[Federal Register Volume 79, Number 202 (Monday, October 20, 2014)]
[Notices]
[Pages 62688-62691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-24777]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73348; File No. SR-ICEEU-2014-17]
Self-Regulatory Organizations; ICE Clear Europe Limited; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Rules and Procedures
October 14, 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 October 3, 2014, ICE Clear Europe Limited (``ICE Clear Europe'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule changes described in Items I, II and III below, which
Items have been prepared primarily by ICE Clear Europe. ICE Clear
Europe filed the proposal pursuant to Section 19(b)(3)(A) of the
Act,\3\ and Rules 19b-4(f)(4)(i) thereunder,\4\ so that the proposal
was effective upon filing with the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(4)(i).
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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 accommodate the
transition of trading in certain cleared financial and soft commodity
contracts from the LIFFE Administration & Management (``LIFFE'') market
to ICE Futures Europe.
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 currently acts as the clearing organization for
futures and option contracts traded on the LIFFE market. These
contracts consist of futures and options contracts involving financial
instruments (including interest rate futures and option contracts and
equity futures and option contracts) and so-called ``soft'' commodities
(including futures and option contracts on cocoa, wheat, coffee and
sugar) (collectively, ``financials and softs contracts''). As has been
publicly announced,
[[Page 62689]]
IntercontinentalExchange Group, Inc. (``ICE Group''), the parent of ICE
Clear Europe and LIFFE, has determined to transition the trading of
such contracts from LIFFE to ICE Futures Europe (which is also a
subsidiary of ICE Group). ICE Clear Europe also acts as the clearing
organization for the ICE Futures Europe market, and ICE Clear Europe
will continue to clear the transitioning financials and softs contracts
following the transition. To facilitate an orderly transition in
trading activity and to accommodate operational requirements of the
clearing house, the exchanges and other market participants, it is
expected that the transition will occur in several stages commencing in
late September 2014 and concluding in mid-November 2014. Each stage
will involve transition of a set of products in a particular category
(such as soft commodity, fixed income or equity contracts).
In connection with the transition, ICE Clear Europe proposes to
make certain amendments to its Rules and Procedures to reflect the
change in trading market and make various related conforming changes.
ICE Clear Europe does not propose to change the clearing resources
supporting the clearing of these products, including the margin
methodology for the products and the guaranty fund supporting clearing
of the products, or to materially change its risk management framework
for these contracts. In addition, ICE Clear Europe does not propose to
change its rules in a manner that conflicts with the terms of the
exemptive order granted by the Commission to ICE Clear Europe from
clearing agency registration in connection with the clearing of the
LIFFE securities products (the ``ICEU Exemptive Order''),\5\ and ICE
Clear Europe will continue to satisfy the conditions of such order.
Furthermore, despite the change in trading venue from LIFFE to ICE
Futures Europe and the proposed rule changes, the controls put into
place by ICE Clear Europe pursuant to the ICEU Exemptive Order to
prevent U.S. persons from clearing transactions in U.S. securities and
to comply with the other conditions in the order will remain in place
and continue to be satisfied.\6\
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\5\ Order Pursuant to Section 17A of the Securities Exchange Act
of 1934 Granting Exemption from the Clearing Agency Registration
Requirement under Section 17A(b) of the Exchange Act for ICE Clear
Europe Limited in Connection With its Proposal to Clear Contracts
Traded on the LIFFE Administration and Management Market, Exchange
Act Release No. 34-69872 (June 27, 2013).
\6\ These include controls implemented as part of the clearing
membership and account set-up process. ICE Clear Europe also notes
in this regard that consistent with the class no-action relief
provided by the Division of Trading and Markets for foreign options
markets (LIFFE A&M and Class Relief, SEC No-Action Letter (July 1,
2013)), LIFFE equity options on securities of U.S. issuers are not
available for sale to U.S. persons. This restriction will continue
to apply following the transition of trading in such options to ICE
Futures Europe. See Representation Letter from ICE Futures Europe
(March 28, 2014).
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ICE Clear Europe submits revisions to Parts 1, 2, 4, 9, 11 and 12
of the Rules and a new Part 21 of the Rules. ICE Clear Europe also
submits certain conforming changes to its Procedures, including the
Clearing Procedures, Finance Procedures, Delivery Procedures General
Contract Terms, Complaint Resolution Procedures and FX Procedures.
Throughout the Rules and Procedures, references to ``LIFFE
Contracts'' and related definitions referring to ``LIFFE'' have been
changed to ``Financials & Softs Contracts'' and corresponding related
terms, as described herein. Accordingly, the current LIFFE segment of
the F&O product category will become known as the Financials & Softs
segment of the F&O product category. During the phased transition
period, the Financials & Softs segment will include both those former
LIFFE contracts that have transitioned to trading on ICE Futures Europe
and those LIFFE contracts that have not yet been transferred.
In Part 1 of the Rules, Rule 101 is modified to add new defined
terms and revise existing definitions in connection with the
transition. The definitions of ``Energy'' and ``Energy Transaction''
have been revised to exclude ICE Futures Europe transactions that are
Financials & Softs transactions. A new set of Financials & Softs
related definitions has been added based on the existing LIFFE contract
related definitions, including ``Financials & Softs'', ``Financials &
Softs Block Contract'', ``Financials & Softs Block Trade Facility'',
``Financials & Softs Block Transaction'', ``Financials & Softs Clearing
Member'', ``Financials & Softs Contract'', ``Financials & Softs Matched
Contract'', ``Financials & Softs Matched Transaction'', and
``Financials & Softs Transaction''. These are substantially the same as
the corresponding definitions for LIFFE products, but reflect the fact
that Financials & Softs contracts will be traded on ICE Futures Europe
and, prior to the transition, on LIFFE. Certain other definitions have
been added to address particular LIFFE trading functionalities,
including ``Basis Trades'' and ``Soft Commodity EFRP,'' which are used
in the definition of Financials & Softs Block Transaction and are
defined by reference to the relevant ICE Futures Europe rules or LIFFE
rules. Various other conforming changes to definitions have been made,
principally to refer to ``Financials & Softs'' instead of ``LIFFE''
and/or to refer to ICE Futures Europe instead of (or in addition to)
the LIFFE market. In addition, the definition of ``Continuing CDS Rule
Provisions'' is modified such that references to ``LIFFE Contracts'' in
Rule 209 thereof will be deemed to be ``Financials & Softs Contracts''
as defined in the Rules.
Rule 102(f), which addresses relevant documentation governing
transactions, has been revised to reference the relevant LIFFE rules in
the case of Financials & Softs Contracts traded on LIFFE and the
relevant ICE Futures Europe rules in the case of Financials & Softs
Contracts traded on ICE Futures Europe.
In Rules 201(a), 207(g) and 208(e) various conforming changes are
made to refer to Financials & Softs Transactions and Contracts instead
of LIFFE Transactions and Contracts, as appropriate. In Rule 207(g), a
further clarification is made that the restriction therein on U.S.
clearing members clearing Financials & Softs Contracts in U.S.
securities does not apply to clearing of futures contracts on exempted
securities.
Rule 401, which addresses contract formation, has been revised to
refer to Financials & Softs Transactions and Contracts instead of LIFFE
Transactions and Contracts and Financials & Softs Clearing Members
instead of LIFFE Clearing Members, and to refer to the ICE Futures
Europe Rules, as appropriate. Similarly, conforming changes to the use
of the term Financials & Softs Clearing Member has been made in Rule
404(a).
In Rules 908 and 909, various conforming references to defined
terms referencing LIFFE have been changed to Financials & Softs.
Similarly, a conforming change in Rule 1101 has been made to refer to
Financials & Softs instead of LIFFE.
The amendments also revise Part 12 of the Rules, which addresses UK
Settlement Finality Regulations and the Companies Act 1989, to refer to
Financials & Softs transactions and to change the defined term ``LIFFE
Delivery Order'' to ``Security Derivative Delivery Order.''
The amendments include a new Part 21 of the Rules, which adopts
transitional provisions for the LIFFE Contracts moving to ICE Futures
[[Page 62690]]
Europe. Rule 2102 \7\ adopts definitions for the various stages of the
transition and the particular contracts being moved to ICE Futures
Europe. It is contemplated that the transition will take place in five
stages. The first stage (expected to occur at the end of September
2014) will consist of soft commodity futures and option contracts; the
second, third and fourth stages (expected to occur during October 2014
and early November 2014) will consist of government bond futures and
options contracts; and the fifth phase (expected to occur in mid-
November 2014) will consist of equity futures and option contracts.
Rule 2103 \8\ provides that the transition of trading will occur for
each stage of the transition at the specified transition time. Rule
2104 \9\ provides for the redesignation of contracts as Financials &
Softs Contracts for purposes of the Rules.
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\7\ In ICE Clear Europe's filing, it referenced Rule 2101.
Following confirmation from ICE Clear Europe, Staff has changed this
reference to Rule 2102.
\8\ In ICE Clear Europe's filing, it referenced Rule 2102.
Following confirmation from ICE Clear Europe, Staff has changed this
reference to Rule 2103.
\9\ In ICE Clear Europe's filing, it referenced Rule 2103.
Following confirmation from ICE Clear Europe, Staff has changed this
reference to Rule 2104.
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In the Clearing Procedures, paragraph 1 has been revised to refer
to ``Financials & Softs'' instead of LIFFE and to refer to various
successor operational systems that may be used by ICE Clear Europe.
Similarly, in the Finance Procedures, references to ``LIFFE Contracts''
have been changed to ``Financials & Softs Contracts.''
ICE Clear Europe also proposes to make conforming changes to the
Delivery Procedures. References to ``LIFFE'' have been changed to
``Financials & Softs.'' In addition, parallel references to ICE Futures
Europe and the ICE Futures Europe Rules have been added as appropriate
to existing references to LIFFE and the LIFFE Rules, including in
connection with delivery specifications. Certain references to LIFFE
contract terms have been changed to relevant contract terms to reflect
the transition to ICE Futures Europe. References to the ``LIFFE
Guardian'' electronic grading and delivery system for softs have been
changed to ``Guardian'' or any successor system. In addition, certain
obsolete references to raw sugar contracts (which are not currently
traded on LIFFE or ICE Futures Europe) have been removed in paragraph
8.
In the General Contract Terms, references to LIFFE Contracts are
changed to Financials & Softs Contracts and a reference to the ICE
Futures Europe Rules is added. Other conforming changes to defined
terms (based on prior amendments to the Rules) are also made, including
to the use of the terms ``Buying Counterparty,'' ``Selling
Counterparty'' and ``Clearing Counterparty''. The ``Waiver'' and
``Entire Agreement'' provisions in new paragraphs 3(o) and (p) were
inadvertently deleted in a prior amendment \10\ and are reinstated in
relevant part.
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\10\ Exchange Act Rel. No. 34-72582 (July 10, 2014), 79 FR 41320
(July 15, 2014) (SR-ICEEU-2014-11).
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In the Complaint Resolution Procedures, a reference to Financials &
Softs Clearing Members is added in paragraph 1.5. In paragraph 1.31 of
the FX Procedures, a conforming change is made to reflect a change in
defined terms under the Rules.
2. Statutory Basis
ICE Clear Europe believes that the proposed rule changes are
consistent with the requirements of Section 17A of the Act \11\ and the
regulations thereunder applicable to it, including the standards under
Rule 17Ad-22.\12\ The amendments will accommodate the transition of
trading of certain cleared Financials & Softs contracts from trading on
LIFFE to trading on ICE Futures Europe, while maintaining clearing at
ICE Clear Europe. The existing clearing arrangements and related
financial safeguards, protections, risk management procedures,
settlement procedures, clearing membership standards and default
management procedures for such contracts at ICE Clear Europe will
continue to apply, as discussed herein. ICE Clear Europe does not
propose to change any rules in a manner that conflicts with the terms
of the ICEU Exemptive Order and will continue to satisfy the conditions
of such order. Furthermore, despite the change in trading venue from
LIFFE to ICE Futures Europe and the proposed rule changes, the controls
put into place by ICE Clear Europe pursuant to the ICEU Exemptive Order
to prevent U.S. persons from clearing transactions in U.S. securities
and to comply with the other conditions in the order will remain in
place and continue to be satisfied. As a result, the transition, and
the related amendments to the ICE Clear Europe rules and procedures,
are consistent with the prompt and accurate clearance of and settlement
of securities transactions and derivative agreements, contracts and
transactions cleared by ICE Clear Europe, the safeguarding of
securities and funds in the custody or control of ICE Clear Europe and
the protection of investors and the public interest, within the meaning
of Section 17A(b)(3)(F) of the Act.\13\
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\11\ 15 U.S.C. 78q-1.
\12\ 17 CFR 240.17Ad-22.
\13\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Self-Regulatory Organization's Statement on Burden on Competition
ICE Clear Europe does not believe the proposed rule and procedure
changes would have any impact, or impose any burden, on competition not
necessary or appropriate in furtherance of the purposes of the Act. As
discussed above, the amendments are intended to accommodate the
transitioning of trading for the relevant contracts from LIFFE to ICE
Futures Europe, and the clearing arrangements for those contracts are
not expected to change in any material respect. In particular, the
contract terms and clearing membership standards will not change in any
material respect, and the availability of clearing and the costs and
requirements for clearing of the contracts are not expected to change
in any material respect as a result of the transition. The rule changes
should therefore not affect access to clearing in these products by
clearing members or their customers. Accordingly, ICE Clear Europe does
not believe that the proposed rule changes will impose any burden on
competition among clearing members or their customers 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
Written comments relating to the proposed changes to the rules have
not been solicited or received. ICE Clear Europe will notify the
Commission of any written comments received by ICE Clear Europe.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A) \14\ of the Act and Rule 19b-4(f)(4)(i) \15\
thereunder because it effects a change in an existing service of a
registered clearing agency that does not adversely affect the
safeguarding of securities or funds in the custody or control of the
clearing agency or for which it is responsible and does not
significantly affect the respective rights or obligations of the
clearing agency or
[[Page 62691]]
persons using the service, within the meaning of Rule 19b-4(f)(4)(i).
As discussed above, ICE Clear Europe is currently the clearing
organization for the transitioning LIFFE contracts, and will continue
to clear such contracts following the transition of trading to ICE
Futures Europe. The contract terms of the transitioning contracts are
not changing in any material respect, and ICE Clear Europe will
continue to use substantially the same risk management, margin,
guaranty fund, settlement and other policies and procedures following
the transition as are currently used with respect to such contracts.
The amendments to the Rules and Procedures discussed herein generally
consist of conforming changes to defined terms and related transitional
provisions that will accommodate the transition of trading activity. In
ICE Clear Europe's view, these changes will thus not significantly
affect the safeguarding of funds or securities in the custody or
control of ICE Clear Europe, or otherwise significantly affect the
rights or obligations of the Clearing House and its Clearing Members.
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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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(i).
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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 (http://www.sec.gov/rules/sro.shtml) or send an email to [email protected].
Please include File Number SR-ICEEU-2014-17 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-2014-17. 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 will also 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/notices/Notices.shtml?regulatoryFilings.
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-2014-17
and should be submitted on or before November 10, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-24777 Filed 10-17-14; 8:45 am]
BILLING CODE 8011-01-P