[Federal Register Volume 82, Number 165 (Monday, August 28, 2017)]
[Rules and Regulations]
[Pages 40675-40681]
[FR Doc No: 2017-16860]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA-2016-9518; Product Identifier 2015-NM-091-AD; Amendment
39-18989; AD 2017-16-12]
RIN 2120-AA64

Airworthiness Directives; Airbus Airplanes

AGENCY: Federal Aviation Administration (FAA), Department of
Transportation (DOT).

ACTION: Final rule.

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SUMMARY: We are superseding Airworthiness Directive (AD) 2013-19-09 and
AD 2014-25-51, which applied to all Airbus Model A318, A319, A320, and
A321 series airplanes. AD 2013-19-09 required replacing Angle of Attack
(AOA) sensor conic plates with AOA sensor flat plates. AD 2014-25-51
required revising the airplane flight manual (AFM) to advise the
flightcrew of emergency procedures for abnormal Alpha Protection (Alpha
Prot). This new AD requires replacing certain AOA sensors; and doing a
detailed inspection and a functional heating test for discrepancies on
certain AOA sensors, and replacing the affected AOA sensors. This AD
was prompted by a report indicating that a Model A321 airplane
encountered a blockage of two AOA probes during climb, leading to
activation of the Alpha Prot while the Mach number increased. We are
issuing this AD to address the unsafe condition on these products.

DATES: This AD is effective October 2, 2017.
    The Director of the Federal Register approved the incorporation by
reference of certain publications listed in this AD as of October 2,
2017.
    The Director of the Federal Register approved the incorporation by
reference of certain other publications listed in this AD as of
November 6, 2013 (78 FR 60667, October 2, 2013).

ADDRESSES: For service information identified in this final rule,
contact Airbus, Airworthiness Office--EIAS, 1 Rond Point Maurice
Bellonte, 31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax
+33 5 61 93 44 51; email<EMAIL_ADDRESS>Internet
http://www.airbus.com. You may view this referenced service information
at the FAA, Transport Standards Branch, 1601 Lind Avenue SW., Renton,
WA. For information on the availability of this material at the FAA,
call<PHONE_NUMBER>. It is also available on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-
9518.

Examining the AD Docket

    You may examine the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-
9518; or in person at the Docket Management Facility between 9 a.m. and
5 p.m., Monday through Friday, except Federal holidays. The AD docket
contains this AD, the regulatory evaluation, any comments received, and
other information. The address for the Docket Office (telephone 800-
647-5527) is Docket Management Facility, U.S. Department of
Transportation, Docket Operations, M-30, West Building Ground Floor,
Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: Sanjay Ralhan, Aerospace Engineer,
International Section, Transport Standards Branch, FAA, 1601 Lind
Avenue SW., Renton, WA 98057-3356; telephone<PHONE_NUMBER>; fax 425-227-
1149.

SUPPLEMENTARY INFORMATION:

Discussion

    We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR
part 39 to supersede AD 2013-19-09, Amendment 39-17591 (78 FR 60667,
October 2, 2013) (``AD 2013-19-09''), and AD 2014-25-51, Amendment 39-
18067 (80 FR 3153, January 22, 2015) (``AD 2014-25-51''). AD 2013-19-09
and AD 2014-25-51 applied to all Airbus Model A318, A319, A320, and
A321 series airplanes. The NPRM published in the Federal Register on
December 28, 2016 (81 FR 95531). The NPRM was prompted by a report
indicating that an Airbus Model A321 airplane encountered a blockage of
two AOA probes during climb, leading to activation of the Alpha Prot
while the Mach number increased. The NPRM proposed to continue to
require replacing AOA sensor conic plates with AOA sensor flat plates
and revising the AFM to advise the flight crew of emergency procedures
for abnormal Alpha Prot. The NPRM also proposed to

continue to require replacing certain AOA sensors; and doing a detailed
inspection and a functional heating test for discrepancies on certain
AOA sensors, and replacing the affected AOA sensors. We are issuing
this AD to prevent a pitch down order due to abnormal activation of the
Alpha Prot. An abnormal Alpha Prot, if not corrected, could result in
loss of control of the airplane.
    The European Aviation Safety Agency (EASA), which is the Technical
Agent for the Member States of the European Union, has issued EASA
Airworthiness Directive 2015-0135, dated July 8, 2015 (referred to
after this as the Mandatory Continuing Airworthiness Information, or
``the MCAI''), to correct an unsafe condition for all Airbus Model
A318, A319, A320, and A321 series airplanes. The MCAI states:

    An occurrence was reported where an Airbus A321 aeroplane
encountered a blockage of two Angle of Attack (AOA) probes during
climb, leading to activation of the Alpha Protection (Alpha Prot)
while the Mach number increased. The flight crew managed to regain
full control and the flight landed uneventfully.
    When Alpha Prot is activated due to blocked AOA probes, the
flight control laws order a continuous nose down pitch rate that, in
a worst case scenario, cannot be stopped with backward sidestick
inputs, even in the full backward position. If the Mach number
increases during a nose down order, the AOA value of the Alpha Prot
will continue to decrease. As a result, the flight control laws will
continue to order a nose down pitch rate, even if the speed is above
minimum selectable speed, known as VLS.
    This condition, if not corrected, could result in loss of
control of the airplane.
    Investigation results indicated that A320 family airplanes
equipped with certain UTC Aerospace (UTAS, formerly known as
Goodrich) AOA sensors, or equipped with certain SEXTANT/THOMSON AOA
sensors, appear to have a greater susceptibility to adverse
environmental conditions than airplanes equipped with the latest
Thales AOA sensor, Part Number (P/N) C16291AB, which was designed to
improve A320 airplane AOA indication behaviour in heavy rain
conditions.
    Having determined that replacement of these AOA sensors is
necessary to achieve and maintain the required safety level of the
airplane, EASA issued AD 2015-0087, retaining the requirements of
EASA AD 2012-0236R1 [which corresponds to FAA AD 2013-06-03], [EASA]
AD 2013-0022 (partially) [which corresponds to FAA AD 2013-19-09],
and [EASA] AD 2014-0266-E [which corresponds to FAA AD 2014-25-51],
which were superseded, and requiring modification of the airplanes
by replacement of the affected P/N sensors, and, after modification,
prohibiting (re-)installation of those P/N AOA sensors. That [EASA]
AD also required repetitive detailed visual inspections (DET) and
functional heating tests of certain Thales AOA sensors and provided
an optional terminating action for those inspections.
    Since EASA AD 2015-0087 was issued, based on further analysis
results, Airbus issued Operators Information Transmission (OIT) Ref.
999.0015/15 Revision 1, instructing operators to speed up the
removal from service of UTAS P/N 0861ED2 AOA sensors.
    For the reasons described above, this [EASA] AD retains the
requirements of EASA AD 2015-0087, which is superseded, but reduces
the compliance times for airplanes with UTAS P/N 0861ED2 AOA sensors
installed.

    You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2016-
9518.

Comments

    We gave the public the opportunity to participate in developing
this AD. The following presents the comments received on the NPRM and
the FAA's response to each comment. Air Line Pilots Association,
International stated that it supported the NPRM.

Request To Revise Certain Exceptions

    Airbus and Virgin America requested that the NPRM be revised to
allow airplanes that have utilized FAA Alternative Methods of
Compliance (AMOC) ANM-116-13-273R1 for probes having P/N C16291AB to be
in compliance with the proposed requirements. Virgin America and Airbus
stated that the language in paragraphs (l), (m)(2), (n), and (q) of the
proposed AD conflict with the language specified in FAA AMOC ANM-116-
13-273R1.
    We agree to revise this AD to address the commenters' request. FAA
AMOC ANM-116-13-273R1 is limited to certain serial numbers that have
passed the inspection and test. We have revised paragraphs (l), (m)(2),
(n), and (q) of this AD to clarify the exception in FAA AMOC ANM-116-
13-273R1.

Request To Incorporate the Latest Service Information

    Airbus requested that the latest service information be used in the
AD and credit given for previous actions done before the effective date
of this AD.
    We agree to incorporate the latest service information in this AD.
Accordingly, we have revised paragraph (g)(1) of this AD; the
introductory text to paragraph (k) of this AD, and paragraphs (l)(1),
(m), and (n) of this AD. For Airbus Service Bulletin A320-34-1415,
Revision 04, dated July 30, 2015; Airbus Service Bulletin A320-34-1610,
Revision 01, dated July 30, 2015; and Airbus Service Bulletin A320-34-
1564, Revision 01, dated August 26, 2013; the changes are minor and do
not add work to this AD. Thales Service Bulletin C16291A-34-007,
Revision 04, dated October 11, 2012, describes procedures for
inspecting, re-identifying, and testing certain AOA sensors, and does
not add work to this AD. We have also revised paragraph (q) of this AD
to give credit for previous actions done before the effective date of
this AD using earlier versions of service information.

Request for Credit for Previous Actions

    Virgin America requested that the FAA include Airbus Service
Bulletin A320-34-1452, dated January 29, 2010 (as specified in
paragraph (g) of AD 2013-06-03 to inspect and replace the affected
probe P/N C16291AA with P/N C16291AB), in paragraph (q), ``Credit for
Previous Actions,'' of the proposed AD. Virgin America stated that
these actions have resulted in installing compliant C16291AB probes in
the affected positions prior to the effective date of the AD.
    We disagree with Virgin America with allowing use of Airbus Service
Bulletin A320-34-1452, dated January 29, 2010, for accomplishment of
the installation of the probe P/N C16291AB. There are certain probe P/
Ns C16291AB having a serial number specified in Thales Service Bulletin
C16291A-34-007, Revision 04, dated October 11, 2012, and these probes
may not be installed unless they have been inspected and re-identified,
and have passed a functional test, in accordance with the following
service information:
     Thales Service Bulletin C16291A-34-007, Revision 04, dated
October 11, 2012.
     Thales Service Bulletin C16291A-34-007, Revision 03, dated
April 10, 2012.
     Thales Service Bulletin C16291A-34-007, Revision 02, dated
December 16, 2011.
     Thales Service Bulletin C16291A-34-007, Revision 01, dated
December 03, 2009.

Conclusion

    We reviewed the available data, including the comments received,
and determined that air safety and the public interest require adopting
this AD with the changes described previously and minor editorial
changes. We have determined that these changes:
     Are consistent with the intent that was proposed in the
NPRM for correcting the unsafe condition; and

     Do not add any additional burden upon the public than was
already proposed in the NPRM.
    We also determined that these changes will not increase the
economic burden on any operator or increase the scope of this AD.

Related Service Information Under 1 CFR Part 51

    We have reviewed the following Airbus service information:
     Airbus Service Bulletin A320-34-1415, Revision 04, dated
July 30, 2015. This service information describes procedures for
performing a detailed inspection and a functional heating test for
discrepancies on certain AOA sensors, and replacing the affected AOA
sensors.
     Airbus Service Bulletin A320-34-1444, Revision 01, dated
March 17, 2011. This service information describes procedures for
replacing certain SEXTANT/THOMSON AOA sensors.
     Airbus Service Bulletin A320-34-1564, Revision 01, dated
August 26, 2013. This service information describes procedures for
installing AOA sensor plates having a certain part number.
     Airbus Service Bulletin A320-34-1610, Revision 01, dated
July 30, 2015. This service information describes procedures for
replacing certain UTAS AOA sensors.
    We have reviewed the following Thales service information, which
describes procedures for inspecting, re-identifying, and testing
certain AOA sensors. These documents are distinct due to editorial
revisions.
     Thales Service Bulletin C16291A-34-007, Revision 04, dated
October 11, 2012.
     Thales Service Bulletin C16291A-34-007, Revision 03, dated
April 10, 2012.
     Thales Service Bulletin C16291A-34-007, Revision 02, dated
December 16, 2011.
     Thales Service Bulletin C16291A-34-007, Revision 01, dated
December 03, 2009.
    This service information is reasonably available because the
interested parties have access to it through their normal course of
business or by the means identified in the ADDRESSES section.

Costs of Compliance

    We estimate that this AD affects 959 airplanes of U.S. registry.
    We estimate the following costs to comply with this AD:

                                                 Estimated Costs
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                                                                                Cost per      Cost on U.S.
              Action                      Labor cost             Parts cost           product        operators
----------------------------------------------------------------------------------------------------------------
Replacement (retained actions from  8 work-hours x $85     $0...................            $680        $652,120
 AD 2013-19-09).                     per hour = $680.
Revising the AFM (retained actions  1 work-hour x $85 per  $0...................              85          81,515
 from AD 2014-25-51).                hour = $85.
Replacement and Inspection (new     5 work-hours x $85     The parts cost is                 425         407,575
 action).                            per hour = $425.       unavailable.
----------------------------------------------------------------------------------------------------------------

    We estimate the following costs to do any necessary replacements
that would be required based on the results of the inspection. We have
no way of determining the number of aircraft that might need these
replacements:

                                               On-Condition Costs
----------------------------------------------------------------------------------------------------------------
                                                                                Cost per
                 Action                          Labor cost                  Parts cost              product
----------------------------------------------------------------------------------------------------------------
Replacement............................  5 work-hours x $85 per      The parts cost is                     $425
                                          hour = $425.                unavailable.
----------------------------------------------------------------------------------------------------------------

    According to the manufacturer, some of the costs of this AD may be
covered under warranty, thereby reducing the cost impact on affected
individuals. We do not control warranty coverage for affected
individuals. As a result, we have included all costs in our cost
estimate.

Authority for This Rulemaking

    Title 49 of the United States Code specifies the FAA's authority to
issue rules on aviation safety. Subtitle I, section 106, describes the
authority of the FAA Administrator. ``Subtitle VII: Aviation
Programs,'' describes in more detail the scope of the Agency's
authority.
    We are issuing this rulemaking under the authority described in
``Subtitle VII, Part A, Subpart III, Section 44701: General
requirements.'' Under that section, Congress charges the FAA with
promoting safe flight of civil aircraft in air commerce by prescribing
regulations for practices, methods, and procedures the Administrator
finds necessary for safety in air commerce. This regulation is within
the scope of that authority because it addresses an unsafe condition
that is likely to exist or develop on products identified in this
rulemaking action.
    This AD is issued in accordance with authority delegated by the
Executive Director, Aircraft Certification Service, as authorized by
FAA Order 8000.51C. In accordance with that order, issuance of ADs is
normally a function of the Compliance and Airworthiness Division, but
during this transition period, the Executive Director has delegated the
authority to issue ADs applicable to transport category airplanes to
the Director of the System Oversight Division.

Regulatory Findings

    We determined that this AD will not have federalism implications
under Executive Order 13132. This AD will not have a substantial direct
effect on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.
    For the reasons discussed above, I certify that this AD:
    1. Is not a ``significant regulatory action'' under Executive Order
12866;
    2. Is not a ``significant rule'' under the DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979);
    3. Will not affect intrastate aviation in Alaska; and
    4. Will not have a significant economic impact, positive or
negative, on a substantial number of small entities

under the criteria of the Regulatory Flexibility Act.

List of Subjects in 14 CFR Part 39

    Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.

Adoption of the Amendment

    Accordingly, under the authority delegated to me by the
Administrator, the FAA amends 14 CFR part 39 as follows:

PART 39--AIRWORTHINESS DIRECTIVES

0
1. The authority citation for part 39 continues to read as follows:

    Authority:  49 U.S.C. 106(g), 40113, 44701.

Sec.  39.13   [Amended]

0
2. The FAA amends Sec.  39.13 by removing Airworthiness Directive (AD)
2013-19-09, Amendment 39-17591 (78 FR 60667, October 2, 2013); and AD
2014-25-51, Amendment 39-18067 (80 FR 3153, January 22, 2015); and
adding the following new AD:

2017-16-12 Airbus: Amendment 39-18989; Docket No. FAA-2016-9518;
Product Identifier 2015-NM-091-AD.

(a) Effective Date

    This AD is effective October 2, 2017.

(b) Affected ADs

    (1) This AD replaces AD 2013-19-09, Amendment 39-17591 (78 FR
60667, October 2, 2013) (``AD 2013-19-09''); and AD 2014-25-51,
Amendment 39-18067 (80 FR 3153, January 22, 2015) (``AD 2014-25-
51'').
    (2) This AD affects AD 2013-06-03, Amendment 39-17399 (78 FR
19085, March 29, 2013) (``AD 2013-06-03'').

(c) Applicability

    This AD applies to the Airbus airplanes listed in paragraphs
(c)(1) through (c)(4) of this AD, certificated in any category, all
manufacturer serial numbers.
    (1) Airbus Model A318-111, -112, -121, and -122 airplanes.
    (2) Airbus Model A319-111, -112, -113, -114, -115, -131, -132,
and -133 airplanes.
    (3) Airbus Model A320-211, -212, -214, -231, -232, and -233
airplanes.
    (4) Airbus Model A321-111, -112, -131, -211, -212, -213, -231,
and -232 airplanes.

(d) Subject

    Air Transport Association (ATA) of America Code 34, Navigation.

(e) Reason

    This AD was prompted by a report indicating that an Airbus Model
A321 airplane encountered a blockage of two Angle of Attack (AOA)
probes during climb, leading to activation of the Alpha Protection
(Alpha Prot) while the Mach number increased. We are issuing this AD
to prevent a pitch down order due to abnormal activation of the
Alpha Prot. An abnormal Alpha Prot, if not corrected, could result
in loss of control of the airplane.

(f) Compliance

    Comply with this AD within the compliance times specified,
unless already done.

(g) Retained New Flat Plate Installation, With Removed Post-
Installation Requirement, Specific Delegation Approval Language, and
New Service Information

    This paragraph restates the requirements of paragraph (j) of AD
2013-19-09, with a removed post-installation requirement, specific
delegation approval language, and revised service information.
Within 5 months after November 6, 2013 (the effective date of AD
2013-19-09), remove all AOA sensor conic plates having part number
(P/N) F3411060200000 or P/N F3411060900000, and install AOA sensor
flat plates having P/Ns specified in paragraph (g)(1) or (g)(2) of
this AD, except as specified in paragraph (h) of this AD. Install
the AOA sensor plates in accordance with the applicable method
specified in paragraph (g)(1) or (g)(2) of this AD.
    (1) Install P/N D3411013520200 in accordance with the
Accomplishment Instructions of Airbus Mandatory Service Bulletin
A320-34-1564, including Appendix 01, dated January 25, 2013, or
Airbus Service Bulletin A320-34-1564, Revision 01, dated August 26,
2013. As of the effective date of this AD, only Airbus Service
Bulletin A320-34-1564, Revision 01, dated August 26, 2013, may be
used for accomplishment of the actions required by this paragraph.
    (2) Install P/N D3411007620000 or P/N D3411013520000, using a
method approved by the Manager, International Section, Transport
Standards Branch, FAA; or the European Aviation Safety Agency
(EASA); or Airbus's EASA Design Organization Approval (DOA).

(h) Retained Exception, With No Changes

    This paragraph restates the exception provided by paragraph (k)
of AD 2013-19-09, with no changes. An airplane on which Airbus
modification 154863 (installation of AOA sensor flat plate) and
modification 154864 (coating protection) have been embodied in
production is not affected by the requirements of paragraph (g) of
this AD, provided that, since first flight, no AOA sensor conic
plate having P/N F3411060200000 or P/N F3411060900000 has been
installed on that airplane.

(i) Retained Parts Installation Prohibition, With No Changes

    This paragraph restates the requirements of paragraph (m) of AD
2013-19-09, with no changes.
    (1) For any airplane that has AOA sensor flat plates installed:
As of November 6, 2013 (the effective date of AD 2013-19-09), do not
install any AOA sensor conic plate having P/N F3411060200000 or P/N
F3411060900000, and do not use any AOA protection cover having P/N
98D34203003000.
    (2) For any airplane that has AOA sensor conic plates installed:
As of November 6, 2013 (the effective date of AD 2013-19-09), after
modification of the airplane as required by paragraph (g) of this
AD, do not install any AOA sensor conic plate having P/N
F3411060200000 or P/N F3411060900000, and do not use any AOA
protection cover having P/N 98D34203003000.

(j) Retained Revision of Airplane Flight Manual (AFM), With No Changes

    This paragraph restates the requirements of paragraph (g) of AD
2014-25-51, with no changes. Within 2 days after February 6, 2015
(the effective date of AD 2014-25-51), revise the AFM to incorporate
procedures to address undue activation of Alpha Prot by inserting
the text specified in figure 1 to paragraph (j) of this AD into the
Emergency Procedures section of the applicable AFM, to advise the
flight crew of emergency procedures for abnormal Alpha Prot. This
may be accomplished by inserting a copy of this AD into the AFM.
When a statement identical to the text specified in figure 1 to
paragraph (j) of this AD is included in the general revisions of the
AFM, the general revisions may be inserted in the AFM, and the text
specified in figure 1 to paragraph (j) of this AD may be removed.

[GRAPHIC] [TIFF OMITTED] TR28AU17.022

(k) New Requirement of This AD: Replacement of Certain UTAS (Formerly
Goodrich) AOA Sensors

    For airplanes on which any UTAS AOA sensor, P/N 0861ED or P/N
0861ED2, is installed: Within the applicable compliance times
specified in paragraphs (k)(1), (k)(2), (k)(3), and (k)(4) of this
AD, replace the affected Captain and First Officer AOA sensors with
Thales AOA sensors, P/N C16291AB, in accordance with the
Accomplishment Instructions of Airbus Service Bulletin A320-34-1610,
Revision 01, dated July 30, 2015.
    (1) For Model A318 and A321 series airplanes on which any UTAS
AOA sensor, P/N 0861ED, is installed: Replace within 7 months after
the effective date of this AD.
    (2) For Model A319 and A320 series airplanes on which any UTAS
AOA sensor, P/N 0861ED, is installed: Replace within 22 months after
the effective date of this AD.
    (3) For Model A318 and A321 series airplanes on which any UTAS
AOA sensor, P/N 0861ED2, is installed: Replace within 4 months after
the effective date of this AD.
    (4) For Model A319 and A320 series airplanes on which any UTAS
AOA sensor, P/N 0861ED2, is installed: Replace within 7 months after
the effective date of this AD.

(l) New Requirement of This AD: Replacement of Certain SEXTANT/THOMSON
AOA Sensors

    (1) For airplanes on which any SEXTANT/THOMSON AOA sensor, P/N
45150320 or P/N 16990568, is installed: Within the applicable
compliance time specified in paragraphs (l)(1)(i) or (l)(1)(ii) of
this AD, replace each SEXTANT/THOMSON AOA sensor, P/N 45150320 and
P/N 16990568, with a Thales AOA sensor, P/N C16291AB, in accordance
with the Accomplishment Instructions of Airbus Service Bulletin
A320-34-1444, Revision 01, dated March 17, 2011; except AOA sensor
probes P/N C16291AB having a serial number specified in Thales
Service Bulletin C16291A-34-007, Revision 04, dated October 11,
2012, may not be installed unless the AOA probe sensors have been
inspected and re-identified, and have passed a functional test, in
accordance with the Thales service information specified in
paragraphs (l)(2)(i), (l)(2)(ii), (l)(2)(iii), or (l)(2)(iv) of this
AD.
    (i) For Model A318 and A321 series airplanes on which any
SEXTANT/THOMSON AOA sensor, P/N 45150320 or P/N 16990568, is
installed: Replace within 7 months after the effective date of this
AD.
    (ii) For Model A319 and A320 series airplanes on which any
SEXTANT/THOMSON AOA sensor, P/N 45150320 or P/N 16990568, is
installed: Replace within 22 months after the effective date of this
AD.
    (2) As specified in paragraph (l)(1) of this AD, use the
following Thales service information specified in paragraphs
(l)(2)(i), (l)(2)(ii), (l)(2)(iii), or (l)(2)(iv) of this AD.
    (i) Thales Service Bulletin C16291A-34-007, Revision 04, dated
October 11, 2012.
    (ii) Thales Service Bulletin C16291A-34-007, Revision 03, dated
April 10, 2012.
    (iii) Thales Service Bulletin C16291A-34-007, Revision 02, dated
December 16, 2011.
    (iv) Thales Service Bulletin C16291A-34-007, Revision 01, dated
December 03, 2009.

(m) New Requirement of This AD: Functional Heating Test, and Corrective
Action for Certain AOA Sensors

    For an airplane on which any Thales AOA sensor, P/N C16291AA, is
installed: Before exceeding 5,200 flight hours accumulated by each
affected Thales AOA sensor since its first installation on an
airplane, or within 6 months after the effective date of this AD,
whichever occurs later, do a functional heating test of each AOA
sensor, P/N C16291AA, to determine the maximum current (Imax) value,
in accordance with the Accomplishment Instructions of Airbus Service
Bulletin A320-34-1415, Revision 04,

dated July 30, 2015. If, during any functional heating test, any
Imax value is below the flow chart value as specified in Airbus
Service Bulletin A320-34-1415, Revision 04, dated July 30, 2015,
before further flight, replace each discrepant AOA sensor with a
sensor identified in paragraph (m)(1) or (m)(2) of this AD, in
accordance with the Accomplishment Instructions of Airbus Service
Bulletin A320-34-1415, Revision 04, dated July 30, 2015. Repeat the
functional heating test thereafter at intervals not to exceed 2,000
flight hours.
    (1) Replace with a Thales AOA sensor, P/N C16291AA, that has
passed a functional heating test as specified in the Accomplishment
Instructions of Airbus Service Bulletin A320-34-1415, Revision 04,
dated July 30, 2015.
    (2) Replace with a Thales AOA sensor, P/N C16291AB, except AOA
sensor probes P/N C16291AB having a serial number specified in
Thales Service Bulletin C16291A-34-007, Revision 04, dated October
11, 2012, may not be installed unless the AOA probe sensors have
been inspected and re-identified, and have passed a functional test,
in accordance with the Thales service information specified in
paragraphs (l)(2)(i), (l)(2)(ii), (l)(2)(iii), or (l)(2)(iv) of this
AD.

(n) Optional Terminating Action

    Modification of an airplane by replacing each Thales P/N
C16291AA AOA sensor with a Thales P/N C16291AB AOA sensor, in
accordance with the Accomplishment Instructions of Airbus Service
Bulletin A320-34-1444, Revision 01, dated March 17, 2011, terminates
the repetitive functional heating tests required in paragraph (m) of
this AD for that airplane; except AOA sensor probes P/N C16291AB
having a serial number specified in Thales Service Bulletin C16291A-
34-007, Revision 04, dated October 11, 2012, may not be installed,
unless the AOA probe sensors have been inspected and re-identified,
and have passed a functional test, in accordance with the Thales
service information specified in paragraphs (l)(2)(i), (l)(2)(ii),
(l)(2)(iii), or (l)(2)(iv) of this AD.

(o) New Provisions of This AD: Airplanes Not Affected

    An airplane with Airbus modification 150006 (installation of
Thales P/N C16291AB AOA sensors), but without modification 26934
(installation of UTAS P/N 0861ED AOA sensors) embodied in
production, is not affected by the requirements of paragraphs (k),
(l), and (m) of this AD, provided it is determined that no AOA
sensor having SEXTANT/THOMSON P/N 45150320 or 16990568, or UTAS P/N
0861ED or 0861ED2, has been installed on that airplane since its
date of manufacture.

(p) New Requirement of This AD: Parts Installation Prohibitions

    (1) As of the effective date of this AD: For an airplane on
which only Thales AOA sensors, P/N C16291AB, are installed, do not
install a Thales AOA sensor, P/N C16291AA, on that airplane. This
parts installation prohibition terminates the requirements of
paragraph (i)(1) of AD 2013-06-03 for the airplanes identified in
this paragraph.
    (2) As of the effective date of this AD: For an airplane on
which any combination of Thales AOA sensors, P/N C16291AA and Thales
P/N C16291AB, is installed, do not install any SEXTANT/THOMSON AOA
sensor, P/N 45150320 or 16990568, or UTAS AOA sensor, P/N 0861ED or
0861ED2, on that airplane.
    (3) After modification of an airplane as required by paragraph
(k) of this AD, do not install any AOA sensor with a part number
specified in paragraphs (p)(3)(i) and (p)(3)(ii) of this AD on that
airplane, with the exception that installation of a UTAS P/N 0861ED
AOA sensor is allowed in the standby position of that airplane.
    (i) SEXTANT/THOMSON AOA sensors, P/N 45150320 and P/N 16990568.
    (ii) UTAS AOA sensors, P/N 0861ED and P/N 0861ED2.

(q) Credit for Previous Actions

    (1) This paragraph provides credit for the actions required by
paragraph (k) of this AD, if those actions were performed before the
effective date of this AD using Airbus Service Bulletin A320-34-
1610, dated March 31, 2015.
    (2) This paragraph provides credit for the actions required by
paragraph (l) of this AD, if those actions were performed before the
effective date of this AD using Airbus Service Bulletin A320-34-
1444, dated October 7, 2009; except AOA sensor probes P/N C16291AB
having a serial number specified in Thales Service Bulletin C16291A-
34-007, Revision 04, dated October 11, 2012, may not be installed
unless the AOA probe sensors have been inspected and re-identified,
and have passed a functional test, using the Thales service
information specified in paragraphs (l)(2)(i), (l)(2)(ii),
(l)(2)(iii), or (l)(2)(iv) of this AD.
    (3) This paragraph provides credit for the actions required by
paragraph (m) of this AD, if those actions were performed before the
effective date of this AD using Airbus Service Bulletin A320-34-
1415, Revision 03, July 8, 2010.

(r) Acceptable Parts

    Installation of a version (part number) of an AOA sensor
approved after the effective date of this AD is an approved method
of compliance with the requirements of paragraph (k), (l), or (m) of
this AD, as applicable, provided the requirements specified in
paragraphs (r)(1) and (r)(2) of this AD are met.
    (1) The version (part number) must be approved by the Manager,
International Section, Transport Standards Branch, FAA; or EASA; or
Airbus's EASA DOA.
    (2) The installation must be accomplished using a method
approved by the Manager, International Section, Transport Standards
Branch, FAA; or EASA; or Airbus's EASA DOA.

(s) Other FAA AD Provisions

    The following provisions also apply to this AD:
    (1) Alternative Methods of Compliance (AMOCs): The Manager,
International Section, Transport Standards Branch, FAA, has the
authority to approve AMOCs for this AD, if requested using the
procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19,
send your request to your principal inspector or local Flight
Standards District Office, as appropriate. If sending information
directly to the International Branch, send it to the attention of
the person identified in paragraph (u)(2) of this AD. Information
may be emailed to<EMAIL_ADDRESS>    (i) Before using any approved AMOC, notify your appropriate
principal inspector, or lacking a principal inspector, the manager
of the local flight standards district office/certificate holding
district office.
    (ii) AMOCs approved previously for AD 2013-19-09 are approved as
AMOCs for the corresponding provisions of paragraphs (g), (h), (i),
and (t)(1) of this AD.
    (iii) AMOCs approved previously for AD 2014-25-51 are approved
as AMOCs for the corresponding provisions of paragraph (j) of this
AD.
    (2) Contacting the Manufacturer: As of the effective date of
this AD, for any requirement in this AD to obtain corrective actions
from a manufacturer, the action must be accomplished using a method
approved by the Manager, International Section, Transport Standards
Branch, FAA; or the European Aviation Safety Agency (EASA); or
Airbus's EASA Design Organization Approval (DOA). If approved by the
DOA, the approval must include the DOA-authorized signature.

(t) Retained Provisions for Special Flight Permits

    (1) For the requirements of paragraphs (g), (h), and (i) of this
AD: Special flight permits may be issued in accordance with sections
21.197 and 21.199 of the Federal Aviation Regulations (14 CFR 21.197
and 21.199) to operate the airplane to a location where the airplane
can be modified (if the operator elects to do so), provided Airbus
A318/A319/A320/A321 TR TR286, Issue 1.0, dated December 17, 2012,
has been inserted into the Emergency Procedures of the Airbus A318/
A319/A320/A321 AFM.
    (2) For the requirements of paragraphs (j) of this AD: Special
flight permits may be issued in accordance with sections 21.197 and
21.199 of the Federal Aviation Regulations (14 CFR 21.197 and
21.199) to operate the airplane to a location where the airplane can
be modified (if the operator elects to do so), provided the revision
required by paragraph (j) of this AD has been done.

(u) Related Information

    (1) Refer to Mandatory Continuing Airworthiness Information
(MCAI) EASA Airworthiness Directive 2015-0135, dated July 8, 2015,
for related information. This MCAI may be found in the AD docket on
the Internet at http://www.regulations.gov by searching for and
locating Docket No. FAA-2016-9518.
    (2) For more information about this AD, contact Sanjay Ralhan,
Aerospace Engineer, International Section, Transport Standards
Branch, FAA, 1601 Lind Avenue SW., Renton, WA 98057-3356; telephone
425-227-1405; fax<PHONE_NUMBER>.

    (3) Service information identified in this AD that is not
incorporated by reference is available at the addresses specified in
paragraphs (v)(5) and (v)(6) of this AD.

(v) Material Incorporated by Reference

    (1) The Director of the Federal Register approved the
incorporation by reference (IBR) of the service information listed
in this paragraph under 5 U.S.C. 552(a) and 1 CFR part 51.
    (2) You must use this service information as applicable to do
the actions required by this AD, unless this AD specifies otherwise.
    (3) The following service information was approved for IBR on
October 2, 2017.
    (i) Airbus Service Bulletin A320-34-1415, Revision 04, dated
July 30, 2015.
    (ii) Airbus Service Bulletin A320-34-1444, Revision 01, dated
March 17, 2011.
    (iii) Airbus Service Bulletin A320-34-1564, Revision 01, dated
August 26, 2013.
    (iv) Airbus Service Bulletin A320-34-1610, Revision 01, dated
July 30, 2015.
    (v) Thales Service Bulletin C16291A-34-007, Revision 04, dated
October 11, 2012.
    (vi) Thales Service Bulletin C16291A-34-007, Revision 03, dated
April 10, 2012.
    (vii) Thales Service Bulletin C16291A-34-007, Revision 02, dated
December 16, 2011.
    (viii) Thales Service Bulletin C16291A-34-007, Revision 01,
dated December 03, 2009.
    (4) The following service information was approved for IBR on
November 6, 2013, Amendment 39-17591 (78 FR 60667, October 2, 2013).
    (i) Airbus Mandatory Service Bulletin A320-34-1564, including
Appendix 01, dated January 25, 2013.
    (ii) Reserved.
    (5) For service information identified in this AD, contact
Airbus, Airworthiness Office--EIAS, 1 Rond Point Maurice Bellonte,
31707 Blagnac Cedex, France; telephone +33 5 61 93 36 96; fax +33 5
61 93 44 51; email<EMAIL_ADDRESS>Internet http://www.airbus.com.
    (6) You may view this service information at the FAA, Transport
Standards Branch, 1601 Lind Avenue SW., Renton, WA. For information
on the availability of this material at the FAA, call<PHONE_NUMBER>.
    (7) You may view this service information that is incorporated
by reference at the National Archives and Records Administration
(NARA). For information on the availability of this material at
NARA, call<PHONE_NUMBER>, or go to: http://www.archives.gov/federal-register/cfr/ibr-locations.html.

    Issued in Renton, Washington, on August 2, 2017.
Jeffrey E. Duven,
Director, System Oversight Division, Aircraft Certification Service.
[FR Doc. 2017-16860 Filed 8-25-17; 8:45 am]
 BILLING CODE P


[Federal Register Volume 79, Number 25 (Thursday, February 6, 2014)]
[Notices]
[Pages 7250-7257]
[FR Doc No: 2014-02496]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71450; File No. SR- ICEEU-2014-03]

Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt
Clearinghouse Recovery and Wind-Down Rules for Its Futures and Options
and Foreign Exchange Product Categories

January 31, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on January 28, 2014, ICE Clear Europe Limited (``ICE Clear Europe'')
filed with the Securities and Exchange Commission (``Commission'' or
``SEC'') the proposed rule change described in Items I and II below,
which Items have been prepared primarily by ICE Clear Europe. ICE Clear
Europe filed the proposal pursuant to Section 19(b)(3)(A)(iii) of the
Act,\3\ and Rules 19b-4(f)(4)(i) and (ii) thereunder,\4\ so that the
proposal was effective upon filing with the Commission. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(4)(i) and (ii).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The principal purpose of the proposed changes is to amend the ICE
Clear Europe Clearing Rules in order to adopt new procedures for
clearinghouse recovery and wind-down in the event of exhaustion or
potential exhaustion of clearinghouse resources following a clearing
member default, as well as make other improvements to the default
management process. As discussed below, the proposed amendments apply
to the F&O and FX product categories, but, except for certain
conforming and clarifying changes described below, do not apply to the
CDS product category.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, ICE Clear Europe included
statements concerning the purpose of and basis for the proposed rule
change and discussed any comments it received on the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. ICE Clear Europe has prepared summaries,
set forth in sections A, B, and C below, of the most significant
aspects of these statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    ICE Clear Europe submits proposed amendments to its Rules in order
to adopt new provisions relating to clearinghouse recovery and wind-
down following the exhaustion or potential exhaustion of available
resources after a clearing member default or series of clearing member
defaults. The amendments would, among other matters, (i) establish a
``cooling-off period'' in cases of certain clearing member defaults
that result in assessments, in which case the liability of clearing
members for additional guaranty fund assessments would be capped for
all defaults that trigger the period or occur during the period; (ii)
establish new procedures under which a clearing member may terminate
its clearing membership, both in the ordinary course of business and
during a cooling-off period, and related procedures for unwinding all
positions of such a clearing member and capping its continuing
liability to the clearing house, (iii) provide for ``haircutting'' of
mark-to-market margin gains by the clearing house in situations where
the clearing house determines, following a clearing member default,
that it is unlikely to have sufficient resources to make all such
payments; (iv) revise procedures for the termination of clearing and
wind-up of outstanding contracts of a particular product category in
the event of exhaustion of clearing house resources available to
support those contracts; (v) adopt a new set of procedures for default
auctions and modify the order of allocation of guaranty funds of non-
defaulting clearing members to strengthen incentives of clearing
members to

actively participate in default auctions; and (vi) in general limit the
effect of losses in the covered product categories (F&O or FX) on
ongoing clearing for other product categories.
    As described in the revised rules, and as described in a Circular
to be published by the Clearing House with respect thereto, these
proposed amendments would not apply to the CDS product category.
Accordingly, ICE Clear Europe's existing rules will continue to apply
to CDS contracts and to CDS Clearing Members (even if they are also F&O
Clearing Members or FX Clearing Members), with certain conforming and
clarifying changes described below.
    Pursuant to amendments made to the recognition requirements for
recognized clearing houses under English law, ICE Clear Europe is
required to have default rules addressing the allocation of losses in
excess of clearing house resources and recovery plans establishing the
steps it will take to maintain continuity of services if such
continuity is threatened. These requirements will go into effect on
February 1, 2014. Recovery and wind-down plans are also an element of
the CPSS-IOSCO Principles for Financial Market Infrastructures (the
``PFMIs'') and are therefore necessary for ICE Clear Europe to be
treated as a qualified central counterparty (``QCCP'') for purposes of
the applicable Basel III bank capital requirements that apply to
clearing members and other market participants.
    The amendments are intended to enhance the clearing house's
existing rules for the F&O and FX product categories by providing
additional tools to assist the clearing house in addressing potential
losses in excess of available clearing house resources. In each case,
ICE Clear Europe, in consultation with its clearing members, has sought
to balance a number of competing considerations in developing these
additional tools. The clearing house needs to have sufficient resources
to cover potential losses in extreme default situations and to have
adequate flexibility in the management of defaults, consistent with the
PFMIs and UK and U.S. regulatory requirements.\5\ At the same time,
clearing members must be able to continue to manage appropriately their
own risks from cleared transactions and their obligations to the
clearing house, in light of the evolving regulatory and capital
framework that applies to them. The amendments are designed to provide
greater certainty (for both clearing members and the clearing house) as
to the maximum liability of clearing members to the clearing house and
as to the particular steps the clearing house may take to manage a
default (and the responsibilities of the clearing members for default
management), and to reduce the incentives for non-defaulting clearing
members to withdraw from the clearing house following a default. The
amendments are also intended to give clearing members appropriate
incentives to participate actively in default management and to provide
the clearing house adequate time and opportunity to resolve a default,
while limiting the incentive for non-defaulting clearing members to
withdraw from clearing membership following a default. The following
discussion is intended to highlight the purpose and expected effects of
the principal features of the proposed amendments:
---------------------------------------------------------------------------

    \5\ See, e.g., 17 CFR 39.11, 39.16; 17 CFR 240.17Ad-22(b)(2)-
(3), (d)(11).
---------------------------------------------------------------------------

Cooling-Off Periods and Assessment Limits
     Under various provisions of its existing rules,\6\ there
are limits on ICE Clear Europe's ability to call for assessments from
clearing members as a result of potential losses exceeding guaranty
fund resources. Following extensive consultation with clearing members,
and consideration of the impact on clearing house resources in extreme
loss scenarios, ICE Clear Europe proposes to revise the assessment
limit framework as set forth herein. In each product category, ICE
Clear Europe proposes to maintain both (i) a per default assessment
limit (which is twice the required guaranty fund contribution for the
F&O and FX product categories) and (ii) an aggregate assessment limit
for any cooling-off period (which is three times the required guaranty
fund contribution for each such product category).
---------------------------------------------------------------------------

    \6\ In particular, existing Rule 1105(b) provides for a per
default assessment limit equal to twice the required guaranty fund
contribution for the F&O product category. The existing rules do not
contemplate a cooling-off period assessment limit. Under the
existing rules, a clearing member can only limit its liability for
further assessments by withdrawing from clearing membership in
accordance with Rule 1105(h) or (i). Similar provisions exist for
the FX product category under Rule 1107. As discussed herein, ICE
Clear Europe proposes the addition of the cooling-off period, with
the related assessment cap for the period, to provide greater
certainty as to the maximum liability of a clearing member during a
series of defaults and to avoid providing an incentive for clearing
members to withdraw from clearing membership to limit their
liability.
---------------------------------------------------------------------------

     A cooling-off period will be triggered by a default or
series of defaults that results in an assessment on clearing members or
a sequential guaranty fund depletion (i.e., a series of defaults
requiring replenishment in the aggregate in excess of the required
guaranty fund contribution). The cooling-off period will initially run
for 30 business days, but if a subsequent trigger event occurs during
the period, the period will be extended until the 30th business day
following that subsequent trigger. Once the cooling-off period is
triggered and for the duration of such period, the guaranty fund will
not be recalculated or replenished. Each clearing member will remain
liable for assessments during the period, up to the relevant maximum
for the period. Clearing members will remain liable to post initial
margin during the cooling-off period.\7\
---------------------------------------------------------------------------

    \7\ The clearing house expects that it would rely on additional
initial margin during the cooling-off period, if necessary, in order
to satisfy ongoing regulatory financial resources requirements
(i.e., the ``cover 2'' requirement).
---------------------------------------------------------------------------

     The combination of the assessment limit and the cooling-
off period is designed to provide certainty to clearing members as to
their maximum liability to the clearing house with respect to the
guaranty fund. Well-defined liability for guaranty fund contributions
is an expected aspect of QCCP status and facilitates the risk
management needs of clearing members under their own capital
requirements and policies.\8\ By fixing the maximum contribution for
all clearing members, the cooling-off period is designed to reduce the
risk of a ``rush for the exit'' following a significant default, since
all clearing members (whether or not they choose to withdraw from
membership) will bear the same assessment liability in proportion to
their guaranty fund requirements. The cooling-off period also gives the
clearing house time to arrange an orderly close-out of the defaulter's
or defaulters' positions and provides the clearing house greater
certainty as to the resources it will have during that period. ICE
Clear Europe believes that even with the assessment caps, the clearing
house has sufficient financial resources to support its operations even
in extreme market conditions.\9\ In ICE Clear Europe's view,

the assessment limits and cooling-off period arrangements strike an
appropriate balance between its needs for financial resources in the
case of an extreme default while providing desired certainty and
protection for non-defaulting clearing members in light of their own
capital, liquidity, risk management and commercial considerations.
---------------------------------------------------------------------------

    \8\ ICE Clear Europe does not believe it is commercially
feasible for an internationally active clearing house to require
potentially unlimited guaranty fund contributions of its members. In
this regard, we note that applicable bank capital guidelines under
the Basel III capital framework contemplate that a qualified central
counterparty, or QCCP, does not impose unlimited liability on its
clearing members for contributions to the guaranty fund. See
Regulatory Capital Rules, 78 FR 62018, 62099 (Oct. 11, 2013).
    \9\ In this regard, we note that ICE Clear Europe satisfies its
regulatory ``cover 2'' financial resources requirement through the
funded component of its guaranty funds, without consideration of
assessment rights. Assessments provide additional financial
resources in extreme scenarios beyond the cover 2 level, but the
assessment caps will thus not impact the clearing house's ability to
meet its regulatory financial resources requirements. Although ICE
Clear Europe would not be permitted to call for replenishment of the
guaranty fund during a cooling-off period, ICE Clear Europe retains
the ability to call for initial margin (including additional initial
margin) at all times during a cooling-off period in its discretion.
ICE Clear Europe would expect to call for additional initial margin
if necessary to satisfy regulatory financial resources requirements
during such period.
---------------------------------------------------------------------------

Procedures for Termination of Clearing Membership
     In connection with the adoption of the cooling-off period
concept, ICE Clear Europe is proposing new procedures for withdrawal
from clearing membership (other than for CDS Clearing Members). Under
the revised rules, a withdrawing clearing member is required to close
out all of its outstanding positions within a specified period. If it
does so, it will not be responsible for losses from defaults occurring
following the end of that period. In the case of a withdrawal during
the cooling-off period, the revised rules provide for a specified
cooling-off termination period during the beginning of the period. If
notice is given within the cooling-off termination period, the clearing
member generally has until the end of the cooling-off period to
terminate its positions at the clearing house. If it does so, it will
not be liable for further assessments beyond those owed during the
cooling-off period, and will not have to replenish its guaranty fund at
the end of the cooling-off period. The amendments are intended to
provide clearing members, and the clearing house, greater certainty as
to their respective rights and obligations in the case of withdrawal.
     The amendments are intended to benefit withdrawing
clearing members by providing a clear procedure for withdrawal, and
specifying the dates by which relevant actions must be taken in order
for the clearing member to limit its liability for future defaults. For
the clearing house, the amendments provide certainty as to those margin
and guaranty fund contributions of a withdrawing clearing member that
can be used for particular defaults, and also provide a series of
remedies for the clearing house in the event that a withdrawing
clearing member does not satisfy its obligations in respect of its
withdrawal. By providing an appropriate delay for withdrawal, the
procedures protect the clearing house and remaining clearing members by
permitting an orderly exit from positions, and continuing liability for
the clearing member until it has closed out its positions. For
customers of a withdrawing clearing member, the rules provide a
mechanism for facilitating the transfer of positions to a new,
remaining clearing member prior to withdrawal. This should mitigate the
impact of withdrawal on customers and the cleared derivative market in
general.
Mark-to-Market Margin Haircutting
     The proposed rules permit the clearing house, in limited
circumstances specified in the proposed rules where, as a result of a
clearing member default, the clearing house has insufficient resources
to pay all outgoing mark-to-market margin payments, to ``haircut'' such
outgoing payments by the amount of the shortfall in resources. This
authority only applies to the F&O and FX product categories. This
approach allows the clearing house to avoid default in such situations
where available resources are insufficient. The proposed rules permit
mark-to-market margin haircutting in several situations following a
default where amounts owed or, in the clearing house's determination,
expected to be owed by the clearinghouse (including to make outward
mark-to-market margin payments and to pay the costs of transferring
positions to non-defaulting clearing members as part of the default
management process) exceed available financial resources. Thus,
haircutting may be appropriate following default (i) where the clearing
house does not believe that it would otherwise have sufficient
resources to run a successful default auction for the defaulter's
positions, and (ii) where the clearing house has encountered difficulty
or delay in collection of amounts owed to it (including assessments on
clearing members that have not been paid) as a result of which it is
unable to pay all amounts then owed. In such situations, mark-to-market
margin haircutting allows the clearing house to continue operations,
despite the potential lack of available resources, in circumstances
where it might otherwise be forced to terminate contracts or default.
In particular, where there is uncertainty as to the ultimate resources
of the clearing house or the ultimate cost of resolving a default,
haircutting may permit the clearing house to continue operations until
such resources or costs are finally determined, following which the
clearing house would expect to be able either to resume normal
operations or proceed to termination of contracts as discussed below.
In addition, mark-to-market margin haircutting can be conducted with
respect to a particular product category (i.e., F&O or FX) that has
been affected by a shortfall, allowing clearing in other product
categories to continue unaffected. ICE Clear Europe anticipates that
mark-to-market haircutting would only be imposed in extreme
circumstances, as an alternative to clearinghouse default and a further
preventive step to avoid or delay tear-up of relevant contracts.
     Haircutting will, of course, mean that clearing members
and their customers that would otherwise have mark-to-market margin
gains will not receive some or all of such gains. In ICE Clear Europe's
view, this is an appropriate approach to loss allocation.\10\ In
particular, haircutting is intended to mimic the way losses would be
expected to be allocated in an actual insolvency, where parties with
claims against an insolvent entity would share pro rata in available
assets (and would thus have their claims ``haircut'' to the extent of
any shortfall in assets). The haircutting rules are intended to achieve
a similar result in an orderly, controlled manner without the need,
expense or disruption of an insolvency proceeding. Although a tear-up
of contracts is potentially an alternative (and is

permitted under the rule amendments), ICE Clear Europe believes that
haircutting would be a useful alternative in the situations mentioned
above, where it is possible that the clearing house will, as a result
of haircutting, be able to maintain the clearing house as a going
concern and run a successful auction that would permit clearing to
continue and be less disruptive to the market than tear-up. Similarly,
where there is a delay in obtaining financial resources following a
default, and the clearing house believes it has a reasonable prospect
of obtaining amounts owed to it, haircutting that allows cleared
contracts to remain outstanding may be preferable to tear-up for market
participants.
---------------------------------------------------------------------------

    \10\ As proposed, haircutting would be performed separately for
the proprietary and each customer account, and within a customer
account, haircutting would be done on a ``gross'' basis across each
customer portfolio, to the extent possible (although positions would
be netted for this purpose within each such portfolio). Although
this approach will impose a burden on customers as well as clearing
members, ICE Clear Europe believes that it most equitably
distributes the loss, as it treats each non-defaulting market
participant with mark-to-market gains in the same manner with the
same percentage haircut. Alternative approaches, such as calculating
the customer haircut on a net basis for this purpose, would make a
customer's treatment depend on the positions of other customers of a
particular clearing member, and would thus lead to different
treatment for the same positions when held at different clearing
members. Another alternative approach, position-by-position
haircutting could adversely affect the ability of market
participants to net exposures for accounting and other purposes.
Furthermore, ICE Clear Europe does not believe it would be
appropriate for the clearing house to try to shift more of the loss
to clearing members as opposed to customers, such as by not
haircutting the customer account or haircutting the proprietary
account before the customer account. Such a preference for some
market participants over others would divorce the haircutting
treatment from the positions held, and would penalize clearing
members (including self-clearing members) for the benefit of
customers, even in circumstances where the customer is holding
potentially riskier, more directional positions.
---------------------------------------------------------------------------

Termination of Clearing
     As a final tool, the proposed rules would provide more
detailed procedures under which ICE Clear Europe could terminate
clearing in the F&O or FX product category. This would permit ICE Clear
Europe to arrange an orderly wind-down of cleared contracts in that
category in the event that there are insufficient financial resources
to support continued clearing of that product and ICE Clear Europe
determines that termination for that product category is appropriate
under the circumstances. Upon termination, available resources for that
product category (including the relevant guaranty fund) will be used,
together with amounts owed to the clearing house, to pay amounts owed
by the clearing house on the terminated contracts. To the extent such
resources are insufficient, the shortfall will be shared among clearing
members and their customers on a pro rata basis.
     Termination of contracts, particularly where resources are
insufficient, will thus impose a loss on certain clearing members and
their customers, similar to that imposed under mark-to-market margin
haircutting. ICE Clear Europe believes that this approach is generally
similar to the result that would obtain in an actual insolvency
proceeding. Furthermore, ICE Clear Europe believes that this approach
is an appropriate means of allocating the loss, consistent with the
goals of avoiding unlimited liability for clearing members.
New Default Auction Procedures
     ICE Clear Europe has determined to adopt a new auction
methodology for unwinding the F&O or FX positions of a defaulting
clearing member. The terms of the auction methodology are set forth in
default auction procedures established by ICE Clear Europe. Under the
auction methodology, the defaulting clearing member's open positions
may be divided in to one or more lots, each of which will be auctioned
separately. Each clearing member will be required to participate in
each auction in a minimum bid amount based on the relative size of its
guaranty fund contribution. (Clearing members will be permitted to
submit bids on behalf of their customers as well, and in certain cases
customers may be permitted to directly bid in the auction.)
     Based on the bids submitted, ICE Clear Europe will
determine an auction clearing price for the relevant portfolio, subject
to any maximum or minimum price established by the clearing house for
that auction. The auction procedures use a ``Dutch'' auction
methodology to establish an auction clearing price at which the
defaulter's portfolio will be unwound. The Dutch auction methodology is
similar to that used in determining auction settlement values under
credit default swaps and in general is widely used in numerous other
financial market contexts.
     In connection with the auction methodology, and to provide
an incentive for active participation in the auction, the proposed
rules also provide for a specific priority of use of guaranty fund
contributions based on bids in the auction (sometimes referred to as
``juniorization''). Under this approach, to the extent the guaranty
funds of non-defaulting clearing members are to be used to pay the
auction price,\11\ ICE Clear Europe will begin with the guaranty fund
contributions of any such clearing member that failed to participate in
the auction. The guaranty fund contributions (and, if necessary,
assessments) of other non-defaulting clearing members are split into a
subordinate and a senior tranche based on the competitiveness of their
respective bids. The subordinate tranche will be applied next to the
auction costs, followed by the senior tranche (and followed by a
subordinate tranche of assessments and senior tranche of assessments,
if necessary). Within each tranche, guaranty fund contributions will be
applied on a pro rata basis.
---------------------------------------------------------------------------

    \11\ Consistent with the existing default management waterfall,
resources of the defaulting clearing member and certain resources
provided by ICE Clear Europe itself would be used prior to the use
of guaranty fund contributions of non-defaulting clearing members as
described herein.
---------------------------------------------------------------------------

     Bidders whose bids were more competitive than a specified
``senior threshold price'' (determined based on a specified range from
the auction clearing price) will have their guaranty fund contributions
assigned to the senior tranche; bidders whose bids were less
competitive than a specified ``subordinate threshold price''
(determined based on a specified range from the auction clearing price)
will have their guaranty fund contributions assigned to the subordinate
tranche. Bidders whose bids were between the senior threshold price and
subordinate threshold price will have their guaranty fund contributions
split between the two tranches based on a formula. Where the
defaulter's positions are divided into multiple lots, the above
calculations will be performed for each lot, and an aggregate senior
and subordinate tranche calculated based on the results of individual
lots. (In such case, a bidder's guaranty fund contribution may be split
between the aggregate senior and subordinate tranches depending on its
bidding for each lot.)
     ICE Clear Europe believes that the new default auction
methodology, together with the guaranty fund priority described above,
will provide a strong incentive for clearing members to participate
actively in the auction and will result in the allocation of the
defaulter's positions at a fair, market-clearing price. Although
clearing members that fail to participate, or that provide non-
competitive bids, will be adversely affected as compared to an approach
in which all clearing members are affected equally, ICE Clear Europe
believes that this approach appropriately takes into account
participation in the auction. The rules of the auction are established
in advance, and all clearing members have an equal opportunity to
participate. By giving clearing members an incentive to bid
competitively, ICE Clear Europe believes that its default auctions will
result in more competitive and accurate pricing for the defaulter's
portfolios, which will benefit the clearing members as a whole and make
it more likely that the clearing house will be able to manage a default
successfully.
Separation of Product Categories
     The rule amendments are also designed to further the
separation of the F&O and FX product categories cleared by ICE Clear
Europe. Under its existing rules, ICE Clear Europe maintains separate
guaranty funds for each product category, each of which is intended to
support only that product category. The amendments will enhance this
separation of products by allowing the clearing house to use the
recovery tools separately for each of the F&O and FX product
categories. As a result, an extreme loss in one such product category
can be addressed by those tools, without adversely affecting clearing
operations in another product

category. In an extreme situation, even if the clearing house has to
implement mark-to-market margin haircutting or termination for one such
product category, that will not in itself require termination of the
other category. Although segregation of the different product
categories in some sense may limit the aggregate resources that could
be used to cover a default, it will protect the market, and market
participants, in each category from events outside that market. ICE
Clear Europe believes that preventing contagion of defaults in this way
will further the operation of the clearing system more generally. Such
separation is particularly important for market participants that may
participate in one product category, but not others.
Use of Recovery Tools
     The recovery and wind-down tools set forth in the proposed
rules are expected to be used only in extreme default scenarios where
the clearing house has exhausted the margin and guaranty fund resources
provided by the defaulter and has used guaranty fund contributions
provided by non-defaulting clearing members (or might reasonably expect
such contributions to be used). Default scenarios, especially such
extreme default scenarios, vary, and as a result the proposed rules
have been designed to provide the clearing house with flexibility as to
how, whether and the extent to which the additional default tools are
implemented in a particular case. However, where ICE Clear Europe has
discretion as to implementing such measures, such as mark-to-market
margin haircutting or termination, ICE Clear Europe expects that it
would make such a decision in accordance with its default management
procedures and governance process more generally. This would include,
where practicable under the circumstances, consultation of clearing
members through the relevant product risk committee.
    As noted above, these new resolution and recovery tools will not
apply to CDS contracts. The proposed Rule amendments are described in
detail as follows.
    In Part 1 of the Rules, various conforming changes have been made
to definitions, including the definitions of ``FX Default Amount'',
``Termination Close-Out Deadline Date'', ``Termination Close-Out
Time'', ``Termination Date'' and ``Termination Notice Time''. Rule
105(c) (``Termination'') has been revised to conform to new termination
provisions in part 9 of the Rules and to clarify the use of the term
``Termination Notice Time'' in connection with a termination of
clearing house services in connection with F&O and FX products. A new
subsection (f) has been added to Rule 110 which permits ICE Clear
Europe to delay making outgoing mark-to-market margin payments for F&O
and FX products on an intra-day basis in certain circumstances where a
clearing member has failed to make a mark-to-market margin payment to
the clearing house on such day.
    In Rule 209 (``Termination of clearing membership''), certain
provisions addressing the termination of clearing membership and a
clearing house default and the consequences thereof have been moved to
Rules 912 and Rule 918, as discussed below, with conforming changes
being made to the remainder of Rule 209. (These amendments will not
apply to CDS Clearing Members. Existing Rules 209 and 912 will continue
to apply to CDS Clearing Members.) \12\ In Rule 301(f) certain cross-
references have been corrected. Various conforming and non-substantive
changes are made in Part 4 of the Rules.
---------------------------------------------------------------------------

    \12\ Pursuant to a telephone conversation among Geoffrey
Goldman, Shearman & Sterling LLP; Gena Lai, Senior Special Counsel,
SEC; and Justin Byrne, Attorney-Advisor, SEC on January 30, 2014,
ICE Clear Europe notes that these Continuing CDS Rule Provisions,
which continue to be in effect with respect to the CDS Contract
Category, will be available on ICE Clear Europe's Web site at
https://www.theice.com/Rulebook.shtml?clearEuropeRulebook=.
---------------------------------------------------------------------------

    Part 9 of the Rules has been revised to incorporate the new
recovery and wind-down provisions discussed above. In addition, several
provisions that were previously in other parts of the Rules have been
moved into Part 9 to consolidate the relevant provisions. Conforming
and cross-reference changes have also been made throughout Part 9.
    The former Rule 1103 (``Application of Assets upon Event of
Default'') has been moved to Rule 908. As moved, relative to former
Rule 1103, Rule 908 also contains various conforming changes,
corrections to cross-references and non-substantive drafting
improvements and clarifications to terms used, including to promote
consistency across the rulebook, such as to change references to ``any
loss or shortfall'' to ``any shortfall, loss or liability'' in relevant
provisions.\13\ In Rule 908(e), which addresses the calculation of a
separate default amount for each product category in the case of a
defaulting clearing member that cleared in multiple product categories,
a reference in clause (iv) to guaranty fund contributions has been
moved, and new clause (v) has been added, to clarify the allocation,
for purposes of determining the default amounts, of the defaulter's
guaranty fund contributions across the product categories in which the
defaulter acted, consistent with the other provisions of Rule 908. (A
conforming change is also made in Rule 908(e)(vi) to clarify that the
allocation of guaranty fund contributions, which is addressed in new
clause (e)(v), is not addressed in clause (vi).) With respect to the
F&O and FX product categories, Rule 908(g) also removes a timing
limitation on the use of a defaulter's guaranty fund contributions from
one product category to cover its losses from another product category.
In the proviso to clause (v) of Rule 908(g), conforming references to
relevant defined terms have been added and a cross-reference in
subclause (2) of the prior provision in former Rule 1103 has been
corrected.\14\ In Rule 908(g)(vii), additional clarifying language has
been included that states explicitly the extent to which assessment
contributions in each product category may be used, consistent with the
use of guaranty fund contributions under other clauses of Rule 908(g)
and with the purposes for which (and amounts in which) assessments may
be called under Rules 909-911. New Rule 908(i) provides that with
respect to the F&O and FX product categories, if a non-defaulting
clearing member fails to participate in a default auction or does not
comply with its obligations under any such auction, its guaranty fund
contributions will be applied prior to the guaranty fund contributions
of other non-defaulting clearing members. Rule 908(i) also imposes the
default auction priority for the use of guaranty fund contributions and
any assessment contributions in the case of default auctions in the F&O
and FX product categories, as discussed above.
---------------------------------------------------------------------------

    \13\ Commission staff made clarifying edits to this sentence
pursuant to a telephone conversation on January 30, 2014, among
Geoffrey Goldman, Shearman & Sterling LLP; Gena Lai, Senior Special
Counsel, SEC; and Justin Byrne, Attorney-Advisor, SEC.
    \14\ Commission staff made clarifying edits to this sentence
pursuant to a telephone conversation on January 30, 2014, among
Geoffrey Goldman, Shearman & Sterling LLP; Gena Lai, Senior Special
Counsel, SEC; and Justin Byrne, Attorney-Advisor, SEC.
---------------------------------------------------------------------------

    Former Rules 1105 (``Powers of Assessment: Energy''), 1106
(``Powers of Assessment: CDS'') and 1107 (``Powers of Assessment: FX'')
have been moved to new Rules 909, 910 and 911, respectively. In
addition to certain conforming changes, new Rules 909 (for F&O) and 911
(for FX) have been revised (i) to provide that the clearing house may
call for assessments where it determines that a shortfall in relevant
resources either has arisen or is likely to arise, (ii) to clarify the
existing per

default maximum assessment liability in each product category, as
described above, and (iii) to provide that assessments called in excess
of the amounts actually required will be treated as surplus collateral
provided by the relevant clearing member until such time as such amount
is required or the clearing house determines that it will not be
required. In Rule 910, certain cross-references have been revised as a
result of the movement of other provisions in the proposed rules. In
addition, relative to former Rule 1106, Rule 910(a) contains certain
non-substantive drafting improvements and clarifications to terms used
across the rulebook, including to promote consistency across the
rulebook, such as to change references to ``any loss or shortfall'' to
``any shortfall, loss or liability'' in relevant provisions.\15\ Rule
910(a) has also been revised to correct cross-references to new Rule
908(g) and remove certain unnecessary cross-references. Rule 910(b)
removes certain text concerning the calculation of the CDS Assessment
Amount that is unnecessary in light of the provisions of Rule 910(a)
and further removes a superfluous reference to the Clearing House CDS
Contribution.
---------------------------------------------------------------------------

    \15\ Commission staff made clarifying edits to this sentence
pursuant to a telephone conversation on January 30, 2014, among
Geoffrey Goldman, Shearman & Sterling LLP; Gena Lai, Senior Special
Counsel, SEC; and Justin Byrne, Attorney-Advisor, SEC.
---------------------------------------------------------------------------

    Certain provisions addressing the termination of transactions in
the event of an ICE Clear Europe insolvency or other default (formerly
in Rule 209) have been moved to new Rule 912, with certain conforming
changes and a clarification relating to a default that affects some but
not all product categories. Such changes will not apply to CDS Clearing
Members (regardless of whether they are also F&O Clearing Members or FX
Clearing Members), and existing Rules 209 and 912 will continue to
apply to CDS Clearing Members.\16\
---------------------------------------------------------------------------

    \16\ See supra note 12.
---------------------------------------------------------------------------

    New Rules 913 to 918 will not apply to the CDS product category.
    New Rule 913 contains various new definitions used in the new
recovery and wind-down provisions, including the haircutting provisions
in Rule 914, the termination provisions of Rule 916, the cooling-off
period provisions of Rule 917 and the clearing member withdrawal
provisions of Rule 918.
    New Rule 914 establishes the haircutting mechanism. The core of
Rule 914 is the procedure for ``haircutting'' the mark-to-market margin
and certain other contractual payments owed by the clearing house to
clearing members for a contract category, to the extent of a shortfall
in available resources for that contract category, when ICE Clear
Europe issues a ``Haircutting Determination''. Such determination may
be made, once certain conditions are satisfied:

    (i) one or more clearing member defaults have occurred but ICE
Clear Europe has not yet declared and either paid or submitted a
claim in respect of all net sums due to or from the defaulter in
respect of its proprietary account and all of its customer accounts;
and (ii) ICE Clear Europe determines, based on one of several
relevant tests, that its available resources are insufficient to pay
all relevant outward mark-to-market margin and contractual payments
and/or its available resources would be insufficient to cover the
losses or shortfalls to the clearing house from close-out of the
defaulter's positions.

    A Haircutting Determination will not be made if clearing in the
relevant contracts is being terminated under Rule 916 or a clearing
house insolvency or failure to pay has occurred. In the event of a
Haircutting Determination, on day during the ``loss distribution
period'' specified by the clearing house, the net amount owed on such
day to each clearing member that is deemed to be a ``cash gainer'' in
respect of an account class (i.e. a member that would otherwise be
entitled to receive mark-to-market margin or other payments in respect
of such account class) will be subject to a percentage haircut.
Corresponding adjustments are also made for ``cash losers'' (i.e.,
those who owe the clearing house) to the extent amounts previously owed
to them have been haircut.
    New Rule 916 permits the clearing house to terminate a set of
contracts where (i) its obligations to meet mark-to-market margin
payments or the cost of auctioning off the positions of a defaulting
clearing member will not be satisfied through the haircutting procedure
in Rule 914, (ii) following the declaration of all net sums in respect
of a particular default, the clearing house may be rendered insolvent,
(iii) there has been a failed auction in a relevant contract category,
or (iv) the clearing house determines that because of the termination
of clearing members, there will be insufficient clearing members for
clearing of the relevant contract category to remain viable. Rule 916
provides a procedure for determining the termination price for all
contracts in a particular set. To the extent the termination value
payable by the clearing house for the terminated contract set exceeds
available resources for that contract set, the clearing house's
obligations will be limited to the available resources. This will
permit clearing activity to continue in other contract categories.
    Rule 917 implements the ``cooling-off period'' concept discussed
above. A cooling-off period is triggered by certain defaults that
result in a guaranty fund assessment or a sequential guaranty fund
depletion. During a cooling-off period, the assessment liability of a
clearing member is capped with respect to all defaults occurring during
the period. In addition, the guaranty fund is not recalculated or
rebalanced during the cooling-off period, and replenishment of guaranty
fund contributions for continuing clearing members is not required
until the end of the cooling-off period.
    Rule 918 implements the revised procedures discussed above for
clearing members (other than CDS clearing members) that wish to
terminate their clearing membership (including during a cooling-off
period). Clearing members that have submitted a termination notice are
required to close out their open contracts by a specified deadline.
Rule 918 also provides for the calculation and payment of a net amount
to or from the terminating clearing member for each of its accounts in
respect of the close out of all of its positions. As discussed above,
terminating clearing members are not responsible for additional
guaranty fund contributions for defaults occurring after the effective
termination date.
    Various conforming changes are also made to the Rules, including in
Part 11 of the Rules. Rule 1102(g), addressing the return of the
guaranty fund, has been revised to provide for the return of F&O and FX
guaranty fund contributions consistent with the new termination
provisions in Rule 918. The amendments do not affect the return of CDS
guaranty fund contributions, to which the existing rules continue to
apply. Revised Rule 1102(i) also revises the timing of replenishment of
guaranty fund contributions for the F&O and FX product categories, but
not for the CDS product category. Certain conforming changes to cross-
references in revised Rule 1102(i) are also made. Former Rule 1104,
which addresses use of guaranty fund contributions, has been
redesignated as Rule 1103, and various conforming changes to cross-
references have been made. Rule 1204(j) has been revised to correct a
cross-reference to Rule 1204(a). Other conforming changes have been
made in parts 12 and 15 of the Rules. In part 17, Rule 1710 has been
removed as it has been replaced by Rule 918.

2. Statutory Basis
    ICE Clear Europe believes that the proposed rule changes are
consistent with the requirements of Section 17A of the Act \17\ and the
regulations thereunder applicable to it, including the standards under
Rule 17Ad-22.\18\ Section 17A(b)(3)(F) of the Act \19\ requires, among
other things, that the rules of a clearing agency be designed to
promote the prompt and accurate clearance and settlement of securities
transactions and, to the extent applicable, derivative agreements,
contracts, and transactions. ICE Clear Europe believes that the
proposed rule changes are consistent with the Act and the regulations
thereunder applicable to ICE Clear Europe, in particular, Section
17(A)(b)(3)(F) \20\, because ICE Clear Europe believes that the new
recovery and wind-down rules will facilitate the prompt and accurate
settlement of derivatives and contribute to the safeguarding of
securities and funds associated with derivative transactions which are
in the custody or control of ICE Clear Europe or for which it is
responsible, as set forth herein. In addition, except for certain
conforming and clarifying changes described above, the proposed
amendments do not affect security-based swaps (i.e., the CDS product
category), which will continue to be subject to the existing rules.\21\
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78q-1.
    \18\ 17 CFR 240.17Ad-22.
    \19\ 15 U.S.C. 78q-1(b)(3)(F).
    \20\ 15 U.S.C. 78q-1(b)(3)(F).
    \21\ Commission staff made clarifying edits to this sentence
pursuant to a telephone conversation on January 30, 2014, among
Geoffrey Goldman, Shearman & Sterling LLP; Gena Lai, Senior Special
Counsel, SEC; and Justin Byrne, Attorney-Advisor, SEC.
---------------------------------------------------------------------------

    ICE Clear Europe has developed the new recovery and wind-down rules
in response to issues raised by the Bank of England as overseer of its
payment arrangements and following extensive consultation with the Bank
of England and clearing members. Recovery rules are required to be in
place by February 2014 under recent amendments to the clearing house
recognition requirements under applicable English law. Recovery and
wind-down rules are also contemplated under the PFMIs and accordingly
are necessary to maintain QCCP status.
    Consistent with these legal and regulatory requirements, the
proposed rules are designed to address extreme loss scenarios following
one or more clearing member defaults, and are not generally intended to
affect the ordinary course operation of the clearing house or its
existing protections for the securities and funds in its custody or
control or for which it is responsible. ICE Clear Europe believes that
the proposed rule changes will enhance the stability of ICE Clear
Europe following the default of one or more clearing members and reduce
the risk of ICE Clear Europe failure or insolvency. The revisions will
in particular facilitate the orderly wind-down or termination of
contracts affected by a default. Further, ICE Clear Europe, as a
clearing house for multiple products, also believes that the changes
will permit the clearing house to address a default in one market while
minimizing the effect on other categories of contracts, for which
clearing should be able to continue. This will reduce the risk of a
systemic problem in one cleared market causing contagion or creating
risks for other cleared markets. The amendments also provide clearer
limitations on the liability of clearing members for assessments
following defaults, and a clearer procedure for termination of clearing
member status. Taken together, the amendments will thus promote the
prompt and accurate clearance and settlement of contracts cleared by
ICE Clear Europe, consistent with the requirements of Section
17A(b)(3)(F).\22\
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    As discussed above, most of the proposed amendments do not affect
the clearing of security-based swaps (i.e., CDS). These changes, which
principally include the implementation of new Rules 912-918, as well as
revisions to Rules 209, 909, 911, 1102 and 1103 and related definitions
and conforming changes, primarily affect ICE Clear Europe's clearing
operations with respect to products that are not securities
(specifically, the F&O and FX product categories) and do not
significantly affect the securities clearing operations of ICE Clear
Europe (i.e., the CDS product category) or the rights or obligations of
ICE Clear Europe and its clearing members with respect to securities
clearing activities.
    Certain other rule changes discussed above (which are applicable to
all product categories or specific to the CDS product category) involve
the movement and/or reorganization of existing provisions, as well as
conforming changes, clarifications and non-substantive drafting
improvements. These include the changes described above that relate to
the CDS product category in Rules 908 and 910, as well as certain other
conforming changes in Part 11 of the Rules. These proposed amendments
do not affect the substance of the existing requirements for the
clearing of CDS or the rights and obligations of CDS Clearing Members
with respect to that product category. As a result, in ICE Clear
Europe's view, they do not adversely affect the safeguarding of
securities or funds relating to CDS in the custody or control of ICE
Clear Europe or for which it is responsible, and do not significantly
affect the rights or obligations of ICE Clear Europe or persons using
its clearing service with respect to the CDS product category. As such,
ICE Clear Europe believes the proposed rule changes are consistent with
the requirements of Section 17(A)(b)(3)(F) of the Act \23\ and the
rules thereunder, as well as filing requirements under Section
19(b)(3)(A)(iii) of the Act \24\ and Rules 19b-4(f)(4)(i) and (ii)
thereunder.\25\
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78q-1(b)(3)(F).
    \24\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \25\ 17 CFR 240.19b-4(f)(4)(i) and (ii). Commission staff made
clarifying edits to this sentence pursuant to a telephone
conversation on January 30, 2014, among Geoffrey Goldman, Shearman &
Sterling LLP; Gena Lai, Senior Special Counsel, SEC; and Justin
Byrne, Attorney-Advisor, SEC.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed rule changes would
have any material impact, or impose any material burden, on competition
not necessary or appropriate in furtherance of the purposes of the Act.
The proposed rule changes either (i) affect only the F&O and FX product
categories or (ii) involve conforming or clarifying changes of general
application (including the CDS product category) that will not
significantly affect the rights or obligations of the Clearing House or
clearing members.\26\ Accordingly, in either case, the proposed
amendments should not have any effect on the competition in the CDS
market. Moreover, any effects on competition would not be on securities
and therefore ICE Clear Europe does not believe that the proposed rule
changes would have any material impact or impose any material burden on
competition that is inappropriate in furtherance of the purposes of the
Act.
---------------------------------------------------------------------------

    \26\ Commission staff made clarifying edits to this sentence
pursuant to a telephone conversation on January 30, 2014, among
Geoffrey Goldman, Shearman & Sterling LLP; Gena Lai, Senior Special
Counsel, SEC; and Justin Byrne, Attorney-Advisor, SEC.
---------------------------------------------------------------------------

    As noted above, most of the proposed changes are intended to
address extreme loss scenarios with respect to the FX and F&O product
categories, and not affect the ordinary securities clearing operation
of the clearing house. As such, ICE Clear Europe does not believe the
changes will reduce access by CDS clearing members to the clearing
house.

ICE Clear Europe also does not believe the rule amendments will
adversely affect the ability of market participants to continue to
clear securities transactions or otherwise limit market participants'
choices for clearing securities transactions. ICE Clear Europe expects
that, in light of the PFMIs and applicable regulatory requirements in
the U.S. and EU, other clearing organizations will similarly need to
develop recovery and wind-down plans. The rule amendments are intended
to provide a stronger framework for the clearing house to deal with
extreme loss events in the FX and F&O product categories. By helping
segregate losses in one of these product categories from another, and
from the CDS product category, the amendments are designed to keep
unaffected CDS clearing services in operation despite losses in another
area. This should generally enhance the ability of market participants
to continue to clear CDS products, and reduce the risk of failure of
the clearing house (which would generally be expected to have an
adverse impact on competition). To the extent market participants have
greater certainty as to how extreme loss events in the F&O and FX
categories would be handled by the clearing house, they may have
greater confidence in clearing generally (including for CDS), which
will also tend to enhance the stability and strength of the market for
cleared securities products, consistent with the goals of the Act.
    With respect to those of the proposed amendments that do affect the
CDS product category or CDS clearing members generally, such changes
are in the nature of clarifying and conforming amendments that will not
significantly affect the substantive rights or obligations of the
Clearing House or clearing members in respect of CDS. As a result, ICE
Clear Europe does not believe such changes would impose any burden on
competition.
    For the foregoing reasons, ICE Clear Europe does not believe that
the proposed amendments will impose any burden on competition not
necessary or appropriate in furtherance of the purpose of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, CDS Clearing Members or Others

    Written comments relating to the rule changes have been solicited
from clearing members through a public consultation and as part of the
clearing house governance process. ICE Clear Europe received various
comments during this consultation and took such comments into account
in making further modifications to the proposed rules. The rule changes
also reflect discussions with the Bank of England. ICE Clear Europe
will notify the Commission of any additional written comments received
by ICE Clear Europe.

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

    The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A)(iii) \27\ of the Act, and Rules 19b-4(f)(4)(i)
and (ii) \28\ thereunder. At any time within 60 days of the filing of
the proposed rule change, the Commission summarily may temporarily
suspend such rule change if it appears to the Commission that such
action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Act.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \28\ 17 CFR 240.19b-4(f)(4)(i) and (ii).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-ICEEU-2014-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ICEEU-2014-03. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filings also will be available
for inspection and copying at the principal office of ICE Clear Europe
and on ICE Clear Europe's Web site at https://www.theice.com/notices/Notices.shtml?regulatoryFilings.
    All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-ICEEU-2014-03
and should be submitted on or before February 27, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-02496 Filed 2-5-14; 8:45 am]
BILLING CODE 8011-01-P