[Federal Register Volume 85, Number 249 (Tuesday, December 29, 2020)]
[Notices]
[Pages 85704-85706]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28660]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90746; File No. SR-ICEEU-2020-016]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change Relating 
to Publication of a Circular Regarding the Interpretation of References 
to EU Legislation in the Clearing Rules at the End of the Brexit 
Transition Period

December 21, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 11, 2020, ICE Clear Europe Limited (``ICE Clear Europe'' or 
the ``Clearing House'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule changes described in 
Items I, II and III below, which Items have been prepared primarily by 
ICE Clear Europe. ICE Clear Europe filed the proposed rule change 
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(1) 
thereunder,\4\ such that the proposed rule change was immediately 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    ICE Clear Europe is proposing to publish a Circular, titled ICE 
Clear Europe: Interpretation of References to EU Legislation in the 
Clearing Rules Post-Brexit (the ``Circular''), to provide guidance as 
to the interpretation of references to European Union (``EU'') 
directives and regulations in the ICE Clear Europe Clearing Rules and 
Procedures \5\ in the event that the United Kingdom (``UK'') ceases to 
be an EU member state, in circumstances where no withdrawal agreement 
stipulating that EU laws will continue to apply in the UK has been 
agreed between the UK and the EU-27. The interpretation contained in 
the Circular will only apply under such circumstances.
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    \5\ Capitalized terms used but not defined herein have the 
meanings specified in the ICE Clear Europe Clearing Rules (the 
``Rules'').
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, ICE Clear Europe included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. ICE Clear Europe has prepared summaries, 
set forth in sections (A), (B), and (C) below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

(a) Purpose
    The purpose of the proposed Circular is to provide guidance with 
respect to the interpretation of certain provisions in the Rules and 
Procedures in the event that the UK exits the Transition Period, in 
circumstances where no trade agreement has been agreed between the UK 
and the EU-27 stipulating that EU laws will continue to apply in the 
UK. In such circumstances, directly applicable EU directives and 
regulations will be incorporated into UK law with modifications at the 
end of the Transition Period pursuant to the European Union 
(Withdrawal) Act 2018 (the ``EUWA''), which would result in there being 
two versions of a directly applicable EU legislative act which may be 
applicable to the Rules: (1) The version as enacted in the EU, directly 
applicable throughout the EU (and, in certain cases, the EEA); and (2) 
the version incorporated into UK law (referred to as ``on-shored'').
    There are various references to EU directives and regulations in 
the Rules and Procedures; others may arise by implication by virtue of 
definitions such as that of ``Applicable Laws'' or ``Governmental 
Authority'' (Rule 101). ICE Clear Europe is proposing to publish the 
Circular to provide guidance as to the proper interpretation of such 
references in the event of the end of the Transition Period without a 
trade agreement in place that provides for continued applicability of 
EU law in the UK. The guidance is intended to be consistent with the 
views of legal practitioners in the UK with respect to references to EU 
directives and regulations in English law contracts generally, but 
applied to the particular definitions and situations that arise under 
the Rules and Procedures.
    The Circular sets out several principles that will be applied by 
ICE Clear Europe when interpreting references to an EU regulation or 
directive in its Rules:
    1. Where the reference concerns an obligation on, or otherwise 
applies to, the Clearing House or a UK Clearing Member:
    [cir] Where the reference is to an EU regulation, it should be 
interpreted as the regulation as it forms part of UK domestic law 
through section 3 of the EUWA, and as amended by UK law from time to 
time; and
    [cir] Where the reference is to an EU directive, it should be 
interpreted as the UK domestic law corresponding to the directive or 
provision thereof.
    2. Where the reference concerns an obligation on, or otherwise 
applies to, an EU Clearing Member:
    [cir] Where the reference is to an EU regulation, it should be 
interpreted as the regulation as it applies in the EU, and as amended 
by EU law from time to time; and
    [cir] Where the reference is to an EU directive, it should be 
interpreted as the EU directive, as amended by EU law from time to time 
and as implemented in the relevant member state of the EU Clearing 
Member.

The Circular also addresses situations where both sets of laws apply, 
for example for entities established in the UK with an EU branch (or 
vice versa) or which continue to be regulated in both systems under 
cross-border licenses, the UK temporary permissions regime or other 
grandfathering arrangements (via reverse solicitation or otherwise). By 
way of example, it explains how Rule requirements that Clearing Members 
maintain sufficient capital would require UK Clearing Members to comply 
with the on-shored version of the applicable regulatory requirements as 
well as applicable EU requirements for any EU branch or to the extent 
they are subject to EU consolidated supervision. EU Clearing Members 
with a UK branch or which are subject to UK consolidated supervision 
would be required to comply with UK capital rules equivalent to the EU 
rules, to the extent applicable (in addition to their applicable home 
country requirements). Rule

[[Page 85705]]

requirements that Clearing Members maintain segregated accounts would 
require UK Clearing Members to comply with the on-shored version of the 
applicable regulatory requirements, while EU Clearing Members would be 
required to comply with the existing EU regulations.
    The Circular further sets out certain exceptions to these general 
principles relating to the following:
     A reference to an EU law relating to emission allowance 
units issued under the EU Emissions Trading Scheme should be 
interpreted, as regards EU emission allowances, to continue to refer to 
the EU law;
     References to an EU law, as it relates to UK emission 
allowances, will refer to the new UK Emissions Trading Scheme (UK ETS). 
The Circular also notes that UK emissions allowances, unlike the EU 
emissions allowances, have not been designated as investments under the 
UK Financial Service and Markets Act and therefore will not be covered 
as deliveries of financial instruments under the Rules or covered by 
the Part 12 settlement finality rules in the Rules, unless and until 
that law is changed;
     References to EU member state laws transposing or 
implementing an EU directive will be read to include UK laws 
corresponding to that EU directive;
     Certain references relating to the European Market 
Infrastructure Regulation (Regulation (EU) No. 648/2012) and related EU 
authorities will be read to continue to refer to relevant EU law and 
authorities, for example in the context of ICE Clear Europe's status as 
a third country central counterparty thereunder;
     As the Clearing House has a designated or deemed national 
settlement finality directive status in certain EU member states, Part 
12 of the Rules will be interpreted as constituting the settlement 
finality rules applicable to its designated system under the laws of 
those EU member states; and
     References relating to EU data protection legislation are 
excluded, since separate amendments will be proposed to the Clearing 
Rules to address Brexit-related data protection issues.
(b) Statutory Basis
    ICE Clear Europe believes that the proposed rule change is 
consistent with the requirements of Section 17A of the Act \6\ and the 
regulations thereunder applicable to it, including the standards under 
Rule 17Ad-22.\7\ In particular, Section 17A(b)(3)(F) of the Act \8\ 
requires, among other things, that the rules of a clearing agency be 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions and, to the extent applicable, derivative 
agreements, contracts, and transactions, the safeguarding of securities 
and funds in the custody or control of the clearing agency or for which 
it is responsible, and the protection of investors and the public 
interest. The proposed Circular would provide guidance with respect to 
the interpretation of the Rules that would apply to EU and UK Clearing 
Members and ICE Clear Europe upon the termination of the Transition 
Period if there is no trade agreement that provides for EU law to 
continue to apply in the UK. The interpretation would thus facilitate 
continued clearing by EU and UK Clearing Members in compliance with 
applicable law in relevant jurisdictions and promote the prompt and 
accurate clearance and settlement of transactions by such persons. As 
such, the interpretation is consistent with the safeguarding of 
securities and funds in the custody or control of the Clearing House or 
for which it is responsible, the protection of investors and the public 
interest.
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    \6\ 15 U.S.C. 78q-1.
    \7\ 17 CFR 240.17Ad-22.
    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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    Moreover, the interpretation is consistent with Rule 17Ad-
22(e)(1),\9\ which requires that each covered clearing agency 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to provide for a well-founded, clear, 
transparent, and enforceable legal basis for each aspect of its 
activities in all relevant jurisdictions. As discussed herein, the 
interpretation is designed to ensure that references to EU legislation 
in the Rules and Procedures are properly interpreted should the 
Transition Period end with no trade agreement stipulating that EU laws 
will continue to apply in the UK. The guidance set out in the Circular 
would facilitate continued clearing in light of the requirements of UK 
and EU law in those circumstances and would minimize the potential for 
disputes and legal uncertainty. ICE Clear Europe does not expect that 
the interpretation will adversely impact its ability to comply with the 
Act or any standards under Rule 17Ad-22.\10\
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    \9\ 17 CFR 240.17Ad-22(e)(1).
    \10\ 17 CFR 240.17Ad-22.
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(B) Clearing Agency's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed guidance in the 
Circular would have any impact, or impose any burden, on competition 
not necessary or appropriate in furtherance of the purpose of the Act. 
The guidance will not change the substantive requirements of any Rules 
or Procedures but will clarify the proper interpretation of references 
to EU legislation in order to facilitate that the Clearing House and EU 
and UK Clearing Members continue to adhere to applicable laws and 
regulations. ICE Clear Europe does not believe the interpretation will 
in itself materially affect the cost of, or access to, clearing. As a 
result, ICE Clear Europe does not believe the proposed rule change 
imposes any burden on competition that is inappropriate in furtherance 
of the purposes of the Act.

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    Written comments relating to the proposed Circular have not been 
solicited or received. ICE Clear Europe will notify the Commission of 
any written comments received by ICE Clear Europe.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and paragraph (f) of Rule 19b-4 thereunder. At 
any time within 60 days of the filing of the proposed rule change, the 
Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml) or
     Send an email to [email protected]. Please include 
File Number SR-ICEEU-2020-016 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.


[[Page 85706]]


All submissions should refer to File Number SR-ICEEU-2020-016. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filings will also be available for inspection 
and copying at the principal office of ICE Clear Europe and on ICE 
Clear Europe's website at https://www.theice.com/notices/Notices.shtml?regulatoryFilings. 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-2020-016 and should be submitted on or before January 19, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28660 Filed 12-28-20; 8:45 am]
BILLING CODE 8011-01-P