[Federal Register Volume 85, Number 79 (Thursday, April 23, 2020)]
[Notices]
[Pages 22892-22922]
[FR Doc No: 2020-08487]

Vol. 85

Thursday,

No. 79

April 23, 2020

Part III

 Securities and Exchange Commission

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Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of
Filing of Partial Amendment No. 1 and Order Granting Accelerated
Approval of Proposed Rule Change, as Modified by Partial Amendment No.
1, Relating to the ICE Clear Europe Rules and Procedures; Notice

Federal Register / Vol. 85, No. 79 / Thursday, April 23, 2020 /
Notices

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88665; File No. SR-ICEEU-2020-003]

Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing of Partial Amendment No. 1 and Order Granting Accelerated
Approval of Proposed Rule Change, as Modified by Partial Amendment No.
1, Relating to the ICE Clear Europe Rules and Procedures

April 16, 2020.

I. Introduction

    On February 18, 2020, 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 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to revise its Clearing Rules (the ``Rules''),\3\
the Standard Terms contained in the annexes to the Rules, the Clearing
Procedures, Finance Procedures, Delivery Procedures, CDS Procedures, FX
Procedures, Complaint Resolution Procedures, Business Continuity
Procedures, Membership Procedures, and General Contract Terms
(collectively, the ``Amended Documents'') to make various updates and
enhancements. The proposed rule change was published for comment in the
Federal Register on March 6, 2020.\4\ The Commission did not receive
comments on the proposed rule change. On April 15, 2020, ICE Clear
Europe filed Partial Amendment No. 1 to the proposed rule change.\5\
The Commission is publishing this notice to solicit comments on Partial
Amendment No. 1 from interested persons and, for the reasons discussed
below, is approving the proposed rule change, as modified by Partial
Amendment No. 1 (hereinafter the ``proposed rule change'') on an
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Capitalized terms used but not defined herein have the
meanings specified in the Rules.
    \4\ Securities Exchange Act Release No. 88308 (Mar. 2, 2020), 85
FR 13200 (Mar. 6, 2020) (SR-ICEEU-2020-003) (``Notice'').
    \5\ ICE Clear Europe filed Partial Amendment No. 1 to update
Exhibit 5C, the Finance Procedures, to reflect changes made to the
Finance Procedures by filing SR-ICEEU-2020-004 subsequent to the
initial filing of this proposed rule change. See Self-Regulatory
Organizations; ICE Clear Europe Limited; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Relating to
Amendments to the Finance Procedures, Securities Exchange Act
Release No. 88433 (Mar. 20, 2020), 85 FR 17139 (Mar. 26, 2020) (SR-
ICEEU-2020-004). Partial Amendment No. 1 also corrects a
typographical error in the amendment to Rule 1005(d) by restoring
the requirement in Rule 1005(d) that no person shall serve on or sit
with an Appeal Panel if that person has certain specified conflicts
of interests, which had unintentionally been deleted. Finally,
Partial Amendment No. 1 makes minor typographical corrections in
relation to both of those changes.
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II. Description of the Proposed Rule Change

A. Background

    The proposed rule change would modify the Amended Documents to make
a variety of improvements and updates to reflect current operational
practice at ICE Clear Europe. For purposes of discussing these changes
and considering their consistency with the Act and the Rules, these
changes have been categorized below according to the aspects of Rule
17Ad-22(e) \6\ and the Exchange Act \7\ which apply to ICE Clear Europe
as a covered clearing agency.
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    \6\ 17 CFR 240.17Ad-22(e).
    \7\ 15 U.S.C. 78q-1(b)(3).
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B. 17Ad-22(e)(1)

    As discussed in this section, the proposed rule change would make a
number of clarifications and drafting improvements to the Amended
Documents. ICE Clear Europe is making these changes to ensure that its
Rules and Procedures provide for a well-founded, clear, transparent,
and enforceable legal basis for each aspect of ICE Clear Europe's
activities in all relevant jurisdictions, in accordance with the
requirement of Rule 17Ad-22(e)(1).\8\ These changes are discussed
below, organized by the nature of each change.
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    \8\ 17 CFR 240.17Ad-22(e)(1).
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i. Definition of Capital
    Currently, the definition of the term ``Capital'' in Rule 101
references the Banking Consolidation Directive. This directive, which
set out the capital requirements framework for EU banks and broker-
dealers, was replaced and superseded by the Capital Requirements
Regulation and Capital Requirements Directive. The proposed rule change
would replace references to the Banking Consolidation Directive in the
defined term Capital with references to the Capital Requirements
Regulation and Capital Requirements Directive. The proposed rule change
would also delete from Rule 101 the definition for the Banking
Consolidation Directive and provide definitions for the terms Capital
Requirements Regulation and Capital Requirements Directive.
ii. Definition of Failure to Pay
    Currently, Rule 101 defines a ``Failure to Pay'' as the failure of
ICE Clear Europe to make any payment when due if such failure is not
remedied on or before the date falling three business days after notice
of such failure is given to ICE Clear Europe. Under Rule 110(b),
however, ICE Clear Europe may extend the time for making payments
whenever in its discretion it considers that such extension is
necessary or in the best interests of ICE Clear Europe but may not
extend for longer than three business days after such payment is due
unless such extension is approved by ICE Clear Europe's Board.
Currently, the definition of ``Failure to Pay'' provides that where ICE
Clear Europe makes such an extension, a Failure to Pay shall occur if
ICE Clear Europe does not remedy the failure by 10 a.m. on the next
Business Day after service of a notice of that failure to ICE Clear
Europe by the Clearing Member or Sponsored Principal to whom such
payment or return is due, provided that such notice is given no earlier
than the final day of the extended period. The proposed rule change
would clarify this provision to provide that where ICE Clear Europe
makes such extension, a Failure to Pay shall not occur until after the
three business day period and the extended period have cumulatively
elapsed. This proposed change would help to clarify an important point
that is assumed in the current definition of ``Failure to Pay,'' namely
that if ICE Clear Europe makes an extension, the Failure to Pay does
not occur after the end of such extended period and the normal three
business day period.
iii. Use of Guaranty Fund in Part 9 of the Rules
    Rule 906(a) defines how ICE Clear Europe calculates the net sum
payable by or to a defaulting Clearing Member. Among other things, this
calculation includes the value of the defaulting Clearing Member's
contributions to the Guaranty Fund. The proposed rule change would
amend this calculation to provide that Guaranty Fund contributions must
be applied for this purpose ``in accordance with Rules 906(b) and
(c).'' Those provisions set out restrictions on the setting off or
aggregation of assets attributable to different accounts of a
defaulting Clearing Member for the purposes of the net sum calculation.
Thus, this proposed change would not change current practice but rather
would help to resolve a potential conflict by clarifying in Rule 906(a)
that these limitations apply to the use of the Guaranty Fund
contributions in determining the net sum calculations under Rule
906(a).

    The proposed rule change would make a similar change to the final
subparagraph of Rule 906(b). As discussed above, Rule 906(b) sets out
restrictions on the setting off or aggregation of assets attributable
to different accounts of a defaulting Clearing Member. The final
paragraph of Rule 906(b) provides that a defaulting Clearing Member's
Guaranty Fund contributions may be used for the purpose of calculating
any net sum on any Account relating to that defaulting Clearing Member
in accordance with Rule 906(a) and subject to the restrictions in Rule
908, Rule 102(q), and Rule 906(b). For the sake of clarity, the
proposed rule change add to this list of restrictions a reference to
Rule 906(c), in addition to the existing rules that are referenced.
Thus, this proposed change would not change current practice but rather
would clarify that the limitation in 906(c) also applies in 906(b).
iv. Set Off Under Rule 906(a)
    Rule 906(c) provides that ICE Clear Europe may aggregate, set off
or apply any Margin, Surplus Collateral or other surplus assets
available to it in relation to a defaulting Clearing Member's house
account to meet a shortfall on any one or more of that defaulting
Clearing Member's customer accounts or Individually Segregated
Sponsored Accounts which the defaulting Clearing Member sponsored. The
proposed rule change would amend this provision to provide that ICE
Clear Europe ``shall'' aggregate, set off, or apply surplus assets,
rather than ``may.'' ICE Clear Europe represents that this proposed
change would not change its default management practices, as in
practice it has treated this provision as mandatory.\9\ Rather, the
proposed rule change would clarify the operation of Rule 906(a) by
eliminating what could appear to be discretion granted to ICE Clear
Europe in whether to aggregate, set off, or apply surplus assets.
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    \9\ Notice, 85 FR at 13210.
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v. Liability for an Individually Segregated Sponsored Account
    The proposed rule change would clarify Rule 912(b)(iv). Rule
912(b)(iv) provides that both the Sponsor and Sponsored Principal
remain jointly liability in respect of any liability on an Individually
Segregated Sponsored Account, in the event of certain terminations of a
Clearing Member's membership at ICE Clear Europe. The proposed rule
change would clarify this provision to provide that the Sponsor and
Sponsored Principal remain ``jointly and severally'' liable, rather
than just ``jointly'' liable. According to ICE Clear Europe, counsel to
an industry association suggested this change to ensure that the
liabilities and assets on sponsored accounts have mutuality.\10\ ICE
Clear Europe also represents that the change would fix a drafting error
as the revised language would be consistent with other provisions in
Part 19, and ICE Clear Europe inadvertently omitted the ``and
severally'' language when adopting Rule 912(b)(iv).\11\
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    \10\ Notice, 85 FR at 13210.
    \11\ Notice, 85 FR at 13210.
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vi. Transfer Orders
a. Changes To Ensure an Enforceable Legal Basis
    The proposed rule change would make a number of amendments to Part
12 of the Rules, regarding ICE Clear Europe's use of Transfer Orders, a
term which is defined in Rule 1201(r) to mean a Payment Transfer Order
and a Securities Transfer Order. As discussed in the preamble to Part
12 of the Rules, ICE Clear Europe uses Transfer Orders, including
Payment Transfer Orders and Securities Transfer Orders, pursuant to the
Financial Markets and Insolvency (Settlement Finality) Regulations 1999
(``Settlement Finality Regulations''). The changes described below
would make a number of updates and clarifications to Part 12 in order
to help ensure that there is a sound and legally enforceable basis for
ICE Clear Europe's use of Transfer Orders pursuant to the Settlement
Finality Regulations. Because the Settlement Finality Regulations
exclude Transfer Orders from certain provisions of insolvency law, like
disclaimer and rescission of contracts, and also protect against
application of national EU insolvency laws, the changes described below
would help ensure the finality of such orders and thereby help to
ensure that ICE Clear Europe's payments and transfers have a well-
founded and enforceable legal basis.\12\
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    \12\ Notice, 85 FR at 13210.
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    The proposed rule change first would amend Rule 1202(b)(i). Rule
1202(b)(i) defines the circumstances under which a Securities Transfer
Order automatically arises, subject to Regulation 20 of the Settlement
Finality Regulations. The proposed rule change would add a new
paragraph (B) to provide that a Securities Transfer Order would be
deemed to arise in the event one Clearing Member (or Sponsored
Principal) allocated an F&O Contract to another Clearing Member (or
Sponsored Principal) under Rule 401(a)(viii) and Rule 401(e) (both of
which explain when an F&O contract is deemed to have arisen upon
allocation). In providing that a Securities Transfer Order would arise
in such a circumstance, ICE Clear Europe is in effect extending the
protections provided by the Settlement Finality Regulations because, as
discussed above, under Part 12 of the Rules, a Securities Transfer
Order is covered by the Settlement Finality Regulations. Thus, ICE
Clear Europe believes that this aspect of the proposed rule change
would extend the protections against insolvency regimes to the
allocation of F&O contracts.\13\
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    \13\ Notice, 85 FR at 13215.
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    To further effectuate this change, the proposed rule change would
make two additional clarifications to Rule 1202. Under Rule 1202(b), a
Securities Transfer Order is further defined as a Position Transfer
Order, and, under Rule 1202(f), each Position Transfer Order applies
and has effect in respect of the Contracts to be transferred, assigned
or novated. The proposed rule change would amend Rule 1202(b) and
1202(f), with respect to a Position Transfer Order, to further refer to
Contracts that are ``allocated.'' ICE Clear Europe is making this
change to be consistent with the change to 1202(b)(i) discussed above,
which treats the allocation of an F&O contract as a Securities Transfer
Order.\14\
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    \14\ Notice, 85 FR at 13215.
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    Along the same line of these changes to Part 12, the proposed rule
change would add to Rule 902 a new paragraph (d). New paragraph (d)
would state that ``Transfer Orders shall be legally enforceable,
irrevocable and binding on third parties in accordance with Part 12,
even on the occurrence of an Event of Default.'' Thus, proposed
paragraph 902(d) would bolster the protections provided by Part 12 and
the Settlement Finality Regulations by further confirming that a
Transfer Order, including one used to transfer contracts following a
Clearing Member's default, is legally enforceable, irrevocable, and
binding on third parties.
b. Clarifications Related to the Use of Transfer Orders
    In addition to the changes described above, the proposed rule
change would also make a number of clarifications to Part 12 to ensure
that Part 12 is consistent with the rest of ICE Clear Europe's Rules.
    First, the proposed rule change would amend Rule 1202(m)(iv)(A),
which refers to a Clearing Member whose rights, liabilities, and
obligations are novated pursuant to a Position Transfer Order, to also
refer to the Clearing Member's rights, liabilities, and

obligations being ``transferred'' or ``assigned'' rather than just
``novated.'' ICE Clear Europe is making these changes to ensure
consistency with the terminology used elsewhere in the Rules (for
example in Part 9) in relation to the transfer of positions from one
Clearing Member to another Clearing Member (whether in a default
scenario or otherwise).\15\ These proposed changes would also ensure
that the provisions in Part 12 relating to Position Transfer Orders
capture the full range of mechanisms through which positions can be
transferred from one Clearing Member to another.
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    \15\ Notice, 85 FR at 13210.
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    Similarly, the proposed rule change would amend Rule 1202(m)(vi)(B)
to add the words ``or Customer'' after the word ``Affiliate'' to
correct an unintentional omission.\16\
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    \16\ Notice, 85 FR at 13210.
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    Finally, the proposed rule change would amend Rule 1205(i), which
explains when a New Contract Payment Transfer Order is deemed to be
satisfied. The proposed rule change would provide that, in addition to
the circumstances already listed in Rule 1205(i), New Contract Payment
Transfer Orders shall also be satisfied if and at the point that the
relevant F&O Transaction or F&O Contract ``has become subject to a
Position Transfer Order that has itself become satisfied under Rule
1205(b).'' Under Rule 1205(b), a Position Transfer Order is satisfied
when ICE Clear Europe updates its records to reflect the Open Contract
Position of the Clearing Member to whom the contract is assigned,
transferred, or novated. ICE Clear Europe is making this drafting
change to clarify that a New Contract Payment Transfer Order would
terminate if the relevant transaction or contract to which it relates
has become subject to a Position Transfer Order that has been
satisfied.
vii. Complaints Resolution Procedures
    The proposed rule change would make a number of clarifications to
ICE Clear Europe's Complaints Resolution Procedures, which detail how
ICE Clear Europe would consider complaints made to it regarding the
conduct of ICE Clear Europe or any of its officers, employees, or
Directors. The proposed rule change would first amend Rule 1001(d),
which details the scope of complaints subject to the Complaints
Resolution Procedures. Rule 1001(d) currently subjects to the
Complaints Resolution Procedures any complaint against ICE Clear Europe
or any of its officers, employees, or agents in their capacity as such.
The proposed rule change would amend Rule 1001(d) to clarify that the
Complaints Resolution Procedures also apply to complaints against ICE
Clear Europe's Directors, committees, and any individual committee
members. ICE Clear Europe is making this change to fix an error in the
drafting of Rule 1001(d), and ICE Clear Europe represents that it did
not intend to exclude directors and committees from the scope of the
Complaints Resolution Procedures.\17\ Thus, ICE Clear Europe is making
this change to fix a drafting error.\18\
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    \17\ Notice, 85 FR at 13206.
    \18\ Notice, 85 FR at 13215.
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    In addition to that change, the proposed rule change would amend
the Complaints Resolution Procedures to ensure that they are consistent
with the requirements of UK law applicable to ICE Clear Europe, clarify
the scope of the procedures, clarify the process and timing for
resolving complaints, clarify the effect of referring a complaint to an
independent Complaints Commissioner, and update cross-references and
correct typographical errors. As discussed below, ICE Clear Europe is
making these changes to ensure that it maintains the Complaints
Resolution Procedures in accordance with the requirements of UK law,
and therefore ICE Clear Europe believes these changes would help ensure
that its activities in the UK have an enforceable legal basis.\19\
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    \19\ Notice, 85 FR at 13215. The Commission has previously
stated that under Rule 17Ad-22(e)(1), a Covered Clearing Agency such
as ICE Clear Europe should consider whether its policies and
procedures for legal risk provide a high degree of certainty for
each material aspect of its activities in all relevant jurisdictions
and whether it has rules, policies and procedures, and contracts
that are enforceable in all relevant jurisdictions and whether it
has a high degree of certainty that actions taken by it under such
rules, policies and procedures, and contracts will not be voided,
reversed, or subject to stays. See Securities Exchange Act Release
No. 78961 (Sep. 28, 2016), 81 FR 70786, 70802 (Oct. 13, 2016)
(``Covered Clearing Agencies Release'').
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    Beginning with the requirements of UK law, the proposed rule change
would amend Paragraph 2.1 of the Complaints Resolution Procedures to
clarify that a complaint eligible to be heard under the Procedures (an
``Eligible Complaint'') is only a complaint relating to the manner in
which ICE Clear Europe has performed, or failed to perform, its
regulatory functions as defined by Section 291(3) of the Financial
Services and Markets Act 2000 (``FSMA''). The FSMA requires that ICE
Clear Europe maintain procedures for resolving complaints related to
its regulatory functions.\20\ Similarly, the proposed rule change would
add references to the FSMA in Paragraphs 4.4 and 7.4 of the Complaints
Resolution Procedures. Thus, ICE Clear Europe is making these changes
to help ensure that it maintains the procedures required under UK law,
specifically the FSMA.
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    \20\ Notice, 85 FR at 13208.
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    The proposed rule change would also clarify the scope of the
Complaints Resolution Procedures. The proposed rule change first would
amend the Complaints Resolution Procedures to clarify that they apply
to complaints against ICE Clear Europe's Directors, committees, and any
individual committee members, consistent with the change to Rule
1001(d) discussed above. Moreover, the proposed rule change would
clarify that the Complaints Resolution Procedures do not apply to any
complaint arising out of a contractual or commercial dispute that is
not connected to the manner in which ICE Clear Europe has performed or
failed to perform its regulatory functions under the FSMA.
    The proposed rule change also would revise and clarify the process
for investigating and resolving complaints. First, the proposed rule
change would amend Paragraph 3.5, which currently states that ICE Clear
Europe will not charge Complainants in relation to any Complaint, by
clarifying that ICE Clear Europe may seek to recover costs if it can be
shown that the Complaint was frivolous and vexations. In new Paragraph
3.6, the proposed rule change would provide ICE Clear Europe the
authority to resolve complaints through an alternative process, like
mediation, provided that ICE Clear Europe may only do so within four
weeks of receiving the Eligible Complaint. Relatedly, in Section 4, the
proposed rule change would update the timelines applicable to ICE Clear
Europe for acknowledging receipt of a Complaint and for dismissing a
Complaint that is not an Eligible Complaint to account for the
possibility of an alternative resolution under Paragraph 3.6.
    The proposed rule change would next add new provisions dealing with
the process for appointing of an investigator, procedures for delaying
the complaints process where there are contemporaneous court or other
proceedings dealing with the same or a related matter, timelines for
complaints investigations, and procedures surrounding the referral of
complaints to the independent Complaints Commissioner where they are
not dealt with expeditiously by an investigation. The proposed rule
change would also add provisions in Paragraph 4.4 to specify the
matters that the investigator must consider when deciding whether

to uphold or reject a complaint against ICE Clear Europe, consistent
with the FSMA. In Paragraph 5, the proposed rule change would clarify
the manner in which the investigator would provide to ICE Clear Europe
and the complainant its conclusions and recommendations for remedial
action, if any, and the proposed rule change would remove an
unnecessary reference to referral of a complaint to an independent
Complaints Commissioner because that is covered in Section 4 and
Section 6.
    In Sections 6, 7, and 8, the proposed rule change would clarify the
effect of referring a complaint to an independent Complaints
Commissioner. First, the proposed rule change would confirm, in new
Paragraph 6.3, that if a complaint is referred to an independent
Complaints Commissioner, the Complainant agrees to be bound by the
Commissioner's recommendation, if adopted by ICE Clear Europe, and
accepts that the recommendation, if adopted by ICE Clear Europe, would
be the full and final resolution and settlement of the complaint. The
proposed rule change would remove similar language in existing
Paragraph 1.4 of the Complaints Resolution Procedures because that
provision would now be duplicative in that event. In Section 7, the
proposed rule change would revise the timing for certain actions of the
Commissioner upon referral of a complaint and make similar changes as
discussed above regarding Paragraph 4.4 to clarify the basis for
upholding or rejecting a complaint, consistent with the FSMA. Finally,
in Section 8, the proposed rule change would clarify the procedures for
the Commissioner to report on the results of the investigation. The
proposed rule change would also modify Paragraph 8.2 to remove the
Commissioner's authority to require ICE Clear Europe to publish its
report and give to ICE Clear Europe the discretion to decide whether to
publish a Commissioner's report.
    Finally, throughout the Complaints Resolution Procedures, the
proposed rule change would make a number of typographical and similar
corrections, updates to cross-references, and similar non-substantive
drafting corrections. For example, the proposed rule change would
update the title of the procedures to the ``Complaints Resolution
Procedures'' and change ``should'' to ``must'' and ``shall'' to
``will'' to clarify the binding nature of certain aspects of the
Procedures.
    As discussed above, ICE Clear Europe is making these changes to
improve the functioning of the Complaints Resolution Procedures and
clarify certain matters as required under UK law, specifically the
FSMA. In so doing, ICE Clear Europe believes that it is helping to
ensure that its activities in the UK have an enforceable legal
basis.\21\
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    \21\ Notice, 85 FR at 13215.
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viii. F&O Contract Settlement
a. Clarifying Concepts That Apply to Both Futures and Options
    ICE Clear Europe proposes a number of changes to harmonize the
terms used with respect to the settlement of Futures and Options and to
make other drafting improvements. Because ICE Clear Europe treats
Futures and Options as part of one related category of F&O Contracts,
having one harmonized set of terms should improve the efficiency of ICE
Clear Europe's processes with respect to F&O Contracts.
    First, the proposed rule change would amend the definitions of
``Put,'' ``Set,'' and ``Short'' in Rule 101, to improve their clarity
and consistency with terminology used for Futures and Options. ICE
Clear Europe is making this change to ensure that these terms clearly
refer to Futures and Options, avoiding potential confusion over the use
of the terms.\22\
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    \22\ Notice, 85 FR at 13205.
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    Next, the proposed rule change would amend the term
``Deliverable,'' which Rule 101 currently defines as ``any property,
right, interest, register or book entry, commodity, certificate,
property entitlement or Investment, which is capable of being delivered
pursuant to an F&O Contract.'' The proposed rule change would update
this definition to add ``or with respect to which settlement amounts
are calculated'' at the end of the definition. ICE Clear Europe is
making this change to reflect the fact that the term is used not only
in relation to property deliverable under F&O Contracts, but also in
relation to the calculation of cash amounts to settle F&O
Contracts.\23\ Thus, this change would improve the clarity of the term
and help to ensure that it is defined consistently with ICE Clear
Europe's operational practice.\24\
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    \23\ Notice, 85 FR at 13205.
    \24\ Notice, 85 FR at 13215.
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    Similarly, the proposed rule change would delete the term
``Reference Price'' from Rule 101 and revise the definition of
``Exchange Delivery Settlement Price.'' Under the proposed rule change,
ICE Clear Europe would no longer use the term Reference Price to refer
to the settlement price of an F&O Contract, but rather the term
Exchange Delivery Settlement Price. Exchange Delivery Settlement Price
is already defined in Rule 101 as the closing, delivery, or cash
settlement price determined pursuant to Rule 701 with respect to an F&O
Contract or set of F&O Contracts. Although this definition already
refers to Options, through the use of the term F&O (which is defined in
Rule 101 to include Futures and Options), it does not refer to Rule
802, which is the rule that provides the procedure for determining the
settlement price for Options. Moreover, the definition of Exchange
Delivery Settlement Price already captures this concept with respect to
Futures, because it refers to the price determined pursuant to Rule
701, and Rule 701 provides the procedure for determining the settlement
price for Futures. Thus, to clarify that the term Exchange Delivery
Settlement Price is applicable to the settlement price of Options the
same as it is for Futures, ICE Clear Europe would add a cross-reference
to Rule 802 to the definition. ICE Clear Europe further believes this
change is appropriate because it would ensure that the Rules use one
consistent, clear term for Futures and Options with respect to the
concept of settlement price, which applies equally to Futures and
Options.\25\
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    \25\ Notice, 85 FR at 13215.
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    Relatedly, the proposed rule change would make non-substantive
drafting clarifications to other rules and procedures to further these
changes to the defined terms. Specifically, the proposed rule change
would amend Rules 802, Rule 810(d), and 904(b) to use the term Exchange
Delivery Settlement Price instead of Reference Price. Moreover, the
proposed rule change would make changes throughout the Clearing
Procedures and paragraph 3.1(b) of the General Contract Terms to use
the term Exchange Delivery Settlement Price. ICE Clear Europe is making
these changes to further the changes described above, which it believes
would ensure that the Rules use one consistent, clear term for Futures
and Options with respect to the concept of settlement price, which
applies equally to Futures and Options.\26\
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    \26\ Notice, 85 FR at 13215.
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    The proposed rule change would also amend Rule 905(b)(vi), which
gives ICE Clear Europe the power to pair and cancel offsetting Long and
Short positions in the same Future or Option Set to close out contracts
of a defaulting Clearing Member. The proposed rule change would insert
the words ``buy and sell or'' before ``Long and Short Positions'' to
reflect the terminology used throughout the Rules to refer to opposite
positions in Futures. Thus, ICE

Clear Europe is making this particular change to ensure this provision
remains consistent with other provisions that apply to Futures, and
therefore believes this change would enhance the clarity of this
provision.
b. Amendments to Part 7 and Part 8 of the Rules
    In addition to the changes to improve the clarity of concepts that
apply to both Futures and Options, the proposed rule change would amend
Part 7 and Part 8 of the Rules, the Clearing Procedures, and the
General Contract Terms to clarify ICE Clear Europe's written procedures
for settling Futures and Options and ensure that those written
procedures accurately reflect ICE Clear Europe's current operational
practice, as discussed below.
    Beginning with Rule 701, which describes the determination of the
Exchange Delivery Settlement Price for Futures, the proposed rule
change would amend the title of Rule 701 to add ``for Futures'' at the
end of the title. ICE Clear Europe is making this change to clarify
that Rule 701 applies to Futures and distinguish it from Rule 802,
which describes the determination of the Exchange Delivery Settlement
Price for Options. This change is necessary because under the proposed
rule change, as described above, the concept of Exchange Delivery
Settlement Price would apply to both Futures and Options.
    The proposed rule change would also amend Rule 701(b), which
currently provides that the Exchange Delivery Settlement Price will
generally be determined on the basis of data provided by the Market on
which the Contract in question is traded. The proposed rule change
would amend this to refer to data that is published by the Market on
which the contract in question is traded, in addition to data that is
provided by the Market. The proposed rule change would also amend Rule
701(b) to state that ICEEU would determine the Exchange Delivery
Settlement Price in accordance with applicable Market Rules, subject to
Rule 701(c). Rule 701(c) provides that ICE Clear Europe shall be
entitled to determine the Exchange Delivery Settlement Price itself, in
certain circumstances at its discretion. In Rule 701(c), the proposed
rule change add a provision to explain that ICE Clear Europe would
communicate to its Clearing Members any Exchange Delivery Settlement
Price determined by ICE Clear Europe under Rule 701(c). Finally, the
proposed rule change would make corresponding changes to Rule 802,
which describes the determination of the Exchange Delivery Settlement
Price for Options. ICE Clear Europe is making these changes to reflect
the fact that Markets also publish data and that ICE Clear Europe must
act in accordance with applicable Market rules.\27\ ICE Clear Europe is
also adding the reference to existing Rule 701(c) to make clear that
Rule 701(b) is subject to 701(c).\28\ Thus, in making these changes,
ICE Clear Europe believes its Rules and Procedures with respect to F&O
Contracts are free from potential conflicts.\29\
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    \27\ Notice, 85 FR at 13205.
    \28\ Notice, 85 FR at 13205.
    \29\ 17 CFR 240.17Ad-22(e)(1); Notice, 85 FR at 13215.
---------------------------------------------------------------------------

    Rule 702(a) describes the situations in which a Futures Contract
shall be settled in cash, and Rule 702(b) explains that cash settlement
and delivery amounts are determined for Customer Accounts based on
gross positions. The proposed rule change would add to Rule 702(b) the
phrase ``without prejudice to any contractual netting under Rule 406 or
the Clearing Procedures.'' The proposed rule change would make an
identical change to Rule 705(a). Under Rule 406, contractual netting
may be applied to offsetting positions in respect of one of a Clearing
Member's Customer Accounts even though such positions are ordinarily
held gross. ICE Clear Europe is adding the language in Rule 702(b) and
Rule 705(a) to clarify that while cash settlement and delivery amounts
are determined for Customer Accounts based on gross positions under
Part 7, this does not preclude contractual netting of positions where
provided for under Rule 406 or the Clearing Procedures (including
contractual netting within the positions of a particular Customer of a
Clearing Member), thus avoiding a potential conflict between Part 7 and
Rule 406.
    In addition, the proposed rule change would amend Rule 703, which
relates to deliveries under Futures contracts. Rule 703(a) provides
that the Delivery Procedures and the requirements of Rule 703 shall
apply to any Futures that are not settled in cash. The proposed rule
change would make a clarification by providing that a Market may
administer matters or exercise rights on behalf of ICE Clear Europe
pursuant to Rule 703 and the Delivery Procedures. This amended
provision is needed to reflect the fact that Markets are typically
involved in the delivery process for Futures and may carry out
functions otherwise specified to be discharged by ICE Clear Europe
pursuant to the Rules or the Delivery Procedures.\30\ Thus, ICE Clear
Europe is making this change to ensure that Rule 703 is consistent with
current operational practice in which Markets are involved in the
delivery process for Futures.\31\
---------------------------------------------------------------------------

    \30\ Notice, 85 FR at 13206.
    \31\ 17 CFR 240.17Ad-22(e)(1); Notice, 85 FR at 13215.
---------------------------------------------------------------------------

    In addition to these changes, the proposed rule change would amend
Paragraph 5.2(d) of the Clearing Procedures, which currently provides
that when an Option is exercised, a Contract at the Strike Price of the
Option will arise in accordance with Rule 401. The proposed rule change
would amend this to specify that it only applies in relation to Options
``whose Deliverable is a Future Contract.'' ICE Clear Europe is making
this change to distinguish from Options where the deliverable is a
security.\32\ The proposed rule change also would amend paragraph
5.7(a), which explains the methods for determining whether elective
exercise and/or abandonment of Options on the relevant expiry day is
permitted. The proposed rule change would amend 5.7(a) to state that it
is subject to the automatic Option exercise facility (as applicable).
Paragraph 5.5 of the Clearing Procedures sets out the provisions for
automatic exercise of Options, and these provisions would be relevant
to determining whether elective exercise and/or abandonment of Options
on the relevant expiry day is permitted under paragraph 5.7(a). Thus,
for the sake of clarity, the proposed rule change would add the cross
reference to beginning of paragraph 5.7(a). ICE Clear Europe is making
both of these changes to further improve the clarity of the Clearing
Procedures, both to distinguish certain Options and to ensure that the
provisions regarding automatic exercise work as intended with respect
to exercise and abandonment of Options.\33\
---------------------------------------------------------------------------

    \32\ Notice, 85 FR at 13206.
    \33\ Notice, 85 FR at 13206.
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ix. Intellectual Property
    ICE Clear Europe is also proposing changes to its Rules to help
ensure that its rights with respect to intellectual property are
enforceable in all of the jurisdictions where it operates. First, the
proposed rule change would amend the definition of ``Intellectual
Property'' in Rule 101 to specify that the definition includes ``all
intellectual property rights in any part of the world and for the
entire duration of such rights.'' ICE Clear Europe is making this
change to improve the international coverage of the definition, by
expressly confirming that it covers all rights in any part of the world
and the entire duration of such

rights.\34\ ICE Clear Europe believes that this change would help to
confirm that ICE Clear Europe's Intellectual Property specifically
includes its rights world-wide, thereby providing further protection
and enforceability of ICE Clear Europe's Intellectual Property Rights
in accordance with Rule 17Ad-22(e)(1).\35\
---------------------------------------------------------------------------

    \34\ Notice, 85 FR at 13211.
    \35\ 17 CFR 240.17Ad-22(e)(1); Notice, 85 FR at 13215.
---------------------------------------------------------------------------

    In addition, the proposed rule change would add a new Section 12(d)
in each of the Standard Terms, to require Customers to agree to Rule
406(g). Rule 406(g) confirms that all Intellectual Property in data
relating to Transactions, Contracts, and Open Contract Positions
provided to ICE Clear Europe under the Rules or generated by ICE Clear
Europe shall be the property of ICE Clear Europe. ICE Clear Europe is
making this change to avoid any uncertainty as to the applicability of
Rule 406(g) in the context of customer transactions and to support ICE
Clear Europe's rights to the Intellectual Property in data provided
under the Rules.\36\ This change would also help ensure the consistent
application of Rule 406(g) by ensuring that ICE Clear Europe receives
the same contractual representation from Customers as regards
Intellectual Property rights as it does from Clearing Members. Thus,
ICE Clear Europe believes this change would assist in the enforcement
of its Intellectual Property rights by helping to ensure that
Customers, as well as Clearing Members, acknowledge ICE Clear Europe's
rights as defined in Rule 406(g), thereby helping to ensure the
enforceability of ICE Clear Europe's Intellectual Property Rights in
accordance with Rule 17Ad-22(e)(1).\37\
---------------------------------------------------------------------------

    \36\ Notice, 85 FR at 13206.
    \37\ 17 CFR 240.17Ad-22(e)(1); Notice, 85 FR at 13215.
---------------------------------------------------------------------------

x. Confidentiality
    Rule 106(a) currently provides that ICE Clear Europe shall keep
confidential certain information received concerning Transactions,
Contracts, past or current Open Contract Positions, and other
information received from Clearing Members, subject to certain
permitted disclosures, such as disclosures pursuant to a formal request
from a Regulatory Authority. The proposed rule change would re-organize
this provision by moving the list of information that ICE Clear Europe
must keep confidential to re-designated paragraph (b) and moving the
list of permitted disclosures to paragraph (c). Moreover, with respect
to the information that ICE Clear Europe must keep confidential, the
proposed rule change would clarify that any information concerning
Margin payments between ICE Clear Europe and another clearing house, a
Clearing Member, or Sponsored Principal, including in relation to a
Customer, must be kept confidential. The previous formulation covered
information concerning Margin payments between ICE Clear Europe and
another clearing house, a Clearing Member, or Sponsored Principal, but
did not specifically include information in relation to a Customer.
    With respect to the list of permitted disclosures in re-designated
paragraph (c), the proposed rule change would clarify that ICE Clear
Europe could make a disclosure to a Regulatory Authority or
Governmental Authority where a lawful request is made (rather than a
``formal'' request, as under the current rule) and where disclosure is
necessary for the making of a complaint or report under Applicable Laws
for an offence alleged or suspected to have been committed under
Applicable Laws. Moreover, the proposed rule change would also add a
provision to specifically permit disclosure pursuant to any Applicable
Law, not simply pursuant to a court order as may be required by
Applicable Law, as currently provided by Rule 106.
    Finally, Rule 115(b) generally allows ICE Clear Europe to make
arrangements with Governmental Authorities for the sharing of
information. The proposed rule change would amend this provision to
specifically state that it is subject to Rule 106, which, as discussed
above, specifies the information that ICE Clear Europe must keep
confidential and explains the circumstances under which ICE Clear
Europe may disclose confidential information.
    ICE Clear Europe designed these changes following an internal
review and is making these changes to clarify and enhance its ability
to disclose confidential information when requested to do so by a
government or regulator or otherwise by Applicable Law.\38\ ICE Clear
Europe believes these changes are important because they will clearly
provide ICE Clear Europe legal authority to disclose confidential
information, and ICE Clear Europe may be required to disclose such
information to maintain its licensure with a regulator or otherwise
under Applicable Law.\39\ Thus, ICE Clear Europe believes that in
clarifying its ability to disclose confidential information in response
to requests from governments and regulators or as required by
Applicable Law, the proposed rule change would help to ensure that ICE
Clear Europe's rules are consistent with relevant laws and
regulations.\40\
---------------------------------------------------------------------------

    \38\ Notice, 85 FR at 13211.
    \39\ Notice, 85 FR at 13211.
    \40\ The Commission has previously stated that under Rule 17Ad-
22(e)(1), a Covered Clearing Agency such as ICE Clear Europe should
consider whether its rules, policies and procedures, and contracts
are clear, understandable, and consistent with relevant laws and
regulations. See Covered Clearing Agencies Release, 81 FR at 70802.
---------------------------------------------------------------------------

xi. Waivers
    The proposed rule change would also clarify ICE Clear Europe's
authority to extend or waive requirements of the Rules. ICE Clear
Europe is making these changes because it believes the current
provisions of the Rules regarding waivers do not provide sufficiently
clear authority for ICE Clear Europe to waive provisions of the Rules,
as needed in relation to the organization and operation of ICE Clear
Europe.\41\
---------------------------------------------------------------------------

    \41\ Notice, 85 FR at 13211.
---------------------------------------------------------------------------

    Specifically, the proposed rule change would add a sentence to Rule
110(a), which currently allows ICE Clear Europe to waive performance by
any Clearing Member or Sponsored Principal of any of its obligations
under the Rules or any Contract whenever it considers that such waiver
is necessary or in its best interests, to provide that ICE Clear Europe
may, in its discretion, publicize such waivers. ICE Clear Europe
believes this change, while not altering its existing authority to
waive requirements, would provide ICE Clear Europe the ability to
publicize such waivers and thereby increase the clarity and
transparency of such waivers.
    Moreover, Paragraph 4.2 of the Business Continuity Procedures
currently provides that ICE Clear Europe may defer or amend any
procedure or practice of ICE Clear Europe, any procedure or practice of
Clearing Members, and any Contract Terms following a Business
Continuity Event. The proposed rule change would clarify this provision
by specifying that the Business Continuity Event in question must
affect a Clearing Member and/or ICE Clear Europe. The proposed rule
change would further specify that in the case of a Business Continuity
Event affecting a Clearing Member, ICE Clear Europe may only defer or
amend ICE Clear Europe's procedures and practices with respect to that
Clearing Member. ICE Clear Europe is making this change to further
clarify its authority to defer or amend its procedures and practices
following a Business Continuity Event and provide certainty to Clearing
Members that if they are not affected by a Business Continuity Event,
they will

not be affected by ICE Clear Europe deferring or amending its
procedures and practices.
    Finally, the proposed rule change would add a new Rule 114(d) to
provide expressly that ICE Clear Europe may take any measure that it
deems reasonably necessary in relation to the organization and
operation of ICE Clear Europe. ICE Clear Europe is proposing to add
this provision to ensure that it is not prevented from taking action
under a range of circumstances that may arise, including, but not
limited to a default scenario, merely because there is no specific
provision of the Rules explicitly empowering it to do so. This
authority is subject to a limitation that ICE Clear Europe may not take
any action in breach of any provision of the Rules or Procedures or
that would modify the Rules or Procedures, and that any such action
must be taken in accordance with ICE Clear Europe's internal governance
requirements. ICE Clear Europe does not believe that this amendment
would alter its existing ability to take actions in such circumstances
but would provide greater clarity and legal certainty as to ICE Clear
Europe's permitted scope of action.\42\
---------------------------------------------------------------------------

    \42\ Notice, 85 FR at 13211.
---------------------------------------------------------------------------

xii. Voiding F&O Contracts
    Rule 404(a) provides ICE Clear Europe the discretion to void F&O
Contracts in certain circumstances. Under Rule 404(a)(vii), ICE Clear
Europe may void an F&O Contract if the relevant Contract is one for
which ICE Clear Europe has requested additional Margin or Permitted
Cover from the Clearing Member or Sponsored Principal and no Margin or
Permitted Cover is provided by the time required. The proposed rule
change would clarify Rule 404(a)(vii) by providing that ICE Clear
Europe must have requested additional Margin or Permitted Cover ``at
the time of the Transaction.'' ICE Clear Europe is making the amendment
to provide greater legal certainty by ensuring that its ability to void
the F&O Contract is limited to the specific situation where additional
margin is requested at the time of the transaction and is not
provided.\43\ This change would also distinguish Rule 404 from the
default rules, which are intended to provide ICE Clear Europe remedies
where there is a failure to provide margin requested at times other
than at the time of the Transaction.
---------------------------------------------------------------------------

    \43\ Notice, 85 FR at 13212.
---------------------------------------------------------------------------

xiii. Termination of Contracts
    The proposed rule change would amend paragraph 3.1(m) of the
General Contract Terms. Currently, paragraph 3.1(m) provides that a
contract shall terminate automatically, and Rule 209(c) shall apply,
upon the Insolvency of ICE Clear Europe. Paragraph 3.1(m) is a standard
contract term that applies to all F&O Contracts and to CDS Contracts
and FX Contracts to the extent specified in the CDS Procedures and FX
Procedures. The proposed rule change would amend paragraph 3.1(m) to
provide simply that the contract shall terminate automatically only in
accordance with and at the time set out in the Rules. ICE Clear Europe
is making this change to ensure that paragraph 3.1(m) captures all
possible instances of automatic termination under the Rules and to
ensure that this provision of the General Contract Terms does not need
to be updated when termination provisions in the Rules are amended or
re-numbered.\44\
---------------------------------------------------------------------------

    \44\ Notice, 85 FR at 13213.
---------------------------------------------------------------------------

xiv. Approved Financial Institutions Acting in Other Capacities
    Rule 501(a) provides that ICE Clear Europe shall only permit
Approved Financial Institutions to open and operate, on behalf of
Clearing Members, accounts from which ICE Clear Europe can draw amounts
pursuant to a direct debit mandate, for the collection of amounts due
to ICE Clear Europe from time to time. Rule 501(a) also provides that
Approved Financial Institutions may also act in other capacities from
time to time, as approved by ICE Clear Europe. The proposed rule change
would modify this slightly to specify that ICE Clear Europe's approval,
if any, for an Approved Financial Institution to act in another
capacity must be ``in writing.'' ICE Clear Europe is making this
amendment to clarify how it would approve requests under Rule 501(a)
for Approved Financial Institutions to act in other capacities, but it
does not believe that this change would alter the substance of Rule
501(a).\45\
---------------------------------------------------------------------------

    \45\ 17 CFR 240.17Ad-22(e)(1); Notice, 85 FR at 13215.
---------------------------------------------------------------------------

xv. Clearing Procedures
    ICE Clear Europe would also amend Paragraphs 6.1 and 6.2 of the
Clearing Procedures. Paragraph 6.1(a) allows a Clearing Member to
request that ICE Clear Europe convert a transaction of one of its
Customers into a proprietary transaction of the Clearing Member upon
the default of the Customer or other termination of the Customer's
transaction. The proposed rule change would revise the language in
Paragraph 6.1(a)(i) to refer to the ``transfer'' of the Customer's
transaction, rather than a conversion of the Customer transaction. ICE
Clear Europe is making this change to ensure that language in Paragraph
6.1 is consistent with the language used in similar provisions in ICE
Clear Europe's Rules and Procedures.
    Paragraph 6.2 of the Clearing Procedures sets out the procedures
and conditions for the transfer of contracts absent an Event of
Default. Paragraph 6.2(a) requires that each Clearing Member with a
Customer Account, upon the request of one of its Customers, transfer
the Clearing Member's rights and obligations with respect to Contracts
recorded in that Customer's Account to another Clearing Member. In that
situation, Paragraph 6.2(g) further provides, to Non-FCM/BD Clearing
Members only, the right to impose margin requirements that the Customer
must satisfy prior to transfer. The proposed rule change would modify
Paragraph 6.2(g) so that it applies to all Clearing Members, not just
Non-FCM/BD Clearing Members. ICE Clear Europe is making this change to
correct a drafting error, as it intended Rule 6.2(g) to apply all
Clearing Members, not just Non-FCM/BD Clearing Members.
xvi. Finance Procedures
    The proposed rule change would also make a number of clarifications
and updates to the Finance Procedures. ICE Clear Europe is making these
changes to ensure that the Finance Procedures accurately reflect, and
are applied in a manner consistent with, other ICE Clear Europe Rules
and Procedures.
    First, the proposed rule change would amend Paragraph 2.1.
Paragraph 2.1 describes the six currencies that ICE Clear Europe
supports and in which ICE Clear Europe settles transactions and holds
accounts. The proposed rule change would amend Paragraph 2.1 to specify
that certain F&O Contracts may settle wholly or partly in those
currencies. ICE Clear Europe does not believe this change would alter
the substance of Paragraph 2.1.\46\ Rather, ICE Clear Europe is making
this change to ensure that the Finance Procedures can accommodate
Contracts that settle wholly or partly in a particular currency.
---------------------------------------------------------------------------

    \46\ Notice, 85 FR at 13213.
---------------------------------------------------------------------------

    In Paragraph 2.2, the proposed rule change would add a reference to
Rule 502(c). Paragraph 2.2 provides that ICE Clear Europe supports
cross currency collateral, which means that it is not necessary to
cover Margin requirements in the same currency as the underlying
Contract. The proposed rule change would amend this by adding a

clarification that this does not apply to variation margin, in
accordance with Rule 502(c).\47\ Rule 502(c) currently provides that
variation margin payments may be made only in cash in the Eligible
Currency in which the Contract in question is to be or can be settled.
Thus, in adding this provision referencing Rule 502(c), ICE Clear
Europe believes the proposed rule change would not alter the substance
of Paragraph 2.2. Rather, ICE Clear Europe believes this change would
ensure that Paragraph 2.2 is applied consistent with existing Rule
502(c).
---------------------------------------------------------------------------

    \47\ Notice, 85 FR at 13213.
---------------------------------------------------------------------------

    Similarly, the proposed rule change would amend Table 1 in
Paragraph 5.6 and Paragraph 6.1(i)(i). Paragraph 6.1(i)(i) provides
that contracts will be revalued and subject to calls for variation
margin on a daily basis, for settlement next day for payments in
Japanese Yen or same day for payments in other currencies. Table 1 in
Paragraph 5.6, which sets out the deadlines for various deliveries
under the Finance Procedures, repeats the substance of this provision.
The proposed rule change would amend both to state that settlement will
be next day for payments in currencies other than Euros, Dollars, and
Pounds or same day for payments in other currencies. Thus, as under the
current provisions, payments in Euros, Dollars, and Pounds will be made
same day, while payments in currencies other than Euros, Dollars, and
Pounds will be next day. ICE Clear Europe is making this change to
clarify this provision and ensure that it reflects the full range of
currencies supported by the Clearing House, as described in Paragraph
2.1. Thus, ICE Clear Europe believes this change will eliminate any
potential inconsistency between Paragraph 2.1 and Table 1 in Paragraph
5.6 and Paragraph 6.1(i)(i).
    The proposed rule change would next re-organize Paragraph 6.1(b),
which generally describes how Adjustments in Margin calls resulting
from price changes in underlying open Contracts will result in a
payment from the Clearing Member to ICE Clear Europe or vice versa. The
proposed rule change also would add a provision to make clear that any
such payments will be subject to Part 3 of the Rules. Part 3 of the
Rules describes the financial requirements for Clearing Members and
contains provisions regarding payments to and from Clearing Members.
Thus, ICE Clear Europe is making this change to ensure that Paragraph
6.1(b) is applied consistent with the related provisions in Part 3 of
the Rules.
    Paragraphs 6.1(e) and (f) contain provisions regarding withdrawals
of cash by Clearing Members from their accounts at ICE Clear Europe.
Paragraph 6.1(e) provides a table listing relevant deadlines, organized
by currency, by which Clearing Members should provide instructions for
withdrawal. Paragraph 6.1(f) further provides that no withdrawals will
be possible after these deadlines. The proposed rule change would re-
organize these provisions so that Paragraph 6.1(e), rather than (f),
specifies that no withdrawals of cash will be possible on the same day
if instructions are received after the deadlines in the table in
6.1(e). The proposed rule change would also describe these withdrawals
as ``ad hoc withdrawals'' and add a provision to state that Paragraph
6.1(f), which provides details on the mechanics of such payments, is
subject to Rule 301(f). Rule 301(f) provides details on the payment of
amounts by electronic transfer. Thus, similar to the changes above,
this change ensures that Paragraph 6.1(f) is applied consistent with
the related provisions in Part 3 of the Rules.
    Finally, Paragraph 6.1(i)(vii) provides that any amount payable by
a Clearing Member to the Clearing House (or vice versa) pursuant to the
Rules or any Contract may be included within an end-of-day or ad hoc
payment, and lists examples of the types of amounts payable that would
be subject to this provision, such as settlement amounts. The proposed
rule change would update the list of examples to include Option
premiums, corporate action payments, amounts resulting from reduced
gain distributions, and product terminations or non-default loss
contributions under Part 9 of the Rules. ICE Clear Europe is making
this change to reflect the full range of payments that may be made to
and from ICE Clear Europe, but does not believe that this change would
alter the substance of Paragraph 6.1(i)(vii).\48\ Thus, similar to the
changes above, this change ensures that Paragraph 6.1(i)(vii) is
applied consistent with the full range of payments that may be made to
and from ICE Clear Europe.
---------------------------------------------------------------------------

    \48\ Notice, 85 FR at 13213.
---------------------------------------------------------------------------

    Various changes have been proposed in paragraph 7.2 of the Finance
Procedures in relation to non-cash assets provided as Permitted Cover.
The changes are intended to update and improve the drafting of this
provision and more clearly reflect the operational detail of how ICE
Clear Europe deals with Permitted Cover, including the use of the ECS
system to provide information in relation to non-cash Permitted Cover
provided to the Clearing House.
    Similarly, the proposed rule change would add a clarification in
Paragraph 8.2, which allows Clearing Members and Sponsored Principals
to suggest to ICE Clear Europe that a new class or series of permitted
cover be included within the list of acceptable Permitted Cover. The
proposed rule change would add a provision to state that a request form
to lodge new certificates of deposit, pursuant to Paragraph 8.2, is
available on ICE Clear Europe's website. ICE Clear Europe believes that
this change would not affect the substance of Paragraph 8.2 but would
merely cross-reference relevant information available elsewhere.
    Finally, the proposed rule change would update Paragraph 11.4 to
state that matching criteria for a settlement system or depository
(which are needed when a Clearing Member transfers securities to ICE
Clear Europe to meet margin obligations) would be published via
circular rather than on ICE Clear Europe's website. ICE Clear Europe
believes this change would ultimately not affect the communication of
this information to Clearing Members or the content of the information
communicated, but rather the vehicle for making that communication.
Moreover, given that ICE Clear Europe publishes its circulars on its
website, ICE Clear Europe does not believe this change would alter the
substance of this provision.
    As discussed above, ICE Clear Europe is making these changes to
ensure that the Finance Procedures accurately reflect, and are applied
in a manner consistent with, other ICE Clear Europe Rules and
Procedures, in accordance with Rule 17Ad-22(e)(1).\49\
---------------------------------------------------------------------------

    \49\ 17 CFR 240.17Ad-22(e)(1).
---------------------------------------------------------------------------

C. 17Ad-22(e)(2)(i)

    As discussed in this section, the proposed rule change would
clarify a number of terms used with respect to the persons involved in
the governance of ICE Clear Europe. ICE Clear Europe is making these
changes, following an internal review, to improve the governance
functions of ICE Clear Europe. ICE Clear Europe believes that these
changes would help ensure that its governance arrangements are clear
and transparent in accordance with Rule 17Ad-22(e)(2)(i).\50\
---------------------------------------------------------------------------

    \50\ 17 CFR 240.17Ad-22(e)(2)(i).
---------------------------------------------------------------------------

    First, the proposed rule change would expand the definition of
``Board'' in Rule 101. As currently defined, ``Board'' means the board
of Directors or any other body established thereunder

(whether called a board, a committee, or otherwise) of ICE Clear
Europe. The proposed rule change would amend this definition to mean
the Board of Directors of ICE Clear Europe and any other body given
powers or discretion by the Board of Directors. The proposed rule
change would also amend this definition to clarify that the definition
includes other bodies established under, or given power by, the Board
of Directors only in the context of any power, discretion or authority
of the Board of ICE Clear Europe. Following an internal review of this
and related definitions, ICE Clear Europe is making this change to
clarify that the term Board includes, in the context of any power,
discretion or authority of the board, other similar bodies and
committees established by or under the Board of Directors of ICE Clear
Europe.\51\ ICE Clear Europe believes that doing so would help to
ensure the clarity and transparency of this definition by being more
specific about the legal bodies that would be included in the
definition of Board.\52\
---------------------------------------------------------------------------

    \51\ Notice, 85 FR at 13211.
    \52\ Notice, 85 FR at 13216.
---------------------------------------------------------------------------

    Similarly, in a number of the Rules, where reference is made to
persons exercising governance or other functions for ICE Clear Europe
or a Clearing Member, such as directors or officers, the proposed rule
change would expand the reference to include committees, individual
committee members, and similar terms. Following an internal review, ICE
Clear Europe determined these changes would more accurately describe
the persons involved in governance and use a consistent list of such
persons involved in governance through the Rules.\53\ ICE Clear Europe
therefore believes this change would help to ensure the clarity and
transparency of the various persons involved in the governance of ICE
Clear Europe.\54\
---------------------------------------------------------------------------

    \53\ Notice, 85 FR at 13211.
    \54\ Notice, 85 FR at 13216.
---------------------------------------------------------------------------

    Finally, the proposed rule change would similarly expand the
definition of ``Representative.'' Rule 1010 currently defines
``Representative'' generally as ``any Person that carries out or is
responsible for (or purports to carry out or be responsible for) any of
the functions of another Person.'' The proposed rule change would
expand this to also include ``any Persons that any such Person employs,
authorises or appoints to act on its behalf.'' Again, following an
internal review, ICE Clear Europe determined to make this change to
more accurately describe the persons who act as representatives on
behalf of its Clearing Members.\55\ This expansion would help to ensure
employees of a Clearing Member's Representative are also included in
the definition of Representative, such as, for example, employees of a
law firm representing a Clearing Member. The proposed rule change would
also carry through this change to the introductory sentence of Rule
102(j). Under Rule 102(j), a Clearing Member is bound by an act,
omission, conduct, or behaviour of its Customers and clients of its
Customers in certain circumstances. The proposed rule change would
modify this to clarify that a Clearing Member is also bound by an act,
omission, conduct, or behaviour of its Representatives in certain
circumstances. Following an internal review, ICE Clear Europe
determined to make this change because in certain circumstances
Representatives might be authorized to take actions on behalf of
Clearing Members, and therefore ICE Clear Europe should be able to rely
on the actions of the Representatives in binding the Clearing Member.
ICE Clear Europe also determined to make this change to correct a
drafting error, as other parts of Rule 102(j) refer to Clearing Members
and their Representatives.\56\ ICE Clear Europe therefore believes this
change would help to ensure the clarity and transparency of the
definition of ``Representative'' by being more specific about the
persons included in the definition and by specifically binding Clearing
Members to the actions of their representatives in certain
circumstances under Rule 102(j).\57\
---------------------------------------------------------------------------

    \55\ Notice, 85 FR at 13211.
    \56\ Notice, 85 FR at 13211.
    \57\ Notice, 85 FR at 13216.
---------------------------------------------------------------------------

D. 17Ad-22(e)(4)(v)

    As discussed in this section, the proposed rule change would amend
ICE Clear Europe's Finance Procedure as they relate to changes to ICE
Clear Europe's Guaranty Funds. Through its Guaranty Funds, ICE Clear
Europe maintains additional financial resources at the minimum to
enable it to cover a wide range of foreseeable stress scenarios that
include, but are not limited to, the default of the two participant
families that would potentially cause the largest aggregate credit
exposure for ICE Clear Europe in extreme but plausible market
conditions, in accordance with Rule 17Ad-22(e)(4)(ii).\58\ As discussed
below, ICE Clear Europe believes the change would help ICE Clear Europe
to maintain these Guaranty Funds, in accordance with Rule 17Ad-
22(e)(4)(v).\59\
---------------------------------------------------------------------------

    \58\ 17 CFR 240.17Ad-22(e)(4)(ii).
    \59\ 17 CFR 240.17Ad-22(e)(4)(v); Notice, 85 FR at 13217.
---------------------------------------------------------------------------

    Specifically, in Paragraph 6.1(i)(iii) of the Finance Procedures,
the proposed rule change would amend the time periods that apply to ICE
Clear Europe's ability to adjust Clearing Members' Guaranty Fund
Contributions. As described in Paragraph 6.1(i)(iii), each relevant
Guaranty Fund Period, ICE Clear Europe reviews, and may amend, the
total value of the Guaranty Funds and required Guaranty Fund
Contributions. ICE Clear Europe then notifies each Clearing Member of
its total Guaranty Fund Contribution requirements and the adjustments
to its Guaranty Fund Contribution. Under the current version of
Paragraph 6.1(i)(iii), such adjustments take effect for the F&O
Guaranty Fund five business days after notification and two business
days after notification for the CDS Guaranty Fund and FX Guaranty Fund.
The proposed rule change would harmonize these time periods by
providing that for all three Guaranty Funds, adjustments take effect
five business days after notification. In other words, the time period
would remain unchanged for adjustments to the F&O Guaranty Fund but
would increase to five business days for adjustments to the CDS
Guaranty Fund and FX Guaranty Fund.
    ICE Clear Europe believes that it is operationally easier and more
efficient to have a single time period for adjustments to Guaranty Fund
Contributions. Thus, ICE Clear Europe believes it is appropriate to
harmonize this time period across all three Guaranty Funds. Moreover,
ICE Clear Europe believes the five business day period, rather than the
two business day period, is appropriate because it provides additional
time to Clearing Members and because ICE Clear Europe does not
anticipate needing to make adjustments in the ordinary course sooner
than five business days.\60\ For these reasons, ICE Clear Europe is
making this change and further believes that the change would be
consistent with Rule 17Ad-22(e)(4)(v).\61\
---------------------------------------------------------------------------

    \60\ Notice, 85 FR at 13213.
    \61\ 17 CFR 240.17Ad-22(e)(4)(v); Notice, 85 FR at 13217.
---------------------------------------------------------------------------

E. 17Ad-22(e)(6)(i) and (ii)

    As discussed in this section, the proposed rule change also would
revise ICE Clear Europe's Rules and Procedures with respect to the
calculation of margin under certain options contracts, the settled-to-
market treatment of variation margin, a new

mechanism for paying variation margin, and authority to treat amounts
payable by a Clearing Member as additional margin. As discussed below,
ICE Clear Europe is making these changes, following an internal review
and feedback from Clearing Members, to improve its operational
practices and facilitate a different legal treatment of variation
margin.\62\ ICE Clear Europe believes these changes would help to
ensure that it maintains a risk-based margin system that, at a minimum
considers, and produces margin levels commensurate with, the risks and
particular attributes of each relevant product, portfolio, and market
and marks participant positions to market and collects margin,
including variation margin or equivalent charges if relevant, at least
daily and includes the authority and operational capacity to make
intraday margin calls in defined circumstances, in accordance with Rule
17Ad-22(e)(6)(i) and (ii).\63\
---------------------------------------------------------------------------

    \62\ Notice, 85 FR at 13203.
    \63\ 17 CFR 240.17Ad-22(e)(6)(i), (ii); Notice, 85 FR at 13215-
13216.
---------------------------------------------------------------------------

i. Calculation of Margin Under Certain Options Contracts
    The proposed rule change would amend Paragraph 4.4(c) of the
Clearing Procedures to clarify how ICE Clear Europe would calculate net
liquidating value (``NLV'') for Premium Up-Front Options. The new
language would also confirm that for long Option holders, a positive
NLV amount would be applied against the requirement for Original
Margin, and that for short Option holders, negative NLV would
contribute to the requirement for Original Margin. ICE Clear Europe is
making these changes to provide greater detail in the written Clearing
Procedures regarding the operational methods for calculating and
applying NLV.\64\ ICE Clear Europe believes that this aspect of the
proposed rule change would help to ensure that ICE Clear Europe
establishes, implements, maintains, and enforces written policies and
procedures reasonably designed to cover its credit exposures to its
participants by establishing a risk-based margin system that, at a
minimum considers, and produces margin levels commensurate with, the
risks and particular attributes of each relevant product, portfolio,
and market.\65\
---------------------------------------------------------------------------

    \64\ Notice, 85 FR at 13206.
    \65\ 17 CFR 240.17Ad-22(e)(6)(i); Notice, 85 FR at 13215-13216.
---------------------------------------------------------------------------

ii. Settled-to-Market Variation Margin
    The proposed rule change also would establish the settled-to-market
treatment of variation margin. Variation margin, also known as mark-to-
market margin, is a daily payment of cash, to ICE Clear Europe by a
Clearing Member or vice versa, meant to cover the change in market
value of a CDS, F&O, or FX contract. ICE Clear Europe's Rules use three
terms to refer to variation margin: Mark-to-Market Margin (for CDS
contracts); FX Mark-to-Market Margin (for FX contracts); and Variation
Margin (for F&O contracts). The proposed changes described below would
apply to Mark-to-Market Margin, FX Market-to-Market Margin, and
Variation Margin; in other words, ICE Clear Europe is making the
changes described below with respect to payment of variation margin
under CDS, FX, and F&O contracts.\66\
---------------------------------------------------------------------------

    \66\ Although ICE Clear Europe has not yet launched clearing of
FX products, the proposed rule change would make similar changes to
the relevant provisions of the Rules and Procedures regarding FX
clearing. Doing so would maintain consistency throughout the rules
and ensure settled-to-market treatment when ICE Clear Europe begins
clearing of FX products. Notice, 85 FR at 13204.
---------------------------------------------------------------------------

    ICE Clear Europe is making changes to establish the settled-to-
market treatment of variation margin at the request of Clearing
Members.\67\ Under the settled-to-market treatment, variation margin is
treated as a cash payment to settle outstanding exposure following
specific payment dates, rather than as collateralizing the
exposure.\68\ ICE Clear Europe represents that Clearing Members view
settled-to-market treatment as beneficial because it may enable them to
reduce their capital requirements with respect to cleared
contracts.\69\ To ensure such treatment, the proposed rule change would
revise terminology and make other drafting changes to clarify the legal
characterization that payments of variation margin represent settlement
payments rather than collateral payments. These changes would not,
however, affect how ICE Clear Europe calculates variation margin or
other operational aspects of variation margin.
---------------------------------------------------------------------------

    \67\ Notice, 85 FR at 13203.
    \68\ Notice, 85 FR at 13203.
    \69\ Notice, 85 FR at 13203.
---------------------------------------------------------------------------

    The proposed rule change would first amend the defined terms
``Margin,'' ``Mark-to-Market Margin,'' ``FX Mark-to-Market Margin,''
and ``Variation Margin'' in Rule 101 to characterize such margin as
settlement payments. The proposed rule change would do so by referring
to the margin as an outright transfer of cash as a settlement payment.
For similar reasons, the proposed rule change would revise the defined
term ``Original Margin'' to exclude Variation Margin from the entire
definition of Original Margin. This change is necessary because the
definition of Original Margin refers to the title transfer or pledge of
Permitted Collateral, rather than a settlement payment.
    Similar to those revisions, the proposed rule change would also
make various amendments to the Rules and Procedures to use terms that
are more consistent with characterizing variation margin as a
settlement payment. For example, the proposed rule change would replace
terms like ``deposit,'' ``pledge,'' ``deposited,'' and ``pledged'' with
``transfer,'' ``transferred,'' ``transferred to,'' and cash
``transfer.'' As with the changes described above, these amendments
would not reflect a change in actual operational practice, but rather
would facilitate the settled-to-market treatment of variation margin.
    The proposed rule change would next amend Rule 505 to continue this
characterization of payments of variation margin. Under Rule 505, a
Customer acknowledges that the Financial Collateral Regulations \70\
apply in relation to all Permitted Cover, Margin, and Guaranty Fund
Contributions transferred to ICE Clear Europe. The proposed rule change
would amend Rule 505 to clarify that payments of Variation Margin,
Mark-to-Market Margin, and FX Mark-to-Market Margin do not constitute
financial collateral under the Financial Collateral Regulations. This
is necessary to ensure that such payments are considered to be
settlement payments rather than collateral. Moreover, the proposed rule
change would replace the term ``collateral'' in the last sentence of
Rule 505 with the more general term ``such assets'' to make Rule 505
more consistent with the definitions used in the Financial Collateral
Regulations. As with the changes described above, ICE Clear Europe is
proposing these changes based upon feedback received by ICE Clear
Europe from some Clearing Members and to ensure consistency with the
characterization of such payments at settlement rather than
collateral.\71\
---------------------------------------------------------------------------

    \70\ Rule 101 of the ICE Clear Europe Rules defines the term
Financial Collateral Regulations as ``the Financial Collateral
Arrangements (No. 2) Regulations 2003 (which implement Directive
2002/47/EC on financial collateral arrangements).'' These
regulations affect ICE Clear Europe's use of collateral provided by
Clearing Members and Customers.
    \71\ Notice, 85 FR at 13204.
---------------------------------------------------------------------------

    To further the characterization of payments of variation margin as
settlement payments rather than payments of collateral, the proposed
rule change would add a new concept of CDS Price Alignment Amount and
FX

Price Alignment Amount to replace interest paid on Mark-to-Market
Margin and FX Mark-to-Market Margin. Currently, ICE Clear Europe pays
or charges a CDS Clearing Member interest with respect to net Mark-to-
Market Margin transferred between the parties.\72\ Under Rule 1519(e),
ICE Clear Europe would instead pay or charge a Price Alignment Amount,
which would be economically equivalent to the interest that ICE Clear
Europe currently pays or charges. Because the term interest is more
typically associated with collateral, however, ICE Clear Europe
proposes to refer to such amounts as Price Alignment Amounts to better
characterize the Mark-to-Market Margin as a settlement payment.\73\
Accordingly, the proposed rule change would add new defined terms,
update existing defined terms, and update cross references.
---------------------------------------------------------------------------

    \72\ This concept would apply to FX Mark-to-Market Margin as
well, but as noted above, ICE Clear Europe has not yet launched
clearing of FX products. See supra note 66.
    \73\ Notice, 85 FR at 13204.
---------------------------------------------------------------------------

    Finally, the proposed rule change would amend the Finance
Procedures to make other changes to further characterize variation
margin as settled-to-market. First, the proposed rule change would add
to the Finance Procedures a new paragraph 2.3 which would state that
Variation Margin, Mark-to-Market Margin, and FX Mark-to-Market Margin
is transferred to and from ICE Clear Europe by way of outright transfer
and is not pledged. Second, the proposed rule change would revise
paragraph 6.1(i)(i) of the Finance Procedures to state that the value
of a CDS, F&O, and FX Contract would reset to zero once the settlement
payments of variation margin have been made. ICE Clear Europe
represents that resetting to zero is required to receive settled-to-
market treatment under certain regulations applicable to ICE Clear
Europe's Clearing Members.\74\ Finally, the proposed rule change would
also make a drafting change to paragraph 6.1(i)(i) to clarify that ICE
Clear Europe would ordinarily calculate adjustments to margin
requirements and execute payments in the currency of the relevant
Contracts.
---------------------------------------------------------------------------

    \74\ Notice, 85 FR at 13204-13205.
---------------------------------------------------------------------------

    ICE Clear Europe believes that these changes, in general, would
enable ICE Clear Europe to establish settled-to-market treatment for
payments of Mark-to-Market Margin, FX Mark-to-Market Margin, and
Variation Margin, at the request of certain Clearing Members to improve
the capital treatment of CDS, FX, and F&O contracts for these clearing
members. ICE Clear Europe further believes that these changes would
place ICE Clear Europe in a better position to collect Mark-to-Market
Margin, FX Mark-to-Market Margin, and Variation Margin from these
Clearing Members in accordance with Rule 17Ad-22(e)(6)(ii).\75\
---------------------------------------------------------------------------

    \75\ 17 CFR 240.17Ad-22(e)(6)(ii); Notice, 85 FR at 13215-13216.
---------------------------------------------------------------------------

iii. Externalised Payments Mechanism
    In addition to settled-to-market treatment of variation margin, ICE
Clear Europe's Clearing Members have requested that it adopt a new
mechanism for the payment of variation margin. These members believe
this new mechanism for the payment of variation margin between ICE
Clear Europe and Clearing Members would make the payment of variation
margin more consistent with how payments are made between those
Clearing Members and their customers.\76\ In accordance with their
request, ICE Clear Europe proposes to adopt this new method of
collecting variation margin, which it refers to as the ``Externalised
Payments Mechanism.'' \77\ Under the Externalised Payments Mechanism,
Clearing Members may opt not to net together payments of variation
margin with other payments, like clearing house and exchange fees,
between ICE Clear Europe and the Clearing Member. Under the existing
approach, ICE Clear Europe would net these payments together (the
amended Rules call this approach the ``Standard Payments Mechanism'').
The effect of using the Externalised Payments Mechanism for cash
payments would be that payments would be settled pursuant to a separate
process and at a separate time from the Standard Payments Mechanism.
---------------------------------------------------------------------------

    \76\ Notice, 85 FR at 13202.
    \77\ Notice, 85 FR at 13202.
---------------------------------------------------------------------------

    To establish the Externalised Payments Mechanism, the proposed rule
change would first add new defined terms for the Standard Payments
Mechanism and the Externalised Payments Mechanism in Rule 101. Those
terms in Rule 101 would cross-reference to the full definitions of
those terms as found in proposed changes to Rule 302(a). The proposed
changes to Rule 302(a) would clarify that the Externalised Payments
Mechanism is an alternative payments mechanism that would only apply in
respect of specified Accounts as requested by the Clearing Member and
confirmed by ICE Clear Europe in writing. Moreover, Rule 302(a), as
proposed to be amended, would state that the Standard Payments
Mechanism shall apply unless ICE Clear Europe has agreed that the
Externalised Payments Mechanism shall apply to a particular cash
payment and that the current provisions regarding the calculation of a
net amount payable by or to ICE Clear Europe in respect of each Account
are part of the Standard Payments Mechanism.
    Next, the proposed rule change would make various changes to the
Finance Procedures to implement the Externalised Payments Mechanism. To
distinguish the Externalised Payments Mechanism from the Standard
Payments Mechanism, the proposed rule change would amend Paragraph
6.1(b) to clarify that cash payments between ICE Clear Europe and a
Clearing Member (including Margin) may only be set off and consolidated
under the Standard Payments Mechanism. Similarly, the proposed rule
change would amend paragraphs 6.1(i)(i) and (ii) to explain that under
the Externalised Payments Mechanism, cash payments would be settled
through a separate cash flow and not included in a combined overnight
call or return as would apply under the Standard Payments Mechanism.
Next, the proposed rule change would amend Paragraph 6.1(b) to describe
the types of payments that Clearing Members may elect to settle through
the Externalised Payments Mechanism: Upfront fees, Mark-to-Market
Margin, FX Mark-to-Market Margin, Variation Margin, and other payments.
Similarly, the proposed rule change would clarify in paragraph
6.1(i)(vii) that any amount payable by a Clearing Member to ICE Clear
Europe (or vice versa) pursuant to the Rules or any Contract may be
included within an end-of-day or ad hoc payment under the Standard
Payments Mechanism and would include, for the sake of clarity, examples
of the types of payments that could be included. Finally, the proposed
rule change would add new paragraph 6.1(i)(viii) to address the
applicability of the Externalised Payments Mechanism in circumstances
where certain payments are being made under ICE Clear Europe's Default
Rules.
    Relatedly, the proposed rule change would update Rules 110(g),
303(a), and 1902(h)(i) to reflect the introduction of the Externalised
Payments Mechanism and differentiate between payments made under the
Standard Payments Mechanism and those made under the Externalised
Payments Mechanism.
    ICE Clear Europe maintains that these changes, in general, would
enable ICE Clear Europe to establish the Externalised Payments
Mechanism at the request of certain Clearing Members. ICE Clear Europe
further believes that this change would put ICE Clear Europe in a
better position to collect variation margin using the Externalised
Payments

Mechanism in accordance with Rule 17Ad-22(e)(6)(ii).\78\
---------------------------------------------------------------------------

    \78\ 17 CFR 240.17Ad-22(e)(6)(ii); Notice, 85 FR at 13215-13216.
---------------------------------------------------------------------------

iv. Amounts Payable as Additional Margin
    Paragraph 6.1 of the Finance Procedures generally describes how
payments are made to and from ICE Clear Europe. Paragraph 6.1(g) sets
deadlines by which Clearing Members must make overnight and ad hoc
payments to ICE Clear Europe, i.e. complete their daily settlement
obligations. The proposed rule change would add to Paragraph 6.1(g) a
provision to give ICE Clear Europe the ability to delay any payments
due to the Clearing Member from ICE Clear Europe if there are
outstanding amounts payable by that Clearing Member (or any Affiliate
of that Clearing Member) to ICE Clear Europe and further provides that
such amounts withheld would be treated as additional required margin of
the Clearing Member under Rule 502(g) (which allows ICE Clear Europe to
impose, amend or withdraw additional Margin requirements in respect of
any Clearing Member at any time). ICE Clear Europe believes this
amendment would enhance its ability to manage the credit and liquidity
risk presented by a Clearing Member that has failed to complete its
daily settlement obligations by allowing ICE Clear Europe to treat that
failure as additional required margin.\79\ ICE Clear Europe further
believes that this change would help to ensure that ICE Clear Europe
has a margin system that includes the authority and operational
capacity to make intraday margin, in accordance with Rule 17Ad-
22(e)(6)(ii).\80\
---------------------------------------------------------------------------

    \79\ Notice, 85 FR at 13213.
    \80\ 17 CFR 240.17Ad-22(e)(6)(ii); Notice, 85 FR at 13215-13216.
---------------------------------------------------------------------------

    Moreover, paragraphs 6.1(i)(i) and 6.1(i)(ii) of the Finance
Procedures provide that if an intra-day margin call affects a
significant number of Clearing Members, ICE Clear Europe will issue a
circular. ICE Clear Europe is amending this provision to provide that
where an intra-day margin call affects a significant number of Clearing
Members, it may issue a circular. ICE Clear Europe is making this
change so it has flexibility to determine the best means of
communicating with affected Clearing Members under the particular
circumstances. ICE Clear Europe does not believe that a circular, which
is widely distributed to the market, will always be the best means of
communicating this information.\81\ ICE Clear Europe further believes
that this flexibility will help to ensure that it has the authority and
operational capacity to make intraday margin calls in defined
circumstances, in accordance with Rule 17Ad-22(e)(6)(ii).\82\
---------------------------------------------------------------------------

    \81\ Notice, 85 FR at 13213.
    \82\ 17 CFR 240.17Ad-22(e)(6)(ii); Notice, 85 FR at 13215-13216.
---------------------------------------------------------------------------

F. 17Ad-22(e)(7)(i)

    As discussed in this section, the proposed rule change also would
codify an important ability that ICE Clear Europe uses to generate
additional liquidity as needed. Specifically, the proposed rule change
would amend Paragraph 7.2 of the Finance Procedures to provide that ICE
Clear Europe may use repurchase agreements, secured lending facilities,
and sales to generate liquidity from non-cash assets provided that, in
the case of Margin and Guaranty Fund Contributions, ICE Clear Europe
will remain liable for returning the same kind of assets if the
relevant secured obligations are performed or closed out by the
Clearing Member. ICE Clear Europe is making this change to reflect its
existing ability to generate liquidity from non-cash assets transferred
to ICE Clear Europe, subject to the requirement to return unused Margin
and Guaranty Fund contributions of the same kind as was provided.\83\
This ability is already described in Rule 1103, and ICE Clear Europe is
adding this provision to the Finance Procedures to further confirm its
ability to maintain sufficient liquid resources in accordance with the
requirements of Rule 17Ad-22(e)(7)(i).\84\
---------------------------------------------------------------------------

    \83\ Notice, 85 FR at 13213.
    \84\ 17 CFR 240.17Ad-22(e)(7)(i); Notice, 85 FR at 13213.
---------------------------------------------------------------------------

G. 17Ad-22(e)(10)

    As discussed in this section, the proposed rule change would also
update Rule 703 and ICE Clear Europe's Delivery Procedures with respect
to physical settlement. ICE Clear Europe is making these changes to be
consistent with market practices regarding settlement and the
operational practices of associated trading venues for which ICE Clear
Europe clears Contracts. ICE Clear Europe believes these changes would
help to ensure that ICE Clear Europe establishes, implements,
maintains, and enforces written policies and procedures reasonably
designed to 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, in accordance with Rule 17Ad-22(e)(10).\85\
---------------------------------------------------------------------------

    \85\ 17 CFR 240.17Ad-22(e)(10); Notice, 85 FR at 13215.
---------------------------------------------------------------------------

    The proposed rule change would add to the end of Rule 703 a new
paragraph (j), which would require Sellers under a Futures Contract to
represent that they convey good title to products (free of
encumbrances) when physical settlement takes place. ICE Clear Europe is
making this change to be consistent with market expectation around
deliveries and to be consistent with other deliveries made of such
products in the relevant cash markets.\86\ ICE Clear Europe also
believes this change would help to ensure that Rule 703 is in
accordance with Rule 17Ad-22(e)(10).\87\
---------------------------------------------------------------------------

    \86\ Notice, 85 FR at 13206.
    \87\ 17 CFR 240.17Ad-22(e)(10); Notice, 85 FR at 13215.
---------------------------------------------------------------------------

    In the Delivery Procedures, which describe ICE Clear Europe's
procedures for physical settlement, the proposed rule change would make
various updates to ensure that the procedures are consistent with the
operational practices and systems of ICE Clear Europe and the
operations of affiliated trading venues. Specifically, in Paragraph 19
of the General Provisions, the proposed rule change would make an
amendment to reflect the fact that other deliverable products may be
dealt with in ICE Clear Europe's Guardian system in addition to those
deliverables already specifically listed in that paragraph. Moreover,
the proposed rule change would add a new paragraph to Part A and Part C
of the Delivery Procedures to clarify that all references to timings or
times of day are references to London times. In addition, the proposed
rule change would make updates throughout the Delivery Procedures to
reflect current operational practices under which certain submissions
(such as delivery intentions) are made electronically through the ECS
system, rather than through submission of specified delivery forms. The
proposed rule change would also update deadlines and descriptions for
particular delivery steps or, in some cases, delete delivery steps that
are no longer carried out. Finally, the proposed rule change would
delete in its entirety Section 7, which addressed alternative delivery
procedure for certain European emissions contracts, as ICE Clear Europe
maintains that it is unnecessary in light of the provisions of Part A
of the Delivery Procedures.\88\ ICE Clear Europe believes that the
proposed rule change would help to ensure that its Delivery

Procedures provide clear written standards that state ICE Clear
Europe's obligations with respect to the delivery of physical
instruments and that identify, monitor, and manage the risks associated
with physical deliveries in accordance with Rule 17Ad-22(e)(10).\89\
---------------------------------------------------------------------------

    \88\ Notice, 85 FR at 13210-13211.
    \89\ 17 CFR 240.17Ad-22(e)(10); Notice, 85 FR at 13215.
---------------------------------------------------------------------------

H. 17Ad-22(e)(13)

    As discussed in this section, the proposed rule change would make a
number of changes to protect and further enhance ICE Clear Europe's
ability to manage the default of a Clearing Member and contain losses
resulting from such a default. The proposed rule change would do so by
expanding the scope of events that could lead to ICE Clear Europe
declaring an event of default with respect to a Clearing Member,
clarifying ICE Clear Europe's authority with respect to conducting
default auctions, and expanding the net sum payable to or by a
defaulting Clearing Member to include the effects of abandoning an
Option. ICE Clear Europe is making these changes, following an internal
review, to improve its management of Clearing Member defaults. ICE
Clear Europe believes these changes are consistent with the requirement
of Rule 17Ad-22(e)(13) that ICE Clear Europe establish, implement,
maintain, and enforce written policies and procedures reasonably
designed to ensure that it has the authority and operational capacity
to take timely action to contain losses and liquidity demands and
continue to meet its obligations.\90\
---------------------------------------------------------------------------

    \90\ 17 CFR 240.17Ad-22(e)(13); Notice, 85 FR at 13216.
---------------------------------------------------------------------------

i. Expanding Event of Default
    The proposed rule change would expand the situations in which ICE
Clear Europe could declare an Event of Default and therefore employ its
default management powers under Part 9 of the Rules. The proposed rule
change would do so by amending the definitions of certain events which
themselves could be the basis for ICE Clear Europe declaring an Event
of Default with respect to a Clearing Member. First, the proposed rule
change would amend the definition of ``Bankruptcy'' and of
``Insolvency'' to include a scenario where a person is ``granted
suspension of payments.'' Insolvency laws may sometimes allow for a
suspension of payments, and treating such a situation as a Bankruptcy
would allow ICE Clear Europe to employ the full range of default
management powers available as needed to address the suspension of
payments.
    Second, the proposed rule change would amend Rule 901(a)(viii) to
expand the list of approvals and similar legal statuses, the revocation
of which may constitute an Event of Default, to include loss of
relevant ``exemptions'' by any Governmental Authority, Regulatory
Authority, Exchange, Clearing Organisation, or Delivery Facility. ICE
Clear Europe believes that the loss of such an exemption could be
equivalent to the loss of a licence or regulatory authorization, which
is already an event that could constitute an Event of Default under
Rule 901(a)(viii).\91\ ICE Clear Europe accordingly believes that loss
of an exemption should similarly be treated as an Event of Default
under Rule 901(a)(viii).
---------------------------------------------------------------------------

    \91\ Notice, 85 FR at 13209.
---------------------------------------------------------------------------

    Third, the current definition of ``Insolvency'' includes ``a
Governmental Authority making an order, pursuant to which any of that
Person's securities, property, rights, or liabilities are
transferred.'' The proposed rule change would expand this to include a
Governmental Authority making an ``instrument or other measure''
pursuant to which any of that Person's securities, property, rights or
liabilities are transferred, in addition to just ``making an order.''
Similarly, the proposed rule change would expand the definition of
``Insolvency Practitioner'' in Rule 101 to include a ``judicial
manager.'' ICE Clear Europe believes these changes would ensure that
all relevant insolvency scenarios and insolvency office-holders are
covered by the definitions of Insolvency and Insolvency Practitioner,
which themselves could lead to ICE Clear Europe declaring an Event of
Default under Rule 901.\92\
---------------------------------------------------------------------------

    \92\ Notice, 85 FR at 13209.
---------------------------------------------------------------------------

    ICE Clear Europe believes that these changes, taken together, would
expand the possible events for which ICE Clear Europe could declare an
Event of Default with respect to a Clearing Member to include the
situations described above.\93\ ICE Clear Europe believes that the
proposed rule change would to help ensure that its powers in responding
to defaults, which are only available after ICE Clear Europe declares
an Event of Default, are accessible as appropriate and necessary to
respond to such situations. ICE Clear Europe believes that this would
mean that it generally has the authority and operational capacity to
take timely action to contain losses and liquidity demands and continue
to meet its obligations in accordance with Rule 17Ad-22(e)(13).\94\
---------------------------------------------------------------------------

    \93\ Notice, 85 FR at 13209.
    \94\ 17 CFR 240.17Ad-22(e)(13); Notice, 85 FR at 13216.
---------------------------------------------------------------------------

ii. Default Auctions
    Rule 905(b) describes actions that ICE Clear Europe may take to
close out contracts upon a Clearing Member's default. The proposed rule
change would add to this, in new paragraph (xix), explicit authority
for ICE Clear Europe to carry out default auctions in accordance with
the Default Auction Procedures and construct auction lots out of the
defaulting Clearing Member's contracts. The lots may include positions
relating to multiple customer accounts of a Non-FCM/BD Clearing Member.
An auction lot relating to Contracts of a defaulting FCM/BD Clearing
Member could only contain positions relating to a single account,
however, and a single auction lot could not consist of both proprietary
and client positions. Moreover, new paragraph (xix) would provide ICE
Clear Europe with the explicit power to use a single bid price received
for a particular lot of auctioned positions to calculate liquidation
values and net sums by apportioning this bid price across the various
accounts in which the contracts in the auction lot are recorded. ICE
Clear Europe is making this change to make explicit its authority to
take these actions. Although the existing CDS Default Management
Framework permits ICE Clear Europe to conduct auctions in lots,\95\ ICE
Clear Europe's Rules currently do not expressly grant this authority,
and the proposed rule change would make express ICE Clear Europe's
authority to do so. In making clear ICE Clear Europe's authority with
respect to auctions, which ICE Clear Europe would use to sell a
defaulting Clearing Member's contracts and contain potential losses on
those contracts, ICE Clear Europe believes that the proposed rule
change would help to ensure that it generally has the authority and
operational capacity to take timely action to contain losses and
liquidity demands and continue to meet its obligations in accordance
with the requirement of Rule 17Ad-22(e)(13).\96\
---------------------------------------------------------------------------

    \95\ See Securities Exchange Act Release No. 86783 (Aug. 28,
2019), 84 FR 46575 (Sep. 4, 2019) (SR-ICEEU-2019-014) (approving the
CDS Default Management Framework).
    \96\ 17 CFR 240.17Ad-22(e)(13); Notice, 85 FR at 13216.
---------------------------------------------------------------------------

iii. Net Sum Payable
    Rule 906(a) defines how ICE Clear Europe calculates the net sum
payable by a defaulting Clearing Member. Among other things, this
calculation

includes the value of the exercise of an Option. The proposed rule
change would modify Rule 906(a) to refer to the ``abandonment'' of an
Option in addition to the exercise of an Option. ICE Clear Europe
proposes this change because abandoning an Option could also affect the
aggregate amount payable by or to a defaulting Clearing Member in
respect of positions recorded in a given account and such impact should
be taken into account in addition to the impact of any exercise of an
Option.\97\ ICE Clear Europe believes that taking into account the
exercise of an Option would help to ensure that the net sum payable by
or to a defaulting Clearing Member accurately reflects the possible
consequences of abandoning Options in the defaulting Clearing Member's
portfolio.\98\ ICE Clear Europe therefore believes this change would
help improve its ability to take timely action to contain losses and
liquidity demands associated with a defaulting Clearing Member's
Options in accordance with Rule 17Ad-22(e)(13).\99\
---------------------------------------------------------------------------

    \97\ Notice, 85 FR at 13206.
    \98\ Notice, 85 FR at 13206.
    \99\ 17 CFR 240.17Ad-22(e)(13); Notice, 85 FR at 13216.
---------------------------------------------------------------------------

I. 17Ad-22(e)(14)

    As discussed in this section, the proposed rule change would make a
number of changes to protect and further enhance ICE Clear Europe's
ability to transfer the positions of a Clearing Member's customers to a
different Clearing Member in the event of the first Clearing Member's
default. This process, generally known as porting, allows customers
uninterrupted access to clearing at ICE Clear Europe in the event of a
Clearing Member's default. As discussed below, the proposed rule change
would clarify: The application of the Standard Terms, ICE Clear
Europe's use or transfer of margin, the timing of the creation,
termination, and pricing of contracts subject to porting, and the price
at which positions are ported. ICE Clear Europe is making these
changes, following an internal review, to ensure its ability to conduct
porting. ICE Clear Europe believes these changes are consistent with
the requirement of Rule 17Ad-22(e)(14) that ICE Clear Europe establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to enable the segregation and portability of
positions of a Clearing Member's customers and the collateral provided
to ICE Clear Europe with respect to those positions and effectively
protect such positions and related collateral from the default or
insolvency of that Clearing Member.\100\
---------------------------------------------------------------------------

    \100\ 17 CFR 240.17Ad-22(e)(14).
---------------------------------------------------------------------------

i. Application of the Standard Terms
    The first set of proposed changes to help facilitate porting would
make changes with respect to the application of the Standard Terms. The
Standard Terms are uniform contractual terms, as published by ICE Clear
Europe, that form the basis for transactions between Non-FCM/BD
Clearing Members and their Customers in credit default swaps.\101\ The
Standard Terms facilitate porting by binding Customers and Clearing
Members to a set of uniform contractual provisions that help to ensure
that all terminations and re-establishments of cleared contracts occur
at the same time and at the same price, reducing the possibility of
valuation disputes or other claims that might prevent or reduce the
likelihood of porting. The Standard Terms also contain provisions that
help to ensure that ICE Clear Europe may use and transfer margin
provided by Customers to Clearing Members.
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    \101\ The Standard Terms do not apply to FCM/BD Clearing Members
and their customers. Notice, 85 FR at 13201.
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    The proposed rule change would make a number of amendments to help
ensure that the Standard Terms are contractually binding as between
Non-FCM/BD Clearing Members and their Customers and that the Standard
Terms cannot be overridden or modified. Specifically, the proposed rule
change would add to existing Rule 202(b) an additional provision that
Customers and Non-FCM/BD Clearing Members will be deemed to be bound by
the Standard Terms through acceptance by conduct as a result of their
continued use of ICE Clear Europe. This proposed change would provide
an additional basis for certainty that the Standard Terms would apply
as between the Customer and Non-FCM/BD Clearing Member, notwithstanding
that a Non-FCM/BD Clearing Member had otherwise failed to obtain its
Customer's agreement to the Standard Terms (under existing Rule 202(b),
Non-FCM/BD Clearing Members are required to ensure that the Standard
Terms are contractually binding as between themselves and their
Customers).\102\ ICE Clear Europe believes that this additional
protection is a reasonable approach in light of the Customer's choice
to clear its transaction through the Non-FCM/BD Clearing Member at ICE
Clear Europe, and represents that the provisions in question are
published and referred to in ICE Clear Europe's customer disclosures
under the European Market Infrastructure Regulation.\103\
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    \102\ Notice, 85 FR at 13201.
    \103\ Notice, 85 FR at 13201 (citing to 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).
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    Moreover, the proposed rule change would amend section 2 of each of
the Standard Terms (CDS, F&O, and FX), to state that ICE Clear Europe
is a third party beneficiary under the Standard Terms and to further
provide that, as a result, any modification or amendment to the
Standard Terms without ICE Clear Europe's prior written consent shall
have no effect. ICE Clear Europe believes this amendment would help to
promote post-default porting by ensuring the Standard Terms apply
uniformly and by ensuring that ICE Clear Europe is able to object to
any modifications to the Standard Terms that would interfere with post-
default porting.\104\
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    \104\ Notice, 85 FR at 13201.
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    Finally, to further clarify the status of the Standard Terms and
the Settlement and Notices Terms (which, like the Standard Terms, apply
as between the Non-FCM/BD Clearing Member and its Customer), the
proposed rule change would amend Rule 102(o). Existing Rule 102(o)
provides that the Rules, together with the applicable Clearing
Membership Agreement and certain documents given contractual force
pursuant to the Rules, form a contract between ICE Clear Europe and
each Clearing Member. The proposed rule change would amend Rule 102(o)
to specifically exclude the Standard Terms and the Settlement and
Notices Terms from this provision. In doing so, ICE Clear Europe
believes the proposed rule change would further clarify that the
Standard Terms are a contract between the Non-FCM/BD Clearing Member
and its Customer, rather than between ICE Clear Europe and each
Clearing Member.\105\ Moreover, ICE Clear Europe believes that the
Standard Terms could not, as discussed above, help facilitate porting
if the Standard Terms do not represent a binding contact between the
Non-FCM/BD Clearing Member and its Customer.\106\ Finally, the proposed
rule change would also add to Rule 102(o) a reference to Rule 102(f),
which contains the list of the documents that are given contractual
force pursuant to the Rules.
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    \105\ Notice, 85 FR at 13201.
    \106\ Notice, 85 FR at 13201.
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ii. Margin
    The second set of proposed changes to help facilitate porting would
help to ensure that ICE Clear Europe is able to transfer margin
provided by a Customer

from the defaulting Clearing Member to a new Clearing Member (i.e.,
porting of margin) and further would help to ensure that ICE Clear
Europe is able to use margin as needed in response to a Clearing
Member's default. Specifically, the proposed rule change would amend
existing Rule 504(c)(iv) to provide that a Clearing Member is deemed to
represent and warrant that the Clearing Member will not claim that any
transfer of Permitted Cover \107\ to or use of Permitted Cover by the
Clearing House in accordance with the Rules or the relevant Clearing
Membership Agreement is contrary to or in breach of any requirement of
Applicable Law, third party right or other contractual obligation. By
extending the existing representation in Rule 504(c)(iv) to the
transfer of Permitted Cover to ICE Clear Europe (rather than merely the
usage of Permitted Cover), ICE Clear Europe believes that the proposed
rule change would further assure that ICE Clear Europe can accept
Permitted Cover without risk of interference from third party
claims.\108\ Specifically, if it is necessary for ICE Clear Europe to
transfer Permitted Cover after the default of a Clearing Member to
facilitate porting of a Customer's positions and margin, this proposed
amendment would help to facilitate that porting by providing ICE Clear
Europe assurance that the defaulting Clearing Member will not claim
that the transfer is contrary to or in breach of any requirement of
Applicable Law, third party right or other contractual obligation.
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    \107\ Under ICE Clear Europe Rule 101, the term Permitted Cover
is defined as ``cash in Eligible Currencies and other assets
determined by the Clearing House as permissible for Margin or
Guaranty Fund Contributions and includes, where the context so
requires, any such cash or assets transferred to the Clearing House
and any proceeds of realisation of the same.''
    \108\ Notice, 85 FR at 13201, 13215.
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    Moreover, in section 4(b) of each of the Standard Terms, the
proposed rule change would add language to provide that when a Clearing
Member transfers collateral provided by a Customer to ICE Clear Europe
for credit to that Customer's account, the Customer shall be deemed to
give all the same representations, warranties, and acknowledgments as
are given by the Clearing Member pursuant to Rule 504(c)(iii), (iv),
and (v); Rule 504(g); and Rule 505. Under Rule 504(c)(iii), (iv), and
(v), a Clearing Member is deemed to represent and warrant that
Permitted Cover is provided on the basis that it may be used by ICE
Clear Europe and applied in accordance with ICE Clear Europe's Rules;
that the Clearing Member will not claim that any transfer (as amended)
of Permitted Cover to or use of Permitted Cover by the Clearing House
in accordance with the Rules or the relevant Clearing Membership
Agreement is contrary to or in breach of any requirement of Applicable
Law, third party right or other contractual obligation; and that the
Clearing Member is not in breach of any of its contractual obligations
or regulatory requirements or other Applicable Laws towards any third
party as a result of the transfer of Permitted Cover to the Clearing
House or its collection from or receipt of any assets from its clients.
Rule 504(g) provides ICE Clear Europe the right to (i) apply any amount
or asset recorded in a particular Account to the extent permitted under
Part 9 of the Rules (regarding default) as against the net sum for such
Account or (ii) transfer any amount or asset recorded in a particular
Account to the extent permitted under Rule 906 (regarding net sums
payable) regardless of the origin or status of such amount or assets.
Under Rule 505, Clearing Members and Customers acknowledge that the
Financial Collateral Regulations \109\ apply in relation to all
Permitted Cover, Margin, and Guaranty Fund Contributions transferred to
ICE Clear Europe in the form of cash or financial instruments. Clearing
Members and Customers also agree that they will not dispute the
construction of the arrangements regarding the provision of collateral
a ``financial collateral arrangements.'' ICE Clear Europe believes
these amendments collectively would enhance its ability to use
collateral ultimately provided by a Customer, including to cover
default losses and to provide for porting of the Customer's positions
in case of the relevant Non-FCM/BD Clearing Member's default, by
providing additional clarity as to ICE Clear Europe's ability to use
collateral provided by a Customer, the Customer's representations and
acknowledgments with respect to such collateral, and the legal status
of such collateral.\110\
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    \109\ Rule 101 of the ICE Clear Europe Rules defines the term
Financial Collateral Regulations as ``the Financial Collateral
Arrangements (No. 2) Regulations 2003 (which implement Directive
2002/47/EC on financial collateral arrangements).'' These
regulations affect ICE Clear Europe's use of collateral provided by
Clearing Members and Customers.
    \110\ Notice, 85 FR at 13201, 13216.
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    Finally, the proposed rule change would add language in section
4(b) of each of the Standard Terms to provide that the Customer shall
take any action reasonably requested by ICE Clear Europe or the
Clearing Member that may be necessary or desirable to create, preserve,
perfect or validate the right, title, or interests of ICE Clear Europe
in any Margin or Permitted Cover or to enable ICE Clear Europe to
exercise or enforce any of its rights under the Rules with respect to
Margin or other Permitted Cover and that the Customer shall not create
or give notice of any Encumbrance related to Permitted Cover that is
held by ICE Clear Europe in any Account. The proposed rule change would
also add language to section 4(b) of each of the Standard Terms to
provide that the Customer shall not assert that: (i) It is the
beneficiary of or interested party in any Encumbrance with respect to
any Permitted Cover held by ICE Clear Europe; (ii) it has given any
notice of any such Encumbrance to ICE Clear Europe; or (iii) ICE Clear
Europe otherwise should be attributed with notice in respect of any
such Encumbrance. This provision would not, however, prevent any
Encumbrance arising under Applicable Laws in favour of a Customer in
respect of a Customer Account. ICE Clear Europe believes these
amendments collectively would enhance its ability to use collateral
ultimately provided by a Customer, including to cover default losses
and to provide for porting of the Customer's positions in case of the
relevant Non-FCM/BD Clearing Member's default, by providing additional
clarity as to ICE Clear Europe's ability to use collateral provided by
a Customer and reducing the risk of any Customer or third party claims
with respect to such collateral.\111\
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    \111\ Notice, 85 FR at 13201, 13216.
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iii. Timing
    ICE Clear Europe is also making a set of proposed changes to help
facilitate porting by improving the clarity and uniformity of the
provisions that determine the time at which contracts are formed and
terminated.
    The proposed rule change would first clarify Rule 401(n), which
currently states that where an F&O Contract (other than an ICE Futures
US Contract) arises pursuant to Rule 401 as a result of trading,
submission of trade data, or other action by or relating to a Customer
of a Non-FCM/BD Clearing Member, an opposite Customer-CM F&O
Transaction shall arise between such Customer and Clearing Member. The
proposed rule change would specify that the opposite Customer-CM F&O
Transaction would arise at the same time as the Contract. Doing so
would clarify that the opposite Customer-CM F&O Transaction arises at
the same time as the F&O Contract arises, thereby ensuring that both

contracts have a uniform time of formation.
    Similarly, the proposed rule change would remove from the Standard
Terms the current reference in Section 3(b) to transactions arising (as
between Non-FCM/BD Clearing Member and Customer) ``at the Acceptance
Time.'' Acceptance Time is not a defined term in the Rules. Instead,
the proposed rule change would provide that transactions would arise
``as set out in Part 4 of the Rules.'' Part 4 of the Rules,
specifically Rule 401, determines the time of formation of cleared
contracts at ICE Clear Europe. Again, this proposed change would
clarify when contracts arise under the Standard Terms and help to
ensure a uniform time of formation by referring to a single set of
rules (i.e. Part 4 of the Rules) that determine when cleared contracts
are formed at ICE Clear Europe. ICE Clear Europe is making these
changes to ensure a uniform time for formation of contracts, which it
believes would help to facilitate porting by reducing the possibility
of disagreements or confusion over when contracts subject to porting
have formed.\112\
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    \112\ Notice, 85 FR at 13201, 13216.
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    The proposed rule change would next amend the Standard Terms and
Rule 202(b)(iii) to eliminate the use of automatic early termination in
client clearing documentation of Non-FCM/BD Clearing Members. As ICE
Clear Europe described in the Notice, some Non-FCM/BD Clearing Members
may use automatic early termination provisions in their client clearing
documentation even though Rule 202(b)(iii) as currently in force
generally prohibits this.\113\ In such a case, the transaction between
the Non-FCM/BD Clearing Member and its Customer may terminate at a
different time than the transaction between the Non-FCM/BD Clearing
Member and ICE Clear Europe, which could lead to the transactions
having different values upon termination following a close-out of a
defaulting Non-FCM/BD Clearing Member's contracts (because the
transactions were terminated at different times). Moreover, as ICE
Clear Europe described in the Notice, automatic or early termination
clauses also may give rise to legal uncertainties as to whether certain
protections from the disapplication of insolvency law for porting in
Part VII of the UK's Companies Act 1989 are available, since following
an automatic termination there would be no contract left to port or
transfer.\114\
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    \113\ Notice, 85 FR at 13201-13202.
    \114\ Notice, 85 FR at 13202.
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    To resolve these issues regarding use of early termination clauses
and therefore facilitate porting of contacts, the proposed rule change
would first remove Rule 202(b)(iii) in its entirety. Rule 202(b)(iii)
currently provides that automatic early termination does not apply to
the Standard Terms in respect of either the Non-FCM/BD Clearing Member
or its Customer and the relevant Customer-CM Transactions. The proposed
rule change would replace this provision with a new Section 5(c) in
each of the Standard Terms, which would provide that any provision
requiring termination of a Customer-CM CDS Transaction upon, prior to,
or following an ICE-Declared Default, or giving a party the right to
terminate, shall be ineffective unless (i) one of the parties is