[Federal Register Volume 82, Number 30 (Wednesday, February 15, 2017)]
[Notices]
[Pages 10848-10850]
[FR Doc No: 2017-02995]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79999; File No. SR-ICEEU-2017-002]

Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing of Proposed Rule Change To Revise the ICE Clear Europe
Clearing Rules Relating to the Application of Default Provisions in the
Event of a Resolution Proceeding

February 9, 2017.
    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 25, 2017, ICE Clear Europe Limited (``ICE Clear Europe'' or
``Clearing House'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been primarily prepared by ICE Clear
Europe. 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.
---------------------------------------------------------------------------

I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    The principal purpose of the proposed rule change is to modify the
ICE Clear Europe Clearing Rules (``Clearing Rules'') to clarify the
application of certain default provisions in the event of a resolution
proceeding with respect to the Clearing House or a Clearing Member.

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

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

A. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change

1. Purpose
    The purpose of the rule amendments is to modify the ICE Clear
Europe Clearing Rules to clarify the application of certain default-
related provisions in the context of resolution proceedings with
respect to the Clearing House or a Clearing Member. Such proceedings
can arise under so-called special resolution regimes that may apply
under applicable law to the Clearing House or a Clearing Member in the
event of either's failure or insolvency, as an alternative to
traditional bankruptcy or insolvency proceedings in the relevant
jurisdiction. Such regimes include the UK Banking Act 2009 and the EU
Bank Recovery and Resolution Directive (the ``BRRD'').\3\
---------------------------------------------------------------------------

    \3\ Directive 2014/59/EU of the European Parliament and of the
Council of 15 May 2014 establishing a framework for the recovery and
resolution of credit institutions and investment firms.
---------------------------------------------------------------------------

    In Rule 101, ICE Clear Europe proposes amendments to the definition
of ``Insolvency'' and addition of new defined terms ``Resolution Step''
and ``Unprotected Resolution Step.'' These amendments are designed to
distinguish between insolvency and resolution proceedings, and reflect
and incorporate certain limitations on the termination of Contracts and
exercise of default remedies that apply under the terms of an
applicable special resolution regime. (Under the current Rules, an
Insolvency in turn constitutes an Event of Default that permits the
exercise of the default rights and remedies specified in the Rules.)
    The definition of Insolvency has been amended to exclude certain
resolution proceedings. Specifically, the amendment removes the
existing provision that a Governmental Authority exercising one or more
of its stabilization powers under the UK Banking Act 2009 will
constitute an Insolvency. In addition, the appointment of an Insolvency
Practitioner, which normally is an Insolvency, will not constitute an
Insolvency if it is made in connection with a Resolution Step that is
not an Unprotected Resolution Step, as defined below. A Resolution Step
involving a Governmental Authority making an order to transfer a
person's securities, property, rights or liabilities (which may be a
feature of a resolution proceeding) will also not constitute an
Insolvency.

    A new definition of ``Resolution Step'' has been added, which can
apply to persons other than the Clearing House. A Resolution Step means
a Government Authority exercising stabilization powers under the UK
Banking Act 2009 or certain resolution authorities under national
legislation implementing the BRRD. A resolution proceeding of this type
involving the Clearing House itself will not constitute a Resolution
Step. The amendments do not address other types of resolution
proceedings (including resolution proceedings under laws other than the
UK Banking Act 2009 or national laws implementing the BRRD).
    A new definition of ``Unprotected Resolution Step'' has been added,
which means a Resolution Step with respect to a person (other than the
Clearing House) in which either (i) the substantive obligations of the
person to the Clearing House under the Rules are not being performed or
(ii) the Clearing House is not prohibited or otherwise prevented from
declaring an event of default or exercising termination and close out
rights under the Rules with respect to that person.
    In Section 901(a)(vii), the definition of Event of Default has been
modified to include an Unprotected Resolution Step with respect to a
Clearing Member or any of its Group Companies.
    As a result of these changes, a resolution proceeding under the UK
Banking Act or national laws implementing the BRRD, with respect to
either the Clearing House itself or a Clearing Member, will not
constitute an Insolvency. Such a resolution proceeding that involves a
Clearing Member will constitute a Resolution Step, but a Resolution
Step will not itself constitute an Event of Default under the Rules,
unless it is an Unprotected Resolution Step. In light of the definition
of Unprotected Resolution Step, this approach thus takes into account
limitations imposed by the relevant resolution regime on the
declaration of a default and exercise of default remedies in the
context of a resolution proceeding.
    A variety of conforming and other clarifying changes have been made
throughout the Rules. In the definition of ``Insolvency Practitioner''
in Rule 101, a reference to a temporary administrator has been added.
The definition of ``Applicable Law'' has been revised to use the
defined term ``Insolvency.'' Rule 201(a)(xxi) has been revised to
provide that in order to become or remain a Clearing Member, a person
must not be subject to an Unprotected Resolution Step (in addition to
the existing provision that a person must not be subject to an
Insolvency). In Rule 202(b), reference to various types of insolvency
laws have been replaced using the term Insolvency and Applicable Laws.
Rule 201(a)(xxxv) has been revised to refer to applicable laws
involving Resolution Steps as well as Insolvency. Similarly, Rule
204(a)(viii) requires a Clearing Member to notify the Clearing House of
any Resolution Step involving it or its Group Companies. In Rule
405(a)(ii) and (f), references to various types of insolvency
proceedings have been replaced with the defined term Insolvency.
    Rule 903(d)(i), which addresses certain automatic termination
events, has been revised to include a reference to an Unprotected
Resolution Step, in addition to the current reference to Insolvency. In
Rule 904(m), which requires the Clearing House to commit to trigger the
procedures for transfer of customer positions following a Clearing
Member default, a requirement has been added that the relevant customer
is not subject to an Unprotected Resolution Step (in parallel to the
existing requirement that the customer not be subject to an
Insolvency). Similar changes are made in Rule 904(p) with respect to
Sponsored Principals and Rule 904(u) with respect to Customers using
Individually Segregated Margin-flow Co-mingled Accounts.
    In Rule 1901(b)(x), a requirement that Sponsored Principals not be
subject to an Unprotected Resolution Step has been added (similar to
the requirement discussed above for Clearing Members in revised Rule
201(a)). Rule 1901(b)(xiv) has also been revised to refer to the
defined term Insolvency. In addition, in each of the forms of Standard
Terms Annex, paragraph 10 has been revised to use the defined term
Insolvency in place of certain references to various types of
insolvency proceedings.
2. Statutory Basis
    ICE Clear Europe believes that the changes described herein are
consistent with the requirements of Section 17A of the Act \4\ and the
regulations thereunder applicable to it, and are consistent with the
prompt and accurate clearance of and settlement of securities
transactions and, to the extent applicable, derivative agreements,
contracts and transactions, the safeguarding of securities and funds in
the custody or control of ICE Clear Europe or for which it is
responsible and the protection of investors and the public interest,
within the meaning of Section 17A(b)(3)(F) of the Act.\5\ The changes
to the Rules are intended to clarify the applicability of certain
default rights and remedies in the context of a resolution proceeding
with respect to the Clearing House or a Clearing Member, in light of
limitations that may exist under the UK Banking Act 2009 and BRRD (and
relevant national implementing legislation) on the exercise of such
rights and remedies. As such, ICE Clear Europe believes that the
changes will promote the prompt and accurate clearance and settlement
of securities and derivatives transactions, and further the public
interest in the safe and effective clearing of such transactions. ICE
Clear Europe also does not believe the amendments will adversely affect
the safeguarding of securities and funds in its custody or control or
for which it is responsible. In addition, the amendments are not
intended to increase risk to ICE Clear Europe, and will not impact ICE
Clear Europe's ability to take risk management measures under its Rules
with respect to non-defaulting Clearing Members (including Clearing
Members that may be subject to a Resolution Step that is not an
Unprotected Resolution Step). The changes are thus consistent with the
requirements of Section 17A of the Act.\6\
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78q-1.
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

B. Clearing Agency's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed changes to the rules
would have any impact, or impose any burden, on competition not
necessary or appropriate in furtherance of the purpose of the Act. ICE
Clear Europe is adopting amendments to the Clearing Rules intended to
conform the Rules to the requirements of certain special resolution
regimes. ICE Clear Europe does not believe that these changes will
impose any significant additional costs on Clearing Members or other
market participants, and further believes that any incremental costs
that result reflect the limitations imposed on the exercise of remedies
as a matter of law under certain special resolution regimes. ICE Clear
Europe does not believe the amendments will adversely affect access to
clearing by Clearing Members or their customers or otherwise adversely
affect Clearing Members or market participants. In this regard, the
changes will apply to all Clearing Members that may be subject to the
covered types of resolution proceedings, and accordingly are not
expected to affect competition among Clearing Members or in the market
for clearing services generally.

C. Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants or Others

    ICE Clear Europe published a prior version of the proposed
amendments for consultation with its Clearing Members. In response to
that consultation, two Clearing Members inquired about the regulatory
process surrounding the proposed changes. In addition, one Clearing
Member suggested that certain additional clarifications be made to
limit the application of other aspects of the Insolvency definition. In
the context of the current version of the proposed amendments, which
has been revised from the original consultation, ICE Clear Europe does
not believe that such additional clarifications are necessary or
appropriate, and has determined not to make any such clarifications.
ICE Clear Europe will notify the Commission of any written comments
with respect to the proposed rule change received by ICE Clear Europe.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-ICEEU-2017-002 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ICEEU-2017-002. 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 will also 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/clear-europe/regulation.
    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-2017-002
and should be submitted on or before March 2, 2017.
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02995 Filed 2-14-17; 8:45 am]
 BILLING CODE 8011-01-P