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Federal Register / Vol. 86, No. 104 / Wednesday, June 2, 2021 / Notices
provided at that earlier stage could also be included as part of, for example, any applications of Guaranty Fund by the Clearing House under Part 9 or Part 11.
Further amendments to Rule 209d would clarify for the avoidance of doubt that the following obligations would apply to a terminating Clearing Member until Open Contract Positions have been closed, the Termination Date has passed and all Guaranty Fund Contributions have been returned under Rule 1102g:
Application of Guaranty Fund Contributions, application of Assessment Contributions to the extent paid under Rule 209d or otherwise prior to the Termination Date, position limits under Part 6, disciplinary actions under Part 10 and the declaration and consequences of an Event of Default under Part 9 of the Rules. This amendment is not intended to change the current requirements under the Rules, but rather to state those requirements more clearly in a single provision and thereby facilitate the Clearing Houses enforcing its rules during a termination period.
The proposed amendments to Rule 209d overall reflect the Clearing Houses experience with both default planning and recent Clearing Member terminations involving group reorganizations.

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f. Notice Provisions These proposed changes are designed to clarify and provide greater flexibility as to delivery of notices under the Rules. The changes have been informed by default simulation planning and in particular the requirements around default notices under Rule 901, but are not limited to that context. Rules 113a and 113ai would be amended to delete the references to telephone as a valid mode of service of notices since this is not supported operationally and to replace it with email. The email address last notified to the Clearing House by a Clearing Member would become an option for service of notices.
The addition of new Rule 113aii would clarify that the Clearing House may also validly deliver notices to a process agent nominated by the Clearing Member to act as its agent. Rule 113e already referred to such agents for service of process, and would be expanded to explicitly refer to service of other contractual notices and communications. A further change to Rule 113a clarifies that delivery in accordance with this section would be deemed made to the Clearing Member or Sponsored Principal also if made to an agent appointed by the Clearing Member or Sponsored Principal.

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Rule 113c and 113d would be amended to clarify the precise time when effective service is deemed to be made for communications by fax, email and courier, and that effective service and delivery can be achieved outside of opening hours on a business day, consistent with current operational practices.
Rule 1901n is similarly proposed to be amended to make clear that process agents for Sponsored Principals will act as agents for service of process of any notice, order or other communication under the Rules and the Sponsored Principal Agreement.
To conform to the Rules, amendments to paragraph 4.2E of the summary table at paragraph 4.2 of the Membership Procedures would provide that termination of a Clearing Membership Agreement or membership as a Clearing Member would become effective no less than 30 Business Days after the date of the Termination Notice Time or pursuant to Rule 917c instead of no less than three months advance notice if termination is not for cause and otherwise as specified in and allowed pursuant to the Rules.
Additionally, updates would be made throughout the summary table at paragraph 4.2 of the Membership Procedures to the email address to which Clearing Members should send certain notifications.
g. Clarifying Clearing Membership Criteria and Clearing Member Obligations Rule 201aix would be amended to reference that under existing Rule 201b, the Clearing House may require that potential Clearing Members enter into additional annexes or agreements to the Clearing Membership Agreement in order to be, and remain, eligible for Clearing Membership. Some such annexes have had to be developed to cater for local law issues arising in certain EU member states as part of Clearing Members post-Brexit group legal structuring. This change would clarify the basis in the Rules for the Clearing House to require such additional documentation to be executed, where necessary.
Rule 202axxii would be amended to extend the requirement for Clearing Members to have competent persons accessible to the Clearing House, to also include two hours prior to the start of the business day. This is consistent with current operational practice and is necessary to ensure that staff are available to process and deal with queries in relation to morning margin calls.

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New Rule 301o would allow the Clearing House to request information when needed on account balances of nominated accounts of the Clearing Member at financial institutions, including for the purpose of calling on available cash where the Clearing Member has failed to meet a payment obligation or determining whether the Clearing Member is or is likely to be in default. This change would address issues that have arisen in practice where payment banks have refused to provide such information to the Clearing House.
This consent, as part of the Rules, should promote the sharing of this important information.
h. Greater flexibility in Financial Reporting by Clearing Members It is proposed that Rule 205aii be amended to give the Clearing House greater flexibility to accept different kinds of financial statements for example, semi-annual accounts from Clearing Members as part of their financial reporting obligations, in circumstances where that Clearing Member does not produce a quarterly financial statement for its regulators.
This amendment would also result in a conforming change to the summary table at paragraph 4.2 of the Membership Procedures.
The amendment would formalize current operational practice for those Clearing Members who do not draw up regulatory quarterly financials and means that the basis for accepting such reporting would be set forth in the Rules rather than pursuant to a separate arrangement, increasing transparency.
In addition, Rule 205aii as well as the summary table at paragraph 4.2 of the Membership Procedures would be amended to change the deadline for submitting financial statements from 30
to 45 days after the relevant period so that the deadline aligns with other regulatory reporting deadlines for example, the FCA deadlines.
i. Clarifying CDS Contract Formation Rule 401o would be amended to make clear that where a CDS Contract of a Non-FCM/BD Clearing Member for a customer account arises pursuant to Rule 401, a Customer-CM CDS
Transaction arises between the Customer and the Non-FCM/BD
Clearing Member at the same time as the Contract. The current rule does not specify the timing of the Customer-CM
CDS Transaction, and the amendment would reflect the equivalent rule for F&O in Rule 401n and eliminate an unintended drafting distinction.

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