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Federal Register / Vol. 86, No. 104 / Wednesday, June 2, 2021 / Notices
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iii Legal Basis Rule 17Ad22e1 21 requires that a clearing agency provide for a wellfounded legal basis for each aspect of its activities in all relevant jurisdictions.
The amendments to Rule 201aix would clarify that the Clearing House may require that potential Clearing Members enter into additional annexes/
agreements to the Clearing Membership Agreement in accordance with Rule 201b in order to be, and remain, eligible for Clearing Membership. The Clearing House would expect to impose such requirements where necessary to comply with or address post-Brexit local law group structuring issues, including as applicable to its Clearing Members located in certain EU member states.
This change would clarify the legal basis under the Rules for the Clearing House to require additional documentation to be executed, where necessary.
The proposed amendments to Rule 1901bxv, Rule 1901dix, Rule 201axx and Section 10 of the F&O
Standard Terms, which would remove the requirement for Clearing Members, Customer and Sponsored Principals to be eligible contract participants if they are solely engaging in F&O
Contracts, is intended to remove an unnecessary requirement for such Contracts while ensuring that the membership requirements remain compliant with applicable US laws.
The amendments to paragraph 3.5a of the Membership Procedures to lower the threshold at which the Clearing House will require a written undertaking from a Clearing Member to not repay subordinated loans will align the Rules more closely with Basel III
requirements applicable to Clearing Members.
The various amendments to address applicable anti-money laundering laws in the EU and UK, including to address requirements to provide necessary information for due diligence checks, are intended to facilitate compliance by the Clearing House, Clearing Members, Sponsored Principals and Customers with applicable anti-money laundering laws. Similarly, amendments to the Delivery Procedures would obligate Clearing Members to conduct appropriate anti-money laundering AML due diligence for any transferors/
transferees and provide relevant documentation to the Clearing House
and/or Clearing Member. These requirements support the well-founded basis for the Clearing Houses operation under applicable anti-money laundering laws.
Overall, these changes, as well the numerous other changes to improve the drafting and clarity of the Rules and Procedures, are generally consistent with establishing a well-founded legal framework for the Clearing Houses operations, within the meaning of Rule 17Ad22e1.22
iv Margin Rule 17Ad22e6 require that a covered clearing agency establish a riskbased margin system that, among other matters, marks participant positions to market and collects margin, including variation margin . . ., at least daily. 23
Rule 1603c would be amended to clarify that only original or initial types of Margin payments would be provided in the form of Pledged Collateral, and that such collateral excludes Variation Margin, Mark-toMarket Margin and FX Mark-to-Market Margin which is provided to or by the Clearing House by outright transfer of cash as a settlement payment. This amendment is consistent with the treatment of variation and mark-tomarket margin as settlement payments,24 as provided elsewhere in the Rules and Procedures, and in ICE
Clear Europes view is consistent with the margin framework requirements under Rule 17Ad22e6.25
v Settlement and Physical Delivery Rule 17Ad22e10 requires that a covered clearing agency 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. 26 The proposed amendment to the definition of Exchange Delivery Settlement Price in the Rules will clarify for the avoidance of doubt that the EDSP can be positive, negative or zero. The amendments will also clarify the procedure for payment of the EDSP in a physical settlement where the EDSP is negative. The amendments will thus clarify and enhance the settlement CFR 240.17Ad22e1.
CFR 240.17Ad22e6.
24 As discussed above, the amendments are also consistent with the approach provided for in Exchange Act Release No. 3488665 File No. SR
ICEEU2020003 Apr. 16, 2020, 85 FR 22892
Apr. 23, 2020.
25 17 CFR 240.17Ad22e6.
26 17 CFR 240.17Ad22e10.

CFR 240.17Ad22e1 which states that each covered clearing agency shall establish, implement, maintain and enforce written policies and procedures reasonably designed to, as applicable: 1 Provide for a well-founded, clear, transparent, and enforceable legal basis for each aspect of its activities in all relevant jurisdictions.

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process in such case, consistent with Rule 17Ad22e10.27
Proposed amendments to the Delivery Procedures will clarify other aspects of the physical settlement process.
Proposed new paragraph 7 to the Delivery Procedures will contemplate an alternative delivery procedure for certain Emission Contracts in the event of a failed delivery. In Part U, new provisions relating to failed settlement and non-delivery of securities under a Financials & Softs Gilt Contract would be added, including as to the steps the Clearing House can take to promote settlement in accordance with the contract terms and the requirements of the CREST central securities depository and allocation of the costs of such steps to the Clearing Member that failed to make delivery. Updates to Part Z would be made to reference the correct settlement facilities and relevant settlement details and settlement procedures. Part Z provisions dealing with failed deliveries and partial deliveries would also be clarified.
Throughout the Delivery Procedures, the delivery documentation summaries, timetables and other relevant provisions will be updated and clarified to reflect current operational processes and Clearing House systems and to remove outdated references and language.
Taken together, these changes will establish and update transparent written standards associated with physical deliveries, consistent with the requirements of Rule 17Ad22e10.28
vi Governance Arrangements Rule 17Ad22e2i 29 requires that a clearing agency have governance arrangements that are clear and transparent. The proposed amendments to Rule 916d would change Risk Committee to relevant product risk committee to reflect the different product risk committees addressing topics specific to F&O and CDS
Contracts. Similar changes would be made to references to relevant risk committees in certain Procedures, as discussed above. In ICE Clear Europes view, these amendments would clarify governance descriptions in the Rules and Procedures to more clearly and accurately reflect established arrangements, and are thus consistent with Rule 17Ad22e2i.

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CFR 240.17Ad22e10.
CFR 240.17Ad22e10.
29 17 CFR 240.17Ad22e2i which states that each covered clearing agency shall establish, implement, maintain and enforce written policies and procedures reasonably designed to, as applicable: 2 Provide for governance arrangements that: i Are clear and transparent;.
28 17

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