81 FR 57635 - Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Settlement of UK Spot Natural Gas Contracts and European Emissions Contracts

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 163 (August 23, 2016)

[Federal Register Volume 81, Number 163 (Tuesday, August 23, 2016)]
[Notices]
[Pages 57635-57636]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-20064]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78604; File No. SR-ICEEU-2016-009]


Self-Regulatory Organizations; ICE Clear Europe Limited; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to the Settlement of UK Spot Natural Gas Contracts and 
European Emissions Contracts

August 17, 2016.
    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 August 3, 2016, ICE Clear Europe Limited (``ICE Clear Europe'' or 
``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 prepared primarily 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) \4\ 
thereunder, 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).
    \4\ 17 CFR 240.19b-4(f)(4)(ii).
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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 changes is to amend certain provisions 
of the ICE Clear Europe Delivery Procedures relating to the settlement 
of UK spot natural gas contracts and European emissions contracts that 
are cleared by ICE Clear 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 
changes. 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. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the rule changes is to modify the ICE Clear Europe 
Delivery Procedures relating to the settlement of UK natural gas spot 
contracts and European emissions contracts. The natural gas spot 
contracts, specifically the ICE Endex UK OCM Natural Gas Spot Contracts 
(``UK OCM Natural Gas Spot Contracts''), are traded on the ICE Endex 
market and cleared by ICE Clear Europe. The European emissions futures 
contracts (``European Emissions Contracts'') are traded on the ICE 
Futures Europe market and cleared by ICE Clear Europe. ICE Clear Europe 
does not otherwise propose to amend its clearing rules or procedures in 
connection with these changes.
    ICE Clear Europe submits revisions to Parts A and E of the Delivery 
Procedures. The text of the proposed Delivery Procedure amendments is 
attached in Exhibit 5, with additions underlined and deletions in 
strikethrough text.
    In Part A of the Delivery Procedures, which applies to the European 
Emissions Contracts, a new paragraph 4 has been added to specify the 
requirements on buyers and sellers under the relevant contracts to 
provide delivery margin (and subsequent paragraphs have been 
renumbered). The delivery timetable in paragraph 5 and documentation 
requirements in paragraph 9 have been amended to remove references to 
the ICE Registry Account Notification Form, which is no longer 
required. The amendments to the delivery timetable in paragraph 5 also 
clarify the timing of requirements to provide delivery margin and the 
timing for the buyer to pay the full contract value to the Clearing 
House and for the Clearing House to remit the full contract value to 
the applicable seller. The delivery timetable has been further revised 
to change the deadlines for submission of certain delivery-related 
forms to the Clearing House.
    In Part E of the Delivery Procedures, which applies to the UK OCM 
Natural Gas Spot Contracts, in paragraph 1 the definition of Delivery 
Month has been further clarified and a new definition of Invoice Period 
has been added, which is used to determine the revised timing of 
various settlement requirements. These changes are consistent with the 
approach used for other natural gas contracts cleared by ICE Clear 
Europe. In paragraph 6, several amendments have been made to settlement 
timetables, including to shorten certain periods for payment and 
release of relevant security or delivery margin. Under the revised 
Delivery Procedures, payment for completed deliveries will be made on 
the second clearing day following the relevant delivery day, and 
buyer's margin will also be released on such day. Timing for delivery 
of relevant invoice details has been tied to the new Invoice Period 
definition. In connection with the revised (and shorter) settlement 
cycle, the amendments also eliminate the concept of contingent credits 
made for prior deliveries. Revised paragraph 7 clarifies the treatment 
of failed deliveries, including the ability of the Clearing House to 
require additional delivery margin from the buyer and seller, and the 
timing of ultimate payment in respect of a prior month's failed 
deliveries. Certain reporting responsibilities and deadlines in 
paragraph 8 are also clarified in light of the adoption of the Invoice 
Period concept.
2. Statutory Basis
    ICE Clear Europe believes that the proposed rule changes are 
consistent with the requirements of Section 17A of the Act \5\ and the 
regulations thereunder applicable to it, including the standards under 
Rule 17Ad-22,\6\ and in particular are consistent with the prompt and 
accurate clearance 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.\7\ Specifically, the amendments are designed to enhance the 
procedures for settlement of the UK OCM Natural Gas Spot Contracts and 
European Emissions Contracts. Among other changes, with respect to the 
UK OCM Natural Gas Contracts, the amendments will shorten the 
settlement cycle and facilitate prompt payment for completed 
deliveries. This will, in turn, reduce settlement risk. The amendments 
will

[[Page 57636]]

make other clarifications to the timing of settlement and provision of 
related delivery margin, as well as update related documentation 
requirements. ICE Clear Europe is not otherwise changing its financial 
resources, risk management, systems and operational arrangements that 
support clearing of these contracts (and address physical delivery 
under these contracts). In ICE Clear Europe's view, these changes will 
enhance its settlement procedures generally, and thus promote the 
prompt and accurate settlement of UK OCM Natural Gas Spot Contracts and 
European Emissions Contracts, within the meaning of Section 
17A(b)(3)(F) of the Act.\8\
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    \5\ 15 U.S.C. 78q-1.
    \6\ 17 CFR 240.17Ad-22.
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
    \8\ 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 procedure changes 
would have any impact, or impose any burden, on competition not 
necessary or appropriate in furtherance of the purpose of the Act. As 
discussed herein, the amendments would make certain clarifications and 
enhancements to the settlement procedures for the UK OCM Natural Gas 
Spot Contracts and European Emissions Contracts. These changes will 
apply equally to all clearing members (and other market participants) 
trading or clearing these products. ICE Clear Europe does not believe 
that these changes would adversely affect access to clearing for 
clearing members or their customers or other market participants, or 
materially and adversely affect the cost of clearing for market 
participants. Similarly, ICE Clear Europe does not believe the proposed 
change would otherwise adversely affect competition among clearing 
members or for clearing services generally. To the extent that the 
changes in the settlement cycle may impose certain additional costs on 
market participants, ICE Clear Europe believes that such costs are 
warranted in light of the benefits to market participants, and the 
overall clearing framework, of a shorter settlement cycle. Accordingly, 
ICE Clear Europe is of the view that any impact on competition is 
appropriate in furtherance of the purpose 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) of the Act \9\ and Rule 19b-4(f)(4)(ii) \10\ 
thereunder because it effects a change in an existing service of a 
registered clearing agency that primarily affects the clearing 
operations of the clearing agency with respect to products that are not 
securities, including futures that are not security futures, swaps that 
are not security-based swaps or mixed swaps, and forwards that are not 
security forwards, and does not significantly affect any securities 
clearing operations of the clearing agency or any rights or obligations 
of the clearing agency with respect to securities clearing or persons 
using such securities-clearing service. 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(4)(ii).
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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-2016-009 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-2016-009. 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/clear-europe/regulation#rule-filings.
    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-2016-009 
and should be submitted on or before September 13, 2016.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Brent J. Fields,
Secretary.
[FR Doc. 2016-20064 Filed 8-22-16; 8:45 am]
 BILLING CODE 8011-01-P