[Federal Register Volume 85, Number 45 (Friday, March 6, 2020)]
[Notices]
[Pages 13200-13221]
[FR Doc No: 2020-04574]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88308; File No. SR-ICEEU-2020-003]

Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing of Proposed Rule Change, Security-Based Swap Submission or
Advance Notice Relating to the ICE Clear Europe Rules and Procedures

March 2, 2020.
    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 February 18, 2020, ICE Clear Europe Limited (``ICE Clear Europe'' or
the ``Clearing House'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule changes described in
Items I, II and III below, which Items have been prepared by ICE Clear
Europe. The Commission is publishing this notice to solicit comments on
the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change, Security-Based Swap Submission, or Advance Notice

    ICE Clear Europe Limited proposes to revise its Clearing Rules (the
``Rules''),\3\ the Standard Terms contained in the annexes to the
Rules, the Clearing Procedures, Finance Procedures, Delivery
Procedures, CDS Procedures, FX Procedures, Complaint Resolution
Procedures, Business Continuity Procedures, Membership Procedures, and
General Contract Terms (collectively, the ``Amended Documents'') to
make various updates and enhancements.
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    \3\ Capitalized terms used but not defined herein have the
meanings specified in the Rules.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change, Security-Based Swap Submission or
Advance Notice

    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, Security-Based Swap Submission or
Advance Notice

(a) Purpose
    ICE Clear Europe is submitting proposed amendments to the Amended
Documents that are intended to make a variety of improvements and
changes, including (1) to enhance the customer documentation framework
for Non-FCM/BD Clearing Members to facilitate default management by the
Clearing House, (2) to adopt an ``externalised payments mechanism'' to
facilitate making certain payments to and from Clearing Members outside
of the standard net settlement process, (3) to make certain amendments
to the variation and mark-to-market margin settlement process (and
related calculations) in order to facilitate treatment of such margin
as a settlement payment rather than collateral for purposes of Clearing
Member capital calculations, (4) to revise certain provisions relating
to option settlement to enhance clarity and reflect operational
procedures, (5) to revise certain disciplinary and complaints
procedures, (6) to add certain provisions relating to compliance with
applicable U.S. tax requirements, (7) to make certain other default
management enhancement and clarifications, (8) to update and clarify
various aspects of the Delivery Procedures and (9) to make certain
other drafting improvements and clarifications, in each case as
described in further detail herein.
    Specifically, ICE Clear Europe proposes to make amendments to Parts
1, 2, 3, 4, 5, 7, 8, 9, 10 and 12 of the Rules, the Customer-Clearing
Member Standard Terms contained in the annexes to the Rules, and the
Clearing Procedures, Finance Procedures, Delivery Procedures, CDS
Procedures, Complaint Resolution Procedures, Business Continuity
Procedures, Membership Procedures and General Contract Terms. The text
of the proposed Rule and Procedure amendments is attached [sic] in
Exhibits 5A-5J, with additions underlined and deletions in
strikethrough text. The proposed Rule and Procedure amendments are
described in detail as follows.
(i) Customer Documentation Framework
    Changes have been proposed to strengthen the legal foundations for
the Standard Terms, which form part of the ICE Clear Europe customer
documentation framework for Non-FCM/BD Clearing Members.\4\ The
existing Standard Terms promote post-default porting in the case of a
Non-FCM/BD Clearing Member default through contractual provisions that
bind Customers and Clearing Members. These provisions are designed to
limit interference with the porting process and give additional comfort
that margin is transferred by Customers to Clearing Members on terms
that allow usage and porting of margin and positions. Purported close-
out actions by the Customer against a defaulting Clearing Member prior
to porting are also restricted, so that all terminations and re-
establishments of cleared contracts occur at the same time and at the
same

price, reducing the possibility of valuation disputes or other claims
that might prevent or reduce the likelihood of porting.
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    \4\ The Standard Terms do not apply to FCM/BD Clearing Members
and their customers.
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    In order to enhance the Standard Terms framework, and in particular
ICE Clear Europe's ability to rely on the Standard Terms so as to carry
out default management and use margin without interference from claims
by Customers of defaulting Clearing Members, ICE Clear Europe is
proposing to make the following amendments:
    Under existing Rule 202(b), Non-FCM/BD Clearing Members are
required to ensure that the Standard Terms are contractually binding as
between themselves and their Customers. As a further protection to
support this requirement, Rule 202(b) would be amended to add an
additional provision that Customers and Non-FCM/BD Clearing Members
will be deemed to be bound by the Standard Terms through acceptance by
conduct as a result of their continued use of the Clearing House. The
change would provide an additional basis for certainty that the
Standard Terms would apply as between the Customer and Non-FCM/BD
Clearing Member, notwithstanding that a Non-FCM/BD Clearing Member had
otherwise failed to obtain its Customer's agreement to the Standard
Terms. ICE Clear Europe believes that this additional protection is a
reasonable approach, in light of the Customer's choice to clear its
transaction through the Non-FCM/BD Clearing Member at ICE Clear Europe,
and given that the provisions in question are published and referred to
in ICE Clear Europe's customer disclosures under the European Market
Infrastructure Regulation (``EMIR'').\5\
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    \5\ Regulation (EU) No 648/2012 of the European Parliament and
of the Council of 4 July 2012 on OTC derivatives, central
counterparties and trade repositories.
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    Amendments to Rule 504(c) would extend Clearing Member warranties
with respect to Permitted Cover to expressly cover all transfers of
Permitted Cover to ICE Clear Europe (rather than merely the usage of
Permitted Cover in accordance with the Rules) as not violating
applicable law or third party rights or contractual obligations. This
change would further enhance ICE Clear Europe's assurance that it can
accept Permitted Cover without risk of interference from third party
claims.
    A change in Rule 102(o) would clarify that the Rules, together with
the applicable Clearing Membership Agreement, and other documents
listed in Rule 102(f) that are given contractual force pursuant to
these Rules (other than the Standard Terms and Settlement and Notices
Terms) form a contract between the Clearing House and each Clearing
Member. (By contrast, the Standard Terms and Settlement and Notice
Terms apply as between the Non-FCM/BD Clearing Member and its
Customer.) Pursuant to the Standard Terms themselves, ICE Clear Europe
would also benefit from the Standard Terms as a third party beneficiary
under the UK Contracts (Rights of Third Parties) Act 1999.
    In Rule 401(n), it is proposed that the words ``at the same time as
the Contract'' be added after the words ``an opposite Customer-CM F&O
Transaction shall arise between such Customer and Non-FCM/BD Clearing
Member''. The additional words are intended to clarify that the
opposite Customer-CM F&O Transaction arises at the same time as the F&O
Contract arises. In ICE Clear Europe's view, this timing is implicit in
the current Rule, and so the amendment would not result in an actual
change in the timing at which the Customer-CM F&O Transaction arises.
ICE Clear Europe believes that the amendment is a non-substantive
drafting improvement that would nonetheless improve the clarity of the
Rules on this point.
    In section 2 of each of the Standard Terms (CDS, F&O and FX), added
drafting would make it clear that attempts by Customers or Non-FCM/BD
Clearing Members to modify or disapply the Standard Terms are of no
effect and that the Standard Terms cannot be overridden. The amendment
would also provide that ICE Clear Europe is a third party beneficiary
of the Standard Terms and may enforce them. This provision is intended
to assist in promoting the consistent implementation of the Standard
Terms, without modification, to govern the contractual relationships
between Non-FCM/BD Clearing Members and their Customers. A non-standard
modification of the Standard Terms could, in theory, interfere with or
complicate attempts by the Clearing House to provide post-default
porting in accordance with the Rules. The proposed amendments do not
reflect any particular problem or scenario experienced by the Clearing
House, but are intended as a general default management planning
improvement in furtherance of ICE Clear Europe's ability to provide
post-default porting.
    In Section 3(b) of each of the Standard Terms, the proposed change
would remove the reference to transactions arising (as between Non-FCM/
BD Clearing Member and Customer) ``at the Acceptance Time'' and
replaces this with a reference to CDS transactions arising (as between
the Non-FCM/BD Clearing Member and Customer) ``as set out in Part 4 of
the Rules''. This change is necessary as a drafting matter, since the
term ``Acceptance Time'' is not defined in the Rules. In addition, the
cross-reference to Part 4 of the Rules is appropriate because Part 4
contains various provisions dictating how contracts and transactions
arise pursuant to the Rules, rather than solely dictating the time at
which a contract is deemed to be formed.
    In Section 4(b) of each of the Standard Terms, the proposed change
is intended to: (a) Clarify the Customer's consent for margin to be
used by the Non-FCM/BD Clearing Member consistent with its obligations,
representations and warranties under the Rules; (b) provide that the
Customer makes substantially equivalent representations, warranties and
acknowledgments with respect to collateral posted by the Non-FCM/BD
Clearing Member to the Clearing House with respect to the relevant
Customer Account; (c) provide further assurance that, if any perfection
or other formalities are required for ICE Clear Europe to use the
collateral originating with the Customer, as ICE Clear Europe is
entitled to do so under the Rules, ICE Clear Europe is able to instruct
the Customer to take such additional steps; and (d) limit Customer
assertions that such collateral is subject to encumbrances in favor of
the Customer. The amendments are collectively designed to provide
additional clarity to the Clearing House as to its ability to use
collateral ultimately provided by a Customer, including to cover
default losses and to provide for porting of the Customer's positions
in case of the relevant Non-FCM/BD Clearing Member's default, in each
case to the extent permitted by the Rules, and mitigate the risk of any
Customer or third party claims with respect to such collateral that may
interfere with such uses.
    In Section 5(c) of each of the Standard Terms (and related changes
at Rule 202(b)(iii)), ICE Clear Europe proposes to clarify its approach
to the use of automatic early termination in client clearing
documentation of Non-FCM/BD Clearing Members. It has come to ICE Clear
Europe's attention that some EU Non-FCM/BD Clearing Members may use
automatic early termination provisions in their client clearing
documentation even though Rule 202(b)(iii) (as currently in force)
generally prohibits this. In that case, such Clearing Member-Customer
clearing agreements may not adequately support porting to the extent
legally possible. In particular, such provisions

expose ICE Clear Europe, the Non-FCM/BD Clearing Member and any
Customer to the risk that the Customer-Clearing Member Transaction and
cleared Contract may terminate at different times, and accordingly may
have different termination values following a post-default close-out.
Automatic or early termination clauses also may give rise to legal
uncertainties as to whether certain protections from the disapplication
of insolvency law for porting in Part VII of the UK's Companies Act
1989 are available, since following an automatic termination there
would be no contract left to port or transfer. The Clearing House's
position is that such terminated contracts may still be subject to
porting but a legal uncertainty is acknowledged. To reduce risks
related to such situations, it is proposed that the prohibition on
including automatic early termination provisions in Clearing Member-
Customer documentation in Rule 202(b)(iii) be removed and a new section
5(c) of the Standard Terms be introduced instead. The new section
5(c)(ii) would disapply automatic termination provisions for contracts
cleared at ICE Clear Europe (with an exception for parties incorporated
in Switzerland \6\ or other jurisdictions designated by the Clearing
House) and new section 5(c)(i) would instead provide for the suspension
of performance under the Customer-Clearing Member Transaction until the
corresponding cleared Contract is terminated or the relevant payment
date for the net sum owed between the Customer and Non-FCM/BD Clearing
Member following termination has occurred. The suspension of
performance provides similar economic protections for Customers as
compared to automatic termination (as the Customer would not be
obligated to make payments to a defaulting or insolvent Non-FCM/BD
Clearing Member) but does not expose ICE Clear Europe to the risks of
inconsistent timing or valuation between the Customer-Clearing Member
Transaction or expose Customers to the risks of their positions being
not portable due to automatic termination of the Customer-Clearing
Member Transaction. Section 5(c)(iii) would provide that even if,
notwithstanding the other provisions of the Standard Terms, automatic
early termination of the Customer-Clearing Member transaction occurred,
the provisions of the Standard Terms relating to calculation of
termination values and portability would apply with necessary
modifications.
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    \6\ The exception for Switzerland reflects the fact that such
jurisdiction is the only Clearing Member jurisdiction for which
automatic early termination is recommended for derivatives by the
International Swaps and Derivatives Association, Inc. (``ISDA'').
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(ii) Externalised Payments Mechanism
    A number of changes have been proposed to the Rules and Procedures
to introduce a new ``Externalised Payments Mechanism'' alternative for
certain cash flows. Under the Externalised Payments Mechanisms, mark-
to-market or variation margin payment flows or certain other payment
flows (including potentially, for example, clearing house and exchange
fees), between ICE Clear Europe and the relevant Clearing Member can,
at the option of the Clearing Member, not be netted in the same way as
they would be under the standard approach (referred to in the amended
Rules as the ``Standard Payments Mechanism''). The introduction of a
payments mechanism under which such amounts exchangeable between ICE
Clear Europe and a Clearing Member are not netted has been requested by
CDS Clearing Members, some of which wish to align payment flows more
closely with those in the OTC markets or under their Customer
documentation. The various changes proposed to implement the
Externalised Payments Mechanism are described in more detail as
follows:
    New defined terms ``Standard Payments Mechanism'' and
``Externalised Payments Mechanism'' are proposed to be added in Rule
101, which would cross-refer to the full definitions of these terms in
Rule 302(a). Proposed changes to Rule 302(a) would clarify that the
current provisions regarding the calculation of a net amount payable by
or to ICE Clear Europe in respect of each Account are part of the
Standardised Payments Mechanism. In addition, new language would be
added to confirm that the Standard Payments Mechanism would apply
unless the Clearing House has agreed that the Externalised Payments
Mechanism applies to a particular kind of cash payment, account and
Clearing Member. The definition of Externalised Payments Mechanism is
proposed to be added at the end of Rule 302(a). This definition would
provide that the Externalised Payments Mechanism is an alternative
payments mechanism available to Clearing Members who elect to use it,
provided that ICE Clear Europe agrees to such usage in relation to
particular accounts. The proposed definition also clarifies that the
Externalised Payments Mechanism can only be used for certain Margin and
other cash payments as specified in the Finance Procedures. The effect
of using the Externalised Payments Mechanism in respect of cash
payments would be that payments would be settled pursuant to a separate
cash flow process at a separate time from that under the Standard
Payments Mechanism.
    Various conforming changes are proposed throughout the Rules and
Procedures to reflect the introduction of the Externalised Payments
Mechanism and the different processes applicable where payments are
settled under the Externalised Payments Mechanism. In Rule 301(f),
amendments clarify which provisions set out under that paragraph are
only applicable to (a) payments made under the Standard Payments
Mechanism or (b) payments made under the Externalised Payments
Mechanism. Other amendments of a similar nature are proposed to Rules
110(g), 303(a) and 1902(h)(i).
    A number of changes are also proposed to the Finance Procedures to
implement the Externalised Payments Mechanism. Paragraph 6.1(b) would
be amended to clarify that cash payments between ICE Clear Europe and a
Clearing Member (including Margin) may only be set off and consolidated
where the Standard Payments Mechanism is used.
    In paragraphs 6.1(i)(i) and (ii), new language is proposed to
explain the effect of the Externalised Payments Mechanism on payment
flows, namely that ``cash payments will be settled through a separate
cash flow and not included in a combined overnight call or return as
would apply under the Standard Payments Mechanism''. Paragraph 6.1(b)
would provide that Clearing Members are able to elect for upfront fees,
Mark-to-Market Margin, FX Mark-to-Market Margin, Variation Margin or
other payments to be dealt with using the Externalised Payments
Mechanism, subject to the written consent of ICE Clear Europe. It is
expected that the process would principally be used for Mark-to-Market
Margin. Further, in paragraph 6.1(i)(vii), a drafting change would be
made to clarify that other amounts payable by a Clearing Member to ICE
Clear Europe (or vice versa) would be included within an end-of-day or
ad hoc payment under the Standard Payments Mechanism. Paragraph
6.1(i)(vii) is also expanded to reference certain other types of
payments under the Rules and Procedures (including option premiums
corporate action payments for delivered investments under certain
Financials & Softs Contracts, amounts resulting from reduced gain
distributions, product terminations and non-default losses) as
includible in end-of-day or ad hoc

payments under the Standard Payments Mechanism.
    A new paragraph 6.1(i)(viii) would address the applicability of the
Externalised Payments Mechanism in circumstances where certain payments
are being made under Part 9 of the Rules (Default Rules), including
Margin Adjustment Amounts in connection with reduced gain distribution
under Rule 914, Product Termination Amounts in connection with product
termination under Rule 916 and Collateral Offset Obligations under Rule
919. Specifically, where the Externalised Payments Mechanism applies to
variation or mark-to-market margin payments, the Clearing House can net
Margin Adjustment Amounts against payments under the Standard or
Externalised Payments Mechanism, at the Clearing House's discretion.
Similarly, the Clearing House may choose to net or aggregate Product
Termination Amounts with payments under the Standard or Externalised
Payment Mechanism, at its discretion. Payments of Collateral Offset
Obligations, assessments and Guaranty Fund contributions and
replenishments would be made under the Standard Payment Mechanism
unless otherwise directed by the Clearing House. In addition, paragraph
6.1(i)(ix) (as renumbered) would be amended to clarify that additional
original or initial margin requirements as a result of the payment of
variation margin or mark-to-market margin in a different currency from
the contractual currency (as a result of a currency holiday) would be
collected via the Standard Payments Mechanism, regardless of whether
the Externalised Payments Mechanism applies to the relevant variation
or mark-to-market margin payment in question.
(iii) Clearing Member Capital Requirements and Settlement to Market
Amendments
    Certain changes are proposed to the Rules and Procedures to reflect
requirements under the EU Capital Requirements Regulation (the
``CRR'').\7\ In Rule 101, it is proposed that the defined term
``Capital'' be revised to remove outdated references to the EU Banking
Consolidation Directive, which is no longer in force. This directive,
which set out the capital requirements framework for EU banks and
broker-dealers, was replaced and superseded by the CRR and Capital
Requirements Directive (together referred to as the ``CRD IV''
package). Related to this, new definitions of ``Capital Requirements
Directive'' and ``Capital Requirements Regulation'' are proposed to be
introduced to replace the outdated ``Banking Consolidation Directive''
definition (which is proposed to be deleted). Although, as a technical
matter, Rule 102(a) provides already for the update of references to
legislation as they are amended or supplemented, as a matter of clarity
ICE Clear Europe is proposing this amendment to explicitly and
correctly reference current EU law. ICE Clear Europe does not believe
the change will have any substantive effect on Clearing Members or the
Clearing House.
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    \7\ Regulation (EU) No 575/2013.
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    In addition, ICE Clear Europe proposes to amend the Rules to
provide more clearly for the characterization of Clearing Members'
exposures for cleared derivatives under Article 274(2)(c) CRR as
``settled to market'' (as opposed to ``collateralized to market''). For
the Article 274(2)(c) treatment to be available, Variation Margin or
Mark-to-Market margin must be characterized as a cash payment ``to
settle outstanding exposure following specific payment dates'',\8\
rather than as collateralizing the exposure. The proposed amendments do
not change the manner in which Variation Margin or Mark-to-Market
Margin is calculated, or other current operational practices. Rather,
the amendments consist of revisions to terminology and other drafting
changes to clarify the legal characterization that payments of
Variation Margin and Mark-to-Market Margin represent settlement
payments rather than collateral payments for purposes of the CRR, as
requested by Clearing Members.
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    \8\ CRR, Article 274(2)(c).
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    With respect to settlement to market, changes have been proposed to
the defined terms ``Margin'', ``Mark-to-Market Margin'' and ``Variation
Margin'' to more accurately and certainly characterize such margin as
settlement payments, so that the relevant exposures more clearly
benefit from the settlement to market treatment under Article 274(2)(c)
CRR. In the defined term ``Margin'', changes are to be made to the
language in parentheses to confirm that Variation Margin, Mark-to-
Market Margin and FX Mark-to-Market Margin are all ``provided to or by
the Clearing House by outright transfer of cash as a settlement
payment''. The defined term ``Mark-to-Market Margin'' currently refers
to such margin being provided ``by way of title transfer pursuant to a
Clearing Membership Agreement or Sponsored Principal Clearing Agreement
or[. . .]by way of a pledge pursuant to a Pledged Collateral
Addendum''. This would be replaced with clear language denoting that
such margin would be provided ``by way of outright transfer of cash as
a settlement payment''. Similarly, the definition of ``Variation
Margin'' is proposed to be updated to clarify that the cash required to
be provided or actually provided by a Clearing Member is ``by way of
outright transfer of cash as a settlement payment''.
    The defined term ``Original Margin'' is proposed to be amended to
move the words ``, but excluding in any case Variation Margin'' to the
end of the definition. This is a drafting change to ensure that
Variation Margin is excluded from the entirety of this definition, as
the definition generally concerns Permitted Cover provided as
collateral.
    In various places throughout the Rules and Procedures, amendments
are proposed to remove all references to the term ``deposit'' in the
context of this being a word to describe the transfer of cash variation
or mark-to-market margin. This, and similar terms, would be replaced
with terms that are more consistent with a settlement payment
characterization of margin, such as ``transfer''. The amendments will
not reflect a change in actual operational practice. These proposed
changes would also more accurately reflect ICE Clear Europe's role in
receiving cash payments under title transfer and its regulatory status
as a central counterparty (``CCP'') which is not a bank or credit
institution.\9\ The changes fall into the following types and are
proposed in relation to the provisions of the Rules and Procedures
noted below:
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    \9\ In this regard, ICE Clear Europe does not keep payments it
receives on deposit for its customers, nor does it engage in the
regulated activity of deposit-taking in the UK, for which a banking
license is required.
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    (a) Removal of the term ``deposit'' (or a derivation thereof) from
existing drafting where a suitable alternative term (such as
``transfer'') is already present: Rules 101 (definition of ``Monetary
Default''); 110(b); 110(c); 110(e); 204(a)(vi); 208(b)(iii); 919(e) and
paragraph 4.2 of the Membership Procedures (section B, row 1 of the
table);
    (b) Replacing the word ``deposit'' (or a derivation thereof) with
the word ``transfer'' (or a derivation thereof): Rule 102(q); 1602(a);
1602(b); 1602(c); 1602(d); 1605(i); 1804(b); 1806(a); paragraphs
3.3(b), 3.7, 3.8, 3.32, 6.1(f), 6.1(g), 10.4, 10.5 and 10.12 of the
Finance Procedures (in 3.3(b), 3.7 and 3.32 the words ``[from/to] the
Clearing House'' are also added as a drafting improvement); and

    (c) Similar drafting changes to achieve the same effect are made in
Rule 202(a)(xi) (replacing the words ``for the deposit of funds in
Eligible Currencies and the deposit of securities required to be
transferred to and from the Clearing House'' with the words ``for the
purposes of cash transfers to and from the Clearing House in Eligible
Currencies''; Rule 1103(b) (replacing the words ``pledged to or
deposited with'' with ``transferred to''); Paragraph 3.26 of the
Finance Procedures (replacing the words ``on deposit'' with the words
``upon completion of the relevant transfer to the Clearing House'');
Paragraph 10.17 of the Finance Procedures (replacing the words
``confirmation of deposit'' with the words ``confirmation of completion
of the relevant transfer''); and Paragraph 11.1 of the Finance
Procedures (replacing the words ``All transactions to deposit or
withdraw'' with the words ``All transactions including each transfer to
or withdrawal'').
    In Rule 505, changes are proposed to clarify that settlement
payments (including payments of Variation Margin, Mark-to-Market Margin
and FX Mark-to-Market Margin) are excluded from constituting financial
collateral within the scope of the UK Financial Collateral Arrangements
(No. 2) Regulations 2003 (which implement Directive 2002/47/EC on
financial collateral (the ``FCD'')). These proposed changes reflect
feedback received by ICE Clear Europe from some Clearing Members and
are to ensure consistency with the characterization of such payments as
contractual payments settling derivatives liabilities and not as
collateral, as described above. In addition, the word ``collateral'' in
the last sentence would be replaced with the more general term ``such
assets''. This links the clause back to statutory definitions more
clearly, since only collateral of certain types (essentially ``cash''
and ``financial instruments'') are covered by the FCD and, for example,
gold collateral accepted by ICE Clear Europe is not.
    A new concept of ``CDS Price Alignment Amount'' would be added.
Pursuant to Rule 1519(e), a daily payment in respect of CDS Price
Alignment Amounts would be required on each Business Day. The CDS Price
Alignment Amount would be economically equivalent to the price
alignment ``interest'' that ICE Clear Europe currently pays or charges
a CDS Clearing Member with respect to net Mark-to-Market Margin
transferred between the parties. Since the term ``interest'' may be
more typically associated with collateral, ICE Clear Europe proposes to
refer to such amounts as CDS Price Alignment Amounts to avoid confusion
over the characterization of Mark-to-Market Margin as settlement
payments. Correspondingly, references to interest on Mark-to-Market
Margin would be removed in the CDS Procedures, as discussed below. The
definition of CDS Price Alignment Amount would be added in Rule
1501(h), which cross-refers to the definition in the CDS Procedures as
proposed to be amended (discussed below).
    Although FX clearing has not yet been launched, similar changes
would be made to relevant FX clearing provisions to maintain
consistency throughout the Rules. The defined term ``FX Mark-to-Market
Margin'' is proposed to be amended to clarify that Permitted Cover
would be provided ``by way of outright transfer as a settlement
payment''. This change is intended to support the characterization of
mark-to-market margin as a settlement payment. There is also a small
drafting tweak within this definition to clarify that the relevant
Procedures are the FX Procedures. The defined term ``FX Mark-to-Market
Interest'' would be deleted and replaced with a new defined term of
``FX Price Alignment Amount''. The deleted definition currently refers
to ``interest calculated by reference to the FX Mark-to-Market Margin
Balance''. The new definition of ``FX Price Alignment Amount'' would
instead refer to ``a price alignment amount calculated by reference to
the relevant FX Notional Margin Balance'', which avoids any reference
to interest (or a similar concept) for the reasons discussed above.
Similarly, amendments to the defined term ``FX Mark-to-Market Margin
Balance'' are proposed so that references to FX Mark-to-Market Margin
being ``delivered'' by a Clearing Member or ICE Clear Europe are
replaced with references to such margin being ``transferred'' and it is
clear that that FX Mark-to-Market Margin is a settlement payment. It is
also intended that the definition be renamed ``FX Notional Margin
Balance'', with the word ``notional'' being added within the
definition, to ensure that the FX Price Alignment Amounts are regarded
as using the mark-to-market margin merely as a notional sum to
calculate the relevant amount, rather than such amounts constituting an
interest or an interest-like return on deposited assets. The proposed
addition of the words ``(notwithstanding that FX Mark-to-Market Margin
is a settlement payment)'' within the definition would further support
a settlement payment characterization.
    Rule 1703 is proposed to be amended to reflect the replacement of
the current defined term ``FX Mark-to-Market Interest'' with the new
defined term ``FX Price Alignment Amounts'', as discussed above. The
heading of the rule would be updated to reflect the new defined term
and the words ``an amount in respect of FX Mark-to-Market Interest''
are to be replaced with the term ``FX Price Alignment Amount''.
Proposed additional language to be added after this amendment would
expressly confirm in the Rules that payment of the FX Price Alignment
Amount must be made on each Business Day in accordance with the FX
Procedures. In the FX Procedures themselves, amendments are proposed at
paragraph 7.2 to reflect the replacement of ``FX Mark-to-Market
Interest'' with ``FX Price Alignment Amounts'' and the replacement of
``FX Mark-to-Market Margin Balance'' with ``FX Notional Margin
Balance''. These include replacing the old defined term with the new
defined term and adding additional language to remove any
interpretative doubt that ``FX Mark-to-Market Margin is a settlement
payment''. Headings and the table of contents are to be updated
accordingly.
    In the Finance Procedures, a new paragraph 2.3 is proposed which
would confirm explicitly that Variation Margin, Mark-to-Market Margin
and FX Mark-to-Market Margin are transferred to and from ICE Clear
Europe by way of outright cash transfer and that no such margin would
be subject to any pledge under the Rules or Procedures, or the
requirement in Rule 1603(c) for Margin provided by an FCM/BD Clearing
Member in respect of a Customer Account to be in the form of Pledged
Collateral. As with the various changes set out above, it is proposed
that this clarification be added to ensure that Margin provided by way
of outright cash transfer is characterized as a settlement payment, so
that the settlement to market treatment can be applied.
    Changes are also proposed in paragraph 6.1(i)(i) of the Finance
Procedures to refer to the ``resulting settlement payments'' from
Variation Margin, Mark-to-Market Margin and FX Mark-to-Market Margin
calls, to support the characterization discussed above. Additional
language would be added to explain that once settlement payments
resulting from daily margin calls have been paid in cleared funds, the
valuation of the Contracts would be reset to zero. This is consistent
with the requirements of settlement to market

treatment under Article 274(2)(c) CRR, which requires that contracts
``are structured to settle outstanding exposure following specified
payment dates and where the terms are reset so that the market value of
the contract is zero on those specified dates''. A drafting change is
also proposed in this paragraph to clarify that the standard process
would be for adjustments to margin requirements to be calculated, and
payments to be executed, in the currency of the relevant Contracts, but
leave it open for payments to be made in a different currency.
    Similarly, it is proposed that paragraph 6.1(i)(iv) of the Finance
Procedures be amended so that it addresses the payment of price
alignment amounts in relation to variation margin separately from
interest payable on initial margin. Language that previously referred
to interest being payable on variation margin would be deleted and new
language would be inserted confirming that price alignment amounts
instead fall payable as further detailed in the relevant Procedures for
the Contract in question. The heading to this provision would be
updated accordingly.
    In the CDS Procedures, new defined terms of ``CDS Price Alignment
Amount'' and ``CDS Notional Margin Balance'' are proposed to be added
in paragraph 1, which are intended to replace the terms ``Mark-to-
Market Interest'' and ``Mark-to-Market Margin Balance'' respectively.
``CDS Price Alignment Amount'' describes amounts paid with reference to
Mark-to-Market Margin as price alignment amounts calculated daily ``by
applying the applicable overnight rate'' to the CDS Notional Margin
Balance. The CDS Notional Margin Balance is defined as a notional sum
based on the aggregate amount of transferred Mark-to-Market Margin, to
be consistent with the characterization of the Mark-to-Market Margin as
a settlement payment.
    Further to these changes, it is proposed that paragraph 1 of the
CDS Procedures be amended to replace the defined term ``Daily Aggregate
MTM Interest Amount'', with a new defined term ``Daily Aggregate CDS
Price Alignment Amount''. Instances of usage of the terms ``Mark-to-
Market Interest'', ``Mark-to-Market Margin Balance'' and ``Daily
Aggregate MTM Interest Amount'' are also proposed to be replaced with
the new defined terms ``CDS Price Alignment Amount ``, ``CDS Notional
Margin Balance'' and ``Daily Aggregate CDS Price Alignment Amount''
respectively. Similar changes would be made in paragraphs 3.1 and 3.3
of the CDS Procedures.
(iv) Enhancement of Settlement for Option and Futures
    Various changes are proposed to the Rules and Procedures to clarify
certain provisions relating to Options cleared by ICE Clear Europe,
including use of terminology and other drafting improvements, and to
address more clearly the concept of ``net liquidating value''. As
discussed herein, the changes are in the nature of drafting
clarifications and improvements following an internal legal and
operational review of the relevant provisions. The amendments are also
intended to harmonize drafting of similar provisions across certain
affiliated ICE futures clearing organizations.
    A number of changes are proposed to the definitions in Rule 101
with the aim of clarifying, improving and harmonising the drafting of
terms used in the Rules to refer to concepts applicable to both Futures
and Options. The definition of ``Deliverable'' is proposed to be
updated to reflect the fact that the term is used not only in relation
to property deliverable under F&O Contracts, but also in relation to
the calculation of settlement amounts. The words ``or with respect to
which settlement amounts are calculated'' are to be added at the end of
the definition to clarify this point. The term ``Reference Price'' in
relation to Options would be removed from the Rules and replaced with
``Exchange Delivery Settlement Price''. The definition of ``Exchange
Delivery Settlement Price'' would be updated to clarify that it also
applies to Options, through addition of a cross-reference to the option
settlement price determination procedure under Rule 802. These changes,
and conforming changes throughout the Rules, are intended to simplify
and clarify the drafting of the Rules around option settlement (and are
not intended to materially change the operational process for such
settlement). Other non-substantive drafting clarifications would also
be made to the definitions of ``Put'', ``Set'' and ``Short''.
    A number of similar drafting clarifications and related changes
have been proposed to Part 8 to ensure that provisions set out
thereunder clearly and accurately describe relevant settlement
processes in relation to Options. Rule 802 would be amended to reflect
the replacement of the term ``Reference Price'' with the term
``Exchange Delivery Settlement Price'' to refer to the settlement price
of an Option. Changes have also been proposed in Rule 802 to better
describe the processes surrounding determination and publication of the
Exchange Delivery Settlement Price in relation to Options on the basis
of data provided or published by the relevant Market. The preamble to
Part 8 is also proposed to be amended to refer to F&O Contracts ``that
are Options'', rather than F&O Contracts generally (which would include
Futures, which are outside the scope of Part 8).
    Moreover, changes are proposed to Rule 809(d) to provide
flexibility for the Clearing House, in a scenario where it directs a
Clearing Member to make delivery of a Deliverable in settlement of an
option directly to another Clearing Member (rather than to the Clearing
House) in accordance with that Rule, to also permit payments to be made
directly between such parties rather than to and from the Clearing
House.
    Changes are proposed in Rule 810(d) to reflect the replacement of
the term ``Reference Price'' with the term ``Exchange Delivery
Settlement Price'' for Options, and to clarify the cash settlement
price for an Option would be determined using the Exchange Delivery
Settlement Price ``on the day of settlement or exercise''. In addition,
the amendment would provide that all outstanding premium payments must
have been made in relation to the relevant set of Options (in addition
to Margin payments) in order to receive cash settlement. This change is
being proposed to more clearly describe relevant Clearing House
operational practices and processes (and is not intended to alter those
practices and processes).
    Similar provisions related to Futures would also be updated for
consistency. Rules 701 to 705 would be amended to ensure that the
provisions relating to (a) the determination of the Exchange Delivery
Settlement Price for Futures, (b) the processes for cash settlement and
physical settlement, and (c) the number of Contracts by reference to
which settlement and delivery obligations are calculated all reflect
operational practice. As with the changes described above in Rule 802,
the proposed changes to Rule 701 would more clearly describe the
processes surrounding determination and publication of the Exchange
Delivery Settlement Price in relation to Futures on the basis of data
provided or published by the relevant Market (and are not intended to
result in a change in those processes). While the existing Rules
currently describe these processes, the amendments are intended as
drafting improvements to better ensure that the description is clear.
In Rules 702(b) and 705(a), the words ``Without prejudice to any
contractual netting under Rule 406 or

the Clearing Procedures'' are proposed to be added. Under Rule 406,
contractual netting may be applied to offsetting positions in respect
of one of a Clearing Member's Customer accounts even though such
positions are ordinarily held gross. The additional language clarifies
that while cash settlement and delivery amounts are determined for
Customer Accounts based on gross positions under Part 7, this does not
preclude contractual netting of positions where provided for under Rule
406 or the Clearing Procedures (including contractual netting within
the positions of a particular Customer of a Clearing Member). The
change is intended to avoid any potential questions as to whether there
might otherwise be a conflict between Part 7 and Rule 406. In Rule
702(c), changes are proposed to clarify the method of determining the
amount payable for cash settlement of a Future. The amended language
would confirm that the relevant amount is based on the price at which
Open Contract Positions were last recorded on ICE Clear Europe's books
and the Exchange Delivery Settlement Price (and not necessarily the
difference between these two prices), in any case as provided in the
applicable Contract Terms. In addition, in Rule 703(a), a clarification
would be added that a Market may administer matters or exercise rights
on behalf of ICE Clear Europe pursuant to Rule 703 and the Delivery
Procedures. This reflects the fact that Markets are typically involved
in the delivery process for Futures and may carry out functions
otherwise specified to be discharged by ICE Clear Europe pursuant to
the Rules or Procedures.
    In Rule 703(f), a parallel change for Futures would be made to that
described above in Rule 809(d) for options, to provide flexibility for
the Clearing House, in a scenario where it directs a Clearing Member to
make delivery of a Deliverable in settlement of an option directly to
another Clearing Member (rather than to the Clearing House) in
accordance with that Rule, to also permit payments to be made directly
between such parties rather than to and from the Clearing House.
Changes are also proposed to Rule 703(h) to provide that both legs (not
just one side) of a Contract in delivery may be subject to mandatory
cash settlement directions in the case of Clearing Member default. This
will facilitate management of such a default by the Clearing House, and
avoid need for the Clearing House itself to make or take delivery of
the underlying asset. Finally, a new Rule 703(j) would be added to
require Sellers to represent that they convey good title to products
(free of encumbrances) when physical settlement takes place. This would
be consistent with market expectation around deliveries, consistent
with any other deliveries made of such products in the relevant cash
markets.
    A change is proposed to Rule 906(a) to refer to the ``abandonment''
of an Option in addition to the ``exercise'' of an Option in
subparagraph (iii) under the description of ``L'', one of the variables
in the net sum calculation. This change is proposed because abandoning
an Option could also affect the aggregate amount payable by or to a
defaulting Clearing Member in respect of positions recorded in a given
account and such impact should be taken into account in addition to the
impact of any exercise of an Option.
    Various changes have been proposed in the Clearing Procedures to
reflect the use of the Exchange Delivery Settlement Price for Options
(which replaces the ``Reference Price'') and provide greater detail on
the calculation and application of net liquidating value for an Option
(``NLV''). Paragraph 4.4(c) would be amended to clarify that NLV would
be calculated on each Business Day based on relevant Exchange Delivery
Settlement Prices. The new language would also confirm that for long
Option holders, a positive NLV amount would be applied against the
requirement for Original Margin, and that for short Option holders,
negative NLV would contribute to the requirement for Original Margin.
This approach reflects current practice for calculating margin
requirements, but is not currently not stated explicitly in the
Procedures. Moreover, the amendments in paragraph 4.4(c) confirm that
where a gross margin model is used for a particular account, NLV would
be held on a gross basis without any setting off between different
Customers interested in the account. Paragraphs 5.1, 5.5(a) and 5.6 of
the Clearing Procedures are also to be amended to reflect the
replacement of the Reference Price with the Exchange Delivery
Settlement Price for Options.
    Several other changes are also proposed in the Clearing Procedures
to better reflect the processes and terminology used in relation to
Options. Paragraph 5.2(d) would be amended to specify that it only
applies in relation to Options ``whose Deliverable is a Future
Contract''. This provision specifies that where such Options are
exercised a Contract at the Strike Price would arise in accordance with
Rule 401, and such Contract would only arise if the Deliverable under
the Option Contract is a Future (as opposed to a security). Changes are
also proposed to paragraph 5.7(a) to cross-reference the operation of
automatic exercise (as applicable), as described in paragraph 5.5 of
the Clearing Procedures, as relevant to determining whether elective
exercise and/or abandonment of Options on the relevant expiry day is
permitted.
    In the General Contract Terms, paragraph 3.1(b) would be amended to
reflect changes to defined terms and other relevant terms relating to
settlement prices for Contracts (including replacement of ``Market
Delivery Settlement Price'' and ``Reference Price'', with ``Exchange
Delivery Settlement Price'').
(v) Complaints and Disciplinary Processes
    Various changes are proposed to Part 10 of the Rules and to the
Complaint Resolution Procedures to streamline and improve ICE Clear
Europe's complaints and disciplinary processes. Many of the proposed
changes are drafting improvements and other enhancements following a
detailed internal review at both ICE Futures Europe and ICE Clear
Europe, based on lessons learned from the practice of previous
complaint and disciplinary processes, especially at the exchange level
where such processes occur more regularly.
    Changes have been proposed to Rule 1001(d) to ensure that the scope
of the Complaint Resolution Procedures extends to complaints against
Directors, committees and any individual committee members of ICE Clear
Europe. Current Rule 1001(d) currently only expressly applies to
officers and employees of ICE Clear Europe. ICE Clear Europe did not
intend to exclude directors and committees from the scope of the
Complaints Resolution Procedures, and believes it is appropriate and
beneficial for Clearing Members and other market participants to
include such persons explicitly in the coverage of those procedures.
    Drafting improvements are proposed to Rule 1002 to improve the
clarity of the provisions governing investigations into breaches of the
Rules. These changes involve clearer language in certain places to aid
readability and also inserting language in Rule 1002(c) to ensure that
ICE Clear Europe's advisers treat not only information obtained in the
course of the investigation as confidential, but also information that
the advisers have been given access to. Changes have also been proposed
to Rule 1002(d)(iv) to require a Clearing Member, as part of their
cooperation with an investigation, to provide access to documents and
materials in its

possession at the direction of the Clearing House (in addition to the
making such documents or materials available for inspection).
    Rule 1002(e) is proposed to be amended to clarify that non-
compliance with an investigation can lead to additional disciplinary
action being brought against a Clearing Member. This provision
currently specifies that failure to co-operate with an investigation
would constitute a breach of the Rules, but the added language would
specify that non-compliance is capable of giving rise to separate and/
or additional disciplinary action in accordance with Part 10 of the
Rules (including by amendment of the Notice of alleged breaches
pursuant to Rule 1003(i)). Certain typographical corrections and
clarifications would be made in Rule 1002(f) and (g), and Rule 1002(g)
would also be amended to clarify that initial meetings following
service of a Letter of Mindedness would be conducted in private.
    Proposed changes to Rule 1002(h), in the context of investigations,
would clarify that the initial findings to be communicated to the
Clearing Member in writing must also be accompanied by an indication of
the intended steps to be taken under Rule 1002(i) (for example,
discontinuing the investigation or commencing disciplinary
proceedings). The Clearing House would also be required to provide
certain notices to the Clearing Member of the acts or practice which it
has been found to taken, the relevant provisions breached and the
proposed sanctions to be taken. Similar changes have also been proposed
to Rule 1003 in relation to different stages involved in disciplinary
proceedings and to section 1 of the Complaint Resolution Procedures.
    Rule 1002(i) would be amended to better clarify certain of the
steps that ICE Clear Europe may take following the communication of its
initial findings to a Clearing Member, as set out in clauses (i)-(vii).
In clause (v), the amendments would specify that the Clearing House may
refer a matter for further inquiry by the Clearing House, a Market or
Governmental Authority, where the Clearing House considers it necessary
that the matter be investigated further. Clause (vii) would be revised
to add a reference to written comments that may be received from the
Clearing Member following the service of the Letter of Mindedness under
Rule 1002(g). Certain typographical corrections would also be made in
Rule 1002(i). A new subclause (viii) would also be added to state
expressly that ICE Clear Europe may take a combination of the actions
listed.
    Various amendments proposed to Rule 1003 would enhance and clarify
the process for disciplinary proceedings. The changes would, for
example, reduce unnecessarily complex drafting, describe the various
steps involved in the disciplinary process in more detail (similar to
those changes proposed for Rule 1002(h) in the context of
investigations) and specify further the timing by which certain actions
must be taken. Specifically, in Rule 1003(b), the amendments would
require notice to the Clearing Member in writing that disciplinary
proceedings are to be commenced and state explicitly that the Clearing
House will appoint the chairman and members of a disciplinary panel.
Revised Rule 1003(c) would establish that the Clearing Member subject
to the proceeding would be notified of the composition of the
Disciplinary Panel within seven calendar days and then have ten further
calendar days to object in writing to any particular appointment. Other
changes include specifying, in further detail in Rule 1003(p), what
information the Disciplinary Panel must communicate (to ICE Clear
Europe and the relevant Clearing Member) once a decision has been made
as to whether a breach of the Rules has been proven (following a
hearing). This includes, for example, the rationale for the
Disciplinary Panel's decision, details of the breach of the Rules and
any sanctions to be imposed. The amendment further clarifies that
sanctions will be suspended pending the determination of any appeal,
unless the Clearing House determines that any order of suspension of
the Clearing Member should be enforced during that period. In addition,
Rule 1003(s) would be amended to clarify the Disciplinary Panel's
ability to order a party to pay costs of disciplinary proceedings,
including specifically the fees and expenses of the members of the
Disciplinary Panel. This amendment is meant to clarify current
practice, currently governed by a broad discretion by the panel to give
awards on costs, and not substantively change the Disciplinary Panel's
authority with respect to assessment of costs.
    In Rule 1004, various amendments would be made to clarify certain
conditions surrounding the use of the Summary Procedure and to improve
the drafting of the provisions in this Rule more generally. The Summary
Procedure is designed to be used in a scenario where a full
disciplinary process would be disproportionate in terms of time or
cost. Rule 1004(a) would be revised to clarify the timing for the use
of the Summary Procedure, in order to facilitate prompt resolution of
matters subject to the Summary Procedure. Rule 1004(b) would be amended
to provide ICE Clear Europe with the express ability to refuse the use
of the Summary Procedure for matters which are more serious or are
``considered of particular significance or relevance to the market in
general or in the public interest''. This changes thus would clarify
the circumstances in which ICE Clear Europe may reject the
inappropriate use of the Summary Procedure. It is also proposed that
Rule 1004(i) be amended to specify the information that the Summary
Disciplinary Committee must communicate to the Clearing Member in
greater detail (mirroring the changes to similar requirements imposed
on the Disciplinary Panel under Rule 1003). Rule 1004(i) would also
clarify that in keeping with the summary nature of the proceeding, the
range of sanctions available to the Summary Disciplinary Committee
would be limited to those set out in the Notice and any additional
sanctions arising out of the conduct of the proceeding. Various other
non-substantive drafting clarifications would be made in Rule 1004.
    Rule 1005, addressing appeals in the context of disciplinary
proceedings, would be revised to include a number of drafting
clarifications and typographical corrections. Rule 1005(a)(ii) would
clarify that the stated grounds in that provision are the only grounds
for appeal. Rule 1005(d) would be amended to add a requirement that the
lawyer appointed to the Appeal Panel has been in practice for more than
ten years and to clarify that an expert assessor may not have a
personal or financial interest in or have been involved in the
investigation of or proceedings with respect to the matter under
consideration.
    A new Rule 1006 would be added to address the interaction between
ICE Clear Europe's disciplinary procedures under the Rules and any
similar procedures under Market Rules. Exchanges that ICE Clear Europe
clears are likely to have their own disciplinary procedures, with the
result that a single disciplinary issue may give rise to two different
disciplinary procedures dealing with the same fundamental issues. For
example, ICE Futures Europe has disciplinary procedures set out in
Section E of its Regulations. The intention behind new Rule 1006 is to:
(a) Ensure that the existence of parallel disciplinary procedures under
Market Rules does not preclude ICE Clear Europe's own disciplinary
procedures; and (b) confirm that where an exchange is carrying out
disciplinary proceedings

at the same time as ICE Clear Europe in relation to an exchange member
that is also a Clearing Member, such proceedings may be consolidated
with those of ICE Clear Europe to avoid unnecessary duplication of
efforts and resources. For example, it may be appropriate for the
exchange and the Clearing House to rely on the same pieces of evidence
and for combined interviews of witnesses to be conducted on behalf of
both the exchange and the Clearing House in the investigative phase of
the disciplinary process, to avoid unnecessary duplication of effort.
Such coordinated proceedings may be appropriate in a range of
circumstances, including alleged breaches of operational systems and
controls, AML matters, market abuses and delivery failures.
    Various changes have also been proposed to the Complaint Resolution
Procedures to ensure that ICE Clear Europe's complaints procedures are
consistent with the applicable requirements of UK law and are clear to
follow and to improve the processes concerning the investigation and
handling of complaints by ICE Clear Europe. Relevant changes would
include:
    (a) Adding a clarification in paragraph 2.1 of the Complaint
Resolution Procedures that Eligible Complaints are only those
complaints relating to the manner in which the Clearing House has
performed, or failed to perform, its regulatory functions as defined by
section 291(3) of the Financial Services and Markets Act 2000
(``FSMA''). FSMA imposes various regulatory functions on markets and
clearing houses such as ICE Clear Europe. The Complaint Resolution
Procedures are intended specifically, and solely, to address complaints
involving the regulatory functions specified in such section of the
FSMA, in accordance with the requirements of FSMA.\10\ Similar changes
to include a reference to section 291(3) of FSMA have also made in
paragraphs 4.4 and 7.4 of the Complaint Resolution Procedures. In
addition, the scope of Eligible Complaints would be amended in Rule 2.2
to clarify that as with its relationship with employees, the Clearing
House's relationship with directors, officers, committees and committee
member would not be the subject of an Eligible Complaint (consistent
with the clarifications discussed above as to the role of such persons
in the context of the disciplinary procedures). The amendments would
also clarify the drafting of the exclusion for commercial disputes in
paragraph 2.2(b);
---------------------------------------------------------------------------

    \10\ As provided in paragraph 1.3 of the Complaint Resolution
Procedures, these procedures do not preclude the Clearing House from
considering or addressing any other complaint pursuant to such
procedures as it may determine, and in accordance with any
applicable law. Accordingly, the Clearing House may use such other
procedures for purposes of considering or addressing complaints
relating to other applicable laws, including the Exchange Act.
---------------------------------------------------------------------------

    (b) adding a time-limited ability for ICE Clear Europe to apply
alternative processes instead of an investigation (including mediation)
to resolve an Eligible Complaint, under new paragraph 3.6 of the
Complaint Resolution Procedures;
    (c) revising and clarifying stages of the Eligible Complaints
investigation process under paragraph 4 of the Complaint Resolution
Procedures--this includes new provisions dealing with the process for
appointing of an investigator, procedures for delaying the complaints
process where there are contemporaneous court or other proceedings
dealing with the same or a related matter, timelines for complaints
investigations, and procedures surrounding the referral of complaints
to the independent Complaints Commissioner where they are not dealt
with expeditiously by an investigation. The revisions also address the
matters that the investigator must have regard to when deciding whether
a complaint should be upheld, which are a failure to act fairly, a
failure to perform the Clearing House's regulatory functions having
regard to all of the circumstances, a lack of care or a mistake, or an
act of fraud, bad faith or negligence (which factors are consistent
with the requirements of FSMA);
    (d) in paragraph 5, clarifying the manner in which the investor
will provide his conclusions and recommendations for remedial action,
if any, to the Clearing House and complainant, and removing an
unnecessary reference to referral of a complaint to the Commissioner
(which is covered in paragraph 4 and 6);
    (e) confirming, in new section 6.3 of the Complaint Resolution
Procedures, that the Commissioner's decision, if adopted by the
Clearing House, would be in full and final resolution and settlement of
a complaint, binding a Clearing Member and preventing the use of any
other dispute resolution procedure in relation to the same complaint
(for example arbitration). Similar language in existing section 1.4 of
the Complaint Resolution Procedures would be removed as duplicative
    (f) in paragraph 7, revising the timing for certain actions of the
Commissioner upon referral of a complaint and making similar changes as
discussed regarding paragraph 4 above to clarify the basis for uphold
or rejecting complaint, consistent with the FSMA;
    (g) in paragraph 8, clarifying the procedures for the Commissioner
to report on the results of the investigation and providing the
Clearing House's discretion to make such report, in whole or in part,
public; and
    (h) throughout the Complaint Resolution Procedures, including
paragraphs 1, 9, 10 and 11, making a number of typographical and
similar corrections, updates to cross-references, and similar non-
substantive drafting corrections.
(vi) U.S. Tax Requirements
    The proposed amendments would adopt a new Paragraph 6.1(k) of the
Finance Procedures to address the application of Section 871(m)
(``Section 871(m)'') of the Internal Revenue Code of 1986, as amended
(the ``I.R.C.'') and regulations thereunder to futures and option
contracts that reference certain underlying equity securities or equity
indexes and are cleared by ICE Clear Europe (``equity contracts'').
Section 871(m) imposes a 30% withholding tax on ``dividend equivalent''
payments that are made or deemed to be made to non-U.S. persons with
respect to certain derivatives that reference equity of a U.S. issuer.
Under the regulations implementing Section 871(m), certain financial
transactions entered into by a non-U.S. person are considered ``Section
871(m) Transactions'' and can potentially give rise to dividend
equivalents subject to withholding tax. A dividend equivalent is deemed
to arise if a dividend is paid on the underlying U.S. equity referenced
by such Section 871(m) Transaction. Furthermore, under applicable
regulations, ICE Clear Europe itself becomes a ``Withholding Agent''
whenever it enters into a Section 871(m) Transaction with a non-U.S.
Clearing Member. Unless the non-U.S. Clearing Member enters into
certain agreements with the Internal Revenue Service (``IRS''), ICE
Clear Europe would be required to withhold on dividend equivalents with
respect to any transactions with the non-U.S. Clearing Member that are
Section 871(m) Transactions. However, a potential Withholding Agent,
such as ICE Clear Europe, can avoid the burden of reporting,
collecting, and remitting the withholding taxes imposed by Section
871(m) on certain payments (including dividend equivalent payments)
made or deemed to be made to a non-U.S. Clearing Member if (i) with
respect to transactions in which the non-U.S. Clearing Member acts as a
principal, such non-U.S. Clearing Member has

entered into a ``qualified intermediary agreement'' with the IRS as a
``qualified derivatives dealer'' whereby the non-U.S. Clearing Member
essentially agrees to undertake the withholding responsibilities (a
``QDD'') and (ii) with respect to transactions in which the non-U.S.
Clearing Member acts as an intermediary, such non-U.S. Clearing Member
has entered into a qualified intermediary agreement with the IRS as a
``qualified intermediary'' and the non-U.S. Clearing Member assumes the
primary obligation for withholding under relevant tax provisions (a
``Withholding QI'').
    For these reasons, ICE Clear Europe is proposing to adopt a new
paragraph 6.1(k) of the Finance Procedures. Subparagraph (i) would
require that, as a precondition for a non-U.S. Clearing Member to clear
equity contracts with ICE Clear Europe, any such non-U.S. Clearing
Member that is treated as a non-U.S. entity for U.S. federal income tax
purposes must enter into appropriate agreements with the IRS and meet
certain other specified qualifications under procedures of the IRS,
such that ICE Clear Europe will not be responsible for withholding on
dividend equivalents under Section 871(m). Subparagraph (ii) would
require non-U.S. Clearing Members to certify annually to the clearing
house that they satisfy these requirements. Subparagraph (iii) would
require non-U.S. Clearing Members to provide, on an annual basis,
certain information necessary for ICE Clear Europe to make required IRS
filings. Subparagraph (iv) would require non-U.S. Clearing Members to
notify the clearing house of relevant changes in their circumstances
affecting compliance with paragraph 6.1(k). Subparagraph (v) would
clarify that a Clearing Member's tax status as an ``intermediary'' or
``dealer'' for this purpose would not affect its status for regulatory
or other purposes.
(vii) Other Default Management Changes
    The amendments would make a number of other changes related to
default management. The definition of ``Bankruptcy'' in Rule 101 would
be amended to include a scenario where a person is ``granted suspension
of payments''. Insolvency laws may sometimes allow for a suspension of
payments, which ICE Clear Europe would treat as a ``Bankruptcy'' under
the Rules to ensure that it has the full range of default management
powers available to address such a scenario. (The amendment would not
affect the existing limitations on exercising default remedies in
connection with a Resolution Step.)
    The definition of ``Failure to Pay'' in Rule 101 would be amended
to clarify the length of the cure period between the service of a
failure to pay notice on ICE Clear Europe by a Clearing Member and the
point at which a ``Failure To Pay'' occurs, in circumstances where ICE
Clear Europe is granted an extension under Rule 110(b) or (c).
    The definitions of ``Insolvency'' and ``Insolvency Practitioner''
in Rule 101 would be amended to ensure that all relevant insolvency
scenarios and insolvency office-holders are covered by the definitions.
The defined term ``Insolvency'' would be widened to also cover a
suspension of payments or moratorium being granted, which reflects a
similar change made to the ``Bankruptcy'' definition (described above).
In addition, the proposed changes would bring the making of an
``instrument or other measure'' by a Governmental Authority pursuant to
which a person's property is transferred within the definition, in
addition to ``orders'' of a similar nature. These changes have been
proposed following a legal review of relevant clearing member
jurisdictions.
    A change is proposed at Rule 901(a)(viii) to expand the list of
approvals and similar statuses, the revocation of which may constitute
an Event of Default, to include loss of relevant ``exemptions'' by any
Governmental Authority, Regulatory Authority, Exchange, Clearing
Organisation or Delivery Facility. The change is being made as the loss
of such an exemption is effectively equivalent to the loss of a licence
or regulatory authorization, and ICE Clear Europe accordingly believes
that loss of an exemption should similarly be treated as an Event of
Default under Rule 901(a)(viii).
    A new Rule 902(d) is proposed to be added, which would provide that
``Transfer Orders shall be legally enforceable, irrevocable and binding
on third parties in accordance with Part 12, even on the occurrence of
an Event of Default''. This proposed new provision refers to Part 12 of
the Rules within the main default rules in Part 9, which is intended to
provide comfort that the protections from the application of insolvency
law under EMIR and the UK Companies Act 1989 for the default procedures
of a central counterparty are available for Transfer Orders described
under Part 12.
    In Rule 904(b), changes are proposed to clarify the price at which
positions are transferred (``ported'') from a defaulting Clearing
Member to a non-defaulting Clearing Member and the relevant time for
the determination of such price, which is at the discretion of the
Clearing House. The proposed changes would allow ICE Clear Europe to
use the time of porting, the time of an Event of Default, Insolvency or
Unprotected Resolution Step, or the end of the Business Day prior to
porting, Event of Default, Insolvency or Unprotected Resolution Step as
the time to determine the porting price. These changes are designed to
facilitate ICE Clear Europe's ability to manage defaults efficiently
and effectively, taking into account different insolvency regimes in
Clearing Member jurisdictions. Similar changes are also proposed to
Rule 905(b)(xiv) to provide that ICE Clear Europe would determine the
price at which it ports positions to a transferee Clearing Member.
    Rule 905(b)(vi), which addresses how ICE Clear Europe would
determine the liquidation price for offsetting Contracts that are to be
paired and cancelled as part of the default management process, would
be revised to refer to a new Rule 905(g). Rule 905(g) would provide
that for purposes of liquidations, terminations and close-outs under
Rule 905 ICE Clear Europe would have discretion to determine the
relevant price of the Contract. ICE Clear Europe would be permitted to
do so on the basis of the Exchange Delivery Settlement Price, Mark-to-
Market Price, FX Market Price, Reference Price, Market-to-Market Value,
current market value or any other price specified by ICE Clear Europe.
The changes would also clarify that ICE Clear Europe has discretion to
determine the reference time for the purposes of the liquidation price
calculation. A further change has been proposed to Rule 905(b)(vi) to
insert the words ``buy and sell or'' before ``Long and Short
Positions'' to reflect the terminology used throughout the Rules to
refer to opposite positions in Futures. (``Long and Short'' are
typically used to refer to positions in Options rather than Futures.)
    New Rule 905(b)(xix) would be added to clarify that ICE Clear
Europe has authority to carry out default auctions and construct
auction lots, which may include positions relating to multiple customer
accounts of a Non-FCM/BD Clearing Member. (Consistent with US
regulatory requirements, an auction lot relating to Contracts of a
defaulting FCM/BD Clearing Member may only contain positions relating
to a single account.) The new provision would not permit a single
auction lot to consist of both proprietary and client positions.
Further, the new provision would provide ICE Clear Europe with the
explicit power to use a single bid price received for a particular lot
of auctioned

positions to calculate liquidation values and net sums by apportioning
this bid price across the various accounts in which the contracts in
the auction lot are recorded. Although the existing Rules do not
necessarily preclude ICE Clear Europe from constructing an auction lot
consisting of contracts recorded in different accounts, the proposed
amendment would provide an express authority to do so. The amendment
would thus enhance transparency.
    In Rule 906(a), the definition of the ``GFC'' variable in the net
sum calculation, which references guaranty fund contributions of the
Defaulter, would be amended to provide that guaranty fund contributions
must be applied for this purpose ``in accordance with Rules 906(b) and
(c)''. The referenced provisions set out restrictions on the setting
off or aggregation of assets attributable to different accounts of a
defaulting Clearing Member for the purposes of the net sum calculation
and require a separate net sum calculation to be carried out for each
account. The reference in the ``GFC'' definition to these provisions is
not intended to change current practice, but to clarify that these
limitations apply to the use of the guaranty fund contributions in
determining the net sum calculations. A similar change is proposed to
the final subparagraph of Rule 906(b), to clarify that guaranty fund
contributions and other amounts may be used for the purpose of
calculating any net sum on any account of the defaulting Clearing
Member, subject to the restrictions in Rule 906(c) (the restrictions in
Rule 906(b) are already referenced in the current version of this
provision).
    Rule 906(c) is proposed to be amended to provide that ICE Clear
Europe ``shall'' aggregate, set off, or apply surplus assets in
relation to a defaulting Clearing Member's Proprietary Account to meet
a shortfall on one or more of its Customer Accounts (rather than
``may''). This is not intended to change the Clearing House's default
management practices (under which such application of the Proprietary
Account would be made), but is intended to clarify the operation of the
Rules and avoid potential questions regarding whether or not ICE Clear
Europe has legitimately exercised its discretion to set off assets in
this way.
    A clarification would be made in Rule 912(b)(iv), which addresses
liability of the Sponsor and Sponsored Principal on an Individually
Segregated Sponsored Account, to add the words ``and severally'' after
the word ``jointly''. The change was suggested by counsel to an
industry association concerning the sponsored principal model, and is
intended to fix a drafting error to ensure that the liabilities and
assets on sponsored accounts have mutuality. The revised language is
consistent with other provisions in Part 19 addressing joint and
several liability for such accounts, and the ``and severally'' language
in this provision was inadvertently omitted.
    Rule 1202(b)(i) would be amended to include a new paragraph (B)
stating an additional circumstance in which a Securities Transfer Order
would be deemed to arise under the designated system operated by ICE
Clear Europe for the purposes of the Financial Markets and Insolvency
(Settlement Finality) Regulations 1999. In the event of one Clearing
Member (or Sponsored Principal) allocating an F&O Contract to another
Clearing Member (or Sponsored Principal) under Part 4 of the Rules, a
new Securities Transfer Order would be deemed to arise under the
Designated System under new Rule 1202(b)(i)(B). The intended result of
this change is that such a transfer would be covered by the settlement
finality provisions under the Settlement Finality Regulations
(implementing the EU Settlement Finality Directive), and subject to
section 20 of those Regulations, and benefit from the Regulations'
protections against the application of national EU insolvency laws.
Changes have also been proposed to Rule 1202(f) to implement this new
Transfer Order for allocations by inserting the words ``or allocated''
after ``transferred, assigned or novated''.
    In Rule 1202(m)(iv)(A), changes are proposed to refer to rights,
liabilities and obligations of Clearing Members being transferred or
assigned, in addition to the current reference to these being novated.
These proposed changes would ensure consistency with the terminology
used elsewhere in the Rules (for example in Part 9) in relation to the
transfer of positions from one Clearing Member to another Clearing
Member (whether in a default scenario or otherwise) and that the
provisions in Part 12 relating to Position Transfer Orders capture the
full range of mechanisms through which positions can be transferred
from one Clearing Member to another. Rule 1202(m)(vi)(B) is also
proposed to be amended to add the words ``or Customer'' after the word
``Affiliate'' to correct an unintentional omission.
    Rule 1205(i) would be amended to provide that New Contract Payments
Transfer Orders shall also be satisfied if and at the point that the
relevant F&O Transaction or Contract ``has become subject to a Position
Transfer Order that has itself become satisfied under Rule 1205(b)''.
This drafting change has been proposed to clarify that a New Contract
Payment Transfer Order would terminate if the relevant transaction or
contract to which it relates has become subject to a Position Transfer
Order that has been satisfied, which would occur once the relevant
contracts have been transferred, assigned or novated to the relevant
transferee Clearing Member.
(viii) Delivery Procedures Changes
    In the Delivery Procedures, various changes would be made to ensure
that the procedures are consistent with the operational practices and
systems of ICE Clear Europe and affiliated trading venues, including
with respect to the processes set out in the delivery timetables.
Paragraph 19 of the General Provisions, which describes the Guardian
electronic grading and delivery system used by ICE Clear Europe, would
be amended to reflect the fact that other deliverable products may be
dealt with in the Guardian system in addition to those financials &
softs commodities already specifically listed in that paragraph.
    In Parts A and C of the Delivery Procedures, a new paragraph would
be added to clarify that all references to timings or times of day in
that Part are references to London times. In addition, updates to
several Parts of the Delivery Procedures would be made to reflect
current operational practices whereby certain submissions (such as
delivery intentions) are made electronically through the ECS system,
rather than through submission of specified delivery forms, which in
many cases are out of date (and accordingly references to such forms
have been removed). Other changes to update deadlines and descriptions
for particular delivery steps or, in some cases, to delete delivery
steps that are no longer carried out would be made. Section 7, which
addressed alternative delivery procedure for certain European emissions
contracts, would be deleted as it is unnecessary in light of the
provisions of Part A of the Delivery Procedures. The various changes
have been proposed in the following parts of the Delivery Procedures:
Part A, paragraphs 5.1, 5.2 and 5.3 (Delivery Timetables); Part B,
paragraph 2 (Delivery Timetable) and paragraph 4 (Delivery
Documentation Summary); Part C, paragraph 5 (Delivery Timetable) and
paragraph 9 (Delivery Documentation Summary); Part D, paragraphs 5.1
and 5.2 (Delivery Timetables) and paragraphs 8.1 and 8.2

(Delivery Documentation Summaries); Part F, paragraphs 6.1 and 6.2
(Delivery Timetables) and paragraphs 9.1 and 9.2 (Delivery
Documentation Summaries); Part G, paragraphs 5.1 (Delivery Timetable)
and 8.1 (Delivery Documentation Summary); Part H, paragraphs 5.1
(Delivery Timetable) and 8.1 (Delivery Documentation Summary); Part I,
paragraphs 6.1 (Delivery Timetable) and 9.1 (Delivery Documentation
Summary); Part K, paragraphs 4 (Delivery Timetable) and 8 (Delivery
Documentation Summary); Part L, paragraphs 4 (Delivery Timetable) and 8
(Delivery Documentation Summary); Part N, paragraph 5 (Delivery
Timetable); Part Q, paragraph 1 (Delivery Timetable); Part U,
paragraphs 1.6 and 1.9 (Delivery Timetables); and Part AA, paragraphs
6.1 (Delivery Timetable) and 9.1 (Delivery Documentation Summary).
(ix) Other Changes
    Various other miscellaneous changes and clarifications are proposed
to the Rules and Procedures.
    Changes have been proposed to expand the definition of ``Board'' in
Rule 101 so that it clearly includes, in the context of any power,
discretion or authority of the board, other similar bodies and
committees established by ICE Clear Europe thereunder. Similarly, in a
number of places in the Rules, changes have been proposed to include
``committees'', ``individual committee members'' and similar terms in
addition to existing terms referring to persons exercising governance
or other functions for ICE Clear Europe or a Clearing Member, such as
``directors'' or ``officers''. These were previously omitted in various
places or terms were used inconsistently to describe individuals or
governance bodies in different provisions of the Rules. ICE Clear
Europe has determined, following an internal review, to make these
changes to more accurately describe the persons involved in governance
in a consistent way in the Rules. The proposed changes are contained in
Rules 102(j)(B), 102(p), 109(c), 111(a), 114(a), 201(a)(xxvi), 905(f),
1001(d) and 1003(q). The definition of ``Representative'' has also been
expanded so as to cover any persons who are employed or authorised by,
or appointed to act on behalf of, another person and such term would be
inserted in the Rules to refer to representatives of Clearing Members
in Rule 102(j).
    Certain changes have also been proposed to the Rules to improve the
provisions concerning intellectual property (``IP'') rights. The
definition of ``Intellectual Property'' in Rule 101 would be revised to
improve the international coverage of the definition, by expressly
confirming that it covers IP rights in any part of the world and all IP
rights ``for the entire duration of such rights''. This clarifies the
provisions relating to IP under the Rules to ensure that all the
standard IP rights are covered. In addition, a new Section 12(d) would
be inserted in each of the Standard Terms, which would require
Customers to agree to Rule 406(g), which concerns the Clearing House's
intellectual property rights. As part of its review of the Standard
Terms more generally, as discussed herein, ICE Clear Europe has
determined that this change is appropriate to avoid any uncertainty as
to the applicability of Rule 406(g) in the context of customer
transactions. The representation in question supports the position in
relation to IP rights provided for in the Rules. ICE Clear Europe has
added this provision to ensure that it has the same contractual
representation from Customers as regards IP rights as it does from
Clearing Members.
    Rule 106 would be amended to expand the provisions relating to
confidentiality and the disclosure of information. For drafting
clarity, redesignated paragraph (b) would set out the information to be
held in confidence by the Clearing House, and redesignated paragraph
(c) would specify disclosures of confidential information permitted to
be made by the Clearing House. In terms of the scope of confidential
information under Rule 106(b), clarifications would be made to provide
that any information in relation to a Customer in connection with
Margin payments is covered by the confidentiality obligation. Changes
proposed to Rule 106(c) would clarify and extend the circumstances in
which ICE Clear Europe would be permitted, under the Rules, to disclose
confidential information. Specifically, a clarification would be added
at Rule 106(c)(i) to allow for confidential information to be disclosed
where ``lawful requests'' are received from regulators (rather than
only a formal statutory request with legal force or Court order) or if
necessary for the making of a complaint or report for offences which
may have been committed under Applicable Laws. This amendment follows
an internal review of these provisions and is intended to avoid
potential questions as to ICE Clear Europe's ability to disclose
confidential information when ICE Clear Europe is subjected to
regulatory requests for information or where the disclosure is
advisable under Applicable Law but not necessarily required by formal
exercise of statutory powers or an unequivocal court order or statutory
mandate.
    Rule 115(b), which addresses the sharing of information with
Governmental Authorities or referrals of complaints to Exchanges,
Clearing Organisations or Regulatory Authorities, would be amended to
provide that such actions are subject to the requirements of Rule 106.
    Various corrections and clarifications are proposed at Rule 110(a),
Rule 114(d) and paragraph 4.2 of the Business Continuity Procedures
relating to ICE Clear Europe's ability to extend or waive requirements
of the Rules. In Rule 110(a), a sentence would be added providing that
waivers may be publicized at the discretion of ICE Clear Europe. (ICE
Clear Europe does not believe that this amendment alters its existing
authority, but believes it would be useful to clarify that it may make
public information about any such waiver.) A new Rule 114(d) is
proposed to provide expressly that ICE Clear Europe may take any
measure that it deems reasonably necessary in relation to the
organization and operation of the Clearing House. ICE Clear Europe is
proposing to add this provision to ensure that it is not prevented from
taking action under a range of circumstances that may arise, including,
but not limited to a default scenario, merely because there is no
specific provision of the Rules explicitly empowering it to do so. This
authority is subject to a proviso that ICE Clear Europe may not take
any action in breach of any provision of the Rules or Procedures or
that would modify the Rules or Procedures, and that any such action
must be taken in accordance with the Clearing House's internal
governance requirements. ICE Clear Europe does not believe that this
amendment would alter its existing ability to take actions in such
circumstances, but the amendment would provide greater clarity and
legal certainty as to its permitted scope of action. ICE Clear Europe
would rely on its internal controls and compliance function to ensure
that any such actions are consistent with its Rules and Procedures. A
related change at paragraph 4.2 of the Business Continuity Procedures
would clarify that ICE Clear Europe's discretionary powers to amend or
waive requirements or deadlines in the case of a Business Continuity
Event affecting a Clearing Member only apply to the affected Clearing
Member(s).
    It is proposed that Rule 117(k) be amended to clarify that Clearing
Members with the ability to claim

sovereign immunity would be deemed to have ``irrevocably'' waived such
immunity for the purposes of dispute resolution processes under Rule
117, to the extent permitted by applicable law. This approach is
consistent with typical practice for waivers of sovereign immunity and
the documentation thereof in the derivatives markets. ICE Clear Europe
is adopting this amendment, following an internal review, for clarity
and to avoid any suggestion that a waiver of immunity in this context
could be revoked.
    Various enhancements to clearing membership requirements for
Clearing Members have been proposed in Rule 201(a). For example, the
need for representatives of Clearing Members to hold all
authorizations, licences, consents and approvals required under
applicable laws would be added in Rule 201(a)(vi). Additional detail on
operational, managerial, back office, systems, controls, business
continuity and banking requirements, among others, for Clearing Members
has been proposed in Rules 201(a)(xi), (xiv), (xxv), (xxvi) and
(xxvii). Similarly, changes are proposed to Rule 202(a)(xiv), (xxii)
and (xxiii) to enhance the ongoing requirements for Clearing Members.
These changes include additional detail on system and controls
requirements and the addition of two new requirements to ensure that
ICE Clear Europe has sufficient access rights in relation to its
Clearing Members. Proposed new Rule 202(a)(xxii) would require Clearing
Members to be accessible during and for two hours immediately after
close of business on every business day. Further, proposed new Rule
202(a)(xxiii) would require Clearing Members to provide such access as
ICE Clear Europe requires to their premises, records and personnel for
the purposes of, for example, carrying out investigations or audits.
Following an internal review of relevant requirements, ICE Clear Europe
has proposed some of these proposed changes to address identified
commercial and operational risks for ICE Clear Europe and to ensure
that Clearing Members meet appropriate and evolving standards
concerning their systems and operations based on day-to-day operational
experience with Clearing Members. The amendments also generally reflect
improvements are further intended to better harmonize Rules and
membership requirements across ICE clearinghouses.
    In Rule 203(a)(xvi), a change is proposed to clarify that Clearing
Members are prohibited from engaging in conduct that would render them
unable to satisfy obligations on Clearing Members under Rule 202(a)
(just as the current Rule prohibits conduct that would render the
Clearing Member unable to satisfy the membership criteria under Rule
201(a)). The amendment is intended to avoid any potential gap in
ongoing obligations under the Rule. New Rule 203(a)(xxii) would
explicitly limit the ability of Clearing Members or Affiliates to
exercise set-off rights against ICE Clear Europe where such Clearing
Members (or their Affiliates) have a relationship in another capacity,
for example providing banking or custodial services to ICE Clear
Europe. This change is intended to reduce the risks that other
contractual agreements contain provisions that could interfere with
default management or operational processes. The approach aims to
provide a level playing field for all Clearing Members, regardless of
any other commercial relationships with the ICE group.
    Changes are proposed in Rules 204(a)(xii) and 204(b)(i) to enhance
certain notification requirements imposed on Clearing Members. The
Clearing Members' notification requirement at Rule 204(a)(xii) would be
extended to require notification of investigations or allegations of
breaches of Applicable Laws by a Clearing Member (if they are non-
frivolous and non-vexatious), in addition to actual breaches. ICE Clear
Europe believes this is an appropriate extension of the Rule, to
facilitate ongoing monitoring by the Clearing House of circumstances
that may significantly affect Clearing Members. In Rule 204(b)(i),
additional language is proposed to require that a Clearing Member
notify the Clearing House of a change of control where that change of
control is subject to the approval of the FCA or PRA, in addition to a
change of control notifiable to the FCA or PRA (as required under the
current version of Rule 204(b)(i)). In ICE Clear Europe's view, the
amendment avoids a potential gap in notification requirements based on
a distinction between regulatory notice and approval that is not
relevant in this context.
    It is proposed that Rules 206(a) and (b) be amended to reflect the
fact that Clearing Members are required to maintain other financial
resources requirements (in addition to Capital) under the relevant CDS,
Finance and Membership Procedures. (The amendment thus does not change
requirements applicable to Clearing Members but is intended to
correctly cross-refer to the existing requirements of various
Procedures documents.) The proposed amendments would also require
Clearing Members to provide documentation and statements supporting
calculations of financial resources requirements, as well as details of
the terms and conditions of any documentation relating to financial
resources requirements, upon ICE Clear Europe's request.
    Rule 301(f) would be revised to allow the Clearing House to grant
an exception to the requirement for payments to be made by electronic
transfer from an account at an Approved Financial Institution for any
type of payment (and not merely application fees, as in the current
Rules). This is intended to provide ICE Clear Europe with greater
flexibility to allow payments to be made using a different method
should this become necessary.
    A clarification is proposed to Rule 404(a)(vii) that ICE Clear
Europe must have requested additional Margin or Permitted Cover ``at
the time of the Transaction'' for a Contract to be voidable under this
provision if such additional Margin or Permitted Cover is not provided
by a specified time. The amendment is intended to provide greater legal
certainty by ensuring that the Clearing House's ability to void the
Contract is limited to the specific situation where additional margin
is requested at the time of the transaction and is not provided. (A
failure to provide margin requested at other times would be addressed
by the default rules.)
    In Rule 501(a), a change is proposed that Approved Financial
Institutions may only act in another capacity if ICE Clear Europe has
provided its approval ``in writing''. The amendment is intended to
provide greater certainty for the Clearing House and Approved Financial
Institutions as to the capacities in which such institutions may be
acting.
    At the beginning of Part 15 of the Rules and at paragraph 1.86 of
the CDS Procedures, changes have been proposed to clarify that
references to timings or times of day in connection with CDS Contracts
are to Greenwich Mean Time (without taking into account daylight
savings time (British Summer Time)). These changes are necessary to
reflect applicable timings for the CDS market under standard CDS
documentation, and to avoid application of Rule 102(h) (which specifies
London time by default, including with daylight savings time
adjustments). This change is intended to avoid `basis risk' between
cleared CDS Contracts and uncleared CDS contracts (which also follow
standard CDS documentation using Greenwich Mean Time). The changes
reflect current operational practices and remove an

unintended inconsistency in the Rules and Procedures.
    Various changes have been proposed in paragraphs 2.2, 2.4(c), 2.6-
2.7, 6.1(a)(i) and 6.2(g) of the Clearing Procedures to update certain
deadlines in order to conform to or reflect relevant Market Rules,
conform to certain operational practices and specify the message format
requirements for F&O Contracts to be validly accepted by ICE Clear
Europe's systems. In paragraph 2.2(c)(ii) a reference to allocation of
trades within one hour would be removed, as the timing of allocation
may be a matter of the relevant Market Rules. Paragraph 2.6 would make
explicit in the Clearing Procedures the Clearing House's position that
Clearing Members bear the risk of late or incorrect instructions to the
Clearing House. Paragraph 2.7 would provide clarity as to specific
reasons for rejection of F&O Contracts and procedures for resubmission.
    The Finance Procedures would be amended to clarify references to
certain operational practices involved in settling margin payments
between ICE Clear Europe and its Clearing Members. Changes have been
proposed in paragraphs 2.1 and 2.2 to reflect settlement requirements
in relevant currencies, whether in whole or in part. The amendments
would also clarify the drafting of the existing provision providing for
a ``haircuts'' to be applied to original margin provided in a currency
other than the reference currency for a particular contract. Similarly,
changes are to be made in paragraphs 5.6 (Table 1) and 6.1(i)(i) of the
Finance Procedures to refer to the full range of currencies aside from
EUR, USD and GBP that are currently available to be used for
settlement. These amendments are intended to update the Finance
Procedures to reflect current settlement practice.
    Paragraph 6.1(b) of the Finance Procedures would be reorganized and
a statement would be added (for clarification and reflecting the
current requirements of the Rules) that payment requirements in respect
of Margin adjustments would be subject to Part 3 of the Rules. In
addition, drafting clarifications in paragraphs 6.1(e) and (f) would
confirm that instructions for withdrawals of cash must be received by
the deadlines specified in the relevant table for cash to be withdrawn
on the same day and to specify the conditions that must be satisfied
for ICE Clear Europe to accept cash transfers entered into its systems
after the instruction deadlines. The amendments are intended to state
more clearly current operational practices of the Clearing House.
    Paragraph 6.1(g) would be revised to provide explicitly that ICE
Clear Europe has the ability to delay cash withdrawals by a Clearing
Member under paragraph 6.1 if there are outstanding amounts payable by
that Clearing Member (or any Affiliate of that Clearing Member) to ICE
Clear Europe, and that such amounts withheld would be treated as
additional required margin of the Clearing Member. This amendment would
codify an existing operational practice of the Clearing House and will
enhance the Clearing House's ability to manage the credit and liquidity
risk of a potential default by a Clearing Member that has not completed
its daily settlement obligations.
    In paragraphs 6.1(i)(i) and 6.1(i)(ii) of the Finance Procedures,
amendments have also been proposed to provide that ICE Clear Europe may
publish circulars in relation to certain matters relating to intra-day
margin calls affecting a significant number of Clearing Members but is
not obligated to do so. The change is intended to provide the Clearing
House flexibility to determine the best means of communicating with
affected Clearing Members under the particular circumstances, which
will not necessarily be a widely distributed circular to the entire
market.
    In paragraph 6.1(i)(iii) of the Finance Procedures, amendments
would provide that adjustments to guaranty fund contributions will be
made 5 Business Days after the date of notification by circular for all
guaranty fund segments (a change from two Business Days for the CDS and
FX Guaranty Funds). ICE Clear Europe believes that it is appropriate to
harmonize the guaranty fund contribution requirements across all
product categories, and further that the five Business Day timeframe is
sufficiently protective of the Clearing House in the case of ordinary
course adjustments to the guaranty funds.
    In paragraph 6.1(i)(vii), the list of types of payments that may be
included in end-of-day or ad hoc net payments would be updated to
include Option premiums, corporate action payments, and amounts
resulting from reduce gain distributions, product terminations or non-
default loss contributions under Part 9 of the Rule. The change is
intended to reflect the full range of payments that may be made to and
from the Clearing House, consistent with current practice.
    Various changes have been proposed in paragraph 7.2 of the Finance
Procedures in relation to non-cash assets provided as Permitted Cover.
The changes are intended to update and improve the drafting of this
provision and more clearly reflect the operational detail of how ICE
Clear Europe deals with Permitted Cover, including the use of the ECS
system to provide information in relation to non-cash Permitted Cover
provided to the Clearing House. The amendments would also reflect in
the Rules the Clearing House's existing ability to generate liquidity
from non-cash assets transferred to the Clearing House by title
transfer pursuant to repurchase transactions, secured lending
facilities or similar arrangements, subject to the requirement of the
Clearing House to return unused Margin and Guaranty Fund contributions
of the same kind as was provided. (The use of such transactions is not
currently addressed in the Rules.) In paragraph 8.2, a clarification
would be added that a request form to lodge new certificates of deposit
is available on ICE Clear Europe's website.
    In paragraphs 11.2 and 11.4 of the Finance Procedures, changes are
proposed to remove a presumption that instructions relating to
securities are for same-day settlement and to reflect that ICE Clear
Europe accepts settlement instructions specifying a settlement date up
to two business days after the relevant trade date, and to make certain
other drafting improvements. This amendment is intended to reflect
existing practice for the range of securities accepted by ICE Clear
Europe, and the amendments are intended to provide improved clarity.
    Various other typographical corrections and similar changes have
been proposed elsewhere throughout the Finance Procedures.
    A drafting change is proposed to paragraph 3.1(m) of the General
Contract Terms to make the general termination provision for all
contracts more generic. Following the proposed amendments, paragraph
3.1(m) would simply state that contracts terminate automatically ``only
in accordance with and at the times specified in the Rules''. This
change would ensure that this provision of the General Contract Terms
does not need to be updated when termination provisions in the Rules
are amended.
    The Membership Procedures would be amended in various places to
update the various requirements that Clearing Members must meet to
attain and maintain membership (consistent with the amendments to the
membership provisions of the Rules discussed above), and ensure that
the Membership Procedures use terminology consistent with the Rules.
Paragraph 1.1 would be amended to confirm that ICE Clear

Europe would require evidence of authority of Clearing Member
signatories to be provided, which is consistent with the Clearing
House's current practices. In the table at paragraph 4.2, various
updates are proposed to reflect the wording used in the current Rules
(as amended by this and previous filings) and to ensure that accurate
details of timing and other requirements for submission of
notifications and documentation are specified. In parts C.4, D.5, D.7
and D.11 of the table, references to key personnel of a clearing member
(or similar references) have been expanded to include the board of
directors. Amendments to part C.11 would also clarify that notices
relating to changes in Eligible Persons (i.e. persons for which
Clearing Members clear) include suspension of clearing arrangements for
Eligible Persons, and are separate from any requirements under the
Clearing Membership Agreement. In part E.2, the timeframe for certain
notices relating to complaints has been revised to be consistent with
amendments to the Complaint Resolution Procedures.
(b) Statutory Basis
    ICE Clear Europe believes that the proposed rule changes are
consistent with the requirements of Section 17A of the Act \11\ and the
regulations thereunder applicable to it, including the standards under
Rule 17Ad-22.\12\ In particular, Section 17A(b)(3)(F) of the Act
requires that that rule changes be consistent with the prompt and
accurate clearance and settlement of securities transactions and
derivative agreements, contracts and transactions cleared by ICE Clear
Europe, t[aring]he 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.\13\
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    \11\ 15 U.S.C. 78q-1.
    \12\ 17 CFR 240.17Ad-22.
    \13\ 15 U.S.C. 78q-1(b)(3)(F).
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    As discussed herein, the proposed rule changes are principally
designed to enhance key aspects of the clearing framework, including by
improving the customer documentation framework for Non-FCM/BD Clearing
Members, adopting an Externalized Payments Mechanism, facilitating
treatment of variation and mark-to-market margin as settlement payments
for purposes of Clearing Member capital requirements, improving futures
and option settlements and related calculations, facilitating
compliance with certain U.S. tax requirements and improving overall
default management. The amendments also clarify various aspects of the
Rules and Procedures to improve drafting and ensure consistency with
operational practices and processes as they have evolved. In ICE Clear
Europe's view, these changes, as discussed in detail herein, will
facilitate the prompt and accurate clearance and settlement of
transactions through the Clearing House and are further generally
consistent with the protection of investors and the public interest.
Furthermore, enhancing the customer documentation framework, and
improving the ability of ICE Clear Europe to conduct post-default
porting, as well as other improvements to the margin process and the
default management processes discussed herein, will enhance the
safeguarding of securities and funds in the custody or control of the
Clearing House or for which it is responsible. As such, the amendments
are consistent with the requirements of Section 17A(b)(3)(F) of the
Act.\14\
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    \14\ 15 U.S.C. 78q-1(b)(3)(F).
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    With respect to proposed paragraph 6.1(k) of the Finance
Procedures, the changes are intended to facilitate compliance by ICE
Clear Europe and Clearing Members with their obligations under Section
871(m) and related U.S. tax obligations. ICE Clear Europe further
believes that the amendments will facilitate the clearance and
settlement of securities and derivative transactions by allowing it to
avoid having to withhold on payments to non-U.S. Clearing Members
relating to dividend equivalents. The imposition of withholding
responsibilities on ICE Clear Europe would potentially interfere with
the current ICE Clear Europe daily settlement process for equity
contracts, and introduce new complications and risks for that process.
The proposed rule change would eliminate such potential complications
and risks, and permit ICE Clear Europe to continue its current
settlement procedures for equity contracts, without need for ICE Clear
Europe to withhold on payments made to Clearing Members. Thus, ICE
Clear Europe believes the proposed rule change will promote the prompt
and accurate clearance and settlement of securities and derivatives
transactions and the protection of investors and the public interest,
within the meaning of Section 17A(b)(3)(F) of the Act.\15\
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    \15\ 15 U.S.C. 78q-1(b)(3)(F).
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    Moreover, ICE Clear Europe believes that proposed paragraph 6.1(k)
does not unfairly discriminate among participants in the use of the
clearing agency, within the meaning of Section 17A(b)(3)(F).\16\
Although the proposed rule change would impose additional requirements
and/or restrictions on non-U.S. Clearing Members that would not apply
to Clearing Members that are U.S. entities for U.S. federal income tax
purposes (``U.S. Clearing Members''), ICE Clear Europe believes that
this approach reflects the nature of the requirements of Section 871(m)
(as the additional withholding requirements under Section 871(m) would
not apply with respect to payments by the Clearing House to U.S.
Clearing Members). Moreover, ICE Clear Europe believes it is preferable
for the clearing system as a whole to place compliance costs with
respect to Section 871(m) Transactions on the relevant Clearing Member,
rather than on the Clearing House itself, given that withholding can be
avoided at the Clearing House level if the relevant Clearing Member has
entered into the requisite agreements with the IRS complies with
certain other conditions. Therefore, ICE Clear Europe believes that the
proposed rule change is not unfairly discriminatory among participants
in the use of the clearing agency and is consistent with Section
17A(b)(3)(F) of the Act.\17\
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    \16\ 15 U.S.C. 78q-1(b)(3)(F).
    \17\ 15 U.S.C. 78q-1(b)(3)(F).
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    The amendments are additionally consistent with Section
17A(b)(3)(G) of the Act which requires that the rules of a clearing
agency provide that its participants be appropriately disciplined for
violation of any provision of the rules of the clearing agency by
expulsion, suspension, limitation of activities, functions, and
operations, fine, censure, or any other fitting sanction.\18\ The
amendments are also similarly consistent with Section 17A(b)(3)(H) of
the Act which requires that the rules of a clearing agency in general,
provide a fair procedure with respect to the disciplining of
participants, the denial of participation to any persons seeking
participation therein, and the prohibition or limitation by the
clearing agency of any person with respect to access to services
offered by the clearing agency.\19\ The various changes proposed to
Part 10 of the Rules to streamline and improve ICE Clear Europe's
disciplinary processes are consistent with these requirements of the
Act. The drafting improvements would clarify the process of
investigating rule breaches, clarify that non-compliance with an
investigation could lead to additional disciplinary action against a
Clearing Member, clarify the conditions surrounding the use of the
Summary Procedure, and address the interaction between ICE Clear
Europe's disciplinary procedures

under the Rules and any similar procedures under Market Rules to ensure
that parallel disciplinary procedures under Market Rules would not
preclude disciplinary procedures ICE Clear Europe's own rules. ICE
Clear Europe believes that the clarity relating to disciplinary
processes will better ensure appropriate disciplinary actions are taken
with respect to rule violations, consistent with the requirements of
Section 17A(b)(3)(G) of the Act \20\ and Section 17A(b)(3)(H) of the
Act.\21\
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    \18\ 15 U.S.C. 78q-1(b)(3)(G).
    \19\ 15 U.S.C. 78q-1(b)(3)(H).
    \20\ 15 U.S.C. 78q-1(b)(3)(G).
    \21\ 15 U.S.C. 78q-1(b)(3)(H).
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    The amendments are also consistent with the relevant specific
requirements of Rule 17Ad-22,\22\ as set forth in the following
discussion:
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    \22\ 17 CFR 240.17Ad-22.
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(i) Legal Framework
    Rule 17Ad-22(e)(1) \23\ requires that clearing agencies establish
policies and procedures that provide for a well-founded, clear,
transparent, and enforceable legal basis for each aspect of its
activities in all relevant jurisdictions. Various amendments have been
proposed to strengthen the legal foundations for the customer
documentation framework, through the Standard Terms, in particular.
Amendments would be made to the Rules to confirm Customers' and non-
FCM/BD Clearing Members' acceptance of the Standard Terms, and to limit
the effect of conflicting automatic early termination provisions in
customer documentation. These changes would reduce legal uncertainties
in default management. The definitions of Bankruptcy, Insolvency and
Insolvency Practitioner would be amended to better capture all relevant
proceedings in relevant jurisdictions. The Rules would also be amended
to improve the provisions relating to confidentiality and the
disclosure of information by clarifying and extending the circumstances
in which ICE Clear Europe would be permitted to disclose confidential
information to allow it to facilitate compliance with regulatory
requests.
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    \23\ 17 CFR 240.17Ad-22(e)(10). The rule states the following:
``(e) Each covered clearing agency shall establish, implement,
maintain and enforce written policies and procedures reasonably
designed to, as applicable:
    (1) Provide for a well-founded, clear, transparent, and
enforceable legal basis for each aspect of its activities in all
relevant jurisdictions.''
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    Other changes would enhance legal certainty and settlement
finality. Amendments would enhance representations as to transfer of
Permitted Cover, including that a ``transfer of Permitted Cover'' is
not contrary to or in breach of a requirement of Applicable Law, third
party right or other contractual obligation. A further Rule change
would enhance the enforceability of Transfer Orders in default
scenarios and take advantage of protections from the application of
insolvency law under EMIR and the UK Companies Act 1989. Another Rule
amendment would include an additional circumstance in which a
Securities Transfer Order would be deemed to arise under the designated
system operated by ICE Clear Europe for the purposes of settlement
finality legislation. (These amendments are also consistent with the
settlement finality requirements under SEC Rule 17Ad-22(e)(8).\24\)
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    \24\ 17 CFR 240.17Ad-22(e)(8). The rule states the following:
``(e) Each covered clearing agency shall establish, implement,
maintain and enforce written policies and procedures reasonably
designed to, as applicable: . . . (8) Define the point at which
settlement is final to be no later than the end of the day on which
the payment or obligation is due and, where necessary or
appropriate, intraday or in real time.''
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    Finally, certain changes will also facilitate compliance with U.S.
tax requirements under Section 871(m), to facilitate the ability of ICE
Clear Europe to make payments of dividend equivalents to Clearing
Members free of US withholding taxes, in compliance with US tax laws.
    The amendments also generally update and clarify the drafting of
various provisions of the Rules and Procedures, with the goal of
enhancing the clarity of the overall legal and documentation framework.
In totality, the amendments largely act so as to align the rules with
existing operational practice, to correct errors, to promote legal
certainty and to provide transparency.
    For the foregoing reasons, in ICE Clear Europe's view, the
amendments are consistent with the requirements of Rule 17Ad-
22(e)(1).\25\
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    \25\ 17 CFR 240.17Ad-22(e)(1).
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(ii) Physical Settlement
    Pursuant to Rule 17Ad(e)(10),\26\ clearing agencies are required to
establish and maintain written standards stating their obligations with
respect to the delivery of physical instruments and manage the
associated risks. Multiple changes have been made to the Amended
Documents to clarify and update delivery arrangements and better align
them with operational practice. As discussed herein, clarifications
have been made to the Rules and Procedures relating to the
determination of the Exchange Delivery Settlement Price for Futures,
settlement of Futures and Options, representations and warranties as to
title and other matters on physical settlement, the role of Markets in
the settlement process and various other processes for physical
settlement, including the delivery of securities, among others. The
Delivery Procedures in particular have also been updated to reflect
operational systems and practices, including as to delivery timetables
and documentation. Through enhancing and clarifying ICE Clear Europe
processes and arrangements with respect to physical deliveries, and
better aligning their descriptions in the Amended Documents with
operational practice, in ICE Clear Europe's view, the amendments are
consistent with the requirements of Rule 17Ad(e)(10).\27\
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    \26\ 17 CFR 240.17Ad-22(e)(10). The rule states the following:
``(e) Each covered clearing agency shall establish, implement,
maintain and enforce written policies and procedures reasonably
designed to, as applicable: . . .
    (10) Establish and maintain transparent written standards that
state its obligations with respect to the delivery of physical
instruments, and establish and maintain operational practices that
identify, monitor, and manage the risks associated with such
physical deliveries.''
    \27\ 17 CFR 240.17Ad-22(e)(10).
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(iii) Margin
    Rules 17Ad-22(b)(2) \28\ and (e)(6) \29\ require clearing agencies
to use margin requirements to limit their credit exposures and have the
operational capacity to make intraday margin calls. The amendments
enhance ICE Clear Europe's approach to managing margin, particularly
with respect to variation

margin and mark-to-market margin. The Amended Documents would introduce
a new ``Externalised Payments Mechanism'' to permit variation margin
cash payments to be settled through separate cash flows, without being
netted with other payment obligations, where Clearing Members so elect.
The amendments would also clarify margin calculations for Options,
taking into account the calculation of NLV. The amendments would
facilitate the characterization of variation and mark-to-market margin
as settlement payments (and not as collateral) for purposes of
settlement to market treatment under Article 274(2)(c) of the CRR.
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    \28\ 17 CFR 240.17Ad-22(b)(2) The rule states the following: ``A
registered clearing agency that performs central counterparty
services shall establish, implement, maintain and enforce written
policies and procedures reasonably designed to: . . .
    (2) Use margin requirements to limit its credit exposures to
participants under normal market conditions and use risk-based
models and parameters to set margin requirements and review such
margin requirements and the related risk-based models and parameters
at least monthly.''
    \29\ 17 CFR 240.17Ad-22(e)(6) The rule states the following:
``(e) Each covered clearing agency shall establish, implement,
maintain and enforce written policies and procedures reasonably
designed to, as applicable: . . .
    (6) Cover, if the covered clearing agency provides central
counterparty services, its credit exposures to its participants by
establishing a risk-based margin system that, at a minimum:
    i. Considers, and produces margin levels commensurate with, the
risks and particular attributes of each relevant product, portfolio,
and market;
    ii. Marks participant positions to market and collects margin,
including variation margin or equivalent charges if relevant, at
least daily and includes the authority and operational capacity to
make intraday margin calls in defined circumstances;
    iii. Calculates margin sufficient to cover its potential future
exposure to participants in the interval between the last margin
collection and the close out of positions following a participant
default;''
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    The Finance Procedures would be amended to clarify certain
provisions relating to settlement of margin payments in relevant
currencies and haircuts for cross-currency payments.
    As the amendments clarify and strengthen ICE Clear Europe's
approach to treatment of margin and better align description in the
Amended Documents with operational practice, in ICE Clear Europe's
view, the amendments meet the requirements of Rules 17Ad-22(b)(2) \30\
and (e)(6) \31\ to appropriately cover its credit exposures with a
risk-based margin system.
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    \30\ 17 CFR 240.17Ad-22(b)(2).
    \31\ 17 CFR 240.17Ad-22(e)(6).
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(iv) Segregation and Portability
    Rule 17Ad-22(e)(14) \32\ requires that clearing agencies enable the
segregation and portability of positions of a participant's customers
and the collateral provided to the clearing agency with respect to
those positions. In general, a number of changes proposed to the
customer clearing documentation in the Rules and Standard Terms are
intended to promote porting. Specifically, as described above,
amendments to the Standard Terms are intended to, among other things,
prevent possible Customer claims that could interfere with ICE Clear
Europe's ability to offer porting, which would enhance the feasibility
of relying on the Standard Terms to effect post-default porting.
Changes are further being proposed to confirm the parameters around ICE
Clear Europe's discretion to determine timing of the price at which
positions are ported from a defaulting Clearing Member to a non-
defaulting Clearing Member and the reference time for the determination
of such price. Further proposed changes address rights, liabilities and
obligations of Clearing Members being transferred or assigned to ensure
that the provisions in Part 12 relating to Position Transfer Orders
capture the full range of mechanisms through which positions can be
transferred from one Clearing Member to another. As a result, ICE Clear
Europe believes the amendments are in compliance with the segregation
and portability requirements of Rule 17Ad-22(e)(14).\33\
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    \32\ 17 CFR 240.17Ad-22(e)(14). The rule states the following:
``(e) Each covered clearing agency shall establish, implement,
maintain and enforce written policies and procedures reasonably
designed to, as applicable:
    (14) Enable, when the covered clearing agency provides central
counterparty services for security-based swaps or engages in
activities that the Commission has determined to have a more complex
risk profile, the segregation and portability of positions of a
participant's customers and the collateral provided to the covered
clearing agency with respect to those positions and effectively
protect such positions and related collateral from the default or
insolvency of that participant.''
    \33\ 17 CFR 240.17Ad-22(e)(14).
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(v) Default Management
    Rule 17Ad-22(e)(13) \34\ requires the covered clearing agency to
ensure that it ``has the authority and operational capacity to take
timely action to contain losses and liquidity demands'' in the case of
default.
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    \34\ 17 CFR 240.17Ad-22(e)(13). The rule states the following:
``(e) Each covered clearing agency shall establish, implement,
maintain and enforce written policies and procedures reasonably
designed to, as applicable: . . . (13) Ensure the covered clearing
agency has the authority and operational capacity to take timely
action to contain losses and liquidity demands and continue to meet
its obligations by, at a minimum, requiring the covered clearing
agency's participants and, when practicable, other stakeholders to