CFTC Staff Letter 14-93: Time-limited no-action relief for ICE Clear Europe Limited regarding Regulation 1.20(g)(4)

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5430
Facsimile: (202) 418-5547 aradhakrishnan@cftc.gov Division of Clearing and Risk Ananda Radhakrishnan Director CFTC Letter No. 14-93 No-Action July 10, 2014 Division of Clearing and Risk Mr. Paul Swann President and Managing Director ICE Clear Europe Limited 60 Chiswell Street Moorgate, London EC1Y 4SA RE: Request for Temporary No-Action Relief from the Written Acknowledgment Requirements in Commission Regulation 1.20(g)(4) Dear Mr. Swann:
This is in response to your letter dated July 3, 2014 (“Letter”), to the Division of Clearing and Risk (“Division”) of the Commodity Futures Trading Commission (“Commission”). In the Letter, you request that the Division confirm that it will not recommend that the Commission take enforcement action against ICE Clear Europe Limited (“ICE Clear Europe”) for temporarily failing to obtain, or provide the Commission with, an executed version of the template acknowledgment letter set forth in Appendix B to Regulation 1.20 (“Acknowledgment Letter”), as required by Regulation 1.20(g)(4). Regulation 1.20(g)(4) requires, among other things, that a derivatives clearing organization (“DCO”) obtain an Acknowledgment Letter from each depository with which the DCO deposits futures customer funds. 1 DCOs are required to obtain the Acknowledgment Letter(s) for existing customer segregated accounts by July 12, 2014. 2 ICE Clear Europe requests an extension of time to comply with Regulation 1.20(g)(4) to obtain and execute a modified version of the Acknowledgment Letter with the Bank of England (“BoE”). In this regard, ICE Clear Europe has represented that it will submit a separate letter requesting that the

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See Enhancing Protections Afforded Customers and Customer Funds Held by Futures Commission Merchants and Derivatives Clearing Organizations, 78 Fed. Reg. 68,506 (Nov. 14, 2013). 2 Id. at 68,578 (setting forth the compliance date for Regulation 1.20).

Mr. Paul Swann
July 10, 2014
Division issue no-action relief to permit specified modifications to the Acknowledgment Letter (“Separate Request”), which will be acceptable to both the Division and the BoE. Statement of Facts Based upon the representations made by ICE Clear Europe to the Division in the Letter, we understand the relevant facts to be as follows:
In addition to its registration with the Commission as a DCO, ICE Clear Europe is a Recognised Clearing House in the United Kingdom, subject to the direct supervisory oversight of the BoE. ICE Clear Europe seeks to maintain accounts at the BoE into which ICE Clear Europe may deposit futures customer funds. The BoE has indicated to ICE Clear Europe that it requires certain modifications to the Acknowledgment Letter. Discussion of Request for No-Action Relief and Applicable Legal Requirements The Commission recognizes that the BoE is a central bank and its provision of account services to ICE Clear Europe is distinguishable from the provision of account services by a commercial bank. 3 In addition, the Commission had contemplated the possibility that foreign depositories might require modifications to the Acknowledgment Letter in certain situations, in which case “the Commission would consider alternative approaches, including no-action relief, on a case-by-case basis.”4 In light of the above facts and circumstances, the Division has had discussions with the BoE regarding a mutually acceptable version of the Acknowledgment Letter. The Acknowledgment Letter requirements were recently finalized and are currently being implemented, and the Division has only recently been presented with, and is currently considering, a similar request for relief encompassing the issues presented in the Letter. 5

Granting the temporary relief requested by ICE Clear Europe is appropriate to allow for continued discussions between the Division staff and the staff of the BoE, and to allow ICE Clear Europe to submit the Separate Request for relief in accordance with the outcome of the Division’s discussions with the BoE. Grant of No-Action Relief Based on the facts presented and the representations ICE Clear Europe has made, the Division will not recommend that the Commission take enforcement action against ICE Clear

3 Cf. id. at 68,535 (recognizing the unique role of the Federal Reserve Bank as a depository). 4 Id. at 68,536. 5 See Letter from Julian Oliver, Director of Compliance and Public Affairs, LCH.Clearnet Limited, to Ananda Radhakrishnan, Director of the Division of Clearing and Risk, Commodity Futures Trading Commission (June 25, 2014).

Mr. Paul Swann
July 10, 2014
Europe for temporarily failing to obtain, or provide the Commission with, an Acknowledgment Letter with the BoE, as required by Regulation 1.20(g)(4). Such relief shall expire the earlier of 90 days from the issuance of this letter, or the date on which the Division responds to ICE Clear Europe’s Separate Request. The position taken herein concerns enforcement action only and does not represent a legal conclusion with respect to the applicability of any provision of the Commodity Exchange Act or the Commission’s regulations. In addition, the Division’s position does not necessarily reflect the views of the Commission or any other division or office of the Commission. Because this position is based upon the representations contained in the Letter, it should be noted that any different, changed, or omitted material facts or circumstances may require a different conclusion or render this letter void. Finally, as with all no-action letters, the Division retains the authority to condition further, modify, suspend, terminate, or otherwise restrict the terms of the no-action relief provided herein, in its discretion. Should you have any questions, please do not hesitate to contact Parisa Abadi, Attorney￾Advisor, at (202) 418-6620. Sincerely, Ananda Radhakrishnan Director