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Federal Register / Vol. 86, No. 33 / Monday, February 22, 2021 / Notices
Default Committee Activation, consistent with the changes to the CDS
Procedures, the proposal would amend the Policy to provide that a Clearing Member would only be defined as Committee-Eligible if such Clearing Member i is deemed appropriate by the Clearing House, ii is the primary clearing entity of an affiliate group, and iii has a London based trading desk.
The Policy would also clarify that the Clearing House maintains a list of all CDS Committee-Eligible Clearing Members and that the relevant term for the committee is six calendar months or until the end of any active Default event.
Additionally, the Policy would be amended to provide that in the event that a CDS Default Committee Participant is unable to fulfill its upcoming rotation obligation for any reason including serving in the CDS
Default Committee of another clearing house, such CDS Default Committee Participant would have the option to request to postpone their Relevant CDS
Default Committee for a Relevant CDS
Default Committee Period. If the Clearing House finds the reason for postponement satisfactory, the CDS
Default Committee Participant would be substituted for a CDS CommitteeEligible Clearing Member from the next three members on the CDS Default Committee Participant List. Prior to commencement of a rotation, CDS
Default Committee Members would be required to have signed all documentation required by the Clearing House including but not limited to a Seconded Trader Agreement, and the Clearing House would use reasonable efforts to ensure that such requirement is enforced. The amendments would also clarify that CDS Default Committee Members would be responsible for assisting in executing any CDS
transactions with respect to Rules 902
or 903 on behalf of the Clearing House only if needed. Under the Committee Activation Procedures section, the procedure for use of an alternate CDS
Default Committee Member contact would be revised to refer generally to a situation where the designated primary representative cannot be reached in a reasonable amount of time, and to remove specific examples of reasons a member could not be reached.
With respect to the Secondment Facilities section, the proposed amendments would clarify that upon arrival at the ICE Clear Europe offices, each CDS Default Committee Member would be assigned a PC with the ICE
Clear Europe risk reports concerning the defaulters portfolio and a third-party data provider application. References to
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how the CDS Default Committee Member would be able to login to the PC and view certain information sent to ICE Clear Europe by the non-defaulting Clearing Members would be removed as unnecessary. The amendments would also clarify that CDS Default Committee Members would only execute the hedging and liquidating transactions that the Head of Clearing Risk and the team deem necessary.
The amendments would also remove the requirement that seconded traders sign an additional confidentiality agreement pertaining to their role within a given member default as ICE
Clear Europe believes the existing single secondment agreement is sufficient.8
Instead, the Policy would provide that CDS Default Committee Members would be reminded of ongoing confidentiality obligations by the ICE Clear Europe Compliance department.
The amendments would provide that details of the auction and relevant position data will be made available through the ICE Default Management System, consistent with the ICE Clear Europe auction procedures. The amendments would also clarify that following the close of an auction for sub-portfolio, the Clearing House would publish the new trades to be booked to the winning bidders through the ICE
Default Management System. The Clearing House would no longer notify the point of contact for the winning bidders verbally. The change is intended to conform to the ICE Clear Europe auction procedures.9
The amendments would provide additional detail with respect to default management testing. Specifically, pursuant to the amendments, the Policy would state that the Clearing House would test and review its default procedures at least quarterly and perform simulation exercises at least annually. The default test would be conducted in coordination with Clearing Members by engaging all the internal and external stakeholders that would be involved in the default management process for example, the Clearing Risk Department, ICE Clear Europe Senior Management Team, CDS
Default Committee Members, regulators, etc.. Each default test would be planned in accordance with the ICE
Clear Europe Multi-Years Default Plan, which would list several different default scenarios that would need to be tested by the Clearing House on a regular basis. The ICE Clear Europe Senior Management Team would be responsible for approving the scope of 8 Notice, 9 Notice,
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86 Federal Register at 171.

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the annual default test by choosing different scenarios outlined in the Plan.
The Plan and changes to it would need to be approved by the Executive Risk Committee.
The rule proposal would also amend the Policy with general drafting clarifications and improvements.
Specifically, the amendments to the Policy would remove Appendices A and B, which contain various forms of notice and examples, as well as references thereto. In ICE Clear Europes view, these appendices do not need to be included in the Policy and, to the extent they remain relevant, forms of notice can be maintained by the Clearing House separately.10 Certain terminology would be updated throughout the Policy as follows: i The term, Employee, would be updated to Eligible Employee;
and ii the terms, Defaulting Clearing Member or Defaulting Member, would be updated to defaulter in certain instances in order to avoid repetition and aid with readability. Certain provisions relating to the Clearing House ceasing to clear new trades for a Defaulting Clearing Member would be moved and renumbered.
III. Discussion and Commission Findings Section 19b2C 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.11 For the reasons given below, the Commission finds that the proposed rule change is consistent with Section 17Ab3F of the Act 12 and Rules 17Ad22e3i and e13
thereunder.13
A. Consistency With Section 17Ab3F of the Act Section 17Ab3F 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.14
10 Notice,
86 Federal Register at 170.
U.S.C. 78sb2C.
12 15 U.S.C. 78q1b3F.
13 17 CFR 240.17 Ad22e3i, e13.
14 15 U.S.C. 78q1b3F.
11 15

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