Federal Register / Vol. 85, No. 249 / Tuesday, December 29, 2020 / Notices 85701 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The Exchange initially filed the proposed fee 

changes on December 1, 2020 (SR–CboeBZX–2020– 

086). On December 9, 2020, the Exchange withdrew 

that filing and submitted this proposal. 

4See Cboe Global Markets U.S. Options Market 

Month-to-Date Volume Summary (November 23, 

2020), available at https://markets.cboe.com/us/ 

options/market_statistics/. 

5See Rule 21.9(a)(2)(D). 

6Fee code RN is appended to routed NonCustomer orders in Penny Program classes and 

assesses a charge of $0.90 per contract. 

7Fee code RO is appended to all routed NonCustomer orders in Non-Penny classes and assesses 

a charge of $1.25 per contract. 

8Fee code RP is appended to routed Customer 

orders to AMEX, BOX, BX, Cboe, EDGX Options, 

ISE Mercury, MIAX or PHLX and assesses a charge 

of $0.25 per contract. 

9Fee code RQ is appended to routed Customer 

orders in Penny Program classes to ARCA, C2, ISE, 

ISE Gemini, MIAX Emerald, MIAX Pearl or NOM 

and assesses a charge of $0.85 per contract. 

10Fee code RR is appended to routed Customer 

orders in Non-Penny classes to ARCA, C2, ISE, ISE 

Gemini, MIAX Emerald, MIAX Pearl or NOM and 

assesses a charge of $1.25 per contract. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90743; File No. SR– 

CboeBZX–2020–089] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change Relating To 

Amend Its Fees Schedule 

December 21, 2020. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

10, 2020, Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) is filing with the 

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

to amend its Fee Schedule. The text of 

the proposed rule change is provided in 

Exhibit 5. 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://markets.cboe.com/us/ 

equities/regulation/rule_filings/bzx/), at 

the Exchange’s Office of the Secretary, 

and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend its 

fee schedule for its equity options 

platform (‘‘BZX Options’’) by removing 

certain fee codes related to routed 

orders and by updating certain fee codes 

in connection with routing orders in 

SPY options to Nasdaq PHLX LLC 

(‘‘PHLX’’).3

The Exchange first notes that it 

operates in a highly competitive market 

in which market participants can 

readily direct order flow to competing 

venues if they deem fee levels at a 

particular venue to be excessive or 

incentives to be insufficient. More 

specifically, the Exchange is only one of 

16 options venues to which market 

participants may direct their order flow. 

Based on publicly available information, 

no single options exchange has more 

than 16% of the market share and 

currently the Exchange represents 

approximately 8% of the market share.4

Thus, in such a low-concentrated and 

highly competitive market, no single 

options exchange, including the 

Exchange, possesses significant pricing 

power in the execution of option order 

flow. The Exchange believes that the 

ever-shifting market share among the 

exchanges from month to month 

demonstrates that market participants 

can shift order flow or discontinue to 

reduce use of certain categories of 

products, in response to fee changes. 

Accordingly, competitive forces 

constrain the Exchange’s transaction 

fees, and market participants can readily 

trade on competing venues if they deem 

pricing levels at those other venues to 

be more favorable. 

The Exchange assesses fees in 

connection with orders routed away to 

various exchanges. Currently, under the 

Fee Codes and Associated Fees section 

of the Fee Schedule, fee codes D1, D2, 

D3 and D4 are appended to Members’ 

Directed ISOs, a routing option under 

which an intermarket sweep order 

(‘‘ISO’’) entered by a User bypasses the 

System and is sent by the System to 

another options exchange specified by 

the User.5 Specifically, these fee codes 

function as follows: 

• Fee code D1 is appended to 

Directed ISOs to Nasdaq Options Market 

LLC (‘‘NOM’’), NYSE Arca, Inc. 

(‘‘ARCA’’) or ISE Gemini, LLC (‘‘ISE 

Gemini’’) in Non-Penny classes and 

assesses a charge of $1.25 per contract; 

• fee code D2 is appended to NonCustomer Directed ISOs to Nasdaq BX 

Options (‘‘BX’’) in Non-Penny classes 

and assesses a charge of $0.95 per 

contract; 

• fee code D3 is appended to NonCustomer Directed ISOs to Cboe C2 

Exchange, Inc. (‘‘C2’’) or PHLX and 

assesses a charge of $0.95 per contract; 

and 

• fee code D4 is appended to Directed 

ISOs (unless otherwise specified in the 

Fee Schedule) and assesses a charge of 

$0.85 per contract. 

The Exchange has observed a minimal 

amount of volume in recent months in 

orders yielding fee codes D1, D2, D3 or 

D4. The Exchange believes that, because 

so few Users elect to route their orders 

as Directed ISOs, the current demand 

does not warrant the infrastructure and 

ongoing Systems maintenance required 

to support separate fee codes 

specifically applicable to Directed ISOs. 

Therefore, the Exchange now proposes 

to delete fee codes D1, D2, D3 and D4 

in the Fee Schedule. The Exchange 

notes that Users will continue to be able 

to choose to route their orders as 

Directed ISOs and such orders will be 

assessed the fees currently in place for 

routed orders generally (i.e., fee codes 

RN,6 RO,7 RP,8 RQ 9 and RR10) as 

follows: 

• A Directed ISO to which fee code 

D1 would have prior been appended 

(routed to NOM, ARCA or ISE Gemini 

in a Non-Penny class) will yield fee 

code RR, if it is a Customer order, which 

is appended to Customer orders in NonPenny classes routed to NOM, ARCA or 

ISE Gemini (among other exchanges) 

and assesses a charge of $1.25 per 

contract, or will yield fee code RO, if it 

is a Non-Customer order, which is 

appended to routed Non-Customer 


KHAMMOND on DSKJM1Z7X2PROD with NOTICES
85702 Federal Register / Vol. 85, No. 249 / Tuesday, December 29, 2020 / Notices 

11See Nasdaq Phlx Options 7 Pricing Schedule, 

Section 3 ‘‘Rebates and Fees for Adding and 

Removing Liquidity in SPY’’, Part A. 

12The Exchange notes that SPY options are part 

of the Penny Program. 

13 15 U.S.C. 78f. 

14 15 U.S.C. 78f(b)(4). 

15 15 U.S.C. 78f.(b)(5). 

16See e.g., NYSE Arca Options Fees and Charges, 

‘‘Routing Fees’’, which provides routing fees of 

‘‘$0.11 per contract on orders routed and executed 

on another exchange, plus (i) any transaction fees 

assessed by the away exchange (calculated on an 

order-by-order basis since different away exchanges 

charge different amounts) or (ii) if the actual 

transaction fees assessed by the away exchange(s) 

cannot be determined prior to the execution, the 

highest per contract charge assessed by the away 

exchange(s) for the relevant option class and type 

of market participant (e.g., Customer, Firm, Broker/ 

Dealer, Professional Customer or Market Maker).’’ 

17See supra notes 6–10. 

orders in Non-Penny classes and also 

assesses a charge of $1.25 per contract; 

• a Directed ISO to which fee code D2 

would have prior been appended (NonCustomer to BX in a Non-Penny class) 

will yield fee code RO; 

• a Directed ISO to which fee code D3 

would have prior been appended (NonCustomer to C2 or PHLX) will yield fee 

code RN, if in a Penny class, which is 

appended to Non-Customer orders 

routed in Penny classes and assesses a 

charge of $0.90 per contract, or will 

yield fee code RO, if it is in a NonPenny class; and 

• a Directed ISO to which fee code D4 

would have prior been appended 

(unless otherwise specified) may yield 

any of fee codes RN, RO, RP, RQ and 

RR, depending on whether the order is 

a (1) routed Customer order in a Penny 

class (to which fee code RP, which 

assess a charge of $0.25 per contract, or 

RQ, which assesses a charge of $0.85 per 

contract, could apply depending on the 

away exchange), (2) a routed Customer 

order in a Non-Penny class (to which fee 

code RP or RR could apply depending 

on the away exchange), (3) is a routed 

Non-Customer order in a Penny class (to 

which fee code RN will apply), or (4) is 

a routed Non-Customer order in a NonPenny Class (to which fee code RO will 

apply). 

The Exchange also proposes to update 

fee codes RP and RQ in connection with 

routed Customer orders in SPY options 

to PHLX. Currently, fee code RP is 

appended to routed Customer orders to 

NYSE American (‘‘AMEX’’), BOX 

Options Exchange (‘‘BOX’’), BX, Cboe 

Exchange, Inc. (‘‘Cboe’’), Cboe EDGX 

Exchange, Inc. (‘‘EDGX Options’’), ISE 

Mercury, LLC (‘‘ISE Mercury’’), MIAX 

Options Exchange (‘‘MIAX’’) or PHLX 

and assesses a charge of $0.25 per 

contract. Fee code RQ is appended to 

routed Customer orders in Penny 

Program classes to ARCA, C2, ISE, ISE 

Gemini, MIAX Emerald Exchange 

(‘‘MIAX Emerald’’), MIAX Pearl 

Exchange (‘‘MIAX Pearl’’), or NOM and 

assesses a charge of $0.85 per contract. 

The Exchange notes that its current 

approach to routing fees is to set forth 

in a simple manner certain subcategories of fees that approximate the 

cost of routing to other options 

exchanges based on the cost of 

transaction fees assessed by each venue 

as well as costs to the Exchange for 

routing (i.e., clearing fees, connectivity 

and other infrastructure costs, 

membership fees, etc.) (collectively, 

‘‘Routing Costs’’). The Exchange then 

monitors the fees charged as compared 

to the costs of its routing services and 

adjusts its routing fees and/or subcategories to ensure that the Exchange’s 

fees do indeed result in a rough 

approximation of overall Routing Costs, 

and are not significantly higher or lower 

in any area. Currently, PHLX assesses a 

charge of $0.42 per contract for 

Customer orders in SPY options that 

remove liquidity.11 As described above, 

the Exchange currently assesses a flat 

routing fee of $0.25 per contract for 

Customer orders routed to PHLX which 

yield fee code RP. This structure does 

not currently take into account the $0.42 

per contract fee assessed by PHLX for 

Customer orders in SPY options. 

Therefore, in order to assess fees more 

in line with the Exchange’s current 

approach to routing fees, that is, in a 

manner that approximates the cost of 

routing to Customer orders in SPY 

options to PHLX, along with other away 

options exchanges, based on the general 

cost of transaction fees assessed by the 

sub-category of away options exchanges 

for such orders (as well as the 

Exchange’s Routing Costs), the 

Exchange proposes to exclude Customer 

orders is SPY options routed to PHLX 

from orders that yield fee code RP and 

are assessed a charge of $0.25 per 

contract and, instead, add Customer 

orders routed to PHLX in SPY options 

only to orders that yield fee code RQ 12

and are assessed a charge of $0.85 per 

contract. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the objectives of Section 6 of the Act,13

in general, and furthers the objectives of 

Section 6(b)(4),14 in particular, as it is 

designed to provide for the equitable 

allocation of reasonable dues, fees and 

other charges among its Members and 

issuers and other persons using its 

facilities. The Exchange also believes 

that the proposed rule change is 

consistent with the objectives of Section 

6(b)(5) 15 requirements that the rules of 

an exchange be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest, and, 

particularly, is not designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

As described above, the Exchange 

operates in a highly competitive market 

in which market participants can 

readily direct order flow to competing 

venues if they deem fee levels at a 

particular venue to be excessive or 

incentives to be insufficient. The 

proposed rule change reflects a 

competitive pricing structure designed 

to incentivize market participants to 

direct their order flow to the Exchange, 

which the Exchange believes would 

enhance market quality to the benefit of 

all Members. The Exchange notes that 

other options exchanges currently 

approximate routing fees in a similar 

manner as the Exchange’s current 

approach.16

In particular, the Exchange believes 

the proposed rule change to remove fee 

codes D1, D2, D3 and D4 is reasonable 

as the Exchange has observed a minimal 

amount of volume in orders yielding fee 

codes D1, D2, D3 or D4 and, therefore, 

the current use of Directed ISO orders 

does not warrant the infrastructure and 

ongoing Systems maintenance required 

to support separate fee codes 

specifically applicable to Directed ISOs, 

a type of routing option Users may elect 

for their orders. As such, the Exchange 

also believes that is reasonable and 

equitable to assess Directed ISO orders 

as it already does for all other routed 

orders, as applicable (i.e., fee codes RN, 

RO, RP, RQ and RR).17 The Exchange 

notes that the use of Directed ISOs, as 

well as routing through the Exchange, is 

optional. The Exchange believes that the 

proposed rule change is equitable and 

not unfairly discriminatory because 

Users will continue to have the option 

to elect to route their orders as Directed 

ISOs and such routed orders will be 

automatically and uniformly assessed 

the applicable charges already in place 

for all other routed orders. 

The Exchange believes the proposed 

rule change to amend fee codes RP and 

RQ to account for PHLX’s current 

assessment of fees for Customer orders 

in SPY options is reasonable because it 


KHAMMOND on DSKJM1Z7X2PROD with NOTICES
Federal Register / Vol. 85, No. 249 / Tuesday, December 29, 2020 / Notices 85703 

18See supra notes 6–10. 

19See supra note 16. 

20See supra note 4. 

21See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 

22NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. 

Cir. 2010) (quoting Securities Exchange Act Release 

No. 59039 (December 2, 2008), 73 FR 74770, 74782– 

83 (December 9, 2008) (SR–NYSEArca–2006–21)). 

23 15 U.S.C. 78s(b)(3)(A). 

24 17 CFR 240.19b–4(f). 

is reasonably designed to assess routing 

fees in line with the Exchange’s current 

approach to routing fees. That is, the 

proposed rule change is intended to 

include Customer orders in SPY options 

routed to PHLX in the most appropriate 

sub-category of fees that approximates 

the cost of routing to a group of away 

options exchanges (including PHLX) 

based on the cost of transaction fees 

assessed by each venue as well as 

Routing Costs to the Exchange. The 

Exchange believes that the proposed 

rule change is equitable and not unfairly 

discriminatory because all Members’ 

Customer orders in SPY routed to PHLX 

will automatically yield fee code RQ 

and uniformly be assessed the 

corresponding fee. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange does not believe the proposed 

rule change will impose any burden on 

intramarket competition because all 

Members Directed ISO order will 

automatically and uniformly be assessed 

the current fees already in place for 

routed orders, as applicable (i.e., fee 

codes RN, RO, RP, RQ and RR).18

Likewise, all Members’ Customer orders 

in SPY routed to PHLX will 

automatically yield fee code RQ and 

uniformly be assessed the 

corresponding fee. 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on intermarket competition 

that is not necessary or appropriate in 

furtherance of the purposes of the Act. 

The Exchange notes that other options 

exchange approximate routing costs in a 

similar manner as the Exchange’s 

current approach.19 Also, as previously 

discussed, the Exchange operates in a 

highly competitive market. Members 

have numerous alternative venues that 

they may participate on and director 

their order flow, including 15 other 

options exchanges and off-exchange 

venues. Additionally, the Exchange 

represents a small percentage of the 

overall market. Based on publicly 

available information, no single options 

exchange has more than 16% of the 

market share.20 Therefore, no exchange 

possesses significant pricing power in 

the execution of option order flow. 

Indeed, participants can readily choose 

to send their orders to other exchange 

and off-exchange venues if they deem 

fee levels at those other venues to be 

more favorable. Moreover, the 

Commission has repeatedly expressed 

its preference for competition over 

regulatory intervention in determining 

prices, products, and services in the 

securities markets. Specifically, in 

Regulation NMS, the Commission 

highlighted the importance of market 

forces in determining prices and SRO 

revenues and, also, recognized that 

current regulation of the market system 

‘‘has been remarkably successful in 

promoting market competition in its 

broader forms that are most important to 

investors and listed companies.’’ 21 The 

fact that this market is competitive has 

also long been recognized by the courts. 

In NetCoalition v. Securities and 

Exchange Commission, the D.C. Circuit 

stated as follows: ‘‘[n]o one disputes 

that competition for order flow is 

‘fierce.’ . . . As the SEC explained, ‘[i]n 

the U.S. national market system, buyers 

and sellers of securities, and the brokerdealers that act as their order-routing 

agents, have a wide range of choices of 

where to route orders for execution’; 

[and] ‘no exchange can afford to take its 

market share percentages for granted’ 

because ‘no exchange possesses a 

monopoly, regulatory or otherwise, in 

the execution of order flow from broker 

dealers’. . . .’’.22 Accordingly, the 

Exchange does not believe its proposed 

fee change imposes any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 23 and paragraph (f) of Rule 

19b–4 24 thereunder, because it 

establishes a due, fee, or other charge 

imposed by the Exchange. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission will institute proceedings 

to determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

CboeBZX–2020–089 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–CboeBZX–2020–089. 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 that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for 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 the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 


KHAMMOND on DSKJM1Z7X2PROD with NOTICES
85704 Federal Register / Vol. 85, No. 249 / Tuesday, December 29, 2020 / Notices 

25 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(1). 

5Capitalized terms used but not defined herein 

have the meanings specified in the ICE Clear 

Europe Clearing Rules (the ‘‘Rules’’). 

available publicly. All submissions 

should refer to File Number SR– 

CboeBZX–2020–089 and should be 

submitted on or before January 19, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–28657 Filed 12–28–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90746; File No. SR–ICEEU– 

2020–016] 

Self-Regulatory Organizations; ICE 

Clear Europe Limited; Notice of Filing 

and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Publication of a Circular Regarding the 

Interpretation of References to EU 

Legislation in the Clearing Rules at the 

End of the Brexit Transition Period 

December 21, 2020. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

11, 2020, ICE Clear Europe Limited 

(‘‘ICE Clear Europe’’ or the ‘‘Clearing 

House’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule changes described in 

Items I, II and III below, which Items 

have been prepared primarily by ICE 

Clear Europe. ICE Clear Europe filed the 

proposed rule change pursuant to 

Section 19(b)(3)(A) of the Act 3 and Rule 

19b–4(f)(1) thereunder,4 such that the 

proposed rule change was immediately 

effective upon filing with the 

Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

ICE Clear Europe is proposing to 

publish a Circular, titled ICE Clear 

Europe: Interpretation of References to 

EU Legislation in the Clearing Rules 

Post-Brexit (the ‘‘Circular’’), to provide 

guidance as to the interpretation of 

references to European Union (‘‘EU’’) 

directives and regulations in the ICE 

Clear Europe Clearing Rules and 

Procedures 5 in the event that the United 

Kingdom (‘‘UK’’) ceases to be an EU 

member state, in circumstances where 

no withdrawal agreement stipulating 

that EU laws will continue to apply in 

the UK has been agreed between the UK 

and the EU–27. The interpretation 

contained in the Circular will only 

apply under such circumstances. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, ICE 

Clear Europe included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. ICE 

Clear Europe has prepared summaries, 

set forth in sections (A), (B), and (C) 

below, of the most significant aspects of 

such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

(a) Purpose 

The purpose of the proposed Circular 

is to provide guidance with respect to 

the interpretation of certain provisions 

in the Rules and Procedures in the event 

that the UK exits the Transition Period, 

in circumstances where no trade 

agreement has been agreed between the 

UK and the EU–27 stipulating that EU 

laws will continue to apply in the UK. 

In such circumstances, directly 

applicable EU directives and regulations 

will be incorporated into UK law with 

modifications at the end of the 

Transition Period pursuant to the 

European Union (Withdrawal) Act 2018 

(the ‘‘EUWA’’), which would result in 

there being two versions of a directly 

applicable EU legislative act which may 

be applicable to the Rules: (1) The 

version as enacted in the EU, directly 

applicable throughout the EU (and, in 

certain cases, the EEA); and (2) the 

version incorporated into UK law 

(referred to as ‘‘on-shored’’). 

There are various references to EU 

directives and regulations in the Rules 

and Procedures; others may arise by 

implication by virtue of definitions such 

as that of ‘‘Applicable Laws’’ or 

‘‘Governmental Authority’’ (Rule 101). 

ICE Clear Europe is proposing to 

publish the Circular to provide guidance 

as to the proper interpretation of such 

references in the event of the end of the 

Transition Period without a trade 

agreement in place that provides for 

continued applicability of EU law in the 

UK. The guidance is intended to be 

consistent with the views of legal 

practitioners in the UK with respect to 

references to EU directives and 

regulations in English law contracts 

generally, but applied to the particular 

definitions and situations that arise 

under the Rules and Procedures. 

The Circular sets out several 

principles that will be applied by ICE 

Clear Europe when interpreting 

references to an EU regulation or 

directive in its Rules: 

1. Where the reference concerns an 

obligation on, or otherwise applies to, 

the Clearing House or a UK Clearing 

Member: 

Æ Where the reference is to an EU 

regulation, it should be interpreted as 

the regulation as it forms part of UK 

domestic law through section 3 of the 

EUWA, and as amended by UK law 

from time to time; and 

Æ Where the reference is to an EU 

directive, it should be interpreted as the 

UK domestic law corresponding to the 

directive or provision thereof. 

2. Where the reference concerns an 

obligation on, or otherwise applies to, 

an EU Clearing Member: 

Æ Where the reference is to an EU 

regulation, it should be interpreted as 

the regulation as it applies in the EU, 

and as amended by EU law from time 

to time; and 

Æ Where the reference is to an EU 

directive, it should be interpreted as the 

EU directive, as amended by EU law 

from time to time and as implemented 

in the relevant member state of the EU 

Clearing Member. 

The Circular also addresses situations 

where both sets of laws apply, for 

example for entities established in the 

UK with an EU branch (or vice versa) or 

which continue to be regulated in both 

systems under cross-border licenses, the 

UK temporary permissions regime or 

other grandfathering arrangements (via 

reverse solicitation or otherwise). By 

way of example, it explains how Rule 

requirements that Clearing Members 

maintain sufficient capital would 

require UK Clearing Members to comply 

with the on-shored version of the 

applicable regulatory requirements as 

well as applicable EU requirements for 

any EU branch or to the extent they are 

subject to EU consolidated supervision. 

EU Clearing Members with a UK branch 

or which are subject to UK consolidated 

supervision would be required to 

comply with UK capital rules equivalent 

to the EU rules, to the extent applicable 

(in addition to their applicable home 

country requirements). Rule 


KHAMMOND on DSKJM1Z7X2PROD with NOTICES