[Federal Register Volume 79, Number 231 (Tuesday, December 2, 2014)]
[Notices]
[Pages 71493-71495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-28322]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73690; File No. SR-ICEEU-2014-24]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change to 
Clearing Rules Relating to CASS Requirements

November 25, 2014.
    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 November 19, 2014, ICE Clear Europe Limited (``ICE Clear Europe'' or 
``Clearing House'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change described in Items I, II and 
III below, which Items have been primarily prepared by ICE Clear 
Europe. ICE Clear Europe filed the proposal pursuant to Section 
19(b)(3)(A) of the Act,\3\ and Rule 19b-4(f)(4)(i) \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.
---------------------------------------------------------------------------

    \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)(i).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The principal purpose of the proposed rule change is to implement 
certain requirements under the U.K. client money rules applicable to 
certain classes of customer accounts of Clearing Members.

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 these statements.

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

1. Purpose
    ICE Clear Europe submits certain proposed amendments to its Rules 
in connection with revised client money and client asset (collectively, 
``client money'') requirements adopted by the U.K. Financial Conduct 
Authority (the ``FCA'') in the U.K. Client Asset Sourcebook (``CASS''). 
Several of the revised FCA requirements will come into effect as of 
December 1, 2014, including those to which the rule changes discussed 
herein relate.\5\ Among numerous other changes, revised CASS 7.18.4R 
and 7.18.6R will require ICEU Clearing Members that are subject to the 
CASS requirements to identify to the Clearing House those accounts that 
contain client money for purposes of CASS through the use of a 
specified form of acknowledgment letter. Such identification is 
intended to facilitate the proper segregation of client money at the 
Clearing House level.
---------------------------------------------------------------------------

    \5\ See generally FCA Policy Statement No. PS14/9, Review of the 
Client Assets Regime for Investment Business (June 2014).
---------------------------------------------------------------------------

    ICE Clear Europe's existing Rules establish several categories of 
customer accounts for Non-FCM/BD Clearing Members. Certain account 
categories are intended for use with customer property subject to the 
FCA client money requirements; other account categories are not 
intended for use with such property. For example, the Segregated 
Customer Omnibus Account for F&O, Segregated Customer Omnibus Account 
for CDS and Segregated Customer Omnibus Account for FX are to be used 
for customers that provide assets to their Clearing Members that are 
subject to the FCA client money regime. In addition, Individually 
Segregated Sponsored Accounts and Margin-flow Co-mingled Accounts may 
be used for such customers. By contrast, Segregated TTFCA Customer 
Omnibus Accounts are not to be used for customers whose assets are 
subject to the FCA client money regime. To date, the Clearing House has 
identified such accounts for purposes of the client money rules 
pursuant to a Circular. The new FCA rules require such identification 
to be provided by the Clearing Member in a specified form.
    ICE Clear Europe proposes to adopt amendments to its Rules that 
implement the CASS acknowledgment letter requirement. Since the CASS 
rules themselves do not identify the accounts that should be subject to 
the requirement, the proposed amendments also specify the account 
categories for which acknowledgment letters should (and should not) be 
provided by Clearing Members. Specifically, ICE Clear Europe proposes 
to make amendments to Parts 1, 2 and 5 of the Rules. The proposed Rule 
amendments are described in detail as follows.
    The relevant portion of Rule 102(q), which specifies that certain 
provisions and documents relating to asset and account segregation 
apply to customer accounts, has been revised to refer specifically to 
the customer account categories for customers whose assets are subject 
to the FCA client money requirements (specifically, the Segregated 
Customer Omnibus Accounts for F&O, CDS and FX, as well as Individually 
Segregated Sponsored Accounts and Margin-flow Co-mingled Accounts). In 
addition, subparagraph (viii) thereof has been revised to refer to 
acknowledgement letters delivered to the Clearing House under CASS 7.18 
and countersigned by the Clearing House (in lieu of the prior Circular 
issued by the Clearing House relating to client money arrangements). 
The revisions also clarify that references to Rule 102(q) in the Rules 
and Procedures are deemed to include references to those provisions and 
documents referred to in subparagraphs (vii) and (viii) thereof.

[[Page 71494]]

    In Rule 202(a), which establishes ongoing obligations of Clearing 
Members, new subparagraph (xxi) has been added. It requires that 
Clearing Members that are subject to CASS 7.18 deliver to the Clearing 
House an acknowledgment letter in the required format for each of its 
Segregated Customer Omnibus Accounts, Individually Segregated Sponsored 
Accounts and Margin-flow Co-mingled Accounts which are treated by it as 
client transaction accounts under CASS 7.18.
    In addition, Rule 203(a) has been amended to add a new subparagraph 
(xx), which provides that a Clearing Member that is subject to CASS 
7.18 is not permitted to deliver an acknowledgment letter in respect of 
any Proprietary Account or Segregated TTFCA Customer Omnibus Account, 
as such accounts are not intended to be used for customers whose assets 
are subject to the FCA client money regime.
    In Rule 504(c), a new subparagraph (vi) has been added with respect 
to Clearing Members that are subject to CASS 7.18. Each such Clearing 
Members is deemed to represent that its Segregated Customer Omnibus 
Accounts only contain cash where the corresponding cash claim or 
receivable in the hands of the Clearing Member is treated by the 
Clearing Member as a client money claim or receivable, and only contain 
non-cash assets (resulting from a transfer into the Account by the 
Clearing Member) which the Clearing Member was entitled to treat as 
client assets prior to their transfer to the Clearing House. A similar 
representation applies to Individually Segregated Sponsored Accounts 
and Margin-flow Co-mingled Accounts which have been designated pursuant 
to a client money acknowledgment letter delivered by the Clearing 
Member. With respect to other Customer Accounts and Proprietary 
Accounts, the Clearing Member is deemed to represent that such accounts 
do not contain any property subject to the client money rules (i.e., 
cash where the corresponding cash claim or receivable in the hands of 
the Clearing Member is required to be treated as a client money claim, 
or any non-cash assets (resulting from a transfer into the account by 
the Clearing Member) which the Clearing Member was required to treat as 
client assets prior to their transfer to the Clearing House). A 
conforming change is also made in Rule 504(h) to refer to CASS 
acknowledgment letters provided and countersigned in accordance with 
Rule 102(q).
    A typographical correction is also made in Rule 918(a)(viii)(B)(1).
2. Statutory Basis
    ICE Clear Europe believes that the proposed amendment to the Rules 
and Procedures is consistent with the requirements of Section 17A of 
the Act \6\ and the regulations thereunder applicable to it.\7\ 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, 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 and to protect investors and the public interest. The 
proposed amendment is intended to facilitate the holding by the 
Clearing House of securities and funds that are subject to the U.K. 
client money regime under the CASS rules. Consistent with the existing 
customer account structure established in the ICE Clear Europe Rules, 
securities and funds subject to such rules are required to be 
maintained in certain categories of Customer Accounts. Under the 
revised CASS regulations, the Clearing Member is required to provide to 
the Clearing House an acknowledgment letter with respect to such assets 
and accounts. The proposed amendment is designed to implement this 
acknowledgment procedure, by requiring the proper acknowledgement 
letter for each relevant account category, and by prohibiting delivery 
of such a letter with respect to accounts not intended to hold client 
money. As such, ICE Clear Europe believes that the proposed changes 
will facilitate compliance with the CASS amendments and the UK client 
money requirements described above and are therefore consistent with 
the protection of investors and the public interest. As a result, the 
proposed changes are, in ICE Clear Europe's view, consistent with the 
requirements of Section 17A(b)(3)(F) of the Act.\9\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78q-1.
    \7\ 17 CFR 240.17Ad-22.
    \8\ 15 U.S.C. 78q-1(b)(3)(F).
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed change to the Rules 
discussed herein would have any adverse impact, or impose any burden, 
on competition not necessary or appropriate in furtherance of the 
purposes of the Act. The proposed amendment is intended to implement, 
at the Clearing House level, the revised client money requirements 
imposed under the CASS revisions. The amendment will thus apply 
uniformly across all Clearing Members that are subject to the CASS 
requirements. The additional requirements imposed by the rules on such 
Clearing Members are directly based on the CASS requirements applicable 
to them. Although the rules only affect Clearing Members that are 
subject to the CASS rules, that result follows from the particular 
regulatory status of such Clearing Members under applicable U.K. law.
    In any event, ICE Clear Europe does not believe the proposed 
amendment set out herein would materially affect access to clearing by 
Clearing Members or their customers, adversely affect competition among 
Clearing Members or adversely affect the market for clearing services 
or limit market participants' choices for clearing transactions. 
Although the proposed amendment may impose additional compliance costs 
on certain Clearing Members, ICE Clear Europe believes that such costs 
result from the requirements imposed by the CASS revisions as discussed 
herein. Such costs also reflect the additional client money protections 
that apply under the CASS revisions. As a result, ICE Clear Europe does 
not believe that the proposed amendment to the Rules will impose any 
burden on competition not appropriate in furtherance of the purposes of 
the Act.

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

    Written comments have not been specifically solicited with respect 
to the Rule change set out herein. ICE Clear Europe will notify the 
Commission of any additional 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 pursuant to Section 
19(b)(3)(A) \10\ of the Act and Rule 19b-4(f)(4)(i) \11\ thereunder 
because the proposed amendment effects a change in an existing service 
of a registered clearing agency that does not adversely affect the 
safeguarding of securities or funds in the custody or control of the 
clearing agency or for which it is responsible and does not 
significantly affect the respective rights or obligations of the 
clearing agency or persons using the service, within the meaning of 
Rule

[[Page 71495]]

19b-4(f)(4)(i). 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(4)(i).
---------------------------------------------------------------------------

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-2014-24 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ICEEU-2014-24. 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 at https://www.theice.com/clear-europe/regulation#rule-filings.
    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-ICEEU2014-24 
and should be submitted on or before December 23, 2014.
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-28322 Filed 12-1-14; 8:45 am]
BILLING CODE 8011-01-P