Document ID: SEC-2014-1179-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: ICE Clear Europe Ltd.
Posted Date: 2014-07-15T04:00Z

[Federal Register Volume 79, Number 135 (Tuesday, July 15, 2014)]
[Notices]
[Pages 41320-41325]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16542]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72582; File No. SR-ICEEU-2014-11]

Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing of Proposed Rule Change Relating to EMIR Requirements

July 10, 2014.
    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 July 7, 2014, ICE Clear Europe Limited (``ICE Clear Europe'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared primarily by ICE Clear Europe. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The principal purpose of the proposed changes is to amend the ICE 
Clear Europe Procedures in order to comply with requirements under the 
European Market Infrastructure Regulation (including regulations and 
implementing technical standards thereunder, ``EMIR'') \3\ that will 
apply to ICE Clear Europe as an authorized central counterparty. ICE 
Clear Europe has separately filed with the Commission proposed changes 
to its Clearing Rules (the ``Rules'') relating to EMIR implementation 
and certain other matters (the ``Rule Submission'').\4\
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    \3\ 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 well as various 
implementing regulations and technical standards.
    \4\ Securities Exchange Act Release No. 34-72540 (July 3, 2014), 
79 FR 39429 (July 10, 2014) (SR-ICEEU-2014-09).
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II. Self-Regulatory Organization'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 these statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

(1) Purpose
    ICE Clear Europe submitted proposed amendments to its Procedures in 
order to comply with requirements under EMIR that will apply to ICE 
Clear Europe upon its authorization as a central counterparty and to 
further implement the related changes made to its Rules pursuant to the 
Rule Submission. As described in more detail in the Rule Submission, in 
order to comply with EMIR, ICE Clear Europe is adopting changes to the 
structure of customer accounts for cleared transactions to enhance 
segregation options for customers of Clearing Members. This includes 
the adoption of an individual client segregation framework (through 
Individually Segregated Sponsored Accounts and Individually Segregated 
Margin-flow Co-mingled Accounts) for Non-FCM/BD Clearing Members as 
well as certain modifications relating to the existing, omnibus client 
segregation model. The amendments to the Procedures described herein 
are intended to further implement these changes, as well as various 
other consolidating, conforming and clarifying changes and drafting 
improvements to the existing Procedures.
    As described in the Rule Submission, the amendments to the Rules 
would establish two new types of individually segregated accounts, 
Individually Segregated Margin-flow Co-mingled Accounts and 
Individually Segregated Sponsored Accounts. The proposed Rules will 
also establish multiple new types of omnibus accounts, Segregated 
Customer Omnibus Accounts (separately for each product: FX, F&O and 
CDS) and Segregated TTFCA Customer Omnibus Accounts (separately for 
each product: FX, F&O and CDS) as well as Omnibus Margin-flow Co-
mingled Accounts. These new individually segregated and omnibus 
accounts will be available only to Non-FCM/BD Clearing Members and 
their customers. For FCM/BD Clearing Members and their customers, 
individual client segregation is not being offered at this time, and 
the existing account types and segregation framework (which are 
required under applicable law) would be maintained.
    ICE Clear Europe proposes to make amendments to the following 
Procedures: the Clearing Procedures, Finance Procedures, Membership 
Procedures, Business Continuity Procedures, Complaint Resolution 
Procedures, General Contract Terms, CDS Procedures, FX Procedures, OTC 
FX Product Guide and Published Terms for FX Contracts, Auction Terms 
for FX Default Auctions, Auction Terms for F&O Default Auctions and 
Delivery Procedures. The CDS Operational Procedures are being 
eliminated as they are no longer applicable.
    The proposed Procedure amendments are described in detail as 
follows.

[[Page 41321]]

    Certain common changes are being made to all relevant sections of 
the Procedures. In each such section of the Procedures, ICE Clear 
Europe has added provisions addressing governing law, arbitration and 
submission to jurisdiction that are substantially the same as those set 
forth in the Rules (specifically, Rules 117 and 1608). In addition, 
various references to Sponsored Principals are added throughout, as 
well as conforming changes to reflect changes in defined terms in the 
Rules, such as the use of ``Buying Counterparty'' and ``Selling 
Counterparty''.
    In the Clearing Procedures, paragraphs 2.3 and 2.4 (which relate to 
position keeping and recording of contract positions) have been revised 
to reflect the additional categories of customer accounts. Similarly, 
paragraph 3.1, which addresses margining of accounts, has been revised 
to reflect the new customer accounts and the manner in which the new 
customer accounts are margined in accordance with the Rules. In 
addition, the Summary of Account Codes in Table A of the Clearing 
Procedures has been updated with the new account classes. Paragraph 4 
has also been updated to incorporate relevant defined terms for margin 
for the relevant product categories (F&O, CDS and FX), as well as 
clarify that certain terms only apply to the F&O product category, 
consistent with current practice. Paragraph 5 is amended to clarify 
that it applies only to options that are F&O contracts, as well as make 
certain other drafting clarifications. Existing paragraph 6, which 
related to ICE OTC transactions, has been removed, consistent with the 
removal of related provisions in the Rules, as such provisions are no 
longer used. A new paragraph 6 has been added addressing customer 
clearing. Paragraph 6.1 provides a procedure for a Clearing Member to 
close out or transfer customer positions to its proprietary account in 
the event of termination of the related Customer-CM Transaction 
(including as a result of a customer default). Paragraph 6.2 provides 
for transfer of customer positions at the request of a customer (this 
provision is substantially similar to existing paragraph 13.2 of the 
CDS Procedures, but has been revised to apply to all product categories 
and to apply to Sponsored Principals as well). New Paragraph 6.3 
addresses certain matters with respect to Customer-CM Collateral 
provided to Non-FCM/BD Clearing Members, including the treatment of 
such collateral that is not in the form of Permitted Cover and the 
treatment of excess collateral provided to the Clearing Member beyond 
the clearing house requirement. New Paragraph 6.4 establishes certain 
recordkeeping requirements for Clearing Members with respect to 
Customers (including as to the identity and default portability 
preferences thereof) and requirements to provide such information to 
the clearing house. New Paragraph 7 adopts certain additional defined 
terms and procedures relating to position transfers made under Rule 
408(a)(i) and Part 12 of the Rules, as well as paragraph 6 of the 
Clearing Procedures.
    The Finance Procedures have been revised in paragraph 2 to 
incorporate relevant defined terms for margin for the relevant product 
categories as well as references to Sponsored Principals. Paragraph 3, 
which addresses the use of triparty collateral arrangements with 
Euroclear Bank, has been revised to apply to Sponsored Principals in 
addition to Clearing Members. The revisions also accommodate the use of 
pledged collateral arrangements as well as title transfer collateral 
and make certain drafting clarifications. Paragraph 4, which addresses 
ICE Clear Europe's assured payment system, has been amended to include 
references to FX Clearing Members and Sponsored Principal arrangements, 
as well as clarifications for the new account categories. Paragraph 5 
contains additional procedures for the assured payment system in 
connection with the Sponsored Principal model. Paragraph 6 has been 
revised to address the requirements for payments in respect of each 
proprietary or customer account of a Clearing Member (including the new 
account categories), as well as changes to apply to Sponsored 
Principals the requirements applicable to Clearing Members. Certain 
provisions relating to margin for various product categories are also 
clarified and consolidated in this section. In particular, for drafting 
clarity, provisions relating to variation or mark-to-market margin for 
the F&O, CDS and FX product categories have been consolidated in 
Paragraph 6(i)(i) and provisions relating to original or initial margin 
for those product categories have been consolidated in Paragraph 
6(i)(ii). Certain conforming references to such margin categories have 
also been added. In connection with the removal of the CDS Operational 
Procedures, references in paragraph 6 to making of CDS contract coupon 
payments thereunder have also been removed (with the effect that such 
payments will be made as provided under Paragraph 6). Paragraph 7, 
which applies to custody accounts for non-cash margin, has been revised 
to apply to Sponsored Principals as well as Clearing Members. The 
revised paragraph also specifies the requirements for each customer and 
proprietary account and clarifies certain tax form requirements. 
Paragraphs 8-11, which address permitted cover in the form of 
securities, emissions allowances, gold bullion and transfer procedures, 
respectively, have been revised to apply to Sponsored Principals as 
well as Clearing Members. New Paragraph 8.4 prohibits the use by a 
Clearing Member, Sponsor or Sponsored Principal of securities that are 
otherwise eligible as permitted cover where such securities are issued 
by such person or one of its affiliates (except in the case of a 
covered bond otherwise eligible as permitted cover \5\ and only where 
the assets backing that bond are appropriately segregated within a 
robust legal framework that the clearing house determines to satisfy 
applicable legal requirements).
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    \5\ Covered bonds are not currently eligible as permitted cover.
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    Revised Paragraphs 9.2 and 9.3 limit, for risk management purposes, 
the use of emissions allowances to satisfy margin requirements to 
contracts in respect of which such allowances are deliverable. 
Paragraph 10 also includes certain updates to defined terms and allows 
use of gold bullion as FX original margin. Paragraph 11 has also been 
revised to reflect the use by the clearing house of direct accounts at 
securities settlement systems. The provisions of Paragraph 12 of the 
Finance Procedures, which address use of letters of credit as margin 
for F&O contracts, have been revised to address use by Sponsored 
Principals. Certain other drafting clarifications are also made, 
including to clarify the right of the clearing house to reject a letter 
of credit, to make explicit requirements as to irrevocability and lack 
of defenses and to limit acceptance of letters of credit from issuing 
banks otherwise providing critical services to the clearing house. New 
provisions have been added to address collateralization of letters of 
credit consistent with certain EU regulations.
    In paragraph 13, various conforming changes have been made to 
include references to Sponsors and Sponsored Principals, as well as 
appropriate references to original margin for the relevant product 
categories. Paragraph 14 has been revised to incorporate certain 
parameters for the FX guaranty fund, and to allow the clearing house to 
allow different currencies to be used for the guaranty fund 
contributions for any

[[Page 41322]]

product category. Revised paragraph 15 of the Finance Procedures 
specifies additional parameters for the Clearing House contributions to 
the three guaranty funds. Paragraph 15.1 specifies a minimum initial 
contribution of ICE Clear Europe's own resources (including retained 
earnings and reserves), equal to 25% of the minimum capital required to 
be maintained in accordance with article 16 of EMIR, to be divided 
among the three product category guaranty funds in proportion to the 
size of those guaranty funds. Paragraph 15.2 further specifies the 
minimum requirements for the Clearing House Initial CDS Contribution 
and Clearing House CDS GF Contribution. In the case of the Clearing 
House Initial CDS Contribution, the required amount will be the higher 
of the amount currently required under the CDS Procedures (as discussed 
below) and the minimum amount determined under paragraph 15.1 as 
discussed above. (Accordingly, the amendments will not reduce the 
current level of the Clearing House Initial CDS Contribution.) The 
provisions of Paragraph 15.2 addressing the Clearing House CDS GF 
Contribution substantially codify the existing requirements under the 
CDS Procedures. Paragraph 15.3 further specifies the minimum 
requirements for the Clearing House FX Initial Contribution and 
Clearing House FX GF Contribution, which substantially codify existing 
requirements under the FX Procedures, but in the case of the Clearing 
House FX Initial Contribution are now also subject to the minimum 
required under paragraph 15.1. Paragraph 15.4 addresses substitution of 
assets constituting Clearing House contributions, and clarifies that 
the clearing house is not obligated to make additional Clearing House 
contributions in certain situations in which clearing is being 
terminated in accordance with the Rules. Various drafting 
clarifications have also been made throughout the Finance Procedures.
    The Membership Procedures, which set out various aspects of the 
clearing membership application process, have been modified to also 
cover Sponsors and Sponsored Principals, in substantially the same 
manner as for Clearing Members. Other revisions include various updates 
to defined terms and drafting clarifications.
    The CDS Procedures contain changes to implement the Sponsored 
Principal model as well as various updates to defined terms (and 
conforming references to terms) and drafting improvements for clarity, 
as discussed herein. Paragraph 1 contains various conforming updates to 
defined terms, including the removal of unnecessary cross-references to 
certain provisions of the ISDA Credit Derivatives Definitions, the 
addition of references to Sponsored Principals and uses of the defined 
terms Matched CDS Buyers and Matched CDS Sellers in connection with 
procedures relating to restructuring credit events (as well as the 
updates to governing law and similar provisions discussed above). As 
noted in the Rule Submission, various membership requirements in 
Paragraph 2 have been moved to Part 2 of the Rules. Cross-references in 
Paragraph 3 to other Procedures sections have been updated. Paragraph 4 
has been updated to include references to Sponsored Principals as well 
as Clearing Members, and to reflect the use of CDS Trade Execution/
Processing Platforms for execution and the additional categories of 
customer accounts. In paragraph 5, various cross-references have been 
updated, along with changes reflecting the Sponsored Principal model. 
Paragraph 6, which addresses the Clearing House's contributions to the 
CDS guaranty fund, has been removed and moved to the Finance 
Procedures, as discussed above. Former paragraph 7 (now renumbered as 
paragraph 6) has been revised to incorporate the Sponsored Principal 
model as well as update the use of certain defined terms (such as CDS 
Buyer, CDS Seller, Matched CDS Buyer, Matched CDS Seller and Manual 
Notifier). Paragraph 8 (formerly paragraph 9) of the CDS Procedures has 
similarly been revised to reflect the Sponsored Principal model, as 
well as other conforming changes. In addition, new paragraph 8.1(e) 
amends the definition of Repudiation/Moratorium Credit Event in Section 
4.6 of the ISDA Credit Derivatives Definitions for sovereign CDS to 
eliminate manual notification of that credit event (consistent with the 
approach used for other credit events). Paragraph 8.2(e) has been 
modified to provide for transfer of CDS contracts in the case of a 
``Merger Without Assumption'' (a merger of a Clearing Member or 
Sponsored Principal where the successor entity fails to assume the 
obligations thereof), in the same manner as is currently provided for 
Tax Events and Tax Events Upon Merger. Paragraph 9 (formerly paragraph 
10) is similarly revised to reflect the Sponsored Principal model, 
update cross-references and make other conforming changes.
    In paragraph 10 (formerly paragraph 11) of the CDS Procedures, 
which addresses single-name European corporate CDS contracts, the 
definitions of ``Eligible SNEC Reference Obligation'' and ``SNEC 
Contract Reference Obligation'' have been revised to clarify the 
treatment of CDS contracts for which market practice is to trade 
without a specified reference obligation.\6\ The existing limitations 
in paragraph 10.4 on self-referencing CDS involving Clearing Members or 
their affiliates have been updated to apply also to Sponsors and 
Sponsored Principals. Various other conforming changes are made in 
paragraph 10. Substantially similar changes to those made in paragraph 
10 have been made in paragraph 11 of the CDS Procedures (formerly 
paragraph 12), which addresses sovereign CDS contracts. Paragraph 13, 
which addresses certain aspects of customer transactions, including 
transfer of customer positions, has been moved to paragraph 6 of the 
Clearing Procedures (and generalized to apply all product categories, 
not just CDS).
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    \6\ This change is not specifically required by EMIR, but 
reflects a clarification to trading terms that reflects existing 
market practice for CDS involving certain reference entities.
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    The FX Procedures have been revised to update various definitions, 
conform to new defined terms (including use of the defined term FX 
Trade Particulars in place of FX Transaction) and other provisions of 
the updated Rules, and incorporate the Sponsored Principal model. In 
Paragraph 2 of the FX Procedures, which addresses membership 
requirements, certain changes have been made to conform to the 
membership standards for CDS Clearing Members, including minimum 
requirements for US-based Clearing Members consistent with CFTC 
requirements. Paragraph 4, which addresses submission and acceptance of 
FX contracts, has been revised to incorporate the Sponsored Principal 
model. References to Sponsored Principals have also been added to 
paragraphs 5-7. Certain conforming changes have been made in paragraph 
9. Paragraph 10, which addressed the Clearing House contribution to the 
FX guaranty fund, has been moved to the Finance Procedures, as 
discussed above. Conforming changes have also been made in paragraph 
11, which has been renumbered paragraph 10.
    The section of the Procedures titled ``General Contract Terms and 
ICE OTC Contract Standard Contract Terms and Eligibility Criteria'' has 
been renamed ``General Contract Terms.'' Consistent with changes made 
to the Rules, references to ICE OTC Contracts have been removed as such 
contracts are no longer cleared by the Clearing House.

[[Page 41323]]

Accordingly, paragraph 3.2 of the General Contract Terms has been 
deleted.
    The Auction Terms for F&O Default Auctions have been revised to 
incorporate participation by Sponsored Principals. Paragraph 2 has also 
been revised to clarify the minimum bid requirement for Clearing 
Members as well as the ability of a Clearing Member to outsource its 
minimum bid obligations to an affiliate. In paragraph 3, the order of 
application of F&O guaranty fund contributions has been revised, such 
that guaranty fund contributions of Clearing Members that are not 
winning bidders are used first, starting with the contributions of 
those with the least competitive bids. After application of guaranty 
fund contributions of losing bidders, guaranty fund contributions of 
winning bidders may be applied on a pro rata basis. ICE Clear Europe 
believes that this approach strengthens the incentive for Clearing 
Members to participate in the auction. The same order of priority 
applies to the use of F&O assessment contributions. Paragraph 3.7 has 
also been revised to address the correction of erroneous bids. 
Paragraph 4.4 has been amended to clarify that invalid bids do not 
count toward the minimum bid requirement. Paragraph 5.4 has been 
revised to limit the Clearing House's ability to change the normal pro 
rata procedure for allocating contracts to multiple winning bidders. 
Paragraph 6 has been revised to clarify the treatment of certain 
customer positions arising from an F&O auction. Paragraph 7 has been 
revised to update references to certain legal requirements in 
connection with auctions. Substantially similar changes have been made 
in the Auction Terms for FX Default Auctions as well.
    Various amendments have also been made to the Delivery Procedures. 
In many cases these do not strictly relate to EMIR implementation but 
reflect other general updates and conforming changes. In paragraph 5, 
provisions allowing buyers and sellers to nominate transferors and 
transferees to make or take delivery on their behalf have been extended 
to additional power and gas contracts. In addition, under revised 
paragraph 9, these same additional contracts are not eligible for 
alternative delivery procedures.
    Part C of the Delivery Procedures has been expanded to apply to ICE 
Futures UK Base Electricity Futures (Gregorian) and ICE Futures UK Peak 
Electricity Futures (Gregorian) as well as the existing EFA contracts. 
Various drafting clarifications have been made to the procedures for 
ICE UK Electricity Futures Contracts. Part D of the Delivery Procedures 
has been expanded to apply also to ICE Futures UK Natural Gas (EUR/MWh) 
Futures Contracts and ICE Futures UK Natural Gas Daily Futures 
Contracts, and various related conforming changes have been made, 
including relevant contract and delivery specifications for such 
contracts. A new delivery timetable has been added for the ICE Futures 
UK Natural Gas Daily Futures Contract, as well as new documentation 
requirements and procedures for invoicing for such contracts.
    Various non-substantive conforming changes and drafting 
clarifications are also made to the Business Continuity Procedures and 
Complaint Resolution Procedures.
(2) Statutory Basis
    ICE Clear Europe believes that the proposed amendments to the 
Procedures are consistent with the requirements of Section 17A of the 
Act \7\ and the regulations thereunder applicable to it, including the 
standards under Rule 17Ad-22.\8\ Section 17A(b)(3)(F) of the Act \9\ 
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 proposed amendments are 
principally intended to further implement the rule amendments described 
in the Rule Submission, which in turn are intended principally to 
ensure compliance by the clearing house with the requirements of EMIR 
and implement new, strengthened options for the segregation and 
safeguarding of customer funds and property for customers of Non-FCM/BD 
Clearing Members.\10\ As such, the proposed amendments to the 
Procedures are part of a set of amendments that will enhance, and not 
reduce, the level of customer protection available under the current 
ICE Clear Europe rules for those Clearing Members and their customers. 
As a result, ICE Clear Europe believes that the proposed changes to the 
Procedures, like the amendments to the Rules discussed in the Rule 
Submission, will contribute to the safeguarding of funds and securities 
associated with derivative transactions that are in the custody or 
control of the clearing house or for which it is responsible, as set 
forth herein, within the meaning of Section 17(A)(b)(3)(F).\11\
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    \7\ 15 U.S.C. 78q-1.
    \8\ 17 CFR 240.17Ad-22.
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
    \10\ As discussed herein, certain additional amendments are in 
the nature of clarifications and drafting improvements to various 
provisions of the Procedures, and as such ICE Clear Europe believes 
that they also promote the prompt and accurate clearance and 
settlement of securities and derivatives transactions cleared by the 
clearing house.
    \11\ 15 U.S.C. 78q-1(b)(3)(F).
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    As discussed above, a key aspect of the amendments to the 
Procedures is the incorporation of the new ICE Clear Europe Sponsored 
Principal model. EMIR requires that the clearing house offer an 
individual segregation model that Clearing Members may in turn offer to 
their customers. Under such a model, the clearing house is required to 
separately account for, and track, the portfolio of positions of a 
customer of a Clearing Member and specific assets provided to margin 
such contracts. ICE Clear Europe has developed its Individually 
Segregated Sponsored Account model to satisfy this requirement of EMIR. 
The Individually Segregated Sponsored Account provides a separate 
account for the positions, and margin, of a particular customer, and 
accordingly should be protected in the event of a default of the 
sponsoring Clearing Member or other customers of the Clearing Member. 
It also facilitates the transition to a new Sponsor in the event of a 
default of the current Sponsor. For market participants that elect to 
use the Individually Segregated Sponsored Account model, the approach 
will thus provide a higher degree of protection for customer assets 
than is currently available.
    As such, ICE Clear Europe believes that the proposed Procedure 
changes, together with the related Rule changes described in the Rule 
Submission will enhance the safeguarding of securities and funds 
associated with securities and derivative transactions that are in the 
custody or control of ICE Clear Europe or for which it is responsible. 
ICE Clear Europe also believes that the proposed rule changes will 
enhance the stability of the clearing system, by reducing the risk to 
market participants of a default by a Clearing Member or other 
customer. As a result, the proposed changes are, in the clearing 
house's view, consistent with the requirements of Section 17A(b)(3)(F) 
of the Act. For the reasons set forth in the Rule Submission, ICE Clear 
Europe also believes that the amendments are consistent with relevant 
requirements of Rule 17Ad-22.\12\
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    \12\ 17 CFR 240.17Ad-22.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed changes to the 
Procedures

[[Page 41324]]

would have any adverse impact, or impose any burden, on competition not 
necessary or appropriate in furtherance of the purposes of the Act. The 
proposed amendments are principally intended to implement the new 
segregation models and account classes adopted pursuant to the Rule 
Submission.
    As discussed in more detail in the Rule Submission, ICE Clear 
Europe is not proposing to materially change its standards for Clearing 
Membership or financial requirements for Clearing Membership. ICE Clear 
Europe is permitting a new form of access to the clearing house, for 
Sponsored Principals, and ICE Clear Europe believes that this 
development should facilitate, rather than limit, access to the 
clearing house. Although cost models remain to be developed, use of 
these accounts may be more expensive than use of omnibus accounts, 
reflecting the additional operational complexity and segregation 
available. It is possible that these additional costs may deter some 
market participants for using the Individually Segregated Sponsored 
Account. The clearing house retains other, omnibus segregation models, 
however, that are based on existing models and will be available to 
market participants that do not elect individual segregation. The 
clearing house also recognizes that the new segregation models may 
impose certain additional costs on Clearing Members, including 
potentially additional guaranty fund contributions, which could raise 
the cost of customer clearing. However, ICE Clear Europe believes that 
this is the result of the requirement under EMIR to offer such models 
and in any event is justified by the benefits provided by such models 
for those who use them.
    ICE Clear Europe also does not believe the proposed amendments to 
the Procedures are likely to adversely affect competition among 
Clearing Members. The new segregation models are (and are required to 
be) made available to all Non-FCM/BD Clearing Members. (As described in 
the Rule Submission, the new models are not being offered to FCM/BD 
Clearing Members, which will continue to use the account and 
segregation framework provided under applicable U.S. law. The ability 
for FCM/BD Clearing Members to continue using the existing framework 
should mitigate any competitive impact of the new models for such 
Clearing Members.) ICE Clear Europe believes that the new options will 
facilitate competition among Clearing Members as they seek to offer the 
segregation models to clients, consistent with the commercial 
requirements of the Clearing Member and their customers and the 
competitive environment as well as background regulatory requirements. 
To the extent that the new segregation models impose additional costs 
and operational complexity, those will fall on all Clearing Members 
that seek to use the models, and are not designed to favor one type of 
Clearing Member over another.
    In terms of the impact on customers of Clearing Members, the 
proposed amendments are intended to provide those customers a greater 
range of choices and protections for margin assets provided by those 
customers, as required under EMIR. Certain models, such as the 
individually segregated model, may impose higher costs on customers. 
ICE Clear Europe believes that such costs are accompanied by the higher 
protection to customer assets afforded by those models and required 
under EMIR. In addition, other models, including omnibus segregation 
models, remain available for customers that prefer such models. As a 
result, ICE Clear Europe does not believe that the proposed amendments 
will impose a significant burden on customers seeking access to 
clearing.
    For similar reasons, ICE Clear Europe does not believe that the 
rule amendments will adversely affect the ability of market 
participants to continue to clear transactions, or otherwise limit 
market participants' choices for clearing derivatives. The rule changes 
implement a range of different models, each with different costs and 
benefits to customers. ICE Clear Europe is also maintaining a 
segregation framework analogous to that available today for customers 
of Clearing Members. Furthermore, the amendments are intended to 
implement requirements that will apply to European clearing houses 
generally under EMIR, including the requirement to offer an individual 
segregation model. As a result, ICE Clear Europe expects that other 
clearing house will offer a similar range of clearing segregation 
options, and the changes are not expected to reduce access to clearing 
or clearing services.
    For the foregoing reasons, ICE Clear Europe does not believe that 
the proposed amendments to the Procedures will impose any burden on 
competition not 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 13
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    \13\ ICE Clear Europe included the following statement regarding 
comments on the proposed rule change received from members, 
participants or others in its Form 19b-4 filing but omitted the 
statement from Exhibit 1 to the filing. On a July 9, 2014, telephone 
call, staff in the Division of Trading and Markets confirmed with 
ICE Clear Europe's counsel that ICE Clear Europe also intended to 
include this statement in Exhibit 1.
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    Although written comments have not been specifically solicited with 
respect to the Procedure changes, comments relating to the related rule 
changes have been solicited from Clearing Members through extensive 
discussions with Clearing Members and a public consultation. ICE Clear 
Europe received various comments during this consultation and took such 
comments into account in making further modifications to the proposed 
rules and in developing the Procedures. The rule changes also reflect 
comments received from the Bank of England in connection with ICE Clear 
Europe's application for EMIR authorization. ICE Clear Europe will 
notify the Commission of any additional written comments received by 
ICE Clear Europe.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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-ICEEU-2014-11 on the subject line.

[[Page 41325]]

Paper Comments

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

All submissions should refer to File Number SR-ICEEU-2014-11. 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 Web site (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 Web site 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 also will be available 
for inspection and copying at the principal office of ICE Clear Europe 
and on ICE Clear Europe's Web site at https://www.theice.com/publicdocs/regulatory_filings/ICEU_070714_SEC.pdf.
    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 available 
publicly. All submissions should refer to File Number SR-ICEEU-2014-11 
and should be submitted on or before July 25, 2014.\14\
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    \14\ The Commission believes that a 10-day comment period is 
reasonable, given the urgency of the matter. It will provide 
adequate time for comment.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-16542 Filed 7-14-14; 8:45 am]
BILLING CODE 8011-01-P