[Federal Register Volume 84, Number 177 (Thursday, September 12, 2019)]
[Notices]
[Pages 48191-48201]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19703]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86891; File No. SR-ICEEU-2019-012]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing of Partial Amendment No. 2 and Order Granting Accelerated 
Approval of Proposed Rule Change, as Modified by Partial Amendment No. 
1 and Partial Amendment No. 2, To Revise the ICE Clear Europe Treasury 
and Banking Services Policy, Liquidity Management Procedures, 
Investment Management Procedures and Unsecured Credit Limits Procedures

September 6, 2019.

I. Introduction

    On July 5, 2019, ICE Clear Europe Limited (``ICE Clear Europe'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
adopt a new Treasury and Banking Services Policy, new Liquidity 
Management Procedures, new Investment Management Procedures, and 
revised Unsecured Credit Limits Procedures. The proposed rule change 
was published for comment in the Federal Register on July 25, 2019.\3\ 
On July 30, 2019, ICE Clear Europe filed Partial Amendment No. 1 to the 
proposed rule change.\4\ Notice of Partial Amendment No. 1 was 
published in the Federal Register on August 7, 2019.\5\ The Commission 
did not receive comments on the proposed rule change, as modified by 
Partial Amendment No. 1. On August 27, 2019, ICE Clear Europe filed 
Partial Amendment No. 2 to the proposed rule change.\6\ The Commission 
is publishing this notice to solicit comments on Partial Amendment No. 
2 from interested persons and, for the reasons discussed below, is 
approving the proposed rule change, as modified by Partial Amendment 
No. 1 and Partial Amendment No. 2 on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 86413 (July 19, 2019), 
84 FR 35892 (July 25, 2019) (SR-ICEEU-2019-012) (``Notice'').
    \4\ ICE Clear Europe filed Partial Amendment No. 1 to correct an 
error in the confidential Exhibit 5-4. The original version of the 
confidential Exhibit 5-4 contained a defined term that did not have 
a definition. ICE Clear Europe filed a new version of the 
confidential Exhibit 5-4 to correct that issue and define the term. 
Partial Amendment No. 1 did not otherwise make any changes to the 
substance of the filing or the text of the proposed rule change, nor 
did it raise any novel regulatory issues.
    \5\ Securities Exchange Act Release No. 86539 (August 1, 2019), 
84 FR 38689 (August 7, 2019) (SR-ICEEU-2019-012) (``Partial 
Amendment No. 1'').
    \6\ ICE Clear Europe filed Partial Amendment No. 2 to provide 
additional details regarding the governance of the approval and 
review of the Treasury and Banking Services Policy, Liquidity 
Management Procedures, Investment Management Procedures, and 
Unsecured Credit Limits Procedures and amend the governance sections 
of each of those documents to be consistent with the information 
provided to the Commission in confidential exhibits. Moreover, 
Partial Amendment No. 2 amends the Liquidity Management Procedures 
to remove references to reverse repos, which ICEEU no longer 
considers as liquid resources, and to specify that ICE Clear Europe 
personnel meet monthly to, among other things, analyze and discuss 
the assumptions and parameters of liquidity stress test scenarios. 
Finally, Partial Amendment No. 2 provides, in a confidential 
exhibit, ICE Clear Europe's Documentation Governance Schedule.
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II. Description of the Proposed Rule Change

    ICE Clear Europe proposes to adopt new Liquidity Management 
Procedures, new Investment Management Procedures, and revised Unsecured 
Credit Limits Procedures (collectively, the ``Procedures Documents''), 
as well as a new Treasury and Banking Services Policy (together with 
the Procedures Documents, the ``Treasury Documents'').\7\ The Treasury 
Documents would replace the existing Liquidity Risk Management 
Framework, Liquidity Plan, Investment Management Policy

[[Page 48192]]

and Approved Financial Institutions Policy (the ``Existing 
Documents'').
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    \7\ Capitalized terms used but not defined herein have the 
meanings specified in the ICE Clear Europe Clearing Rules (the 
``Rules'') or the Treasury Documents. The following description of 
the proposed rule change is excerpted from the Notice, 84 FR 35892.
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    Generally, ICE Clear Europe proposes to adopt the new Treasury 
Documents to simplify and streamline the documentation for the 
procedures and policy listed above; remove inaccuracies and unused 
elements from that documentation; remove elements that are documented 
or managed elsewhere; better separate between policy-level 
documentation (Policies) and implementation-level documentation 
(Procedures); and improve operational flexibility. Thus, the proposed 
rule change would combine the high-level policy elements of the 
Existing Documents into the Treasury and Banking Services Policy and 
consolidate the supporting detail in the new Procedures Documents. 
After adoption of the Treasury Documents, ICE Clear Europe would retire 
the Existing Documents.

A. Treasury and Banking Services Policy

    The Treasury and Banking Services Policy would set out the overall 
principles applied to the ICE Clear Europe cash and collateral 
management functions for Clearing Member (``CM'') assets. The Treasury 
and Banking Services Policy would replace the existing Liquidity Risk 
Management Framework and would contain policy-level information 
relating to liquidity risk management and investment management.
i. Responsibilities of the Treasury and Banking Services Department
    The Treasury and Banking Services Policy would state that ICE Clear 
Europe's Treasury and Banking Services Department (``TBS'') is 
responsible for cash and collateral management functions for CM assets 
including liquidity and cash margin investment and that these functions 
are subject to applicable regulations and the Rules and Procedures, 
particularly the Finance Procedures. The Policy would further describe 
the requirements imposed upon CMs with respect to initial margin 
(``IM''), guaranty fund (``GF''), and variation margin (``VM'') 
deposits and contributions, as well as the manner in which CMs would 
cover these requirements.
ii. Cash Management
    The Treasury and Banking Services Policy would describe the manner 
in which ICE Clear Europe transfers cash in the relevant currencies 
intraday through an Assured Payment System (``APS'') into its 
concentration banks and invests or secures such cash at end of day. ICE 
Clear Europe currently uses multiple APS banks which are Approved 
Financial Institutions that have committed to meet certain technical 
and operational requirements, and ICE Clear Europe's use of such APS 
banks would be described in the Treasury and Banking Services Policy. 
Moreover, the Treasury and Banking Services Policy would add a 
definition for the term ``Approved Financial Institution'', defining it 
as a financial service provider that has been approved by the Credit 
Risk team and meets eligibility and monitoring criteria set out in the 
Unsecured Credit Limits Procedures.
iii. Liquidity Risk
    The Treasury and Banking Services Policy would identify and 
describe ICE Clear Europe's liquidity risks and, at a high level, how 
ICE Clear Europe addresses those liquidity risks. It would further set 
out ICE Clear Europe's primary liquidity risk management objective, 
which is to maintain sufficient liquid resources in all relevant 
currencies to meet its payment obligations as they come due, as well as 
ICE Clear Europe's strategy to achieve this objective. Specifically, as 
described in the Treasury and Banking Services Policy, ICE Clear Europe 
would structure and sequence its cash flows to minimize liquidity 
risks, monitor intraday cash inflows and outflows to ensure payments 
are met, and run daily liquidity stress tests (``LSTs'') to assess and 
monitor its potential liquidity needs under stress scenarios.
    The Treasury and Banking Services Policy would explain that ICE 
Clear Europe runs daily liquidity monitoring and LSTs to measure and 
monitor its liquidity position on an ongoing basis and assesses its 
potential immediate and future liquidity needs across a range of 
extreme but plausible market scenarios. The LSTs are set out in the LST 
Model Documentation and would be reviewed periodically as would be 
described in the Liquidity Management Procedures. ICE Clear Europe 
would review the models that would underpin the LSTs in accordance with 
ICE Clear Europe's Model Risk Governance Framework.
iv. Investment of Cash
    The Treasury and Banking Services Policy would set out ICE Clear 
Europe's investment management objective. ICE Clear Europe's investment 
management objective would be to safeguard the principal of its CMs' 
cash, maintain sufficient liquidity to cover its payment obligations, 
and obtain a reasonable rate of return. The Treasury and Banking 
Services Policy would explain that ICE Clear Europe's related 
investment strategy would be to: (i) Manage its investment portfolio to 
ensure it has sufficient liquidity; (ii) rebalance its investment 
portfolio as a result of the LSTs and available liquidity to ensure 
enough cash is available to meet daily payment obligations; and (iii) 
invest or secure cash after the relevant deadline has passed for CMs to 
withdraw or exchange excess cash.
    The Treasury and Banking Services Policy would explain that ICE 
Clear Europe aims to only invest in cash or highly liquid financial 
instruments with minimal market and credit risk and which are capable 
of being liquidated quickly and with minimal losses. The Treasury and 
Banking Services Policy would further explain that an instrument would 
be acceptable if the market for the instrument is sufficiently liquid 
and transparent to enable ICE Clear Europe to re-value the instrument 
on a daily basis with prices quoted intraday and if the market for the 
instrument has sufficient price history to enable ICE Clear Europe to 
analyze the statistical returns of such assets. Moreover, the Treasury 
and Banking Services Policy would prohibit ICE Clear Europe from 
investing in instruments issued by a CM, or any entity that is part of 
the same group as the CM. Similarly, the Treasury and Banking Services 
Policy would prohibit ICE Clear Europe from investing in instruments 
issued by a CCP or by entities whose business involves providing 
services critical to the function of ICE Clear Europe, unless that 
entity is a European Economic Area central bank or a central bank of 
issue of a currency in which ICE Clear Europe has exposure. The 
Treasury and Banking Services Policy would further require that 
investments be in sufficiently liquid currencies; diversified across 
counterparties, issuers, and asset classes; subject to suitable credit 
criteria; and, with respect to reverse repo collateral, subject to 
suitable haircuts and credit criteria. Finally, the Treasury and 
Banking Services Policy would require that parties and employees 
involved in the investment process refrain from conflicts of interest.
v. Collateral Management
    Pursuant to the Treasury and Banking Services Policy, CMs could 
substitute cash covering IM or GF requirements with collateral or cash 
in a different currency, subject to constraints set out in the ICE 
Clear Europe Finance Procedures. Moreover, the Treasury and Banking 
Services Policy would specify that whenever practicable, ICE Clear 
Europe would hold accounts with

[[Page 48193]]

Central Securities Depositories (``CSDs'') because CSDs are highly 
regulated and operate robust securities settlement systems. Finally, 
the Treasury and Banking Services Policy would require that assets of 
individual CMs and, where appropriate, clients with individually 
segregated assets, be readily identifiable in ICE Clear Europe's 
systems.
vi. Governance
    The Treasury and Banking Services Policy would make the document 
owner responsible for ensuring that it remains up-to-date and is 
reviewed in accordance with ICEU's governance processes. Moreover, the 
Treasury and Banking Services Policy would make the document owner 
responsible for reporting material breaches or unapproved deviations 
from the policy to their Head of Department, the Chief Risk Officer, 
and the Head of Compliance (or their delegates), who together would 
determine if further escalation should be made to relevant senior 
executives, the ICE Clear Europe Board and/or competent authorities. 
Finally, the Treasury and Banking Services Policy would explain that 
exceptions to the policy can be approved in accordance with ICEU's 
governance process for the approval of changes to the document.\8\
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    \8\ This process would be further explained in ICE Clear 
Europe's Documentation Governance Schedule, which ICE Clear Europe 
submitted as a confidential exhibit to Partial Amendment No. 2 to 
the filing.
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B. Liquidity Management Procedures

    The Liquidity Management Procedures would replace the current 
Liquidity Plan. The Liquidity Management Procedures would generally 
explain ICE Clear Europe's liquidity management processes; how ICE 
Clear Europe conducts periodic reviews of liquidity stress tests and 
liquidity providers; and how ICE Clear Europe governs exceptions and 
modifications to the procedures.
i. ICE Clear Europe's Liquidity Management Processes
1. Payment Obligations
    The Liquidity Management Procedures would describe the sources of 
payment obligations relevant to liquidity management: (i) Paying VM to 
CMs with positive profit and loss on their trades; (ii) paying delivery 
or settlement monies when trades deliver or settle; and (iii) returning 
surplus IM or other margin to individual CMs as appropriate. The 
Liquidity Management Procedures would further specify that in normal 
circumstances ICEU's payment obligations should be covered by VM taken 
from those with negative profit and loss on their trades; settlement 
amounts taken from the CM expecting to receive delivery and paid to the 
delivering CM; and cash deposited to cover margin requirements. Thus, 
the Liquidity Management Procedures would specify that ICE Clear Europe 
would only have a liquidity need not covered in the ordinary course 
where there was a firm default or a technical issue at a financial 
services provider.
    The Liquidity Management Procedures would then explain the various 
structural arrangements that ICE Clear Europe has in place to minimize 
these liquidity risks, which would include sequencing its processes to 
minimize liquidity risk and not permitting CMs to overdraw accounts 
with ICE Clear Europe. The Liquidity Management Procedures would 
further explain the daily timeline of when cash is received versus when 
payment obligations are due and special liquidity considerations for 
the settlements and deliveries process, both of which would help ICE 
Clear Europe to minimize liquidity risks.
2. Management and Monitoring of Liquidity Needs
    The Liquidity Management Procedures would explain that ICE Clear 
Europe identifies its liquidity needs by running a range of LSTs each 
day to calculate its exposures under various market and operational 
scenarios. The Liquidity Management Procedures would specify that the 
LSTs are designed to cover the default of at least the two CMs with the 
largest exposures to ICEU in extreme but plausible market conditions 
together with defaults of financial service providers and other 
operational outflows. The Liquidity Management Procedures would further 
require that ICE Clear Europe run a specific scenario to account for 
the Commission's requirement to cover the default of the largest CM 
with qualifying liquid resources.
    Moreover, the Liquidity Management Procedures would explain how the 
Clearing Risk team develops market scenarios and calculates stress 
losses to set the required levels of IM and GF for CMs and accounts. 
Once Clearing Risk has calculated stress losses, the Liquidity 
Management Procedures would require that TBS aggregate these losses 
across different operational scenarios to set the level of liquid 
resources ICE Clear Europe must maintain. TBS would also be required to 
calculate potential investment losses should the defaulting CMs also be 
investment counterparties, as well as cash outflows due to deliveries 
and settlements. Finally, the Liquidity Management Procedures would 
require that throughout the day, TBS monitor outstanding payment 
requests to identify failures which could lead to default, as well as 
the current amount of available liquid resources compared to what ICE 
Clear Europe needs.
    Next, the Liquidity Management Procedures would explain ICE Clear 
Europe's sources of available liquidity, including liquidity available 
in the case of a CM default and liquidity in the case of technical 
issues. The Liquidity Management Procedures would describe how in a 
default situation, liquidity is generated through the default 
management waterfall and how ICE Clear Europe may use its existing pool 
of cash first to cover immediate payment obligations because this cash 
may be available sooner than cash generated through the default 
management waterfall. In a liquidity shortfall situation due to a 
technical issue, the Liquidity Management Procedures would explain that 
ICE Clear Europe would use its uncommitted and committed lines or 
liquidate non-cash collateral to generate liquidity.
3. Daily Assessment and Valuation of Liquid Assets
    The Liquidity Management Procedures would explain how ICE Clear 
Europe values it liquid assets, including the haircuts it applies 
through the ICE Clear Europe Collateral and Haircut Policy.
4. Sources and Mitigations of Liquidity Risk
    The Liquidity Management Procedures would explain the sources of 
liquidity risk to ICE Clear Europe and how ICE Clear Europe manages 
these sources of risk. The Liquidity Management Procedures would 
categorize these risks as those arising from a default, such as a 
default by a CM or investment counterparty, and those arising from a 
technical issue, like an APS Bank's failure to transfer funds to ICE 
Clear Europe's concentration bank.
5. Timescale of Liquidity Resources
    The Liquidity Management Procedures would require that for purposes 
of monitoring its liquidity, ICE Clear Europe only include, as 
available liquidity resources, those resources that can be drawn upon 
on a same day basis. The resources would include cash; investments 
maturing that day; sovereigns with different maturities that can be 
liquidated that day; highly

[[Page 48194]]

reliable uncommitted operating lines; and committed repo lines.
6. Substitution of Cash With Non-Cash Collateral and Withdrawal of 
Excess Margin by CMs
    The Liquidity Management Procedures would specify that CMs may only 
substitute cash with non-cash collateral or with cash in other 
currencies once they have first covered their margin requirements in 
cash. Moreover, the Liquidity Management Procedures would explain that 
substitutions of cash with non-cash collateral or with cash in other 
currencies by CMs are subject to the Collateral and Haircut Policy. 
Finally, the Liquidity Management Procedures would explain how ICE 
Clear Europe minimizes the impact of substitutions, including by only 
investing funds after the deadline for substitution and having 
sufficient investments maturing to cover likely outflows due to 
substitutions.
7. Liquidity Shortfalls
    The Liquidity Management Procedures would explain how ICE Clear 
Europe would deal with liquidity shortfalls with respect to default 
situations and technical issues. The proposed Liquidity Management 
Procedures would specify that in a default situation, ICE Clear Europe 
would ultimately generate liquidity using the default management 
waterfall and that before resorting to the waterfall ICE Clear Europe 
may choose to cover its payment obligations using its existing pool of 
cash. If a liquidity shortfall is caused by a technical issue at a 
service provider, the proposed Liquidity Management Procedures would 
explain how ICE Clear Europe can use its credit lines to generate 
liquidity.
8. Replenishment of Liquidity in Stress Events
    The Liquidity Management Procedures would explain that in a default 
situation, where ICE Clear Europe uses the default waterfall to cover 
losses, the replenishment of liquidity would depend on the extent of 
the losses. If ICE Clear Europe covers the losses with the margin and 
GF contribution of the defaulting CM only, there would be no need for 
replenishment. On the other hand, if ICE Clear Europe covers the losses 
with part of the GF contributions of the other CMs or ICE Clear 
Europe's GF contribution, ICE Clear Europe would replenish these 
contributions using the process set out in the ICE Clear Europe Rules. 
The Liquidity Management Procedures would further explain that where 
the liquidity need arises from a technical issue, resolution of the 
technical issue would resolve the liquidity need and that the technical 
issue would not overall reduce liquidity resources.
ii. Periodic Reviews of Liquidity Stress Tests and Liquidity Providers
    The Liquidity Management Procedures would explain that the LSTs 
would assess the impact on sources of liquidity and liquidity exposures 
in both currency and time in a broad range of market and operational 
scenarios. To assess the LSTs, the Liquidity Management Procedures 
would require that TBS, Clearing Risk Department, and Risk Oversight 
Department meet monthly to analyze and discuss whether to include any 
new or emerging risks in the stress tests; the adequacy, assumptions, 
and parameters of LST scenarios; the adequacy of stress test inputs; 
acceptance of current LST scenario calibrations; performance of 
liquidity providers; annual due diligence reviews of liquidity 
providers to assess their ability to perform their role as such; and 
annual testing of sources of liquidity. Moreover, the Liquidity 
Management Procedures would require that in stressed market conditions, 
TBS, Clearing Risk Department, and Risk Oversight Department meet more 
frequently than monthly to ensure LSTs and stress scenarios are fit for 
purpose. Finally, the Liquidity Management Procedures would require 
that this analysis of LSTs be periodically reported to a Board-level 
committee.
iii. Governance
    The Liquidity Management Procedures would make the document owner 
responsible for ensuring that it remains up-to-date and is reviewed in 
accordance with ICEU's governance processes. Moreover, the Liquidity 
Management Procedures would make the document owner responsible for 
reporting material breaches or unapproved deviations from the 
procedures to their Head of Department, the Chief Risk Officer, and the 
Head of Compliance (or their delegates) who together would determine if 
further escalation should be made to relevant senior executives, the 
ICE Clear Europe Board and/or competent authorities. Finally, the 
Liquidity Management Procedures would explain that exceptions to the 
procedures can be approved in accordance with ICEU's governance process 
for the approval of changes to the document.\9\
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    \9\ This process would be further explained in ICE Clear 
Europe's Documentation Governance Schedule, which ICE Clear Europe 
submitted as a confidential exhibit to Partial Amendment No. 2 to 
the filing.
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C. Investment Management Procedures

    The Investment Management Procedures would explain how ICE Clear 
Europe manages its investments in times of normal market supply of 
adequate investments and the concentration limits that ICE Clear Europe 
must follow with respect to particular investments. The Investment 
Management Procedures would also explain the changes ICE Clear Europe 
would implement in times of insufficient market supply of adequate 
investments. Finally, the Investment Management Procedures would 
explain how ICE Clear Europe would govern exceptions and modifications 
to the procedures.
i. ICE Clear Europe's Investment Management
    The Investment Management Procedures would explain that ICE Clear 
Europe's investment management objective is to safeguard the principal 
of its CMs' cash, maintain sufficient liquidity for its payment 
obligations and obtain a reasonable rate of return. Moreover, the 
proposed Investment Management Procedures would require that 
investments be denominated in EUR, GBP and USD.
    During times of normal supply, the Investment Management Procedures 
would require that ICE Clear Europe: (i) Invest only with Approved 
Financial Institutions; (ii) invest at least 50% of the portfolio in 
each currency in overnight reverse repo agreements; (iii) hold a 
variety of maturity dates for non-overnight investments; and (iv) hold 
purchased securities until maturity to minimize market risk impact. 
Moreover, with respect to customer funds of FCM Clearing Members, the 
Investment Management Procedures would require that ICE Clear Europe: 
(i) Segregate those customer funds of from those of other CMs; (ii) 
hold the funds in permitted depositories consistent with applicable 
regulations; and (iii) invest the funds only in overnight reverse repos 
and direct purchases of US sovereign obligations with permitted 
counterparties for such transactions under applicable regulations. The 
Investment Management Procedures would contain a table setting out the 
authorized instruments for investment, maximum portfolio concentration 
limits for those investments, and maximum

[[Page 48195]]

maturity and minimum credit ratings for those investments (or the 
entities in which ICE Clear Europe would be allowed to invest). 
Finally, the Investment Management Procedures would require that TBS 
monitor adherence to the investment criteria.
    The Investment Management Procedures would explain that breaches of 
concentration limits would be escalated to the Risk Oversight 
Department and the Compliance team as well as reported to the relevant 
regulators through regular reports. The Investment Management 
Procedures would require that the investment portfolio then be 
rebalanced to return within the concentration limits. Moreover, the 
Investment Management Procedures would require that TBS, in conjunction 
with the Risk Oversight Department and Clearing Risk team, review the 
concentration limits every quarter.
    Finally, the Investment Management Procedures would set out 
additional requirements for investments in reverse repo agreements. 
First, ICE Clear Europe would need at least four investment 
counterparties in each currency. Second, the Head of TBS department, or 
their delegate, would need to consider, in the event of a counterparty 
downgrade, whether it would be more prudent to liquidate or hold a 
trade until maturity. Third, the Investment Management Procedures would 
deem repo agreements to have a maturity equal to the scheduled 
repurchase date of the underlying securities, or where the agreement is 
subject to a demand, the applicable notice period. Finally, the 
Investment Management Procedures would limit the collateral to only 
certain collateral deemed acceptable and would subject that collateral 
to a predetermined haircut.
ii. Changes in Times of Insufficient Market Supply
    In times of insufficient market supply of the authorized 
investments described above, the Investment Management Procedures would 
deem US government agency securities and supranational obligations 
acceptable for investment and repo agreement collateral. Moreover, ICE 
Clear Europe would no longer need to invest at least 50% in overnight 
repurchase agreements and concentration limits for all instruments 
would no longer apply. In periods of low supply of overnight repos, the 
Investment Management Procedures would require that investments be 
allocated to other investment types according to the following order of 
preference: (i) Central bank deposits; (ii) sovereign obligations; 
(iii) term reverse repurchase agreements; (iv) government, agency, and 
supranational obligations; and (v) bank obligations. Finally, the 
Investment Management Procedures would explain that periods of 
insufficient market supply of authorized investments and overnight 
repos are typically characterized by the investment agents not being 
able to invest funds in ICEU's preferred investments.
iii. Governance
    The Investment Management Procedures would make the document owner 
responsible for ensuring that it remains up-to-date and is reviewed in 
accordance with ICEU's governance processes. Moreover, the Investment 
Management Procedures would make the document owner responsible for 
reporting material breaches or unapproved deviations from the 
procedures to their Head of Department, the Chief Risk Officer, and the 
Head of Compliance (or their delegates) who together would determine if 
further escalation should be made to relevant senior executives, the 
ICE Clear Europe Board and/or competent authorities Finally, the 
Investment Management Procedures would explain that exceptions to the 
procedures can be approved in accordance with ICEU's governance process 
for the approval of changes to the document.\10\
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    \10\ This process would be further explained in ICE Clear 
Europe's Documentation Governance Schedule, which ICE Clear Europe 
submitted as a confidential exhibit to Partial Amendment No. 2 to 
the filing.
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D. Unsecured Credit Limits Procedures

    The Unsecured Credit Limits Procedures would support aspects of the 
Treasury and Banking Services Policy and the Investment Management 
Procedures. Specifically, the Unsecured Credit Limits Procedures would 
establish the eligibility and limit allocation methodology that ICE 
Clear Europe would use with respect to counterparties, how ICE Clear 
Europe monitors these limits, and how ICE Clear Europe would govern 
exceptions and modifications to the procedures.
i. Eligibility Methodology and Limit Allocation
    The Unsecured Credit Limits Procedures would require that in order 
for a legal entity to be eligible as a counterparty or financial 
service provider, it would need to (i) be regulated by a competent 
authority with valid jurisdiction; (ii) comply with the applicable 
minimum external rating; and (iii) comply with the maximum ICE Clear 
Europe rating for such entity type as set out in the procedures. If the 
entity is a repo provider, the Unsecured Credit Limits Procedures would 
require that it be organized in the US, UK, or in EU countries 
satisfying the minimum external rating. The Unsecured Credit Limits 
Procedures would include a table explaining the minimum external rating 
and maximum ICE Clear Europe rating for different counterparties, such 
as custodians and investment agents.
    Using the Unsecured Credit Limits Procedures, ICE Clear Europe's 
Credit Team and Treasury would assign each counterparty an unsecured 
credit limit, ranging from the limit floor ($50 million or lower, at 
the discretion of the Treasury or Credit team) and the limit ceiling 
($200 million).
ii. Monitoring
    The Unsecured Credit Limits Procedures would require that ICE Clear 
Europe's Treasury team conduct daily monitoring of overnight unsecured 
exposure at the legal entity level to ensure that ICE Clear Europe 
adheres to the limits per counterparty, as well as weekly monitoring, 
and monthly aggregation of Legal Entities of the same group of 
companies.
iii. Governance
    The Unsecured Credit Limits Procedures would make ICE Clear 
Europe's Credit Team the owner of the procedures, responsible for 
production of reports to monitor exposures ad limits, and responsible 
for escalating breaches and exceptions. The Unsecured Credit Limits 
Procedures also would make ICE Clear Europe Treasury responsible for 
providing the Credit Team with input requirements and operational 
monitoring.
    Moreover, as with the other Treasury Documents, the Unsecured 
Credit Limits Procedures would make the document owner responsible for 
ensuring that it remains up-to-date and is reviewed in accordance with 
ICEU's governance processes. Moreover, the Unsecured Credit Limits 
Procedures would make the document owner responsible for reporting 
material breaches or unapproved deviations from the procedures to their 
Head of Department, the Chief Risk Officer, and the Head of Compliance 
(or their delegates) who together would determine if further escalation 
should be made to relevant senior executives, the ICE Clear Europe 
Board and/or competent authorities. Finally, the Unsecured Credit 
Limits Procedures would explain that exceptions to the procedures can 
be approved in accordance with ICEU's governance

[[Page 48196]]

process for the approval of changes to the document.\11\
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    \11\ This process would be further explained in ICE Clear 
Europe's Documentation Governance Schedule, which ICE Clear Europe 
submitted as a confidential exhibit to Partial Amendment No. 2 to 
the filing.
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III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act directs the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
such proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to such 
organization. For the reasons given below, the Commission finds that 
the proposed rule change, as modified by Partial Amendment No. 1 and 
Partial Amendment No. 2, is consistent with Section 17A(b)(3)(F) of the 
Act \12\ and Rules 17Ad-22(e)(2), (e)(3), (e)(7)(i), (e)(7)(ii), 
(e)(7)(iv), (e)(7)(v), (e)(7)(vi), (e)(7)(ix), and (e)(16) 
thereunder.\13\
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
    \13\ 17 CFR 240.17Ad-22(e)(2), (e)(3), (e)(7)(i), (e)(7)(ii), 
(e)(7)(iv), (e)(7)(v), (e)(7)(vi), (e)(7)(ix), and (e)(16).
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A. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, among other things, that 
the rules of ICE Clear Europe be designed to promote the prompt and 
accurate clearance and settlement of securities transactions and, to 
the extent applicable, derivative agreements, contracts, and 
transactions, as well as to assure the safeguarding of securities and 
funds which are in the custody or control of ICE Clear Europe or for 
which it is responsible, and, in general, to protect investors and the 
public interest.\14\
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    \14\ 15 U.S.C. 78q-1(b)(3)(F).
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    As discussed above, the proposed rule change would adopt a new 
Treasury and Banking Services Policy, new Liquidity Management 
Procedures, new Investment Management Procedures, and revised Unsecured 
Credit Limits Procedures. For the reasons discussed below, the 
Commission believes that each of these Treasury Documents would enable 
ICE Clear Europe to manage effectively its liquidity risks and 
liquidity demands. The Commission further believes that, in turn, 
managing effectively its liquidity risks and liquidity demands would 
enable ICE Clear Europe to promote the prompt and accurate clearance 
and settlement of securities transactions and assure the safeguarding 
of securities and funds which are in the custody or control of ICE 
Clear Europe or for which it is responsible, and, in general, protect 
investors and the public interest.
i. Treasury and Banking Services Policy
    The Commission believes that the Treasury and Banking Services 
Policy would help to ensure that ICE Clear Europe effectively manages 
its liquidity risks and liquidity demands by providing a clear and 
effective process for identifying and managing liquidity risks. The 
Commission believes that, for example, in defining ICE Clear Europe's 
sources of liquidity and liquidity risk, as well as ICE Clear Europe's 
approaches to managing liquidity and liquidity risk, the Treasury and 
Banking Services Policy would help ICE Clear Europe to respond to 
liquidity risk by defining in advance the sources of such risk and the 
strategies for managing such risk. Moreover, in describing how ICE 
Clear Europe structures and sequences its cash flows to minimize 
liquidity risks, including transfers of cash and substitution of 
collateral, and how ICE Clear Europe runs daily liquidity monitoring 
and stress testing to measure and monitor its liquidity position on an 
ongoing basis, the Commission believes that the Treasury and Banking 
Services Policy would help ICE Clear Europe to identify potential 
sources of liquidity risk and mitigate those risks by sequencing its 
cash flows appropriately. The Commission further believes that, in 
explaining how ICE Clear Europe manages its investment portfolio to 
ensure it has sufficient liquidity and the criteria that ICE Clear 
Europe would use to determine whether a financial instrument would be 
acceptable for investment, the Treasury and Banking Services Policy 
would help to establish a reasonable and conservative process by which 
ICE Clear Europe invests and manages its available cash to meet 
liquidity demands. Finally, the Commission believes that, in defining 
the responsibilities of TBS with respect to the cash and collateral 
management functions of ICE Clear Europe and the general governance and 
exceptions process for the policy, the Treasury and Banking Services 
Policy would define responsibilities associated with liquidity 
management and ensure compliance with the policy, as well as establish 
a process to modify the policy as needed.
ii. Liquidity Management Procedures
    The Commission believes that the Liquidity Management Procedures 
would help to ensure that ICE Clear Europe effectively manages its 
liquidity risks and liquidity demands by identifying such risks and 
demands and providing procedures for managing and satisfying those 
risks and demands. For example, the Commission believes that, in 
describing the sources of payment obligations relevant to liquidity 
management and specifying the situations in which ICE Clear Europe 
would have a liquidity need and the sources of liquidity to meet those 
needs, the Liquidity Management Procedures would allow ICE Clear Europe 
to satisfy liquidity needs as they arise. In explaining how ICE Clear 
Europe would replenish liquidity in cases of a CM default or technical 
issues, the Commission likewise believes that the Liquidity Management 
Procedures would provide ICE Clear Europe a predetermined method for 
replenishing liquidity as needed. Similarly, the Commission believes 
that, in explaining the sources of liquidity risk to ICE Clear Europe 
and how ICE Clear Europe manages those liquidity risks, including the 
timescale of liquidity resources, the substitution of cash collateral 
with non-cash collateral, and how ICE Clear Europe would resolve 
liquidity shortfalls, the Liquidity Management Procedures would 
identify potential sources of drain on liquidity (like substitution and 
shortfall) and explain how ICE Clear Europe uses the timescale of 
payments to mitigate such potential drains.
    The Commission further believes that, in explaining how ICE Clear 
Europe identifies its liquidity needs by running the LSTs and how ICE 
Clear Europe develops and reviews the LSTs, the Liquidity Management 
Procedures would allow ICE Clear Europe to identify potential new 
liquidity needs and risks and determine the potential severity of such 
needs and risks. This, in turn, should allow ICE Clear Europe to 
develop an appropriate response and secure additional liquidity, if 
needed. The Commission also believes that, in explaining how ICE Clear 
Europe values it liquid assets, including the haircuts it applies 
through the ICE Clear Europe Collateral and Haircut Policy, the 
Liquidity Management Procedures would establish a baseline for 
determining the amount of ICE Clear Europe's liquid resources, which, 
in turn, would allow ICE Clear Europe to determine how much additional 
resources (if any) it would need to meet potential demands. Finally, 
the Commission believes that, in explaining how TBS, Clearing Risk and 
Risk Oversight departments would meet monthly to analyze and assess the 
LSTs, requiring that this analysis of LSTs be periodically reported to 
a Board-level committee, and defining the general

[[Page 48197]]

governance and exceptions process for the procedures, the Liquidity 
Management Procedures would establish responsibilities for ensuring 
that ICE Clear Europe responds to the findings of the LSTs and ensuring 
compliance with the procedures, as well as a process to modify the 
procedures as needed.
iii. Investment Management Procedures
    The Commission believes that the Investment Management Procedures 
would help to ensure that ICE Clear Europe effectively manages its 
liquidity risks and liquidity demands by providing stable and 
conservative investments and processes for managing such investments. 
For example, the Commission believes that the Investment Management 
Procedures would help to establish a reasonable and conservative 
objective for ICE Clear Europe's investments by requiring that ICE 
Clear Europe, in making investments, safeguard the principal of its 
members' cash, maintain sufficient liquidity for its payment 
obligations, and obtain a reasonable rate of return. The Commission 
further believes that the reasonable and conservative investment 
requirements established by the Investment Management Procedures would 
help to limit the potential losses ICE Clear Europe could suffer upon 
the default of a counterparty or underperformance of an investment. The 
Commission believes that limiting such potential losses is important to 
ICE Clear Europe's overall liquidity because such losses could reduce 
ICE Clear Europe's liquidity by reducing its supply of cash.
    Similarly, the Commission believes that, in defining the criteria 
for authorized investments in times of normal supply, defining 
additional requirements for reverse repos, and explaining the steps ICE 
Clear Europe would take in times of insufficient market supply of 
acceptable investments, the Investment Management Procedures would 
establish reasonable and conservative criteria for selecting 
investments. The Commission further believes that, in defining the 
investment concentration limits and how ICE Clear Europe would respond 
to breaches of those limits, the Investment Management Procedures would 
help to limit the potential risks associated with concentrating 
investments in particular instruments or particular counterparties. For 
example, ICE Clear Europe could potentially suffer large losses from a 
default by an investment counterparty to which it has a large exposure. 
Finally, in defining the general governance and exceptions process for 
the procedures, the Commission believes that the Investment Management 
Procedures would establish an effective and clear process for ensuring 
adherence to the procedures and a process for modifying or altering the 
procedures as needed.
iv. Unsecured Credit Limits Procedures
    The Commission believes that the Unsecured Credit Limits Procedures 
would help to ensure that ICE Clear Europe effectively manages its 
liquidity risks and liquidity demands by establishing credit limits for 
counterparties and processes for monitoring and enforcing those limits. 
Specifically, the Commission believes that, in describing the processes 
to allocate and monitor limits on unsecured overnight cash exposures 
and eligibility requirements for counterparties, including financial 
service providers and investment counterparties, and the processes for 
allocating and monitoring those limits, the Unsecured Credit Limits 
Procedures would help to ensure that ICE Clear Europe limits its 
potential unsecured exposures to all counterparties, thereby helping to 
reduce credit and liquidity risks. Also, in defining the 
responsibilities of ICE Clear Europe's Credit Team and Treasury and the 
general governance and exceptions process for the procedures, the 
Commission believes the Unsecured Credit Limits Procedures would 
establish an effective process for monitoring and enforcing the limits.
v. Promoting the Prompt and Accurate Clearance and Settlement of 
Securities Transactions, Assuring the Safeguarding of Securities and 
Funds, and Protecting Investors and the Public Interest
    For the reasons discussed above, the Commission believes that the 
proposed rule change would help to ensure that ICE Clear Europe 
effectively manages the liquidity risks arising from the clearance and 
settlement of CDS transactions. Moreover, the Commission believes that 
such liquidity risks, if not properly managed, could cause ICE Clear 
Europe to have insufficient liquidity to meet its payment obligations 
and threaten ICE Clear Europe's ability to operate and thereby clear 
and settle securities transactions. For similar reasons, the Commission 
believes that such liquidity risks, if not properly managed, could 
threaten ICE Clear Europe's ability to operate, thereby threatening 
access to securities and funds in ICE Clear Europe's control. 
Accordingly, the Commission believes that, in ensuring that ICE Clear 
Europe has clear and effective processes for identifying and managing 
liquidity risks; procedures for responding to liquidity demands and 
replenishing liquidity; stable and conservative investments and 
processes for managing such investments; and credit limits for 
counterparties and processes for monitoring and enforcing those limits, 
the proposed rule change would promote the prompt and accurate 
clearance and settlement of securities transactions and help assure the 
safeguarding of securities and funds which are in the custody or 
control of the ICE Clear Europe or for which it is responsible. 
Finally, for these reasons, the Commission believes the proposed rule 
change would, in general, protect investors and the public interest.
    Therefore, the Commission finds that the proposed rule change would 
promote the prompt and accurate clearance and settlement of securities 
transactions, assure the safeguarding of securities and funds in ICE 
Clear Europe's custody or control, and, in general, protect investors 
and the public interest, consistent with the Section 17A(b)(3)(F) of 
the Act.\15\
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

B. Consistency With Rule 17Ad-22(e)(2)

    Rule 17Ad-22(e)(2) requires, among other things, that ICE Clear 
Europe establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to provide for governance arrangements 
that are clear and transparent and specify clear and direct lines of 
responsibility.\16\ As discussed above, each of the Treasury Documents 
would establish the general governance and exceptions process for that 
document, and this process would be identical among all of the Treasury 
Documents. The Commission believes that, in doing so, the Treasury 
Documents would establish clear and transparent arrangements for 
ensuring that ICE Clear Europe personnel adhere to the Treasury 
Documents and for modifying the Treasury Documents as needed.
---------------------------------------------------------------------------

    \16\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
---------------------------------------------------------------------------

    The Commission also believes that the Treasury and Banking Services 
Policy would specify clear and direct lines of responsibility for the 
cash and collateral management functions under the policy by assigning 
those responsibilities to TBS. Similarly, the Commission believes that 
the Liquidity Management Procedures would specify clear and direct 
lines of responsibility by making the Clearing Risk team responsible 
for developing LSTs; making TBS responsible for using the LSTs to 
anticipate liquidity demands and

[[Page 48198]]

monitoring outstanding payments and the current level of available 
liquid resources; and making TBS, Clearing Risk, and Risk Oversight 
responsible for analyzing and assessing the LSTs. Moreover, in 
requiring that breaches of concentration limits be escalated to the 
Risk Oversight Department and the Compliance team and that TBS, in 
conjunction with the Risk Oversight Department and Clearing Risk team, 
review concentration limits every quarter, the Commission believes the 
Investment Management Procedures would specify clear and direct lines 
of responsibility with respect to the concentration limits. The 
Commission believes the Unsecured Credit Limits Procedures would 
similarly establish clear and direct lines of responsibility by 
requiring ICE Clear Europe's Credit Team and Treasury to establish and 
monitor credit limits. Finally, the Commission believes that these 
lines of responsibility would be clear and transparent because they 
would be defined and available for review in the Treasury Documents.
    For these reasons, the Commission finds that the proposed rule 
change is consistent with Rule 17Ad-22(e)(2).\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 240.17Ad-22(e)(2).
---------------------------------------------------------------------------

C. Consistency With Rule 17Ad-22(e)(3)

    Rule 17Ad-22(e)(3) requires that ICE Clear Europe establish, 
implement, maintain, and enforce written policies and procedures 
reasonably designed to maintain a sound risk management framework for 
comprehensively managing legal, credit, liquidity, operational, general 
business, investment, custody, and other risks that arise in or are 
borne by ICE Clear Europe. The Commission believes that the Unsecured 
Credit Limits Procedures, in establishing the eligibility and limit 
allocation methodology that ICE Clear Europe would use with respect to 
counterparties, including investment counterparties, would help ICE 
Clear Europe to manage the potential credit risks arising from ICE 
Clear Europe's transactions with counterparties. Specifically, by 
assigning a counterparty an overall unsecured credit limit, the 
Commission believes the Unsecured Credit Limits Procedures would help 
to limit ICE Clear Europe's maximum potential losses from a default of 
that counterparty to the limit assigned to that counterparty. In 
addition, in establishing minimum eligibility criteria for 
counterparties, the Commission believes that the Unsecured Credit 
Limits Procedures would help limit ICE Clear Europe's exposure to 
counterparties that are creditworthy and regulated by a competent 
authority with valid jurisdiction. Finally, in requiring that ICE Clear 
Europe's Treasury team conduct daily and weekly monitoring as well as 
monthly aggregation of Legal Entities of the same group of companies, 
the Commission believes that the Unsecured Credit Limits Procedures 
would help establish a process for ensuring that ICE Clear Europe 
complies with the limits.
    For these reasons, the Commission finds that the proposed rule 
change is consistent with Rule 17Ad-22(e)(3).\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 240.17Ad-22(e)(3).
---------------------------------------------------------------------------

D. Consistency With Rule 17Ad-22(e)(7)

i. Rules 17Ad-22(e)(7)(i) and (ii)
    Rules 17Ad-22(e)(7)(i) requires that ICE Clear Europe establish, 
implement, maintain, and enforce written policies and procedures 
reasonably designed to effectively measure, monitor, and manage the 
liquidity risk that arises in or is borne by ICE Clear Europe, 
including measuring, monitoring, and managing its settlement and 
funding flows on an ongoing and timely basis, and its use of intraday 
liquidity by, at a minimum, (i) maintaining sufficient liquid resources 
at the minimum in all relevant currencies to effect same-day and, where 
appropriate, intraday and multiday settlement of payment obligations 
with a high degree of confidence under a wide range of foreseeable 
stress scenarios that includes, but is not limited to, the default of 
the participant family that would generate the largest aggregate 
payment obligation for ICE Clear Europe in extreme but plausible market 
conditions and (ii) holding qualifying liquid resources sufficient to 
meet the minimum liquidity resource requirement under Rule 17Ad-
22(e)(7)(i) in each relevant currency for which ICE Clear Europe has 
payment obligations owed to clearing members.\19\
---------------------------------------------------------------------------

    \19\ 17Ad-22(e)(7)(i) and (ii).
---------------------------------------------------------------------------

    As discussed above, the Treasury and Banking Services Policy would 
require that ICE Clear Europe run daily liquidity monitoring and stress 
testing to measure and monitor its liquidity position on an ongoing 
basis and assess its potential immediate and future liquidity needs 
across a range of extreme but plausible market scenarios. As explained 
further in the Liquidity Management Procedures, one of the LSTs would 
be a specific scenario to cover the default of the largest CM with 
qualifying liquid assets. The Commission believes that, in requiring 
ICE Clear Europe to conduct daily stress testing, including stress 
testing of a specific scenario for the default of the participant 
family that would generate the largest aggregate payment obligation for 
ICE Clear Europe in extreme but plausible market conditions, the 
proposed rule change would help ensure that ICE Clear Europe maintains 
sufficient liquid resources to effect same-day and, where appropriate, 
intraday and multiday settlement of payment obligations with a high 
degree of confidence under a wide range of stress scenarios, including 
such a default. Moreover, because the Liquidity Management Procedures 
would require that, for its liquidity planning, ICE Clear Europe only 
include resources which are cash or which can be transferred into cash 
or can be drawn upon on a same day basis, the Commission believes the 
Liquidity Management Procedures would be reasonably designed to enable 
ICE Clear Europe to hold qualifying liquid resources sufficient to meet 
the minimum liquidity resource requirement under Rule 17Ad-22(e)(7)(i).
    For these reasons, the Commission finds that the proposed rule 
change is consistent with Rules 17Ad-22(e)(7)(i) and (ii).\20\
---------------------------------------------------------------------------

    \20\ 17Ad-22(e)(7)(i) and (ii).
---------------------------------------------------------------------------

ii. Rules 17Ad-22(e)(7)(iv) and (v)

    Rules 17Ad-22(e)(7)(iv) and (v) require that ICE Clear Europe 
establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to effectively measure, monitor, and 
manage the liquidity risk that arises in or is borne by ICE Clear 
Europe, including measuring, monitoring, and managing its settlement 
and funding flows on an ongoing and timely basis, and its use of 
intraday liquidity by, at a minimum, (i) undertaking due diligence to 
confirm that it has a reasonable basis to believe each of its liquidity 
providers, whether or not such liquidity provider is a clearing member, 
has (a) sufficient information to understand and manage the liquidity 
provider's liquidity risks and (b) the capacity to perform as required 
under its commitments to provide liquidity to ICE Clear Europe and (ii) 
maintaining and testing with each liquidity provider, to the extent 
practicable, ICE Clear Europe's procedures and operational capacity for 
accessing each type of relevant liquidity resource under Rule 17Ad-
22(e)(7)(i) at least annually.\21\
---------------------------------------------------------------------------

    \21\ 17 CFR 240.17Ad-22(e)(iv) and (v).
---------------------------------------------------------------------------

    As described above, the Liquidity Management Procedures would 
require that TBS, Clearing Risk and Risk Oversight departments meet 
monthly to

[[Page 48199]]

analyze and discuss the performance of liquidity providers. Moreover, 
the Liquidity Management Procedures would require that TBS, Clearing 
Risk and Risk Oversight departments conduct annual due diligence 
reviews of liquidity providers to assess their ability to perform their 
role as such and annual testing of sources of liquidity. The Commission 
believes that the monthly analysis and annual due diligence reviews 
would help ICE Clear Europe to confirm that it has a reasonable basis 
to believe each of its liquidity providers has sufficient information 
to understand and manage the liquidity provider's liquidity risks and 
the capacity to perform as required under its commitments to provide 
liquidity to ICE Clear Europe. Moreover, the Commission believes that 
the annual testing of sources of liquidity would help ICE Clear Europe 
to assess its operational capacity for accessing each type of liquidity 
resource provided by those sources of liquidity.
    For these reasons, the Commission finds that the proposed rule 
change is consistent with Rule 17Ad-22(e)(7)(iv) and (v).\22\
---------------------------------------------------------------------------

    \22\ 17Ad-22(e)(7)(i).
---------------------------------------------------------------------------

iii. Rule 17Ad-22(e)(7)(vi)
    Rule 17Ad-22(e)(7)(vi) requires that ICE Clear Europe establish, 
implement, maintain, and enforce written policies and procedures 
reasonably designed to effectively measure, monitor, and manage the 
liquidity risk that arises in or is borne by ICE Clear Europe, 
including measuring, monitoring, and managing its settlement and 
funding flows on an ongoing and timely basis, and its use of intraday 
liquidity by, at a minimum, determining the amount and regularly 
testing the sufficiency of the liquid resources held for purposes of 
meeting the minimum liquid resource requirement under Rule 17Ad-
22(e)(7)(i) by (i) conducting stress testing of its liquidity resources 
at least once each day using standard and predetermined parameters and 
assumptions; (ii) conducting a comprehensive analysis on at least a 
monthly basis of the existing stress testing scenarios, models, and 
underlying parameters and assumptions used in evaluating liquidity 
needs and resources, and considering modifications to ensure they are 
appropriate for determining ICE Clear Europe's identified liquidity 
needs and resources in light of current and evolving market conditions; 
(iii) conducting a comprehensive analysis of the scenarios, models, and 
underlying parameters and assumptions used in evaluating liquidity 
needs and resources more frequently than monthly when the products 
cleared or markets served display high volatility or become less 
liquid, when the size or concentration of positions held by ICE Clear 
Europe's CMs increases significantly, or in other appropriate 
circumstances described in such policies and procedures; and (iv) 
reporting the results of its analyses to appropriate decision makers at 
ICE Clear Europe, including but not limited to, its risk management 
committee or board of directors, and using these results to evaluate 
the adequacy of and adjust its liquidity risk management methodology, 
model parameters, and any other relevant aspects of its liquidity risk 
management framework.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 240.17Ad-22(e)(7)(vi).
---------------------------------------------------------------------------

    The Commission believes that, in requiring that ICE Clear Europe 
run daily liquidity monitoring and stress testing to measure and 
monitor its liquidity position on an ongoing basis and assess its 
potential immediate and future liquidity needs across a range of 
extreme but plausible market scenarios, the Treasury and Banking 
Services Policy would help to ensure that ICE Clear Europe conducts 
stress testing of its liquidity resources at least once each day using 
standard and predetermined parameters and assumptions. Moreover, the 
Commission believes that the Liquidity Management Procedures would help 
to ensure that ICE Clear Europe conducts a comprehensive analysis on at 
least a monthly basis of the existing stress testing scenarios, models, 
and underlying parameters and assumptions used in evaluating liquidity 
needs and resources, and considering modifications to ensure they are 
appropriate for determining ICE Clear Europe's identified liquidity 
needs and resources in light of current and evolving market conditions 
because they would require that TBS, Clearing Risk, and Risk Oversight 
departments meet monthly to analyze and discuss whether to include any 
new or emerging risks in the stress tests; the adequacy, assumptions, 
and parameters of LST scenarios; the adequacy of stress test inputs; 
and acceptance of current LST scenario calibrations. Similarly, because 
they would require that in stressed market conditions, the TBS, 
Clearing Risk and Risk Oversight departments meet more frequently than 
monthly to ensure LSTs and stress scenarios are fit for purpose, the 
Commission believes the Liquidity Management Procedures would help to 
ensure that ICE Clear Europe conducts a comprehensive analysis of the 
scenarios, models, and underlying parameters and assumptions used in 
evaluating liquidity needs and resources more frequently than monthly 
when the products cleared or markets served display high volatility or 
become less liquid, when the size or concentration of positions held by 
ICE Clear Europe's CMs increases significantly, or in other appropriate 
circumstances described in such policies and procedures. Finally, the 
Commission believes the Liquidity Management Procedures would help to 
ensure that ICE Clear Europe reports the results of these analyses to 
appropriate decision makers at ICE Clear Europe because they require 
that the analysis of LSTs be periodically reported to a Board-level 
committee.
    For these reasons, the Commission finds that the proposed rule 
change is consistent with Rule 17Ad-22(e)(7)(vi).\24\
---------------------------------------------------------------------------

    \24\ 17Ad-22(e)(7)(vi).
---------------------------------------------------------------------------

iv. Rule 17Ad-22(e)(7)(ix)
    Rule 17Ad-22(e)(7)(ix) requires that ICE Clear Europe establish, 
implement, maintain, and enforce written policies and procedures 
reasonably designed to effectively measure, monitor, and manage the 
liquidity risk that arises in or is borne by ICE Clear Europe, 
including measuring, monitoring, and managing its settlement and 
funding flows on an ongoing and timely basis, and its use of intraday 
liquidity by, at a minimum, describing ICE Clear Europe's process to 
replenish any liquid resources that ICE Clear Europe may employ during 
a stress event.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 240.17Ad-22(e)(7)(ix).
---------------------------------------------------------------------------

    As described above, the Treasury and Banking Services Policy would 
identify two sources of liquidity risk and shortfall: CM default and 
technical issue at a financial service provider. The Liquidity 
Management Procedures would further explain how ICE Clear Europe would 
replenish liquidity in both scenarios. Thus, the Commission believes 
that the Treasury and Banking Services Policy and Liquidity Management 
Procedures would help to ensure that ICE Clear Europe's process to 
replenish any liquid resources that ICE Clear Europe may use during a 
stress event is documented and therefore able to be employed by ICE 
Clear Europe during a stress event.
    For these reasons, the Commission finds that the proposed rule 
change is consistent with Rule 17Ad-22(e)(7)(ix).\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 240.17Ad-22(e)(7)(ix).

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

[[Page 48200]]

E. Consistency With Rule 17Ad-22(e)(16)

    Rule 17Ad-22(e)(16) requires that ICE Clear Europe establish, 
implement, maintain, and enforce written policies and procedures 
reasonably designed to safeguard ICE Clear Europe's own and its 
participants' assets, minimize the risk of loss and delay in access to 
these assets, and invest such assets in instruments with minimal 
credit, market, and liquidity risks. The Commission believes the 
Investment Management Policy, in establishing a reasonable and 
conservative investment objective and establishing overall 
concentration limits, would help ensure that ICE Clear Europe 
safeguards its own and its participants' assets and minimize the risk 
of loss or delay of such assets. Similarly, in defining the criteria 
for authorized investments in times of normal supply, defining 
additional requirements for reverse repos, and explaining the steps ICE 
Clear Europe would take in times of insufficient market supply of 
acceptable investments, the Commission believes that the Investment 
Management Policy would help ensure that ICE Clear Europe invests such 
assets in instruments with minimal credit, market, and liquidity risks.
    For these reasons, the Commission finds that the proposed rule 
change is consistent with Rule 17Ad-22(e)(16).\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 240.17Ad-22(e)(16).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by Partial Amendment No. 1 and Partial Amendment 
No. 2, 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-2019-012 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ICEEU-2019-012. 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 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-2019-012 and should be 
submitted on or before October 3, 2019.

V. Accelerated Approval of the Proposed Rule Change, as Modified by 
Partial Amendment No. 1 and Partial Amendment No. 2

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\28\ to approve the proposed rule change prior to the 30th day 
after the date of publication of Partial Amendment No. 2 in the Federal 
Register. As discussed above, Partial Amendment No. 1 corrects an error 
in the confidential Exhibit 5-4. By correcting the error, Partial 
Amendment No. 1 provides for a more clear and comprehensive 
understanding of the estimated impact of the proposed rule change, 
which helps to improve the Commission's review of the proposed rule 
change for consistency with the Act.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    Moreover, as discussed above, Partial Amendment No. 2 would provide 
additional details regarding the governance of the approval and review 
of the Treasury and Banking Services Policy, Liquidity Management 
Procedures, Investment Management Procedures, and Unsecured Credit 
Limits Procedures and amend the governance sections of each of those 
documents to be consistent with the information provided in 
confidential exhibits. The Commission believes that in doing so, 
Partial Amendment No. 2 provides important information and clarity that 
enables the Commission's review of the proposed rule change for 
consistency with the Act. Moreover, Partial Amendment No. 2 amends the 
Liquidity Management Procedures to remove references to reverse repos, 
which ICEEU no longer considers as liquid resources, and to specify 
that ICE Clear Europe personnel meet monthly to, among other things, 
analyze and discuss the assumptions and parameters of liquidity stress 
test scenarios. The Commission believes that, in doing so, Partial 
Amendment No. 2 enables the Commission's review of the proposed rule 
change for consistency with the Act by ensuring that the Liquidity 
Management Procedures accurately reflect ICE Clear Europe's current 
practices.
    For the reasons discussed above, the Commission finds that the 
proposed rule change, as modified by Partial Amendment No. 1 and 
Partial Amendment No. 2, are consistent with the Act and the applicable 
rules thereunder. Accordingly, the Commission finds good cause for 
approving the proposed rule change, as modified by Partial Amendment 
No. 1 and Partial Amendment No. 2, on an accelerated basis, pursuant to 
Section 19(b)(2) of the Exchange Act.\29\
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change, as modified by Partial Amendment No. 1 and 
Partial Amendment No. 2, is consistent with the requirements of the 
Act, and in particular, with the requirements of Section 17A(b)(3)(F) 
of the Act \30\ and Rules 17Ad-22(e)(2), (e)(3), (e)(7)(i), (e)(7)(ii), 
(e)(7)(iv), (e)(7)(v), (e)(7)(vi), (e)(7)(ix), and (e)(16) 
thereunder.\31\
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    \30\ 15 U.S.C. 78q-1(b)(3)(F).
    \31\ 17 CFR 240.17Ad-22(e)(2), (e)(3), (e)(7)(i), (e)(7)(ii), 
(e)(7)(iv), (e)(7)(v), (e)(7)(vi), (e)(7)(ix), and (e)(16).
---------------------------------------------------------------------------

    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\32\ that the proposed rule change, as modified by Partial Amendment 
No. 1 and Partial Amendment No. 2 (SR-ICEEU-2019-

[[Page 48201]]

012), be, and hereby is, approved on an accelerated basis.\33\
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78s(b)(2).
    \33\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \34\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19703 Filed 9-11-19; 8:45 am]
 BILLING CODE 8011-01-P