[Federal Register Volume 87, Number 176 (Tuesday, September 13, 2022)]
[Notices]
[Pages 56118-56120]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19675]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95682; File No. SR-ICEEU-2022-018]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change Relating 
to Amendments to the ICE Clear Europe Delivery Procedures and the ICE 
Clear Europe Clearing Procedures

September 7, 2022.
    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 August 30, 2022, 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)(4)(ii) 
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)(4)(ii).
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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 amend (i) Parts C, D, F, H, K, L, AA, EE, and HH 
of its Delivery Procedures (``Delivery Procedures'') and (ii) Part I of 
its Clearing Procedures (``Clearing Procedures''), in each case to 
implement the use of Contingent Variation Margin for certain UK and 
European energy futures contracts.

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
Background
    The amendments are intended to extend the Clearing House's use of 
Contingent Variation Margin (``CVM'') requirements during the tender or 
delivery period to certain additional UK and European natural gas and 
electricity futures contracts. Under the existing Rules and Procedures 
(including paragraph 4.6 of the Clearing Procedures), CVM can be 
imposed by the Clearing House on specified F&O Contracts to account for 
the difference, during the delivery period, between the final 
settlement price for the relevant contract (typically established on 
the last trading day of the contract, before the commencement of the 
delivery period) and the price of the relevant contract for the next 
contract month. CVM is intended to provide additional protection to the 
Clearing House against potential exposure to Clearing Member default 
from movements in the market price of the underlying commodity during 
the delivery period. CVM is collected by the Clearing House from the 
applicable Clearing Members but not paid out to the opposite Clearing 
Members, although the opposite Clearing Member may apply the amount as 
a credit against other margin requirements.
    ICE Clear Europe is proposing to amend the Clearing Procedures and 
the Delivery Procedures chapters for the relevant Contracts in order to 
implement the extension to specified UK and European energy futures 
contracts.
Clearing Procedures
    Paragraph 4.6 of the Clearing Procedures would be updated to remove 
the two listed examples of contracts for which CVM would be required. 
Given the Clearing House's proposed extension of the use of CVM, the 
examples would be incomplete and are in any event unnecessary. 
Additionally, the amendments would make a clarification that Clearing 
Members will not receive payment of CVM in cash (as opposed to 
referring to repayment) but instead may credit CVM against other margin 
requirements, as discussed above. Paragraph 4.7, which described a 
prior contingent credit approach for sellers under natural gas and 
electricity futures, would be removed as it will be superseded by the 
extension of CVM to such contracts.
Delivery Procedures
    ICE Clear Europe is proposing to amend Parts C, D, F, H, K, L, AA, 
EE, and HH of its Delivery Procedures to implement CVM for physically-
settled monthly European and UK electricity and natural gas futures 
contracts.
    The delivery timetable for routine deliveries of ICE UK Electricity 
Futures in Part C of the Delivery Procedures would be updated to 
provide that on the Delivery Day of such contract the Clearing House 
will apply CVM to the Buyer's and the Seller's remaining units of the 
underlying to be delivered. The amendments would further provide on the 
Business Day following the Delivery Day, the Clearing House will 
continue to apply CVM to the Buyer's and Seller's remaining units of 
the underlying to be delivered. The same updates would be made to the 
delivery timetable for routine deliveries of each of (i) ICE Futures UK 
Natural Gas Futures (Part D of the Delivery Procedures), (ii) ICE Endex 
TTF Natural Gas Futures (Part F of the Delivery Procedures), (iii) ICE 
Endex German THE Natural Gas Futures (Part H of the Delivery 
Procedures), (iv) ICE Endex Dutch Power Futures (Part K of the Delivery 
Procedures), (v) ICE Endex Belgian Power Base Load Futures (Part L of 
the Delivery Procedures), and (vi) ICE Endex French PEG Natural Gas 
Futures (Part HH of the Delivery Procedures). In respect of the 
delivery timetable for routine delivery of ICE Endex PSV Natural Gas 
Futures (Part AA of the Delivery Procedures) and ICE Endex VTP Natural 
Gas Futures (Part EE of the Delivery Procedures), similar updates would 
be made taking into account the delivery characteristics of those 
contracts: each such timetable would provide that on the first Business 
Day immediately preceding the first day of the month in which the 
Delivery Day specified in the relevant contract commenced, the Clearing 
House will apply CVM to the Buyer's and the Seller's remaining natural 
gas units. The amendments would further provide that on the Business 
Day following the Delivery Day, the Clearing House will continue to 
apply CVM to the Buyer's and Seller's remaining natural gas units.
    The amendments would make certain other clarifications updates to 
the Delivery Procedures unrelated to the

[[Page 56119]]

implementation of CVM. Specifically, references to ICE Futures UK 
Natural Gas (EUR/MWh) Futures Contracts in Part D of the Delivery 
Procedures would be removed as such contracts are no longer traded. In 
Part F of the Delivery Procedures (ICE Endex TTF Natural Gas Futures), 
references to weekly contracts (and related defined terms such as 
``Delivery Week'' and ``W+'' and ``W-'' would be removed as no such TTF 
natural gas contracts of this type are traded. The remaining provisions 
would apply to the continuing monthly contracts (with some references 
to ``monthly'' removed as no longer necessary to distinguish from 
weekly contracts). In Part K of the Delivery Procedures (ICE Endex Base 
Load Futures), references to the ICE Endex Dutch Power Base Load Week 
Futures and related references to weekly contracts and related defined 
terms are being removed since such weekly contract will no longer be 
listed for trading. The remaining provisions would apply to the 
continuing monthly contracts (with some references to ``monthly'' 
removed as no longer necessary to distinguish from weekly contracts). 
In Part HH of the Delivery Procedures (ICE Endex PEG Natural Gas 
Futures) references to the applicable ICE Endex confirmation reports 
are being corrected.
(b) Statutory Basis
    ICE Clear Europe believes that the proposed amendments to the 
Delivery Procedures and the Clearing Procedures 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 intended to apply CVM to 
certain additional UK and European electricity and natural gas futures 
contracts to enhance the protections for the Clearing House against the 
risk of market movements in the underlying commodity during the 
delivery period. The amendments to the Delivery Procedures are designed 
to add applicable references to CVM requirements in respect of the 
routine delivery of certain physically-settled European and UK Natural 
Gas futures contracts in order to reflect the Clearing House's 
application of CVM. The changes to the Clearing Procedures are intended 
to align with such updates to the Delivery Procedures. Certain 
additional updates and clarifications would be made to the Delivery 
Procedures. The amendments would not otherwise affect the manner in 
which such contracts are cleared and settled. As a result, in ICE Clear 
Europe's view, the amendments would be consistent with the prompt and 
accurate clearance and settlement of the contracts, the safeguarding of 
funds or securities in the custody or control of the clearing agency or 
for which it is responsible, and the protection of investors and the 
public interest, consistent with the requirements of Section 
17A(b)(3)(F) of the Act.\7\
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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(b)(3)(F).
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    Rule 17Ad-22(e)(6) provides that ``[e]ach covered clearing agency 
shall establish, implement, maintain and enforce written policies and 
procedures reasonable designed to, as applicable [. . .] cover, if the 
covered clearing agency provides central counterparty services, its 
credit exposures to its participants by establishing a risk-based 
margin system that, at a minimum (i) considers, and produces margin 
levels commensurate with the risks and particular attributes of each 
relevant product, portfolio and market. . . .''.\8\ As discussed above, 
ICE Clear Europe has determined to apply CVM to certain additional UK 
and European natural gas and electricity futures contracts to address 
the particular risks faced by the Clearing House with respect to such 
contracts as a result of price movements during the delivery period. As 
a result, in ICE Clear Europe's view, the amendments are consistent 
with the requirements of Rule 17Ad-22(e)(6).\9\
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    \8\ 17 CFR 240.17Ad-22(e)(6).
    \9\ 17 CFR 240.17Ad-22(e)(6).
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    In addition, Rule 17Ad-22(e)(10) \10\ provides that ``[e]ach 
covered clearing agency shall establish, implement, maintain and 
enforce written policies and procedures reasonable designed to, as 
applicable [. . .] establish and maintain transparent written standards 
that state its obligations with respect to the delivery of physical 
instruments, and establish and maintain operational practices that 
identify, monitor and manage the risks associated with such physical 
deliveries.'' The proposed changes to the Delivery Procedures are 
designed to amend delivery specifications in respect of the routine 
delivery of certain physically-settled European and UK Natural Gas 
futures contracts to reflect the application of CVM. Clearance of such 
contracts would not otherwise be affected. As amended, the Delivery 
Procedures thus appropriately state the role and responsibilities of 
the Clearing House and Clearing Members with respect to physical 
delivery. As a result, ICE Clear Europe believes the amendments are 
consistent with the requirements of Rule 17Ad-22(e)(10).\11\
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    \10\ 17 CFR 240.17Ad-22(e)(10).
    \11\ 17 CFR 240.17Ad-22(e)(10).
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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 proposed 
amendments to the Delivery Procedures are intended to implement the 
Clearing House's application of CVM in respect of certain physically-
settled European and UK electricity and natural gas futures contracts. 
The imposition of CVM may impose certain costs on market participants 
trading such contracts, as they may be required to provide CVM amounts 
to the Clearing House during the delivery period. ICE Clear Europe 
believes that such costs are appropriate, however, to account for the 
risks to the Clearing House from market movements during the delivery 
period, and reflect the particular positions of the market participant 
that have gone to delivery. The CVM requirements will apply in the same 
way to all similarly situated market participants. ICE Clear Europe 
does not believe the amendments would otherwise materially affect the 
cost of clearing, adversely affect competition among Clearing Members, 
adversely affect access to clearing in the relevant contracts for 
Clearing Members or their customers, or otherwise adversely affect 
competition in clearing services. Accordingly, ICE Clear Europe does 
not believe that the amendments would impose any impact or burden on 
competition that is not appropriate in furtherance of the purpose 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 amendment has not been 
solicited or received by ICE Clear Europe. ICE Clear Europe will notify 
the Commission of any comments received

[[Page 56120]]

with respect to the proposed rule change.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and paragraph (f) of Rule 19b-4 \13\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml) or
     Send an email to [email protected]. Please include 
File Number SR-ICEEU-2022-018 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-2022-018. 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/clear-europe/regulation.
    All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ICEEU-2022-018 and should be 
submitted on or before October 4, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19675 Filed 9-12-22; 8:45 am]
BILLING CODE 8011-01-P