[Federal Register Volume 78, Number 172 (Thursday, September 5, 2013)]
[Notices]
[Pages 54713-54715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-21534]



[[Page 54713]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70283; File No. SR-ICEEU-2013-08]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To 
Account for Sections 1471 through 1474 of the U.S. Internal Revenue 
Code and U.S. Treasury Regulations and Other Guidance Thereunder 
(Commonly Known as the Foreign Account Tax Compliance Act or ``FATCA'')

August 29, 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 August 20, 2013, ICE Clear Europe Limited (``ICE Clear Europe'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule changes described in Items I and II below, which Items 
have been prepared primarily by ICE Clear Europe. ICE Clear Europe 
filed the proposal pursuant to Section 19(b)(3)(A)(ii) \3\ of the Act 
and Rule 19b-4(f)(2) \4\ thereunder so that the proposal was 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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    ICE Clear Europe submits proposed amendments to its CDS Procedures, 
as described below, in connection with the implementation of sections 
1471 through 1474 of the Internal Revenue Code of 1986, as amended, 
which sections were enacted as part of the Foreign Account Tax 
Compliance Act, and the Treasury Regulations or other official 
interpretations thereunder (collectively ``FATCA'').

II. Self-Regulatory Organization'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. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    ICE Clear Europe submits proposed amendments to its CDS Procedures 
in order to clarify the scope of the obligation of CDS Clearing Members 
to pay additional amounts to (or otherwise indemnify) ICE Clear Europe 
for any tax imposed or collected pursuant to FATCA in connection with 
CDS clearing.
    FATCA was enacted on March 18, 2010, as part of the Hiring 
Incentives to Restore Employment Act, and became effective, subject to 
transition rules, on January 1, 2013. The U.S. Treasury Department 
finalized and issued various implementing regulations (``FATCA 
Regulations'') \5\ on January 17, 2013. FATCA's intent is to curb tax 
evasion by U.S. citizens and residents through their use of offshore 
bank accounts. FATCA generally requires foreign financial institutions 
(``FFIs'') \6\ to become ``participating FIs'' by entering into 
agreements with the Internal Revenue Service (``IRS''). Under these 
agreements, FFIs are required to report to the IRS information on U.S. 
persons and entities that have (directly or indirectly) accounts with 
these FFIs. If an FFI does not enter into such an agreement with the 
IRS, FATCA will generally impose a 30% withholding tax on U.S.-source 
interest, dividends and other periodic amounts paid to such 
``nonparticipating FFI'' (``Income Withholding''), as well as on the 
payment of gross proceeds arising from the sale, maturity or redemption 
of securities or any instrument yielding U.S.-source interest and 
dividends (``Gross Proceeds Withholding,'' and, together with Income 
Withholding, ``FATCA Withholding''). The 30% FATCA Withholding taxes 
will apply to payments made to a nonparticipating FFI acting in any 
capacity, including payments made to a nonparticipating FFI that is not 
the beneficial owner of the amount paid and acting only as a custodian 
or other intermediary with respect to such payment. To the extent that 
U.S.-source interest, dividend, and other periodic amount or gross 
proceeds payments are due to a nonparticipating FFI in any capacity, a 
U.S. payor transmitting such payments to the nonparticipating FFI will 
be liable to the IRS for any amounts of FATCA Withholding that the U.S. 
payor should, but does not, withhold and remit to the IRS.
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    \5\ Regulations Relating to Information Reporting by Foreign 
Financial Institutions and Withholding on Certain Payments to 
Foreign Financial Institutions and Other Foreign Entities, 78 FR 
5874 (Apr. 15, 2013).
    \6\ Non-U.S. financial institutions are referred to as ``foreign 
financial institutions'' or ``FFIs'' in the FATCA Regulations.
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    In addition, under FATCA, a U.S. payor could be required to deduct 
Income Withholding with regard to a participating FFI if either: (x) 
the participating FFI makes a statutory election to shift its 
withholding responsibility under FATCA to the U.S. payor; or (y) the 
U.S. payor is required to ignore the actual recipient and treat the 
payment as if made instead to certain owners, principals, customers, 
account holders or financial counterparties of the participating FFI.
    As an alternative to FFIs entering into individual agreements with 
the IRS, the U.S. Treasury Department provided another means of 
complying with FATCA for FFIs which are resident in Non-U.S. 
jurisdictions that enter into intergovernmental agreements (``IGAs'') 
with the United States.\7\ Generally, such a jurisdiction (``FATCA 
Partner'') would pass laws to eliminate the conflicts of law issues 
that would otherwise make it difficult for FFIs in its jurisdiction to 
collect the information required under FATCA and transfer this 
information, directly or indirectly, to the United States. An FFI 
resident in a FATCA Partner jurisdiction would either transmit FATCA 
reporting to its local competent tax authority, which in turn would 
transmit the information to the IRS, or the FFI would be authorized/
required by FATCA Partner law to enter into an FFI agreement and 
transmit FATCA reporting directly to the IRS. Under both IGA models, 
payments to such FFIs would not be subject to FATCA Withholding so long 
as the FFI complies with the FATCA Partner's laws mandated in the IGA.
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    \7\ As of the date of this proposed rule change filing, the 
United Kingdom, Mexico, Ireland, Switzerland, Spain, Norway, 
Denmark, Italy, and Germany have signed or initialed an IGA with the 
United States. The U.S. Treasury Department has announced that it is 
engaged in negotiations with more than 50 countries and 
jurisdictions regarding entering into an IGA.
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    In preparation for FATCA's implementation, FFIs are being asked to 
identify their expected FATCA status as a condition of continuing to do 
business. Customary legal agreements in the financial services industry 
already contain provisions allocating the risk of any FATCA Withholding 
tax that will need to be collected, and requiring that, upon FATCA's 
effectiveness, foreign

[[Page 54714]]

counterparties must certify (and periodically recertify) their FATCA 
status using the relevant tax forms that the IRS has announced it will 
provide. Advance disclosure by an FFI client or counterparty would 
permit a withholding agent to readily determine whether it must, under 
FATCA, withhold on payments it makes to the FFI. If an FFI fails to 
provide appropriate compliance documentation to a withholding agent, 
such FFI would be presumed to be a nonparticipating FFI and the 
withholding agent will be obligated to withhold on certain payments.
    FATCA will require ICE Clear Europe to deduct FATCA Withholding on 
payments to certain clearing members arising from certain transactions 
processed by ICE Clear Europe on behalf of such clearing members. 
Because FATCA treats any entity holding financial assets for the 
account of others as a ``financial institution,'' ICE Clear Europe 
believes that almost all of its clearing members which are treated as 
non-U.S. entities for federal income tax purposes will likely be FFIs 
under FATCA (collectively, ``FFI Members''). As such, ICE Clear Europe 
will be liable to the IRS for any failures to withhold correctly under 
FATCA on payments made to its FFI Members.
    Accordingly, the proposed amendments are intended to clarify the 
scope of the obligation of CDS Clearing Members to pay additional 
amounts to (or otherwise indemnify) ICE Clear Europe for any tax 
imposed or collected as a result of FATCA. This also includes any tax 
that results from current or future regulations or interpretations of 
FATCA, as well as any fiscal or regulatory legislation, rules or 
practices adopted pursuant to any IGA entered into in connection with 
the implementation of FATCA.
    ICE Clear Europe believes that the proposed rule changes are 
consistent with the requirements of Section 17A of the Act \8\ and the 
regulations thereunder applicable to it. Specifically, the proposed 
rule changes promote the prompt and accurate clearing and settlement of 
CDS transactions by eliminating any uncertainty in payment settlement 
that would arise if ICE Clear Europe were subject to FATCA Withholding 
Obligations. The proposed rule changes are also consistent with Section 
17A of the Act because they provide for the equitable allocation of 
reasonable due, fees and other charges among ICE Clear Europe's CDS 
Clearing Members. Finally, the proposed rule changes allow ICE Clear 
Europe to be in compliance with FATCA Regulations.
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    \8\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed rule changes would 
have any impact, or impose any burden, on competition. The proposed 
rule changes would apply to all CDS Clearing Members of ICE Clear 
Europe that may be subject to FATCA. The proposed rule changes are for 
the purpose of ensuring that ICE Clear Europe, as well as its CDS 
Clearing Members, are in compliance with FATCA Regulations and thereby 
permit the operation of ICE Clear Europe's clearing services consistent 
with the FATCA Regulations. As a result, ICE Clear Europe believes that 
the obligations imposed under the proposed rule changes are appropriate 
in furtherance of the purposes of the Act, and should not have any 
effect on the competitive position of CDS Clearing Members.

C. Self-Regulatory Organization'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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A) \9\ of the Act and Rule 19b-4(f)(2) \10\ 
thereunder because it primarily establishes a fee or other charge 
imposed by ICE Clear Europe on its CDS Clearing Members. Specifically, 
the proposed rule changes will require CDS Clearing Members to pay 
additional amounts to ICE Clear Europe for tax imposed or collected 
pursuant to FATCA in connection with CDS clearing. 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(2).
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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

     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-2013-08 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 20549-1090.

All submissions should refer to File Number SR-ICEEU-2013-08. 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 also will be available 
for inspection and copying at the principal office of ICE Clear Europe 
and on ICE Clear Europe's Web site at https://www.theice.com/notices/Notices.shtml?regulatoryFilings.
    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-2013-08 
and should be submitted on or before September 26, 2013.


[[Page 54715]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-21534 Filed 9-4-13; 8:45 am]
BILLING CODE 8011-01-P