[Federal Register Volume 87, Number 208 (Friday, October 28, 2022)]
[Notices]
[Pages 65262-65265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23481]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96134; File No. SR-ICEEU-2022-010]


Self-Regulatory Organizations; ICE Clear Europe Limited; Order 
Approving Proposed Rule Change Relating to Amendments to the ICE Clear 
Europe Clearing Membership Procedures

October 24, 2022.

I. Introduction

    On August 30, 2022, 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 thereunder,\2\ a proposed rule change 
to amend its Clearing Membership Procedures (the ``Procedures''). The 
proposed rule change was published for comment in the Federal Register 
on September 13, 2022.\3\ The Commission did not receive comments 
regarding the proposed rule change. For the reasons discussed below, 
the Commission is approving the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Self-Regulatory Organizations; ICE Clear Europe Limited; 
Notice of Filing of Proposed Rule Change Relating to Amendments to 
the ICE Clear Europe Clearing Membership Procedures, Exchange Act 
Release No. 95683 (Sep. 7, 2022); 87 FR 56110 (Sep. 13, 2022) (SR-
ICEEU-2022-010) (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Procedures describe how ICE Clear Europe applies its policies 
for reviewing applications for clearing membership, variations of 
permissions for Clearing Members, ongoing monitoring of Clearing 
Members, and termination of clearing membership.

[[Page 65263]]

The proposed rule change would amend the Procedures to: (i) correct a 
typographical error and establish a new defined term; (ii) update the 
names of responsible ICE Clear Europe departments and committees; (iii) 
correct or remove references to material found in other ICE Clear 
Europe policies or the ICE Clear Europe Clearing Rules (the ``Rules''); 
and (iv) clarify certain aspects of ICE Clear Europe's process for 
approving and reviewing Clearing Members.\4\
---------------------------------------------------------------------------

    \4\ This description is substantially excerpted from the Notice, 
87 FR at 56110. Capitalized terms not otherwise defined herein have 
the meanings assigned to them in the Rules or the Procedures, as 
applicable.
---------------------------------------------------------------------------

i. Typographical Correction and New Defined Term

    The proposed rule change would first make minor updates to Section 
1, which describes the purpose of the Procedures. First, it would make 
a typographical correction, changing ``these'' to ``the'' at the 
beginning of the first sentence of the section.
    Section 1 of the Procedures also states that terms used in the 
document are defined in the document or in ICE Clear Europe's Clearing 
Rules. The proposed rule change would retain this statement but would 
add a defined term for ``the Rules'' at the end of the sentence. 
Throughout the Procedures, the proposed rule change would use this new 
defined term and replace references to the ``Clearing Rules'' with 
references to the ``Rules.''

ii. Names of ICE Clear Europe Departments and Committees

    Next, the proposed rule change would update the names of 
responsible ICE Clear Europe departments and committees. Currently, the 
Procedures provide that all applications for clearing membership will 
be subject to due diligence from relevant ICE Clear Europe departments, 
including, among others, Operations, Risk, and Treasury. The proposed 
rule change would change the reference to the ``Risk'' department to 
the ``Credit and Clearing Risk'' department, to encompass both the 
Credit Risk Department and the Clearing Risk Department.
    Similarly, the Procedures currently provide that all applications 
are submitted to the ``Committee'' for approval. The proposed rule 
change would correct this reference to the ``Executive Risk 
Committee,'' which is the current and correct name of that Committee. 
Throughout the Procedures, the proposed rule change also would change 
references to the ``Committee'' to the ``Executive Risk Committee'' or 
``ERC.''

iii. Material Found in Other ICE Clear Europe Policies or Rules

    The proposed rule change also would make a number of amendments to 
correct or remove references to material found in other ICE Clear 
Europe policies or in the Rules. For example, Section 2.2.1 of the 
Procedures, which describes the process to approve an application for 
clearing membership, provides that the Clearing Risk department will 
conduct a review based on financial and qualitative information of 
prospective clearing members. The proposed rule change would remove 
this statement because this review is described in, and governed by, 
ICE Clear Europe's Counterparty Credit Risk Policy and Counterparty 
Credit Risk Procedures.\5\
---------------------------------------------------------------------------

    \5\ For a description of the Counterparty Credit Risk Policy and 
Counterparty Credit Risk Procedures, see Self-Regulatory 
Organizations; ICE Clear Europe Limited; Order Approving Proposed 
Rule Change Relating to Adoption of the Counterparty Credit Risk 
Policy and Counterparty Credit Risk Procedures, Exchange Act Release 
No. 93880 (Dec. 30, 2021), 87 FR 513 (Jan. 5, 2022) (SR-ICEEU-2021-
015).
---------------------------------------------------------------------------

    Section 2.4 describes how ICE Clear Europe may terminate the 
membership of a Clearing Member. Section 2.4.2 states that ICE Clear 
Europe may terminate Clearing Membership in accordance with ICE Clear 
Europe Rule 209 and that the ICE Clear Europe Board is required to 
approve the issuance of a Termination Notice against a Clearing Member. 
The proposed rule change would delete the requirement that the ICE 
Clear Europe Board approve the issuance of a Termination Notice. The 
proposed rule change would remove this requirement because it is not 
part of Rule 209, and ICE Clear Europe would instead rely on the 
general delegation of authority provided by ICE Clear Europe Rule 
114.\6\
---------------------------------------------------------------------------

    \6\ Rule 114(a) provides that ``any action permitted or required 
to be taken by the Clearing House may be taken by the Board, the 
Chairman, the President, any other Director or any other employee, 
officer or committee (or any individual committee member) to whom or 
which authority has been delegated by the Clearing House, the Board, 
the Chairman, the President or any committee.'' Although ICE Clear 
Europe has not issued a specific delegation of authority with 
respect to the issuance of a termination notice, ICE Clear Europe 
believes its existing general Delegation of Authority to its 
President implemented pursuant to Rule 114(a) could potentially 
apply to issuance of a Termination Notice in certain emergency 
scenarios. Notice, 87 FR at 56111.
---------------------------------------------------------------------------

    Section 3.1.1 of the Procedures describes the minimum capital 
requirements for Clearing Members. Section 3.1.1 states that the data 
sources used to determine a Clearing Member's capital are found in the 
Counterparty Credit Policy. The proposed rule change would remove this 
statement because this information is described in, and governed by, 
ICE Clear Europe's Counterparty Credit Risk Policy and Counterparty 
Credit Risk Procedures.\7\
---------------------------------------------------------------------------

    \7\ See Self-Regulatory Organizations; ICE Clear Europe Limited; 
Order Approving Proposed Rule Change Relating to Adoption of the 
Counterparty Credit Risk Policy and Counterparty Credit Risk 
Procedures, Exchange Act Release No. 93880 (Dec. 30, 2021), 87 FR 
513 (Jan. 5, 2022) (SR-ICEEU-2021-015).
---------------------------------------------------------------------------

    Section 3.1.1 also states that in relation to the minimum capital 
requirement, ICE Clear Europe may, among other things, establish 
additional risk-based requirements for Clearing Members which are FCM/
BD Clearing Members (meaning Clearing Members that are registered as 
futures commission merchants and/or broker-dealers) and that wish to 
provide client clearing services. The proposed rule change would 
clarify that ICE Clear Europe could only establish these additional 
requirements for CDS Clearing Members, which are Clearing Members that 
are authorized to clear CDS Contracts. The proposed rule change would 
add this statement because this provision is actually referring to 
Section 2 of the ICE Clear Europe CDS Procedures, which specify 
additional membership requirements for CDS Clearing Members.
    Section 3.1.2 of the Procedures describes, in general, the 
contributions that Clearing Members must make to ICE Clear Europe's CDS 
and Futures and Options (``F&O'') Guaranty Funds. The proposed rule 
change would add to this description references to the F&O Guaranty 
Fund Policy and the CDS Risk Policy because these are the correct ICE 
Clear Europe policies that describe these requirements.
    Section 3.1.3 of the Procedures briefly describes ICE Clear 
Europe's margin-to-capital ratio, which helps to ensure that a Clearing 
Member's maximum margin requirement does not exceed a specified 
multiple of its balance sheet capital. The proposed rule change would 
delete this section as unnecessary because this information is 
described in, and governed by, ICE Clear Europe's Counterparty Credit 
Risk Policy and Counterparty Credit Risk Procedures.\8\
---------------------------------------------------------------------------

    \8\ See Self-Regulatory Organizations; ICE Clear Europe Limited; 
Order Approving Proposed Rule Change Relating to Adoption of the 
Counterparty Credit Risk Policy and Counterparty Credit Risk 
Procedures, Exchange Act Release No. 93880 (Dec. 30, 2021), 87 FR 
513 (Jan. 5, 2022) (SR-ICEEU-2021-015).
---------------------------------------------------------------------------

    Section 4 of the Procedures describes in general how ICE Clear 
Europe monitors Clearing Members on an ongoing basis. Section 4 
currently contains a general statement that further

[[Page 65264]]

information on the ongoing monitoring of Clearing Members can be found 
in the Counterparty Credit Risk Policy. The proposed rule change would 
delete this reference as unnecessary because this information is 
described in, and governed by, ICE Clear Europe's Counterparty Credit 
Risk Policy and Counterparty Credit Risk Procedures.\9\
---------------------------------------------------------------------------

    \9\ Id.
---------------------------------------------------------------------------

    Section 4.3 describes in general ICE Clear Europe's Quarterly 
Counterparty Rating System Report. Section 4.3 currently states that 
ICE Clear Europe's counterparty rating system aggregates risk factors 
covering credit, market price, liquidity and operational risk for each 
Clearing Member and is updated at least once per quarter. The proposed 
rule change would delete this reference as unnecessary because this 
information is described in, and governed by, ICE Clear Europe's 
Counterparty Credit Risk Policy and Counterparty Credit Risk 
Procedures.\10\
---------------------------------------------------------------------------

    \10\ Id.
---------------------------------------------------------------------------

iv. Clarifying Other Aspects of the Clearing Membership Process

    Finally, the proposed rule change would clarify certain aspects of 
the clearing membership process.
    Section 2.2.1 of the Procedures provides that ICE Clear Europe's 
list of Approved Jurisdiction for applicants for clearing membership 
(meaning those jurisdictions for which additional legal and regulatory 
analysis is not required) is maintained in ICE Clear Europe's Clearing 
Membership Parameters. The proposed rule change would delete this 
statement because ICE Clear Europe's legal department maintains this 
list, and ICE Clear Europe does not keep this list in the Clearing 
Membership Parameters.
    Section 4.1 of the Procedures describes ICE Clear Europe's periodic 
reviews of its Clearing Members. Section 4.1 currently states that ICE 
Clear Europe conducts periodic reviews of the financial position and 
compliance with the membership requirements of each Clearing Member to 
provide a baseline measurement of each Clearing Member's reported 
financial position and a measure of relative performance. The proposed 
rule change would retain this description, but would add that ICE Clear 
Europe's periodic reviews include know-your-customer and anti-money 
laundering assessments. ICE Clear Europe is adding this to memorialize 
a review that it already performs in practice.\11\
---------------------------------------------------------------------------

    \11\ Notice, 87 FR at 56111.
---------------------------------------------------------------------------

    Section 4.5 of the Procedures describes ICE Clear Europe's Annual 
Member Return. The Annual Member Return is an annual process through 
which ICE Clear Europe requests that Clearing Members provide and 
confirm information related to their membership. ICE Clear Europe uses 
the Annual Member Return to update information about its Clearing 
Members. Section 4.5 currently states that the Annual Member Return 
includes information on, among other things, key contacts, authorized 
signatories, and compliance with ICE Clear Europe rules. The proposed 
rule change would retain this description and add to it ``updated 
Clearing Member information.'' ICE Clear Europe would be making this 
change to require that Clearing Members provide, as part of the Annual 
Member Return, updated information about the legal entity that is the 
Clearing Member, such as its address and legal name.

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.\12\ For the reasons discussed below, the Commission finds 
that the proposed rule change is consistent with section 17A(b)(3)(F) 
of the Act \13\ and Rules 17Ad-22(e)(2)(i) and 17Ad-22(e)(18) 
thereunder.\14\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2)(C).
    \13\ 15 U.S.C. 78q-1(b)(3)(F).
    \14\ 17 CFR 240.17Ad-22(e)(2)(i) and (e)(18).
---------------------------------------------------------------------------

i. 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.\15\ Based on its review of the record, and for the 
reasons discussed below, the Commission believes the proposed changes 
to the Procedures are consistent with the promotion of the prompt and 
accurate clearance and settlement of securities transactions.
---------------------------------------------------------------------------

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

    The Commission believes that a number of the changes discussed 
above would improve the overall operation and application of the 
Procedures. For example, the Commission believes that correcting the 
errors and introducing the defined term discussed in Part II.i above 
would help to ensure that ICE Clear Europe personnel apply the 
Procedures in a consistent manner and free from error. The Commission 
further believes that correcting the names of responsible ICE Clear 
Europe departments and committees discussed Part II.ii above would help 
to ensure that the correct ICE Clear Europe personnel complete the 
processes and responsibilities specified in the Procedures. Finally, 
the Commission believes that correcting and removing references to 
material found in other ICE Clear Europe policies or in the Rules would 
help to reduce the possibility of conflict between the Procedures and 
other ICE Clear Europe policies or the Rules. The Commission believes 
these changes would help to ensure that ICE Clear Europe personnel 
apply the Procedures in a manner consistent with other ICE Clear Europe 
policies or Rules.
    The Commission further believes that the changes discussed in Part 
II.iv above would help to improve the overall operation and application 
of the Procedures by clarifying certain aspects of ICE Clear Europe's 
process for review and approving clearing membership. Specifically, the 
changes to Section 2.2.1 and 4.1 would make the Procedures consistent 
with ICE Clear Europe's current practices in maintaining the list of 
Approved Jurisdictions and reviewing know-your-customer and anti-money 
laundering compliance. Memorializing these practices in the Procedures 
should help to ensure that ICE Clear Europe continues to perform these 
practices consistently in the future. Similarly, the amendment to 
Section 4.5 should help to ensure that Clearing Members provide to ICE 
Clear Europe updated legal entity information, as needed, as part of 
the Annual Member Return.
    The Commission believes that the Procedures help to ensure that ICE 
Clear Europe effectively manages the potential risks posed by its 
Clearing Members in the clearance and settlement of securities 
transactions. The Commission further believes that these potential 
membership risks, if not properly managed, could threaten ICE Clear 
Europe's ability to operate and thereby clear and settle transactions. 
The Commission therefore believes that the proposed rule change, in 
improving the Procedures, would help to ensure that that ICE Clear 
Europe effectively manages the potential risks posed by its Clearing 
Members and thereby should help to ensure ICE Clear Europe's ability to 
promptly and accurately clear and settle securities transactions, 
consistent with Section 17A(b)(3)(F) of the Act.\16\
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78q-1(b)(3)(F).

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

[[Page 65265]]

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

    Rule 17Ad-22(e)(2)(i) requires that ICE Clear Europe establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to provide for governance arrangements that are 
clear and transparent.\17\ The Commission believes that deleting the 
requirement that the ICE Clear Europe Board approve the issuance of a 
Termination Notice from Section 2.4.2., as discussed in Part II.iii 
above, would help to clarify the process for issuing such a Termination 
Notice. Because Board approval is not a requirement of Rule 209, and 
because Board approval could potentially conflict with a delegation 
issued under ICE Clear Europe Rule 114, the Commission believes this 
proposed change would reduce the possibility for conflict and thereby 
clarify the governance arrangement for issuing a Termination Notice.
---------------------------------------------------------------------------

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

    Therefore, the Commission finds that the proposed rule change is 
consistent with Rule 17Ad-22(e)(2)(i).\18\
---------------------------------------------------------------------------

    \18\ Id.
---------------------------------------------------------------------------

iii. Consistency With Rule 17Ad-22(e)(18)

    Rule 17Ad-22(e)(18) requires that ICE Clear Europe establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to, as applicable, establish objective, risk-based, 
and publicly disclosed criteria for participation, which permit fair 
and open access by direct and, where relevant, indirect participants 
and other financial market utilities, require participants to have 
sufficient financial resources and robust operational capacity to meet 
obligations arising from participation in the clearing agency, and 
monitor compliance with such participation requirements on an ongoing 
basis.\19\ As discussed above, the proposed rule change would require 
that Clearing Members provide, as part of the Annual Member Return, 
updated information about the legal entity that is the Clearing Member, 
such as its address and legal name. The Commission believes this 
requirement is an objective, risk-based, and publicly disclosed 
criteria for participation by Clearing Members.
---------------------------------------------------------------------------

    \19\ 17 CFR 240.17Ad-22(e)(18).
---------------------------------------------------------------------------

    Therefore, the Commission finds that the proposed rule change is 
consistent with Rule 17Ad-22(e)(18).\20\
---------------------------------------------------------------------------

    \20\ Id.
---------------------------------------------------------------------------

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 \21\ and Rules 17Ad-22(e)(2)(i) and 17Ad-22(e)(18).\22\
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78q-1(b)(3)(F).
    \22\ 17 CFR 240.17Ad-22(e)(2)(i) and (e)(18).
---------------------------------------------------------------------------

    It is therefore ordered pursuant to section 19(b)(2) of the Act 
\23\ that the proposed rule change (SR-ICEEU-2022-010) be, and hereby 
is, approved.\24\
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(2).
    \24\ 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.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-23481 Filed 10-27-22; 8:45 am]
BILLING CODE 8011-01-P