Document ID: SEC-2018-1582-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: ICE Clear Europe Ltd.
Posted Date: 2018-10-12T04:00Z

[Federal Register Volume 83, Number 198 (Friday, October 12, 2018)]
[Notices]
[Pages 51715-51720]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22204]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84375; File No. SR-ICEEU-2018-012)

Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Order Granting Accelerated Approval of Proposed Rule 
Change, as Modified by Amendment No. 1, Relating to Intraday Margining

October 5, 2018.
    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 September 24, 2018, ICE Clear Europe Limited (``ICE Clear Europe'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule changes described in Items I and II below, which Items 
have been prepared by ICE Clear Europe. On October 4, 2018, ICE Clear 
Europe filed Amendment No. 1 to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as modified by Amendment No. 1, from interested 
persons and to approve the proposed rule change, as modified by 
Amendment No. 1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 added an additional confidential exhibit to 
the filing.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    ICE Clear Europe proposes to amend its Finance Procedures and 
certain related policies to expand the hours covered by its intraday 
margining process and make certain related changes to the intraday 
margining process and process for deposit of cash balances.

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, ICE Clear Europe included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item III below. ICE Clear Europe has prepared summaries, 
set forth in sections (A), (B), and (C) below, of the most significant 
aspects of such statements.

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

(a) Purpose
    ICE Clear Europe is proposing to amend its intraday risk management 
processes for certain F&O client and house accounts to extend the 
intraday margining hours (which currently run from 9:00 a.m.-6:00 p.m.) 
to 7:30 a.m.-8:00 p.m. (with a payment deadline of 9:00 p.m.), London 
time, to cover the active portions of the trading day in relevant F&O 
contracts.\4\
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    \4\ Capitalized terms used herein but not otherwise defined have 
the meaning set forth in the ICE Clear Europe Clearing Rules, which 
are available at https://www.theice.com/publicdocs/clear_europe/rulebooks/rules/Clearing_Rules.pdf.
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    ICE Clear Europe is adopting these amendments to facilitate 
compliance with margin requirements under European Union regulations 
and related implementing legislation and technical

[[Page 51716]]

standards applicable to it as an authorized central counterparty under 
the European Market Infrastructure Regulation (EMIR).\5\
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    \5\ The amendments principally address requirements under 
Commission Delegated Regulation (EU) No 153/2013 of 19 December 2012 
supplementing Regulation (EU) No 648/2012 of the European Parliament 
and of the Council with regard to regulatory technical standards on 
requirements for central counterparties, as amended by Commission 
Delegated Regulation (EU) 2016/822 of 21 April 2016 as regards the 
time horizons for the liquidation period to be considered for the 
different classes of financial instruments (as so amended, ``RTS 
153/2013''). Specifically, Article 26(1)(c) of RTS 153/2013 requires 
ICE Clear Europe, among other matters, to be in a position to issue 
and collect margin calls on at least an hourly basis during the 
active trading day for futures products that are gross-margined 
using a one business day margin period of risk.
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    These amendments will principally affect F&O energy contracts 
cleared by ICE Clear Europe. Specifically, the extended margining hours 
and updated materiality threshold changes will apply to all gross 
margined client accounts (i.e., those client accounts margined on a 
``gross'' basis using a minimum one business day margin period of risk 
(``MPOR'')) \6\ and F&O house accounts.
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    \6\ Contracts using a one-day MPOR are generally F&O energy 
contracts. Other F&O Contracts using a 2 (or more) business day 
MPOR, and CDS Contracts (using a 5 business day MPOR) are not 
subject to the hourly intraday margin requirement under Article 
26(1)(c) of RTS 153/2013.
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    ICE Clear Europe is also amending certain policies relating to the 
deposit of uninvested cash margin with banks in light of potential 
increases in cash balances arising from the above changes in intraday 
margining, consistent with requirements under EMIR. (These amendments 
to the investment policies may apply to all product categories.)
Finance Procedures
    As part of these changes, ICE Clear Europe is proposing to amend 
Parts 5 and 6 of the Finance Procedures to address intraday margining 
procedures and certain other matters. Paragraph 5.5 is amended to 
clarify the circumstances in which the Clearing House would invoke a 
contingency method for transfer of margin, which would occur if an 
Approved Financial Institution or the Clearing House itself experiences 
a failure in its ability to send or receive SWIFT messages. Paragraph 
6.1(i) is amended to provide that intraday margin calls for F&O 
Contracts can be made between 7:30 and 20:00 London time. (The existing 
period for intraday margin calls for other (i.e., CDS) Contracts 
remains unchanged at from 9:00 to 19:00 London time.) Where a 
contingency method applies under paragraph 5.5, intraday margin calls 
can be made up to 21:00 London time. The amendments also clarify that 
all intraday margin calls within these hours must be met within 60 
minutes of notification by the Clearing House. Margin calls made 
outside of these hours must be met by the later of (x) within 60 
minutes after notification, if any settlement system used by the 
Clearing House for the relevant currency is open at the time, or (y) 
within 60 minutes after the time at which such settlement system 
becomes open for business following the notification of the margin call 
by the Clearing House.
    Corresponding changes are also made to the table following Part 5 
of the Finance Procedures. A row has been inserted stating the timing 
for intraday margin instructions, as discussed above. Corresponding 
changes are also being made to the existing rows relating to routine 
end-of-day instructions, routine end-of-day instructions for financials 
& softs contracts that settle in JPY only and the revised 21:00 London 
time cut-off time for intraday instructions in the event of a 
contingency.
Cash Investment Policies
    Because of the possibility that it will hold additional cash 
balances as a result of the extended margining hours discussed above 
(since it may be difficult to invest such balances if received later in 
the day), ICE Clear Europe is proposing to amend the Investment 
Management Policy and adopt a new set of Unsecured Credit Limits 
Procedures. Certain other updates and clarifications are being made to 
the Investment Management Policy as well.
    In general, the changes to the Investment Management Policy will 
permit the Clearing House to hold additional uninvested balances, by 
eliminating the current fixed dollar limits and replacing them with the 
new Unsecured Credit Limits Procedures, which provide more flexible 
allocation guidelines based on the capital of the deposit bank and 
other factors. The amendments remain consistent with the requirements 
under EMIR that the Clearing House maintain at least 95% of its cash in 
qualifying investments on average during each calendar month, such that 
deposits in banks will be limited to the remaining 5% on average.\7\
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    \7\ Article 45, RTS 153/2013.
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    The Investment Management Policy has also been revised to 
distinguish more clearly between central bank deposits and commercial 
bank deposits, both of which are authorized for deposit of cash. For 
commercial bank deposits, the $50 million per counterparty bank limit 
has been removed and replaced with the Unsecured Credit Limits 
Procedures, as discussed below. The 5% limit on investments in bank 
obligations in a 30-day period has been revised to refer to an average 
level over a calendar month, consistent with the EMIR limitations.
    Certain clarifications (unrelated to the extended margin hours) are 
being made to the limits on investments in sovereign obligations and 
central bank deposits. For sovereign obligations, for EUR denominated 
investments, no more than 15% of the total EUR balance of the 
investment portfolio must be invested in sovereign obligations of a 
single issuer; and no more than 20% of the total balance of the 
investment portfolio per currency may be invested in a single issue of 
a sovereign issuer. Pursuant to the proposed amendments, there is no 
limitation on maturity for central bank obligations and central bank 
deposits. The amended policy lists the Dutch National Bank, Bank of 
England and Federal Reserve as acceptable central banks for this 
purpose.
    The proposed amendments also update the policy review section to 
remove certain details, clarify the procedures for escalation of 
defined risk management thresholds triggers and provide that the policy 
will be reviewed in accordance with internal governance processes and 
regulatory requirements. ICE Clear Europe does not anticipate that 
these amendments will substantively change its process for policy 
review at this time, but the amendments will facilitate consolidation 
and harmonization of internal governance processes across various 
Clearing House policies.
    ICE Clear Europe is further proposing various clarifications and 
updates throughout the Investment Management Policy including to the 
description of the board risk policy and related management thresholds 
and the objectives of the counterparty rating system. References to the 
Clearing Risk and Finance departments have been updated throughout the 
document.
    The Clearing House is adopting the new Unsecured Credit Limits 
Procedures, which establish a limit methodology for determining the 
amount of cash that may be placed in an unsecured deposit with a 
particular bank. The procedures establish basic requirements for any 
deposit bank as to regulation and credit rating (with the possibility 
of an exception where determined appropriate by the executive risk 
committee). For each qualifying institution, a limit will be 
established at 3% of the entity's capital minus other exposures vis-a-
vis ICE Clear Europe or

[[Page 51717]]

if the entity relies on a parent guaranty, 80% of the amount guaranteed 
thereunder. (The 3% limit is based on the Clearing House's credit 
judgment as to the appropriate level of unsecured risk to take from a 
bank counterparty.) The limit is subject to a minimum level of USD 50 
million (or a lesser level determined by the Clearing House) and a 
maximum level of USD 200 million. ``Other exposures'' for this purpose 
include uncollateralized stress losses or exposures arising from other 
financial services provided by ICE Clear Europe to the institution.\8\ 
The methodology also provides for ongoing monitoring of deposit banks 
for purposes of updating limits as necessary, and addresses governance 
and exception handling.
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    \8\ ICE Clear Europe contemplates a specific exception for 
Euroclear Bank SA/NV, in light of the particular function of that 
entity as a central securities depository and the accompanying 
limitations on its business that would allow a limit of USD 200 
million notwithstanding that 3% of its capital would be a lower 
figure.
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(b) Statutory Basis
    ICE Clear Europe believes that the proposed amendments are 
consistent with the requirements of Section 17A of the Act \9\ and the 
regulations thereunder applicable to it, including the standards under 
Rule 17Ad-22.\10\ In particular, Section 17A(b)(3)(F) of the Act \11\ 
requires, among other things, that the rules of a clearing agency be 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions and, to the extent applicable, derivative 
agreements, contracts, and transactions, the safeguarding of securities 
and funds in the custody or control of the clearing agency or for which 
it is responsible, and the protection of investors and the public 
interest. The amendments will facilitate the management of intraday 
risk faced by the Clearing House for certain F&O Contracts, by 
extending the daily hours in which the Clearing House may call for 
intraday margin. These changes will in turn promote the prompt and 
accurate clearance and settlement of transactions through the Clearing 
House. The changes will also enhance the Clearing House's procedures 
for investment of cash received by it, in recognition that it may 
receive higher cash balances as a result of additional intraday calls 
for margining. The enhanced procedures provide new guidelines for 
allocating deposits across different banks based on their 
capitalization and other factors. In ICE Clear Europe's view, these 
changes will enhance the safeguarding of funds in the custody of the 
Clearing House or over which it has control. ICE Clear Europe also 
notes that the amendments are intended to facilitate compliance with 
certain specific requirements under EMIR, and thereby are consistent 
with the public interest as it applies to the operation of the Clearing 
House as an authorized central counterparty under European Union 
regulations.
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    \9\ 15 U.S.C. 78q-1.
    \10\ 17 CFR 240.17Ad-22.
    \11\ 15 U.S.C. 78q-1(b)(3)(F).
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    Further, the amendments are consistent with requirements of Rule 
17Ad-22 \12\ regarding margin and credit risk management. Rule 17Ad-
22(b)(1) and (2) \13\ in particular require that ICE Clear Europe 
measure its credit exposure at least once per day and use margin 
requirements to limit its exposures to participants under normal market 
conditions. Consistent with these requirements, the proposed amendments 
require the Clearing House to measure its intraday credit exposures 
during additional hours and to collect margin if appropriate, reducing 
its credit risk to Clearing Members. The proposed amendments are also 
consistent with Rule 17Ad-22(e)(4)(i) \14\, as the additional ability 
to conduct intraday margining will help the Clearing House maintain 
sufficient financial resources to cover its credit exposures to 
Clearing Members. The enhancements to the margin system are further 
consistent with the requirements to maintain margin levels to cover 
potential losses from participants pursuant to Rule 17Ad-22(e)(6)(i)-
(iii).\15\
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    \12\ 17 CFR 240.17Ad-22.
    \13\ 17 CFR 240.17Ad-22(b)(1) and (2). The rule states that: [a] 
Registered clearing agency that performs central counterparty 
services shall establish, implement, maintain and enforce written 
policies and procedures reasonably designed to:
     (1) Measure its credit exposures to its participants at least 
once a day and limit its exposures to potential losses from defaults 
by its participants under normal market conditions so that the 
operations of the clearing agency would not be disrupted and non-
defaulting participants would not be exposed to losses that they 
cannot anticipate or control.
    (2) Use margin requirements to limit its credit exposures to 
participants under normal market conditions and use risk-based 
models and parameters to set margin requirements and review such 
margin requirements and the related risk-based models and parameters 
at least monthly.''
    \14\ 17 CFR 240.17Ad-22(e)(4)(i). The rule states that: ``[e]ach 
covered clearing agency shall establish, implement, maintain and 
enforce written policies and procedures reasonably designed to, as 
applicable: (4) Effectively identify, measure, monitor, and manage 
its credit exposures to participants and those arising from its 
payment, clearing, and settlement processes, including by: (i) 
Maintaining sufficient financial resources to cover its credit 
exposure to each participant fully with a high degree of 
confidence;''
    \15\ 17 CFR 240.17Ad-22(e)(6)(i)-(iii). The rule states that: 
``[e]ach covered clearing agency shall establish, implement, 
maintain and enforce written policies and procedures reasonably 
designed to, as applicable: (6) Cover, if the covered clearing 
agency provides central counterparty services, its credit exposures 
to its participants by establishing a risk-based margin system that, 
at a minimum: (i) Considers, and produces margin levels commensurate 
with, the risks and particular attributes of each relevant product, 
portfolio, and market; (ii) Marks participant positions to market 
and collects margin, including variation margin or equivalent 
charges if relevant, at least daily and includes the authority and 
operational capacity to make intraday margin calls in defined 
circumstances; (iii) Calculates margin sufficient to cover its 
potential future exposure to participants in the interval between 
the last margin collection and the close out of positions following 
a participant default;''
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    ICE Clear Europe's amendments to the Investment Management Policy 
and adoption of the Unsecured Credit Limit Procedures to tailor deposit 
limits to the particular characteristics of deposit banks is consistent 
with Rule 17Ad-22(e)(9) \16\, as it will mitigate the credit and 
liquidity risk arising from conducting its money settlements in 
commercial bank money.
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    \16\ 17 CFR 240.17Ad-22(e)(9). The rule states that: ``[e]ach 
covered clearing agency shall establish, implement, maintain and 
enforce written policies and procedures reasonably designed to, as 
applicable: (9) Conduct its money settlements in central bank money, 
where available and determined to be practical by the board of 
directors of the covered clearing agency, and minimize and manage 
credit and liquidity risk arising from conducting its money 
settlements in commercial bank money if central bank money is not 
used by the covered clearing agency.''
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(B) Clearing Agency's Statement on Burden on Competition

    ICE Clear Europe does not believe the proposed amendments would 
have any impact, or impose any burden, on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The amendments 
are being adopted to facilitate compliance with European Union 
requirements applicable to intraday margin requirements and to extend 
the hours covered by its intraday risk management process. The 
amendments will affect all F&O Clearing Members that trade contracts in 
the relevant categories. Although the amendments could impose certain 
additional costs on Clearing Members, as a result of additional 
intraday margin calls, which may have financing and liquidity 
implications for F&O Clearing Members, these result from the 
requirements imposed by EU regulations, and in any case reflect the 
risks presented by the trading activities of the F&O Clearing Members. 
Furthermore, any such increased margin requirements will result in risk 
management benefits for the Clearing House, through improved ability to 
address risks throughout the trading day, consistent with the goals of 
the relevant EU regulations and also in

[[Page 51718]]

furtherance of the risk management requirements of the Act. In light of 
these considerations, ICE Clear Europe does not believe the amendments 
will adversely affect competition among clearing members, the market 
for clearing services generally or access to clearing in cleared 
products by clearing members or other market participants. ICE Clear 
Europe believes that any impact on competition is appropriate in 
furtherance of the purposes of the Act.

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

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

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by Amendment No. 1, 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 [email protected]. Please include 
File Number SR-ICEEU-2018-012 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-ICEEU-2018-012. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change, security-based swap submission or advance notice between 
the Commission and any person, other than those that may be withheld 
from the public in accordance with the provisions of 5 U.S.C. 552, will 
be available for website viewing and printing in the Commission's 
Public Reference Room, 100 F Street NE, Washington, DC 20549, on 
official business days between the hours of 10:00 a.m. and 3:00 p.m. 
Copies of such filings will also be available for inspection and 
copying at the principal office of ICE Clear Europe and on ICE Clear 
Europe's website at https://www.theice.com/clear-europe/regulation. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ICEEU-2018-012 and should be 
submitted on or before November 2, 2018.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change, as Modified by Amendment No. 1

    Section 19(b)(2)(C) of the Act directs the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
such proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to such 
organization. \17\ For the reasons given below, the Commission finds 
that the proposal is consistent with Section 17A(b)(3)(F) of the Act 
\18\ and Rules 17Ad-22(e)(6)(ii) and 17Ad-22(e)(16) thereunder.\19\
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    \17\ 15 U.S.C. 78s(b)(2)(C).
    \18\ 15 U.S.C. 78q-1(b)(3)(F).
    \19\ 17 CFR 240.17Ad-22(e)(6)(ii) and (e)(16).
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(A) Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, among other things, that 
the rules of ICE Clear Europe be designed to promote the prompt and 
accurate clearance and settlement of securities transactions and, to 
the extent applicable, derivative agreements, contracts, and 
transactions, as well as to assure the safeguarding of securities and 
funds which are in the custody or control of ICE Clear Europe or for 
which it is responsible, and, in general, to protect investors and the 
public interest.
(a) Finance Procedures
    As discussed above, the proposed rule change, as modified by 
Amendment No. 1, would amend ICE Clear Europe's Finance Procedures to 
extend the period for intraday margin calls for F&O Contracts to cover 
the active portions of the trading day for such F&O contracts (i.e., 
from 7:30 and 20:00 London time) and to require clearing participants 
to satisfy margin calls during these hours within 60 minutes of 
notification by ICE Clear Europe.\20\ The Commission believes that this 
aspect of the proposed rule change should expand ICE Clear Europe's 
ability to call additional intraday margin, as necessary, by extending 
the window during which ICE Clear Europe may call such margin. In 
addition, as discussed above, the proposed rule change would provide 
that, for margin calls outside of these hours, clearing participants 
would be required to meet margin calls by the later of (x) within 60 
minutes after notification, if any settlement system used by ICE Clear 
Europe for the relevant currency is open at the time, or (y) within 60 
minutes after the time at which such settlement system becomes open for 
business following the notification of the margin call. The Commission 
believes that these provisions should help ensure that ICE Clear Europe 
collects intraday margin on a timely basis by setting standard 
specified time periods in which clearing participants must meet margin 
calls. Thus, the Commission believes that these aspects of the proposed 
rule change should enable ICE Clear Europe to collect additional 
intraday margin as necessary to cover the risks related to the relevant 
F&O contracts.
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    \20\ The Commission understands that, pursuant to EMIR 
requirements, ICE Clear Europe must be in a position to issue and 
collect margin calls on at least an hourly basis during the active 
trading day for futures products that are gross-margined using a one 
business day margin period of risk. See supra note 5.
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    The Commission believes that the ability of ICE Clear Europe to 
collect intraday margin and have such margin available to support ICE 
Clear Europe's ability to manage financial risk exposure that may arise 
in the course of its ongoing clearance and settlement activities 
should, in turn, help promote the prompt and accurate clearance and 
settlement of securities transactions, derivative agreements, 
contracts, and transactions. Similarly, the proposed rule change should 
enhance ICE Clear Europe's ability to help assure the safeguarding of 
securities and funds which are in the custody or control of ICE Clear 
Europe or for which it is responsible because intraday margin 
collections will increase the overall amount of financial resources ICE 
Clear Europe maintains to address potential loss exposures that could 
arise from a Clearing Member default or other stressed market 
conditions. Finally, for both of these reasons, the Commission

[[Page 51719]]

believes the proposed rule change, as modified by Amendment No. 1, is 
consistent with protecting investors and the public interest.
(b) Investment Management Policy
    The proposed rule change, as modified by Amendment No. 1, would 
also amend the Investment Management Policy to address potential 
additional cash balances that could accrue as a result of the 
additional margin collected during the extended margining hours 
discussed above. Specifically, these changes include: (i) With respect 
to sovereign obligations, providing that for EUR denominated 
investments, no more than 15% of the total EUR balance of the 
investment portfolio must be invested in sovereign obligations of a 
single issuer, and no more than 20% of the total balance of the 
investment portfolio per currency may be invested in a single issue of 
a sovereign issuer; (ii) with respect to central bank deposits, 
removing the limitation on maturity for central bank obligations and 
central bank deposits and identifying the Dutch National Bank, Bank of 
England, and Federal Reserve as acceptable central banks for that 
purpose; and (iii) with respect to commercial bank deposits, removing 
the $50 million per counterparty bank limit, replacing it with the 
Unsecured Credit Limits Procedures, including the regulation and credit 
rating requirements for deposit banks and the revised limits for each 
qualifying institution, and revising the 5% limit on investments in 
bank obligations in a 30-day period to refer to an average level over a 
calendar month.
    With respect to the changes regarding investments in sovereign 
obligations, the Commission believes that these changes provide 
reasonable limitations on ICE Clear Europe's investment portfolio that 
should help ensure that it is not overly concentrated in securities of 
a single sovereign issuer or in a single issue of a sovereign issuer. 
With respect to the changes regarding central bank deposits, the 
Commission believes that the proposed rule change should facilitate ICE 
Clear Europe's use of central bank deposits, which should, in turn, 
have minimal credit, market, and liquidity risks. With respect to the 
changes regarding commercial bank deposits, the Commission believes the 
Unsecured Credit Limits Procedures as they relate to the qualifications 
and ongoing monitoring of deposit banks should help ICE Clear Europe 
ensure that the banks in which it holds deposits are creditworthy and 
subject to adequate regulatory oversight. The Commission further 
believes that the revised limitation methodology in the Unsecured 
Credit Limits Procedures should help ICE Clear Europe to ensure that 
its deposits do not present an outsize risk to any particular deposit 
bank.
    Taken together, the Commission believes that these changes to the 
Investment Management Policy should help assure the safeguarding of 
securities and funds in ICE Clear Europe's custody and control, 
including any additional cash collected as intraday margin resulting 
from the changes described above,\21\ which, in turn, helps promote the 
prompt and accurate clearance and settlement of securities transactions 
by ICE Clear Europe. Likewise, the safeguarding of securities and funds 
in ICE Clear Europe's control would further the protection of investors 
and the public interest by ensuring that ICE Clear Europe has 
appropriate funds available to clear and settle transactions. 
Therefore, the Commission finds that the proposed rule change, as 
modified by Amendment No. 1, would promote the prompt and accurate 
clearance and settlement of securities transactions, assure the 
safeguarding of securities and funds in ICE Clear Europe's custody and 
control, and, in general, protect investors and the public interest, 
consistent with Section 17A(b)(3)(F) of the Act.\22\
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    \21\ ICE Clear Europe also proposed to amend the Investment 
Management Policy governance processes, update the description of 
the board risk policy and related risk management thresholds, and 
update references to the Clearing Risk and Finance departments. The 
Commission believes these changes would help ensure that the 
Investment Management Policy is maintained and that any issues 
resulting in a breach of a risk management threshold are 
appropriately addressed. The Commission believes that this would 
help maintain the efficacy of the Investment Management Policy 
which, as discussed, the Commission believes is necessary to help 
safeguard ICE Clear Europe's investments, including its investment 
of cash associated with margin requirements.
    \22\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Consistency With Rule 17Ad-22(e)(6)(ii)

    Rule 17Ad-22(e)(6)(ii) requires that ICE Clear Europe establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to cover its credit exposures to its participants 
by establishing a risk-based margin system that marks participant 
positions to market and collects margin, including variation margin or 
equivalent charges if relevant, at least daily and includes the 
authority and operational capacity to make intraday margin calls in 
defined circumstances.\23\
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    \23\ 17 CFR 240.17Ad-22(e)(6)(ii).
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    As discussed above, the Commission believes that the amendments to 
the Finance Procedures would allow ICE Clear Europe to request 
additional intraday margin, as necessary, by extending the window 
during which ICE Clear Europe may call such margin. Moreover, the 
Commission believes that the amendments to the Finance Procedures 
regarding when participants must satisfy margin calls should help 
ensure that ICE Clear Europe collects intraday margin on a timely 
basis. The Commission believes that both of these aspects of the 
proposed rule change should therefore help ensure that ICE Clear 
Europe's risk-based margin system includes the authority and 
operational capacity to make intraday margin calls.
    Therefore, for the above reasons the Commission finds that these 
aspects of the proposed rule change, as modified by Amendment No. 1, 
are consistent with Rule 17Ad-22(e)(6)(ii).\24\
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    \24\ Id.
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(C) Consistency With Rule 17Ad-22(e)(16)

    Rule 17Ad-22(e)(16) requires that ICE Clear Europe establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to safeguard its own and its participants' assets, 
minimize the risk of loss and delay in access to these assets, and 
invest such assets in instruments with minimal credit, market, and 
liquidity risks.\25\
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    \25\ 17 CFR 240.17Ad-22(e)(16).
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    As discussed above, the proposed rule change would amend ICE Clear 
Europe's Investment Management Policy. For the reasons discussed above 
in connection with Section 17A(b)(3)(F), the Commission believes that 
these aspects of the proposed rule change would help ensure that ICE 
Clear Europe safeguards its own and its participants' assets--
specifically, ICE Clear Europe's deposits of cash, which would include 
cash posted by clearing participants to satisfy their margin and 
Guaranty Fund requirements--and minimize the risk of loss or delay of 
such assets. For the same reasons, the Commission believes that the 
changes to the Investment Management Policy would help ensure that ICE 
Clear Europe invests such assets in instruments with minimal credit, 
market, and liquidity risks.
    Therefore, for the above reasons the Commission finds that these 
aspects of the proposed rule change, as modified by Amendment No. 1, 
are consistent with Rule 17Ad-22(e)(16).\26\
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    \26\ Id.
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V. Basis for Accelerated Approval

    In its filing, ICE Clear Europe requested that the Commission grant

[[Page 51720]]

accelerated approval of the proposed rule change pursuant to Section 
19(b)(2)(C)(iii) of the Exchange Act.\27\ Under Section 
19(b)(2)(C)(iii) of the Act,\28\ the Commission may grant accelerated 
approval of a proposed rule change if the Commission finds good cause 
for doing so. ICE Clear Europe believes that accelerated approval is 
warranted because the proposed rule change, as modified by Amendment 
No. 1, is required to comply with requirements under the European 
Market Infrastructure Regulation that ICE Clear Europe have the ability 
to call for intraday margin for relevant F&O contracts, and ICE Clear 
Europe is seeking to comply with those requirements as soon as 
possible.\29\
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    \27\ 15 U.S.C. 78s(b)(2)(C)(iii).
    \28\ 15 U.S.C. 78s(b)(2)(C)(iii).
    \29\ See supra note 5.
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    The Commission finds good cause, pursuant to Section 
19(b)(2)(C)(iii) of the Act,\30\ for approving the proposed rule 
change, as modified by Amendment No. 1, on an accelerated basis, prior 
to the 30th day after the date of publication of notice in the Federal 
Register, because the proposed rule change is required as soon as 
possible in order to facilitate ICE Clear Europe's efforts to comply 
with the aforementioned requirements.\31\ Additionally, the Commission 
notes that the proposed changes do not impede compliance with relevant 
U.S. law, including Section 17A(b)(3)(F) of the Act.\32\
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    \30\ 15 U.S.C. 78s(b)(2)(C)(iii).
    \31\ See id.
    \32\ 15 U.S.C. 78q-1(b)(3)(F).
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VI. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act, and in 
particular, with the requirements of Section 17A(b)(3)(F) of the Act 
\33\ and Rules 17Ad-22(e)(6)(ii) and 17Ad-22(e)(16) thereunder.\34\
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    \33\ Id.
    \34\ 17 CFR 240.17Ad-22(e)(6)(ii) and (e)(16).
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    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
\35\ that the proposed rule change (SR-ICEEU-2018-012), as modified by 
Amendment No. 1, be, and hereby is, approved on an accelerated 
basis.\36\
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    \35\ 15 U.S.C. 78s(b)(2).
    \36\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\37\
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    \37\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-22204 Filed 10-11-18; 8:45 am]
 BILLING CODE 8011-01-P