[Federal Register Volume 78, Number 20 (Wednesday, January 30, 2013)]
[Notices]
[Pages 6371-6373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-01993]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68734; File No. SR-ICEEU-2013-01]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Order Granting Accelerated Approval of Proposed Rule 
Change To Extend Member Liability for Payment Obligations to the 
Clearing House

January 25, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 10, 2013, ICE Clear Europe Limited (``ICE Clear Europe'' or 
the ``Clearing House'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change 
described in Items I and II below, which Items have been substantially 
prepared by ICE Clear Europe. The Commission is publishing this Notice 
and Order to solicit comments on the proposed rule change from 
interested persons and to approve the proposed rule change on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    ICE Clear Europe submits proposed amendments to Parts 2 and 3 of 
its Rules and CDS Procedures to clarify a Clearing Member's ongoing 
payment obligation to ICE Clear Europe with respect to electronic 
payment transfers. ICE Clear Europe proposes to amend Part 3 of the ICE 
Clear Europe Rules to state when a Clearing Member's payment obligation 
has been satisfied or discharged. Part 2 would be revised to further 
clarify the application of the amendments to Part 3. The other proposed 
changes in the ICE Clear Europe CDS Procedures reflect drafting 
clarifications in Section 8.8(a), and do not affect the substance of 
the ICE Clear Europe CDS Procedures. All capitalized terms not defined 
herein are defined in the Rules or CDS Procedures.

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 III below. ICE Clear Europe has prepared summaries,

[[Page 6372]]

set forth in sections A, B, and C below, of the most significant 
aspects of such statements.\3\
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    \3\ The Commission has modified the text of the summaries 
prepared by ICE Clear Europe pursuant to discussions with ICE Clear 
Europe by telephone on January 22, 2013 (among Patrick Davis, Head 
of Legal and Company Secretary, ICE Clear Europe; Gena Lai, Senior 
Special Counsel, SEC; and Zachary Hunter, Attorney-Advisor, SEC) and 
on January 24, 2013 (among the same parties, with the addition of 
Geoffrey B. Goldman, Partner, Shearman & Sterling LLP).
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(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In response to issues raised by the Bank of England as overseer of 
its payment arrangements, ICE Clear Europe is submitting proposed 
amendments that are intended to reduce the unsecured credit risk to ICE 
Clear Europe in its payment system. The proposed amendments re-allocate 
this unsecured credit risk by, among other things, stating the 
conditions under which Clearing Members' payment obligations are deemed 
to have been satisfied or discharged and clarifying the liability with 
respect to payments not meeting those conditions.
    ICE Clear Europe proposes to revise Rule 301(f) in its Rulebook so 
Clearing Members are deemed to have satisfied or discharged payment 
obligations when three conditions are met. First, Rule 301(f)(i) would 
require that the relevant electronic transfer of funds is actually 
received by the Clearing House in unencumbered, fully cleared and fully 
available funds in ICE Clear Europe's Clearing House Account at an 
Approved Financial Institution (``AFI''), provided that the AFI is not 
subject to an Insolvency. Second, Rule 301(f)(ii) would provide that if 
the AFI is not a Concentration Bank, the AFI must have fully performed 
its concentration function in respect of the payment in question, by 
completing the transfer of funds from ICE Clear Europe's account at the 
AFI to ICE Clear Europe's concentration account at a Concentration Bank 
(which Concentration Bank is not subject to an Insolvency). Payments 
transferred to ICE Clear Europe's concentration account at a 
Concentration Bank must be in the form of unencumbered, fully cleared 
and fully available funds, representing (a) in the case of a payment 
under ICE Clear Europe Rule 302(a), a net amount reflecting all 
payments processed through that AFI in respect of all calls on or 
payments to all Clearing Members using that AFI under Rule 302(a) in 
respect of the Business Day in question; or (b) in the case of a 
payment not under ICE Clear Europe Rule 302(a) (for example, a payment 
for an intra-day margin call or an ad hoc transfer of additional cash 
Permitted Cover to ICE Clear Europe), the amount received from the 
Clearing Member that is seeking to make the payment in question. Third, 
Rule 301(f)(iii) would provide that, for payments under Rule 302(a) 
only, the AFI (including if it is a Concentration Bank) has made all 
relevant payments under Rule 302(a) due to the Clearing Member and 
other Clearing Members (in its capacity as an AFI or Concentration 
Bank) in respect of the Business Day in question.
    ICE Clear Europe also proposes to revise Rule 301(f) to clarify ICE 
Clear Europe's, its Clearing Members', and an AFI's rights or 
liabilities in the event the AFI fails to make a payment referred to 
under Rule 301(f). Specifically, Rule 301(f) would provide that nothing 
in Rule 301(f) restricts or prevents ICE Clear Europe or any Clearing 
Member from making any claim against an AFI which has failed to make a 
payment under Rule 301(f). In particular, the Clearing House will not 
be deemed to have had any loss, liability or shortfall made good or 
whole vis-[agrave]-vis an AFI by virtue of any further payment by a 
Clearing Member in addition to an attempted payment not credited to its 
account as a result of Rule 301(f). Additionally, an AFI which has 
failed to make any payment under Rule 301(f) will remain fully liable 
to the Clearing House or relevant Clearing Member for any such failed 
payment or account balance notwithstanding a reimbursement or 
additional payment as between a Clearing Member and the Clearing House.
    Further, ICE Clear Europe proposes to revise Rule 301(f) to clarify 
ICE Clear Europe's procedures in the event a payment fails to meet the 
requirements of Rule 301(f)(i)-(iii). In essence, ICE Clear Europe must 
first notify the Clearing Member of the failed payment and request that 
it make the payment using alternative means before ICE Clear Europe may 
declare that the Clearing Member is subject to an Event of Default. ICE 
Clear Europe would not declare an Event of Default unless and until the 
Clearing Member failed to make the latter payment (other than solely 
due to the operation of either Rule 301(f)(ii) or Rule 301(f)(iii). In 
addition, Rule 301(f) would provide that ICE Clear Europe will return 
any funds recovered from the AFI if the Clearing Member satisfied its 
payment obligations through an additional payment that complies with 
the Rule.
    In particular, Rule 301(f) would provide that, in the event that 
(a) a payment is received into an ICE Clear Europe Account at an AFI 
but the requirements of Rule 301(f)(ii) or Rule 301(f)(iii) are not 
satisfied; (b) an affected Clearing Member has satisfied its payment 
obligations through an additional payment which complies with the 
requirements of Rule 301(f); and (c) ICE Clear Europe makes a recovery 
or irrevocably receives any part or full payment from the AFI into one 
of its accounts at a Concentration Bank (which Concentration Bank is 
not subject to an Insolvency), then ICE Clear Europe will make payment 
to affected Clearing Members in respect of the recovery or receipt 
actually made by ICE Clear Europe, net of ICE Clear Europe's costs and 
expenses, pro rata in proportion to the amounts of the original missed 
payments of each affected Clearing Member.
    ICE Clear Europe also proposes to add new Rule 301(l) to provide 
clarification regarding the satisfaction of ICE Clear Europe's 
obligations to its Clearing Members, providing that ICE Clear Europe's 
obligations have been satisfied or discharged when the relevant Credit/
Debit Payment Transfer Order arises. Specifically, new Rule 301(l) 
provides that ``[a]ny payment due to a Clearing Member from ICE Clear 
Europe will be recognized as having been duly made, and ICE Clear 
Europe's obligations in respect thereof shall be treated as having been 
satisfied and discharged, at the time that the relevant Credit/Debit 
Payment Transfer Order arises relating to such payment (or, if the 
Clearing Member or AFI is not a Participant, would have arisen were the 
Clearing Member or AFI to have been a Participant), provided that ICE 
Clear Europe has reason to believe that the Clearing House Account from 
which payment is to be made has sufficient funds or credit on 
Account.'' This provision, like the proposed amendments to Rule 301(f), 
is intended to re-allocate the risk of unsecured credit losses, rather 
than concentrating it with ICE Clear Europe.
    Finally, Rule 209(c) would be revised to state that neither Rules 
301(f)(ii)-(iii) nor Rule 301(l) shall apply to payments made or 
received after the Insolvency or an Event of Default as aforementioned 
in respect of ICE Clear Europe.
    ICE Clear Europe believes that the proposed rule change is 
consistent with the requirements of Section 17A of the Act and the 
regulations thereunder applicable to it. Specifically, ICE Clear Europe 
believes that the proposed rule change will improve the finality and 
accuracy of its daily settlement process and reduce the risk to 
Clearing House of settlement failures, thereby permitting

[[Page 6373]]

the accurate clearing and settlement of cleared transactions.

(B) Clearing Agency's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed rule change would 
have any impact, or impose any burden, on competition.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    ICE Clear Europe has solicited written comments relating to the 
proposed rule change, but has not received any written comments to 
date. ICE Clear Europe will notify the Commission of any written 
comments received by ICE Clear Europe.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-ICEEU-2013-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549.

All submissions should refer to File Number SR-ICEEU-2013-01. 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 Web site (http://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 Web site 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 Web site (https://www.theice.com/publicdocs/regulatory_filings/011013_ICEU_SEC.pdf). All comments received will 
be posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-ICEEU-2013-01 and should be submitted on 
or before February 20, 2013.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    Section 19(b) of the Act \4\ 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. The Commission finds that the proposed rule change is 
consistent with the requirements of the Act, in particular the 
requirements of Section 17A of the Act,\5\ and the rules and 
regulations thereunder applicable to ICE Clear Europe. Specifically, 
the Commission finds that the proposed rule change is consistent with 
Section 17A(b)(3)(F) of the Act, which requires, among other things, 
that the rules of a registered clearing agency be designed to assure 
the safeguarding of securities and funds which are in the custody or 
control of the clearing agency or for which it is responsible.\6\ As 
the proposed rule change is intended to reduce unsecured credit risk to 
ICE Clear Europe in its payment systems, by means of stating the 
conditions under which Clearing Members' payment obligations are deemed 
to have been satisfied or discharged and clarifying the liability with 
respect to payments not meeting those conditions, the proposed rule 
change is designed to assure the safeguarding of securities and funds 
which are in the custody or control of ICE Clear Europe.
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    \4\ 15 U.S.C. 78s(b).
    \5\ 15 U.S.C. 78q-1. In approving this proposed rule change, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    ICE Clear Europe has requested that the Commission approve the 
proposed rule change on an accelerated basis. The Bank of England has 
indicated that implementation of the proposed rule change would 
mitigate to a significant extent the unsecured credit risk to which ICE 
Clear Europe is currently exposed.\7\ Based on the foregoing, the 
Commission finds good cause for accelerating approval.
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    \7\ Teleconference on January 11, 2013, among Robleh Ali, FS-PID 
Oversight Team, Bank of England; Joseph Kamnik, Assistant Director, 
SEC; Gena Lai, Senior Special Counsel, SEC; and Zachary Hunter, 
Attorney-Advisor, SEC.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-ICEEU-2013-01) is approved on an 
accelerated basis.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-01993 Filed 1-29-13; 8:45 am]
BILLING CODE 8011-01-P