[Federal Register Volume 86, Number 39 (Tuesday, March 2, 2021)]
[Notices]
[Pages 12234-12237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04221]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91204; File No. SR-ICEEU-2021-004]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change Relating 
to Amendments to the ICE Clear Europe Clearing Rules

February 24, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 17, 2021, 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 and II below, which Items have been prepared 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)(6) \4\ thereunder, 
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.
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    \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)(6).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The principal purpose of the proposed amendments is for ICE Clear 
Europe to make certain amendments to its Clearing Rules (the ``Rules'') 
\5\ relating to settlement of Euro payments through the European 
Union's TARGET2 payment system.
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    \5\ Capitalized terms used but not defined herein have the 
meanings specified in the Rules.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    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.

[[Page 12235]]

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

(a) Purpose
    ICE Clear Europe is proposing to amend Part 12 of the Rules to 
implement certain account and settlement finality arrangements 
applicable to the settlement of Euro-denominated payments by the 
Clearing House through the European Union (``EU'') TARGET2 payment 
system.\6\ Effective as of January 1, 2021, upon the exit of the United 
Kingdom from the EU, ICE Clear Europe has been recognized as a ``tier 
2'' third-country central counterparty (``TC-CCP'') \7\ for purposes of 
the European Market Infrastructure Regulation (``EMIR'').\8\ Pursuant 
to Article 25(2b) of EMIR, a tier 2 TC-CCP is required, as a condition 
to such recognition, to open an overnight deposit account with the 
central bank of issue of the relevant currency. ICE Clear Europe 
currently has accounts with the Dutch component of TARGET2 (``TARGET2-
NL'') operated by De Nederlandsche Bank (``DNB''), but will not be 
eligible to maintain such accounts after March 31, 2021. ICE Clear 
Europe therefore plans to establish an account with the European 
Central Bank (``ECB'') component of the TARGET2 system (``TARGET2-
ECB''), which both ICE Clear Europe and the ECB wish to do in 
compliance with, and furtherance of, EMIR. The proposed changes to Part 
12 of the Rules would facilitate the establishment and use of accounts 
with TARGET2 (including TARGET2-ECB) \9\ and address settlement 
finality with respect to payments made through such accounts in 
accordance with TARGET2 terms and conditions of operation.
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    \6\ TARGET2 is the real-time gross settlement system for Euro 
payments owned and operated by the Eurosystem (which consists of the 
European Central Bank and the national central banks of those 
countries that have adopted the Euro).
    \7\ See European Securities and Markets Authority (ESMA) Public 
Statement of 28 September 2020, available at https://www.esma.europa.eu/press-news/esma-news/esma-recognise-three-uk-ccps-1-january-2021.
    \8\ Regulation (EU) No 648/2012 of the European Parliament and 
of the Council of 4 July 2012 on OTC derivatives, central 
counterparties and trade repositories; Commission Delegated 
Regulation (EU) 2020/1301 of 14 July 2020 Supplementing Regulation 
(EU) No 648/2012 of the European Parliament and of the council with 
respect to the criteria that ESMA should take into account to 
determine whether a central counterparty established in a third 
country is systemically important or likely to become systemically 
important for the financial stability of the Union or of one or more 
of its Member States.
    \9\ For such time as the TARGET2-NL accounts remain in 
operation, the proposed changes to Part 12 would apply to such 
accounts as well.
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    Specifically, in Rule 1201, several new definitions would be added. 
In addition to a definition for ``TARGET2'' (referencing the real-time 
gross settlement system owned and operated by the Eurosystem), new 
definitions would be added for ``TARGET2 Component System'' 
(referencing the real-time gross settlement system of any central bank 
that is part of the TARGET2 system where the operator of such system is 
a Concentration Bank under the Rules), ``TARGET2 Concentration Bank'' 
(referencing a Concentration Bank under the Rules that is the operator 
of a TARGET2 Component System), ``TARGET2 PM Account'' (referencing a 
cash account of the Clearing House in TARGET2), and ``TARGET2 Terms and 
Conditions'' (referencing the terms and conditions that apply to 
participation in the relevant TARGET2 Component System). The definition 
of ``Payment Transfer Order'' would be amended to add TARGET2 Payment 
Transfer Orders, as discussed below. Subsequent provisions of Rule 1201 
would be renumbered accordingly. It is contemplated that ICE Clear 
Europe's account with TARGET2-ECB would constitute a TARGET2 PM Account 
and that the ECB would constitute a TARGET2 Concentration Bank for 
purposes of these Rules as proposed to be amended.\10\ ICE Clear Europe 
intends to designate the ECB as a Concentration Bank under the Rules 
for these purposes.
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    \10\ Similarly, while they remain operational, ICE Clear 
Europe's existing accounts with TARGET2-NL will constitute a TARGET2 
PM Accounts and DNB will constitute a TARGET2 Concentration Bank. It 
is expected that after the TARGET2-ECB account has been opened, the 
TARGET2-NL account of ICE Clear Europe would be closed and DNB would 
cease to be a Concentration Bank.
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    In Rule 1202(a), a new clause (v) would be added to provide that a 
Payment Transfer Order will arise and enter ICE Clear Europe's 
designated system at the moment ICE Clear Europe's TARGET2 PM Account 
is debited or credited with funds, pursuant to the Clearing House 
sending a SWIFT instruction to the TARGET2 Concentration Bank. Such a 
Payment Transfer Order would be defined as a ``TARGET2 Payment Transfer 
Order.'' Rule 1202(a)(iv), which addresses Payment Transfer Orders 
involving Clearing House bank accounts, would be amended to exclude 
TARGET2 Concentration Banks (which would be covered instead by the new 
clause (v)). Rule 1202(e)(ii), which addresses the amounts subject to a 
Payment Transfer Order, would be amended to cover TARGET2 Payment 
Transfer Orders. Rule 1202(m), which specifies the parties subject to a 
Payment Transfer Order, would be amended to add a new clause (iv) 
specifying that a TARGET2 Payment Transfer Order would have effect 
between the relevant TARGET2 Concentration Bank and the Clearing House. 
Subsequent provisions of Rule 1202(m) would be renumbered accordingly.
    In Rule 1203, a new paragraph (c) would be added to provide that a 
TARGET2 Payment Transfer Order will become irrevocable at the earlier 
of (i) the moment the TARGET2 Payment Account is credited or debited or 
(ii) when or during the period in which any relevant payment settlement 
algorithm used in TARGET2 commences or is running. The approach is 
intended to be consistent with the point at which payment order becomes 
irrevocable under the TARGET2 Terms and Conditions. Subsequent 
provisions of Rule 1203 would be renumbered accordingly.
(b) Statutory Basis
    ICE Clear Europe believes that the proposed amendments to the 
Clearing Rules are consistent with the requirements of Section 17A of 
the Act \11\ and the regulations thereunder applicable to it including 
the standards under Rule 17Ad-22.\12\ In particular, Section 
17A(b)(3)(F) of the Act \13\ requires, among other things, that the 
rules of a clearing agency be designed to promote the prompt and 
accurate clearance and settlement of securities transactions and, to 
the extent applicable, derivative agreements, contracts, and 
transactions, the safeguarding of securities and funds in the custody 
or control of the clearing agency or for which it is responsible, and 
the protection of investors and the public interest. The amendments are 
intended to accommodate the Clearing House's use of TARGET2-ECB 
accounts (and would also apply to the Clearing House's use of TARGET2-
NL accounts whilst they remain operational) for purposes of settling 
Euro payments through the TARGET2 system in central bank funds, 
consistent with the conditions of recognition for a tier 2 TC-CCP under 
EMIR. As such, the amendments will facilitate settlement by the 
Clearing House of Euro payments and provide for settlement finality of 
such payments in accordance with the TARGET2 Terms and Conditions. In 
ICE Clear Europe's view, the amendments will thus promote the prompt 
and accurate clearance and settlement of transactions and the 
protections of investors and the public interest, within

[[Page 12236]]

the meaning of Section 17A(b)(3)(F) of the Act. (ICE Clear Europe does 
not believe the amendments would affect the safeguarding of securities 
and funds in the custody or control of the clearing agency or for which 
it is responsible, within the meaning of that section.)
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    \11\ 15 U.S.C. 78q-1.
    \12\ 17 CFR 240.17Ad-22.
    \13\ 15 U.S.C. 78q-1(b)(3)(F).
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    Moreover, the amendments are consistent with Rule 17Ad-
22(e)(9),\14\ which requires that each covered clearing agency 
``conduct its money settlements in central bank money, where available 
and determined to be practical by the board of directors of the covered 
clearing agency''. The amendments will facilitate ICE Clear Europe's 
opening accounts in TARGET2, and thereby permit it to conduct money 
settlements in Euro in central bank funds and to reduce the potential 
for conflicts between the rules governing ICE Clear Europe's settlement 
system and those governing the TARGET2 System where ICE Clear Europe 
holds and uses accounts in the TARGET2 System. As a result, the 
amendments would be consistent with the requirements of Rule 17Ad-
22(e)(9).
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    \14\ 17 CFR 240.17Ad-22(e)(9).
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    Rule 17Ad-22(e)(8) \15\ requires the covered clearing agency to 
``define the point at which settlement is final to be no later than the 
end of the day on which the payment or obligation is due and, where 
necessary or appropriate, intraday or in real time.'' The amendments to 
Part 12 of the Rules will establish the time at which Payment Transfer 
Orders are effective and irrevocable for Euro payments made through the 
TARGET2 System. In accordance with the TARGET2 Terms and Conditions, 
such payments will be effected, and become final, on a real-time basis. 
The amendments are thus consistent with the requirements of Rule 17Ad-
22(e)(8).
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    \15\ 17 CFR 270.17Ad-22(e)(8).
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    Rule 17Ad-22(e)(1) requires that the covered clearing agency 
``provide for a well-founded, clear, transparent and enforceable legal 
basis for each aspects of its activities in all relevant 
jurisdictions.'' As discussed above, the amendments are being made to 
permit ICE Clear Europe to have a central bank account for Euro 
payments in accordance with Article 25(2b) of EMIR, as applicable to 
ICE Clear Europe as a tier 2 TC-CCP. The amendments are, therefore, 
necessary and desirable to maintain ICE Clear Europe's status as a 
recognized TC-CCP under EMIR. The amendments also reduce the potential 
for conflicts between the settlement finality rules governing ICE Clear 
Europe's settlement system and those governing relevant TARGET2 
components. The amendments will therefore further compliance with 
article 5(4) of EU Regulation 153/2013, as on-shored in the United 
Kingdom and as applicable in the EU, which requires a CCP to ``identify 
and analyse potential conflicts of law issues and develop rules and 
procedures to mitigate legal risk resulting from such issues''. As a 
result, the amendments enhance the legal framework of the Clearing 
House in the UK and EU, and as such are consistent with the 
requirements of Rule 17Ad-22(e)(1).

(B) Clearing Agency's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed rule changes would 
have any impact, or impose any burden, on competition not necessary or 
appropriate in furtherance of the purpose of the Act. The amendments 
will not affect the rights or obligations of Clearing Members or the 
terms of cleared Contracts. The amendments are designed to facilitate 
establishment and use by the Clearing House of a TARGET2-ECB payment 
account to permit real-time settlement of Euro-based payments as 
between the Clearing House's own accounts, and would not affect 
significantly the rights of Clearing Members. As a result, ICE Clear 
Europe does not expect that the proposed changes will adversely affect 
access to clearing or the ability of Clearing Members, their customers 
or other market participants to continue to clear contracts. ICE Clear 
Europe also does not believe the amendments would materially affect the 
cost of clearing or otherwise limit market participants' choices for 
selecting clearing services. As a result, ICE Clear Europe does not 
believe the proposed rule changes impose any burden on competition that 
is inappropriate in furtherance of the purposes of the Act.

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

    Written comments relating to the proposed rule changes have not 
been solicited or received by ICE Clear Europe. ICE Clear Europe will 
notify the Commission of any written comments received with respect to 
the proposed rule change.

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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \16\ and 
Rule 19b-4(f)(6) \17\ thereunder.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).
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    ICE Clear Europe has requested that the Commission waive both the 
five-day pre-filing requirement and the 30-day delayed operative date 
under Rule 19b-4(f)(6)(iii) \18\ so that the proposed rule change may 
become effective and operative upon filing with the Commission. ICE 
Clear Europe has satisfied the five-day pre-filing requirement already, 
so the Commission only considers whether to waive the 30-day delayed 
operative date.
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    \18\ 17 CFR 240.19b-4(f)(6)(iii).
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    ICE Clear Europe believes that waiver of the 30-day delayed 
operative date is warranted because the proposed rule change would not 
(i) significantly affect the protection of investors or the public 
interest and (ii) impose any significant burden on competition.
    With respect to (i), ICE Clear Europe maintains that the proposed 
rule change would in practice affect transfers between different bank 
accounts of ICE Clear Europe (including TARGET2 PM Accounts), which are 
not transfers involving payments to or from Clearing Members. 
Accordingly, ICE Clear Europe states that the proposed rule change 
would have no effect on the safeguarding of funds or securities in the 
custody or control of ICE Clear Europe, nor significantly affect any 
other rights or obligations of ICE Clear Europe, Clearing Members, 
Sponsored Principals or other persons using the clearing service. ICE 
Clear Europe further maintains that the proposed rule change would not 
affect the terms of contracts it clears or ICE Clear Europe's financial 
resources or risk models. As a result, ICE Clear Europe does not 
believe the proposed rule change would significantly affect the 
protection of investors or the public interest.
    With respect to (ii), ICE Clear Europe maintains that the proposed 
rule change would not impose any new obligations on Clearing Members, 
affect significantly the rights of Clearing Members, or affect the cost 
of clearing or access to clearing for market participants. As a result, 
in ICE Clear Europe's view, the proposed rule change would not impose 
any significant burden on competition.

[[Page 12237]]

    The Commission believes that the proposed rule change would only 
affect transfers between different bank accounts of ICE Clear Europe 
(including TARGET2 PM Accounts), not transfers involving payments to or 
from Clearing Members. As a result, the Commission does not believe the 
proposed rule change would have any effect on the safeguarding of funds 
or securities in the custody or control of ICE Clear Europe or any 
other rights or obligations of ICE Clear Europe, Clearing Members, 
Sponsored Principals or other persons using the clearing service. 
Accordingly, the Commission believes the proposed rule change would not 
significantly affect the protection of investors or the public 
interest.
    Moreover, the Commission believes the proposed rule change would 
not impose any new obligations on Clearing Members, affect 
significantly the rights of Clearing Members, or affect the cost of 
clearing or access to clearing for market participants. Accordingly, 
the Commission believes the proposed rule change would not impose any 
significant burden on competition.
    Because the Commission believes the proposed rule change would not 
(i) significantly affect the protection of investors or the public 
interest and (ii) impose any significant burden on competition, the 
Commission believes that waiver of the 30-day operative delay would not 
itself significantly affect the protection of investors or the public 
interest and impose any significant burden on competition. Moreover, 
the Commission believes that the delay of the operation of the proposed 
rule change through the 30-day operative delay could impede ICE Clear 
Europe's compliance with its requirements under EMIR. As ICE Clear 
Europe notes, the proposed rule change would allow ICE Clear Europe to 
establish a TARGET2-ECB account, which is necessary in order to further 
compliance by ICE Clear Europe with the policy underlying Article 
25(2b) of EMIR applicable to a tier 2 TC-CCP in light of the United 
Kingdom's exit from the European Union. ICE Clear Europe seeks to 
establish such an account to replace its existing TARGET2-NL account by 
the end of March 2021. Any delay in implementing the amendments, and 
establishing the TARGET2-ECB account, could affect ICE Clear Europe's 
ability to comply with applicable EU requirements and maintain 
recognition. Thus, the Commission believes that waiving the 30-day 
operative delay would allow ICE Clear Europe to comply with applicable 
EU requirements and maintain recognition, thus providing certainty to 
ICE Clear Europe and its Clearing Members, while not significantly 
affecting the protection of investors or the public interest and 
imposing any significant burden on competition. Therefore, the 
Commission designates the proposed rule change as operative upon 
filing.\19\
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    \19\ As noted, ICE Clear Europe satisfied the five-day pre-
filing requirement. For purposes only of waiving the 30-day 
operative delay, the Commission has considered the proposed rule 
change's impact on efficiency, competition, and capital formation. 
See 15 U.S.C. 78c(f).
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    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.

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

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml) or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#a7d5d2cbc28ac4c8cacac2c9d3d4e7d4c2c489c0c8d1"><span class="__cf_email__" data-cfemail="394b4c555c145a5654545c574d4a794a5c5a175e564f">[email protected]</span></a>. Please include 
File Number SR-ICEEU-2021-004 on the subject line.

Paper Comments

    <bullet> 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-2021-004. 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, 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-2021-004 and should be submitted on or before March 23, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04221 Filed 3-1-21; 8:45 am]
BILLING CODE 8011-01-P


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