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Federal Register / Vol. 86, No. 104 / Wednesday, June 2, 2021 / Notices certain subordinated debt instruments could be of an amount equal to tier 1
essentially share capital Section B, Annex 1a, Basel II. This was changed in Basel III LEX 20.1 to involve greater restrictions on the usage of subordinated debt in general subject, where subordinated debt may be used, to an upper limit of 25%. This proposed change in capital requirements promotes greater consistency with its existing operational implementation of capital requirements for Clearing Members, albeit remaining more liberal than Basel III. All of the Clearing Members are located in countries which have implemented Basel III and this change is not considered to be material for any of them, whilst at the same time making the Clearing Houses capital requirements more robust.
It is further proposed that paragraph 3.5 of the Membership Procedures would be amended to remove irrevocable letters of credit as a potential method that Clearing Members or Sponsored Principals may use to satisfy capital requirements. Instead, the Clearing House could, at its discretion, require a Clearing Member to post additional cash or collateral in addition to the normal margin requirements pursuant to the amendments.

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v. Replacement of Prospectus Directive Amendments are proposed to Part 1501 of the Rules to change the definition of Prospectus Directive to Prospectus Regulation as the EU
Prospectus Directive has been repealed and replaced with the Prospectus Regulation. Conforming changes would be made to the definitions of Offer to the Public, Relevant Member State and Securities. The definition of 2010 PD Amending Directive and references thereto would be deleted as this is also no longer in force.
Conforming changes would be made in Rule 1503 to remove obsolete legislative references.
w. Changes to Clearing Member Account Requirements Amendments to the Finance Procedures in paragraphs 4.1ai and iv and 4.4ai and iv are proposed to the account requirements for members to reflect that ICE Clear Europe clears both EUR and USD denominated CDS contracts and as such all CDS
Clearing Members are required to have both EUR and USD accounts and need not have a GBP account.
x. Updates for Changes to Applicable Anti-Money Laundering Law Amendments are proposed in Rule 101 to update the definition of Money
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Laundering Directive to reflect the implementation of the fifth EU AntiMoney Laundering Directive. A
definition of Money Laundering Regulations is also proposed to be added to the rules to reference the applicable UK regulations corresponding to that Directive including after its exit from the European Union.
In Rule 201axxix and 1901dxi, the reference to simplified due diligence is proposed to be removed.
This reflects the repeal and restatement of the former U.K.s Money Laundering Regulations 2007 pursuant to the Money Laundering, Terrorist Financing and Transfer of Funds Information on the Payer Regulations 2017, which removed simplified due diligence as the default option for a defined list of entities and replaced this with a discretion on in-scope firms to apply risk-based levels of due diligence.
Rule 201axxxi is proposed to be amended to include anti-money laundering laws to the list of applicable laws that are required to be acceptable to the Clearing House in a jurisdiction for Clearing Members.
New Rule 201axxxiii is proposed to be added to require Clearing Members to have adequate policies, procedures, systems and controls relating to Applicable Laws, including relating to anti-money laundering and the prevention of financial crime.
Amendments are proposed to Rules 202axii and 1901m to update relevant references to relevant laws, clarify that the Clearing Member is required to make certain representations and warranties to the Clearing House with respect to the matters in those subsections, require the Clearing Member to have the necessary authority from customers and others to disclose the necessary information about beneficial owners in order to comply with requirements under Applicable Laws, and to retain copies of documents required to be retained under antimoney laundering laws.
A similar amendment is proposed to Rule 1607g to require FCM/BD
Customers to also obtain the authority from beneficial owners to disclose information to the Clearing Member and Clearing House necessary for antimoney laundering due diligence.
Similar amendments are also proposed to the CDS Standard Terms 3q, F&O Standard Terms 3r and FX
Standard Terms 3q to require Customers to obtain the necessary authority from beneficial owners to make disclosure to the Clearing Member and Clearing House necessary for antimoney laundering due diligence.

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A new paragraph 1.1d of the Delivery Procedures would obligate Clearing Members to conduct appropriate AML due diligence for any transferors/transferees and provide relevant documentation to the Clearing House and/or Clearing Member. The amendments at paragraphs 5.4 and 5.5
of the Delivery Procedures would clarify that transferors and transferees that are customers would be bound by the F&O
Standard Terms, including with respect to delivery of information, and also clarify that transferors/transferees are not customers of the Clearing House for purposes of relevant anti-money laundering laws and other Applicable Law.
y. Amendments To Reflect Updates to ICE Clear Europe Systems New definitions of ECS, MFT, ICE FEC and MPFE, reflecting various existing ICE Clear Europe systems, are proposed in the Delivery Procedures so that there is consistent usage across the Procedures.
An amendment is proposed to Clearing Procedures paragraph 1.1a as the referenced PTMS/ACT systems are legacy systems no longer used by the Clearing House, and have been replaced with ICE FEC.
Amendments are proposed to Clearing Procedures paragraphs 1.1f and 3.1c to remove the definitions of MFT and ECS as these terms would now be defined in the Delivery Procedures.
Similar amendments are proposed to Finance Procedures paragraphs 3.10, 3.11, 3.21 and 4.5 to ensure that the use of defined term ECS is consistent.
z. Clarifications Relating to Negative EDSP
The definition of Exchange Delivery Settlement Price in Rule 101 would be amended to clarify, for the avoidance of doubt, that the EDSP can be positive, negative or zero.
Rule 703b would be revised to clarify the process for payment obligations if the EDSP is a negative number.
aa. Clarification to the Finance Procedures Amendments are proposed to paragraph 6.1iix of the Finance Procedures to clarify that the additional margin requirement that applies where payment of variation or mark-to-market margin is made in a currency other than the contractual currency would apply on a Currency Holiday. This reflects current Clearing House practice.

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