incorporated in Switzerland \115\ or any other jurisdiction as may be
specified by ICE Clear Europe for such purposes or (ii) ICE Clear
Europe provides its written consent to such termination provision being
effective. Moreover, new Section 5(c)(iii) would provide that even if
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 still apply. Finally, new
section 5(c)(i) would provide in case of default, instead of automatic
early termination, 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. ICE Clear Europe believes suspension of performance provides
similar economic protections for Customers as compared to automatic
termination because the Customer would not be obligated to make
payments while avoiding the risks, as discussed above, of inconsistent
timing or valuation or of positions not being portable.\116\
---------------------------------------------------------------------------

    \115\ As described in the Notice, 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. Notice, 85 FR at 13202, n.6.
    \116\ Notice, 85 FR at 13202.
---------------------------------------------------------------------------

iv. Price
    Finally, the proposed rule change would clarify the price at which
positions are ported from a defaulting Clearing Member to a non-
defaulting Clearing Member and the relevant time for the determination
of such price. Currently, Rule 904(b) provides that all Contracts
subject to a Transfer shall be Transferred on the basis of the
applicable Exchange Delivery Settlement Price, Reference Price, Market-
to-Market Value, or other price specified by ICE Clear Europe. ICE
Clear Europe would notify Transferee Clearing Members of applicable
prices determined pursuant to this provision prior to the Transfer. The
proposed rule change would modify this to provide that ICE Clear
Europe, at its discretion, shall determine the price of any contract
subject to a Transfer and that this price may be determined on basis of
the applicable Exchange Delivery Settlement Price (for F&O Contracts),
the Market-to-Market Value (for CDS Contracts), the FX Market Price
(for FX Contracts), or as zero (for certain Options), in any case as at
the time specified by ICE Clear Europe. The proposed rule change would
also allow ICE Clear Europe to calculate the price at which positions
are ported with reference to any time determined at ICE Clear Europe's
discretion, which may be the time of the Transfer, 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. Similarly, the proposed rule change would
amend Rule 905(b)(xiv), which currently allows ICE Clear Europe to
transfer a defaulting Clearing Member's contracts to another Clearing
Member at a price agreed to with the transferee Clearing Member, to
provide instead that ICE Clear Europe may transfer at a price
determined by ICE Clear Europe pursuant to part 9 of the Rules. Because
ICE Clear Europe, and its Clearing Members, operate in multiple
jurisdictions, ICE Clear Europe is making these changes to facilitate
porting by giving ICE Clear Europe flexibility to establish prices for
contracts to be transferred, as needed to take into consideration
different insolvency regimes in Clearing Member jurisdictions.\117\
---------------------------------------------------------------------------

    \117\ Notice, 85 FR at 13209.
---------------------------------------------------------------------------

    For similar reasons, the proposed rule change would add a new Rule
905(g). New Rule 905(g) would give ICC discretion to determine the
price at which it liquidates, terminates, or closes out a Contract,
while Rule 904(b) would only apply to the Transfer of a Contract. The
terms of new Rule 905(g) would be similar to those of amended Rule
904(b). Specifically, for all liquidations, terminations and close outs
of Contracts, ICE Clear Europe would, at its discretion, determine the
price of the Contract, which may be on the basis of

the Exchange Delivery Settlement Price, the Mark-to-Market Price, the
FX Market Price, Reference Price, Market-to-Market Value, current
market value or any other price specified by ICE Clear Europe. ICE
Clear Europe would be able to calculate the price with reference to any
time determined at its discretion, which may be at the time such
cancellation is ordered, the time an Event of Default, Insolvency,
Unprotected Resolution Step occurs or is declared, or the time of
calculation of any price as at the end of the Business Day prior to the
Transfer, Event of Default, Insolvency or Unprotected Resolution Step.
Moreover, the proposed rule change would amend Rule 905(b)(vi), which
allows ICE Clear Europe to pair and cancel offsetting Long and Short
positions in the same Future or Option Set or Selling Counterparty and
Buying Counterparty positions in any Set of CDS Contracts or FX
Contracts. Under Rule 905(b)(vi) as amended, ICE Clear Europe would
still have authority to pair and cancel such positions, but the amended
rule would refer to Rule 905(g) with respect to determining the price
when needed to conduct the pair and cancel. ICE Clear Europe represents
that this change is necessary to be consistent with the discretion
granted to ICE Clear Europe under amended Rule 905(g).

J. 17Ad-22(e)(17)(i)

    As discussed in this section, the proposed rule change would also
make changes with respect to requirements applicable to ICE Clear
Europe under U.S. tax law and the timing and operational aspects
associated with ICE Clear Europe's clearance and settlement of CDS,
F&O, and FX Contracts. ICE Clear Europe is making these changes to
better manage the operational risks associated with these aspects of
ICE Clear Europe's clearance and settlement processes. ICE Clear Europe
believes these changes would be consistent with Rule 17Ad-
22(e)(17)(i)'s requirement that ICE Clear Europe establish, implement,
maintain, and enforce written policies and procedures reasonably
designed to manage its operational risks by, among other things,
identifying the plausible sources of operational risk, both internal
and external, and mitigating their impact through the use of
appropriate systems, policies, procedures, and controls.\118\
---------------------------------------------------------------------------

    \118\ 17 CFR 240.17Ad-22(e)(17)(i); Notice, 85 FR at 13216.
---------------------------------------------------------------------------

i. U.S. Tax Requirements
    The proposed rule change 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 to Clearing Members.
Under Section 871(m), unless a Clearing Member that is treated as a
non-U.S. entity for U.S. federal income tax purposes enters into
certain agreements with the Internal Revenue Service, ICE Clear Europe
would be required to withhold taxes on dividend equivalents with
respect to any transactions with that Clearing Member that are subject
to Section 871(m).\119\
---------------------------------------------------------------------------

    \119\ Notice, 85 FR at 13208.
---------------------------------------------------------------------------

    To avoid having to withhold taxes and manage the operational risks
associated with such withholding, ICE Clear Europe is proposing to
adopt a new Paragraph 6.1(k) of the Finance Procedures. This new
paragraph would require that, as a precondition for a Clearing Member
to clear equity contracts with ICE Clear Europe, any 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
taxes under Section 871(m). Moreover, new Paragraph 6.1(k)(ii) would
require each Clearing Member that is treated as a non-U.S. entity for
U.S. federal income tax purposes to certify annually that they satisfy
these requirements. New Paragraph 6.1(k)(iii) also would require each
Clearing Member that is treated as a non-U.S. entity for U.S. federal
income tax purposes to provide, on an annual basis, certain information
necessary for ICE Clear Europe to make required IRS filings. Finally,
new Paragraph 6.1(k)(iv) would require each Clearing Member that is
treated as a non-U.S. entity for U.S. federal income tax purposes to
notify ICE Clear Europe of relevant changes in their circumstances
affecting compliance with paragraph 6.1(k).
    ICE Clear Europe is making this proposed change to manage the
operational risks associated with the application of Section 871(m) to
Clearing Members. Because, as discussed above, Section 871(m) could
require ICE Clear Europe in certain circumstances to withhold taxes on
dividend equivalents with respect to any transactions with a Clearing
Member that is treated as a non-U.S. entity for U.S. federal income tax
purposes that are subject to Section 871(m), ICE Clear Europe believes
application of Section 871(m) could hinder its operational processes
for clearing and settling transactions.\120\ ICE Clear Europe therefore
believes that application of Section 871(m) represents an operational
risk to ICE Clear Europe, and that the proposed response to that risk
would be consistent with the requirement in Rule 17Ad-22(e)(17) that
ICE Clear Europe establish, implement, maintain, and enforce written
policies and procedures reasonably designed to manage its operational
risks and mitigate their impact through the use of appropriate policies
and procedures.\121\
---------------------------------------------------------------------------

    \120\ Notice, 85 FR at 13208-13209.
    \121\ 17 CFR 240.17Ad-22(e)(17)(i); Notice, 85 FR at 13216.
---------------------------------------------------------------------------

ii. Timing and Operations
    ICE Clear Europe is also making changes to clarify and harmonize
references to timing in the Rules, the CDS Procedures, Clearing
Procedures, Finance Procedures, and mitigate other aspects of the
operational risk associated with clearing contracts. ICE Clear Europe
is doing so to manage and mitigate the operational risks presented by
having divergent standards of timing applied to its clearing of
contracts.
    Beginning with CDS Contracts, the proposed rule change would
clarify, at the beginning of Part 15 of the Rules and at Paragraph 1.86
of the CDS Procedures, 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)). ICE
Clear Europe is making these changes 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). ICE Clear Europe
believes this change would help to avoid a risk that cleared CDS
Contracts at ICE Clear Europe would diverge from the timing of
uncleared CDS contracts, which also follow standard CDS documentation
using Greenwich Mean Time.\122\
---------------------------------------------------------------------------

    \122\ Notice, 85 FR at 13212.
---------------------------------------------------------------------------

    With respect to the Clearing Procedures, Section 2 describes the
operational aspects of ICE Clear Europe's systems for clearing trades
and managing positions. The proposed rule change would delete, in
Paragraph 2.2(c)(ii), a reference to allocation of trades within one
hour. The timing of allocation may be a matter of the relevant Market
Rules, so ICE Clear Europe is making this change to avoid potential
conflict with those Market Rules, including a situation where ICE Clear
Europe's systems allocate trades at a time different from the relevant
Market where those trades occur.\123\
---------------------------------------------------------------------------

    \123\ Notice, 85 FR at 13213.

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

    Similarly, the proposed rule change would amend Paragraph 2.4(c),
which specifies that close-outs of Options must be complete at or
before 10:00 a.m. to be reflected in Open Contract Positions and Margin
calls calculated at the end of that day, to instead specify that close-
outs must be complete at or before the time specified by the relevant
Market from time to time. Again, ICE Clear Europe is making this change
to avoid potential conflict with those Market Rules and to reduce the
operational risks that could result from such a conflict.\124\
---------------------------------------------------------------------------

    \124\ Notice, 85 FR at 13213.
---------------------------------------------------------------------------

    The proposed rule change would also add a new Paragraph 2.6 and
Paragraph 2.7. New Paragraph 2.6 would make explicit that Clearing
Members bear the risk of late or incorrect instructions to ICE Clear
Europe. Paragraph 2.7 would specify technical reasons for which ICE
Clear Europe may reject an F&O contract, such as the trader not being
recognized, the Clearing Member not being approved, or the relevant
market member code is not recognized or approved. Paragraph 2.7 would
also specify how ICE Clear Europe would respond to the rejected
contract, which would include, for example, contacting the relevant
Market. As with the changes discussed above, ICE Clear Europe is adding
these new paragraphs to manage and mitigate the operational risks
presented by late or incorrect instructions and invalid F&O
Contracts.\125\
---------------------------------------------------------------------------

    \125\ Notice, 85 FR at 13213.
---------------------------------------------------------------------------

    Similarly, in paragraphs 11.2 and 11.4 of the Finance Procedures,
ICE Clear Europe would remove a presumption that deposits and
withdrawals of non-cash collateral should be settled on the same day as
a Clearing Member places with ICE Clear Europe an instruction for
deposit or withdrawal. Instead, the proposed rule change would state
that ICE Clear Europe accepts settlement instructions specifying a
settlement date up to two business days after the relevant trade date
and that the proposed settlement must be specified in the instruction
and agreed to by ICE Clear Europe. If ICE Clear Europe assumes same-day
settlement where a Clearing Member does not intend same-day settlement,
this could result in a mismatch and a failure to complete settlement.
Thus, this change would mitigate the operational risk that could be
presented by use of such an assumption, in accordance with Rule 17Ad-
22(e)(17)(i).\126\
---------------------------------------------------------------------------

    \126\ 17 CFR 240.17Ad-22(e)(17)(i); Notice, 85 FR at 13213.
---------------------------------------------------------------------------

K. 17Ad-22(e)(18)

    As discussed in this section, ICE Clear Europe is also proposing a
number of changes to the standards that govern membership in ICE Clear
Europe. ICE Clear Europe is making these changes to enhance these
requirements following an internal review that identified areas for
improvement. ICE Clear Europe believes the proposed rule change would
help to ensure that ICE Clear Europe satisfies Rule 17Ad-22(e)(18),
which requires that ICE Clear Europe establish, implement, maintain,
and enforce written policies and procedures reasonably designed to
establish objective, risk-based, and publicly disclosed criteria for
participation, which permit fair and open access by direct and, where
relevant, indirect participants and other financial market utilities,
require participants to have sufficient financial resources and robust
operational capacity to meet obligations arising from participation,
and monitor compliance with such participation requirements on an
ongoing basis.\127\
---------------------------------------------------------------------------

    \127\ 17 CFR 240.17Ad-22(e)(18); Notice, 85 FR at 13217.
---------------------------------------------------------------------------

i. Rule 117
    The proposed rule change would first amend Rule 117. Rule 117
requires that Clearing Members arbitrate any disputes with ICE Clear
Europe that are not subject to ICE Clear Europe's Disciplinary
Procedures or Complaints Resolution Procedures. Rule 117(k) further
requires that Clearing Members waive any ability to claim sovereign
immunity with respect to such arbitration. The proposed rule change
would amend Rule 117(k) slightly to provide that Clearing Members
``irrevocably'' waive any ability to claim sovereign immunity with
respect to such arbitration. ICE Clear Europe is making this change so
its Rules reflect the typical practice for waivers of sovereign
immunity and the documentation thereof in the derivatives markets and
therefore believes that this change should not be inconsistent with
other waivers its Clearing Members may have already made.\128\
---------------------------------------------------------------------------

    \128\ Notice, 85 FR at 13212.
---------------------------------------------------------------------------

ii. Rule 201
    The proposed rule change would also make various enhancements to
Rule 201(a), which sets out the basic standards for membership in ICE
Clear Europe. As discussed above, following an internal review, ICE
Clear Europe is making these changes to further specify the
operational, managerial, back office, systems, controls, business
continuity and banking requirements applicable to Clearing Members. As
with the changes to Rule 117 discussed above, ICE Clear Europe is
making these changes to further clarify and establish objective, risk-
based, and publicly disclosed criteria for participation by its
Clearing Members, in accordance with Rule 17Ad-22(e)(18).\129\ Each of
these changes is described below according to the numbering of Rule
201.
---------------------------------------------------------------------------

    \129\ 17 CFR 240.17Ad-22(e)(18); Notice, 85 FR at 13216-13217.
---------------------------------------------------------------------------

    First, the proposed rule change would amend Rule 201(a)(vi), which
currently requires a Clearing Member to nominate a Person meeting
certain requirements to act on behalf of the Clearing Member, to
further require that the nominated Person have all authorisations,
registrations, licences, permissions, non-objections, consents, or
approvals required under Applicable Law in any jurisdiction in order to
act as a representative for the relevant Clearing Member's business in
connection with ICE Clear Europe. ICE Clear Europe is making this
change to ensure that representatives of Clearing Members hold all
authorizations, licences, consents, or approvals required under
applicable laws needed to act on behalf of Clearing Members.
    The proposed rule change would next amend Rule 201(a)(xi), which
requires that a Clearing Member be fit and proper and have sufficient
qualities of financial responsibility and operational capacity, to
further require that a Clearing Member have sufficient qualities of
compliance and managerial responsibilities, including having adequate
segregation of front and back office functions and adequate back office
and compliance support, as required under Applicable Laws. ICE Clear
Europe is making this change to add an explicit reference to Applicable
Laws and ensure that Clearing Members have adequate back office and
compliance support.
    The proposed rule change would amend Rule 201(a)(xiv), which
requires that a Clearing Member have in place business continuity
procedures to satisfy ICE Clear Europe's minimum requirements, to
require instead that a Clearing Member have in place business
continuity procedures to enable it to meet its obligations as a
Clearing Member. ICE Clear Europe is making this change in wording to
clarify that rather than meeting certain minimum requirements, the
business continuity procedures must enable the Clearing Member to meet
its obligations to ICE Clear Europe.

    The proposed rule change would amend Rule 201(a)(xxv), which
requires that a Clearing Member have provided details of an office
which is staffed during normal business hours and sufficient for its
proposed activities as a Clearing Member under the direct supervision
and responsibility of an executive officer, to expand this to include
its proposed activities as a Clearing Member under the direct
supervision and responsibility of an executive director or other
executive officer. ICE Clear Europe is making this change to expand the
scope of this provision to include those offices under the supervision
of an executive director or other officer.
    The proposed rule change would amend Rule 201(a)(xxvi), which
requires that a Clearing Member satisfy ICE Clear Europe that it, its
officers, directors, and Controllers would each meet the requirements
for an ``approved person'' under applicable rules of the UK Financial
Conduct Authority and Prudential Regulation Authority, to further apply
this requirement to the Clearing Member's relevant employees and
further require that the Clearing Member satisfy ICE Clear Europe that
such persons are fit and proper. ICE Clear Europe is making this change
to further extend this requirement to relevant employees subject to the
applicable rules of the UK Financial Conduct Authority and Prudential
Regulation Authority.
    Finally, the proposed rule change would amend Rule 201(a)(xxvi),
which requires that a Clearing Member hold a Nominated Bank Account or
Accounts (as necessary) at an Approved Financial Institution or
Institutions in relation to each of which a direct debit mandate has
been established in favour of the Clearing House. The proposed rule
change would update the wording to refer to ``one or more'' Approved
Financial Institutions and to further require that the Clearing Member
satisfy ICE Clear Europe of the adequacy of its contingency banking
arrangements in the event of an Insolvency or failure to pay or default
of an Approved Financial Institution which affects the operation of a
Nominated Bank Account or Accounts or a Clearing House Account. ICE
Clear Europe is making this change to ensure that its Clearing Members
have sufficient back-up arrangements in the event that an Approved
Financial Institution is no longer able to operate on their behalf.
iii. Rule 202
    Similar to the changes to Rule 201, ICE Clear Europe would also
make changes to Rule 202. Rule 202 sets out the ongoing obligations of
Clearing Members, while Rule 201 sets out the criteria for membership.
As discussed above, following an internal review, ICE Clear Europe is
making these changes to include additional detail on system and
controls requirements and to add new requirements to ensure that ICE
Clear Europe has sufficient access rights in relation to its Clearing
Members. ICE Clear Europe believes these proposed changes would address
identified commercial and operational risks for ICE Clear Europe and
ensure that Clearing Members meet appropriate and evolving standards
concerning their systems and operations. ICE Clear Europe believes that
in making these changes the proposed rule change would further clarify
and establish objective, risk-based, and publicly disclosed criteria
for participation by its Clearing Members, in accordance with Rule
17Ad-22(e)(18).\130\ Each of these changes is described below according
to the numbering of Rule 202.
---------------------------------------------------------------------------

    \130\ 17 CFR 240.17Ad-22(e)(18); Notice, 85 FR at 13216-13217.
---------------------------------------------------------------------------

    The proposed rule change would first amend Rule 202(a)(xi), to
replace references to the deposit of funds with a reference to ``cash
transfers.'' ICE Clear Europe is making this change to further
establish a settled-to-market treatment of variation margin, as
discussed above.\131\
---------------------------------------------------------------------------

    \131\ See supra section II.E.ii.
---------------------------------------------------------------------------

    Next, the proposed rule change would amend Rule 202(a)(xiv), which
defines the standards for systems and controls that a Clearing Member
must have in place. The proposed rule change would specify that a
Clearing Member must have adequate systems and controls in place to
ensure that it has adequate separation policies to mitigate
concentration risk of critical business functions and compliance
oversight in place to enable it to meet its obligations as a Clearing
Member, adequate segregation of front and back office functions, and
adequate back office and compliance support, as required under
Applicable Laws. The proposed rule change would also require that a
Clearing Member have adequate systems and controls in place to ensure
that it has internal audit processes that are applied appropriately.
ICE Clear Europe is making this change to require additional detail on
system and controls requirements for Clearing Members.
    The proposed rule change would next add a new paragraph in Rule
202(a)(xxii) to require a Clearing Member to be accessible during and
for two hours immediately after close of business on every business
day. ICE Clear Europe is making this change to ensure that Clearing
Members remain accessible following close of business, during which
time ICE Clear Europe may need to contact Clearing Members regarding
events that happened during the business day.
    Finally, the proposed rule change would add a new paragraph in Rule
202(a)(xxiii) to require a Clearing Member to provide such access as
ICE Clear Europe requires to its premises, records, and personnel for
the purposes of, for example, carrying out investigations or audits.
ICE Clear Europe is making this change to further enhance its ability
to investigate and audit a Clearing Member, such as, for example, an
investigation in connection with a disciplinary proceeding.
iv. Rule 203
    Rule 203 sets out certain prohibitions on Clearing Members. The
proposed rule change would amend Rule 203(a)(xvi) to specify that a
Clearing Member is prohibited from engaging in conduct that would
render it unable to satisfy obligations under Rule 202(a). Rule
203(a)(xvi) already prohibits a Clearing Member from engaging in
conduct that would render it unable to satisfy the membership criteria
in Rule 201(a). ICE Clear Europe views Rule 202(a) as working in
conjunction with Rule 201(a), and, accordingly, is making the proposed
amendment to close a potential gap in the coverage of Rule 203(a).\132\
---------------------------------------------------------------------------

    \132\ Notice, 85 FR at 13212.
---------------------------------------------------------------------------

    The proposed rule change would also add a new paragraph at Rule
203(a)(xxii). New Rule 203(a)(xxii) would explicitly limit the ability
of a Clearing Member or its Affiliates to exercise set-off rights
against ICE Clear Europe where such Clearing Member (or its Affiliates)
have a relationship in another capacity, for example providing banking
or custodial services to ICE Clear Europe. ICE Clear Europe is making
this change to reduce the risks that other contractual agreements
contain provisions that could interfere with ICE Clear Europe's default
management or operational processes.\133\ ICE Clear Europe also
believes this change would provide a level playing field for all
Clearing Members, regardless of any other commercial relationships with
ICE Clear Europe, and therefore would help to ensure that ICE Clear
Europe establishes objective criteria for participation applicable to
all of its Clearing

Members, in accordance with Rule 17Ad-22(e)(18).\134\
---------------------------------------------------------------------------

    \133\ Notice, 85 FR at 13212.
    \134\ 17 CFR 240.17Ad-22(e)(18); Notice, 85 FR at 13212.
---------------------------------------------------------------------------

v. Rule 204
    ICE Clear Europe would also make changes to Rule 204, which
requires a Clearing Member to notify ICE Clear Europe in certain
circumstances. Specifically, Rule 204(a)(xii) requires that a Clearing
Member notify ICE Clear Europe of any breach by the Clearing Member of
any Applicable Law relating to its status and performance as a Clearing
Member. The proposed rule change would amend this to further require
that the Clearing Member provide notice of any non-frivolous or non-
vexatious investigation or allegation of a breach by the Clearing
Member of any Applicable Law relating to its status and performance as
a Clearing Member. Moreover, Rule 204(b)(i) requires that a Clearing
Member notify ICE Clear Europe of a change of control where that change
of control is notifiable to the UK Financial Conduct Authority or
Prudential Regulation Authority. The proposed rule change would extend
this to require notification where a change of control is subject to
the approval of the UK Financial Conduct Authority or Prudential
Regulation Authority, in addition to a change of control that is
notifiable. ICE Clear Europe believes these are appropriate extensions
of Rule 204 and that the proposed changes would facilitate ongoing
monitoring by ICE Clear Europe of circumstances that may significantly
affect Clearing Members.\135\ ICE Clear Europe also believes the
proposed amendments would close a potential gap in notification
requirements based on a distinction between regulatory notice and
approval.
---------------------------------------------------------------------------

    \135\ Notice, 85 FR at 13212.
---------------------------------------------------------------------------

vi. Rule 206
    ICE Clear Europe also proposes a minor change to Rule 206. Rule 206
requires that a Clearing Member maintain at all times the requisite
types and amount of Capital as required under the CDS Procedures,
Finance Procedures, and Membership Procedures, and further requires
that a Clearing Member, upon request, provide financial statements and
other documentation supporting calculations of Capital. The proposed
rule change would amend Rule 206 to add a reference to other financial
resources requirements (in addition to Capital) under the relevant
procedures. ICE Clear Europe is making this change to correctly cross-
refer to the existing requirements of the various procedures documents,
which may impose requirements for other financial resources in addition
to capital. In doing so, ICE Clear Europe believes that the change
would help to ensure that its criteria for participation are objective
and clear and help ensure that Clearing Members have sufficient
financial resources, in accordance with Rule 17Ad-22(e)(18).\136\
---------------------------------------------------------------------------

    \136\ 17 CFR 240.17Ad-22(e)(18); Notice, 85 FR at 13212, 13216,
and 13217.
---------------------------------------------------------------------------

vii. Membership Procedures
    The proposed rule change would amend the Membership Procedures in
various places to be consistent with the amendments to the membership
provisions of the Rules discussed above and to ensure that the
Membership Procedures use terminology consistent with the Rules.
    The proposed rule change would first amend Paragraph 1.1, which
describes the membership application process, to specify that ICE Clear
Europe would require evidence of authority of the persons who sign the
Clearing Membership Agreement, Sponsor Agreement, and Sponsored
Principal Clearing Agreement on behalf of a Clearing Member. ICE Clear
Europe is making this change to be consistent with ICE Clear Europe's
other practices requiring signatories.
    Paragraph 4.2 of the Membership Procedures provides, in a table,
details of the various notifications that Clearing Members should make
to ICE Clear Europe, including when to submit the notification and the
form to use. The proposed rule change would update various entries in
the table to reflect the wording used in the current Rules and the
changes discussed above, by, for example, removing use of the word
``deposit,'' referring to the board of directors of a Clearing Member
in addition to key personnel, specifying that certain days for
providing a notice are business days, requiring notification of a
suspension of a clearing arrangements with an Eligible Person,
requiring notice of any Insolvency of the Clearing Member or its
shareholders or any death of a substantial shareholder, and requiring
notice of changes to the board of directors of a Clearing Member.
    Like the changes discussed above, ICE Clear Europe is making these
changes to ensure that its Membership Procedures provide objective,
risk-based, and publicly disclosed criteria for participation, in
accordance with Rule 17Ad-22(e)(18).\137\
---------------------------------------------------------------------------

    \137\ 17 CFR 240.17Ad-22(e)(18); Notice, 85 FR at 13216-13217.
---------------------------------------------------------------------------

viii. Rule 301
    Rule 301 sets out certain financial requirements and payment
obligations on Clearing Members. Rule 301(f) requires that a Clearing
Member pay all amounts payable to ICE Clear Europe by electronic
transfer from an account at an Approved Financial Institution only. The
proposed rule change would modify Rule 301(f) to require instead that a
Clearing Member pay all amounts payable to ICE Clear Europe by
electronic transfer from an account at an Approved Financial
Institution only except with the written consent of ICE Clear Europe
and delete an existing exception for application fees. ICE Clear Europe
is making this change to provide it and Clearing Members greater
flexibility to make all payments using a method other than electronic
transfer from an account at an Approved Financial Institution should
that become necessary due to, for example, an outage or other
interruption to the operation of an Approved Financial
Institution.\138\ Like the changes discussed above, ICE Clear Europe is
making this change to ensure that this aspect of its membership
requirements is objective, risk-based, and publicly disclosed, in
accordance with Rule 17Ad-22(e)(18).\139\
---------------------------------------------------------------------------

    \138\ Notice, 85 FR at 13212.
    \139\ 17 CFR 240.17Ad-22(e)(18); Notice, 85 FR at 13216-13217.
---------------------------------------------------------------------------

L. 17A(b)(3)(F)

    As discussed in this section, the proposed rule change would amend
Part 7 and Part 8 of the Rules to simplify and clarify the drafting of
provisions relating to the cash settlement of Futures and Options
Contracts.\140\ ICE Clear Europe is making these changes to improve its
procedures regarding cash settlement and to ensure that its written
procedures for cash settlement accurately describe its current
operational practices and processes.\141\ As such, ICE Clear Europe
believes these changes would help ensure that ICE Clear Europe's Rules
promote the prompt and accurate clearance and settlement of securities
transactions and, to the extent applicable, derivative agreements,
contracts, and transactions, in accordance with Section 17A(b)(3)(F) of
the Act.\142\
---------------------------------------------------------------------------

    \140\ Notice, 85 FR at 13205-13206.
    \141\ Notice, 85 FR at 13205-13206.
    \142\ 15 U.S.C. 78q-1(b)(3)(F); Notice, 85 FR at 13214.

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

    Beginning with Part 7 of the Rules, the proposed rule change would
amend Rule 702(c) to clarify the method of determining the amount
payable for cash settlement of a Future. Currently, Rule 702(c)
provides that the amount payable shall be the net gain or loss, based
on the difference between the price at which Open Contract Positions
are recorded on ICE Clear Europe's books and the Exchange Delivery
settlement price. The proposed 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.
    Rule 703(f) gives ICE Clear Europe the authority, at its
discretion, to direct a Clearing Member who is a Seller under a Futures
Contract to deliver the Deliverable that is the subject matter of such
Contract to another Clearing Member that is a Buyer. Rule 703(f)
further provides that in such a case, the Clearing Members shall make
all payments in relation to such Contracts only to and from ICE Clear
Europe. The proposed rule change would caveat this point by adding the
phrase ``(except with the prior written consent of the Clearing
House).'' The proposed rule change would make an identical change to
Rule 809(d) with respect to Options Contracts. ICE Clear Europe is
making this change to Rule 703(f) and Rule 809(d) to provide
flexibility to also permit payments to be made directly between
Clearing Members rather than to and from ICE Clear Europe. ICE Clear
Europe believes this operational flexibility would improve its ability
to cash settle Futures and Options Contracts by allowing ICE Clear
Europe to facilitate direct payments between Clearing Members.\143\
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    \143\ Notice, 85 FR at 13206.
---------------------------------------------------------------------------

    The proposed rule change would also revise Rule 703(h). Rule 703(h)
currently provides that where a Clearing Member that is a Buyer or
Seller under a Futures Contract subject to delivery is subject to
grounds for declaring an Event of Default or Force Majeure Event, the
rights, liabilities, and obligations of the defaulter may, at the
option of ICE Clear Europe, be subject to mandatory cash settlement.
The proposed rule change would revise this provision to provide that in
such a situation, the obligations of both Clearing Members under the
Contract (not just the defaulting Clearing Member) may be subject to
mandatory cash settlement directions. ICE Clear Europe is making this
change to facilitate management of such a default and avoid need for
ICE Clear Europe to make or take delivery of the underlying asset from
the non-defaulting clearing member.
    Finally, the proposed rule change would amend Rule 810, which
describes the cash settlement of Options. Specifically, the proposed
rule change would amend Rule 810(d) to clarify that ICE Clear Europe
would determine the cash settlement price for an Option using the
Exchange Delivery Settlement Price on the day of settlement or exercise
and that, to receive cash settlement, all outstanding premium payments
must have been made in relation to the relevant set of Options (in
addition to Margin payments). ICE Clear Europe is making these changes
to clarify the practices and processes for cash settlement of Options.

M. 17A(b)(3)(H)

    As discussed in this section, the proposed rule change would amend
Part 10 of the Rules to streamline and improve ICE Clear Europe's
process for disciplining Clearing Members. ICE Clear Europe is making
the changes to implement lessons learned from an internal review at ICE
Clear Europe and from the practice of previous complaint and
disciplinary processes, especially at the exchanges affiliated with ICE
Clear Europe through its corporate structure, where such processes
occur more regularly. As such, ICE Clear Europe believes these changes
would help to ensure that its Rules provide a fair procedure with
respect to the disciplining of Clearing Members, in accordance with
Section 17A(b)(3)(H) of the Act.\144\ As discussed below, ICE Clear
Europe proposes these changes to Rules 1002, 1003, 1004, and 1005, and
further proposes creating a new 1006.
---------------------------------------------------------------------------

    \144\ 15 U.S.C. 78q-1(b)(3)(H); Notice, 85 FR at 13214.
---------------------------------------------------------------------------

i. Rule 1002
    The proposed rule change would begin with Rule 1002, making various
changes to improve the process for investigating potential breaches of
the Rules by Clearing Members.
    Starting with Rule 1002(c), the proposed rule change help to ensure
that external advisers, such as accountants or attorneys hired by ICE
Clear Europe to assist an investigation, keep information confidential.
Specifically, the proposed rule change would add language to Rule
1002(c) to ensure that any external advisers appointed by ICE Clear
Europe treat information that the advisers have been given access to as
confidential, in addition to treating information obtained in the
course of the investigation as confidential (as required currently
under Rule 1002(c)).
    The proposed rule change would also revise Rule 1002(d)(i) and
(d)(iv) to ensure that ICE Clear Europe can access the information it
needs to conduct an investigation. As revised, Rule 1002(d)(i) and (iv)
would require a Clearing Member, at ICE Clear Europe's direction, to
provide access to (i) information and documentary and other material
documents and (ii) documents, records, or materials in its possession,
in addition to the making such materials available for inspection (as
required currently under Rule 1002(d)).
    The proposed rule change would also revise Rule 1002(e) to clarify
that non-compliance with an investigation can lead to additional
disciplinary action being brought against a Clearing Member. Rule
1002(e) currently specifies that failure to cooperate 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. This change would thus clarify the consequences to
Clearing Members of failing to cooperate with an investigation.
    The proposed rule change would amend Rule 1002(g), which provides
details regarding an initial meeting between ICE Clear Europe and the
Clearing Member subject to investigation, to improve the drafting of
the provision. Under Rule 1002, after ICE Clear Europe provides a
Letter of Mindedness (which explains ICE Clear Europe's preliminary
conclusions and its intended course of action), ICE Clear Europe must
invite the Clearing Member to attend an initial meeting, or send
written comments, to provide the Clearing Member an opportunity to
correct any factual error in the Letter of Mindedness. The initial
meeting would take place on a confidential basis. The proposed rule
change would make minor amendments to this provision to clarify that
ICE Clear Europe would serve the Letter of Mindedness to the Clearing
Member rather than issue it; that the Clearing Member would be afforded
an opportunity to address any factual ``inaccuracy'' in addition to a
factual ``error''; and that the initial meeting would take place ``in
private on a confidential basis'' rather than just ``on a confidential
basis.'' Thus, ICE Clear Europe is making this change to improve the
overall drafting of 1002(g).

    The proposed rule change would amend 1002(h), which currently
requires that ICE Clear Europe finalize its initial findings and
communicate those in writing to the Clearing Member, to further require
that ICE Clear Europe communicate any steps it proposes to take and
notify the Clearing Member of the acts or practices which ICE Clear
Europe has found the Clearing Member to have taken or omitted, the
relevant provisions breached, and the proposed sanctions. Thus, this
change would improve the availability of information to Clearing
Members regarding the investigation by requiring that ICE Clear Europe
communicate certain information to Clearing Members.
    The proposed rule change would also amend Rule 1002(i) to clarify
certain steps that ICE Clear Europe may take following the
communication of its initial findings to a Clearing Member. In Rule
1002(i)(iv), which currently provides that ICE Clear Europe may
commence disciplinary proceedings following the communication of its
initial findings to a Clearing Member, the proposed rule change would
add a cross-reference to Rule 1003 (under which such disciplinary
proceedings would take place). Moreover, in Rule 1002(i)(v), which
provides that ICE Clear Europe may refer a matter for further inquiry
following the communication of its initial findings to a Clearing
Member, the proposed rule change would add a list of the entities to
whom ICE Clear Europe may refer the matter for further inquiry: ICE
Clear Europe, a Market, or a Governmental Authority. The proposed rule
change would amend Rule 1002(i)(vii), which gives ICE Clear Europe the
ability to publish its findings following the initial meeting discussed
above, to also provide that ICE Clear Europe could publish its initial
findings following receipt of written comments from the Clearing
Member. As discussed above, following the service of the Letter of
Mindedness under Rule 1002(g), a Clearing Member may submit written
comments to ICE Clear Europe instead of conducting an initial meeting,
and thus this change would clarify Rule 1002(i)(vii) to take this
circumstance into account. Finally, the proposed rule change would add
a new Rule 1002(i)(viii) to state expressly that ICE Clear Europe may
take a combination of the actions listed in Rule 1002(i). Thus, this
change would provide further clarity to the actions that ICE Clear
Europe could take in response to its investigation.
ii. Rule 1003
    The proposed rule change would also make various amendments to Rule
1003 to enhance and clarify the process for conducting disciplinary
proceedings. ICE Clear Europe is making these proposed changes to
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) described in the context of
investigations), and specify further the timing by which certain
actions must be taken. ICE Clear Europe believes the changes would help
to ensure that ICE Clear Europe's Rules provide a fair procedure with
respect to the disciplining of Clearing Members, in accordance with
17A(b)(3)(H) of the Act.\145\
---------------------------------------------------------------------------

    \145\ 15 U.S.C. 78q-1(b)(3)(H); Notice, 85 FR at 13214.
---------------------------------------------------------------------------

    Specifically, in Rule 1003(b), the proposed amendments would
require, upon ICE Clear Europe's determination to commence disciplinary
proceedings, that ICE Clear Europe provide written notice to the
Clearing Member that disciplinary proceedings are to be commenced. This
requirement to provide written notice of commencement already exists in
current Rule 1003(g), and the proposed rule change would move this
requirement to Rule 1003(b) and revise Rule 1003(g) as appropriate.
Because Rule 1003(b) details other actions that ICE Clear Europe must
take upon determining to commence disciplinary proceedings, ICE Clear
Europe is moving this notification requirement to Rule 1003(b) to
consolidate in Rule 1003(b) the requirements applicable to ICE Clear
Europe upon determining to commence disciplinary proceedings.
    Currently, under Rule 1003(b), upon ICE Clear Europe's
determination to commence disciplinary proceedings, ICE Clear Europe
must establish a Disciplinary Panel. The proposed rule change would
revise Rule 1003(b) to state explicitly that ICE Clear Europe shall
appoint the chairman and members of the Disciplinary Panel, a point
that is assumed in the current rule. Moreover, the proposed rule change
would clarify the use of independent assessors by the Disciplinary
Panel, but would not alter the substance of those provisions as they
exist in current Rule 1003(b). Specifically, current Rule 1003(b)
provides that ``Expert assessors may be appointed, at the discretion of
the Disciplinary Panel itself, to sit with and advise the Disciplinary
Panel but not to vote,'' and the proposed rule change would clarify
this by specifying that ``such persons shall not be entitled'' to vote.
Similarly, current Rule 1003(b) provides that no person shall serve on
or sit with a Disciplinary Panel if the person has a personal or
financial interest in or has been involved in any investigation into or
previous Disciplinary Panel hearing on the matter. The proposed rule
change would modify this to state that no person shall be appointed to
a Disciplinary Panel or be eligible as an expert assessor if he has any
personal or financial interest in the investigation which has led to
the current disciplinary proceedings or has been involved in any
investigation into or previous Disciplinary Panel dealing with or
relating to the matter which is the subject of the current disciplinary
proceedings. Thus, these changes would clarify the existing provisions
of Rule 1003(b) by making more specific ICE Clear Europe's authority
with respect to appointing members to the Disciplinary Panel and the
standard of independence for members of the Disciplinary Panel and
expert assessors.
    Currently, Rule 1003(c) provides that the Clearing Member may
object to any particular appointment to the Disciplinary Panel, which
objection will be determined in the first instance by the chairman of
the Disciplinary Panel and, in the event that the objection is to the
chairman, then the Chairman of ICE Clear Europe. The proposed rule
change would revise Rule 1003(c) to explicitly state that the Clearing
Member shall be notified of the composition of the Disciplinary Panel.
This point is assumed in the current rule, and the proposed rule change
would clarify this provision by making it explicit. The proposed rule
change would further require that the Clearing Member be notified
within seven calendar days of the panel being established and that the
Clearing Member have ten further calendar days to object in writing to
any particular appointment. Thus, these changes would clarify Rule
1003(c) by making explicit certain matters assumed in the rule, clarify
the method for objecting to an appointment, and further place limits on
the use of such objections by Clearing Members.
    In Rule 1003(d), the proposed rule change would make minor drafting
improvements by, for example, changing ``of'' to ``that'' and by
referring to the ``subject matter of the disciplinary proceedings''
rather than the ``outcome'' of the proceedings. Thus, this change would
further clarify and improve the coherency of this provision.
    Rule 1003(e) currently provides that in the event of equality of
votes, the chairman of the Disciplinary Panel shall

have a second or casting vote in reaching any determination. The
proposed rule change would clarify this provision by stating that it
applies to in relation to any matter before the Disciplinary Panel.
This point is assumed in the current rule, and this change would
further clarify the rule by making this point explicit.
    As discussed above, ICE Clear Europe would revise Rule 1003(g) to
consolidate the requirement to provide written notice of commencement
of disciplinary proceedings in Rule 1003(b). Instead, under the
proposed rule change, Rule 1003(g) would require that ICE Clear Europe
send a formal written notice of the alleged breach of the Rules to the
Clearing Member after the appointment of a Disciplinary Panel. The
proposed rule change would make other minor drafting improvements to
Rule 1003(g). These changes would improve the information available to
Clearing Members and help to ensure that Clearing Members are aware of
the alleged breaches that would be the subject of the disciplinary
proceedings.
    Current Rule 1003(h) gives the Clearing Member or other person
subject to the notice of the alleged breach of the Rules 20 days from
the service of the notice to provide a statement of defence. The
proposed rule change would modify this provision slightly to clarify
that the 20 day time period consists of 20 calendar days, and that it
begins on the date of service of the notice. Moreover, the proposed
rule change would add a provision to require that the statement of
defence state explicitly whether the Clearing Member accepts the
allegations. The proposed rule change would make other minor drafting
clarifications, like referring to matters ``specified'' rather than
``alleged.'' Thus, this change would clarify this rule by being
explicit about the days used to count the deadline for the statement of
defence and by further requiring that the Clearing Member be explicit
about whether it accepts the allegations.
    Current Rule 1003(i) provides that having seen and considered the
state of defence, ICE Clearing Europe may proceed with the disciplinary
proceedings, discontinue the disciplinary proceedings, or deal with the
matter as set out in Rule 1003(j). The proposed rule change would
delete this provision as unnecessary because ICE Clear Europe has the
authority to continue or discontinue disciplinary proceedings at any
time and as such Rule 1003(j) did not provide any additional authority.
    Current Rule 1003(j) allows ICE Clear Europe to amend the notice of
alleged breach that is required by Rule 1003(g) and explains certain
limitations on ICE Clear Europe's ability to amend that notice. The
proposed rule change would renumber this provision as Rule 1003(i) and
further specify ICE Clear Europe's ability to amend by explicitly
stating that ICE Clear Europe may change the breach alleged in the
notice or add another breach. The proposed rule change would also make
certain drafting clarifications and improvements to the limitations on
ICE Clear Europe's to amend the notice, but would not alter the
substance of those limitations. Finally, the proposed rule change would
explicitly require that following any deletion, amendment, or other
alteration, ICE Clear Europe serve an amended notice on the Clearing
Member. Thus, this aspect of the proposed rule change would enhance the
fairness of the disciplinary proceedings by clarifying the limits on
ICE Clear Europe's ability to amend a notice and requiring that ICE
Clear Europe serve an amended notice to the Clearing Member.
    Current Rule 1003(k) specifies that ICE Clear Europe's power to
amend a Notice exists where it has determined that a separate or
unrelated prima facie breach of ICE Clear Europe's Rules has occurred.
The proposed rule change would renumber this provision as Rule 1003(j)
and make drafting improvements, by for example, changing ``exist'' to
``exists'' and adding a reference to the disciplinary proceeding.
Moreover, current Rule 1003(k) provides that ICE Clear Europe is not
obliged to hold a further initial meeting or otherwise consult with a
Clearing Member in response to additional or new alleged breaches. The
proposed rule change would maintain this provision but would further
specify that it only applies to additional or new alleged breaches that
come to ICE Clear Europe's attention during the ongoing disciplinary
proceedings. Similar to the change to Rule 1003(j), this aspect of the
proposed rule change would enhance the fairness of the disciplinary
proceedings by limiting Rule 1003(k), which exempts ICE Clear Europe
from holding a further initial meeting or otherwise consulting with a
Clearing Member with respect to new or additional breaches, to breaches
that come to ICE Clear Europe's attention during the ongoing
disciplinary proceedings.
    The proposed rule change would also make non-substantive drafting
improvements to renumbered Rules 1003(l), (m), (o), (q), (r), and (t).
These changes would include, for example, specifying dates or deadlines
as constituting calendar days, capitalizing defined terms, adding
explicit references to the Disciplinary Panel and disciplinary
proceedings, specifying that agreements shall be written, and updating
or adding cross-references as needed. These changes would improve the
overall clarity of these provisions.
    In renumbered Rule 1003(p) (currently Rule 1003(q)), the proposed
rule change would specify in further detail 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 would
include, for example, the rationale for the Disciplinary Panel's
decision, details of the breach of the Rules, and any sanctions to be
imposed. The proposed rule change would also clarify that sanctions
would be suspended pending the determination of any appeal, unless ICE
Clear Europe determined that any order of suspension of the Clearing
Member should be enforced during that period. This proposed change
would help to enhance the fairness of the disciplinary proceedings by
specifying the information that ICE Clear Europe must communicate to a
Clearing Member regarding a decision and allow a Clearing Member to
appeal without sanctions going into effect.
    Finally, the proposed rule change would amend renumbered Rule
1003(s) (currently Rule 1003(t)), which gives the Disciplinary Panel
authority to order any party to the proceedings to pay costs as it
thinks appropriate, including the costs of running the Disciplinary
Panel. The proposed rule change would modify this slightly by
specifying that the Disciplinary may order a party to pay the fees and
expenses of the members of the Disciplinary Panel. Moreover, the
proposed rule change would specify that any order in relation to
payment of costs may also specify the manner of assessment and
timetable for payment. ICE Clear Europe intends this specific amendment
to clarify current practice, under which a Disciplinary Panel has broad
discretion to give awards on costs, and not substantively change the
Disciplinary Panel's authority with respect to assessment of
costs.\146\ Thus, this change would further clarify Rule 1003(s) by
making this point explicit.
---------------------------------------------------------------------------

    \146\ Notice, 85 FR at 13207.
---------------------------------------------------------------------------

iii. Rule 1004
    In Rule 1004, the proposed rule change would make various
amendments to clarify conditions

surrounding the use of the Summary Procedure and to improve the
drafting of the provisions in Rule 1004. Currently, under Rule 1004, a
Clearing Member may submit in writing to ICE Clear Europe a request to
use the Summary Procedure, and ICE Clear Europe may in its discretion
refer a matter to the Summary Procedure. 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. The proposed rule
change would modify Rule 1004(a) to clarify that the Summary Procedure
would be used for disposing of a matter within 14 days of Notice being
served. ICE Clear Europe is making this change to facilitate prompt
resolution of matters subject to the Summary Procedure.
    The proposed rule change would next amend Rule 1004(b) 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 change thus would clarify the circumstances
in which ICE Clear Europe may reject the inappropriate use of the
Summary Procedure.
    Rule 1004(c) currently provides that upon reference of the matter
to the Summary Procedures, ICE Clear Europe shall nominate three
Directors or employees of ICE Clear Europe to form the Summary
Disciplinary Committee. The proposed rule change would modify this
provision first to provide that it applies upon agreement to refer the
matter to the Summary Procedure. This change would carry forth the
change to Rule 1004(b) described above, giving ICE Clear Europe the
express ability to refuse the use of the Summary Procedure. Moreover,
the proposed rule change would modify Rule 1004(c) to state that ICE
Clear Europe shall appoint members to the Summary Disciplinary
Committee rather than nominate, because use of the term nominate gives
the impression that ICE Clear Europe's choice would need to be ratified
by someone else, which is not the case.
    Current Rule 1004(d) provides the Summary Disciplinary Committee
discretion to make such directions as to the conduct of the case as it
sees fit. The proposed rule change would clarify that this provision
also applies to the hearing of the case as well as the conduct of the
case.
    Current Rule 1004(e) provides that the Summary Disciplinary
Committee may accept as conclusive any finding of fact by a court or
Governmental Authority. The proposed rule change would clarify that
this provision applies to any legally appointed court, tribunal,
expert, arbitrator, or Governmental Authority. Thus, this change would
clarify the scope of this provision.
    Current Rule 1004(f) requires that the Summary Disciplinary
Committee hold a private hearing where the Clearing Member may respond
to the alleged breach of the Rules. The proposed rule change would
simplify this provision to state that all hearings before the Summary
Disciplinary Committee shall be held in private unless ICE Clear Europe
and the Clearing Member agree otherwise. Thus, this change would
simplify the drafting of this provision but not alter its substance.
    Finally, the proposed rule change would amend Rule 1004(i) 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). The proposed rule change would also clarify in Rule 1004(i)
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 proceedings.
    As discussed above, ICE Clear Europe believes that these changes to
Rule 1004, in clarifying the timeline for disposing of matters under
the Summary Proceeding, requiring ICC's consent to use the Summary
Proceeding, clarify ICE Clear Europe's authority in appoint members to
the Summary Disciplinary Committee, and clarifying the scope of the
Summary Disciplinary Committee's authority, would help to ensure that
ICE Clear Europe's Rules provide a fair procedure with respect to the
disciplining of Clearing Members, in accordance with Section
17A(b)(3)(H) of the Act.\147\
---------------------------------------------------------------------------

    \147\ 15 U.S.C. 78q-1(b)(3)(H).
---------------------------------------------------------------------------

iv. Rule 1005
    Throughout Rule 1005, which addresses appeals in the context of
disciplinary proceedings, the proposed rule change would make a number
of drafting clarifications and typographical corrections, like
capitalizing defined terms and adding cross-references as needed. The
proposed rule change also would amend Rule 1005(a)(ii) to clarify that
the grounds for appeal listed in Rule 1005(a)(ii) are the only grounds
for appeal and a party may not otherwise appeal on other grounds.
Finally, the proposed rule change would amend Rule 1005(d) to require
that the lawyer appointed to the Appeal Panel has been in practice for
more than ten years and to clarify that an expert assessor, in addition
to any other person sitting on an Appeal Panel, 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. ICE
Clear Europe believes that in making these changes, the proposed rule
change would help to improve the use of appeals, and thereby would help
to ensure that ICE Clear Europe's Rules provide a fair procedure with
respect to the disciplining of Clearing Members, in accordance with
17A(b)(3)(H) of the Act.\148\
---------------------------------------------------------------------------

    \148\ 15 U.S.C. 78q-1(b)(3)(H); Notice, 85 FR at 13214.
---------------------------------------------------------------------------

v. Rule 1006
    The proposed rule change would add new Rule 1006 to address the
interaction between ICE Clear Europe's disciplinary procedures under
the Rules and any similar procedures under the rules of an Exchange.
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.\149\
ICE Clear Europe intends new Rule 1006 to: (i) Ensure that the
existence of parallel disciplinary procedures under Market Rules does
not preclude ICE Clear Europe's own disciplinary procedures; and (ii)
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. This, for example, would allow the exchange and
ICE Clear Europe to rely on the same pieces of evidence or conduct
combined interviews of witnesses, to avoid unnecessary duplication of
effort. ICE Clear Europe believes such coordinated proceedings may be
appropriate in a range of circumstances, such as market abuses and
delivery failures.\150\ In providing for these coordinated proceedings,
ICE Clear Europe believes the proposed rule change would improve the
efficiency of disciplinary proceedings and avoid unnecessary effort or
expenditure by Clearing

Members in responding to multiple, simultaneous proceedings, and
thereby would help to ensure that ICE Clear Europe's Rules provide a
fair procedure with respect to the disciplining of Clearing Members, in
accordance with 17A(b)(3)(H) of the Act.\151\
---------------------------------------------------------------------------

    \149\ Notice, 85 FR at 13207.
    \150\ Notice, 85 FR at 13207-13208.
    \151\ 15 U.S.C. 78q-1(b)(3)(H); Notice, 85 FR at 13214.
---------------------------------------------------------------------------

III. Commission Findings

    Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
the proposed rule change is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to the
organization. For the reasons given below, the Commission finds that
the proposed rule change is consistent with Section 17A(b)(3)(F) of the
Act, 17A(b)(3)(H) of the Act, and Rules 17Ad-22(e)(1), (e)(2)(i),
(e)(4)(v), (e)(6)(i), (e)(6)(ii), (e)(7)(i), (e)(10), (e)(13), (e)(14),
(e)(17)(i), and (e)(18).\152\
---------------------------------------------------------------------------

    \152\ 15 U.S.C. 78q-1(b)(3)(F); 15 U.S.C 78q-1(b)(3)(H); 17 CFR
240.17Ad-22(e)(1), (e)(2)(i), (e)(4)(v), (e)(6)(i), (e)(6)(ii),
(e)(7)(i), (e)(10), (e)(13), (e)(14), (e)(17)(i), and (e)(18).
---------------------------------------------------------------------------

A. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of ICE Clear Europe be designed to promote the prompt and
accurate clearance and settlement of securities transactions and, to
the extent applicable, derivative agreements, contracts, and
transactions, to assure the safeguarding of securities and funds which
are in the custody or control of ICE Clear Europe or for which it is
responsible, and, in general, to protect investors and the public
interest.\153\
---------------------------------------------------------------------------

    \153\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    As discussed in Section II.B above, the proposed rule change would
make a number of clarifications and drafting improvements to the
Amended Documents, to ensure that the Amended Documents are clear,
consistent, and provide an enforceable legal basis for ICE Clear
Europe's activities. In the Commission's view, a lack of clarity and
consistency in ICE Clear Europe's Rules and Procedures could hinder ICE
Clear Europe's ability to promptly and accurately clear and settle
transactions, by possibly leading to disputes over the terms of
transactions. Likewise the Commission believes a lack of enforceable
legal basis could undermine the legitimacy and finality of ICE Clear
Europe's actions in clearing and settling transactions. Thus, the
Commission believes this aspect of the proposed rule change should help
ensure that ICE Clear Europe is able to promptly and accurately clear
and settle transactions.
    As discussed in Section II.C above, the proposed rule change would
clarify the scope of the terms used with respect to the persons
involved in the governance of ICE Clear Europe. The Commission believes
that this change would help to ensure clarity regarding the persons
involved in the governance processes at ICE Clear Europe. The
Commission believes that a lack of clarity could lead to potential
confusion regarding the proper persons to take action on behalf of ICE
Clear Europe, thereby potentially hindering ICE Clear Europe's ability
to operate and therefore clear and settle transactions. Thus, the
Commission believes this aspect of the proposed rule change should help
ensure that ICE Clear Europe is able to promptly and accurately clear
and settle transactions.
    As discussed in Section II.D above, the proposed rule change would
unify the time period for adjustments under the CDS, F&O, and FX
Guaranty Funds, thereby helping ICE Clear Europe to maintain the
Guaranty Funds. Because ICE Clear Europe maintains the Guaranty Funds
to absorb potential losses, including losses from the default of the
two participant families that would potentially cause the largest
aggregate credit exposure for ICE Clear Europe in extreme but plausible
market conditions, the Commission believes that this aspect of the
proposed rule change, in facilitating ICE Clear Europe's maintenance of
the Guaranty Funds, would also facilitate ICE Clear Europe's ability to
cover such losses. The Commission further believes that such losses
could, if not covered, interfere with ICE Clear Europe's ability to
clear and settle transactions and safeguard securities and funds.
Therefore, the Commission believes that this aspect of the proposed
rule change, in facilitating ICE Clear Europe's maintenance of the
Guaranty Funds, should help to ensure that ICE Clear Europe is able to
promptly and accurately clear and settle transactions and safeguard
securities and funds which are in its custody or control or for which
it is responsible.
    As discussed in Section II.E above, the proposed rule change would
clarify how ICE Clear Europe would calculate NLV for Premium Up-Front
Options relating to Original Margin and would provide ICE Clear Europe
authority to treat amounts owed to it by a Clearing Member as
additional margin. The Commission believes that this aspect of the
proposed rule change should help ICE Clear Europe to calculate such
margin by clarifying the calculation of NLV and giving authority with
respect to treating amounts owed as margin. Moreover, as discussed in
Section II.E above, the proposed rule change would, at the request of
Clearing Members, establish the settled-to-market treatment of
variation margin and adopt the Externalised Payments Mechanism for the
payment of variation margin. The Commission believes that this aspect
of the proposed rule change should help ICE Clear Europe to collect
such margin by establishing a legal treatment of variation margin that
may benefit Clearing Members' capital requirements and by establishing
a method for paying variation margin that is more consistent with
market practices. The Commission believes that in calculating and
collecting margin, including initial margin and variation margin, ICE
Clear Europe manages and mitigates potential losses associated with
clearing and settling transactions. The Commission further believes
that losses associated with clearing and settling transactions, if not
managed and mitigated by margin, could interfere with ICE Clear
Europe's ability to clear and settle transactions and safeguard
securities and funds. Therefore, the Commission believes that this
aspect of the proposed rule change, in facilitating ICE Clear Europe's
calculating and collection of margin, should help to ensure that ICE
Clear Europe is able to promptly and accurately clear and settle
transactions and safeguard securities and funds which are in its
custody or control or for which it is responsible.
    As discussed in Section II.F above, the proposed rule change would
give ICE Clear Europe explicit authority to use repurchase agreements,
secured lending facilities, and sales to generate liquidity from non-
cash assets, subject to certain conditions. The Commission believes
that this aspect of the proposed rule change would provide ICE Clear
Europe an additional source of liquidity to use as needed to meet
liquidity demands from clearing and settling transactions and potential
liquidity demands resulting from the default of a Clearing Member. The
Commission further believes that such liquidity may be needed for ICE
Clear Europe to clear and settle transactions, including clearing and
settling transactions in the event of a Clearing Member's default. The
Commission therefore believes that this aspect of the proposed rule
change would help to ensure that ICE Clear Europe is able to promptly
and accurately clear and settle transactions.
    As discussed in Section II.G above, the proposed rule change would
update Rule 703 and ICE Clear Europe's Delivery Procedures regarding
physical

settlement to be consistent with market practices and the operational
practices of associated trading venues for which ICE Clear Europe
clears Contracts. The Commission believes that discrepancies between
ICE Clear Europe's stated practices in the Delivery Procedures and the
operational practices of associated trading venues could lead to
failures to conduct physical settlement, and therefore failures to
finalize and clear transactions. Therefore, the Commission believes
that in resolving these potential discrepancies, the proposed rule
change would help to ensure that physical settlement is completed.
Moreover, the Commission believes that in updating Rule 703 to require
Sellers under a Futures Contract to represent that they convey good
title to products (free of encumbrances) when physical settlement takes
place, the proposed rule change would help to mitigate the risk that a
Seller would deliver a product subject to an encumbrance that could
interfere with settlement of a transaction. The Commission therefore
believes that this aspect of the proposed rule change should help to
ensure that ICE Clear Europe is able to promptly and accurately clear
and settle transactions.
    As discussed in Section II.H above, the proposed rule change would
expand the scope of events that could lead to ICE Clear Europe
declaring an Event of Default with respect to a Clearing Member,
clarify ICE Clear Europe's authority with respect to conducting default
auctions, and amend the net sum payable to or by a defaulting Clearing
Member to include the effects of abandoning an Option. Upon declaring
an Event of Default, ICE Clear Europe has certain powers under Part 9
of the Rules to respond to the default. The Commission therefore
believes that expanding the scope of events that could lead to ICE
Clear Europe declaring an Event of Default would better enable ICE
Clear Europe to invoke these powers and thereby prevent or reduce the
losses that could result from a default. Similarly, the Commission
believes that clarifying ICE Clear Europe's authority with respect to
conducting default auctions and amending the net sum payable to or by a
defaulting Clearing Member to include the effects of abandoning an
Option would help ICE Clear Europe to respond to a default and thereby
prevent or reduce the losses that could result from such a default. The
Commission further believes that losses from a default could interfere
with ICE Clear Europe's ability to clear and settle transactions and
safeguard securities and funds. Therefore, the Commission believes that
this aspect of the proposed rule change, in facilitating ICE Clear
Europe's ability to respond to defaults and thereby prevent or reduce
losses, should help to ensure that ICE Clear Europe is able to promptly
and accurately clear and settle transactions and safeguard securities
and funds which are in its custody or control or for which it is
responsible.
    As discussed in Section II.I above, the proposed rule change would
clarify the application of the Standard Terms; ICE Clear Europe's use
or transfer of margin; the timing of the creation, and termination of
contracts subject to porting; and the price at which positions are
ported, all for the purpose of enhancing ICE Clear Europe's ability to
conduct porting of a Customer's positions. The Commission believes
that, in further enabling ICE Clear Europe to conduct porting, the
proposed rule change would help facilitate the transfer of Customer
positions from one Clearing Member to another Clearing Member and the
settlement of the transactions resulting from such transfers.
Therefore, the Commission believes that this aspect of the proposed
rule change, in facilitating porting, should help to ensure that ICE
Clear Europe is able to promptly and accurately clear and settle
transactions.
    As discussed in Section II.J above, the proposed rule change would
make changes to manage and mitigate the operational risks associated
with requirements applicable to ICE Clear Europe under U.S. tax law and
the timing and operational aspects associated with ICE Clear Europe's
clearance and settlement of CDS, F&O, and FX Contracts. The Commission
believes that such operational risks, if not properly managed and
mitigated, could interfere with ICE Clear Europe's ability to clear and
settle transactions. Therefore, the Commission believes that this
aspect of the proposed rule change, in facilitating the management and
mitigation of these operational risks, should help to ensure that ICE
Clear Europe is able to promptly and accurately clear and settle
transactions.
    As discussed in Section II.K above, the proposed rule change would
also enhance and update the standards and requirements applicable to
membership in ICE Clear Europe. Moreover, as discussed in Section II.M
above, the proposed rule change would amend Part 10 of the Rules to
streamline and improve ICE Clear Europe's process for disciplining
Clearing Members that violate these standards and requirements, and
other aspects of the Rules. The Commission believes that these
membership standards and requirements, among other things, would help
to ensure that ICE Clear Europe's Clearing Members are able to perform
their obligations that enable ICE Clear Europe to clear and settle
transactions, such as transferring margin and contributing to the
Guaranty Fund. Moreover, the Commission believes that ICE Clear
Europe's process for disciplining Clearing Members that violate these
membership standards and requirements, and other aspects of the Rules,
would help to ensure that Clearing Members meet their obligations to
ICE Clear Europe under the Rules. Therefore, the Commission believes
that in enhancing these standards and requirements and the process ICE
Clear Europe uses to discipline Clearing Members, the proposed rule
change should thereby help to ensure that ICE Clear Europe is able to
clear and settle transactions.
    Finally, as discussed in Section II.L above, the proposed rule
change would amend Part 7 and Part 8 of the Rules to simplify and
clarify the drafting of provisions relating to the cash settlement of
Futures and Options Contracts. Specifically, the proposed rule change
would ensure that ICE Clear Europe's written procedures for cash
settlement accurately describe its current operational practices and
processes and would clarify the method of determining the amount
payable for cash settlement of a Future. In doing so, the Commission
believes that the proposed rule change should help to avoid any
possible disputes or discrepancies over these operational processes,
which could hinder cash settlement.
    The proposed rule change would also give ICE Clear Europe the
authority to require both Clearing Members that are party to a Futures
contract to engage in cash settlement if one of the Clearing Members
defaults and give ICE Clear Europe flexibility to permit payments to be
made directly between Clearing when directing Clearing Members to
deliver to other Clearing Members under Rules 703(f) and 809(d). In
doing so, the Commission believes that the proposed rule change should
help ICE Clear Europe to continue settling transactions even in cases
of default and help ICE Clear Europe to facilitate deliveries and
payments among clearing members.
    Finally, the proposed rule change would clarify that ICE Clear
Europe could determine the cash settlement price for an Option using
the Exchange Delivery Settlement Price on the day of settlement or
exercise and would also require that, to receive cash settlement, all
outstanding premium payments must have been made in relation to the

relevant set of Options (in addition to Margin payments). The
Commission believes that these changes allow ICE Clear Europe
additional operational flexibility and help to ensure that the Clearing
Member has made the payments necessary to clear and settle an Option.
Thus, the Commission believes that these aspects of the proposed rule
change should help to ensure that ICE Clear Europe is able to promptly
and accurately clear and settle transactions.
    For these reasons, the Commission finds the proposed rule change
would promote the prompt and accurate clearance and settlement of
securities transactions, derivative agreements, contracts, and
transactions and would assure the safeguarding of securities and funds
which are in the custody or control of ICE Clear Europe or for which it
is responsible. Therefore, the Commission finds the proposed rule
change is consistent with section 17A(b)(3)(F) of the Act.\154\
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    \154\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

B. Consistency With Section 17A(b)(3)(H) of the Act

    Section 17A(b)(3)(H) of the Act requires that the rules of ICE
Clear Europe in general provide a fair procedure with respect to the
disciplining of participants, the denial of participation to any person
seeking participation therein, and the prohibition or limitation of any
person with respect to access to services offered by ICE Clear
Europe.\155\ As discussed in Section II.M above, the proposed rule
change would amend Part 10 of the Rules to streamline and improve ICE
Clear Europe's process for disciplining Clearing Members, including
amendments to Rule 1002. The Commission believes that these changes to
Rule 1002, in ensuring the confidentiality of information and
increasing the information that ICE Clear Europe must disclose, would
help to ensure that ICE Clear Europe provides a fair procedure with
respect to disciplining its Clearing Members by providing Clearing
Members with additional information about the consequences of the
investigation and ICE Clear Europe's conclusions. Moreover, in ensuring
that ICE Clear Europe can access information it needs to conduct its
investigation, the Commission believes that these changes would help to
ensure the efficacy of ICE Clear Europe's investigation, thereby
improving ICE Clear Europe's ability to conduct a fair investigation.
---------------------------------------------------------------------------

    \155\ 15 U.S.C. 78q-1(b)(3)(H).
---------------------------------------------------------------------------

    The changes to Part 10 discussed in Section II.M above would also
include amendments to Rule 1003. The Commission believes that these
amendments, in clarifying ICE Clear Europe's authority to appoint
members to the Disciplinary Panel and providing the Clearing Member an
ability to object to such appointments, would help to ensure that ICE
Clear Europe provides a fair procedure with respect to disciplining its
Clearing Members by giving Clearing Members a voice in the
establishment of the disciplinary panel. Similarly, the Commission
believes that in establishing the standard of independence for members
of the Disciplinary Panel and expert assessors and clarifying limits on
ICE Clear Europe's ability to amend a notice and requiring that ICE
Clear Europe serve an amended notice to the Clearing Member, the
amendments to Rule 1003 should help to ensure that ICE Clear Europe
provides a fair procedure with respect to disciplining its Clearing
Members by limiting ICE Clear Europe's ability to add additional
charges and helping to ensure a minimum level of independence, and
therefore objectivity, among the members of the Disciplinary Panel and
expert assessors. Finally, in clarifying a Disciplinary Panel's ability
to award costs, the Commission believes the changes to Rule 1003 should
make clear to both parties of the proceeding the potential risk they
would face to pay for the costs of the proceeding.
    Moreover, as discussed in Section II.M above, the proposed rule
change would also amend Rule 1004 to clarify certain conditions
surrounding the use of the Summary Procedure and to improve the
drafting of Rule 1004. Similarly, as discussed in Section II.M above,
the proposed rule change would make a number of drafting clarifications
and typographical corrections in Rule 1005 and clarifying the scope of
the grounds for appeal. The Commission believes that the changes would
improve the clarity of these aspects of the disciplinary procedures and
reduce any potential confusion or disputes over their application,
thereby helping to ensure that ICE Clear Europe provides a fair
procedure with respect to disciplining its Clearing Members.
    Finally, as discussed in Section II.M above, the proposed rule
change would add a new Rule 1006 to address the interaction between ICE
Clear Europe's disciplinary procedures under the Rules and any similar
procedures under the rules of an Exchange. The Commission believes that
this change would help to avoid any potential conflicts between ICE
Clear Europe's disciplinary procedures and any similar procedures of an
Exchange and help to ensure the efficiency of proceedings by allowing
ICE Clear Europe and an Exchange to consolidate proceedings and share
evidence and other materials. In doing so, the Commission believes Rule
1006 should help Clearing Members to avoid the burden of having to
respond to simultaneous, separate proceedings. Therefore, the
Commission believes this change would help to ensure that ICE Clear
Europe provides a fair procedure with respect to disciplining its
Clearing Members.
    For these reasons, the Commission finds the proposed rule change is
consistent with section 17A(b)(3)(H) of the Act.\156\
---------------------------------------------------------------------------

    \156\ 15 U.S.C. 78q-1(b)(3)(H).
---------------------------------------------------------------------------

C. Consistency With Rule 17Ad-22(e)(1)

    Rule 17Ad-22(e)(1) requires that ICE Clear Europe establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to provide for a well-founded, clear, transparent,
and enforceable legal basis for each aspect of its activities in all
relevant jurisdictions.\157\ As discussed in Section II.B above, the
proposed rule change would make a number of clarifications and drafting
improvements to the Amended Documents to explicitly and correctly
reference current law; eliminate discrepancies and inconsistencies;
comply with applicable legal requirements; use consistent terminology;
update cross references and numbering; and correct drafting errors. The
Commission believes that these changes, taken as a whole, would help to
ensure that the Amend Documents provide for a well-founded, clear,
transparent, and enforceable legal basis for each aspect of ICE Clear
Europe's activities in all relevant jurisdictions. For these reasons,
the Commission finds the proposed rule change is consistent with Rule
17Ad-22(e)(1).\158\
---------------------------------------------------------------------------

    \157\ 17 CFR 240.17Ad-22(e)(1).
    \158\ 17 CFR 240.17Ad-22(e)(1).
---------------------------------------------------------------------------

D. Consistency With Rule 17Ad-22(e)(2)(i)

    Rule 17Ad-22(e)(2)(i) requires that ICE Clear Europe establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to provide for governance arrangements that are
clear and transparent.\159\ As discussed in Section II.C above, the
proposed rule change would clarify the scope of terms used with respect
to the persons involved in the governance of ICE Clear Europe by (i)
revising the

definition of Board and Representative and (ii) expanding references to
persons exercising governance for ICE Clear Europe to include
committees and individual committee members. The Commission believes
that these changes should help to ensure that ICE Clear Europe's
governance arrangements are clear and transparent by clarifying the
definition of Board and Representative and clearly identifying the
persons involved in governance at ICE Clear Europe. For this reason,
the Commission finds the proposed rule change is consistent with Rule
17Ad-22(e)(2)(i).\160\
---------------------------------------------------------------------------

    \159\ 17 CFR 240.17Ad-22(e)(2)(i).
    \160\ 17 CFR 240.17Ad-22(e)(2)(i).
---------------------------------------------------------------------------

E. Consistency With Rule 17Ad-22(e)(4)(v)

    Rule 17Ad-22(e)(4)(v) requires that ICE Clear Europe establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to effectively identify, measure, monitor, and
manage its credit exposures to participants and those arising from its
payment, clearing, and settlement processes, including by maintaining
the financial resources required under Rule 17Ad-22(e)(4)(ii) in
combined or separately maintained clearing or guaranty funds.\161\ As
discussed in Section II.D above, the proposed rule change would
establish a single time period under which adjustments to Contributions
to the CDS, F&O, and FX Guaranty Funds would take effect. The
Commission believes that establishing a single time period would
improve the efficiency of ICE Clear Europe's operations with respect to
adjustments to the Guaranty Fund and reduce the possibility for any
discrepancy or confusion among Clearing Members who contribute ton
multiple Guaranty Funds. Moreover, the Commission believes that the
five business day period provided for by the proposed rule change,
rather than the two business day period currently applicable to
adjustments to the CDS and FX Guaranty Funds, would provide additional
time to Clearing Members to adapt to adjustments without materially
affecting ICE Clear Europe's ability to adjust the Guaranty Funds.
Thus, in general, the Commission believes this change would better
enable ICE Clear Europe to maintain the CDS, F&O, and FX Guaranty
Funds. For these reasons, the Commission finds the proposed rule change
is consistent with Rule 17Ad-22(e)(4)(v).\162\
---------------------------------------------------------------------------

    \161\ 17 CFR 240.17Ad-22(e)(4)(v).
    \162\ 17 CFR 240.17Ad-22(e)(4)(v).
---------------------------------------------------------------------------

F. Consistency With Rule 17Ad-22(e)(6)(i) and (ii)

    Rule 17Ad-22(e)(6)(i) and (ii) require that ICE Clear Europe
establish, implement, maintain, and enforce written policies and
procedures reasonably designed to cover its credit exposures to its
Clearing Members 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 and (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.\163\
As discussed in Section II.E above, the proposed rule change would
clarify how ICE Clear Europe would calculate NLV for Premium Up-Front
Options; establish the settled-to-market treatment of variation margin;
adopt the Externalised Payments Mechanism for the payment of variation
margin; and provide ICE Clear Europe authority to treat amounts owed to
it by a Clearing Member as additional margin. Because, as discussed in
Section II.E above, ICE Clear Europe is establishing the settled-to-
market treatment of variation margin and the Externalised Payments
Mechanism at the request of Clearing Members, the Commission believes
these changes would facilitate ICE Clear Europe's collection of
variation margin from Clearing Members. The Commission further believes
that, in further clarifying the calculation of NLV and establishing ICE
Clear Europe's authority to treat amounts owed to it by a Clearing
Member as additional margin, the proposed rule change should help to
ensure that ICE Clear Europe's margin system produces margin
commensurate with the risks presented by a Clearing Member. For these
reasons, the Commission finds the proposed rule change is consistent
with Rule 17Ad-22(e)(6)(i) and (ii).\164\
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    \163\ 17 CFR 240.17Ad-22(e)(6)(i), (ii).
    \164\ 17 CFR 240.17Ad-22(e)(6)(i), (ii).
---------------------------------------------------------------------------

G. Consistency With Rule 17Ad-22(e)(7)(i)

    Rule 17Ad-22(e)(7)(i) requires that ICE Clear Europe establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to effectively measure, monitor, and manage the
liquidity risk that arises in or is borne by ICE Clear Europe,
including measuring, monitoring, and managing its settlement and
funding flows on an ongoing and timely basis, and its use of intraday
liquidity by maintaining sufficient liquid resources at the minimum in
all relevant currencies to effect same-day and, where appropriate,
intraday and multiday settlement of payment obligations with a high
degree of confidence under a wide range of foreseeable stress scenarios
that includes, but is not limited to, the default of the participant
family that would generate the largest aggregate payment obligation for
the covered clearing agency in extreme but plausible market
conditions.\165\ As discussed in Section II.F above, the proposed rule
change would amend the Finance Procedures to give ICE Clear Europe
explicit authority use repurchase agreements, secured lending
facilities, and sales to generate liquidity from non-cash assets,
subject to certain conditions. The Commission believes that this change
would provide ICE Clear Europe a source of liquidity, effectively
borrowing from Clearing Members' Margin and Guaranty Fund contributions
by using non-cash collateral to generate liquidity. The Commission
further believes that this source of liquidity, along with ICE Clear
Europe's existing sources of liquidity, should help to ensure that ICE
Clear Europe maintains sufficient liquid resources. For this reason,
the Commission finds the proposed rule change is consistent with Rule
17Ad-22(e)(7)(i).\166\
---------------------------------------------------------------------------

    \165\ 17 CFR 240.17Ad-22(e)(7)(i).
    \166\ 17 CFR 240.17Ad-22(e)(7)(i).
---------------------------------------------------------------------------

H. Consistency With Rule 17Ad-22(e)(10)

    Rule 17Ad-22(e)(10) requires that ICE Clear Europe establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to establish and maintain transparent written
standards that state its obligations with respect to the delivery of
physical instruments, and establish and maintain operational practices
that identify, monitor, and manage the risks associated with such
physical deliveries.\167\ As discussed in Section II.G above, the
proposed rule change would add a new Rule 703(j) to require Sellers
under a Futures Contract to represent that they convey good title to
products (free of encumbrances) when physical settlement takes place.
In doing so, the Commission believes the proposed rule change would
establish an operational practice to manage the risks associated with
physical deliveries, by mitigating the risk that a

Seller would deliver products subject to encumbrances.
---------------------------------------------------------------------------

    \167\ 17 CFR 240.17Ad-22(e)(10).
---------------------------------------------------------------------------

    Moreover, as discussed in Section II.G above, the proposed rule
change would update the Delivery Procedures to be consistent with ICE
Clear Europe's and affiliated trading venues' operational practices.
The Commission believes that these changes should help to ensure that
the Delivery Procedures accurately reflect delivery obligations, in
line with operations at ICE Clear Europe and affiliated trading venues,
and mitigate the risks that could arise from discrepancies between such
operational practices and the Delivery Procedures.
    For these reasons, the Commission finds the proposed rule change is
consistent with Rule 17Ad-22(e)(10).\168\
---------------------------------------------------------------------------

    \168\ 17 CFR 240.17Ad-22(e)(10).
---------------------------------------------------------------------------

I. Consistency With Rule 17Ad-22(e)(13)

    Rule 17Ad-22(e)(13) requires that ICE Clear Europe establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to ensure it 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 its
Clearing Members and, when practicable, other stakeholders to
participate in the testing and review of its default procedures,
including any close-out procedures, at least annually and following
material changes thereto.\169\ As discussed in Section II.H above, the
proposed rule change would expand the scope of events that could lead
to ICE Clear Europe declaring an Event of Default with respect to a
Clearing Member by amending the definitions of certain events which
themselves could be the basis for ICE Clear Europe declaring an Event
of Default. In doing so, the Commission believes the proposed rule
change should help ensure that ICE Clear Europe's powers in responding
to defaults, which are only available after ICE Clear Europe declares
an Event of Default, are accessible as appropriate and necessary to
respond to situations not currently considered to be an Event of
Default.
---------------------------------------------------------------------------

    \169\ 17 CFR 240.17Ad-22(e)(13).
---------------------------------------------------------------------------

    Moreover, as discussed in Section II.H above, the proposed rule
change would give ICE Clear Europe explicit authority to carry out
default auctions in accordance with the Default Auction Procedures and
construct auction lots out of the defaulting Clearing Member's
contracts. The Commission believes that this aspect of the proposed
rule change would help facilitate ICE Clear Europe's conduct of default
auctions, which ICE Clear Europe uses to contain losses and liquidity
demands in the event of a Clearing Member's default.
    Finally, as discussed in Section II.H above, the proposed rule
change would expand the net sum payable to or by a defaulting Clearing
Member to include the effects of abandoning an Option. The Commission
believes this would help ensure that the net sum payable by or to a
defaulting Clearing Member accurately reflects the possible
consequences of abandoning Options in the defaulting Clearing Member's
portfolio, and therefore reflects any potential losses to ICE Clear
Europe resulting from such abandonment.
    For these reasons, the Commission finds the proposed rule change is
consistent with Rule 17Ad-22(e)(13).\170\
---------------------------------------------------------------------------

    \170\ 17 CFR 240.17Ad-22(e)(13).
---------------------------------------------------------------------------

J. Consistency With Rule 17Ad-22(e)(14)

    Rule 17Ad-22(e)(14) requires that ICE Clear Europe establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to enable the segregation and portability of
positions of a Clearing Member's customers and the collateral provided
to ICE Clear Europe with respect to those positions and effectively
protect such positions and related collateral from the default or
insolvency of that Clearing Member.\171\ As discussed in Section II.I
above, the proposed rule change would further enhance ICE Clear
Europe's ability to transfer the positions of a Clearing Member's
customers in the event of that Clearing Member's default by ensuring
that the Standard Terms are contractually binding between Customers and
Clearing Members and cannot be overridden. Because the Standard Terms
are uniform contractual provisions that ensure that all terminations
and re-establishments of cleared contracts occur at the same time and
at the same price, the Commission believes this change would help
facilitate porting by helping to ensure that all terminations and re-
establishments of cleared contracts occur at the same time and at the
same price, thereby reducing the possibility of valuation disputes or
other claims that might prevent or reduce the likelihood of porting.
---------------------------------------------------------------------------

    \171\ 17 CFR 240.17Ad-22(e)(14).
---------------------------------------------------------------------------

    Moreover, as discussed in Section II.I above, the proposed rule
change would require Clearing Members and Customers to make
representations regarding the transfer of collateral to ICE Clear
Europe and further would require Customers to take any action
reasonably requested by ICE Clear Europe or Clearing Member that may be
necessary or desirable to create, preserve, perfect, or validate the
right, title or interests of ICE Clear Europe in the collateral. The
Commission believes this change would help to ensure that ICE Clear
Europe is able to transfer and use collateral as needed, including as
needed for porting, free from any other claim or encumbrance.
    The proposed rule would also, as discussed in Section II.I above,
clarify the time at which contracts are deemed to arise and replace
automatic early termination clauses with suspension of performance.
Because discrepancies in the timing of the creation and termination of
a contract could lead to disputes about whether that contract could be
ported, the Commission believes that this change would help to enable
the portability of a customer's contracts.
    Finally, as discussed in Section II.I above, the proposed rule
change would give ICE Clear Europe discretion to determine the price at
which it transfer or liquidates a contract and the time for determining
such price. Because ICE Clear Europe may need to consider different
prices and times under the different insolvency regimes of the
jurisdictions in which it operates, the Commission believes this change
should further facilitate ICE Clear Europe's ability to port by giving
it flexibility with respect to the determination of those prices.
    For these reasons, the Commission finds the proposed rule change is
consistent with Rule 17Ad-22(e)(14).\172\
---------------------------------------------------------------------------

    \172\ 17 CFR 240.17Ad-22(e)(14).
---------------------------------------------------------------------------

K. Consistency With Rule 17Ad-22(e)(17)(i)

    Rule 17Ad-22(e)(17)(i) requires that ICE Clear Europe establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to manage its operational risks by identifying the
plausible sources of operational risk, both internal and external, and
mitigating their impact through the use of appropriate systems,
policies, procedures, and controls.\173\ As discussed in Section II.J
above, the proposed rule change would require that, before clearing
equity contracts with ICE Clear Europe, any Clearing Member that is
treated as a non-U.S. entity for U.S. federal income tax purposes enter
into appropriate agreements with the IRS and meet certain other
specified qualifications under procedures of the IRS, such that ICE
Clear Europe would not be responsible for withholding taxes under
Section 871(m) of the Internal Revenue

Code. The Commission believes that this change would help ICE Clear
Europe to avoid having to withhold taxes and further believes that
having to withhold taxes could hinder ICE Clear Europe's operational
processes for clearing and settling transactions. As such, the
Commission believes that this change would help ICE Clear Europe to
manage the operational risks associated with the application of Section
871(m) of the Internal Revenue Code.
---------------------------------------------------------------------------

    \173\ 17 CFR 240.17Ad-22(e)(17)(i).
---------------------------------------------------------------------------

    Moreover, as discussed in Section II.J above, the proposed rule
change would clarify and harmonize references to timing in the Rules,
the CDS Procedures, Clearing Procedures, and Finance Procedures; revise
the timing of certain actions taking by ICE Clear Europe to avoid any
potential conflict with the practices of the markets that ICE Clear
Europe clears; make explicit that Clearing Members bear the risk of
late instruction; and remove a presumption that deposits and
withdrawals of non-cash collateral should be settled on the same day as
a Clearing Member places with ICE Clear Europe an instruction for
deposit or withdrawal. The Commission believes that these changes
should help mitigate the operational risks that could result from
discrepancies about the timing for certain actions or unclear
deadlines, such as the risk that ICE Clear Europe's assumption about
the timing of settlement does not match a Clearing Member's
instruction.
    For these reasons, the Commission finds the proposed rule change is
consistent with Rule 17Ad-22(e)(17)(i).\174\
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    \174\ 17 CFR 240.17Ad-22(e)(17)(i).
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L. Consistency With Rule 17Ad-22(e)(18)

    Rule 17Ad-22(e)(18) requires that ICE Clear Europe establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to establish objective, risk-based, and publicly
disclosed criteria for participation, which permit fair and open access
by direct and, where relevant, indirect participants and other
financial market utilities, require participants to have sufficient
financial resources and robust operational capacity to meet obligations
arising from participation, and monitor compliance with such
participation requirements on an ongoing basis.\175\ As discussed in
Section II.K above, the proposed rule change would revise the standards
that govern membership in ICE Clear Europe; clarify the waiver of
sovereign immunity that all Clearing Members must make; expand and
enhance Rule 201(a) and Rule 202(a), which set out the requirements for
membership in ICE Clear Europe and obligations on Clearing Members;
amend Rule 203 to prohibit a Clearing Member from engaging in conduct
that would render it unable to satisfy the membership and from
exercising set-off rights against ICE Clear Europe; expand the events
for which a Clearing Member must notify ICE Clear Europe under Rule
204; clarify that Rule 206 also requires Clearing Members to maintain
financial resources in addition to capital; and update the Membership
Procedures in light of these changes. The Commission believes that
these changes, taken as a whole, would enhance the criteria for
participation in ICE Clear Europe and would help to ensure that ICE
Clear Europe continues to maintain objective, risk-based, and publicly
disclosed criteria for participation, that permit fair and open access.
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    \175\ 17 CFR 240.17Ad-22(e)(18).
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    Moreover, as discussed in Section II.K above, the proposed rule
change would clarify that Rule 301(f) requires written consent from ICE
Clear Europe for an exception to the requirement that a Clearing Member
pay all amounts payable to ICE Clear Europe by electronic transfer from
an account at an Approved Financial Institution only. Again, the
Commission believes that this revision would enhance and clarify this
requirement with respect to membership in ICE Clear Europe and
therefore would help to ensure that ICE Clear Europe continues to
maintain objective, risk-based, and publicly disclosed criteria for
participation, that permit fair and open access.
    For these reasons, the Commission finds the proposed rule change is
consistent with Rule 17Ad-22(e)(18).\176\
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    \176\ 17 CFR 240.17Ad-22(e)(17)(i).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as modified by Partial Amendment No. 1, is consistent with the
Act. Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml) or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-ICEEU-2020-003 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ICEEU-2020-003. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change, as modified by
Partial Amendment No. 1, that are filed with the Commission, and all
written communications relating to the proposed rule change, as
modified by Partial Amendment No. 1, between the Commission and any
person, other than those that may be withheld from the public in
accordance with the provisions of 5 U.S.C. 552, will be available for
website viewing and printing in the Commission's Public Reference Room,
100 F Street NE, Washington, DC 20549, on official business days
between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filings
will also be available for inspection and copying at the principal
office of ICE Clear Europe and on ICE Clear Europe's website at https://www.theice.com/clear-europe/regulation. All comments received will be
posted without change. Persons submitting comments are cautioned that
we do not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
ICEEU-2020-003 and should be submitted on or before May 14, 2020.

V. Accelerated Approval of the Proposed Rule Change, as Modified by
Partial Amendment No. 1

    The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\177\ to approve the proposed rule change, as modified by
Partial Amendment No. 1, prior to the 30th day after the date of
publication of Partial Amendment No. 1 in the Federal Register. As
discussed above, Partial Amendment No. 1 updates Exhibit 5C to reflect
changes made to the Finance Procedures subsequent to the initial filing
of this proposed rule change,

corrects a typographical error in the amendment to Rule 1005(d) by
restoring a requirement that had been unintentionally deleted, and
makes minor typographical corrections in relation to both of those
changes. By updating Exhibit 5C, correcting the error in amended Rule
1005(d), and making typographical corrections in relation to those
changes, Partial Amendment No. 1 provides for a more clear and
comprehensive understanding of the estimated impact of the proposed
rule change, which helps to improve the Commission's review of the
proposed rule change for consistency with the Act.
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    \177\ 15 U.S.C. 78s(b)(2).
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    For the reasons discussed above, the Commission finds that the
proposed rule change, as modified by Partial Amendment No. 1, is
consistent with the Act and the applicable rules thereunder.
Accordingly, the Commission finds good cause for approving the proposed
rule change, as modified by Partial Amendment No. 1, on an accelerated
basis, pursuant to Section 19(b)(2) of the Exchange Act.\178\
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    \178\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    On the basis of the foregoing, the Commission finds that the
proposed rule change, as modified by Partial Amendment No. 1, is
consistent with the requirements of the Act, and in particular, with
the requirements of Section 17A(b)(3)(F) of the Act, 17A(b)(3)(H) of
the Act, and Rules 17Ad-22(e)(1), (e)(2)(i), (e)(4)(v), (e)(6)(i),
(e)(6)(ii), (e)(7)(i), (e)(10), (e)(13), (e)(14), (e)(17)(i), and
(e)(18).\179\
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    \179\ 15 U.S.C. 78q-1(b)(3)(F); 15 U.S.C 78q-1(b)(3)(H); 17Ad-
22(e)(1), (e)(2)(i), (e)(4)(v), (e)(6)(i), (e)(6)(ii), (e)(7)(i),
(e)(10), (e)(13), (e)(14), (e)(17)(i), and (e)(18).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act
\180\ that the proposed rule change, as modified by Partial Amendment
No. 1 (SR-ICEEU-2020-003), be, and hereby is, approved on an
accelerated basis.\181\
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    \180\ 15 U.S.C. 78s(b)(2).
    \181\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\182\
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    \182\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08487 Filed 4-22-20; 8:45 am]
 BILLING CODE 8011-01-P