[Federal Register Volume 84, Number 117 (Tuesday, June 18, 2019)]
[Notices]
[Pages 28372-28374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12786]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86092; File No. SR-ICEEU-2019-008]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change Relating
to Publication of a Circular Regarding the Interpretation of References
to EU Legislation in the Clearing Rules Post-Brexit
June 12, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 28373]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 31, 2019, ICE Clear Europe Limited (``ICE Clear Europe'' or the
``Clearing House'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule changes described in Items I, II,
and III below, which Items have been primarily 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)(1) 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)(1).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
ICE Clear Europe is proposing to publish a Circular, titled ICE
Clear Europe: Interpretation of References to EU Legislation in the
Clearing Rules Post-Brexit (the ``Circular''), to provide guidance as
to the interpretation of references to European Union (``EU'')
directives and regulations in the ICE Clear Europe Clearing Rules and
Procedures in the event that the United Kingdom (``UK'') ceases to be
an EU member state, in circumstances where no withdrawal agreement
stipulating that EU laws will continue to apply in the UK has been
agreed between the UK and the EU-27. The interpretation contained in
the Circular will only apply under such circumstances.
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 Circular is to provide guidance with
respect to the interpretation of certain provisions in the Rules and
Procedures in the event that the UK ceases to be an EU member state, in
circumstances where no withdrawal agreement has been agreed between the
UK and the EU-27 stipulating that EU laws will continue to apply in the
UK. In such circumstances, directly applicable EU directives and
regulations will be incorporated into UK law with modifications on
``exit day'' through the European Union (Withdrawal) Act 2018 (the
``EUWA''), which would result in there being two versions of a directly
applicable EU legislative act which may be applicable to the Rules: (1)
The version as enacted in the EU, directly applicable throughout the EU
(and, in certain cases, the EEA); and (2) the version incorporated into
UK law (referred to as ``on-shored'').
There are various references to EU directives and regulations in
the Rules and Procedures; others may arise by implication by virtue of
definitions such as that of ``Applicable Laws'' or ``Governmental
Authority'' (Rule 101). ICE Clear Europe is proposing to publish the
Circular to provide guidance as to the proper interpretation of such
references in the event of the UK leaving the EU without withdrawal
agreement that provides for continued applicability of EU law in the
UK. The guidance is intended to be consistent with the views of legal
practitioners in the UK with respect to references to EU directives and
regulations in English law contracts generally, but applied to the
particular definitions and situations that arise under the Rules and
Procedures.
The Circular sets out several principles that will be applied by
ICE Clear Europe when interpreting references to an EU regulation or
directive in its Rules:
1. Where the reference concerns an obligation on, or otherwise
applies to, the Clearing House or a UK Clearing Member:
[cir] Where the reference is to an EU regulation, it should be
interpreted as the regulation as it forms part of UK domestic law
through section 3 of the EUWA, and as amended by UK law from time to
time; and
[cir] Where the reference is to an EU directive, it should be
interpreted as the UK domestic law corresponding to the directive or
provision thereof.
2. Where the reference concerns an obligation on, or otherwise
applies to, an EU Clearing Member:
[cir] Where the reference is to an EU regulation, it should be
interpreted as the regulation as it applies in the EU, and as amended
by EU law from time to time; and
[cir] Where the reference is to an EU directive, it should be
interpreted as the EU directive, as amended by EU law from time to time
and as implemented in the relevant member state of the EU Clearing
Member.
The Circular also addresses situations where both sets of laws
apply, for example for entities established in the UK with an EU branch
(or vice versa) or which continue to be regulated in both systems under
cross-border licenses, the UK temporary permissions regime or other
grandfathering arrangements. By way of example, it explains how Rule
requirements that Clearing Members maintain sufficient capital and
segregated accounts would require UK Clearing Members to comply with
the on-shored version of the applicable regulatory requirements, while
EU Clearing Members would be required to comply with the existing EU
regulations.
The Circular further sets out certain exceptions to these general
principles relating to the following:
A reference to an EU law relating to emission allowance
units issued under the EU Emissions Trading Scheme should be
interpreted to continue to refer to the EU law since the UK no longer
participates in the scheme;
References to EU member state laws transposing or
implementing an EU directive will be read to include UK laws
corresponding to that EU directive;
Certain references relating to the European Market
Infrastructure Regulation (Regulation (EU) No 648/2012) and related EU
authorities will be read to continue to refer to relevant EU law and
authorities, for example in the context of ICE Clear Europe's status as
a third country central counterparty thereunder; and
References relating to EU data protection legislation are
excluded, since these are addressed separately in ICE Clear Europe
Circular C19/053 dated March 15, 2019.
(b) Statutory Basis
ICE Clear Europe believes that the proposed rule change is
consistent with the requirements of Section 17A of the Act \5\ and the
regulations thereunder applicable to it, including the standards under
Rule 17Ad-22.\6\ In particular, Section 17A(b)(3)(F) of the Act \7\
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
[[Page 28374]]
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 proposed Circular would provide
guidance with respect to the interpretation of the Rules that would
apply to EU and UK Clearing Members and ICE Clear Europe upon the UK
departure from the EU if there is no withdrawal agreement that provides
for EU law to continue to apply in the UK. The interpretation would
thus facilitate continued clearing by EU and UK Clearing Members in
compliance with applicable law in relevant jurisdictions and promote
the prompt and accurate clearance and settlement of transactions by
such persons. As such, the interpretation is consistent with the
safeguarding of securities and funds in the custody or control of the
Clearing House or for which it is responsible, the protection of
investors and the public interest.
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\5\ 15 U.S.C. 78q-1.
\6\ 17 CFR 240.17Ad-22.
\7\ 15 U.S.C. 78q-1(b)(3)(F).
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Moreover, the interpretation is consistent with Rule 17Ad-
22(e)(1),\8\ 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
interpretation is designed to ensure that references to EU legislation
in the Rules and Procedures are properly interpreted should the UK
cease to be an EU member state with no withdrawal agreement stipulating
that EU laws will continue to apply in the UK. The guidance set out in
the Circular would facilitate continued clearing in light of the
requirements of UK and EU law in those circumstances and would minimize
the potential for disputes and legal uncertainty. ICE Clear Europe does
not expect that the interpretation will adversely impact its ability to
comply with the Act or any standards under Rule 17Ad-22.\9\
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\8\ 17 CFR 240.17Ad-22(e)(1).
\9\ 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 guidance in the
Circular would have any impact, or impose any burden, on competition
not necessary or appropriate in furtherance of the purpose of the Act.
The guidance is will not change the substantive requirements of any
Rules or Procedures but will clarify the proper interpretation of
references to EU legislation in order to facilitate that the Clearing
House and EU and UK Clearing Members continue to adhere to applicable
laws and regulations. ICE Clear Europe does not believe the
interpretation will in itself materially affect the cost of, or access
to, clearing. As a result, ICE Clear Europe does not believe the
proposed the rule change imposes 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 with respect to the proposed
rule change.
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) of the Act \10\ and paragraph (f) of Rule 19b-4 \11\
thereunder. 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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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f).
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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-2019-008 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-2019-008. 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 Section, 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-2019-008 and should be
submitted on or before July 9, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-12786 Filed 6-17-19; 8:45 am]
BILLING CODE 8011-01-P