[Federal Register Volume 84, Number 47 (Monday, March 11, 2019)]
[Notices]
[Pages 8769-8773]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04286]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85247; File No. SR-ICEEU-2019-004]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change Relating 
to Amendments to the Clearing Rules (the ``Rules'')

March 5, 2019.
    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 February 22, 2019, 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 by ICE Clear Europe. ICE Clear Europe filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder,\4\ so that the proposal was immediately 
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).
    \4\ 17 CFR 240.19b-4(f)(6).

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[[Page 8770]]

I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    ICE Clear Europe proposes to make certain amendments to its Rules 
to address certain requirements under the European Union General Data 
Protection Regulation (``GDPR'') \5\ in the event that the United 
Kingdom (``UK'') ceases to be a European Union (``EU'') member state, 
which is currently scheduled to occur on March 29, 2019, in 
circumstances where: (i) No withdrawal agreement has been agreed 
between the UK and the EU27 which stipulates that EU data protection 
law, among other laws, shall continue to apply in the UK (a 
``withdrawal agreement''); and (ii) the UK's data protection laws have 
not been found to provide for an adequate level of protection for the 
personal data of individuals in the EU pursuant to a decision made by 
the European Commission under Article 45 of the GDPR (an ``adequacy 
decision'').
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    \5\ Regulation (EU) 2016/679 of the European Parliament and of 
the Council of 27 April 2016 on the protection of natural persons 
with regard to the processing of personal data and on the free 
movement of such data.
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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
    The purpose of the proposed changes is to amend the Rules \6\ to 
address certain requirements under the GDPR relating to personal data 
in the context of Clearing House activity that will apply upon the UK 
ceasing to be an EU member state, in circumstances where: (i) No 
withdrawal agreement has been agreed between the UK and the EU27; and 
(ii) the UK has not been the subject of an adequacy decision, such that 
the UK thereby becomes a third country under the GDPR.
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    \6\ Capitalized terms used but not defined herein have the 
meanings specified in the Rules.
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    ICE Clear Europe Rules relating to personal data protection were 
amended in 2018 to reflect certain requirements of the GDPR as it 
applied to ICE Clear Europe.\7\ Rule 106 currently requires, among 
other provisions, that Clearing Members ensure that personal data 
transfers to ICEU are lawful.
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    \7\ Exchange Act Release No. 34-83311 (SR-ICEEU-2018-007) (May 
23, 2018), 83 FR 24834 (May 30, 2018).
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    If the UK ceases to be an EU member state without a withdrawal 
agreement being agreed and in the absence of adequacy decision, the UK 
would be a `third country' for GDPR purposes. In that case, in certain 
circumstances, it may be necessary or advisable to take certain 
additional steps to avoid a greater risk that transfers of personal 
data from EU27-based Clearing Members to ICE Clear Europe violate the 
GDPR. Specifically, if an EU27-based Clearing Member has not already 
put in place safeguards called for by the GDPR with respect to transfer 
of personal data from that member to ICE Clear Europe, that Clearing 
Member could violate the GDPR if it continued to transfer personal data 
to ICE Clear Europe. Thus, in the case of a UK exit without a 
withdrawal agreement or adequacy decision, without any change to the 
Rules, Clearing Members could violate the GDPR as well as Rule 106, 
which requires, among other provisions, that Clearing Members ensure 
that personal data transfers to ICE Clear Europe are lawful.
    In light of this change in circumstances, although the principles 
of Rule 106 continue to be relevant, ICE Clear Europe considers that it 
would be prudent to put in place additional safeguards with respect to 
transfers of personal data from EU27-based Clearing Members to ICE 
Clear Europe such that it can be certain that such transfers are 
subject to appropriate safeguards within the meaning of the GDPR and 
therefore comply with the GDPR and Rule 106. As such, ICE Clear Europe 
proposes to amend its Rules to incorporate standard data protection 
clauses pursuant to Article 46(2) of the GDPR in the form of the Set II 
Standard Contractual Clauses published by the European Commission for 
the transfer of personal data from the EU to third countries \8\ (the 
``Standard Contractual Clauses'') into Rule 106 and a new Exhibit 5.
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    \8\ SET II Standard contractual clauses for the transfer of 
personal data from the Community to third countries (controller to 
controller transfers), European Commission Decision C(2004)5721.
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    The proposed amendments in new Rule 106(f) would by their terms 
apply only if ICE Clear Europe is established in a jurisdiction which 
the European Commission has not found to offer an adequate level of 
protection for personal data under the GDPR, in other words, in a 
scenario where no withdrawal agreement has been agreed and there has 
been no adequacy decision by the European Commission in respect of the 
UK.\9\ It is noted that if no withdrawal agreement is agreed at the 
time of the UK's departure from the EU, it cannot be assumed that an 
adequacy decision would automatically be granted.
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    \9\ ICE Clear Europe believes that this scenario will, if it 
occurs, be readily apparent to market participants based on public 
actions of relevant authorities.
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    The amendments would require that the Clearing House and each 
Clearing Member subject to Chapter V of the GDPR which transfers 
Personal Data to the Clearing House (an ``Exporting Member'') agree to 
comply with the Standard Contractual Clauses. Revised Rule 106 
specifically provides for the positions of the Clearing Member and the 
Clearing House under the Standard Contractual Clauses (as data exporter 
and data importer, respectively). The amendments also provide for the 
Standard Contractual Clauses to take precedence over other Rules and 
the Clearing Membership Agreement on Personal Data processing matters. 
The amendments would define the terms ``Data Subject'', ``Process'' 
(and derivations thereof), ``Personal Data'', ``Controller'' and 
``Supervisory Authority'' to have the meaning given to such terms in 
the GDPR for purposes of Rule 106. Rule 106(d) (which defined such 
terms, as well as certain other terms that are not used in the Rule) 
has been deleted and reserved as unnecessary.
    The proposed amendments would add a new Exhibit 5 to the Rules, 
which reproduces the Standard Contractual Clauses. The Standard 
Contractual Clauses are in the form prescribed by the EU and have not 
been amended (except for Annex B which is intended to be tailored to 
the processing of personal data carried out by that specific data 
controller). The Standard Contractual Clauses define the terms 
``personal data'', ``special categories of data/sensitive data'', 
``process/processing'', ``controller'', ``processor'', ``data subject'' 
and ``supervisory authority/authority'', consistent with regulatory 
requirements. The term ``data exporter'' is defined as the controller 
who transfers the personal data and the term ``data importer'' is 
defined as the controller who agrees to receive from the data exporter 
personal data for further processing in accordance with the Standard 
Contractual Clauses and is

[[Page 8771]]

not subject to a third country's system ensuring adequate protection.
    The Standard Contractual Clauses set out the obligations of the 
data exporter and data importer, which generally relate to legal 
compliance, having in place processes to protect personal data and 
respond to enquiries, having necessary legal authority to fulfill the 
obligations, having sufficient financial resources to fulfill 
responsibilities relating to liability for damages, and agreeing to 
limitations on personal data transfer and processing. Each party 
commits to being liable to the other for damages caused by breach of 
the Standard Contractual Clauses and to giving a data subject the right 
to enforce as a third party beneficiary many of the Standard 
Contractual Clauses. The Standard Contractual Clauses also set out how 
disputes with data subjects or authorities would be resolved.
    The Standard Contractual Clauses permit the data exporter to 
temporarily suspend transfers of personal data to the data importer if 
the importer has breached its obligations, until the breach is 
repaired, and further set out the conditions under which either party 
may terminate the Standard Contractual Clauses and when the authority 
must be informed.
    Proposed Annex A to Exhibit 5 to the Rules would set out certain 
data processing principles which relate to purpose limitation of 
personal data processing; data quality and proportionality; 
transparency; security and confidentiality; rights of access, 
rectification, deletion and objection; imposition of additional 
measures for sensitive data; permitting an opt-out with respect to data 
use in marketing; and limiting use of automated decisions relating to 
data subjects based on personal data.
    Proposed Annex B to Exhibit 5 to the Rules sets out the description 
of the Data Subjects, recipients of Personal Data, purpose of the 
transfer(s) and categories of Personal Data transferred by the 
Exporting Member, for purposes of Rule 106.
(b) Statutory Basis
    ICE Clear Europe believes that the proposed amendments are 
consistent with the requirements of Section 17A of the Act \10\ and the 
regulations thereunder applicable to it, including the standards under 
Rule 17Ad-22.\11\ In particular, Section 17A(b)(3)(F) of the Act \12\ 
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. The amendments clarify certain rights and obligations of the 
Clearing House and Clearing Members with respect to personal data 
obtained in connection with clearing activity in light of legal 
considerations under the GDPR that may apply to Clearing Members and 
ICE Clear Europe upon the UK departure from the EU if there is no 
withdrawal agreement and the EU has not issued an adequacy decision. 
EU-27 based Clearing Members must in practice export personal data to 
ICE Clear Europe in order to clear transactions at ICE Clear Europe. 
The proposed Rule changes will facilitate the continued transfer of 
personal data for that purpose in the scenario described above and 
avoid increased risk of violations of GDPR requirements in connection 
with such transfers. The changes will thus facilitate continued 
clearing by EU-27 Clearing Members in compliance with applicable law 
and promote the prompt and accurate clearance and settlement of 
transactions by such persons. As such, the amendments are consistent 
with the protection of investors and the public interest. (ICE Clear 
Europe does not believe the amendments will have any effect on the 
safeguarding of securities and funds in the custody or control of the 
Clearing House or for which it is responsible.)
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    \10\ 15 U.S.C. 78q-1.
    \11\ 17 CFR 240.17Ad-22.
    \12\ 15 U.S.C. 78q-1(b)(3)(F).
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    Moreover, the amendments are consistent with Rule 17Ad-
22(e)(1),\13\ which requires that each covered clearing agency 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to provide for a well-founded, clear, 
transparent, and enforceable legal basis for each aspect of its 
activities in all relevant jurisdictions. As discussed herein, the 
amendments are designed to facilitate continued compliance by ICE Clear 
Europe and its Clearing Members with requirements of GDPR that will 
apply upon the UK ceasing to be an EU member state if there is no 
withdrawal agreement and the EU has not issued an adequacy decision. EU 
based Clearing Members must export personal data to ICE Clear Europe in 
order to clear transactions at ICE Clear Europe, and this Rule change 
will facilitate those Clearing Members' continued ability to export the 
data without violating GDPR should UK depart the EU without a 
withdrawal agreement and without an adequacy decision. The amendments 
thereby facilitate continued clearing for EU-based persons in 
accordance with EU regulations relating to data protection. ICE Clear 
Europe does not expect that the amendments will adversely impact its 
ability to comply with the Act or any standards under Rule 17Ad-22.\14\
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    \13\ 17 CFR 240.17Ad-22(e)(1).
    \14\ 17 CFR 240.17Ad-22.
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(B) Clearing Agency'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 not necessary or 
appropriate in furtherance of the purpose of the Act. The amendments 
are considered prudent in order for ICE Clear Europe to ensure that 
there will be no interruption in the receipt of personal data from its 
EU27-based Clearing Members (or increased risk to such Clearing Members 
in the provision of such data). ICE Clear Europe does not believe the 
amendments will in themselves materially affect the cost of, or access 
to, clearing as they are generally consistent with GDPR requirements 
with which entities based in the EU must already comply. To the extent 
the amendments impose certain additional costs on Clearing Members and 
Sponsored Principals through the specific requirements of the Standard 
Contractual Clauses that may differ from current practices, these 
result from the requirements imposed by the GDPR, and are generally 
applicable to Clearing Members and Sponsored Principals throughout the 
European Union. (In addition, Clearing Members and Sponsored Principals 
are already required under the Rules to ensure that their transmission 
of data is lawful, and the amendments are therefore not expected to 
impose significant additional burdens.) As a result, ICE Clear Europe 
does not believe the proposed rule changes impose 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 comments received

[[Page 8772]]

with respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, provided that ICE 
Clear Europe has given the Commission written notice of its intent to 
file the proposed rule change at least five business days prior to the 
date of filing of the proposed rule change or such shorter time as 
designated by the Commission,\15\ the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) \17\ thereunder.
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    \15\ ICE Clear Europe has satisfied this requirement.
    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).
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    The Commission believes that the proposed rule change would clarify 
certain rights and obligations of the Clearing House and EU27-based 
Clearing Members under the GDPR regarding personal data transferred in 
connection with clearing activity where the UK withdraws from the EU 
without a withdrawal agreement and the EU has not issued an adequacy 
decision for the UK. As such, the Commission believes that the proposed 
rule change would have no effect on (i) the safeguarding of funds or 
securities in the custody or control of ICE Clear Europe or for which 
it is responsible; (ii) the terms of cleared contracts; (iii) or the 
financial resources of ICE Clear Europe. Moreover, the Commission notes 
that the proposed rule change would be limited to adding to the Rules 
the standard provisions already applicable under the GDPR. Thus, EU27-
based Clearing Members would already be subject to these requirements, 
and, as such, the Commission does not believe that the proposed rule 
change would impose any new requirements on EU27-based Clearing 
Members. Accordingly, the Commission does not believe that the proposed 
rule change would significantly affect the rights or obligations of ICE 
Clear Europe, Clearing Members, or other persons using the clearing 
service. For these reasons, the Commission believes that the proposed 
rule change would not significantly affect the protection of investors 
or the public interest.
    Moreover, because the Commission believes that the proposed rule 
change would be limited to adding to the Rules the standard provisions 
under the GDPR already applicable to EU27-based Clearing Members, the 
Commission does not believe that the proposed rule change would impose 
any significant burdens on EU27-based Clearing Members. The Commission 
acknowledges that the proposed rule change could impose additional 
costs on EU27-based Clearing Members if the Standard Contractual 
Clauses differ from their current practices, but the Commission 
believes these costs would be the result of the requirements imposed by 
the GDPR, not the proposed rule change. Moreover, as noted, these 
requirements are already applicable to all EU27-based Clearing Members, 
and thus, EU27-based Clearing Members should already comply with these 
requirements. For these reasons, the Commission believes that the 
proposed rule change would not impose any significant burden on 
competition.
    A proposed rule change filed under Rule 19b-4(f)(6) \18\ normally 
would not become operative prior to 30 days after the date of its 
filing. Pursuant to Rule 19b-4(f)(6)(iii),\19\ however, the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. ICE Clear Europe has 
requested that the Commission waive the five-day pre-filing requirement 
and the 30-day operative delay so that ICE Clear Europe may implement 
the proposed rule change prior to the UK's departure from the EU, which 
is currently scheduled to occur on March 29, 2019. ICE Clear Europe 
believes that doing so would facilitate Clearing Members' continued 
compliance with the GDPR requirements which would apply upon the UK's 
withdrawal from the EU. Moreover, ICE Clear Europe represents that 
because the proposed rule change would only apply upon the UK's 
withdrawal without a withdrawal agreement or adequacy decision, the 
proposed rule change would not have any effect sooner than the UK's 
departure from the EU (March 29, 2019), regardless of the 30-day 
operative delay. ICE Clear Europe does not believe that a further 
operative delay would be necessary in light of this fact, and further 
represents that any operative delay would be inconsistent with market 
expectations in light of the date upon which the UK is scheduled to 
withdraw from the EU and could impair clearing by EU27-based clearing 
members after the UK's withdrawal. As a result, in ICE Clear Europe's 
view, immediate effectiveness would be consistent with the protection 
of investors and the public interest.
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    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that delaying the operation of the proposed 
rule change would serve no purpose in light of the fact that the 
proposed rule change, by its terms, would not be effective prior to 
March 29, 2019. Moreover, the Commission believes, as represented by 
ICE Clear Europe, that any delay in the operation of the proposed rule 
change would be inconsistent with market expectations and could hinder 
preparations for the UK's withdrawal from the EU by delaying the 
operation of the proposed rule change until shortly before the 
scheduled withdrawal date. Further, the Commission believes, as 
discussed above, the proposed rule change would not (i) significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; or (iii) affect the safeguarding 
of funds or securities in the custody or control of ICE Clear Europe or 
for which it is responsible. Rather, the Commission believes the 
proposed rule change would allow EU27-based Clearing Members to 
continue clearing at ICE Clear Europe after the UK's withdrawal from 
the EU. Thus, the Commission believes that waiving the 30-day operative 
delay would not (i) significantly affect the protection of investors or 
the public interest or (ii) impose any significant burden on 
competition. The Commission further believes that waiving the 30-day 
operative delay would provide certainty to ICE Clear Europe and EU27-
based Clearing Members regarding the application of the GDPR after the 
UK's withdrawal from the EU. Therefore, the Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest and designates the proposed rule 
change as operative upon filing.\20\
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    \20\ For these same reasons, the Commission waives the five-day 
pre-filing requirement. Moreover, for purposes only of waiving the 
five-day pre-filing requirement and the 30-day operative delay, the 
Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection

[[Page 8773]]

of investors; or (iii) otherwise in furtherance of the purposes of the 
Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or 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:

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-2019-004 on the subject line.

Paper Comments

     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-2019-004. 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 (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 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 10:00 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 website at https://www.theice.com/clear-europe/regulation. All comments received will be posted without change. 
Persons submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ICEEU-2019-004 and should be 
submitted on or before April 1, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-04286 Filed 3-8-19; 8:45 am]
 BILLING CODE 8011-01-P