]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing of Proposed Rule Change, as Modified by Amendment No. 1,
Relating to Amendments to the Clearing Membership Policy and Clearing
Membership Procedures
August 23, 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 August 8, 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. On August 22, 2023, ICE Clear Europe filed Amendment
No. 1 to the proposed rule change to make certain changes to the
Exhibits 5A and 5B.\3\ 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''), from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 amends the Exhibit 5A and Exhibit 5B to
correctly reflect the addition of the Document Handling subsection
to each document's Table of Contents. The proposed rule change
includes an Exhibit 4A and Exhibit 4B. Exhibit 4A shows the change
that Amendment No. 1 makes to Exhibit 5A, and Exhibit 4B does the
same with respect to attit 5B.
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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 (i) modify its Clearing Membership Policy
(``Policy'') \4\ to
[[Page 59548]]
update certain monitoring and document review procedures and to make
certain drafting clarifications and (ii) amend its Clearing Membership
Procedures (``Procedures'') to clarify the Clearing House's discretion
with respect to certain requirements and to add notification
requirements, among other changes. The updates would also make certain
other non-substantive amendments.
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\4\ Capitalized terms used but not defined herein have the
meanings specified in the Policy and 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
I. Clearing Membership Policy
In the discussion of the purpose of the Policy, the amendments
would change an incorrect reference to ``model documents'' to
``parameter documents'' (reflecting that relevant parameters will be
set out in parameter documents). Further changes would clarify that
Clearing Members are required to notify the Clearing House promptly
when there is any change to its business which would have an impact on
meeting the membership criteria. Additionally, the monitoring of
membership criteria would be revised to reflect that the Clearing House
conducts ongoing (rather than only quarterly or other periodic)
monitoring of compliance with membership criteria. Ongoing monitoring
for this purpose consists of continuous monitoring and additional
trigger-based reviews, including relating to credit and AML/KYC risk
and to daily operational matters (such as margin calls). References to
quarterly reviews of financial position through Audited Annual
Accounts, quarterly review of financial information, quarterly updates
of the Counterparty Rating System (``CRS''), and the requirement to
maintain a watch list would be removed (as such matters relate to
credit issues that are addressed in the Clearing House's Counterparty
Credit Risk Policy,\5\ and do not need to be referenced in this
policy). A cross reference to the Clearing Membership Procedures and
the Counterparty Credit Risk Policy for monitoring information would
also be removed as unnecessary.
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\5\ See Exchange Act Release No. 34-97169 (SR-ICEEU-2023-004)
(March 20, 2023), 88 FR 17886 (March 24, 2023).
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The amendments would also update document governance requirements,
consistent with other ICE Clear Europe policies.\6\ Document review
would be conducted by the document owner or relevant staff, with
approval of the head of department (or their delegate) and the Chief
Risk Officer (or their delegate). The amendments would specify that
document review, at a minimum, would encompass regulatory compliance,
documentation and purpose, implementation, use and open items from
prior reviews. The results of the review would be reported to the
Executive Risk Committee (and in certain cases, to the Model Oversight
Committee). The document owner would aim to remediate any findings,
complete internal governance and obtain regulatory approvals (as
applicable) before the next annual review. The amendments would also
state explicitly that changes to the Policy would need to be approved
in accordance with the Clearing House governance process and take
effect after completion of all necessary internal and regulatory
approvals.
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\6\ See, e.g., The Counterparty Credit Risk Policy and
Procedures as described in Exchange Act Release No. 34-97169, SR
ICEEU-2023-004 (March 20, 2023) 88 FR 17886 (March 24, 2023); the
Investment Management Procedures as described in Exchange Act
Release No. 34-97528, SR ICEEU-2023-009 (May 19, 2023) 88 FR 33949
(May 25, 2023); the Futures and Options Default Management Policy as
described in Exchange Act Release No. 34-97383, SR ICEEU-2023-012
(Apr. 26, 2023) 88 FR 27539 (May 2, 2023).
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Certain other non-substantive typographical and similar corrections
would also be made in the Policy, such as using the correct name of the
Clearing Membership Policy.
II. Clearing Membership Procedures
ICE Clear Europe is proposing to amend its Clearing Membership
Procedures to make certain clarifications and updates, including for
consistency with the amendments to the Policy described above. Under
the discussion of the application process, the amendments would
specifically require notifications by Clearing Members of changes to
their business that may impact the membership criteria, consistent with
the change to the Policy described above. Additionally, under the
diligence process, the amendments would clarify that the applicant
would be required to provide sufficient evidence, details and
information as required by the Rules. The proposed amendment would also
state that the membership team would ensure that all applicants would
be added to the applicable schedule of insured entities by the ICE
Group insurer.
The amendments would remove a provision that the Product Risk
Committee would be notified of new applications, after approval of an
application by the Executive Risk Committee. ICE Clear Europe does not
believe notification of applications to the Product Risk Committee is
necessary in light of the duties and functions of those committees. The
proposed amendments would also clarify that the Circular confirming
approval is issued once the application is approved. In addition, the
amendments would make non-substantive clarifications concerning the
requirement for Clearing Members to respond in a timely manner to any
additional information requested by the Clearing House.
The proposed changes would also clarify and make consistent
throughout the Procedures certain provisions relating to decisions that
may be taken or requirements that may be imposed by the Clearing House
in its discretion. Specifically, the amendments would clarify ICE Clear
Europe's absolute legal discretion in making certain determinations,
imposing additional requirements and granting exceptions relating to
the minimum capital requirement, acceptability of subordinated loans,
acceptability of controller guarantee, requirements for additional cash
or collateral and the size of additional guaranty fund assessments. The
amendments would similarly clarify that the Clearing House will define
the maximum period between in-depth counterparty reviews and the
threshold for taking further action on negative changes in Clearing
Member financial condition in its absolute discretion. ICE Clear Europe
does not believe these amendments change its existing authority, but
rather state more explicitly the scope of its discretion, which remains
subject to the Rules and applicable law.
The discussion of document governance and oversight in the Policy
and Procedures would be replaced with a new Document Governance and
Exception Handling section that is substantially the same as that
described above for the Policy, and is consistent
[[Page 59549]]
with other Clearing House policies recently adopted or modified.\7\
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\7\ See, e.g., The Counterparty Credit Risk Policy and
Procedures as described in Exchange Act Release No. 34-97169, SR
ICEEU-2023-004 (March 20, 2023) 88 FR 17886 (March 24, 2023); the
Investment Management Procedures as described in Exchange Act
Release No. 34-97528, SR ICEEU-2023-009 (May 19, 2023) 88 FR 33949
(May 25, 2023); the Futures and Options Default Management Policy as
described in Exchange Act Release No. 34-97383, SR ICEEU-2023-012
(Apr. 26, 2023) 88 FR 27539 (May 2, 2023).
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(b) Statutory Basis
ICE Clear Europe believes that the proposed amendments to the
Clearing Membership Policy and Procedures are consistent with the
requirements of section 17A of the Act \8\ and the regulations
thereunder applicable to it. In particular, section 17A(b)(3)(F) of the
Act \9\ 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.
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\8\ 15 U.S.C. 78q-1.
\9\ 15 U.S.C. 78q-1(b)(3)(F).
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The proposed changes to the Clearing Membership Policy and
Procedures are intended to update and more clearly document the
Clearing House's procedures for reviewing applications for clearing
membership, criteria for membership, and on-going monitoring of
membership of ICE Clear Europe. The amendments update the Policy to
better reflect the ongoing monitoring of Clearing Members and to update
document governance processes. The amendments to the Procedures clarify
the discretion that ICE Clear Europe has to make certain
determinations, clarify certain notification requirements, and make
other drafting improvements. The amendments would therefore facilitate
the prompt and accurate clearing of cleared contracts and protect
investors and the public interest in the sound operations of the
Clearing House, consistent with the requirements of section
17A(b)(3)(F).\10\ Further, the amendments will not affect the
safeguarding of securities and funds in the custody or control of the
Clearing House or for which it is responsible, within the meaning
section 17A(b)(3)(F).\11\
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\10\ 15 U.S.C. 78q-1(b)(3)(F).
\11\ 15 U.S.C. 78q-1(b)(3)(F).
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The amendments to the Procedures are also consistent with relevant
provisions of Rule 17Ad-22.\12\ Rule 17Ad-22(e)(18) provides that
``[e]ach covered clearing agency shall establish, implement, maintain
and enforce written policies and procedures reasonable designed to, as
applicable [. . .] establish objective, risk-based and publicly
disclosed criteria for participation, which permit fair and open access
by direct . . . participants . . . require participants to have
sufficient financial resources and robust operational capacity to meet
obligations arising from participation in the clearing agency, and
monitor compliance with such participation requirements on an ongoing
basis''.\13\ As set forth above, the amendments to the Clearing
Membership Procedures are intended to clarify and enhance the Clearing
House's procedures and policies as they relate to Clearing Membership
application and monitoring processes. The amendments do not
substantively change the requirements for membership or the related
Rules, but rather update the Policy and Procedures to reflect the
Clearing House's current practices, and make other updates to improve
clarity, including to state more clearly the Clearing House's
discretion to make certain determinations as part of the application
process. The amendments will facilitate the Clearing House's ability to
implement and monitor its participation requirements. In ICE Clear
Europe's view, the amendments are therefore consistent with the
requirements of Rule 17Ad-22(e)(18).\14\
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\12\ 17 CFR 240.17 Ad-22.
\13\ 17 CFR 240.17 Ad-22(e)(18).
\14\ 17 CFR 240.17Ad-22(e)(18).
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Rule 17Ad-22(e)(2) further provides that ``[e]ach covered clearing
agency shall establish, implement, maintain and enforce written
policies and procedures reasonable designed to, as applicable [. . .]
provide for governance arrangements that are (i) clear and transparent,
(ii) clearly prioritize the safety and efficiency of the covered
clearing agency; and (iii) support the public interest requirement in
section 17A of the Act'' \15\ among other requirements. As set forth
above, the amendments update the documentation governance, review and
approval provisions, in a manner consistent with other ICE Clear Europe
policies and procedures. As such, in ICE Clear Europe's view, the
amendments are consistent with the requirements of Rule 17Ad-
22(e)(2).\16\
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\15\ 17 CFR 240.17Ad-22(e)(2).
\16\ 17 CFR 240.17Ad-22(e)(2).
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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 amendments
are being adopted to update and clarify the Clearing Membership Policy
and Procedures, which relates to the Clearing House's internal
processes for implementation, reviewing and ongoing monitoring of its
membership requirements and criteria. No substantive changes are being
made to the membership requirements themselves or the Rules.
Accordingly, ICE Clear Europe does not believe the amendments would
affect the ability of an applicant to become a Clearing Member, the
costs of clearing, the ability of market participants to access
clearing, or the market for clearing services generally. Therefore, ICE
Clear Europe does not believe the proposed rule change imposes any
burden on competition that is inappropriate in furtherance of the
purposes 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 written comments received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
[[Page 59550]]
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#d0a2a5bcb5fdb3bfbdbdb5bea4a390a3b5b3feb7bfa6"><span class="__cf_email__" data-cfemail="5d2f283138703e3230303833292e1d2e383e733a322b">[email protected]</span></a>. Please include
file number SR-ICEEU-2023-022 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-2023-022. 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
a.m. and 3 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>.
Do not include personal identifiable information in submissions;
you should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to File Number SR-ICEEU-2023-022 and
should be submitted on or before September 19, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-18551 Filed 8-28-23; 8:45 am]
BILLING CODE 8011-01-P
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