[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]
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