[Federal Register Volume 86, Number 111 (Friday, June 11, 2021)]
[Notices]
[Pages 31348-31351]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-12247]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92120; File No. SR-ICEEU-2021-013]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing of Proposed Rule Change Relating to the ICE Clear Europe
Articles of Association
June 7, 2021.
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 May 25, 2021, 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. 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.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
ICE Clear Europe Limited (``ICE Clear Europe'' or the ``Clearing
House'') proposes to modify its Articles of Association (the
``Articles''). The revisions would not involve any changes to the ICE
Clear Europe Clearing Rules or Procedures.
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, Security-Based Swap Submission or
Advance Notice
(a) Purpose
The purpose of the amendments is to update the Articles to reflect
certain changes in the composition of the ICE Clear Europe Board and
the composition and structure of Board committees, to clarify certain
director independence standards, to clarify certain super-quorum
standards applicable to certain actions relating to CDS clearing, to
revise certain provisions regarding directors and to reflect the use of
gender-neutral language, as discussed in more detail herein.
In article 3,\3\ definitions of certain specific committees would
be deleted, including the Audit Committee, Board Risk Committee,
Compensation Committee and Nomination Committee, and the definition of
Committee would be revised to generally reference any committee
constituted by the Board under the Articles. Although ICE Clear Europe
is not proposing to change its current committee structure at this
time, it does not believe the committees need to be defined in the
Articles. Since the Board is authorized to create, modify or dissolve
committees as it determines to be appropriate, the amendments would
facilitate future changes to the committee structure by the Board
without need to amend the Articles. The definition of Product Risk
Committee, however, would not be removed from the Articles because
there are references to this committee throughout the Articles in light
of certain specific requirements relating to the CDS Director.
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\3\ References herein to the numbering of particular articles
will be to the articles as amended.
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In addition, the amendments would modify certain other definitions,
including CDS Director, Committees, Independent Director, Risk
Committee and Super-Quorum Matters. These definitions would be updated
as follows:
CDS Director--a sentence would be added to the definition
to clarify that the CDS Director may also meet the criteria required of
an Independent Director, however, for the avoidance of doubt they will
continue to be classified only as a CDS Director.
Independent Director--this definition would be updated
such that instead of describing this person as independent of the
Company and of the Clearing House (without further definition of
independence), the definition would require the director to
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meet the independence criteria for a director, as defined under
relevant applicable legislation.\4\
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\4\ Specifically, such legislation would include the definition
of ``independent member'' pursuant to Article 2(28) of the European
Market Infrastructure Regulation (EMIR), Regulation (EU) No 648/2012
of the European Parliament and of the Council of 4 July 2012 on OTC
derivatives, central counterparties and trade repositories as
incorporated into UK law under the European Union (Withdrawal) Act
2018 (UK EMIR).
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Risk Committee--this definition would be renamed Product
Risk Committee, and references to this committee would be updated
throughout the Articles. This change reflects the correct current name
and function of this committee (and distinguishes the Product Risk
Committee from other existing risk committees). Further, the statement
that it is composed of directors would be deleted as it does not
reflect the composition of the committee under its terms of reference
(which includes clearing member representatives, among others).
Super-Quorum Matters--this definition would be updated to
clarify, as a matter of drafting, that such matters include the
criteria for CDS Clearing Membership. A reference to the terms of
reference for the CDS Risk Committee would be updated to the terms of
reference for the Product Risk Committee with responsibility for CDS
(which is the current name for the relevant committee). The amendments
would also resolve a drafting ambiguity by removing the subject and
content of the Board Resolution as a Super-Quorum Matter as, by current
practice, not all Board resolutions are Super-Quorum Matters.
A new article 11 would provide that a member shall be deemed
present at a general meeting if participating by telephone or other
electronic means and all participating members can hear each other.
The amendments would make certain revisions to the composition of
the board and board committees. Amended article 26 would provide that
one third of directors appointed to the board should be classed as
Independent Directors (instead of at least two and not more than four),
and at least one CDS Director would be required to be appointed to
serve in such a capacity at any one time (instead of two). The proposed
change to the required number of CDS Directors follows the retirement
of one of the previous CDS Directors and the determination by the
Clearing House that it is not necessary to appoint a minimum of two CDS
Directors to serve in such capacity in order to adequately address the
interests of Clearing Members in Clearing House governance. In addition
to the remaining CDS Director, Clearing Members would continue to be
represented through the CDS Product Risk Committee which, other than
the Chair, is composed entirely of representatives of Clearing Members.
The change was approved by the CDS Product Risk Committee, and no
Clearing Members objected to the change in the required number of CDS
Directors.
In article 27, consistent with the changes to the definitions of
Committees described above, the reference to the Nomination Committee
would be deleted and replaced with language referring to a committee
appointed by the board which would be responsible for appointing
directors by ordinary resolution. Article 28 would be amended to
reflect the change in article 26 to require only a single CDS Director.
Article 30A would be amended to delete certain language pertaining
to a CDS Director's retirement date that is no longer necessary with a
single CDS Director. In article 32, the reference to the Nomination
Committee would be deleted and replaced with language referring to a
committee of the board appointed to consider retirement of directors
under the Articles. Likewise, article 33 would be amended to delete the
reference to the Nomination Committee and replaced such reference with
language referring to a committee appointed by the board to considering
the reappointment of an Independent Director.
Article 44, which discusses the delegation of directors' power to
certain committees, would be amended to delete references to the
specific committees that were deleted from article 3 (i.e., the Risk
Committee(s), an Audit Committee, a Board Risk Committee, a Nominations
Committee and a Compensation Committee).
Amended Article 49 would clarify that directors may be paid certain
expenses that are reasonable and the amendments would remove the
requirement that this be subject to board approval as such expenses
would be approved by the ICE Clear Europe President.
Amendments to article 59(a) would clarify the operation of the
super-quorum requirement for Super-Quorum Matters, which relate to CDS
Contracts including to reflect the requirement to only have one CDS
Director. For such matters, if a CDS Director has been appointed, such
director must be present at the meeting, together with the normal
quorum of a majority of the directors serving on the board at the time.
The amendments would add a defined term for ``Super-Quorum'' and make
revisions throughout the Articles to use such term as appropriate. The
amendments also clarify that the CDS director must be present at the
present for a super-quorum meeting, but need not vote in favor of the
resolution. Amendments to article 59(b) would state explicitly that in
order for a quorum to be met for non-super-quorum matters, the required
directors must be present at the meeting. Article 59(c) would be
amended to clarify that for super-quorum matters that need to be
resolved in an emergency, the presence of a CDS Director is not
necessary. The amendments would also clarify that whether an emergency
exists for this purpose is to be determined by the President or their
delegate.
Similarly, article 59A, would be revised to clarify that where
Super-Quorum matters have to be adjourned to a subsequent meeting
because no CDS Director is present, the subsequent meeting must have a
quorum present at the meeting but need not include a CDS Director.
Throughout the Articles, various provisions would be amended to use
gender-neutral language. Certain non-substantive typographical and
similar corrections would also be made.
Various articles would be renumbered due to the changes discussed
above.
(b) Statutory Basis
ICE Clear Europe believes that the proposed amendments to the
Articles are consistent with the requirements of Section 17A of the Act
\5\ and the regulations thereunder applicable to it. In particular,
Section 17A(b)(3)(F) of the Act \6\ 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
changes are designed to clarify and update certain aspects of ICE Clear
Europe's Articles, particularly around board committees, the number of
CDS Directors, and the application of certain super-quorum requirements
applicable to matters relating to CDS Contracts. The amendments are
intended to facilitate use of board committees where
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appropriate, without need to update the Articles. The amendments reduce
the required number of CDS Directors to one, and clarify the operation
of the CDS super-quorum requirements in light of that change. In ICE
Clear Europe's view, these amendments would enhance and streamline the
clearing house's overall governance framework, and thus facilitate the
efficient operation of the clearing house and the prompt and accurate
clearance and settlement of transactions and the public interest,
within the meaning of the Act. For these reasons, the amendments would
also promote governance arrangements that are clear and transparent to
fulfill the public interests requirements in Section 17A of the Act \7\
applicable to clearing agencies, support the objectives of owners and
participants and promote the effectiveness of the clearing agency's
risk management procedures.
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\5\ 15 U.S.C. 78q-1.
\6\ 15 U.S.C. 78q-1(b)(3)(F).
\7\ 15 U.S.C. 78q-1.
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Further, Section 17A(b)(3)(C) of the Act \8\ requires that the
rules of a clearing agency ``assure a fair representation of its
shareholders (or members) and participants in the selection of its
directors and administration of its affairs.'' Following the proposed
amendments, Clearing Members will continue to be represented on the
Board by the existing CDS Director and the Articles will continue to
require the appointment of at least one CDS Director to the Board. In
addition, the interests of Clearing Members will continue to be
represented through the F&O and CDS Product Risk Committees and the
Client Risk Committee. The majority of the members of all the three
committees are Clearing Member representatives.\9\ As such, ICE Clear
Europe believes its governance arrangements, as modified by the
amendments to the Articles, will continue to provide a fair
representation of its shareholders and participants in the selection of
its directors and administration of its affairs, within the meaning of
Section 17A(b)(3)(C).\10\
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\8\ 15 U.S.C. 78q-1(b)(3)(C).
\9\ Under UK EMIR Article 28, ICE Clear Europe is required to
ensure that the Client Risk Committee maintains Clearing Member and
client representation.
\10\ 15 U.S.C. 78q-1(b)(3)(C).
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Rule 17Ad-22(e)(2)(i) \11\ requires clearing agencies to establish
reasonably designed policies and procedures to provide for governance
arrangements that are clear and transparent. The proposed amendments to
the Articles more clearly set out the composition of the board and
board committees, the appointment of directors, delegation of
directors' powers and requirements relating to a quorum and super-
quorum. ICE Clear Europe believes that the amendments to the Articles
are therefore consistent with the requirements of Rule 17Ad-
22(e)(2).\12\
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\11\ 17 CFR 240.17 Ad-22(e)(2)(i).
\12\ 17 CFR 240.17 Ad-22(e)(2).
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(B) Clearing Agency's Statement on Burden on Competition
ICE Clear Europe does not believe the proposed amendments would
have any impact, or impose any burden, on competition not necessary or
appropriate in furtherance of the purposes of the Act. The amendments
are being adopted to further strengthen Clearing House governance
arrangements by more clearly setting out requirements relating to the
composition of the board and board committees, the appointment of
directors, delegation of directors' powers and meeting quorum and
super-quorum requirements. The amendments do not affect any terms or
conditions of cleared contracts, and are not intended to affect
directly Clearing Members or market participants, or the markets for
cleared products. As a result, ICE Clear Europe does not otherwise
believe the amendments would affect the costs of or access to clearing,
or the market for clearing services generally. Therefore, 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 amendments have not been
solicited or received by ICE Clear Europe. ICE Clear Europe will notify
the Commission of any written comments received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change, Security-Based
Swap Submission and Advance Notice and Timing for Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, security-based swap submission or advance notice 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-2021-013 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-ICEEU-2021-013. 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, security-based
swap submission or advance notice that are filed with the Commission,
and all written communications relating to the proposed rule change,
security-based swap submission or advance notice between the Commission
and any person, other than those that may be withheld from the public
in accordance with the provisions of 5 U.S.C. 552, will be available
for website viewing and printing in the Commission's Public Reference
Room, 100 F Street NE, Washington, DC 20549, on official business days
between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filings
will also be available for inspection and copying at the principal
office of ICE Clear Europe and on ICE Clear Europe's website at https://www.theice.com/clear-europe/regulation.
All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available
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publicly. All submissions should refer to File Number SR-ICEEU-2021-013
and should be submitted on or before July 2, 2021.
For the Commission, by the Division of Trading and Markets, pursuant
to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-12247 Filed 6-10-21; 8:45 am]
BILLING CODE 8011-01-P