$450,000: CFTC fines ICE Clear Europe for derivatives clearing violations

Rick Steves

The derivatives clearing organization also failed to have adequate standards and procedures designed to protect and ensure the safety and assets belonging to clearing members and their customers, the CFTC stated.

The Commodity Futures Trading Commission issued an order simultaneously filing and settling charges against ICE Clear Europe Limited, which will pay a  $450,000 civil monetary penalty.

ICE Clear Europe was charged for violating regulations requiring derivatives clearing organizations (DCOs) to obtain written acknowledgment letters from a depository.

Acknowledgment letters state that the depository was informed that funds deposited are customer funds being held in accordance with the Commodity Exchange Act (CEA) and restrict the use of such funds, among other things.

According to the order, from February 2015 to August 2019, ICE Clear Europe opened six customer segregated accounts, each clearly titled to identify them as futures customer funds, without obtaining executed acknowledgment letters from the depository prior to or contemporaneously with the opening of those accounts.

The derivatives clearing organization also failed to have adequate standards and procedures designed to protect and ensure the safety and assets belonging to clearing members and their customers, the CFTC stated.

Two of the accounts ICEU opened in April 2018 and May 2019 held customer funds in connection with tri-party reverse repurchase transactions, collectively holding more than $500 million at one time.

With over 5 million contracts cleared every day across multiple asset classes, ICE Clear Europe is one of the world’s most diverse and leading clearing houses. It provides central counterparty clearing and risk management services for interest rate, equity index, agricultural and energy derivatives, as well as European credit default swaps (CDS).

ICE Clear Europe is the London-based derivatives clearing house for the Intercontinental Exchange (ICE). ICE Clear Europe began operations in November 2008, clearing for the futures markets of ICE Futures Europe and ICE’s OTC energy markets, which were previously cleared by LCH. Clearnet.

Financial resources held at the clearing house, including margin and clearing member guaranty funds, total more than $64 billion.

ESMA, the EU’s financial watchdog, has recognized ICE Clear Europe as a third country CCP in January 2021 in the context of Brexit. This made the firm eligible to operate in the European Union.

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