Document ID: SEC-2023-0389-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: ICE Clear Europe Ltd.
Posted Date: 2023-04-06T04:00Z

[Federal Register Volume 88, Number 66 (Thursday, April 6, 2023)]
[Notices]
[Pages 20595-20597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-07139]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97230; File No. SR-ICEEU-2023-007]

Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change, as 
Modified by Amendment No. 1, Relating to Amendments of the ICE Clear 
Europe Delivery Procedures

March 31, 2023.
    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 March 20, 2023, ICE Clear Europe Limited (``ICE Clear Europe'' or 
the ``Clearing House'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule changes described in 
Items I, II and III below, which Items have been primarily prepared by 
ICE Clear Europe. ICE Clear Europe filed the proposed rule change 
pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(4)(ii) 
thereunder,\4\ such that the proposed rule change was immediately 
effective upon filing with the Commission. On March 27, 2023, ICE Clear 
Europe filed Amendment No. 1 to the proposed rule change. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as modified by Amendment No. 1 (hereafter the 
``proposed rule change''),\5\ from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(4)(ii).
    \5\ Amendment No. 1 amended and restated in its entirety the 
Form 19b-4 and Exhibit 1A in order to correct the narrative 
description of the proposed rule change.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    ICE Clear Europe Limited (``ICE Clear Europe'' or the ``Clearing 
House'') proposes to amend its Delivery Procedures (``Delivery 
Procedures'' or ``Procedures'') to add a new Part N2 thereto (``Part 
N2''), which will apply to certain ICE Futures Europe Deliverable 
Carbon Credit Contracts (together the ``Contracts''), for which 
delivery will be made through a registry account of the Clearing 
House.\6\
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    \6\ Capitalized terms used but not defined herein have the 
meanings specified in the Delivery Procedures or, if not defined 
therein, the ICE Clear Europe Clearing Rules.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

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

(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 add a new Part N2 to the Delivery 
Procedures. Part N2 would apply to the Contracts, which are to be 
traded on ICE Futures Europe and cleared at ICE Clear Europe, and would 
address settlement that will occur through a Registry Account of the 
Clearing House. The proposed Delivery Procedures are intended to become 
operative on March 28, 2023, subject to regulatory approval. ICE Clear 
Europe will announce by Circular the specific Contracts to which Part 
N2 of the Delivery Procedures will apply. ICE Clear Europe currently 
expects that Part N2 will apply to all ICE Futures Europe physically 
deliverable carbon credit contracts.
    Pursuant to Part N2, delivery under the Contracts, in the case of 
the Seller, would be effected upon the transfer of the relevant Carbon 
Credits from the Registry Account of the Seller into the Registry 
Account of the Clearing House and acceptance of the Carbon Credits by 
the Clearing House. In the case of the Buyer, delivery would be 
effected upon transfer of the relevant Carbon Credits from the relevant 
Registry Account of the Clearing House to the relevant Registry Account 
of the Buyer, and there would not be a prerequisite for the Buyer to 
accept the Carbon Credits. Part N2 would set out the Clearing House's 
ability not to accept a transfer from the Seller in the event the 
transferred carbon credits are not in accordance with the contract 
specifications. Delivery would take place during the Delivery Period 
for the relevant Contracts in accordance with the contract 
specifications, and neither delivery by Seller nor receipt by Buyer 
would require performance by the other to occur simultaneously. 
Consistent with the foregoing, the amendments would also state that 
both the Buyer and Seller would deal directly with the Clearing House 
in the settlement.
    The amendments would set out relevant definitions related to 
delivery under the contract, including as to the underlying deliverable 
Carbon Credits. The amendments provide that the Carbon Credits must 
conform to the specification described in the Contract and the 
specifications of the Registry to and from which delivery may be made 
under the relevant Contract. In cases where the Seller effected the 
transfer of carbon credits that are not in accordance with the relevant 
Contract specifications, the Clearing House would reserve the right to 
reject the transfer and return the respective carbon credits. In such 
scenario the Seller would remain under an obligation to deliver the 
Carbon Credits of the specified quantity along with the Contract within 
the appropriate timeline. The amendments would further specify certain 
details of the delivery process for the Contracts including quantity, 
settlement price, and timing of cessation of trading.
    The amendments would state that the Contracts would be based on 
Open Contract Positions after expiration of the relevant Contract Set 
and the delivery process would occur over a three consecutive Business 
Day period. In addition, the amendments would include delivery 
timetables with detailed timeframes and descriptions of the processes 
for delivery under Contracts. Such timetables would set out, among 
other processes, the time for cessation of trading, submission of 
delivery intentions, confirmation reports, confirmations of delivery 
position/expiry, payment by the Buyer, payment and return of delivery 
margin, Seller's delivery to the Clearing House, payment to Seller, and 
Clearing House delivery to the Buyer.
    The amendments would also address the responsibilities of the 
Clearing House and relevant parties for delivery under Contracts, as 
well as certain limitations of liability for the Clearing House. 
Specifically, the Clearing House would not be responsible for the 
performance or non-performance of, or any delay or error in performance 
by any Registry or Registry Operator; the compliance or lack of 
compliance of any Seller or Buyer or their respective

[[Page 20596]]

Transferors or Transferees with any rules of the relevant Registry or 
any laws applicable to it; any errors in the Registry Account details 
entered into the relevant Registry systems or provided to the Clearing 
House by a Seller, Transferor, Buyer or Transferee in respect of a 
delivery; closure of any Registry Accounts; or the compliance with the 
contractual obligations owed to the Registry in respect of any Clearing 
House Registry Accounts, among other matters. Additionally, neither the 
Buyer or Seller would have any claim against the Clearing House for any 
loss, cost, damage or expense incurred or suffered as a result of the 
condition or operation of any Registry Operator or the performance or 
non-performance of any Registry Operator. The amendments would state 
that the section on liability would be without prejudice to the 
generality of and subject to the provisions of the Rules relating to 
liability and would be in addition to the general requirements of the 
Delivery Procedures. Furthermore, the Clearing House would not make any 
representation regarding the authenticity, validity or accuracy of any 
delivery tender notice, description of a Registry, market tracking 
system or any other Registry instructions, confirmations of transfer or 
any other notice, document, file, record or instrument used or 
delivered pursuant to the Contract Terms or pursuant to the procedures 
of any Registry.
    The amendments would provide details related to delivery contract 
security, which is the delivery margin to be provided by Buyer and 
Seller, and which would take into account the Finance Procedures. The 
Clearing House would retain the Seller's security until the full 
contract value is released to the Seller following the delivery 
timetables.
    The amendments would outline the use of the relevant Registry. 
Clearing Members would have to ensure their Transferors/Transferees 
have established the appropriate Registry Accounts at the relevant 
Registry for the Contracts in question and provide necessary 
instructions or confirmations to the Registry. Furthermore, Clearing 
Members making or taking delivery of the Contracts for their own 
account would be required to have established Registry Accounts in the 
relevant Registry for the Contract in question. In addition, it would 
be the responsibility of the Clearing Members to comply, and ensure 
their Transferors/Transferees also comply, with the rules, regulations 
and laws applicable to the Registry. The Clearing Members would also 
have to provide, and ensure their respective Transferors/Transferees 
also provide, correct Registry account details at all times.
    The amendments would also provide for the use of an Alternative 
Delivery Procedure (``ADP'') in the event of a failure to transfer 
carbon credits in the manner and on the terms specified in the 
Contract. In such case, a Clearing Member may request agreement of the 
Clearing House to enter into an ADP to provide for delivery outside the 
terms of the Contract. In such case, settlement of the Contract would 
be dealt with in the manner specified in the ADP, and the affected 
parties and the Clearing House would be released from their rights and 
obligations in respect of the existing Contract. If the existing 
Contract would be liquidated under the ADP Agreement, it would be on 
the basis of the Exchange Delivery Settlement Price. A new Contract or 
Contracts would then be formed for purposes of the Rules, and delivery 
under an ADP Agreement would be subject to the specified requirements 
of the Delivery Procedures, the same Contract Terms as the Contracts 
replaced by the ADP Agreement (subject to the terms agreed in the ADP), 
the directions by the Clearing House that it may issue under its 
discretion, and the terms of the ADP Agreement. Any Clearing Member 
that enters into an ADP agreement would be deemed to have agreed to 
indemnify the Clearing House in respect of all and any of the Clearing 
House's costs, losses, charges and expenses incurred by the Clearing 
House in connection with the ADP. If a Clearing Member and the Clearing 
House are unable to enter into an ADP Agreement or effect delivery 
under an ADP within a reasonable time period after the failed delivery, 
the Clearing House may refer the matter to ICE Futures Europe and it 
will consider in its discretion what other reasonable next steps it 
should take, if any, under applicable exchange rules.
(b) Statutory Basis
    ICE Clear Europe believes that the proposed amendments to the 
Delivery Procedures are consistent with the requirements of Section 17A 
of the Act \7\ and the regulations thereunder applicable to it. In 
particular, Section 17A(b)(3)(F) of the Act \8\ 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 proposed 
changes to the Delivery Procedures are designed to establish delivery 
procedures relating to ICE Futures Europe Deliverable Carbon Credit 
Contracts under which delivery will be made through a Registry Account 
of the Clearing House. The amendments would set out the role, 
responsibilities and liabilities of the Clearing House, Clearing 
Members and designated transferors and transferees in the delivery 
process, in line with Delivery Procedures for other types of carbon 
credit futures contracts. Contracts providing for delivery under Part 
N2 will be cleared by the Clearing House in the substantially same 
manner as other types of deliverable carbon credit contracts that have 
been settled bilaterally rather than through a Clearing House Registry 
Account, and will be supported by ICE Clear Europe's existing F&O 
financial resources, risk management, systems and operational 
arrangements. Accordingly, ICE Clear Europe believes that its financial 
resources, risk management, systems and operational arrangements are 
sufficient to support clearing of such contracts and to manage the 
risks associated with such contracts. As a result, in ICE Clear 
Europe's view, the amendments would be consistent with the prompt and 
accurate clearance and settlement of the contracts, and the protection 
of investors and the public interest consistent with the requirements 
of Section 17A(b)(3)(F) of the Act.\9\ (In ICE Clear Europe's view, the 
amendments would not affect the safeguarding of funds or securities in 
the custody or control of the clearing agency or for which it is 
responsible, within the meaning of Section 17A(b)(3)(F).\10\)
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    \7\ 15 U.S.C. 78q-1.
    \8\ 15 U.S.C. 78q-1(b)(3)(F).
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
    \10\ 15 U.S.C. 78q-1(b)(3)(F).
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    In addition, Rule 17Ad-22(e)(10) \11\ provides that ``[e]ach 
covered clearing agency shall establish, implement, maintain and 
enforce written policies and procedures reasonably designed to, as 
applicable [. . .] establish and maintain transparent written standards 
that state its obligations with respect to the delivery of physical 
instruments, and establish and maintain operational practices that 
identify, monitor and manage the risks associated with such physical 
deliveries.'' As discussed above, the amendments would establish a new 
set of procedures applicable to the delivery and settlement of ICE 
Futures Europe Deliverable Carbon Credit Contracts that are to be 
settled by

[[Page 20597]]

delivery through the Clearing House's Registry Account. The procedures 
would address, among other matters, delivery specifications for such 
contracts, the obligations and roles of Clearing Members and the 
Clearing House, certain limitations of liability for the Clearing 
House, and certain other documentation and timing matters. Clearance of 
the Contracts would otherwise be supported by ICE Clear Europe's 
existing financial resources, risk management, systems and operational 
arrangements. The amendments thus appropriately clarify the role and 
responsibilities of the Clearing House and Clearing Members with 
respect to physical delivery. As a result, ICE Clear Europe believes 
the amendments are consistent with the requirements of Rule 17Ad-
22(e)(10).\12\
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    \11\ 17 CFR 240.17Ad-22(e)(10).
    \12\ 17 CFR 240.17Ad-22(e)(10).
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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 proposed 
amendments to the Delivery Procedures are intended to establish a new 
set of procedures applicable to the delivery and settlement of ICE 
Futures Europe Deliverable Carbon Credit Contracts under which delivery 
will be made through a Registry Account of the Clearing House. In ICE 
Clear Europe's view, the amendments will thus enhance the settlement 
process, and would not otherwise materially affect the terms of the 
contract. ICE Clear Europe does not believe the amendments would 
adversely affect competition among Clearing Members, materially affect 
the cost of clearing, adversely affect access to clearing for Clearing 
Members or their customers, or otherwise adversely affect competition 
in clearing services. Accordingly, ICE Clear Europe does not believe 
that the amendments would impose any impact or burden on competition 
that is not appropriate in furtherance of the purpose 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 amendment 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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \13\ and paragraph (f) of Rule 19b-4 \14\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f).
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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 (https://www.sec.gov/rules/sro.shtml) or
     Send an email to [email protected]. Please include 
File Number SR-ICEEU-2023-007 on the subject line.

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-2023-007. 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 (https://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 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-2023-007 and should be 
submitted on or before April 27, 2023.

    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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-07139 Filed 4-5-23; 8:45 am]
BILLING CODE 8011-01-P