Document ID: SEC-2020-1896-0001
Agency: sec
Document Type: Notice
Title: Policy Statement; Guidance: Statement on Central Counterparties Authorized Under the European Markets Infrastructure Regulation Seeking To Register as a Clearing Agency or to Request Exemptions From Certain Requirements Under the Securities Exchange Act
Posted Date: 2020-11-30T05:00Z

[Federal Register Volume 85, Number 230 (Monday, November 30, 2020)]
[Notices]
[Pages 76635-76640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26285]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90492]

Statement on Central Counterparties Authorized Under the European 
Markets Infrastructure Regulation Seeking To Register as a Clearing 
Agency or To Request Exemptions From Certain Requirements Under the 
Securities Exchange Act of 1934

AGENCY: Securities and Exchange Commission.

ACTION: Policy statement; guidance.

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SUMMARY: The Securities and Exchange Commission (``SEC'') is issuing a 
policy statement and guidance regarding future applications from a 
central counterparty (``CCP'') authorized under the European Market 
Infrastructure Regulation (``EMIR'') and based in the European Union 
(an ``EU CCP'') that is seeking to register as a clearing agency with 
the SEC under the Securities Exchange Act of 1934 (``Exchange Act'') 
and future requests by EU CCPs for exemptions from certain SEC 
requirements.

DATES: The Commission's policy statement is effective November 30, 
2020.

FOR FURTHER INFORMATION CONTACT: Matthew Lee, Assistant Director; 
Stephanie Park, Senior Special Counsel; or Claire Noakes, Special 
Counsel; at 202-551-7000 in the Division of Trading and Markets, U.S. 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549.

SUPPLEMENTARY INFORMATION: The SEC regulates as clearing agencies two 
EU CCPs authorized under EMIR that provide CCP services for security-
based swaps.\1\ Where an EU CCP has been authorized under EMIR, it is 
subject to requirements that are generally consistent with the same 
international standards for CCPs as are the SEC's requirements for 
CCPs. Based on these factors, the SEC is issuing this policy statement 
and guidance to describe the processes for EU CCPs seeking to register 
as clearing agencies or to request exemptions from SEC requirements. To 
provide transparency into SEC processes and to highlight efficient ways 
that EU CCPs can comply with SEC rules, this policy statement and 
guidance identifies the information that an EU CCP can provide in its 
registration application and provides a summary of the factors that the 
SEC will consider, as applicable, with respect to future requests for 
exemptions. Specifically, with respect to the registration process, EU 
CCPs can use preexisting materials, including self-assessments, in 
their applications to demonstrate compliance with EMIR and consistency 
with SEC requirements for CCPs. Such materials and self-assessments 
could facilitate both the EU CCP's efficient preparation of the 
application and the SEC's review of applications for registration. With 
respect to requests for exemptions, the SEC identifies below specific 
factors that it will consider if relevant to a particular future 
request for an exemption by an EU CCP. As an example of one such 
factor, an EU CCP may request an exemption because it has determined 
that the application of SEC requirements would impose unnecessary, 
duplicative, or inconsistent requirements in light of EMIR requirements 
to which it is subject. Issuing this policy statement and guidance is 
relevant to the SEC's ongoing dialogue with the European Commission 
(``EC'') regarding the EC's consideration of whether to find the SEC's 
regulatory framework for CCPs equivalent to EMIR.
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    \1\ The Commission has based this statement, in part, on its 
experience regulating EU CCPs for security-based swaps, and 
therefore this release primarily discusses the Commission's 
processes for registration as a clearing agency and for requesting 
exemptions with respect to such CCPs. However, the Commission notes 
that the policy and guidance set forth in this statement, by its 
terms and as set forth below, also applies to an EU CCP that clears 
securities other than security-based swaps.
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Table of Contents

I. Introduction
II. Background
    A. SEC Requirements for CCPs
    B. EMIR Requirements for CCPs
    C. SEC-Registered Clearing Agencies Based in the EU
III. SEC Process for Review of Applications for Registration as a 
Clearing Agency and Requests for Exemptions by EU CCPS
    A. Applications for Registration as a Clearing Agency
    B. Requests for Exemptions
IV. Conclusion

I. Introduction

    The SEC regulates centralized clearance and settlement systems for 
securities, including those provided by CCPs and central securities 
depositories (``CSDs''). As part of the Securities Acts Amendments of 
1975 (``1975 Amendments''), Congress directed the SEC to facilitate the 
establishment of a national system for the prompt and accurate 
clearance and settlement of securities transactions.\2\ Since the 
enactment of the 1975 Amendments, the SEC has given regular 
consideration to how non-U.S. clearing agencies fit within the SEC's 
regulatory framework under the Exchange Act.\3\ The SEC also acted to 
facilitate the central clearing of credit default swaps by permitting 
certain entities that performed CCP services to clear and settle credit 
default

[[Page 76636]]

swaps on a temporary, conditional basis.\4\
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    \2\ See 15 U.S.C. 78q-1(a)(2); see also Report of the Senate 
Committee on Banking, Housing & Urban Affairs, S. Rep. No. 94-75, at 
4 (1975) (stating that ``[t]he Committee believes the banking and 
security industries must move quickly toward the establishment of a 
fully integrated national system for the prompt and accurate 
processing and settlement of securities transactions'').
    \3\ See Release No. 34-11904 (Dec. 5, 1975), 40 FR 57872 (Dec. 
12, 1975) (considering requests for exemptions from non-U.S. 
clearing agencies).
    \4\ The SEC authorized five entities to clear credit default 
swaps, three of which were based in the EU. See Exchange Act Release 
Nos. 60372 (July 23, 2009), 74 FR 37748 (July 29, 2009), 61973 (Apr. 
23, 2010), 75 FR 22656 (Apr. 29, 2010) and 63389 (Nov. 29, 2010), 75 
FR 75520 (Dec. 3, 2010) (CDS clearing by ICE Clear Europe Limited 
(``ICEEU''); 60373 (July 23, 2009), 74 FR 37740 (July 29, 2009), 
61975 (Apr. 23, 2010), 75 FR 22641 (Apr. 29, 2010) and 63390 (Nov. 
29, 2010), 75 FR 75518 (Dec. 3, 2010) (CDS clearing by Eurex 
Clearing AG); 59578 (Mar. 13, 2009), 74 FR 11781 (Mar. 19, 2009), 
61164 (Dec. 14, 2009), 74 FR 67258 (Dec. 18, 2009), 61803 (Mar. 30, 
2010), 75 FR 17181 (Apr. 5, 2010) and 63388 (Nov. 29, 2010), 75 FR 
75522 (Dec. 3, 2010) (CDS clearing by Chicago Mercantile Exchange, 
Inc.); 59527 (Mar. 6, 2009), 74 FR 10791 (Mar. 12, 2009), 61119 
(Dec. 4, 2009), 74 FR 65554 (Dec. 10, 2009), 61662 (Mar. 5, 2010), 
75 FR 11589 (Mar. 11, 2010) and 63387 (Nov. 29, 2010), 75 FR 75502 
(Dec. 3, 2010) (CDS clearing by ICE Trust US LLC); 59164 (Dec. 24, 
2008), 74 FR 139 (Jan. 2, 2009) (temporary CDS clearing by LIFFE A&M 
and LCH.Clearnet Ltd.).
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    In 2010, Title VII of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (``Dodd-Frank Act'') amended the Exchange Act 
to provide for the comprehensive regulation of security-based swaps by 
the SEC.\5\ In 2012, the EU adopted the EMIR framework to accomplish 
many of the same objectives in the EU. The oversight and regulation of 
security-based swap activity that is centrally cleared by both the SEC 
and under EMIR occurs through the registration and supervision of 
clearing agencies, among other things. Under its regulatory framework 
for clearing agencies, the SEC supervises clearing agencies that are 
subject to EU regulatory frameworks,\6\ including EMIR.
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    \5\ See Public Law 111-203, 124 Stat. 1376 (2010).
    \6\ In addition to EU CCPs discussed in this document, the SEC 
regulates clearing agencies that provide CSD services. See Release 
Nos. 34-38328 (Feb. 24, 1997), 62 FR 9225 (Feb. 28, 1997) (order 
approving application for exemption from clearing agency 
registration for Cedel Bank, now Clearstream); 34-39643 (Feb. 11, 
1998), 63 FR 8232 (Feb. 18, 1998) (order approving application for 
exemption from clearing agency registration by Morgan Guaranty Trust 
Company of New York, Brussels Office, as operator of the Euroclear 
System, now Euroclear Bank).
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    With regard to EU CCPs currently registered with the SEC as 
clearing agencies,\7\ the SEC has applied requirements commensurate and 
appropriate to the risks posed by the clearing agency functions and 
activities. The SEC believes that its supervisory approach to these EU 
CCPs has benefited from the SEC's familiarity with EMIR, including 
through the rule filing process for self-regulatory organizations 
(``SROs''),\8\ and from ongoing communication and coordination between 
SEC staff and staff at the relevant national competent authorities 
(``NCAs'') for EU CCPs. The SEC also recognizes that both EMIR and the 
SEC's regulatory frameworks are designed to be generally consistent 
with the Principles for Financial Market Infrastructures (``PFMI''),\9\ 
which are the relevant international standards for CCPs.\10\
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    \7\ As discussed in more detail in Part II.C, the SEC granted 
ICEEU an exemption from clearing agency registration on July 23, 
2009 to clear and settle credit default swaps on a temporary, 
conditional basis. ICEEU was subsequently deemed a clearing agency 
registered with the SEC on July 16, 2011. On December 16, 2016, the 
Commission registered Banque Centrale de Compensation, which 
conducts business under the name LCH SA (``LCH SA'') as a clearing 
agency, so that it may provide CCP services for security-based swaps 
to U.S. persons and LCH SA.
    \8\ An SRO must submit proposed rule changes to the SEC for 
review and approval pursuant to 17 CFR 240.19b-4 (``Rule 19b-4''). A 
stated policy, practice, or interpretation of an SRO would generally 
be deemed to be a proposed rule change. See 15 U.S.C. 78s(b)(1); 17 
CFR 240.19b-4.
    \9\ See Committee on Payment and Settlement Systems and 
Technical Committee of the International Organization of Securities 
Commissions (``CPSS-IOSCO''), Principles for financial market 
infrastructures (Apr. 16, 2012), http://www.bis.org/publ/cpss101a.pdf. In 2014, the CPSS became the Committee on Payments and 
Market Infrastructures (``CPMI'').
    \10\ Title VIII of the Dodd-Frank Act directs the SEC, when 
prescribing risk management standards for systemically important 
CCPs, to take into consideration relevant international standards 
and existing prudential requirements. See 12 U.S.C. 5464(a)(2).
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    Based on these factors, the SEC is issuing this policy statement 
and guidance to provide transparency into the processes for a new EU 
CCP applicant to (i) register with the SEC as a clearing agency to 
provide CCP services, and (ii) request exemptions from certain SEC 
requirements under the Exchange Act using preexisting materials in 
their applications that demonstrate compliance with EMIR and also 
consistency with SEC requirements for CCPs.\11\ The SEC is also 
highlighting efficient ways that EU CCPs can comply with SEC rules.
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    \11\ Pursuant to the Congressional Review Act, the Office of 
Information and Regulatory Affairs has designated this statement as 
not a ``major rule,'' as defined by 5 U.S.C. 804(2). See 5 U.S.C. 
801 et seq.
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    Part II briefly describes EMIR and the SEC's regulatory framework 
for CCPs, both of which are generally consistent with common 
international standards for CCPs, and summarizes the SEC's experience 
with supervising or otherwise engaging with EU CCPs that the SEC has 
registered as clearing agencies. Part III describes and provides 
guidance regarding the process for seeking registration and requesting 
exemptions from SEC requirements. In particular, Part III.A provides 
guidance regarding the types of documentation that can be provided to 
facilitate both the efficient preparation of an application and the 
SEC's review of the application. Part III.B describes and provides 
guidance regarding the types of exemptions the SEC has generally 
provided to EU CCPs in the past and identifies the factors that the SEC 
will consider, if relevant to a particular request for an exemption, 
when reviewing future requests for exemptions.

II. Background

A. SEC Requirements for CCPs

    SEC requirements for CCPs are codified in 17 CFR 240.17Ad-22 
(``Rule 17Ad-22'') and designed to ensure that CCPs operate consistent 
with the requirements of Section 17A of the Exchange Act, which 
establishes the national system for clearance and settlement of 
securities transactions in the United States.\12\ As a general matter, 
Rule 17Ad-22 includes policies and procedures requirements designed to 
promote the safe and reliable operation of registered clearing 
agencies, and to improve efficiency, transparency, and access to 
registered clearing agencies.\13\ Rule 17Ad-22(e) establishes an 
enhanced regulatory framework for clearing agencies that provide the 
services of CCPs and CSDs.\14\ It includes requirements for policies 
and procedures related to, among other things, financial risk 
management, governance, recovery planning, operations, and general 
business risk.\15\ In adopting Rule 17Ad-22(e), the SEC noted that it 
was consistent with the PFMI.\16\ In addition, CCPs registered

[[Page 76637]]

with the SEC as clearing agencies are also SROs under the Exchange Act 
and subject to the SRO rule filing process for proposed rule 
changes,\17\ and registered clearing agencies are subject to the 
requirements of Regulation Systems Compliance and Integrity.\18\
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    \12\ See 17 CFR 240.17Ad-22; see also Clearing Agency Standards, 
Release No. 34-68080 (Oct. 22, 2012), 77 FR 66220, 66225-26 (Nov. 2, 
2012) (``Clearing Agency Standards adopting release'').
    \13\ See Clearing Agency Standards adopting release, supra note 
13, at 66224-25.
    \14\ See 17 CFR 240.17Ad-22(e); Release No. 34-78961 (Sept. 28, 
2016), 81 FR 70786 (Oct. 13, 2016) (``CCA Standards adopting 
release''). While Rule 17Ad-22(e) originally applied to systemically 
important clearing agencies and clearing agencies for security-based 
swaps, the Commission amended the approach in 2020 so that Rule 
17Ad-22(e) applies to any clearing agency that provides the services 
of a CCP or CSD. See Release No. 34-88616 (Apr. 9, 2020), 85 FR 
28853 (May 14, 2020).
    \15\ See CCA Standards adopting release, supra note 14.
    \16\ See CCA Standards adopting release, supra note 14, at 70789 
(stating that ``the PFMI is the relevant international standard for 
systemically important financial market infrastructures, such as 
[clearing agencies]. . . . Commission staff co-chaired the working 
group within CPSS-IOSCO that drafted both the consultative and final 
versions of the PFMI, and the Commission believes that the 
requirements applicable to clearing agencies set forth in the 
Exchange Act and the rules thereunder, including [Rule 17Ad-22(e)], 
are consistent with the standards set forth in the PFMI. Regulatory 
authorities around the world are in various stages of updating their 
regulatory regimes to adopt measures consistent with the PFMI. [Rule 
17Ad-22 is] a continuation of the Commission's active effort to 
foster the development of the national clearance and settlement 
system, consistent with the requirements of the Exchange Act, and 
enhance the regulation and supervision of [clearing agencies], 
consistent with the Clearing Supervision Act.''). Similar to the 
subparts of Rule 17Ad-22(e), the PFMI includes 23 principles 
intended to address different potential sources of risk to CCPs and 
CSDs, including, among other things, legal risk, financial risk 
management, operational risk, and governance. See supra note 9.
    \17\ See supra note 8.
    \18\ See 17 CFR 242.1000 et seq.; Release No. 34-73639 (Nov. 19, 
2014), 79 FR 72251 (Dec. 5, 2014).
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    With respect to CCPs for security-based swaps, Congress has charged 
the SEC with oversight of security-based swaps and the obligation to 
ensure that risk in the U.S. securities markets is appropriately 
managed, consistent with the purposes of the Exchange Act and Title VII 
of the Dodd-Frank Act.\19\ Security-based swaps, and the CCPs that 
clear them, present unique risks to the U.S. securities markets, 
necessitating appropriate risk management by the CCPs and supervision 
by the SEC.\20\ As it does more generally with respect to clearing 
agencies, the SEC has sought to apply requirements to such CCPs 
commensurate and appropriate to these risks while recognizing that each 
CCP has different organizational and operating structures and clears 
distinct products that warrant a tailored approach to governance and 
risk management. Accordingly, the SEC's regulatory framework for CCPs 
is designed to balance imposing appropriate regulatory requirements on 
CCPs and allowing each CCP, subject to its obligations and 
responsibilities as an SRO,\21\ to implement its own policies and 
procedures consistent with Rule 17Ad-22.\22\
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    \19\ See id. at 70800.
    \20\ See, e.g., id. at 70854-55 (noting that certain 
requirements in Rule 17Ad-22(e) are applied specifically to CCPs for 
security-based swaps to protect against the risks associated with 
the jump-to-default risk and nonlinear payoffs associated with 
security-based swaps).
    \21\ See supra notes 8, 17, and accompanying text (discussing 
the SRO rule filing process in further detail).
    \22\ See CCA Standards adopting release, supra note 14, at 
70875.
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B. EMIR Requirements for CCPs

    EMIR was enacted in 2012 and, among other things, sets out 
requirements for the clearing of OTC derivatives through authorized 
CCPs.\23\ More specifically, EMIR introduces rules to reduce the 
counterparty credit risk of derivatives contracts by requiring that: 
All standardized OTC derivatives contracts must be centrally cleared 
through CCPs; if a contract is not cleared by a CCP, risk mitigation 
techniques must be applied; and CCPs must comply with stringent 
prudential, organizational, and conduct of business requirements. The 
regulation also requires market participants to monitor and mitigate 
the operational risks associated with transactions in derivatives, such 
as fraud and human error, by, for example, using electronic means to 
promptly confirm the terms of OTC derivatives contracts.\24\ Recital 90 
of EMIR also notes that EMIR is designed to be generally consistent 
with the PFMI:
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    \23\ 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, as amended, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02012R0648-20200101. 
The Commission notes that it would take substantially the same 
approach set out in this document for other jurisdictions that have 
adopted a regulatory framework that is substantially similar to 
EMIR.
    \24\ See EC, ``Derivatives/EMIR,'' https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-markets/post-trade-services/derivatives-emir_en#eu-rules-on-derivatives-contracts.

    It is important to ensure international convergence of 
requirements for CCPs and trade repositories. This Regulation 
follows the existing recommendations developed by the Committee on 
Payment and Settlement Systems (CPSS) and International Organization 
of Securities Commissions (IOSCO) noting that the CPSS-IOSCO 
principles for financial market infrastructure, including CCPs, were 
established on 16 April 2012. It creates a Union framework in which 
CCPs can operate safely. ESMA should consider these existing 
standards and their future developments when drawing up or proposing 
to revise the regulatory technical standards as well as the 
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guidelines and recommendations foreseen in this Regulation.

    In addition, the European Securities Markets Authority (``ESMA'') 
issued guidance confirming that EMIR and the relevant Regulatory 
Technical Standards are ``intended for the EU regulatory framework for 
CCPs to consistently implement the PFMI, and NCAs have already been 
applying the PFMI in their supervision of CCPs.'' \25\
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    \25\ See ESMA, Guidelines and Recommendations regarding the 
implementation of the CPSS-IOSCO Principles for Financial Market 
Infrastructures in respect of Central Counterparties (Apr. 9, 2014), 
https://www.esma.europa.eu/sites/default/files/library/2015/11/2014-1133_en.pdf.
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C. SEC-Registered Clearing Agencies Based in the EU

    The SEC regulates two registered clearing agencies based in the EU 
that provide CCP services for security-based swaps pursuant to EU 
regulatory requirements, and the SEC has sought to avoid the 
application of unnecessary, duplicative, or inconsistent regulatory 
requirements with respect to these clearing agencies. ICEEU is based in 
the United Kingdom and was an authorized CCP under EMIR until the UK 
left the EU on January 31, 2020. The Commission granted ICEEU an 
exemption from clearing agency registration on July 23, 2009, to clear 
and settle credit default swaps on a temporary, conditional basis.\26\ 
Congress deemed ICEEU a clearing agency registered with the SEC on July 
16, 2011, so that ICEEU could provide CCP services for security-based 
swaps.\27\ LCH SA is based in France and is an authorized CCP under 
EMIR. LCH SA applied for registration as a clearing agency to provide 
CCP services for security-based swaps to U.S. persons in 2016, and the 
SEC registered LCH SA on December 16, 2016.\28\
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    \26\ The Commission granted the exemption in connection with its 
efforts to facilitate the central clearing of credit default swaps 
prior to the enactment of the Dodd Frank Act. See Release Nos. 34-
60373 (July 23, 2009), 74 FR 37740 (July 29, 2009), 61975 (Apr. 23, 
2010), 75 FR 22641 (Apr. 29, 2010) and 63390 (Nov. 29, 2010), 75 FR 
75518 (Dec. 3, 2010).
    \27\ Section 763(b) of the Dodd-Frank Act amended Section 17A of 
the Exchange Act by adding new paragraph (l), 15 U.S.C. 78q-1(l), 
which provides that (i) a depository institution registered with the 
CFTC that cleared swaps as a multilateral clearing organization 
prior to the date of enactment of the Dodd-Frank Act and (ii) a 
derivatives clearing organization registered with the CFTC that 
cleared swaps pursuant to an exemption from registration as a 
clearing agency prior to the date of enactment of the Dodd-Frank Act 
will be deemed registered with the Commission as a clearing agency 
solely for the purpose of clearing security-based swaps.
    \28\ See Release No. 34-79707 (Dec. 29, 2016), 82 FR 1398 (Jan. 
5, 2017) (``LCH SA registration order'').
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    The SEC's regulatory approach to ICEEU and LCH SA avoids the 
application of unnecessary, duplicative, or inconsistent regulatory 
requirements in several ways. First, SEC requirements for clearing 
agencies generally, and in Rule 17Ad-22 specifically, are principles-
based rather than prescriptive, enabling ICEEU and LCH SA to achieve 
compliance with SEC requirements, through the SRO rule filing process, 
in a manner that is also consistent with EMIR.\29\ Second, the SEC 
requirements for CCPs, codified in Rule 17Ad-22, are generally 
consistent with the PFMI,\30\ as are the requirements under the EMIR 
framework.\31\ Third, as

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discussed further below and in Part III.B, the SEC has exempted both 
clearing agencies from certain SEC requirements that may be 
unnecessary, duplicative, or inconsistent in light of EMIR requirements 
to which the EU CCPs are subject.\32\ Fourth, the SEC remains engaged 
in a collaborative regulatory dialogue with the NCAs for each CCP, 
including the Bank of England for ICEEU and the Autorit[eacute] des 
March[eacute]s Financiers, Autorit[eacute] de Contr[ocirc]le Prudentiel 
et de R[eacute]solution, and Banque de France for LCH SA. The following 
sections provide a brief overview of the SEC's experience with each 
clearing agency, including examples of how the SEC has used its 
supervisory authority to avoid imposing unnecessary, duplicative, or 
inconsistent requirements on each clearing agency.
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    \29\ Both ICEEU and LCH SA are subject to Section 19(b) of the 
Exchange Act, which requires a registered clearing agency to submit 
proposed rule changes to the SEC for public comment and SEC review 
and approval. See supra notes 8 and 17 (further discussing the 
requirements of the rule filing process under Rule 19b-4).
    \30\ See supra note 16 and accompanying text.
    \31\ See supra note 25 and accompanying text.
    \32\ See infra notes 40-42, 55-57, and accompanying text.
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1. ICEEU
    Pursuant to the Exchange Act and Rule 19b-4 thereunder, the SEC has 
published, reviewed, and approved a number of proposed rule changes 
submitted by ICEEU that, based on the information and representations 
made by ICEEU, were intended to facilitate its efforts to comply with 
EMIR, in addition to the Exchange Act. These proposed rule changes 
addressed topics including: (i) Segregation and portability of customer 
positions and margin; (ii) risk modeling; (iii) back testing; (iv) 
stress testing; (v) default management; and (vi) liquidity risk 
management.\33\ In a number of instances, the SEC found good cause to 
provide accelerated approval \34\ for proposed rule changes derived 
from EMIR requirements.\35\ The SEC has also published notice of 
certain other immediately effective ICEEU rule filings \36\ that were 
submitted in connection with other EU-based regulatory requirements for 
EU CCPs, including the General Data Protection Regulation,\37\ the 
revised Markets in Financial Instruments Directive (``MiFID II''),\38\ 
and the Markets in Financial Instruments Regulation (``MiFIR'').\39\
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    \33\ See Release Nos. 34-73075 (Sept. 11, 2014), 79 FR 55848 
(Sept. 17, 2014); 34-72756 (Aug. 4, 2014), 79 FR 46479 (Aug. 8, 
2014); 34-72755 (Aug. 4, 2014), 79 FR 46481 (Aug. 8, 2014); 34-72754 
(Aug. 4, 2014), 79 FR 46477 (Aug. 8, 2014).
    \34\ See 15 U.S.C. 78s(b)(2)(C)(iii).
    \35\ See, e.g., ICEEU Notice of Filing Amendment Nos. 1 and 2 
and Order Granting Accelerated Approval of Proposed Rule Change, as 
Modified by Amendment Nos. 1 and 2, to Revise the ICE Clear Europe 
Clearing Rules Relating to the Application of Default Provisions in 
the Event of a Resolution Proceeding, Release No. 34-80304 (Mar. 24, 
2017) https://www.sec.gov/rules/sro/iceeu/2017/34-80304.pdf; ICEEU 
Notice of Filing and Order Granting Accelerated Approval of a 
Proposed Rule Change Relating to Amendments to the ICE Clear Europe 
CDS Risk Policy, Release No. 34-81680 (Sep. 22, 2017), https://www.sec.gov/rules/sro/iceeu/2017/34-81680.pdf; ICEEU Notice of 
Filing and Order Granting Accelerated Approval of Proposed Rule 
Change Relating to Amendments to the ICE Clear Europe Clearing Rules 
and Procedures for Indirect Clearing, Release No. 34-82422 (Dec. 29, 
2017), https://www.sec.gov/rules/sro/iceeu/2017/34-82422.pdf; ICEEU 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change, as Modified by Amendment No. 1, Relating to Intraday 
Margining, Release No. 34-84375 (Oct. 5, 2018), https://www.sec.gov/rules/sro/iceeu/2018/34-84375.pdf.
    \36\ See ICEEU Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Accounts Categories for Positions 
of Clearing Member Affiliates, Release No. 34-77809 (May 11, 2016), 
available at: https://www.sec.gov/rules/sro/iceeu/2016/34-77809.pdf; 
ICEEU Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change Relating to Certain Default Management Requirements 
under Applicable Law, Release No. 34-78762 (Sep. 2, 2016), available 
at: https://www.sec.gov/rules/sro/iceeu/2016/34-78762.pdf.
    \37\ See, e.g., ICEEU Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change Relating to Amendments to 
the Clearing Rules to Implement the European Union General Data 
Protection Regulation, Release No. 34-83311 (May 23, 2018), https://www.sec.gov/rules/sro/iceeu/2018/34-83311.pdf; ICEEU Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating 
to Amendments to the Clearing Rules, Release No. 34-85247 (Mar. 5, 
2019), https://www.sec.gov/rules/sro/iceeu/2019/34-85247.pdf.
    \38\ See ICEEU Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change Relating to the ICE Clear Europe Clearing Rules 
and Procedures, Release No. 34-86753 (Aug. 23, 2019), https://www.sec.gov/rules/sro/iceeu/2019/34-86753.pdf.
    \39\ See ICEEU Notice of Filing and Order Granting Accelerated 
Approval of Proposed Rule Change Relating to Amendments to the ICE 
Clear Europe Clearing Rules and Procedures for Indirect Clearing, 
Release No. 34-82422 (Dec. 29, 2017), https://www.sec.gov/rules/sro/iceeu/2017/34-82422.pdf.
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2. LCH SA
    When the SEC approved LCH SA's registration as a clearing agency, 
LCH petitioned for, and the SEC granted, exemptions from certain 
requirements in the Exchange Act for aspects of LCH SA's U.S. 
operations, referencing the fact that LCH SA is subject to oversight by 
regulators in other jurisdictions.\40\ Specifically, the SEC granted 
exemptions from requirements in Rule 17a-22 (concerning the filing by 
clearing agencies of certain supplemental material provided to 
participants), Rule 17Ad-22(c)(2) and (c)(2)(iii) (relating to annual 
audited financial statements), Section 19(b) of the Exchange Act and 
Rule 19b-4 thereunder (relating to SRO rule filings),\41\ and Sections 
5 and 6 of the Exchange Act (relating to registration as an 
exchange).\42\ In addition, as part of its oversight of LCH SA, the SEC 
routinely evaluates representations made in proposed rule changes 
submitted by LCH SA that state as their purpose a need to comply with 
EMIR regulatory requirements, and the SEC has been able to approve 
multiple rule filings after finding that they were consistent with the 
Exchange Act, enabling LCH SA to achieve compliance with both the 
Exchange Act and EMIR.\43\
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    \40\ See LCH SA registration order, supra note 28, at 1398.
    \41\ See supra notes 8, 17, and 29 (further discussing the 
requirements of the rule filing process under Rule 19b-4 for 
registered clearing agencies).
    \42\ See LCH SA registration order, supra note 28, at 1414-15; 
see also Release No. 34-64795 (July 1, 2011), 76 FR 39927, 39934-35 
(July 7, 2011) (further describing exemptions from Sections 5 and 6 
of the Exchange Act for clearing agencies for security-based swaps).
    \43\ See LCH SA Order Granting Accelerated Approval of a 
Proposed Rule Change Relating to the Implementation of the Markets 
in Financial Instruments Regulation, Release No. 34-82421 (Dec. 29, 
2017), https://www.sec.gov/rules/sro/lchsa/2017/34-82421.pdf; LCH SA 
Order Granting Approval on an Accelerated Basis of Proposed Rule 
Change Relating to Self-Referencing Transactions, Release No. 34-
82883 (Mar. 15, 2018), https://www.sec.gov/rules/sro/lchsa/2018/34-82883.pdf; see also LCH SA Order Granting Accelerated Approval of a 
Proposed Rule Change Relating to the Implementation of the Markets 
in Financial Instruments Regulation, Release No. 34-82421 (Dec. 29, 
2017), https://www.sec.gov/rules/sro/lchsa/2017/34-82421.pdf.
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III. SEC Process for Review of Applications for Registration as a 
Clearing Agency and Requests for Exemptions by EU CCPs

    For the reasons discussed above, the SEC is describing, and 
providing transparency into, its processes to assist EU CCPs seeking 
registration or requesting exemptions. The guidance includes 
information that an EU CCP can provide in its application and a summary 
of the factors that the SEC will consider, if applicable to a 
particular request, with respect to future exemption requests.

A. Applications for Registration as a Clearing Agency

    To register as a clearing agency, an EU CCP must submit an 
application for registration on Form CA-1 in accordance with Section 
17A of the Exchange Act and Rule 17Ab2-1 thereunder.\44\ Form CA-1 
requires an applicant to complete the elements of the form itself and 
submit nineteen exhibits. Specifically, the form itself, and Schedule A 
thereto, contain questions that are designed to elicit general 
information about the types of activities in which the applicant 
proposes to engage and the identity of the applicant's direct and 
indirect owners and other control persons, as

[[Page 76639]]

well as all affiliates engaged in the clearing agency activity. 
Exhibits A through R request specific information related to the 
applicant's business organization, financial information, operational 
capacity and access to services.\45\
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    \44\ 15 U.S.C. 78q-1; 17 CFR 240.17Ab2-1. Rule 17Ab2-1 directs 
applicants for registration as a clearing agency or applicants for 
an exemption from registration to apply on Form CA-1.
    \45\ As discussed further in Part III.A, Exhibit S is required 
for requests for an exemption from registration as a clearing 
agency. In addition to completing the Exhibit S, an EU CCP may also 
submit a petition to request an exemption from certain SEC 
requirements outside of the registration process. See supra note 40, 
infra note 55, and accompanying text.
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    The SEC is providing guidance to reference the types of documents 
that could be submitted in preparing responses to the exhibits required 
by Form CA-1. For example, an EU CCP may submit to the SEC preexisting 
documentation or a self-assessment demonstrating that (i) the EU CCP is 
in compliance with EMIR and (ii) the EU CCP's compliance with EMIR also 
satisfies the Exchange Act requirements for registration.\46\ The use 
of existing documentation or a self-assessment could help facilitate 
the efficient preparation of an EU CCP's application to the SEC, as 
well as the SEC's efficient review of the application, potentially 
resulting in shorter application preparation and review periods. The 
use of self-assessments may help facilitate the SEC's review process by 
substantiating and supplementing any preexisting documentation provided 
in response to the Form CA-1.
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    \46\ To register a clearing agency, the SEC must find that the 
clearing agency meets each of the requirements in Section 17A(b)(3) 
of the Exchange Act. See 15 U.S.C. 78q-1(b)(3)(A)-(I).
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    Accordingly, the SEC is providing guidance to articulate methods 
that future EU CCPs can use to facilitate an efficient process for 
clearing agency registration. First, the SEC encourages future EU CCP 
applicants to engage with SEC staff and submit drafts of the 
application for SEC staff to review while an EU CCP prepares the Form 
CA-1 and accompanying exhibits. SEC staff can provide technical advice 
regarding how to answer the questions on the form itself and to prepare 
the required exhibits, which could help facilitate the efficient 
preparation of a Form CA-1 application. The SEC will also look to 
coordinate with the EU CCP's NCA for the purposes of analyzing and 
evaluating any documentation submitted by the EU CCP.\47\
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    \47\ Any such cooperative arrangements entered as a precondition 
to this process could be useful for ongoing coordinated or joint 
supervisory matters between the SEC and the NCA.
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    Second, the SEC believes that much of the material requested by the 
Form CA-1 and its exhibits has likely been memorialized in preexisting 
documents that an EU CCP already provides or has provided to NCAs or 
other regulatory authorities in the EU. In particular, an EU CCP may 
use materials generated in the course of its oversight by its NCA to 
prepare its application on Form CA-1, so long as those materials are 
accurate and current in all material respects.\48\ In addition, these 
documents could be attached to a Form CA-1 application as responsive to 
particular exhibits, which can facilitate the efficient preparation of 
the form.
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    \48\ For example, an EU CCP could include any preexisting 
documents prepared for use by its NCA as an attachment to its Form 
CA-1 application and reference said attachment in response to the 
requested exhibit. Such an approach would be consistent with the 
requirements of the Form CA-1.
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    Third, future EU CCP applicants could prepare self-assessments to 
facilitate the efficient preparation of Form CA-1 and the SEC's review 
of the application to determine that the applicant meets each of the 
requirements set forth in Section 17A(b)(3) of the Exchange Act to 
register a clearing agency.\49\ In a self-assessment, an EU CCP can 
describe how satisfaction of regulatory requirements under EMIR 
supports an SEC finding that the applicant has met the requirements for 
registration as a clearing agency in Section 17A(b)(3). In the SEC's 
view, based on its experience supervising EMIR-authorized EU CCPs 
registered as clearing agencies and its familiarity with the PFMI, such 
self-assessment could significantly facilitate the SEC's review in 
order to make the determinations required in the Exchange Act. As an 
example, a self-assessment could explain how the EU CCP's compliance 
with EMIR corresponds to the requirements in the Exchange Act and 
applicable SEC rules thereunder, such as Rule 17Ad-22 and Regulation 
SCI.\50\
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    \49\ See supra note 46.
    \50\ See supra notes 12-15 (describing the requirements in Rule 
17Ad-22 applicable to CCPs), 18 (citing to the requirements of 
Regulation SCI), and accompanying text.
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B. Requests for Exemptions

    An EU CCP may submit a request for an exemption to the SEC in one 
of two ways: through the Form CA-1 application or through a separate 
petition to the SEC. First, an EU CCP may submit a request for an 
exemption from registration as part of Exhibit S to its Form CA-1 
application, either when it seeks to register as a clearing agency or 
at any time following registration by submitting an amendment to its 
application including such request. Exhibit S requires an applicant to 
provide a statement demonstrating why the approval of the requested 
exemption would be consistent with the public interest, the protection 
of investors, and the purposes of Section 17A of the Exchange Act.\51\
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    \51\ See supra note 6 (noting exemptions from registration as a 
clearing agency provided to Clearstream and Euroclear Bank).
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    Second, for other exemption requests, an EU CCP may submit a 
petition to the SEC requesting exemptions from certain SEC requirements 
for clearing agencies under the Exchange Act pursuant to the SEC's 
authority in Section 17A(b)(1) or Section 36 of the Exchange Act, as 
applicable. For example, an EU CCP may request an exemption because it 
has determined that the application of certain SEC requirements would 
impose unnecessary, duplicative, or inconsistent requirements in light 
of EMIR requirements to which the EU CCP is already subject. As 
outlined above, the SEC previously has made determinations related to 
such issues.\52\
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    \52\ See supra notes 40-42 and accompanying text; infra notes 
55-57 and accompanying text.
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    As discussed in the CCA Standards adopting release, whether the SEC 
approves an exemption is dependent on several factors, many of which 
were identified as relevant to a potential request for an exemption by 
an EU CCP.\53\ Based on the SEC's supervision of EU CCPs to date, and 
to provide certainty to EU CCPs that request exemptions, the SEC 
believes it is appropriate to make clear that it will consider the 
following factors--as applicable to a particular request--in assessing 
whether to grant an exemption to an EU CCP: (i) The nature of the EU 
CCP's activities as a clearing agency; (ii) the anticipated level or 
volume of activity that the applicant seeks to effect within the United 
States; (iii) the structure of, scope of, and requirements under EMIR 
to which the applicant is subject in its home jurisdiction; (iv) the 
extent to which the application of EMIR is relevant to the findings the 
SEC must make in considering an exemption under Section 17A(b)(1) of 
the Exchange Act; and (v) the extent to which the SEC and the relevant 
EU authority or authorities have appropriate cooperative arrangements 
in place to communicate and cooperate to fulfill their respective 
regulatory mandates. In addition, as noted in the CCA Standards 
adopting release, the Commission will also consider the extent to which 
the EU CCP is subject to appropriate supervision and enforcement by the 
NCA or other relevant authorities in the

[[Page 76640]]

context of comparable EMIR requirements.\54\
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    \53\ CCA Standards adopting release, supra note 14, at 70791.
    \54\ See id. (discussing as a relevant factor the particular 
system of supervision and oversight in a non-U.S. jurisdiction for 
purposes of evaluating any non-U.S. framework).
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    As discussed in Part II.C.2, LCH SA petitioned the SEC to request 
exemptions under the Exchange Act from the application of Rule 17a-22 
and Rules 17Ad-22(c)(2) and (c)(2)(iii), and the SEC approved this 
request based on factors similar to those discussed above.\55\ The SEC 
has also provided exemptions to LCH SA with respect to application of 
Section 19(b) of the Exchange Act and Rule 19b-4 thereunder,\56\ and to 
LCH SA and ICEEU with respect to the application of Sections 5 and 6 of 
the Exchange Act.\57\
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    \55\ See supra note 40 and accompanying text.
    \56\ See supra note 41 and accompanying text.
    \57\ See supra note 42 and accompanying text.
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IV. Conclusion

    The SEC has structured its regulatory framework for clearing 
agencies that are EU CCPs to achieve an appropriate balance between (i) 
applying the levels of oversight and supervision for clearing agencies 
that ensure consistency with the Exchange Act and, at the same time, 
(ii) avoiding the application of certain SEC requirements that are 
unnecessary, duplicative, or inconsistent relative to EMIR requirements 
that have already been applied to the EU CCP in the EU. Accordingly, 
this policy statement and guidance is designed to provide transparency 
into the SEC's processes and to describe the processes available to EU 
CCPs that seek to register as clearing agencies or request exemptions 
from certain SEC requirements. This policy statement and guidance also 
highlight efficient ways that EU CCPs can comply with SEC rules and 
describe how an EU CCP can facilitate the efficient preparation of its 
application and the SEC's review of such application, potentially 
resulting in shorter application preparation and review periods. It 
also identifies the factors that the SEC will consider with respect to 
future requests for exemptions, as applicable to a particular request. 
The SEC looks forward to continuing its dialogue with the EC regarding 
its consideration of whether to find the SEC's regulatory framework for 
CCPs equivalent to EMIR.

    By the Commission.

    Dated: November 23, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-26285 Filed 11-27-20; 8:45 am]
BILLING CODE 8011-01-P