[Federal Register Volume 83, Number 218 (Friday, November 9, 2018)]
[Notices]
[Pages 56107-56109]
[FR Doc No: 2018-24521]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84533; File No. SR-ICEEU-2018-015]

Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing of Proposed Rule Change Relating to Amendments to the ICE
Clear Europe Limited Liquidity Plan

November 5, 2018.
    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 October 22, 2018, ICE Clear Europe Limited (``ICE Clear Europe'' or
the ``Clearing House'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as 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 proposes to amend its Liquidity Plan to reflect
changes in its treasury arrangements and certain other enhancements.
The amendments do not involve any changes to ICE Clear Europe's
Clearing Rules or Procedures.\3\
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    \3\ 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
    ICE Clear Europe is proposing to make certain amendments to its
Liquidity Plan to address changes in its treasury activities and to
make certain enhancements to liquidity risk stress testing scenarios
and other clarifications.
    The approved financial institution (``AFI'') default and AFI plus
Member default liquidity stress testing scenarios have been revised to
refer to AFIs (such as investment agents and custodians) more
generally, rather than to specific institutions. For example, in the
AFI default liquidity stress testing scenario, sources used for risk
tolerance and risk appetite evaluation have been revised to refer to
non-defaulting investment agents, rather than a specific bank. In the
AFI plus member default scenario, the scenario has been revised to be
based on a default of an AFI (investment agent or custodian) as
liquidity provider and clearing member, and sources used for evaluation
would look at a non-defaulting service provider. These changes reflect
that the Clearing House may use a number of different AFIs, and thus
will assist the Clearing House in keeping the Liquidity Plan up to date
as service providers change. The amendments also facilitate use by the
Clearing House of additional treasury service providers, consistent
with its other policies and procedures, which will help the Clearing
House appropriately manage risks from treasury operations.
    The amendments also add a new Central Securities Depository (CSD)
default scenario. This is defined as the relevant CSD (the Federal
Reserve (for USD securities), Euroclear Bank (for Euro securities) or
Euroclear UK & Ireland (for GBP securities)) being unable to process
settlements. Under this scenario, available liquidity is assessed
against the expected net cash payment outflow for a single day on a per
currency basis, to determine if such a default could result in a delay
in payment to clearing members.
    Certain other updates and clarifications have been made to the
liquidity stress testing scenarios and related sources used in risk
tolerance and risk appetite evaluations. These include amendments to
address reliance on intra-day overdraft facilities and eliminate
references to an ICE Inc. (the parent company of ICE Clear Europe)
credit facility. In calculating the investment loss component of
liquidity stress losses in clearing member default scenario, the
amendments clarify that time deposits are assumed to have a 100%
liquidity loss, similar to other unsecured investments. The amendments
also clarify certain arrangements with respect to cross-currency
investment for purposes of liquidity stress testing. U.S. dollar cash
can, in certain circumstances, be invested through reverse repurchase
agreements in assets denominated in Euro or pounds sterling, but for
scenarios that look at cash invested with a one-day maturity, such
investments will be excluded from available liquidity resources. The
amended plan notes that cross-currency investments for Euro and British
pounds sterling balances are not permitted.
    The amendments update a table of key risk and performance
indicators (KRPIs) used by the Clearing House to determine if
investments meet the credit and liquidity standards set out in Clearing
House investment policies. Additional KRPIs included in the Liquidity
Plan address such indicators as rating checks for unsecured
investments, repo counterparties and sovereigns; the level of sovereign
purchases; matching of the currency of investment and underlying
collateral; collateral coverage; and repo balance per counterparty by
rating. The KRPI for unsecured investment tenor is reduced to one
business day. The KRPI for aggregate reverse repo balance is reduced
from 55% of total investments to 50%. The KRPI for reverse repo tenor
is revised to be less than or equal to 37 days. Certain other
clarifications and typographical corrections are also made.
    The amendments also update cross-references to various treasury
standard operating procedures used by the Clearing House.
    Certain internal reporting processes have been streamlined. A
number of weekly and monthly reports would no longer be provided on a
routine basis to the Board Risk Committee and the Board. New governance
reporting requirements have been added instead, with (i) certain
liquidity metrics (including breaches) being provided to the Audit
Committee, (ii) collateral and investment data, APS performance and
exposure, liquidity metrics and assessments, and KRPI data being
provided to the Board, and (iii) a liquidity management summary and
certain other summary data being provided to the Business Risk
Committee. ICE Clear Europe believes that these amendments will enhance
oversight of Clearing House liquidity risk management.
    Certain clarifications are made to provisions relating to the
annual testing of the Liquidity Plan. In addition, the amendments also
provide that at least on an annual basis, the Liquidity Plan will be
reviewed by the Executive Risk Committee (instead of the Business
Control Committee).
    The appendices have been edited to remove an unnecessary list of
risk default scenarios.

(b) Statutory Basis
    ICE Clear Europe believes that the proposed rule changes are
consistent with the requirements of Section 17A of the Act \4\ and the
regulations thereunder applicable to it, including the standards under
Rule 17Ad-22.\5\ 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.
In addition, Rule 17Ad-22(e)(7) \7\ requires covered clearing agencies
to effectively measure, monitor and manage their liquidity risk,
including through liquidity stress testing.\8\
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    \4\ 15 U.S.C. 78q-1.
    \5\ 17 CFR 240.17Ad-22.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ 17 CFR 240.17Ad-22(e)(7).
    \8\ Specifically, Rule 17Ad-22(e)(7)(vi) requires that the
covered clearing agency:
    ``(vi) Determin[e] the amount and regularly testing the
sufficiency of the liquid resources held for purposes of meeting the
minimum liquid resource requirement under paragraph (e)(7)(i) of
this section by, at a minimum:
    (A) Conducting stress testing of its liquidity resources at
least once each day using standard and predetermined parameters and
assumptions. . . .'' 17 CFR 240.17Ad-22(e)(7).
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    The proposed amendments to the Liquidity Plan are designed to
update and strengthen the clearing house's policies and procedures
relating to liquidity risk management, in light of these requirements.
In particular, the revised policies will enhance certain liquidity
stress testing scenarios, by more readily taking into account relevant
changes in treasury service providers in AFI failure scenarios and
addressing the possibility of a CSD failure through the CSD default
scenario. The amendments also update monitoring metrics and standards,
including through revised KRPIs. In addition, the revisions improve
internal reporting and oversight of liquidity risk management, and
specify the appropriate governance framework for review of liquidity
stress testing and related metrics and parameters, among other matters.
In ICE Clear Europe's view, the amendments thereby enhance the ability
of the clearing house to assess potential liquidity events that may
affect its ability to conduct settlements for cleared transactions,
which in turn will strengthen its ability to manage such events in
order to continue clearing house operations. As such, ICE Clear Europe
believes that the changes will promote the prompt and accurate
settlement of securities and derivatives transactions and, in general,
protect investors and the public interest within the meaning of Section
17A(b)(3)(F) .\9\ Furthermore, and for similar reasons, ICE Clear
Europe believes that the amendments are consistent with the specific
liquidity testing and monitoring requirements of Rule 17Ad-
22(e)(7).\10\
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    \9\ 15 U.S.C. 78q-1(b)(3)(F).
    \10\ 17 CFR 240.17Ad-22(e)(7).
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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 enhance the Clearing House's own liquidity stress
testing procedures. The amendments are not expected to change the
rights or obligations of Clearing Members or the terms or conditions of
any cleared contract. In addition, the amendments should not materially
affect the cost of clearing for Clearing Members or other market
participants, and should not otherwise affect accessing to clearing for
any market participants. As a result, the amendments should not affect
competition among Clearing Members or other market participants.

(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 comments received with respect to the proposed
rule change.

III. Date of Effectiveness of the Proposed Rule Change

    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 such 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 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-2018-015 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-2018-015. 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 a.m. and 3
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#rule-filing. 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-2018-015
and should be submitted on or before November 30, 2018.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-24521 Filed 11-8-18; 8:45 am]
 BILLING CODE 8011-01-P