[Federal Register Volume 85, Number 129 (Monday, July 6, 2020)]
[Notices]
[Pages 40369-40377]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14389]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89186; File No. SR-ICEEU-2020-007]
Self-Regulatory Organizations; ICE Clear Europe Limited; Order
Approving Proposed Rule Change, as Modified by Partial Amendment No. 1,
Relating to the ICE Clear Europe Auction Terms for CDS Default Auctions
and CDS Default Management Policy
June 29, 2020.
I. Introduction
On May 12, 2020, 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
(the ``Act''),\1\ and Rule 19b-4,\2\ a proposed rule change to amend
its Auction Terms for CDS Default Auctions (the ``CDS Auction Terms'')
and CDS Default Management Policy (the ``Policy''). On May 20, 2020,
ICE Clear Europe filed Partial Amendment No. 1 to the proposed rule
change.\3\ The proposed rule change, as modified by Partial Amendment
No. 1, was published for comment in the Federal Register on May 28,
2020.\4\ The Commission did not receive comments regarding the proposed
rule change, as modified by Partial Amendment No. 1. For the reasons
discussed below, the Commission is approving the proposed rule change,
as modified by Partial Amendment No. 1 (hereinafter the ``proposed rule
change'').
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Partial Amendment Number 1 amended Exhibit 5A of the filing
to correct the paragraph numbering in Part 2 of the CDS Auction
Terms.
\4\ Self-Regulatory Organizations; ICE Clear Europe Limited;
Notice of Filing of Proposed Rule Change, as Modified by Partial
Amendment No. 1, Relating to the ICE Clear Europe Auction Terms for
CDS Default Auctions and CDS Default Management Policy (formerly the
CDS Default Management Framework), Exchange Act Release No. 88928
(May 21, 2020); 85 FR 32075 (May 28, 2020) (SR-ICEEU-2020-007)
(``Notice'').
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II. Description of the Proposed Rule Change
As discussed below, the proposed rule change would amend the CDS
Auction Terms and the Policy.\5\ The CDS Auction Terms explain how ICE
Clear Europe would auction one or more lots of a defaulting Clearing
Member's CDS Contracts, and the Policy describes the processes that ICE
Clear Europe would use to close a defaulting Clearing Member's CDS
Contracts, including by auction.
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\5\ Capitalized terms not otherwise defined herein have the
meanings assigned to them in the CDS Auction Terms, the Policy, or
the ICE Clear Europe Rulebook, as applicable. The description that
follows is excerpted from the Notice, 85 FR at 32075.
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A. Amendments to the CDS Auction Terms
Currently, the CDS Auction Terms contain provisions that apply to
Primary CDS Auctions (meaning initial auctions of CDS contracts) and
Secondary CDS Auctions (meaning auctions conducted under part two of
the CDS Auction Terms and in accordance with ICE Clear Europe Rule
905(d)(i)(B).\6\ The provisions of the CDS Auction Terms applicable to
Primary CDS Auctions are substantially the same as those applicable to
Secondary CDS Auctions, and the proposed rule change would make the
changes described below to
[[Page 40370]]
both sets of provisions. Thus, for the sake of brevity, the description
below refers collectively to changes to the CDS Auction Terms and to an
``Auction,'' rather than a Primary CDS Auction and Secondary CDS
Auction, unless needed to distinguish between the two terms.
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\6\ A Secondary CDS Auction is an auction that ICE Clear Europe
may conduct if ICE Clear Europe does not terminate, transfer, or
close out all of the CDS Contracts of a Defaulter pursuant to a
Primary CDS Auction and the other actions permitted under ICE Clear
Europe Rule 905(a)-(c). Moreover, in the event of the failure of one
or more Secondary CDS Auctions to eliminate or replace all remaining
risk of the open contracts of a defaulting Clearing Member, ICE
Clear Europe may employ its ability to engage in reduced gains
distributions under Rule 914 and to partially terminate open
contracts under Rule 915.
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As described below, the proposed rule change would make changes
primarily related to (i) updating and revising defined terms of the CDS
Auction Terms; (ii) interpretation and application of the CDS Auction
Terms; (iii) the operation of an Auction; (iv) Minimum Bid
Requirements; (v) use of the Default Management System; (vi)
introducing All or Nothing Bids; and (vii) adding provisions to cover
the EU Market Abuse Regulation.
i. Amendments to the Defined Terms
The proposed rule change would amend a number of the defined terms
found in Section 1 of the CDS Auction Terms. First, the proposed rule
change would update the names of certain defined terms to refer to an
``Auction Lot'' rather than a ``Lot.'' For example, the proposed rule
change would re-title the term ``Failed Lot'' to ``Failed Auction
Lot.'' ICE Clear Europe is making this change to be more specific and
distinguish the term Auction Lot from the more general term Lot.
Moreover, this change is consistent with ICE Clear Europe's current
authority under the CDS Auction Terms, which permit ICE Clear Europe to
divide a Clearing Member's portfolio into one or more Auction Lots and
auction off each Auction Lot separately, as ICE Clear Europe considers
appropriate.
Similarly, the proposed rule change would rename and amend certain
defined terms to clarify that they apply to Primary CDS Auctions rather
than Secondary CDS Auctions. The CDS Auction Terms contain one set of
defined terms that contain definitions that are applicable to both
Primary CDS Auctions and Secondary CDS Auctions. To clarify the terms
applicable only to Primary CDS Auctions and better distinguish them
from Secondary CDS Auctions, the proposed rule change would re-name the
terms that currently only refer to a ``CDS Auction'' to specify that
they apply to a Primary CDS Auction. For example, the proposed rule
change would change the name of the terms ``CDS Auction'' and ``CDS
Auction Participant'' to ``Primary CDS Auction'' and ``Primary CDS
Auction Participant.'' With respect to Secondary CDS Auctions, no
change is necessary because the CDS Auction Terms already contain terms
specific to Secondary CDS Auctions. For example, the CDS Auction Terms
already have a term called ``Secondary CDS Auction Participant.''
The proposed rule change would also amend the defined term ``Second
CDS Auction.'' A Second CDS Auction is a Primary CDS Auction that ICE
Clear Europe may hold to sell an Auction Lot if it fails to sell all of
the contracts in that Auction Lot via an initial Primary CDS Auction. A
Second CDS Auction is an additional Primary CDS Auction, rather than a
Secondary CDS Auction, as described above, and would therefore be
subject to the rules for a Primary CDS Auction. To better clarify that
point, the proposed rule change would rename the term ``Second CDS
Auction'' to ``Repeat CDS Auction.''
Moreover, the proposed rule change would revise the terms ``Split
Bidder'' and ``Subordinate Bidder'' to note that they could apply to
either a Primary CDS Auction Participant or a Secondary CDS Auction
Participant, as applicable for the relevant auction. ICE Clear Europe
represents that this amendment does not reflect a change in substance
but would make the drafting consistent with the distinction between
Primary and Secondary CDS Auctions discussed above.
Next, the proposed rule change would make changes to defined terms
that affect the specifics of how ICE Clear Europe conducts an Auction.
Specifically, the proposed rule change would change the name of the
term ``Closing Time'' to ``Bidding Close Time'' to be more precise. The
proposed rule change would not alter the substance of this definition,
however.
Similarly, the proposed rule change would slightly revise the
definitions of ``Primary CDS Auction Priority AC Sequence'',
``Secondary CDS Auction Priority AC Sequence'', ``Primary CDS Auction
Priority GF Sequence,'' and ``Secondary CDS Auction Priority GF
Sequence''. These defined terms specify the order in which ICE Clear
Europe would use non-defaulting Clearing Members' Guaranty Fund
Contributions and Assessment Contributions if needed as additional
financial resources to resolve the default of a Clearing Member under
ICE Clear Europe Rule 908(i). Generally, under the current definitions,
ICE Clear Europe would first apply the contributions of those Clearing
Members whose bids in an Auction were the least competitive, starting
with Non-Bidding CDS Clearing Members, and would then apply the
contributions of those Clearing Members whose bids in an Auction were
more competitive. The proposed rule change would not alter this order
of priority. The proposed rule change would require, however, that ICE
Clear Europe take each amount in the sequence pro rata for the relevant
Auction Lot by applying the Auction Lot Guaranty Fund Weighting. The
Auction Lot Guaranty Fund Weighting would be a percentage equal to the
Initial Margin requirement associated with the contracts in the Auction
Lot divided by the Initial Margin requirement associated with all of
the contracts in all of the Auction Lots comprising the defaulting
Clearing Member's portfolio. Thus, under this change, ICE Clear Europe
would determine the amounts in the sequence by Auction Lot, taking into
account the Initial Margin requirement associated with each Auction Lot
versus all Auction Lots. ICE Clear Europe represents that this change
is consistent with, and does not represent an alteration to, its
current practices because the CDS Auction Terms already permit ICE
Clear Europe to divide a Clearing Member's portfolio into one or more
Auction Lots and auction off each Auction Lot separately, as ICE Clear
Europe considers appropriate.
Finally, consistent with the changes described below, the proposed
rule change would add new defined terms. For example, the proposed rule
change would add the terms ``All or Nothing Bid'', ``DMS'', and
``Standard Bid.'' The definitions of those new terms are discussed
further below as part of the discussion of the specific changes related
to those terms.
ii. Interpretation and Application of CDS Auction Terms
The proposed rule change would add several paragraphs regarding
interpretation and application of the CDS Auction Terms. For example,
the proposed rule change would add paragraphs to define the governing
law for the CDS Auction Terms, to identify which courts shall have
jurisdiction over disputes, and to provide for submission of matters to
arbitration. ICE Clear Europe represents that these provisions are
substantially similar to existing provisions in the Rulebook and the
other Procedures, and ICE Clear Europe is proposing to add them to the
CDS Auction Terms for consistency across its documentation.
Similarly, the proposed rule change would clarify that nothing in
the CDS Auction Terms would prevent ICE Clear Europe from administering
a sale or entering into offsetting transactions without holding an
Auction and that the CDS Auction Terms are subject to ICE Clear
Europe's Rulebook. These changes reflect ICE Clear Europe's existing
authority under its Rulebook, and ICE Clear Europe is adding these
clarifications to avoid any potential
[[Page 40371]]
confusion as to the scope of the CDS Auction Terms.
The proposed rule change would also clarify that references to CDS
Contracts, for purposes of the CDS Auction Terms, include (i) CDS
Contracts terminated via automatic early termination or notional
amounts representing such terminated CDS Contracts and (ii) CDS
Contracts that have arisen from hedging transactions executed by ICE
Clear Europe. ICE Clear Europe is making these changes to clarify that
it may auction such CDS Contracts to establish replacement contracts
with non-defaulting Clearing Members and to determine a price for
calculating ICE Clear Europe's loss from closing the defaulting
Clearing Member's positions.
iii. Operation of an Auction
The proposed rule change would also make certain changes regarding
the operation of an Auction, specifically relating to the Bidding Close
Time for an Auction, the treatment of Bids, and participation of
customers of Clearing Members in an Auction.
Currently, the CDS Auction Terms provide that Clearing Members may
only submit Bids for an Auction prior to the Bidding Close Time for
that Auction. The proposed rule change would not alter this provision,
but it would further specify that ICE Clear Europe could postpone the
Bidding Close Time for up to one hour by giving notice of such
postponement to all participants and following consultation to the
extent practicable with the CDS Default Committee. Similarly, the CDS
Auction Terms permit ICE Clear Europe to withdraw an Auction Lot prior
to the Bidding Close Time. The proposed rule change would expand this
authority to permit ICE Clear Europe to withdraw an Auction Lot after
the Bidding Close Time. ICE Clear Europe believes these changes would
provide it additional flexibility to deal with any potential
operational issues that could arise during an Auction.
The proposed rule change would update provisions related to the
treatment of Bids in an Auction. First, the proposed rule change would
revise the wording of a number of provisions to specify that in certain
circumstances ICE Clear Europe would treat Clearing Members as having
not made a Bid in Auction rather than not participating in an auction,
as currently stated. This is not a substantive change because in either
case, whether not participating in the Auction or not making a Bid in
the Auction, the CDS Auction Terms as amended would treat the Clearing
Member as a Non-Bidding CDS Clearing Member. This designation is
important because under the CDS Auction Terms and ICE Clear Europe Rule
908(i), in the event that ICE Clear Europe needs to use non-defaulting
Clearing Members' Guaranty Fund Contributions or Assessment
Contributions to resolve the default of a Clearing Member, ICE Clear
Europe would use Non-Bidding CDS Clearing Members' Contributions first.
Thus, under the proposed rule change, the CDS Auction Terms would treat
a Clearing Member that submits a referential Bid (meaning a Bid that is
one Euro higher or lower than the highest or lowest bidder), an invalid
Bid, a void Bid, a Bid after the Bidding Close Time, a Bid in breach of
the CDS Auction Terms, position limits, or other risk policies of ICE
Clear Europe, or that submits a Bid while a Defaulter, as having not
made a Bid in an Auction and as a Non-Bidding Clearing Member. Although
effectively this treatment is the same as under the current CDS Auction
Terms (designation as a Non-Bidding CDS Clearing Member), ICE Clear
Europe is making this change because its believes that it is more
accurate to describe the Clearing Member as having not made a Bid
rather than not participating.
Relatedly, the CDS Auction Terms currently permit ICE Clear Europe
to exclude certain Bids for purposes of calculating the CDS Auction
Clearing Price (as defined below). Specifically, the CDS Auction Terms
permit ICE Clear Europe to exclude a Bid that is invalid because ICE
Clear Europe reasonably believes that if it accepted such Bid, the
Clearing Member would not clear the resulting CDS Contract. The
proposed rule change would expand this provision to include Bids that
are invalid for other reasons under the CDS Auction Terms, like Bids
submitted below the minimum bid size, if any, Bids submitted after the
Bidding Close Time, and Bids that do not comply with the requirements
of the CDS Auction Terms.
In addition, under the current CDS Auction Terms, each Bid
constitutes an offer from a CDS Clearing Member to ICE Clear Europe to
enter into CDS Contracts. The proposed rule change would not change
this provision. The proposed rule change would clarify, however, that
the offer would be an offer to enter into CDS Contracts pursuant to a
Transfer governed by ICE Clear Europe Rule 904(b) and Part 4 of the ICE
Clear Europe Rulebook. This change would not alter the substance of
this provision. Rather, ICE Clear Europe is making this change to
provide additional specificity by referencing the existing process for
entering into CDS Contracts under the ICE Clear Europe Rulebook.
Finally, the CDS Auction Terms currently permit customers of
Clearing Members to participate in Auctions by becoming Direct
Participating Customers. To become a Direct Participating Customer, a
customer must meet certain requirements, including making a deposit and
entering into an agreement with ICE Clear Europe regarding its
participation. The proposed rule change would further require that that
each Direct Participating Customer enter into a CDS Auction
Participation Agreement with its CDS Clearing Member. ICE Clear Europe
is making this change to establish a clearer and stronger basis for
enforcement of the CDS Auction Terms against the Direct Participating
Customer.
iv. Minimum Bid Requirements
Currently, the CDS Auction Terms require each CDS Clearing Member
to bid in every CDS Auction and for every lot in a CDS Auction unless
its membership privileges permit it not to participate and it elects
not to participate, with this obligation referred to as a CDS Clearing
Member's Minimum Bid Requirement. The CDS Auction Terms provide
further, however, that a Minimum Bid Requirement would not apply to the
extent: (i) it would breach applicable law or the ICE Clear Europe
Rulebook; (ii) it would result in a self-referencing CDS; or (iii)
where ICE Clear Europe, after being notified in writing by the Clearing
Member that it would be inappropriate, reasonably determines that the
Minimum Bid Requirement does not apply. In that case, the Clearing
Member must notify ICE Clear Europe promptly and in any event at least
12 hours prior to the opening of the relevant Auction.
The proposed rule change would make a number of amendments to these
provisions. First, to acknowledge the fact there may be circumstances
where a minimum Bid is not required, the proposed rule change would
amend the requirement that each CDS Clearing Member bid in every CDS
Auction for every lot in a CDS Auction to make it subject to a zero
Minimum Bid Requirement being established under the conditions
described further below.
Next, the proposed rule change would delete the qualification that
the Minimum Bid Requirement does not apply to a CDS Clearing Member
whose membership privileges permit it not to participate. ICE Clear
Europe is deleting that particular provision because there are no
Clearing Members whose
[[Page 40372]]
membership privileges permit them not to participate in CDS Auctions.
Relatedly, the proposed rule change would also delete the term
``Elective CDS Auction Participant,'' which refers to a CDS Clearing
Member whose membership privileges permit it not to participate.
Moreover, with respect to the circumstances in which a Minimum Bid
Requirement does not apply, the proposed rule change would amend the
portion of the CDS Auction Terms regarding a Clearing Member's
notification to ICE Clear Europe that the Minimum Bid Requirement
should not apply. Under the proposed rule change, a Clearing Member
would still be required to notify ICE Clear Europe, and ICE Clear
Europe still would have to reasonably determine that the Minimum Bid
Requirement would be inappropriate. The Clearing Member would be
required to provide the notice, however, within one hour of ICE Clear
Europe publishing details of the CDS Contracts comprising the relevant
Auction Lot, and ICE Clear Europe would need to confirm that it agrees
with the Clearing Member's assessment. ICE Clear Europe is making this
particular change because ICE Clear Europe does not believe the current
12-hour period is feasible given that it may need to conduct an Auction
with less than 12 hours' notice.
Finally, the CDS Auction Terms currently provide that a Clearing
Member can satisfy its Minimum Bid Requirement by submitting multiple
Bids with differing Bid prices and Bid sizes provided that, in the
aggregate, its submitted Bids equal or exceed the Minimum Bid
Requirement and any individual Bid is larger than any applicable
minimum Bid size imposed for that particular Auction, consistent with
the CDS Auction Terms. The proposed rule change would clarify this
provision by providing that any individual Bid must be equal to or
larger than any applicable minimum Bid size.
Additionally, the CDS Auction Terms currently allow affiliated
Clearing Members to transfer, outsource, or aggregate their Minimum Bid
Requirements to apply to a single one of them, subject to notifying ICE
Clear Europe prior to a CDS Auction. The CDS Auction Terms further
provide that a Clearing Member that transfers or outsources its Minimum
Bid Requirement to an Affiliate remains liable for any breach by its
Affiliate in respect of such Clearing Member's Minimum Bid Requirement
(in addition to the liability on the part of its Affiliate for such
breach) and is subject to the CDS Auction Priority as if such Bid were
its own. Under the proposed rule change, the CDS Auction Terms would
continue to allow a Clearing Member to transfer its Minimum Bid
Requirement to an Affiliate but would further require that the
Affiliate also be a Clearing Member and that both Clearing Members
execute an agreement provided by ICE Clear Europe for this purpose. The
proposed rule change also would allow Clearing Members to outsource the
operational processing of any of their obligations under the CDS
Auction Terms pursuant to ICE Clear Europe Rule 102(w), which permits
Clearing Members to outsource the performance of their obligations
under the ICE Clear Europe Rulebook. Thus, this change would expand a
Clearing Member's ability to outsource the operational processing of
any of its obligations under the CDS Auction Terms (not just the
Minimum Bid Requirement) and would reference the applicable ICE Clear
Europe Rule. Moreover, the proposed rule change, as under the current
CDS Auction Terms, would provide that a Clearing Member that transfers
its Minimum Bid Requirement to an Affiliate remains liable with respect
to that Minimum Bid Requirement. The proposed rule change also would
expand this liability to make a Clearing Member liable for any breach
of the CDS Auction Terms by the person to whom the Clearing Member has
outsourced its operational obligations, consistent with the expansion
discussed above. Finally, the proposed rule change would further
specify that a Clearing Member that transfers or outsources its Minimum
Bid Requirement to an Affiliate would assume the same position as the
Affiliate for the purposes of determining the order of application of
non-defaulting Clearing Members' Guaranty Fund Contributions and
Assessment Contributions under ICE Clear Europe Rule 908(i) and for
designation as a Non-Bidding CDS Clearing Member. ICE Clear Europe is
making this particular change to better specify the consequences of
transfer of a CDS Clearing Member's obligations to an Affiliate.
Finally, to clarify the extent of the Minimum Bid Requirements, the
proposed rule change would add a provision to state that only those
Bids that count toward the Minimum Bid Requirement would be taken into
account in determining the order of application of Guaranty Fund
Contributions and Assessment Contributions under the Primary and
Secondary CDS Auction Priority AC Sequence, Primary and Secondary CDS
Auction Priority GF Sequence, and ICE Clear Europe Rule 908(i) (as
discussed above). Thus, for example, a Clearing Member that submits a
Bid despite having a Minimum Bid Requirement of zero (for one of the
reasons discussed above), would not see that Bid considered in
determining where the Clearing Member stands in the CDS Auction
Priority GF Sequence.
v. Use of the Default Management System
As mentioned above, the proposed rule change would add a new
defined term, ``DMS.'' The proposed rule change would define DMS as the
Default Management System operated by ICE Clear Europe. The Default
Management System would be the system used by ICE Clear Europe to
communicate information to, and receive information from, CDS Clearing
Members regarding Auctions. The proposed rule change would make changes
to various aspects of the CDS Auction Terms to reflect use of this new
defined term. With respect to the defined terms, the proposed rule
change would make amendments to reflect the use of the DMS rather than
the currently specified forms of communication, which usually require
some form of manual delivery. For example, the proposed rule change
would rename the term ``Bid Form'' to ``Bid Submission'' and revise the
definition to reflect that it would refer to a Bid submitted via the
DMS rather than a Bid submitted on a form prescribed by ICE Clear
Europe. Similarly, the proposed rule change would amend the definitions
for Primary and Secondary CDS Auction Announcement to reflect that ICE
Clear Europe would send the announcement via the DMS rather than a
circular.
Similarly, the proposed rule change would amend other parts of the
CDS Auction Terms to reflect ICE Clear Europe's use of the DMS.
Specifically, the proposed rule change would require that Minimum Bid
Requirements be communicated via the DMS (or via such other means and
in such format as is specified by ICE Clear Europe), rather than by the
template notification currently set out in Annex B. Accordingly, the
proposed rule change would delete Annex B from the CDS Auction Terms.
The proposed rule change would also require that ICE Clear Europe send
the particular specifications for an Auction Lot, like its minimum
reserve price (the lowest price ICE Clear Europe would accept), via the
DMS rather than by the template notification currently set out in Annex
A. Accordingly, the proposed rule change would delete Annex A from the
CDS Auction Terms. Finally, the
[[Page 40373]]
proposed rule change would require that ICE Clear Europe notify the
winning bidders for particular Auction Lots via the DMS.
In addition, the proposed rule change would amend the CDS Auction
Terms to reflect Clearing Members' use of the DMS. The proposed rule
change would require Clearing Members to submit bids via the DMS. The
proposed rule change would also specify that a Clearing Member could
amend its Bid by resubmitting the entire bid through DMS.
To reflect the particular operations of the DMS, the proposed rule
change would delete a provision from the CDS Auction Terms that
currently states that Clearing Members may make an unlimited number of
separate Bids. Operationally, the DMS does not accept an unlimited
number of separate Bids from Clearing Members. Rather, the DMS would
allow a Clearing Member to make separate Bids in respect of either its
Customers for whom it acts as Clearing Member or its Sponsored
Principals for whom it acts as Sponsor (in addition to any Bids for its
Proprietary Accounts), in the same way as it may make a Bid for one of
its Proprietary Accounts and subject to the same provisions of the CDS
Auction Terms. Similarly, the proposed rule change would delete a
statement that a Clearing Member who has made a mistaken or erroneous
bid may withdraw the Bid and correct the mistake. The DMS would not
permit Clearing Members to withdraw Bids. Instead, the Clearing Member
would need to request that ICE Clear Europe invalidate the Bid, which,
as under the current CDS Auction Terms, ICE Clear Europe could do at
its own discretion if the Clearing Member has made a genuine mistake in
the submission of a Bid.
Finally, the CDS Auction Terms currently allow ICE Clear Europe to
set a minimum bid size for an Auction and provide that any bid below
the minimum bid size will be null and void. The proposed rule change
would leverage the DMS to automate these existing requirements by
specifying that the DMS would be designed to automatically prevent
Clearing Members from submitting bids below the minimum bid size and to
render null and void any bid below the minimum bid size that the DMS
accepted in error.
vi. All or Nothing Bids
As mentioned above, the proposed rule change would add a new
defined term, ``All or Nothing Bid.'' An All or Nothing Bid would be a
Bid that stipulates that if the Bid is the winning Bid, the bidder
would receive all of the contracts being auctioned in the lot, without
any of the contracts being split among other Bids. To make an All or
Nothing Bid, the bidder would need to mark the Bid as such in its
submission. The proposed rule change would introduce a new defined term
for Bids that are not All or Nothing Bids, calling them Standard Bids.
Clearing Members would not be required to make All or Nothing Bids
pursuant to the proposed rule change. If a Clearing Member submits an
All or Nothing Bid, however, then in the absence of other bids, the All
or Nothing Bid would satisfy the Clearing Member's Minimum Bid
Requirement (if any) at the same price but adjusted on a pro rata basis
for the notional amount of contracts in the Auction Lot. If a Clearing
Member makes an All or Nothing Bid, the Clearing Member still would be
able to submit one or more Standard Bids for the same Auction Lot,
whether for its account or the account of its customers, provided that
all of the Bids are submitted in the same submission.
Under the CDS Auction Terms, ICE Clear Europe currently determines
the price of an Auction by ordering Bids sequentially, starting with
the highest price and ending with the lowest price. The price of the
Bid at which, along with any equal or higher Bids, the sum of the
notional amount of contracts being purchased equals or is greater than
the notional amount of contracts that ICE Clear Europe is auctioning is
the clearing price of the Auction (the ``CDS Auction Clearing Price'').
In other words, ICE Clear Europe proceeds down the list of Bids by
price, starting with the highest priced Bid, and sets the CDS Auction
Clearing Price at the Bid that, along with the other higher priced Bids
before it, allows ICE Clear Europe to allocate 100% of the open CDS
contracts in the Auction Lot.
The CDS Auction Terms currently require that, in the event there
are multiple Bids at the CDS Auction Clearing Price and there is a
shortfall of open CDS contracts, ICE Clear Europe must allocate the
contracts pro rata according to the notional amount of contracts that
each winning bidder requested in its Bid. As revised under the proposed
rule change, the CDS Auction Terms would require that, where there is
an All or Nothing Bid in the sequence of Bids before the CDS Auction
Clearing Price, the price of the All or Nothing Bid would set the CDS
Auction Clearing Price (because that would be the highest priced bid
that would allow ICE Clear Europe to allocate 100% of the open
contracts). In that case, ICE Clear Europe would allocate to the bidder
that submitted the All or Nothing Bid 100% of the contracts even if
there are Standard Bids at a higher or equal price. If there were more
than one All or Nothing Bid at the CDS Auction Clearing Price, then the
CDS Auction Procedures, as revised under the proposed rule change,
would require that ICE Clear Europe allocate the portfolio equally
among the All or Nothing Bids.
The proposed rule change would update two other provisions of the
CDS Auction Terms to clarify how those provisions would apply in light
of the presence of All or Nothing Bids. First, the CDS Auction Terms
currently provide that ICE Clear Europe may, after a Primary Auction,
in its discretion and after consultation with the CDS Default
Committee, determine the CDS Auction Clearing Price to be less than
100% of the notional amount of the contracts and declare a Repeat
Auction to auction off the remaining contracts. ICE Clear Europe may do
so if, in its reasonable determination, awarding 100% of the notional
amount of the contracts would have a material impact on the amounts
payable or receivable by ICE Clear Europe. The proposed rule change
would not alter this provision but would specify that, in such a
situation, ICE Europe could disregard any All or Nothing Bids.
Second, the proposed rule change would revise the CDS Auction Terms
to clarify how an All or Nothing Bid affects the calculation of a
Clearing Member's Bid price for purposes of determining the
competitiveness of a Clearing Member's Bid and satisfaction of a
Clearing Member's Minimum Bid Requirement. The competitiveness of a
Clearing Member's Bid and satisfaction of a Clearing Member's Minimum
Bid Requirement are important because under the CDS Auction Terms and
ICE Clear Europe Rule 908(i), in the event that ICE Clear Europe needs
to use non-defaulting Clearing Members' Guaranty Fund Contributions or
Assessment Contributions to resolve the default of a Clearing Member,
ICE Clear Europe uses first the contributions attributable to Clearing
Members that did not satisfy their Minimum Bid Requirement (Non-Bidding
CDS Clearing Members), followed by those that submitted less
competitive Bids. Currently, ICE Clear Europe uses the weighted average
price of all valid Standard Bids made by the Clearing Member in the
Auction (weighted by the portfolio size of each such Bid, and converted
into Euro, if applicable) to determine Bid price and thus to determine
the competitiveness
[[Page 40374]]
of a Clearing Member's Bids in an Auction.
Under the CDS Auction Terms as revised by the proposed rule change,
where a Clearing Member has submitted both an All or Nothing Bid and
one or more Standard Bids, the Clearing Member's Bid price would be the
(i) the weighted average price of all valid Standard Bids made by the
Clearing Member in the Auction (weighted by the portfolio size of each
such bid, and converted into Euro, if applicable) and (ii) the price of
any valid All or Nothing Bid made by the Clearing Member in the
Auction, in either case proportionately scaled to a portfolio size
representing 100% of the relevant Auction Lot. Moreover, under the
proposed rule change, if a Clearing Member's Standard Bids do not
satisfy its Minimum Bid Requirement, the Clearing Member's Bid price
would be the price of its All or Nothing Bid. Where a Clearing Member
has submitted one or more Standard Bids (and has not submitted an All
or Nothing Bid), and that Clearing Member's Standard Bids do not
satisfy its Minimum Bid Requirement, the CDS Auction Terms would treat
the Clearing Member as a Non-Bidding CDS Clearing Member, which, as
noted above, has consequences under ICE Clear Europe Rule 908(i).
vii. Market Abuse Regulation
The proposed rule change would also amend the CDS Auction Terms to
clarify and state explicitly certain obligations for auction
participants in respect of information they may receive in connection
with an Auction, including the contents of the portfolio and the
outcome or timing of an Auction. Specifically, a participant in an
Auction would be required to acknowledge that such information may
constitute inside information for the purposes of the EU Market Abuse
Regulation (Regulation (EU) No 596/2014) or any similar under
applicable law in respect of any Contracts cleared by the ICE Clear
Europe or in respect of securities of a defaulting Clearing Member.
Under the proposed rule change, each participant in an Auction would be
required to assess whether such information is inside information for
purposes of the Market Abuse Regulation and, if so, to agree to: (i)
Comply with applicable Market Abuse Laws; (ii) generally not disclose
such information to persons outside of its organization; (iii) prevent
persons engaged in client trading at such organization from possessing
such information; (iv) prevent those in possession of such information
from trading on such information until it ceases to be inside
information; and (v) where such information constitutes inside
information under Regulation (EU) No. 596/2014, maintain an insider
list of persons with access to this information.
B. Amendments to the Policy
The proposed rule change would make a number of changes to the
Policy in relation to the amendments to the CDS Auction Terms. First,
as mentioned above, the proposed rule change would change the name from
the CDS Default Management Framework to the CDS Default Management
Policy. The proposed rule change would make amendments to that effect
throughout the document.
Next, the proposed rule change would revise certain
characterizations of the timeframe within which certain actions would
occur under the Policy. The Policy currently provides that after the
approval for the declaration of a default, ICE Clear Europe will
immediately institute its default management process as outlined in the
Policy. The proposed rule change would remove ``immediately'' from this
provision. In addition, the proposed rule change would remove
``immediately'' from the provision that ICE Clear Europe cease clearing
trades for the defaulting Clearing Member when that Clearing Member is
declared in default. Although ICE Clear Europe expects that it would
implement such actions in a timely manner under the circumstances, ICE
Clear Europe does not believe it is necessary or feasible to specify
that it would do take such actions immediately.
Similarly, with respect to assembling the Clearing Risk Team after
a default, the Policy currently requires that the Head of Clearing Risk
assemble the Clearing Risk Team as soon as a Clearing Member is deemed
to have defaulted. The proposed rule change would amend this to require
assembly once a Clearing Member is deemed to have defaulted. Again, ICE
Clear Europe does not believe it is necessary or feasible to specify
that assembly occur as soon as a Clearing Member is deemed to have
defaulted. Finally, the Policy currently provides that when liquidating
collateral assets of a default Clearing Member, ICE Clear Europe
ensures that it can sell the collateral, subject to settlements terms,
within a single working day, but the Head of Clearing Risk has
discretion to postpone the collateral sale. The proposed rule change
would delete this statement. ICE Clear Europe believes the statement is
not needed to ensure timely sale of collateral and that it is
unnecessary given that ICE Clear Europe relies on its existing and
detailed collateral and liquidity policies to ensure it has sufficient
access to liquidity in case of default.
The proposed rule change would also make a change with respect to
the personnel authorized to take action regarding default management.
The proposed rule change would remove a statement that in the event
that the President/Chief Operating Officer is absent, the Head of
Clearing Risk has the ability to overrule any other head of department
(including Head of Treasury and Head of Operations) where necessary, on
matters relating to default management. Thus, if the President/Chief
Operating Officer is absent, the Head of Clearing Risk no longer has
the ability to overrule any head of department. ICE Clear Europe is
making this amendment to reflect a change in the Board's delegation of
authority. Under the current delegation of authority, where the
President/Chief Operating Officer is absent, the Executive Risk
Committee has authority to make decisions, and thus override any head
of department.
The proposed rule change would also amend the Policy regarding ICE
Clear Europe's authority to convert a default Clearing Member's non-
cash margin to cash. The Policy currently provides that to manage the
risks related to a Clearing Member's default, ICE Clear Europe will
internally isolate the Defaulting Clearing Member's positions and, if
deemed appropriate, convert any non-cash portion of the Defaulting
Member's margin and collateral securing their portion of the Guaranty
Fund into cash. The proposed rule change would alter this slightly to
provide that ICE Clear Europe ``may'' convert any non-cash portion of
the Defaulting Member's margin and collateral securing their portion of
the Guaranty Fund into cash. ICE Clear Europe is making this change to
clarify the drafting of this provision, but it does not believe this
change would substantively alter ICE Clear Europe's authority under
this provision.
The proposed rule change would also amend the portion of the Policy
related to the mechanics of bidding in an Auction to address the
introduction of All or Nothing Bids, as discussed above. The proposed
amendments would provide explanation regarding the meaning of an All or
Nothing Bid and an example of how an All or Nothing Bid would work. The
proposed amendments would also provide that ICE Clear Europe would
publish further information on the bidding types utilized in any given
Auction as part of the specifications for that Auction.
[[Page 40375]]
Finally, the proposed rule change would amend the Policy's
provisions regarding review, breach management, and exception handling.
With respect to reviewing and revising the Policy, the Policy currently
provides that ICE Clear Europe will conduct a quarterly review of the
Policy, to include an assessment of responsibilities, trading
facilities, and equipment. The proposed rule change would delete this
provision because ICE Clear Europe would review and revise the Policy
as part of ICE Clear Europe's separate annual documentation review
process rather than on a quarterly basis and, as discussed below, the
document owner would be responsible for ensuring the Policy remains up-
to-date. In its place, the proposed rule change would add a provision
explaining that ICE Clear Europe, in coordination with its Clearing
Members, would conduct an annual mock Clearing Member default test with
the Clearing Risk Department, appropriate Clearing House management,
and CDS Default Committee Members for each Clearing Member. The
proposed rule change would also make the Policy's provisions for breach
management and exception handling consistent with other ICE Clear
Europe policies and governance processes.\7\ Pursuant to the
amendments, the document owner, as specified in ICE Clear Europe
policies, would be responsible for making sure the Policy is up-to-date
and for reporting report material breaches or unapproved deviations
from the Policy to the 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 Board and/or competent authorities. Exceptions to the
Policy would be approved in accordance with ICE Clear Europe's
governance process for the approval of changes to the Policy.
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\7\ See 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, Exchange Act Release No. 86891 (Sept. 6, 2019);
84 FR 48191 (Sep. 12, 2019) (SR-ICEEU-2019-012) (approving similar
provisions in the ICE Clear Europe Treasury and Banking Services
Policy, Liquidity Management Procedures, Investment Management
Procedures and Unsecured Credit Limits Procedures).
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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.\8\ For the reasons given below, the Commission finds that
the proposed rule change is consistent with Section 17A(b)(3)(F) of the
Act \9\ and Rules 17Ad-22(e)(2)(v) and (e)(13).\10\
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\8\ 15 U.S.C. 78s(b)(2)(C).
\9\ 15 U.S.C. 78q-1(b)(3)(F).
\10\ 17 CFR 240.17Ad-22(e)(2)(v), (e)(13).
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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.\11\ As discussed in more detail below, the
Commission generally believes that the proposed rule change should
improve the CDS Auction Terms and the Policy and, therefore, ICE Clear
Europe's conduct of an Auction in response to a Clearing Member's
default, and, as a result, believes that the proposed rule change is
consistent with Section 17A(b)(3)(F) of the Act.\12\
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\11\ 15 U.S.C. 78q-1(b)(3)(F).
\12\ 15 U.S.C. 78q-1(b)(3)(F).
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Specifically, the Commission believes that the proposed rule
change, in amending certain defined terms and adding defined terms
needed for the other changes as discussed in Part II,A,i above, should
reduce the possibility for confusion in the application of the CDS
Auction Terms by clarifying the terminology in the CDS Auction Terms
and by identifying and defining the terms needed to enact the other
changes discussed above. In addition, amending the defined terms with
respect to certain operations of an auction, including changing the
term Closing Time to Bidding Close Time and revising the definitions of
Primary and Secondary CDS Auction Priority AC Sequence and Primary and
Secondary CDS Auction Priority GF Sequence, should help to clarify
these operational aspects of Auctions and thereby improve the
efficiency of Auctions.
Moreover, adding provisions to explain how ICE Clear Europe would
interpret and apply the CDS Auction Terms, as discussed in Part II.A.ii
above, including how the CDS Auctions Terms would relate to the ICE
Clear Europe Rulebook, should help to reduce the possibility for
confusion when interpreting and applying the CDS Auction Terms
alongside the ICE Clear Europe Rulebook. Similarly, the additional
provisions to explain that the CDS Contracts part of an Auction would
include certain terminated CDS Contracts and hedging CDS Contracts
should allow ICE Clear Europe to replace such contracts and establish a
price to calculate its loss with respect to such contracts, thereby
further improving the efficacy of Auctions.
Further, giving ICE Clear Europe the ability to postpone the
Bidding Close Time and withdraw a lot after the Bidding Close Time, as
discussed in Part II.A.iii above, should afford ICE Clear Europe
flexibility to respond to changing conditions as Auctions are being
conducted and therefore to respond as needed to conduct a successful
Auction. Clearing Members should also benefit from additional clarity
with respect to the consequences of making Bids in an Auction as a
result of the proposed rule change specifying the circumstances in
which a Clearing Member is treated as having not made a Bid, in which
ICE Clear Europe could exclude certain bids for purposes of calculating
the CDS Auction Clearing Price, and in which a Bid would constitute an
offer governed by ICE Clear Europe Rule 904(b) and Part 4 of the ICE
Clear Europe Rulebook. Finally, the additional requirement that each
Direct Participating Customer enter into a CDS Auction Participation
Agreement with its CDS Clearing Member should provide an additional
assurance that Customers participating in an Auction would comply with
the requirements of the CDS Auction Terms.
As it relates to Minimum Bid Requirements discussed in Part II.A.iv
above, the Commission believes that the proposed rule change could
increase participation in Auctions by reducing the potential for
avoidance of Minimum Bid Requirements, thereby leading to more
successful Auctions. Three particular aspects of the proposed rule
change should help to reduce the possibility that a Clearing Member
elects not to participate in an Auction or avoids the Minimum Bid
Requirement: (i) Removal of the possibility that a Clearing Member
could elect not to participate in an Auction; (ii) shortening the time
by which a Clearing Member must provide notice to ICE Clear Europe that
a Minimum Bid Requirement should not apply; and (iii) requiring ICE
Clear Europe to confirm that it agrees to the Clearing Member's
assessment
[[Page 40376]]
At the same time, the proposed rule change should increase the
flexibility with which Clearing Members may address Minimum Bid
Requirements by allowing Clearing Members to outsource the operational
processing of their obligations under the CDS Auction Terms; continuing
to allow Clearing Members to transfer their Minimum Bid Requirements to
Affiliates (subject to both being Clearing Members and entering into an
agreement); making explicit that a Clearing Member can satisfy its
Minimum Bid Requirement with multiple Bids provided that any individual
Bid is equal to or larger than the applicable minimum Bid size; and
adding a provision to state that only those Bids that count toward the
Minimum Bid Requirement would be taken into account under the Primary
and Secondary CDS Auction Priority AC Sequence, Primary and Secondary
CDS Auction Priority GF Sequence, and ICE Clear Europe Rule 908(i).
Similarly, the additional clarity provided regarding the continued
liability of a Clearing Member that transfers its Minimum Bid
Requirement or outsources other operational obligations would allow
Clearing Members to better understand the consequences of transferring
or outsourcing a Minimum Bid Requirement. The Commission believes that
this additional flexibility and information should generally help to
ensure Clearing Members comply with Minimum Bid Requirements, which, in
turn, should help to increase the likelihood of a successful Auction.
As discussed in part II.A.v above, the proposed rule change would
make a number of changes reflecting the role and operations of the DMS
in the context of an Auction. These changes would replace manual
communications with electronic ones and therefore should improve the
efficiency and accuracy of communications regarding Auctions, which may
help to avoid delays or miscommunications that could delay the
successful completion of an Auction. Thus, requiring use of the DMS and
amending the CDS Auction Terms to reflect the operation of the DMS
should help to promote the smooth conduct and successful completion of
Auctions.
The proposed rule change would also add All or Nothing Bids, and
make related changes, to the CDS Auction Terms, as discussed in Part
II.A.vi above. Because an All or Nothing Bid provides a means for a
single bidder to take all of the contracts in an Auction and requires
that ICE Clear Europe allocate such contracts to that bidder if the All
or Nothing Bid meets the Auction Clearing Price, All or Nothing Bidding
should increase the likelihood that ICE Clear Europe successfully sells
all of a defaulting Clearing Member's contracts by an Auction. Thus,
the Commission believes that the changes discussed regarding All or
Nothing Bids, including how an All or Nothing Bid would affect Minimum
Bid Requirements and the calculation of bid price, should help to
increase the likelihood of a successful Auction.
Moreover, adding provisions for the EU Market Abuse Regulations as
discussed in Part II.A.vii above should ensure compliance with
applicable EU law in the conduct of Auctions and should protect
sensitive information shared as part of an Auction. The Commission
believes this should, in turn, increase participants' confidence in the
security of information shared as part of an Auction and therefore
increase participation in an Auction.
Finally, the Commission believes that the changes to the Policy
discussed in Part II.B above should improve ICE Clear Europe's ability
to use the processes outlined in the Policy to respond to a Clearing
Member's default and increase the clarity regarding the operation of
the Policy, including when ICE Clear Europe may take certain actions
and its authority for doing so. These changes include: (i) Renaming the
Policy; (ii) revising the timing requirements for certain actions; and
(iii) specifying that ICE Clear Europe may convert the defaulting
Clearing Member's non-cash Margin and Guaranty Fund Contributions into
cash. Similarly, removing a statement that in the event that the
President/Chief Operating Officer being absent, the Head of Clearing
Risk has the ability to overrule any other head of department
(including Head of Treasury and Head of Operations) to reflect a change
in the Board's delegation of authority, should reduce the possibility
for confusion or mistakes in taking action under the Policy. Amending
the mechanics of bidding in an Auction to address the introduction of
All or Nothing Bids should further help to implement All or Nothing
Bidding, which, as discussed above, should increase the likelihood for
a successful Auction. Deleting the requirement that ICE Clear Europe
conduct a quarterly review and instead making the document owner
responsible for ensuring that the Policy is up-to-date and for
reporting breaches, consistent with other ICE Clear Europe policies and
governance processes, should establish a means for ensuring that ICE
Clear Europe maintains and adheres to the Policy. For these reasons,
the Commission believes the changes to the Policy should generally
improve ICE Clear Europe's conduct of Auctions.
Through Auctions, ICE Clear Europe sells the open CDS contracts of
a defaulting Clearing Member. Thus, in improving the efficiency of such
Auctions, the Commission believes the proposed rule change should
promote the prompt and accurate clearance and settlement of the CDS
transactions resulting from such Auctions. Moreover, the Commission
believes that the default of a Clearing Member, if not promptly
resolved, could cause losses for ICE Clear Europe. The Commission
believes the proposed rule change should help to avoid these losses by
promoting the prompt resolution of Auctions, and therefore the prompt
resolution of a Clearing Member's default. Because losses resulting
from the default of a Clearing Member could disrupt ICE Clear Europe's
ability to operate and therefore threaten ICE Clear Europe's ability to
clear and settle transactions and access securities and funds, the
Commission believes the proposed rule change also should help to
promote the prompt and accurate clearance and settlement of
transactions and assure the safeguarding of securities and funds in ICE
Clear Europe's custody and control.
Therefore, the Commission finds that the proposed rule change
should promote the prompt and accurate clearance and settlement of
securities transactions and assure the safeguarding of securities and
funds in ICE Clear Europe's custody and control, consistent with the
Section 17A(b)(3)(F) of the Act.\13\
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\13\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency with Rule 17Ad-22(e)(2)(v)
Rule 17Ad-22(e)(2)(v) requires that ICE Clear Europe establish,
implement, maintain and enforce written policies and procedures
reasonably designed to provide for governance arrangements that, among
other things, specify clear and direct lines of responsibility.\14\ As
discussed in Part II.B above, the proposed rule change would amend the
Policy to make the document owner responsible for ensuring that the
Policy is up-to-date and for reporting breaches. The Commission
believes that this aspect of the proposed rule change would place on
the document owner a clear and direct responsibility for ensuring that
ICE Clear Europe maintains the Policy and complies with it. For this
reason, the Commission finds
[[Page 40377]]
that the proposed rule change is consistent with Rule 17Ad-
22(e)(2)(v).\15\
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\14\ 15 U.S.C. 17Ad-22(e)(2)(v).
\15\ 15 U.S.C. 17Ad-22(e)(2)(v).
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C. Consistency with Rule 17Ad-22(e)(13)
Rule 17Ad-22(e)(13) requires that ICE Clear Europe establish,
implement, maintain and enforce written policies and procedures
reasonably designed to ensure ICE Clear Europe has the authority and
operational capacity to take timely action to contain losses and
liquidity demands and continue to meet its obligations by, at a
minimum, requiring its Clearing Members and, when practicable, other
stakeholders to participate in the testing and review of its default
procedures, including any close-out procedures, at least annually and
following material changes thereto.\16\
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\16\ 15 U.S.C. 17Ad-22(e)(13).
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As discussed above, the Commission believes the proposed rule
change should generally improve the clarity and operation of the CDS
Auction Terms and, therefore, ICE Clear Europe's ability to conduct a
successful Auction via the CDS Auction Terms. Because ICE Clear Europe
uses Auctions to close out a defaulting Clearing Member's contracts and
contain the losses and liquidity demands stemming from a Clearing
Member's default, the Commission believes the proposed rule change, in
improving ICE Clear Europe's ability to conduct a successful Auction
via the CDS Auction Terms, should help to ensure ICE Clear Europe has
the authority and operational capacity to take timely action to contain
losses and liquidity demands. Moreover, as discussed in Part II.B
above, the proposed rule change would amend the Policy to add a
provision explaining that ICE Clear Europe, in coordination with its
Clearing Members, would conduct an annual mock Clearing Member default
test with the Clearing Risk Department, appropriate ICE Clear Europe
management, and CDS Default Committee Members for each Clearing Member.
The Commission believes this particular change should help to ensure
that ICE Clear Europe requires its Clearing Members to participate in
the testing and review of its default procedures.
For these reasons, the Commission finds that the proposed rule
change is consistent with Rule 17Ad-22(e)(13).\17\
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\17\ 15 U.S.C. 17Ad-22(e)(13).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act,
and in particular, with the requirements of Section 17A(b)(3)(F) of the
Act \18\ and Rules 17Ad-22(e)(2)(v) and (e)(13).\19\
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\18\ 15 U.S.C. 78q-1(b)(3)(F).
\19\ 17 CFR 240.17Ad-22(e)(2)(v) and (e)(13).
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It is therefore ordered pursuant to Section 19(b)(2) of the Act
\20\ that the proposed rule change, as modified by Partial Amendment
No. 1 (SR-ICEEU-2020-007), be, and hereby is, approved.\21\
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\20\ 15 U.S.C. 78s(b)(2).
\21\ 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).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-14389 Filed 7-2-20; 8:45 am]
BILLING CODE 8011-01-P