[Federal Register Volume 78, Number 185 (Tuesday, September 24, 2013)]
[Notices]
[Pages 58576-58578]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-23128]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70444; File No. SR-ICEEU-2013-12]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change to Clear 
Contracts Traded on ICE Endex

September 18, 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 September 18, 2013, ICE Clear Europe Limited (``ICE Clear Europe'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change described in Items I, II and III below, which 
Items have been prepared primarily by ICE Clear Europe. ICE Clear 
Europe filed the proposal pursuant to Section 19(b)(3)(A)(iii) \3\ of 
the Act and Rule 19b-4(f)(4)(ii) \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)(iii).
    \4\ 17 CFR 240.19b-4(f)(4)(ii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    ICE Clear Europe has agreed to act as the clearing organization for 
futures and option contracts traded on the ICE Endex derivatives 
market. IntercontinentalExchange, Inc. together with Gasunie NV 
Nederlandse, a European gas infrastructure company, launched the ICE 
Endex market in March 2013. ICE Endex Derivatives B.V., which operates 
the relevant derivatives market, is based in Amsterdam, Netherlands and 
provides markets for trading continental European energy products, 
including natural gas and power derivatives, gas balancing markets and 
gas storage services. ICE Endex Derivatives B.V. holds a license to 
operate a regulated market in the Netherlands.

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

    The ICE Endex contracts that are proposed to be cleared by ICE 
Clear Europe (the ``ICE Endex Contracts'') consist of energy futures 
and options, including futures and option contracts involving natural 
gas and power in the Dutch, Belgian and German markets. The clearing of 
ICE Endex Contracts will be supported by the F&O Guaranty Fund (and in 
particular the energy clearing segment of the F&O Guaranty Fund). ICE 
Clear Europe anticipates that the clearing of the ICE Endex contracts 
will initially require a de minimis change in the size of the F&O 
Guaranty Fund or the energy segment thereof, if indeed any change is 
actually required. In making this determination, ICE Clear Europe has 
considered and will continue to review a number of factors, including 
the anticipated volume and open interest in ICE Endex Contracts based 
on historical trading volume and open interest, expected market 
conditions in the relevant natural gas and power markets, the fact that 
clearing of ICE Endex Contracts is expected to be conducted by existing 
ICE Clear Europe Clearing Members, and the identity of such members, 
and the initial margin expected to be required in connection with the 
ICE Endex Contracts. In ICE Clear Europe's view, these factors, 
considered in light of ICE Clear Europe's overall energy clearing 
activities and Guaranty Fund methodology, indicate that the ICE Endex 
clearing activity will not require more than a de minimis change in the 
F&O Guaranty Fund. ICE Endex Contracts will be executed on or subject 
to the rules of the ICE Endex electronic trading system. ICE Clear 
Europe intends to commence clearing for the ICE Endex Contracts on 7 
October, 2013.

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

1. Purpose
    The principal purpose of the changes is to implement a clearing 
relationship in which ICE Clear Europe will provide clearing services 
for energy futures and options contracts traded on the ICE Endex 
market. ICE Clear Europe submits revised Parts 1, 2, 4, 12 and new Part 
20 of its Rules (along with other conforming and clarifying Rule 
amendments) and further amendments to the Delivery Procedures to 
reflect the operational delivery arrangements in relation to the 
referenced markets.
    In Part 1 of the Rules, Rule 101 is modified to add new defined 
terms and revise existing definitions in connection with the ICE Endex 
clearing relationship, including designation of ICE Endex as a Market 
for which ICE Clear Europe provides clearing services and the addition 
of defined terms and other revisions to integrate ICE Endex Contracts 
into the existing ICE Clear Europe clearing framework for energy 
futures and options.
    Part 2 of the Rules has been revised to require generally that a 
Clearing Member must be a member of ICE Endex in order to clear ICE 
Endex Contracts at ICE Clear Europe. In the case of FCM/BD Clearing 
Members, however, ICE Clear Europe will waive compliance with that 
requirement pursuant to Rule 110, in order to ensure that FCM/BD 
Clearing Members do not breach certain restrictions under the U.S. 
Commodity Exchange Act on direct access by U.S. persons to the ICE 
Endex market.\5\ Although FCM/BD Clearing Members would be permitted to 
clear ICE Endex Contracts, they would be required to access the ICE 
Endex market itself through a non-U.S. ICE Endex member.
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    \5\ ICE Endex intends to apply for registration with the 
Commodity Futures Trading Commission as a Foreign Board of Trade. If 
such application is approved, direct access to ICE Endex by certain 
U.S. persons would be permitted, and FCM/BD Clearing Members would 
be expected to become members of ICE Endex at that time.
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    Changes to Part 4 of the Rules incorporate ICE Endex Contracts into 
the procedures for submission of contracts for clearing and creation of

[[Page 58577]]

cleared contracts, as well as other relevant conforming changes.
    The amendments also revise Part 12 of the Rules, which addresses UK 
Settlement Finality Regulations and the Companies Act 1989, to 
incorporate ICE Endex Contracts in the provisions addressing various 
categories of transfer orders under those regulations.
    The amendments include a new Part 20 of the Rules, which adopts 
transitional provisions concerning the novation of open contracts with 
European Commodity Clearing A.G., which currently clears ICE Endex 
contracts, to ICE Clear Europe, under the new clearing relationship. 
New Part 20 also allows ICE Clear Europe to redesignate certain 
existing ICE Futures Europe Contracts as ICE Endex Contracts for 
purposes of the Rules, consistent with the plan of those markets to 
move trading in those contracts to ICE Endex.
    The changes to the General Contract Terms and ICE OTC Contract 
Standard Contract Terms and Eligibility Criteria consist of conforming 
changes that reflect the addition of ICE Endex Contracts.
    ICE Clear Europe also proposes to amend its Delivery Procedures to 
reflect the ICE Endex Contracts. The Delivery Procedures amendments 
will set forth specifications for delivery, including delivery 
standards and timing for delivery, documentation for delivery, security 
for delivery, and related matters.
2. Statutory Basis
    ICE Clear Europe believes that the proposed rule changes are 
consistent with the requirements of Section 17A of the Act \6\ and the 
regulations thereunder applicable to it, including the standards under 
Rule 17Ad-22.\7\ The amendments will provide for clearing of ICE Endex 
Contracts by ICE Clear Europe, consistent with ICE Clear Europe's 
existing clearing arrangements and related financial safeguards, 
protections and risk management procedures, as discussed herein. The 
ICE Endex Contracts that will be cleared are energy futures and options 
contracts substantially similar to those currently traded on ICE 
Futures Europe and cleared by ICE Clear Europe. Acceptance of ICE Endex 
Contracts for clearing, on the terms and conditions set out in these 
rule amendments, will promote the prompt and accurate clearance of and 
settlement of securities transactions and derivative agreements, 
contracts and transactions cleared by ICE Clear Europe, the 
safeguarding of securities and funds in the custody or control of ICE 
Clear Europe and the protection of investors and the public interest, 
within the meaning of Section 17A(b)(3)(F) of the Act.\8\ Clearing of 
the ICE Endex Contracts will also satisfy the relevant requirements of 
Rule 17Ad-22,\9\ as discussed below.
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    \6\ 15 U.S.C. 78q-1.
    \7\ 17 CFR 240.17Ad-22.
    \8\ 15 U.S.C. 78q-1(b)(3)(F).
    \9\ 17 CFR 240.17Ad-22.
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    Financial Resources. ICE Clear Europe will apply its existing 
margin methodology for energy contracts to the new ICE Endex Contracts. 
ICE Clear Europe believes that this model will provide sufficient 
margin to cover the risks from clearing such contracts. In addition, 
ICE Clear Europe believes the F&O Guaranty Fund will provide sufficient 
additional financial resources to support the clearing of ICE Endex 
Contracts consistent with the requirements of Rule 17Ad-22(b)(2)-
(3).\10\ (ICE Clear Europe anticipates that clearing of the ICE Endex 
Contracts will initially require a de minimis change in the size of the 
F&O Guaranty Fund or the energy clearing segment thereof, if indeed any 
change is actually required.) The proposed amendments do not impact ICE 
Clear Europe's financial resources devoted to its security-based swap 
related (i.e., credit default swap) clearing business. ICE Clear Europe 
does not propose to alter the segment of the F&O Guaranty Fund that 
primarily supports the LIFFE contracts cleared by ICE Clear Europe.
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    \10\ 17 CFR 240.17Ad-22(b)(2)-(3).
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    Operational Resources. ICE Clear Europe will have the operational 
and managerial capacity to clear the ICE Endex Contracts as of the 
commencement of clearing, consistent with the requirements of Rule 
17Ad-22(d)(4).\11\ ICE Clear Europe believes that its existing systems 
are appropriately scalable to handle the additional ICE Endex 
Contracts, which are generally similar to the energy contracts 
currently cleared by ICE Clear Europe.
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    \11\ 17 CFR 240.17Ad-22(d)(4).
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    Participant Requirements. ICE Clear Europe believes that the rule 
amendments are consistent with the requirements of Rule 17Ad-22(d)(2) 
\12\ to provide fair and open access through participation requirements 
that are objective and publicly disclosed. The amendments establish 
fair and objective criteria for the eligibility to clear ICE Endex 
Contracts. ICE Clear Europe clearing membership is available to 
participants that meet such criteria. ICE Clear Europe clearing members 
that wish to clear ICE Endex Contracts will have to satisfy the 
financial resources requirements to clear these products and continue 
to do so in order to preserve their eligibility to clear ICE Endex 
Contracts. Clearing member compliance with the requirements to clear 
ICE Endex Contracts will be monitored by ICE Clear Europe.
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    \12\ 17 CFR 240.17Ad-22(d)(2).
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    Settlement. ICE Clear Europe believes that the rule changes will be 
consistent with the requirements of Rule 17Ad-22(d)(5), (12) and (15) 
\13\ as to the finality and accuracy of its daily settlement process 
and avoidance of the risk to ICE Clear Europe of settlement failures. 
ICE Clear Europe will use its existing settlement procedures, account 
structures and approved financial institutions as used in energy 
clearing for the ICE Endex Contracts. ICE Clear Europe believes that 
its Rules and procedures related to settlements (including physical 
settlements), as amended, appropriately identify and manage the risks 
associated with settlements under ICE Endex Contracts.
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    \13\ 17 CFR 240.17Ad-22(d)(5), (12) and (15).
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    Default Procedures. ICE Clear Europe believes that the Rules and 
its relevant procedures allow for it to take timely action to contain 
losses and liquidity pressures and to continue meeting its obligations 
in the event of clearing member insolvencies or defaults, including in 
respect of ICE Endex Contracts, in accordance with Rule 17Ad-
22(d)(11).\14\
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    \14\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed rule and procedure 
changes would have any impact, or impose any burden, on competition. 
ICE Endex is an established market for the ICE Endex Contracts, and ICE 
Clear Europe does not anticipate that its becoming the clearing house 
for the ICE Endex Contracts will adversely affect the trading market 
for those contracts on ICE Endex. Moreover, ICE Clear Europe has 
established fair and objective criteria for eligibility to clear ICE 
Endex Contracts, and accordingly ICE Clear Europe does not believe that 
the proposed rule changes will impose any burden on competition among 
clearing members.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, CDS Clearing Members or Others

    Written comments relating to the proposed amendments have not been

[[Page 58578]]

solicited or received. 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)(iii) of the Act \15\ and Rule 19b-4(f)(4)(ii) 
\16\ thereunder because it effects a change in an existing service of a 
registered clearing agency that primarily affects the operations of the 
clearing agency with respect to products that are not securities, 
including futures that are not security futures, swaps that are not 
security-based swaps or mixed swaps, and forwards that are not security 
forwards, and does not significantly affect any securities clearing 
operations of the clearing agency or any rights or obligations of the 
clearing agency with respect to securities clearing or persons using 
such securities clearing service. 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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    \15\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \16\ 17 CFR 240.19b-4(f)(4)(ii).
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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-2013-12 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-2013-12. 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-2013-12 
and should be submitted on or before October 15, 2013.
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    \17\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-23128 Filed 9-23-13; 8:45 am]
BILLING CODE 8011-01-P