Maria Alarcon

Manager, Legal

July 29, 2022

Re: Updates to Clearing Rules Pursuant to 

Section 5c(c)(1) of the Commodity Exchange 

Act and Commission Regulation 40.6(a)

VIA ELECTRONIC PORTAL

Mr. Christopher Kirkpatrick

Secretary

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, NW

Washington, D.C. 20581

Dear Mr. Kirkpatrick:

ICE Clear Credit LLC (“ICE Clear Credit” or “ICC”) hereby submits, pursuant to Section 5c(c)(1) of the 

Commodity Exchange Act (the “Act”) and Commodity Futures Trading Commission (“Commission”) 

Regulation 40.6(a), a self-certification of changes to its Clearing Rules (the “Rules”). ICC is registered with 

the Commission as a derivatives clearing organization (“DCO”). ICC intends to implement the changes no 

sooner than the tenth business day following the filing of this submission with the Commission at its 

Washington, D.C. headquarters and with its Chicago regional office.

ICC proposes to implement certain amendments to its Rules to permit it to take advantage of certain 

additional settlement finality protections under applicable United Kingdom (“UK”) and European Union 

(“EU”) law. This submission includes a description of the changes. Certification of the changes pursuant 

to Section 5c(c)(1) of the Act and Commission Regulation 40.6(a) is also provided below. 

The purpose of the proposed changes is to modify certain provisions of the Rules to permit the clearing 

house to take advantage of certain protections for default rights and remedies under applicable UK and EU 

Settlement Finality Laws and regulations. The amendments are expected to be principally relevant in the 

case of an insolvency of an ICC clearing participant (“Participant”) domiciled in the UK or an EU member 

state. The amendments would rely on certain protections in such Settlement Finality Laws and regulations 

that provide additional support (on top of existing protections in applicable law) for the enforceability of the 

clearing house’s default rights and remedies under the Rules without interference in such an insolvency. 

By way of background, the EU Settlement Finality Directive 1introduced various insolvency-related 

protections in relation to “designated systems” used by EU participants to transfer financial instruments and 

payments, and participation in those systems. The Settlement Finality Directive aims to ensure that as a 

matter of EU member state laws, transfer orders which enter into such systems are finally settled, 

regardless of whether the sending participant has gone into an insolvency process. Transfer orders for this 

purpose include instructions to make cash payments (including margin payments) and instructions to 

transfer securities (including as margin or in physical settlement of a cleared transaction, if applicable). 

Under the Settlement Finality Directive, transfer orders and related netting arrangements are enforceable, 

even in the event of insolvency proceedings against a participant, provided that the transfer order was 

entered into the system before the opening of the insolvency proceeding.2 Further, under the Settlement 

1 EU Directive 98/26/EC.

2 Settlement Finality Directive Article 3(1).
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Finality Directive, the right of the operator of a designated system to realize and apply collateral security 

provided by a participant would not be affected by insolvency proceedings against the participant.3

“Designated systems” are defined as formal arrangements between three or more participants with common 

rules and standard arrangements for clearing or execution of transfer orders between participants which 

are governed by the law of an EU member state and have been designated as a system and notified to the 

European Securities and Markets Authority (“ESMA”).4 Although the Settlement Finality Directive itself does 

not establish an equivalent regime for systems operated under the laws of a non-EU member state (“thirdcountry systems”), such as United States (“US”) clearing houses, Recital 7 of the Settlement Finality 

Directive provides that member states may choose to apply the provisions of the Settlement Finality 

Directive to their domestic institutions which participate directly in third country systems and to collateral 

security provided in connection with participation in such systems. As a result, in some EU member states 

it is possible for a third country system such as ICE Clear Credit to receive national designation or be 

otherwise protected as a designated system for the purposes of that member state’s national law. 

The UK has implemented similar settlement finality regulations that continue to apply following the 

withdrawal of the UK from the EU, and which are also potentially applicable to UK institutions that participate 

in third country systems (such as a US clearing house).5 

As discussed in further detail herein, ICE Clear Credit is proposing to adopt amendments to its Rules to 

introduce explicit provisions relating to the settlement finality of transfer orders, in order to take advantage 

of the protections of Settlement Finality Laws. Specifically, the amendments would address which “transfer 

orders” arise in its system, when they become irrevocable, who is bound by them and when they terminate. 

ICE Clear Credit believes that the amendments would facilitate obtaining the relevant protections of the 

Settlement Finality Directive and UK Settlement Finality Regulations, which will principally be relevant in 

the case of an insolvency of a Participant that is domiciled in an EU member state or in the UK. The 

amendments would not otherwise affect the clearing house’s rights and obligations under the Rules, 

including default rights and remedies, and would not be expected to be relevant to an insolvency proceeding 

involving a Participant organized in the US or otherwise outside of the EU or the UK. 

ICE Clear Credit would adopt a new Part 10 of the Rules addressing Settlement Finality Laws. Rule 1000 

would add a number of related definitions, including definitions for relevant legislation and regulations, such 

as “EMIR,” “Financial Collateral Directive,” “Financial Collateral Regulations,” “FSMA,” “Settlement Finality 

Directive,” “Settlement Finality Regulations” and “UK EMIR.” The rule would also adopt key definitions 

relating to the settlement finality provisions, including “ICE Systems” (referencing ICE Clear Credit’s trade 

registration, clearing processing and finance systems), “SFD System” (referencing the third country system 

operated by ICE Clear Credit for purposes of the Settlement Finality Laws), “Payment Transfer Order,” 

“Securities Transfer Order” and “Transfer Order” (representing the types of transfer orders used in the ICE 

system and covered by the Settlement Finality Laws), “SFD Participant” (referencing ICE Clear Credit itself, 

its Participants organized in the European Economic Area (“EEA”) or in the UK, among certain other 

relevant persons), “SFD Custodian” (referencing a custodian located in the EEA or the UK used by ICE 

Clear Credit or a Participant for the holding or transfer of Non-Cash Collateral), “SFD Financial Institution” 

(referencing a financial institution located in the EEA or UK used by ICE Clear Credit or a Participant for 

purpose of the deposit or transfer of cash), “SFD Security” (referencing a security as defined in the 

Settlement Finality Laws), “Indirect Participant” (referencing Non-Participant Parties that fall within the 

3 Settlement Finality Directive Article 9.

4 Settlement Finality Directive Article 2(a). 

5 Financial Markets and Insolvency (Settlement Finality) Regulations 1999. 

As used herein, the EU Settlement Finality Directive, national implementing legislation and the UK 

Settlement Finality Regulations are collectively referred to as “Settlement Finality Laws.”
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definition of indirect participant under the Settlement Finality Laws), and “Non-Cash Collateral” (referencing 

Margin or Collateral in the form of a security). 

New Rule 1001 would set out general principles relevant to implementation of the EU and UK settlement 

finality arrangements. Subsection (a) would provide that ICC is the operator of a third country system for 

purposes of relevant Settlement Finality Laws, and that Chapter 10 of the Rules would apply to ICE Clear 

Credit and SFD Participants to the extent that the Settlement Finality Laws are applicable to such persons. 

Subsection (b) would require SFD Participants to comply with actions taken by ICC pursuant to Chapter 10 

and the relevant Settlement Finality Laws, and to acknowledge that the Settlement Finality Laws modify 

certain otherwise applicable provisions of insolvency laws. Subsection (c) would provide that each SFD 

Participant is on notice of the provisions of Chapter 10, and by virtue of participating in the SFD System, is 

deemed to agree to the application of Chapter 10 (including in the event of any conflict with any other 

agreement or obligation). Subsection (d) would provide an additional acknowledgment that Margin and 

Collateral transferred to ICC under the Rules fall within certain protections for collateral arrangements under 

the Settlement Finality Laws. 

New Rule 1002 would address the timing and circumstances in which various types of Transfer Orders 

would arise for purposes of the ICC SFD System, specifically Payment Transfer Orders and Securities 

Transfer Orders in various circumstances, including for transfer of positions (“Position Transfer Orders”), 

transfer of non-cash collateral (“Collateral Transfer Orders”), submission of new trades for clearing (“New 

Transaction Clearing Orders”), backloading trades for clearing (“Backloaded Transaction Clearing Orders, 

and together with New Transaction Clearing Orders, “Transaction Clearing Orders”), and physical 

settlement under cleared CDS contracts (“CDS Physical Settlement Orders”). The rule would also specify 

the subject matter of each type of Transfer Order (e.g., a payment in respect of a Payment Transfer Order) 

and the parties in respect of which each type of Transfer Order would apply and have effect (e.g., in the 

case of a Payment Transfer Order, the affected Participant (if it is an SFD Participant), ICE Clear Credit, 

and any affected SFD Financial Institution). Rule 1002 would also address the possibility of multiple 

Transfer Orders existing in respect of the same obligation (which may exist, but would not result in the 

duplication of any obligation), and the fact that netting or close out of Contracts would not affect the status 

of Transfer Orders. The rule also states, consistent with the general approach of the Rules, that where a 

Transfer Order applies to an Indirect Participant, it would not affect the liability of any SFD Participant 

pursuant to the same Transfer Order. 

Rule 1003 would specify the time at which each type of Transfer Order (specifically, Payment Transfer 

Orders, Position Transfer Orders, Collateral Transfer Orders, Transaction Clearing Orders and CDS 

Physical Settlement Orders) becomes irrevocable for purposes of the relevant Settlement Finality Laws. 

Payment Transfer Orders would become irrevocable at the earlier of the time payment is received or at the 

time the relevant financial institution used by ICC for this purpose sends a SWIFT or other confirmation that 

payment has been made. Collateral Transfer Orders similarly would become irrevocable at the earlier of 

the time the transfer is received or a related securities transfer order in a relevant securities transfer system 

becomes irrevocable. Position Transfer Orders would become irrevocable at the time the position transfer 

is recorded in the ICC systems, and Transaction Clearing Orders would become irrevocable at the 

applicable Novation Time under the Rules. CDS Physical Settlement Orders would become irrevocable at

the earliest of (1) the time the Matched Delivery Buyer has irrevocably instructed its custodian to transfer 

the relevant securities to the Matched Delivery Seller, (2) the time the relevant instrument is delivered or 

assigned, or (3) the time notice is otherwise given under the Rules that the Matched Delivery Pair have 

settled the relevant Matched Delivery Contracts. Under the Rule, as from the time when the Transfer Order 

becomes irrevocable, it cannot be revoked or purported to be revoked by any SFD Participant or ICE Clear 

Credit and will be binding on all SFD Participants. 

Rule 1004 would address variations or cancellations of Transfers Orders prior to the time they become 

irrevocable, in specified circumstances. These circumstances include, for any Transfer Order, cases where 

the order is affected by manifest or proven error or an error agreed by all affected SFD Participants. 
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Additional grounds for variation or cancellation apply for particular types of Transfer Order, including, in the 

case of a Payment Transfer Order or Collateral Transfer Order, where the underlying Contract is void or 

avoided under the Rules or appliable law, or amended as a result of ICC exercising its discretion under the 

Rules. Transaction Clearing Orders may be subject to variation or cancellation where the underlying trade 

is not eligible for clearing or otherwise not accepted for clearing, and Backloaded Transaction Clearing 

Orders may be subject to variation or cancellation if an error or omission is noted to ICC prior to the Novation 

Time. Similarly, variation or cancellation of a CDS Physical Settlement Order may be made if a NOPS 

Amendment Notice is validly delivered under the Rules or ICE Clear Credit Procedures. Under Rule 1004, 

in these circumstances, ICC would be permitted to make appropriate modifications to the relevant Transfer 

Order, or in the alternative to cancel the relevant Transfer Order. Rule 1004 also would not preclude ICC 

from taking steps to give rise to a new Transfer Order with opposite effect to an existing Transfer Order or 

part thereof. Rule 1004 also would provide for notice of any modification or cancellation of a Transfer Order 

to affected SFD Participants. 

Rule 1005 would specify the circumstances under which Transfer Orders are deemed satisfied. 

Specifically, Payment Transfer Orders are satisfied upon all required payments being received in 

immediately available funds or full satisfaction of the underlying obligation is otherwise made and recorded 

in ICC’s systems, free of any encumbrances. Position Transfer Orders would be deemed satisfied upon 

becoming irrevocable (at which time the relevant positions have been transferred under the Rules). 

Collateral Transfer Orders would be deemed satisfied upon ICC or the Participant, as applicable, receiving 

the Non-Cash Collateral in its account or upon the definitive record of the assets transferred by the 

Participant being updated to reflect the successful transfer of the relevant collateral. Transaction Clearing 

Orders would be deemed satisfied at the time the relevant cleared contracts arise under the Rules. A CDS 

Physical Settlement Order would be deemed satisfied at the time ICC updates its records to reflect that 

physical delivery of the relevant security has been completed or the delivery obligations of the parties are 

otherwise discharged or settled.

Rule 1006 would set out certain acknowledgements of ICC, Participants and Non-Participant Parties with 

respect to matters relating to Margin or Collateral to the extent they fall to be determined under the laws of 

an EEA member state or the UK. The amendments would clarify that such arrangements are subject to 

the EU Financial Collateral Directive or UK Financial Collateral Regulations, as applicable, and would 

provide that Participants and Non-Participant Parties would not dispute that characterization. The 

amendments would further provide that arrangements for the provision of cash Margin and Collateral 

constitute “title transfer financial collateral arrangements” and arrangements for the provision of Pledged 

Items constitute “security financial collateral arrangements”, in each case for purposes of the EU Financial 

Collateral Directive or UK Financial Collateral Arrangements, that all such Margin and Collateral constitute 

“financial collateral” for purposes of such laws, and that ICC has possession or control of such Margin and 

Collateral for purposes of such laws. The amendments would also state that for purposes of UK law, the 

security arrangements under the Rules constitute a “market charge” for purposes of the Companies Act 

1989, which provides certain protections for the enforceability of such arrangements in the event of the 

insolvency of a clearing participant. 

ICC also proposes to make certain amendments to Rule 611, which currently addresses the treatment of 

certain Rules under various insolvency laws and other protections for the enforceability of default remedies 

in the event of the insolvency of a clearing participant. The amendments would add a new subsection (f), 

which would provide that specified Rules providing for default rights and remedies would constitute default 

rules, procedures and similar arrangements as defined for purposes of relevant EU and UK law, including 

EMIR, UK EMIR, and the Settlement Finality Laws. 

Core Principle Review:

ICC reviewed the DCO core principles (“Core Principles”) as set forth in the Act. During this review, ICC 

identified the following Core Principles as being impacted:
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Settlement Procedures: The changes to the Rules are consistent with the settlement procedures 

requirements of Core Principle E and Commission Regulation 39.14. The amendments adopt explicit 

provisions relating to settlement finality of transfer orders relating to various clearing activities, most 

importantly the payment and transfer of Margin and Collateral, and the enforcement of ICC’s rights with 

respect thereto, in order to facilitate potential reliance by the clearing house on settlement finality 

protections existing under relevant Settlement Finality Laws. The amendments provide additional legal 

certainty as to the ability of the clearing house to enforce its default rights and remedies (including its rights 

to use Margin and Collateral provided by Participants under the Rules) in the event of the insolvency of a 

Participant domiciled in the EU or the UK (on top of existing protections for the enforceability of such rights 

and remedies on which the clearing house may currently rely). 

Legal Risk: The changes to the Rules are consistent with the requirements of Core Principle R and 

Commission Regulation 39.27. The amendments would provide an additional legal basis to support the 

enforceability of the clearing house’s default rules in the context of an insolvency of a Participant that is 

domiciled in an EU member state or in the UK. The amendments would in particular facilitate the clearing 

house’s taking advantage of protections for the enforceability of transfer orders, including in default 

scenarios, based on the EU Settlement Finality Directive and UK Settlement Finality Regulations. The 

amendments thus enhance the legal certainty of the framework supporting ICC’s activities in those 

jurisdictions. 

Default Management: The changes to the Rules are consistent with the default rules and procedures 

requirements of Core Principle G. ICC is not proposing to change the substance of its existing default 

remedies and procedures under the Rules and the ICE Clear Credit Procedures. The amendments are 

intended to enhance the legal certainty of those existing default remedies and procedures in the context of 

an insolvency of a clearing participant domiciled in the EU or the UK by facilitating the clearing house’s 

ability to take advantage of protections for transfer orders under applicable Settlement Finality Laws. 

Amended Rules:

The proposed changes consist of revisions to the ICC Rules to adopt a new Part 10 and to amend Rule 

611. 

Annexed as an Exhibit hereto is the following:

A. Proposed amendments to the ICC Rules.

Certifications:

ICC hereby certifies that the changes comply with the Act and the regulations thereunder. There were no 

substantive opposing views to the changes.

ICC further certifies that, concurrent with this filing, a copy of the submission was posted on ICC’s website, 

and may be accessed at: https://www.theice.com/clear-credit/regulation.
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ICC would be pleased to respond to any questions the Commission or the staff may have regarding this 

submission. Please direct any questions or requests for information to the attention of the undersigned at 

(312) 836-6854.

Sincerely,

Maria Alarcon

Manager, Legal